Sweet Success

Seth Goldman launched Honest Tea out of his Bethesda kitchen. Now it’s a cool brand and President Obama’s favorite drink. But the tea itself is good because it’s not too sweet.

By: Leslie Milk

It was an entrepreneur’s dream: a call from Barack Obama’s people to say that the candidate was hooked on Honest Tea and needed help finding it on the campaign trail. That meant national visibility for the Bethesda beverage company.

Then John McCain’s camp cited Obama’s preference for organic iced tea as an example of elitism.

Company founder Seth Goldman couldn’t have asked for better publicity. For the Democratic National Convention, Honest Tea created a commemorative label for its Black Forest Berry flavor, changing its name temporarily to Barack Forest Berry. Now the White House refrigerators are stocked with Black Forest Berry and a new favorite, Green Dragon.

Goldman, 44, started the company 11 years ago with Barry Nalebuff, a business-school professor of his. At the time, Goldman had a young family and had never run a business, but he quit his job at the Calvert Social Investment Fund in Bethesda to focus on iced tea.

Goldman’s childhood friend Paul Sabin says that when he heard about the venture, “I joked that instead of Honest Tea, they should call it Pover-Tea.”

Goldman’s wife, Julie Farkas, came home one day in 1998 to find her kitchen overrun. Goldman and Nalebuff had covered every inch of counter space with tea concoctions. There were spices, leaves, and stains everywhere. Goldman had a meeting with the Fresh Fields beverage buyer the next day, and they needed samples.

They had gone to Vanns Spices in Baltimore for cardamom, cloves, and other flavorings. After a lot of trial and error, they came up with five brews: Moroccan Mint Green, Kashmiri Chai, Assam Black, Gold Rush Cinnamon, and Black Forest Berry. Fresh Fields—now Whole Foods Market—ordered 1,200 cases. “We were in business,” Goldman says.In 1998, Honest Tea had sales of $250,000. A year later Giant and Harris Teeter were among its outlets, and sales had quadrupled. By 2002, Honest Tea was the best-selling bottled tea in the natural-foods industry. Sales topped $4.6 million.

That year, the US Department of Agriculture began issuing “organic” seals. The partners’ brews didn’t qualify. “The only thing we could reliably source was organic sugar,” Goldman says.

But by 2004, all Honest Tea flavors were certified organic, and the company had gained a loyal following. One drinker had the logo tattooed on his body.

Goldman is tall and lean. He bikes to work, has given bikes to employees, and had showers for riders built in Honest Tea’s new ecofriendly office. He also goes out of his way to buy ingredients from economically disadvantaged communities. It’s all part of his message of corporate responsibility—a message he’ll be able to preach on a much larger scale.

Last year, Coca-Cola bought 40 percent of Honest Tea for $43 million with the option to buy the company outright in three years. Coke began distributing Honest Tea in California, Arizona, Nevada, Washington, and Oregon; more states will follow. Customers aired their concern about the Coca-Cola deal on Goldman’s blog. “I truly believe you just made a deal with the devil,” one person wrote. But Goldman says he’s in it for the long haul, envisioning a global enterprise producing healthy, organic products. He says Honest Tea is not selling out; Coke is “buying in.”Plus, he says, the bigger the company, the bigger the impact: “Buying 2.5 million pounds of organic ingredients, as we do, is a notable thing, but it doesn’t change markets; it doesn’t change the landscape of agriculture. When we go to 25 million pounds, then you start seeing some of the larger suppliers saying, ‘Wait a minute, we’re going to have to change.’ ”

This article first appeared in the March 2009 issue of The Washingtonian. For more articles from that issue, click here.