Bonus Episode: Seth Goldman Brews Another Ice Tea

[Music] hello everyone welcome to the 21 hats podcast I'm your host Lauren Feldman this week in a special bonus episode recorded right before Labor Day Seth Goldman talks about getting the disappointing news that honest T the brand he built and sold to Coca-Cola was being discontinued and how it took him about 2 weeks to decide to create another te business to fill the Shelf space that Koch was vacating along the way Goldman talks about why it made sense to sell a mission-driven business to a soda company what he wishes he had done differently in the sale what it was like being a Coke employee what he's been doing since leaving how the beverage industry has evolved and whether he'll end up selling this business to Coke too even in Good Times owning and running a business can be a lonely Pursuit our hope is that these weekly conversations will let owners know they are not alone in facing challenges same thing with our daily newsletter the 21 hats Morning Report which in magazine recently name the best newsletter for business owners and which you can subscribe to at 21h hats.com where you can also find transcripts of our podcast episodes and lots of other articles and interviews the episode is titled Seth Goldman bruise another iced tea welcome Seth Goldman thanks so much for doing this it's great to talk to you thank you Lauren great to be with you I think we first spoke maybe 20 years ago when you were fairly early in the honest Journey it's so unusual for someone to have the opportunity to kind of get a second chance you know I imagine this one is getting started a little bit differently just because you're smarter and more experienced can you tell us a little bit about that sure so just to update you on the timing so we found out May 23rd that Coca-Cola was going to be discontinuing onest te and the first two weeks were kind of just shock disbelief and a little bit of mourning uh but by June 6 we said well we're going to go launch our own IC te we getting enough interest and support from not just consumers but even suppliers and and fans and retailers so June 6 we announced so so that took about two two weeks is that right two weeks to get over the initial shock we couldn't do anything and on September 6 we're Confident by September 6th we'll have sold our first bottle out in retail so uh three months from decision point to commercialization I've never heard of anyone moving that quickly but this is not a r job this is actually a I call instead of calling it a a you know a startup this is a jump start meaning we had the whole supply chain in place we had the team in place and so um and frankly I think the product we just did a tasting yesterday against Hest te varieties and I actually think on every item we're our taste is cleaner uh and better so uh this was you know not rushed just getting to Market it was done with building on you know two decades of experience and I just did a little calculation because we have a team of 12 people but within that more than half of that 12 people are honest te veterans and so we have over a hundred years of uh experience collective experience among on our team of people you know building an nice tea brand so we are ready to go when you say you had the supply chain in place do you mean that you were were you actually buying tea no it's I guess the relationships yeah it was is the relationships so the folks who manage the Tea Gardens and you know our our supply chain there even if I weren't going back into the T business they're now close personal friends you know my family has been to these Tea Gardens and so they literally reached out to me when they heard the news Because by the way they didn't hear the news from Coca-Cola they they learned of this news from my LinkedIn post that shared the announcement so um they were very concern because for their economic livelihood and also for the decisions they've made you know that their decision to commit to organic and to commit to fair trade certifications there's a price to that and they were worried that this you know they they didn't want to come to regret those decisions so they were super eager to you know work with with me again and the bottling plan and the bottle suppliers and in many cases I'm now dealing with the second generation you know with the bottle supplier I dealt with the father and now this son has taking over the business and he said you know it's such an honor for me to continue the work my father started on on this um so it's just been a very gratifying experience a little bit like being able to be at your own funeral without having to die just sort of hearing the appreciation and and and uh that's just been a very um real gratifying um experience correct me if I'm wrong but I seem to recall that when kooch made the announcement they referred to supply chain issues it would be kind of interesting if you were able to walk right in what do you make of that I think they did have supply chain challenges I because I saw I during the pandemic I would go to stores and I would see shelf voids where you know there should be 10 varieties of honest te and I'd see either none or maybe one or two bottles so there were challenges I think some of it was around the glass packaging some of it made have been sourcing but that's also the difference between a large corporation and an entrepreneur you know a large Corporation says oh there's no inventory of this available okay we we just go make something else um if I makeing and we saw this because we have to move so quickly when it comes time to do our first production run if an ingredient not there we're gonna find a way and literally if it means driving the ingredient to the bottling plant which has happened more than once or or making a personal call to the owner and explaining that this is critical for our success and you know the the entrepreneur is not going to be denied a large Cor operation has got so many different things they're just going to move to whatever else you know is is occupying their mind so we haven't had supply chain challenges getting this line launched and and we have locked in uh and made our suppliers aware of our bold Ambitions for this for this product line so I don't anticipate any challenges in that Dimension I think you bought quite a bit of tea from China in the first time round is that going to be possible this time sure yeah we bought we buy tea from China India and Africa and uh we have already uh purchased a great deal and you know expect to continue to buy more it's all certified organic and all certified fair trade as well and there there aren't the supply chain issues associated with China that were you know so prominent early in the pandemic not with respect to te we have good good suppliers who can you