In an announcement that Seth Goldman (who founded HONEST Tea with Barry Nalebuff in 1998) said felt like a “gut punch,” Coca Cola said that ‘mainstream’ brands such as Gold Peak and Peace Tea were driving growth of the RTD tea category, and will henceforth be the ‘anchor’ of Coca-Cola’s RTD tea business in North America.
“Sales of both Gold Peak and Peace Tea have increased during the COVID-19 pandemic as shoppers gravitate both to beverages with immune-boosting properties and multi-serve packaging options for at-home consumption,” said Coca-Cola, which bought a 40% stake in HONEST in 2008 before fully acquiring the brand in 2011.
“HONEST teas, which are primarily offered in single-serve bottles with a strong concentration in the Northeast and along the West Coast, have been negatively impacted by a drop in immediate consumption sales and limited glass supplies [although a spokesperson confirmed to us that HONEST teas are now "predominantly packaged in PET"].
"Ongoing supply chain challenges mean we are having to prioritize production and distribution of certain product SKUs, and that we’ve been unable to meet consumer demand for Gold Peak. This, among other factors, helped drive this very difficult decision.”
'We are phasing out the HONEST teas product line, but are not selling the HONEST brand'
The Coca-Cola system will continue to produce and distribute the HONEST Kids line and explore licensing ventures and innovation opportunities for the HONEST brand in other categories, said Sabrina Tandon, group director, RTD Tea, Coca-Cola North America Operating Unit: “We are phasing out the HONEST teas product line, but are not selling the HONEST brand.”
A spokesperson told us: "No roles will be impacted by this decision."
Coca-Cola has been steadily streamlining its portfolio in recent years, waving goodbye to Odwalla juices, Zico coconut water, TaB soda, and Coca-Cola Life (a mid-calorie cola sweetened with cane sugar and stevia), among others.
Seth Goldman: ‘I believe that HONEST Tea and what it represents was about future forward thinking'
Seth Goldman - who stepped away from day-to-day operations at the brand in late 2015 after moving into the executive chairman role at Beyond Meat - told FoodNavigator-USA that the "pandemic has changed a lot of the dynamics of the [beverage] business," with Coca-Cola making a pragmatic decision amidst supply chain challenges: "HONEST Kids dwarfs the tea business, so that is where they're putting their efforts and that's their prerogative."
That said, today's news was pretty depressing, he said.
"I think the Venturing and Emerging Brands effort [Coca-Cola's attempt to identify longer-term consumer opportunities and build a model that could that nurture and support them], which started in 2008 with Honest Tea [described by Coca-Cola in 2017 as "one of the top success stories at VEB"] started at a time when they were being expansive and looking at new horizons. I think this step today is where they're being less expansive and obviously, less daring."
'The brand came in and ended with its integrity intact'
Asked whether the market had shifted in recent years such that HONEST Tea had lost relevance, or whether Gold Peak was now capturing the same consumer, he said: "I believe that HONEST Tea and what it represents was about future forward thinking, thinking about where the world is going, around transparency, around health of the planet, around health of the consumer."
While Gold Peak has a premium positioning, he said, "I certainly felt there was enough space between them [Gold Peak vs HONEST Tea, which is organic and Fairtrade] in terms of the sweetness profile, the ingredients, the sourcing."
On the other hand, he said, he appreciated that under Coca-Cola, "there was never an attempt to compromise what the brand stood for. I'd rather they just stopped the brand than say we're going to cut the organic or add a ton of sugar, or drop the Fairtrade piece. So you know, the brand came in and ended with its integrity intact."
From five thermoses and an empty Snapple bottle into more than a billion bottles sold’
In a linkedin post shared with the media, he added that the news came as a “gut punch to all the sweat, tears, and incredible passion that went into building our beloved brand,” adding that he was at least “somewhat consoled by the fact that HONEST Kids will continue to grow and thrive.
”My thoughts are with our longtime partners and friends, the organic and Fair Trade farmers who helped develop their communities and protect their ecosystems with the tens of millions of pounds of tea, sugar and spice they sold us.
“I am grateful for the hundreds of amazing people who helped Barry Nalebuff and me grow this idea from five thermoses and an empty Snapple bottle into more than a billion bottles sold. Thank you to all the retailers, restaurants and distributors who believed in us. Your partnership helped democratize organic and healthier drinks in a way that had never been done before.”
Euromonitor: 'This isn’t completely surprising'
Howard Telford, head of soft drinks at Euromonitor International, noted that Coca-Cola had "talked about being more ruthless with underperforming brands/niche SKUs and there does seem to be a need for more efficiencies in terms of sourcing ingredients and packaging materials amid ongoing supply pressures."
He told FoodNavigator-USA: "Given the higher price point for organics and tough trading environment generally in terms of price, this isn’t completely surprising – although it hasn’t been a stellar year for the wider ready-to-drink tea category either. Within the Coke portfolio it does seem as though Peace Tea had eclipsed Honest as the number two brand after Gold Peak."
'HONEST Tea was caught in the middle in terms of category segmentation'
Honest Kids "seems to have developed and maintained a niche as the better-for-you option within mass kids juice drinks," added Telford, "whereas perhaps HONEST Tea was caught in the middle in terms of category segmentation."
More recently, he speculated, HONEST Tea may have found itself "competing with Coke’s own Gold Peak or PepsiCo’s Pure Leaf as the more natural option in conventional, but also with a much wider variety of more premium independent options and more function-forward teas (gut health, energy) in natural/specialty channels today," which he said was "not the case when Coke first acquired its stake in 2008."