A new Federal Aviation Administration program called NextGen has increased efficiency for airports around the nation. But more flights mean more noise, and the number of disgruntled local residents has only grown over the years.
Sales of sugary sodas are declining nationwide as consumers gravitate toward lighter, healthier bottled beverages. Bethesda-based Honest Tea is uniquely positioned in this changing soda, juice and tea landscape: the local start-up that makes organic, fair trade teas and juices is now owned and distributed by Coca-Cola. Honest Tea co-founder and Tea-EO Seth Goldman joins Kojo to talk about his mission to change what Americans drink.
MR. KOJO NNAMDIBack in the late '90s, Seth Goldman couldn't find a bottle of iced tea that wasn't too sweet so he set out to make his own. A decade later the co-founder of the Bethesda-based Honest Tea isn't the only one cutting back on sugar. Sales of soda are declining as Americans gravitate towards healthier, less sugary drinks.
MR. KOJO NNAMDIHonest Tea boasts organic ingredients and fair trade suppliers, but it isn't the only one making healthy teas and juices. The natural drinks market is expanding and competitors abound. That competition for shelf space is one of the reasons Goldman and his business partner decided to sell the company to the biggest sugary-drink maker of them all, Coca-Cola.
MR. KOJO NNAMDISkeptics worried about Honest Tea's integrity now that it's been swallowed by Coke, but Seth Goldman is still in charge and still hoping his company will help transform the American diet. Joining me to look at the trends in what Americans are drinking is Seth Goldman, co-founder and president of Honest Tea.
MR. KOJO NNAMDIHe's the author of "Mission in a Bottle: The Honest Guide to Doing Business Differently – and Succeeding." Seth Goldman, thank you for joining us.
MR. SETH GOLDMANSo nice to be with you, Kojo.
NNAMDIWhy the comic book? Why the graphic novel. I really enjoyed "Mission in a Bottle"...
NNAMDI...it was so easy to read. Maybe that's why?
GOLDMANThat's why. You just put your finger on it. I was really struggling through a lot of these business books and I'd get through the first chapter and then I'd kind of get bored. And at the same time my oldest son who was a senior in high school had officially entered senior slump so he had gotten into college and he was just reading comic books and I was charged with the duty of making sure he did his homework.
GOLDMANAnd I'd go upstairs and he'd show me a comic book and my wife would come upstairs and find us both reading comic books.
NNAMDIBoth intensely involved in the comic books.
GOLDMANSo we found, we wanted to make this story come alive and we wanted to reach a much wider audience than the traditional business book...
GOLDMAN...to inspire people to think about business differently.
NNAMDIIt's an easy read. The reign of big soda seems to be slipping. Both Coke and Pepsi have seen soda sales decline over the past decade. Why do you think consumers are moving away from sugary drinks?
GOLDMANI think consumers are continuing to seek out healthier options. It's just an evolution. We've certainly seen, you know, our, as a nation, you know, we have an obesity crisis so people are looking for different ways and beverages are one part of it. They're certainly not the only cause of what's going on, but, you know, people have to.
GOLDMANWell, it's not just in beverages. They're looking at foods, too, and whether it was the low carb phase that we all went through or just different. People are reading their ingredient panels more.
GOLDMANAnd the tastes are both delicious, but different and so it's a very positive thing.
NNAMDII was fascinated to see how this odyssey got started for you because I can relate to being out jogging and looking for an appropriate drink and then finding sugar.
GOLDMANYeah, I went to a beverage shelf and I said, there's nothing here for me. And my friend was with me and he said, what do you mean there's nothing here? There are hundreds of options and there are, but the range was so limited. They were all 100 calories or zero calories.
GOLDMANAnd at the time, this is back in 1997, we just said there really should be something with one or two teaspoons of sugar.
NNAMDII always try to mix them with club soda to see if it...
GOLDMANThat's it, that's it. That was the original idea my co-founder had.
NNAMDIYep. Your prime motivation in starting Honest Tea was to create a drink with a lot less sugar. What do you use to sweeten Honest Tea's different drinks and where do you source the sweetness?
GOLDMANYeah, all over, so we use organic cane sugar as the primary sweetener and that's often from Paraguay or in Central America. We also though use organic honey. And the rules on organics for honey are very challenging because remember, organic means there's no chemical pesticides or no potential source of chemicals and with bees they're flying around.
GOLDMANSo there has to be a two-mile radius from any apiary and it makes it very complex to source organic honey. But that's one, also organic brown rice syrup.
NNAMDIYou recently switched from sugar to organic kosher white grape juice to sweeten Honest Kids juices.
NNAMDIIt's my understanding there were rabbis involved.
