The TH Interview: Seth Goldman, Honest Tea Co-Founder & TeaEO
Seth Goldman co-founded Honest Tea in 1998 with a thermos in his kitchen. Today, they make the US's top-selling organic bottled tea (we mentioned it here before), and have received $12 million in equity financing to further expand distribution and develop new beverages. We recently caught up with the TeaEO of the company with a mission to make great-tasting, truly healthy organic beverages sweetened with less sugar and calories than most bottled drinks for a conversation about the growth of organics, connecting with the mainstream and manning the helm at a sustainable business.
TreeHugger: In one of your blog posts, you reference "the high cost of cheap goods" about how "the lowest possible cost" often includes hidden expenses that we all ultimately pay in the long run. How do you think you can get more people to consider the real costs of everyday goods like tea and bigger things like cars?
Seth Goldman: Obviously, information is certainly an important part of that equation, to make people more aware of those costs. In a way, we pay for those costs in a different way, through subsidies. For example, look at all the corn subsidies, which helps make one of those things that's too cheap -- not that we should necessarily make it more expensive -- is high fructose corn syrup. It's interesting, as ethanol starts to gain more interest as gas prices continue to rise, the price of high fructose corn syrup is going up as well, so that makes soda something that's "too cheap" as well. I've seen enough of what happens when consumers are given low prices: they prefer that. I don't want to sound too idealistic and say it's Wal-Mart that's offering all the products for too cheap, but I think oil and corn are good examples of when subsidies create an artificially low price.
With tea, we can't always get people to pay the "real" cost, but what is exciting is when you do see the market respond to organics; in a way, what people are responding to there is information, right? Basically, there's enough of an awareness of what organics means, in terms of how it's different, and the growth in organics demonstrates that people have put a value on those costs. There's the question of are they doing it for themselves or are they doing it for the environment, and we all might like to think they're doing it to protect the environment when in fact they're doing it to benefit themselves; at the end of the day, it doesn't really matter, because the net impact of those purchasing decisions still benefits the environment. That, to me, is one of the most exciting part about what organics has done. It's very rare when you can get people, and the market, to respond to something that's positive without a government mandate. Industries don't respond well to mandates and that's not just a perception; it's where government is telling people what to do, so what's so exciting about the sale of organics is that, in this case, the government just said, "Here's a symbol that demarcates that something has gone through a certain process" and consumers have responded really positively to that, and that's the best way to see change happen, where consumers are making the decisions. They are choosing more sustainable options and there isn't anyone forcing them to do that. There is a price, a higher price to that, and not just for the certification but because when you're producing tea leaves or other agricultural goods and aren't using the cheap chemical pesticides, you have to find another way to do that, so those prices are incorporated, but you aren't getting the other externalities priced in there; you aren't seeing the environmental costs associated with non-organics. So I think following the path that organic food has followed is a good way to help people realize that we can't internalize all those extra costs.
TH: One of the markets that you're breaking in to is in schools, where Honest Tea would replace soda and other unhealthy drinks. How do you go about marketing to kids and maybe even school board administrators that don't care about organic & fair trade tea?
SG: That's tough -- it's really tough -- because distribution is so locked up there. It really takes a different sales pitch. Ironically, a lot of the school systems where we have gained a presence has been through the support of Coca-Cola bottlers around the country, and they've been the ones who've opened the doors for us. These are folks that are independent Coke distributors -- they can market other brands -- so we can take advantage of the fact that they have such strong distribution connections, so we can actually get to the store, so to speak.
TH: You started brewing tea nine years ago in your kitchen, and now Honest Tea is distributed across the US. What's the hardest part about balancing business growth with your social & environmental goals?
SG: They've really grown in tandem. We've had the same goals from the beginning and haven't really wavered on the goals, but the exciting part is, as we've grown, our impact can also be larger. For example, we just did a promotion at the end of last year with fair trade, and it was based on the number of bottles we sold and the dollar amount -- we gave away a portion of sales to a fair trade project based on that. We sold a little over 200,000 bottles during the promotion, and we didn't even sell that many bottles in the first year altogether, and this was in just over a month. So, that was very gratifying and shows how a bigger company can have a bigger positive impact; as long as you keep your mission intact, and can stick to it. It's been great to see them grow together; very rarely have we been in a position where we felt like there's a trade-off. When we started going with fair trade in 2003, we did have a discussion about whether or not we should do everything fair trade. We had a marketing director who said that we really had to do the right thing, and we looked at the numbers, and it turned out that we would have had to raise our prices so high that we would have had dramatically limited our ability to reach a lot of customers or we would have had to cut our margin, which would have meant we would have had to dramatically limit our profitability, so we really wondered: what's the right thing? Would it be to make it all fair trade but then not grow and not do things that will enable us to help these communities? Where we came down was with the conclusion that everything has to make financial sense, and I didn't have misgivings about it. Obviously I'd love everything to be fair trade, but if we're created economic inefficiencies -- going back to the subsidies we talked about earlier -- then our business isn't sustainable.
TH: What's the best part of owning a business that strives to be ethical and sustainable?
SG: There are a lot. Certainly one thing is the response we get from consumers; that's just so gratifying because it's exactly what we'd hope to hear. We get some complaints, too, but it's that we've created something meaningful to them, that tastes good to them, that they were looking for in a beverage. The impact that we have is also so gratifying, to feel like we're having an impact on people's diets, that we're having an impact on the agricultural system, and granted, it's still small, but there's a lot to be said for the model that we have. Even if we're not, on our own, making a tremendous impact with our purchasing -- and we're starting to -- it's more that others are following our lead, and if we can help make the case for organics, that's really exciting. We just had a meeting yesterday with a big convenience store chain who's never had an organic product before, and I think we got 'em -- I can't say for sure -- but I think they understood that there's a real benefit to having organic products in their stores. If we can start doing that kind of thing, and we succeed, then they'll take other organic products and we start to have a broader impact. Of course, there's always the basic benefits of building and growing something from scratch, and I think I'd feel that way about building any organization, non-profit, for-profit or otherwise that involves building a team, hiring people, creating economic opportunity for them and their families, so those are all broader things that are always very gratifying.
TH: If you had to pick one thing to tell everyone you met to do to create a more sustainable future, what would that be?
SG: I think it's to act on your passions. I believe that most people really do have strong beliefs, whether it's the environment -- with all the press around global warming and other green stuff these days, I think there are very few people out there who are saying to themselves, "Boy, I really want to consume everything I can and burn all the energy I can," so I think that if people really listened to their beliefs and acted on them, we'd have a very different world. One of the more recent blogs I wrote was about the song "Waiting for the World to Change," which I just found out won a Grammy, and I like the melody but I have a big issue with that song because it's about waiting for things to change and that's just the worst piece of advice we could be following right now. We can't be waiting for the world to change; we need to find big and small steps we can take to make change happen. That's what got us here, waiting on the world to change and if you wait for it to change, it's not going to happen, so take the steps, listen to what you believe in and act on it. When people act on things they believe in, as long as you can do it in a way that's intelligent, you do it with more intensity, with more confidence and more relentlessly. This business has been so challenging, over the nine years we've been at it, that it would have been easy to give up a long time ago, but one of the reasons that we never gave up is that we knew this is the right thing to be doing, and it's something we cared about. I can't imagine I'd have the same devotion or work with the same intensity if it were just about making money.
Seth Goldman is co-founder and TeaEO of Honest Tea.