The stories of Honest Tea’s trial and error—sediment at the bottom of early bottles; big, laundry bag–like tea balls bursting and spraying hot, wet tea leaves all over the factory floor and ceiling—have appealed to journalists and the tea’s many fans. So have the doughty attempts of Seth Goldman and Barry Nalebuff, two idealistic men with a business plan, modest start-up funding, and no experience, to establish a new bottled beverage with a do-good image in a fiercely competitive industry not known for its charitable deeds.
Goldman, the son of the Russia scholar Marshall Goldman and the China scholar Merle Goldman, went to Yale’s School of Management, known for the use in its curriculum of the nonprofit sector, where he heard Nalebuff, one of his professors, pose a question during a discussion of cola marketing: Why were soft drinks either way too sweet or artificially sweetened, with nothing in between? Nalebuff later looked into the tea industry in India and found that very good tea cost almost nothing more to brew than bad tea. Several business plans, rounds of family and personal fundraising, and many kitchen tea tastings later, Honest Tea rolled up to supermarkets and convenience stores. (Often it rolled around downtown Bethesda, Maryland, where Honest Tea has its offices and modest test kitchen, in Goldman’s U-Haul, or in the trunk of his wife’s car to and from the homeless shelter where she then worked.)
Now in its ninth year, Honest Tea comes in eighteen flavors (two new ones, Just Black and Just Green, are unsweetened) and is on the shelves of stores across the country, including the entire Whole Foods chain and some Target stores. (Starbucks owns its own tea company, Tazo, which makes a lightly sweetened, organic iced tea that tastes fine but is not as pure-flavored as Honest Tea.) Goldman says the company will break even for the first time next month.
Fundraising has gotten easier. The cartoonist Berkeley Breathed (who later drew the label for Honest Tea’s Peach Oo-La-Long) and the writer Andrew Tobias wrote fan letters and then checks to invest in the small, privately held company; one woman who simply liked the product eventually wrote a check for $250,000. (The company asks fans who send only good wishes to spread the word—it spends no money on advertising except in a few trade journals.) In the most recent round of fundraising, Goldman and Nalebuff had to turn away investors—and also companies that wanted to invest a little too much. If they decide to sell, Goldman says, it will be on their own terms, after the company has become profitable.
All very colorful, and admirable too. Royalties from sales of its herbal peppermint First Nation tea go to Native American groups in Montana. Some of its tea is “Fair Trade,” meaning guaranteed to put part of the profits into the hands of the people who raised and picked it. (Why not all the tea? Supplies of Fair Tradecertified tea are sometimes limited in the varieties Goldman needs. And sometimes the company can’t afford the surplus cost of certification.)
Goldman takes as a hero and model Gary Hirshberg, the founder and CEO of Stonyfield Farms, which has built a national organic brand of yogurt and marketed to parents concerned about their children’s health. Hirshberg sits on the Honest Tea board, and Goldman, as a friend and colleague, recently ob-served his attempts to get Stonyfield products into school vending machines. Could Honest Tea, he wondered, do the same thing?
The question took on some urgency at the beginning of this school year, when Goldman learned to his shock that the public elementary school where all three of his sons had gone—and for which, as head of the school’s foundation, he had helped raise more than $200,000—had put a soda machine right next to the new gym’s exit. Although it would be in service only after school hours, the machine stood just where children would be thirstiest. Similarly horrified parents insisted that it be removed. (Many cities and states have outlawed such machines; others place restrictions on hours of operation and on drinks that contain high-fructose corn syrup. A recently introduced amendment to the National School Lunch Act, which has bipartisan support, would regulate all food and drink sold in school vending machines with an eye to whether they promote obesity or chronic illness.) Here, far too close to home, was a point on the carbohydrate continuum that Goldman once heard described at a convenience-store convention: “Wewant ’em to go from apple juice to soda to beer.”
If a school in Montgomery County, Maryland, one of the country’s richest per capita, feels compelled to raise a few hundred dollars a month from a vending machine selling syrup-laced sodas, Goldman says, imagine trying to change schools all over the country. The challenges to Honest Tea in schools start with distribution and profit margins schools earn from big-business beverages. They go on to include caffeine, which some schools ban and many others are concerned about, and extend to glass bottles, which schools usually don’t allow. Beverage companies generally supply the machines, which need maintenance; Goldman doesn’t want to spend the money or to send his team around to make repairs. And big beverage companies have sales forces just for schools, which Honest Tea can’t afford.
But if parents and schools band together, they can put better snacks and drinks into vending machines. The parents at Goldman’s local school managed to get the sodas and the picture of a brand-name soda removed, but Goldman calls it “a Pyrrhic victory”—the machine is still there, selling sugar-laced fruit drinks. A school system in Minnesota has put Honest Tea in its vending machines. The local success story is the Sidwell Friends School, in Washington, D.C., which subsidizes Honest Tea there by charging the same for it as for Coke even though it gets less per bottle. And Goldman admits that Coke still outsells Honest Tea.
But that may change, and Honest Tea will be ready. Two years ago it began bottling in plastic, partly to get into more vending machines, especially in schools. Four of its teas are decaf or herbal. Last year the company launched two flavors of Honest Ade (limeade and cranberry lemonade), and it just launched one with pomegranate, grape, and blueberry juices. I tasted the pomegranate ade when I visited the Honest Tea offices recently. It was pleasant, with a slight tartness and a strong fruit flavor. It contains half as much sugar as most other fruit drinks (Goldman claims that all Honest Ades use less than half as much sugar as similar drinks from Snapple, his closest competitor).
This is what should refresh students coming out of the gym. Of course, there’s always tap water. But however good it may be for health, it doesn’t have that small amount of real sugar—and I know what it takes to get through a day.