GOLDMANSo this Honest Kids product has only 40 calories so it's a lot less sweet and we wanted to see if we could take all the sugar out. Of course, there's sugar in juice, but could we sweeten it only with juice? In order to do that, white grape juice became the main sweetener, but the challenge is that we had to get a lot of organic OU Kosher white grape juice and there were two primary countries, Turkey and Argentina.
GOLDMANAnd in order to get it with the OU process, we had to fly in rabbis to both countries. It was quite a process.
NNAMDIHow does that switch reflect the importance of messaging to the parents who buy drink pouches for the kids?
GOLDMANBecause, you know, I'll be the first, as I should be, to honestly tell you, nutritionally it's the same. It's still 40 calories. But if you're a parent reading a box, a nutrition panel, you'll see the ingredients and you'll see instead of the first ingredient being sugar, you'll see organic white grape juice.
GOLDMANIt's funny when we brought on kids how people would say, well I want a product that's all juice and an all-juice product has 100 calories so people don’t often think about exactly what they're serving their kids.
NNAMDILet's see if you have yet answered the question of Arlene in Crofton, Md. Arlene, you're on the air. Go ahead, please.
ARLENEThank you, Kojo and Seth. I do have a question. There are many teas these days on the shelf, even organic ones and very pricey ones that list natural flavoring. Is that something that's made in a chemistry lab or what is meant by natural flavoring?
GOLDMANYeah, well, it can mean a lot of different things. So natural flavoring can be about an acidifier that, you know products have to have a certain acidity level in order to maintain the pH, to keep it stable without, meaning no microbes would grow.
GOLDMANIt also could be a flavoring and that might be an essence or an oil so it is admittedly a broader label. For us, since our products are all organic, with the organic seal, there's a requirement that -- there's certain banned ingredients. There's certain ingredients you can't have allowed and so organic is one way to ensure you're not going to end up with something you either may not be able to pronounce or may not want in your product and natural doesn't have that same efficacy.
NNAMDIArlene, does that answer your question.
ARLENEYes, it pretty much does, although there are some teas that, for instance, are blueberry or there's peach or something and I wonder if there is a lot of essence in that or if it's something else?
GOLDMANWell, it will depend on the ingredients. Obviously, if there's a blueberry you'd also hopefully see some blueberry juice or, you know, some connection to that ingredient. But like I said, I think the one way to make sure you're taking in ingredients that are at least on the approved organic list would be to look for the organic seal.
ARLENEThank you very much.
NNAMDISome Honest Tea drinks list citric acid or...
NNAMDI...ascorbic acid as ingredients. What are those and why do you need to add acids to tea?
GOLDMANThat's a good question and it was something that we asked in the beginning too. So our products are all what's called shelf-stable. They sit on a shelf. They don't, you know, they won't go bad if they're on a shelf. And in order to do that, they have to have an acidity level below 4.6. So water is 7.0, but then you need to get the acidity below 4.6 and that's the point at which no microbes would grow, obviously, no bacteria and or anything that could be harmful.
GOLDMANAnd so what we do, initially is we actually filter the water to get a lot of the pH down below and there's a way to take out some of the buffers and that gets the pH below 6 and then we'll use either citric acid or even malic acid which is an apple-based acid and citric obviously is a citrus-based acid, to get the acidity level below 4.6.
NNAMDIOn now to Geena in Alexandria, Va. , Geena, your turn...
GEENAHi, my question is, my husband and I, we quit drinking sodas years and years ago and so mainly the only thing we drink is coffee or green tea, water. But when I go to -- if I ever want to buy tea at the store, all teas have some form of sweetener in there. And I don't do anything that has any kind of artificial or regular sugar and I just wonder why nobody makes those products that are just not sweetened?
NNAMDIHe's holding up, as we speak, the Honest Tea Unsweet Lemon Tea, Geena.
GOLDMANSo we now have several varieties with zero sugar.
NNAMDIWhich, I am currently tasting.
GOLDMANHere's a cup for you. So we have a tea called Just Green Tea, which is as it suggests, just green tea or just black tea. And then we also just brought out Unsweet Lemon Tea, which is a black tea with a bit of lemon and no sugar.
NNAMDIActually, Geena, it's pretty good.
GEENAWonderful, thank you very much.
NNAMDIThank you very much for your call. You too can call us. The number is 800-433-8850. Our guest is Seth Goldman. He is co-founder and president of Honest Tea and author of "Mission in a Bottle: The Honest Guide to Doing Business Differently – and Succeeding." Honesty has been as much a mission for you as a business, but when New York Mayor Michael Bloomberg tried to ban 16 oz. sodas, both you and Coca-Cola spoke out against the measure. Why?
