Can Your Green Company Get Big and Stay Real?

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For 10 years, since he founded Honest Tea, in 1998, Seth Goldman has been among the heroes of the natural foods movement. Even as his company took off, Goldman held true to his socially responsible ways. Honest Tea still buys its ingredients at fair-trade prices from small organic farms around the globe; its lightly sweetened drinks for kids are sold in pouches that can be recycled into pencil cases. In 2007, with Honest Tea's sales up 70 percent, to $23 million, Goldman enjoyed poster-boy status among the organic foods crowd.

But that was before his deal in February to sell 40 percent of his company to Coca-Cola for an estimated $43 million. For many in the natural foods world, that's tantamount to selling out to the Evil Empire. Natural foods activists have excoriated Coca-Cola for peddling unhealthful soft drinks and tolerating environmental and labor abuses by its overseas bottlers. "You just signed a deal with the devil," one former fan vented on Goldman's Honest Tea blog. Goldman is responding to his critics on his Inc.com blog, where he is also getting his share of praise from those who support the Coke deal. (Goldman's blog is at blog.inc.com/the-mission-driven-business.)

Goldman argues that his decision to team with Coke isn't just good business but good natural foods policy. Like many niche products, Honest Tea has struggled to find its way into mainstream outlets such as supermarkets and convenience stores. Goldman says the company's patchwork of distributors wasn't enough to get it on such shelves outside of a few major cities. Convinced that Honest Tea had to go for a national presence to be successful (despite its sales, the company isn't profitable), Goldman began talking with suitors in mid-2006. In the end, Goldman figured, what better partner than Coke to help Honest Tea take its products to the masses?

Just as important, says Goldman, teaming up with a big corporation is the only way Honest Tea and companies like it can have the impact on society they desire. If Coke can get it in front of more consumers, Honest Tea will not only grow but also will amplify the good it does in the world, through such practices as sourcing ingredients from sustainable farms and encouraging consumers to be healthy and recycle. "Our mission is to democratize organics," says Goldman. "The best way to protect what we've done is to make it big."

That's what the natural products guys always say when they sell. But the organic foods movement sees the entrance of the mega-corporations differently. "They're here because organics have proven to be the fastest-growing segment of the market," says Craig Minowa, an environmental scientist with the Organic Consumers Association. "As they step into it, the organic market is literally getting trashed." And boy, are they stepping into it. Last fall, Clorox paid $913 million for Burt's Bees, maker of beeswax-based lip balms and lotions, and Kellogg picked up a pair of natural foods brands, Bear Naked granola and Wholesome & Hearty Foods, for a combined $122 million.

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