Honesty from Coke? Well, at least, Hones-Tea

Earlier this week, the Financial Times ran a piece by Jonathan Birchall about the 40% investment made last year by Coca-Cola in Honest Beverages, makers of Honest Tea bottled iced tea and fruit drinks. It's an interesting analysis of the problems and pitfalls of trying to run an ethical business.

Honest Beverages, founded and run by Seth Goldman, pledges to "strive to grow with the same honesty we use to craft our products, with sustainability and great taste for all." The company's website includes the mission statement quoted above and is committed to transparency and social responsibility.

A good product and its ethical focus has made Honest Tea a success of sorts in the beverage market -- but it is still, as the Financial Times put it, a minnow compared to the whale that is Coca-Cola.

Honest Tea needed access to wider distribution, which is where Coke comes in. But Coca-Cola has in the past invested in small companies only to kill the brands when they failed to perform to expectations.

So Goldman had two problems: (a) he wanted distribution help, but with continued control, and (b) he needed to get the message out to his own customers who might look askance at the alliance. As Birchall put it: "In spite of efforts to improve its reputation on social and environmental issues, [Coca-Cola] remains the target of campus boycotts at US universities and colleges -- among the kind of ethically concerned young people who are Honest Beverage's customers."

Coca-Cola agreed that Goldman could maintain control, and then suggested that its investment could be made through a private non-Coke-branded entity. Goldman, however, said that "if we believe the transaction was worth doing [which we did], we wouldn't try to cover it up...In fact, we would have to be proactive in how we communicated about it."

Hurrah for transparency!