GOLDMANSure. So and I want to say in advance I'm an admirer of the mayor and he's actually been to our office in Bethesda and I certainly appreciate both his entrepreneurial approach to business as well as what he's done in terms of public health.
GOLDMANBut this where I disagreed with him and his proposal was to limit the size of beverages to 16 oz. And so the irony there is that we would have_- our bottles are 16.9 oz. so the effect of his ban would have been that this drink here -- this is a Honey Green Tea with 70 calories for the whole bottle. This product would have been banned, whereas a Snapple bottle with 240 calories would have been allowed.
NNAMDIAnd how many calories?
GOLDMANThis is 70 calories in the whole bottle so there's no one who can convince me that it's rational to ban a 70-calorie drink and it makes sense to allow a 240-calorie drink because that's healthier.
GOLDMANWell, this is a new one for us. And frankly, a direction I hadn't envisioned us going. But we were looking at the trends. And as you noted earlier, people are moving away from soda and yet a lot of people like the taste. And actually there's nothing unhealthy about bubbles themselves. So for us, Honest Fizz was a really nice way to think about innovation. And in this case, could we do it with zero calories?
GOLDMANWe used Stevia leaf, which is a leaf-based sweetener. And then the challenge in making it, obviously the taste is still people are used to when they have a soda to having that sweet taste. And how can you create that with both, in this case, flavoring and the natural sweetness? And for us, it's been a really fun expansion. And ironically, my wife who has been such a -- she hadn't drank soda in not just years, decades. And all of a sudden, she just can't stop drinking our root beer.
GOLDMANShe drinks the Fizz, Honest Fizz.
NNAMDISeduced by the Fizz? On to Dennis in Alexandria, VA. Dennis, you're on the air, go ahead please.
DENNISThank you, Kojo, and thank you, Seth. My question had to do with business practices. But before, I just want to state that I've actually been a regular buyer of Honest Tea for a long time.
DENNISAnd that was motivated primarily by things like the fair trade and use of actual cane sugar as opposed to high fructose corn syrup. But I actually -- I'm kind of sad to hear about the purchase by Coca Cola because I recently have decided to boycott all Coca Cola products due to some of their less-than noble business practices, particularly with regards to things like exploiting water tables in India.
DENNISAnd then offering the local villagers free fertilizer that happened to be just chemical waste sludge from the process of pumping the water. And I just wanted to know -- my question had to do with how you square what generally seems to be a pretty ethically minded business philosophy for Honest Tea with the greater, not so concerned business philosophy that seems to motivate Coca Cola as a corporation. And I'll take the answer off the air, thank you.
NNAMDIThank you very much for your call, Dennis.
GOLDMANSo, Dennis, it's a very important question you asked, and obviously one that I don't take lightly and certainly didn't take lightly in making the decision. And, you know, when we set out to create Honest Tea, going back 15, 16 years ago now, we had a bold vision about not just changing the American diet but even thinking about changing the way business does business. And so, for us, one of the reasons we called the book "Mission In A Bottle" is because the idea for our business is that the mission is inside the bottle.
GOLDMANThe fact that our product is both less sweet but that the organic ingredients and the fair trade ingredients are in the bottle, those are embedded in the product we're selling. And that hasn't changed. In fact, our product wasn't all fair trade until after Coca Cola bought the company. So we continued in that direction. And for us, our point view is if what we're doing is important, then it needs to get to scale.
GOLDMANAnd we were growing as an independent company, but we were struggling too. We couldn't get into the national chains. We had Safeway that wanted our product and other stores. We didn't have the ability to deliver it. And from our point of view, what is -- it's not -- it's good to be a model but it's even more exciting to be a powerful driver of change. And so, you know, someone asked me how do we change Coca Cola.
GOLDMANWell, five years ago, Coca Cola wasn't selling an organic or fair trade or low calorie like ours. And now we're selling hundreds of millions of units. So to the extent you have concerns about what's going on in India or labor conditions, I would say you should be buying a fair trade certified organic product that's actually the leaves are sourced from India. That's a way to help address what's going on there.
NNAMDIWhich may help to explain that when Coke bought Honest Tea, you could have moved on to a new enterprise.
NNAMDIOne can presume that you stayed because of what you as Honest Tea's mission.
GOLDMANSure. Yeah, I got -- for me, in the big picture, the most compelling statistic I've heard is that the United Nations recent -- they ranked the average life expectancy of all 200 countries. And even though the United States is the wealthiest nation in the history of the world and we have more advanced knowledge of science and medicine than any country, we're not number one, we're not number two, we're number 40.
