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Corporate Social Responsibility
'Our Pick'
2.07.2008 - 10:11am ET
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Source:
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CNN.com
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News Category:
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Coca-Cola takes stake in Honest Tea
The deal continues a trend of big distributors gobbling up smaller, natural-foods purveyors
February 7, 2008 -- The Coca-Cola Company (KO,
Fortune
500) said Tuesday it will buy a 40% stake in Honest Tea, a
10-year-old organic bottled tea upstart that grew its sales 70% last
year.
Coca-Cola will have the right to buy the rest of the Bethesda, Md.,
company after three years. But for now, the maker of low-calorie drink
brands such as Honest Tea, Honest Ade and Honest Kids will continue to
operate as an independent business under its existing leadership.
Financial terms of the investment, which had been rumored
since December, were not disclosed.
"This is not a purchase: this is an investment in our brand," said Honest
Tea founder and CEO Seth Goldman, who started the company in 1998 with
co-founder Barry Nalebuff. Last year, Honest Tea Inc. sold 32 million
bottled drinks, grossing $23 million.
Partnering with Atlanta-based Coca Cola will give Honest Tea access to
wider distribution beyond the natural food stores, such as Whole Foods (WFMI,
Fortune
500), in which it already has a strong presence. The company will now
be able to reach American colleges, universities and restaurants with
which Coca-Cola has exclusive relationships. Honest Tea has been seeking
that kind of mainstream presence in recent years, expanding into
convenience and grocery stores such as Target (TGT,
Fortune
500).
"We felt the need for additional resources," said Goldman, who was
approached by Coca-Cola North America's "Venturing and Emerging Brands"
(VEB) business unit in the fall of 2007. "We recognized that a larger
partner could help us do more."
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