know handle The Brokerage we want to make sure everything is landed in the United States so there's a long lead time on those purchases technology has changed a lot in the last 20 years is there anything that has an impact on your business doing it this time as opposed to last time because technology has evolved yeah it's so funny the the the bottling plants are very much the same bottling plants they've got a little more mechanized they may use a you know a robot palletizer but the the bottling technology is is pretty basic and so where Technologies you know has an impact on Us is around social media and how we communicate with people but the basic science of taking tea leaves Brewing them bottling it putting it in a truck getting it to a store all of those things really those have those haven't changed since 1998 uh it's just the the way we market and create awareness that's gonna will have to be a little more um Innovative than we were back in 1998 the marketing was giving out samples and we'll still do a lot of that but we have to find additional ways to get get U people to be aware about what we're doing is that marketing plan in place and something you're ready to talk about in Broad Strokes I mean it's going to be very much based on the ingredients we have the ethos around the the the sourcing and um you know certainly working with retailers who are very excited to have this line I mean the loss of honesty wasn't just a you know something consumers will miss but retailers will miss having you know this kind of offering on their shelves both for the dollars but also for the the the values that it pomed and so we've gotten great support from retailers and several um National retailers who who have committed to launching the brand and already have plans to give us you know high visibility in in their endcaps and in their coolers and and on other places in the store what's different this time because you have more money to spend from the beginning well it's not about the money what's different this time for me personally is the level of fear uh you know I I had a a a lot of worry I was not just launching an IC Tea Company for the first time I was launching a company for the first time and I had had no experience in the beverage industry no experience in the food industry and so uh it was all very um intimidating and and uh worrisome and you know my whole kind of my livelihood and our how everything was on the line this time um I have the n and and the other thing that was so hard back in 1998 was trying to convince Distributors to carry our product because the dominant brand at the time was Snapple and so anyone who was carrying Snapple just wasn't to be bothered with honesty because they didn't think that you know that wasn't the taste that was the the mainstream taste what's so exciting now is that the marketplace has been built and frankly I you know the team and I spent 20 years building it so I have no doubt that there's a place for this on the shelves of the grocery stores and just because Coca-Cola is pulling out doesn't mean the the category is over so a lot more confidence and a lot more willing Partners uh both within our company who who know the opportunities there because they built it but also our Distributors and our retailers so we've had you know I used to have to spend well back in the day it was you know weeks and months just trying to call somebody to get them to answer the phone now it's emails and and when in many cases the retailers are reaching out to us but when I do reach out to a retailer that you know the calls are getting uh or the emails are getting returned and that's that's really great gratifying I guess when I was asking about the money I was thinking about you know the difference between a you know a scrappy bootstrap kind of startup uh which I believe you started in your kitchen to you know a more professional operation right from the go how does that feel different to you not too different frankly we you know we always want to have that Challenger mindset and that's a phrase we use all the time inside e the change is that Challenger mindset is just a key way to do business because a challenger mindset knows things aren't given you know you've got to go out and earn them even the day for our first production run we went to our bottling plant and it in Pennsylvania and my co-founder Spike and I shared a hotel room because in in the Hampton in you're like we're not we're not just because we've raised money doesn't mean we're going to go spend it on ourselves we've gotta we still got to be lean and and entrepreneurial and and have a Gorilla Marketing mindset so we're not going to go advertise our way to growth that's if if we can spend money on an ad so can a big company and a big company's got a lot more money to spend so that's not going to be the way for us to compete we've got to be resourceful and creative and and and lean and Scrappy and so um that challenge your mindset frankly I hope we never lose it I I I never I I've been around companies that don't have it and I can tell you that's not a it's not a path to growth and it's also not a path to disruption it's not where it's not where change happens you know it's it's where status quo is maintained you mentioned that Snapple was the dominant brand uh back then and that you know they weren't nobody was looking for uh anybody in your lane are are there other big differences in the beverage industry today well yeah certainly the big one is the sweetness level right when we started back in 1998 we were the only people try trying to sell a less sweet tea and it was a little bit like crickets right nobody no one even understood why we would try to do that because the Snapples of time or Arizona we're much closer to soda from a a calorie and even from a ingredients perspective but now that's all shifted somebody said to me today you know you guys were ahead of your time 20 years ago now it is your time and so uh we can avoid the the the pretty grueling learning curve that we had to go through as a company but also that we had to take consumers through um so that's a big change the other one of course is Organics when we started in 1998 we had some organic ingredients but there wasn't a national system for administering an organic seal now there is a USDA certified seal and fair trade as well there was not a a chance to use fair trade ingredients at in a national brand um both for scale and and then for marketing reasons and now there is as well so it's wonderful that all of those are have advanced and can be relevant for us you said you can avoid the learning curve uh that you went through as a company not just in terms of teaching uh consumers what were you referring to in terms of the internal learning curve how do we work with Distributors how