Nearly a decade ago, Seth Goldman began brewing his dream business in his own kitchen, with a thermos of tea, some old Snapple bottles and help from his B-school professor and partner Barry Nalebuff. Today, Goldman, "TeaEO" of Honest Tea, reigns over the nation's fastest-growing organic bottled-beverage company, with projected 2007 sales of $23 million and a 58 percent share of the organic tea market.
Goldman's company is not only a model business in its rapid growth in the crowded beverage industry -- more than 50 percent growth for the past two years. It's also a model citizen in its multiple sustainability measures at its Bethesda, Md., headquarters and innovative partnerships ranging from Indian tea gardens to American Indian reservations.
Honest Tea is a pioneer in its industry, offering lightly sweetened, 100 percent organic beverages and claiming the first line of fair trade certified bottled tea in the U.S. Honest Tea truly exemplifies the "new wave" in business -- placing equal emphasis on profitability, ecology and humanity, aka the triple bottom line.
More and more entrepreneurs are striving to strike such a balance between profit and principle, asking themselves, "Can do the same in my company? Is my green dream really feasible?" Freelance writer and fair trade entrepreneur
April Thompson spoke with Goldman recently to tap the leader for his secrets to start-up success. Here are 10 tips culled from their "fireside chat" on socially responsible entrepreneurship.
1. Consumer before mission. Many "green" or socially responsible start-ups get so excited about their mission they neglect to pay the same attention to detail to the product itself. While the green consumer base is rapidly growing, so is the competition within that market. Consumers won't buy a product on mission statement alone. "You need to have a great product -- the consumer comes first," says Goldman. "It must taste great, look great, have good packaging -- you have to be competitive along every dimension of the product line."
2. Focus on core business. This is BIZ 101, but it's amazing how many companies get distracted by side projects. Goldman says Honest Tea's biggest mistakes were trying to run its own bottling plant and to start a bagged-tea line. "Being our own distribution company was also short lived. You don't want to be your own distributor," says Goldman. Just because you have a great idea doesn't mean you have the right stuff to execute it. Jim Collins in his book "Good to Great" calls this the "Hedgehog Principle": What are you deeply passionate about? What can you be the best in the world at? What drives your economic engine? If a particular project doesn't figure into the answer to all three questions, it doesn't belong in your portfolio.
3. Price appropriately. Honest Tea started out with prices that were "too low, then raised them over time. But because we started low and went high volume we were able to do so," says Goldman. A 16-ounce bottle of Honest Tea now retails at around $1.49, still a relative bargain given its organic and fair trade certification.
4. Don't let your mission cloud your vision. "We had a great connection with a farmer's co-op in South Africa, sourcing honeybush tea, but the drink, 'Haarlem Honeybush,' didn't really resonate with consumers. It was exactly the kind of partner we wanted to work with, but we had to let it go," says Goldman. The company also received a "off batch" from the same cooperative. "You need to get the highest quality control ... if not, then who are you helping? You can support capacity building, but you can't take shortcuts for the consumer," Goldman explains. Happily, Honest Tea was able to bring Honeybush back this year, reincarnating the ingredient in its new Pomegranate Red Tea with Goji Berry.
5. Aim high in terms of creating a "squeaky-clean-green" supply chain -- but
don't try to do too much too soon. Goldman advises to "make sure you are working with solid organizations" with regards to your supply chain. That said, the company made a strong commitment to sourcing organic materials early on, which helped set it apart from other companies just testing the waters.
6. Don't waste your time chasing "socially responsible dollars." The only color of money is green. "What it comes down to: an investor is looking for a return -- period," says Goldman. "Actually, the best investors have always been consumers who love the product." The key to Honest Tea's financial growth is that "we never took in too much money ... we took it in chunks (a million at a time) and this way we were able to maintain control of the company," Goldman explains.
7. Look at the big picture, and that sometimes means making trade-offs for greater good. Expanding Honest Tea's bottling from strictly glass to include a 100 percent PET plastic line "meant that we could expand beyond the natural foods channel," says Goldman. Honest Tea, already on the shelves at Target, is now in negotiation with Wal-Mart -- "which actually sells more organic products than anyone in the world," according to Goldman. "We believe in the democratization of organics -- that they cannot only be available to consumers who live in certain areas and have a high level of income."
8. Get the right people on board: first and foremost, professionals who are excellent at what they do. "Every employee does not need to be aligned with the mission. It's OK that some of our salespeople are just there to make a lot of money," says Goldman. "You have to find people who are not afraid of hard work... and understand what it means to be an entrepreneur. At time that means to put on a t-shirt and unload some pallets. People glorify this work too much; you have to appreciate both the positive and negative aspects."
9. To run a sustainable company, you have to
live a sustainable lifestyle. Goldman prioritizes ruthlessly; the key is focus on family and business. "Work is addictive, you could do it 24 hours a day...if this was a company I was just looking to flip in a few years, then it would be easier to work nonstop but I'm in it for the long term," Goldman says.
Goldman's time management tips include:
- No long meetings. If there is a decision Goldman sees the meeting moving towards, he'll say, "OK, this is where I see us heading, does anyone disagree?"
- Nipping unproductive interviews in the bud. Within 10 minutes of an interview, he knows if a candidate can do the job and won't drag on an interview if feel like they can't.
- Passing on the networking events. "I'm not a schmoozer," Goldman confesses. While Goldman is invited to many cocktail parties and events for socially responsible business leaders, if it's not something he can take his family to, he tends to skip it.
- Goldman doesn't subscribe to listservs, and is a master at multitasking.
10. Don't give up! Honest Tea took ten years to become consistently profitable -- and that's not unusual. Sam Walton operated a small franchise of Ben Franklin "five-and-dimes" for 20 years before he opened up his first rural discount retail store in 1962. It took another 30 years for Wal-Mart to reach critical mass. Hopefully 30 years from now, Honest Tea and the companies following in its footsteps today will be the ones ruling the world.
April Thompson is a freelance writer and fair trade entrepreneur based in Washington D.C. More information about her projects is on her website, AprilWrites.com. She would like to thank David Stonehill for his assistance in conducting this interview.
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