GOLDMANSo what does that say about our diets? Our lifestyles? Our lack of connection to the natural world. Our ineffectiveness to exist, coexist with each other. It tells me we have to change direction. And so, what we're doing and still doing -- and I'm still, as I think you probably can tell, still very passionate about is trying to take things in a different direction. And what's exciting to me is we're not just a model anymore, we're actually helping to drive that change.
CATHERINEHi, thank you. I went to Yale School of Management with Seth and I wanted to congratulate him on his success.
CATHERINEAnd say that I love the product. So with that in mind, I'm interested to hear about how the ethos of Honest Tea applies and impacts the management of your company of Honest Tea itself.
NNAMDIThank you for your call, Catherine.
GOLDMANSo, certainly the product itself, you know, the connections we have to these communities is really at the heart of what we're doing. And we even think about our business not just selling beverages, it's really connecting people both to the natural world and to these communities that we're sourcing from. But in terms of the way we run the company, it is -- it continues to be very entrepreneurial.
GOLDMANOur business is still based in Bethesda, MD where we have both -- it's been called an eco-funky office with used furniture. But are teams are still entrepreneurial. Every manager has their own P&L, their own profit and loss. Every manager really is running their own business. And my job is to try to sort of make sense of it all. So it's still free-spirited. And then our whole marketing is very grassroots based where we do a lot of events out in the field. We don't do the conventional advertising the way other companies do.
NNAMDIThank you very much for your call, Catherine. You've had a lot of successes but also launched a couple of drinks that either didn't sell or presented technical hurdles too steep to overcome. Talk about CocoaNova.
GOLDMANSo we had a cocoa product. It was really very interesting at the very least, if not successful. But it was a brewed cacao. We have the cacao bean and we were able to spin the pods out and brew it like a tea. It was different and sometimes, you know, like my co-founder Barry says, when you -- sometimes you see a hole. It's an opportunity, other times it's a black hole. So that was a black hole.
GOLDMANI think people just couldn't figure out what it was. So that didn't work. And then we did have a product called Kombucha which is a fermented tea. It has a very different taste, but one that people are gravitating towards. But with that, there was a percentage of alcohol in the bottle. And that had a potential to take us from being a non-alcoholic drink into an alcoholic drink which we just didn't want to go there. And there's a legal risk associated with it. So we got out of that.
NNAMDIExplain, if you will, the economics of the beverage industry. When you started Honest Tea, you spent only about 13 cents per bottle on the ingredients, another 15 cents on packaging and 17 cents on the labor and freight.
NNAMDIAnd you sold it to distributors for about 70 cents a bottle. Who are all the players that need to make money to get that bottle of tea or juice or soda to me?
GOLDMANWhat we found so critical was the distributors. You know, we had this product. We made -- and, you know, you heard the phrase, you build a better mouse trap and the world will build a path to your door. Well, with beverages it's the exact opposite because no matter how good your product is, if you can't get it to the shelf, not just to the store but to the shelf, then you're not in business.
GOLDMANAnd so we really needed those beverage distributors to come along and it was frustrating to know that they actually often were making more per bottle than we were. So they would make a lot and the store would make a lot. And we were with the least. But one of the interesting things you'd mentioned about the ingredients, 13 cents. What's notable about that is we're spending about four cents for the tea ingredient.
GOLDMANBut in fact, that's almost eight times what many of the companies are spending on their tea ingredients. So the big insight that my co-founder Barry had is, well, if we're calling this a tea product, why shouldn't we get -- if we can have great quality tea for four cents, why shouldn't we get, really, the best we can?
ADAMGood afternoon. Thanks, Kojo and Seth. My work is primarily with cooperative businesses at both the retail and wholesale level. So my question is one on your sourcing of the fair trade. What measures do you take to ensure that the farmers who are picking the tea and sourcing your other products that go into it are being treated fairly? And then secondly, the fact that you are now owned by Coca Cola, what changes have you seen?
ADAMAnd what influence do they have from the top down as well as your influence from the bottom up as well?
GOLDMANSure. So one of the things -- and I would encourage this with anybody not just a company, you know, that's part of a multinational -- you should never take a company just at their word. I think as much as we call our self Honest Tea, we feel it's very important to have third party verification of any claim we make. And this goes with both organic and fair trade. And that means that there's people who part of the certification body that go to the gardens that inspect the labor conditions both on scheduled visits but also on what they call visits where they'll just show up.
GOLDMANAnd I also visit now -- obviously when I visit they know I'm coming, so I don't want to make it sound like those visits are the only, you know, the only mechanism we have. It's really the third party. And as an example with organic, they're also looking at the water samples, the soil samples, obviously the leaf samples with fair trade in addition to looking at labor conditions.
GOLDMANAnd they're also looking at the schools to understand, you know, sort of the schedule of the day and just sort of following the path of where, for example, children go, you know, to make sure that -- just to see how that's -- the infrastructure there is set up. But to your question about what's changed, this for me is where it's exciting because it's really a difference in scare. When Coca Cola invested in Honest Tea in 2008, we were in about 15,000 stores.
GOLDMANToday we're in over 100,000 stores. So our reach is very different. When Coca Cola invested in 2008, we were buying 800,000 pounds of organic ingredients. And this year, we'll buy over 5 million pounds of organic ingredients. And so that just changes the scale, it changes the demand and it really changes the decision making about these communities when they think about, well, should we go fair trade or should we go organic? And we found a lot of our supply has increased.
NNAMDIThank you very much for your call, Adam. You've launched a new tea called Heavenly Lemon Toffee that uses an Indian variety of basil. How did that come about? I just tasted it, by the way.
GOLDMANYeah, yeah. It's such a -- it's really my new favorite. It is -- I visited this community and we had heard about tulsi. It is used often in Hindu rituals. People in India often have it in their home and rub the plant. But to brew it and to put it in a ready-to-drink bottle tea was really a new twist. And it's got such a refreshing taste that is herbal. We know that a lot of times people are looking for drinks without caffeine.
GOLDMANAnd my connection with this community was so personally inspiring that this tulsi is generally used for garlands in rituals. It's not really used as a tea. And when they pick it and just sell it to grower, to the coop, they can only sell it for 11 cents a kilo. But we helped set up a drying shed in the community so they could sell the value-added product and they were able to sell it for $2.70 cents a kilo. So it's just a transformation in their economic ability to be self-sufficient.
GOLDMANI wish. It was -- it really was -- this was our first. It was the first organic tea ever made. It was one of our very earliest varieties. The challenge is we had another tea called Moroccan Mint which has been so successful and what we heard from the stores is, well, you can't have two peppermint teas on the shelf at the same time. And so I don't know that we're going...
NNAMDIEmail from Margaret: I love the caffeine-free teas. The Pomegranate Red Tea is the best. Where can I buy it by the case in the D.C. area?
GOLDMANYes. Well, all Whole Foods will sell out teas by the case.
NNAMDIAnd, Seth, I now get it Whole Foods at $1.49 a bottle.
GOLDMANBut you can get -- I think you get a discount. I know you get a discount when you buy it by the case. And then of course Meyer Organic Market, MOM's also sells by the case.
NNAMDITell Whole Foods don't want this bottle stuff at me, I can buy a case. I heard that from Seth Goldman. Seth...
NNAMDIWe got an email from Liz that says, I would like to know why Honest Tea oppose GMO labeling in California and Proposition 37? Second, are there genetically modified organisms in Honest Tea?
GOLDMANSo the first answer is absolutely not. There's, you know, the fact that we're organic prohibits any genetically modified organisms. Honest Tea has always supported transparency. We were the first to make organic bottled tea and all of our teas are organic. And my guess is what the caller is referring to is Coca Cola did oppose that. And so while I, you know, this is one of those cases when you have a small organic fair trade company that's part of a large multinational, there's bound to be situations where they're not always going to agree on everything.
MATTHi, Kojo and Seth. Thanks so much for taking my call. And I'm currently reading "Conscious Capitalism" by the founder of Whole Foods. So I'm excited to add another book to my collection. My wife and I very recently started a business that hopes to be a holistically conscious about what we do, sounds like you are. But I'm wondering, what keeps you in Bethesda? We could really use a pep talk as to keeping a business in this area?
MATTI'm sure there's advantages beyond the disadvantages of costs and things. And I'd love your opinion on that.
GOLDMANWell, it's funny, when we started the company, we have one of these fancy investors come in and say, well, you've got this organic tea company. You shouldn't be based in Bethesda. You could set up a P.O. Box in New Hampshire or Vermont. I said, well, number one, that's not honest. But number two, why can't Bethesda be a home for a sustainable business? And for us, it's our home.
GOLDMANWe have -- all three of our boys are raised here. We've been here for, I guess, 18 years. So it just the natural place for us to build a business. And we've actually -- since we've been growing, we created a nonprofit called Bethesda Green which, among other things, has a green business incubator where 16 other entrepreneurs are launching their green businesses. So I think it's -- there's certainly no reason Bethesda can't be a home for this kind of business.
GOLDMANYou've got a very conscientious, you know, and educated population and great infrastructure to support it.