do we make the product I mean you may remember because when we met back in early 2000s Hest te still had like an inch of sediment on the bottom because we were using real tea leaves but we didn't know how to filter it but you know our first production run we we've already done here and we've got this beautiful clean tea uh it's still very much got all the right t- notes it just is much cleaner filtration so you know some of this stuff we just had to learn and was painful we we've already be able to to Le frog all that when you raise money um and I think you've raised more than $14 million if um the reporting I saw was correct you know that that's a responsibility you're you're um when companies go into public markets they disclose risk factors they talk about what could go wrong did did you warn your investors of anything that could go wrong here oh always and any accredited investor should be familiar with the risks but look most companies don't make it and and you know it's easy for someone to look at my track record and S there's not a risk but of course there's risk here I'm curious if there were any risks that you highlighted that might be worth talking about I mean I always make a point of sharing the risk so I mean it's still you know even with all our advantages and the funding and our team it's still an uphill battle we're we're challenging established interests and you know it's certainly worth noting that Coca-Cola exited the space because they didn't think it was worth going to so that that should raise some questions we'll certainly assess those risks but obviously we' decided it's a risk worth taking do you have a uh a national retail deal in place we have several we have several we haven't announced them yet but yes we have uh several National retailers who are already ready to go and have H given us the commitment to launch this in the coming weeks I believe at one point we spoke about why you decid decided to sell the business uh to Coca-Cola and I think the the main thing you emphasized to me was the need for better distribution and that you didn't think uh you could get there as a small business which I I think honest may have been around $20 million in in sales at the time when you first sold the coke um and that that's what Coke was bringing to the deal yeah we' always had the mission and it continues through today to democratize Organics to make healthier foods available not just to the Healthy and Wealthy or just to people on the coast but to everyone and so you know uh when Coca-Cola uh arose as a potential partner we thought who better to democratize Organics with and and what who better to make a change you know in a in America's diet with than the world's largest beverage company and so I still stand by that decision I I think it was the right decision I what I would have done differently now in retrospect is I would have made sure honesty got to be larger um before turning over ownership to Coca-Cola um it was still too small the scale wasn't there so it was easy for them to say okay well you know we got a lot of priorities this will not be one of those priorities um and uh but you know here I eat the change our goal is to take Planet make Planet friendly food available and help change people's diets and the way they think about their diets you did get some backlash at the time of the sale from people who thought you were selling out and not remaining true to your your principles yeah I mean the idea that we didn't stay true to our principles is is just ludicrous we when Coca-Cola invested um only 40% of our product was uh fair trade certified um by two they invested in 2008 by 2011 all of our products were fair trade certif and organic and by 2015 we even converted all the sweetener the sugar over to fair trade as well and and and the drinks net calorie profile went down as well so um they may think that we you know didn't stick to principes so we sold a Coca-Cola but one of the things I was proud of and I'm still proud of is that the honest brand was more more quote unquote honest you know um when it uh in 2019 than it was in uh 1998 so um you know the idea of partnering with a large company means betraying your principles that that I just reject I I think we have to a mission-driven entrepreneur has to have the aspiration to make impact happen at scale and so you know I love I have the greatest respect for the small craft entrepreneur but that's that's not a an aspiration I have my goal is to make a change happen at scale and in order to do that you either have to become one of the world's largest companies or you have to work with the world's largest companies and that's exactly what we did and you know to talk about the impact we brought onest and and Honest Kids by the way which is not being discontinued is you know carried in McDonald's Wendy's Subway and Chick-fil-A you know some of the world's largest restaurant chains and so that democratization of organic is absolutely happening for millions of people around the world honest the honest brand is is their first exposure to organic and not just to organic it's also their first exposure to less sweet taste profiles and so what we're doing here at e the change also we're excited to bring organic food and present it in new forms and and make it available to people in a way that we hope will become part of their daily diets do you have a sense of why honesty wasn't more profitable for Coke it wasn't on the inside so I can only speculate but I do know they did not invest in honesty the way they invested in their other tea brands so there you you know so then you weren't going to see the same level of growth uh and then um during the pandemic as you know they had supply chain challenges so then when they get to uh after the pandemic and it's obviously shooken up the whole business they go through they went through a process call fewer bigger bets meaning fewer Brands betting on bigger ones and so on his te as they look at the numbers isn't growing uh and so it's easier to to say well this this and they didn't have an internal Advocate like me they explaining or making the case for why it was important for the world's lest Beverage Company to be future forward in its thinking so they just weren't the same internal Advocates there and that um you know made it easier to decide to to cut the brand and I when they called me to tell me I I thought at first they were saying it was just going to move off the bottler trucks but I thought for sure they would keep it in the natural Channel where honesty is and has been the top selling bottle tea brand and and they said no we're cutting it there too and that that was just I had just been in the Whole Food store the week before for a new store opening and honesty had two full shelves of product and it's so as soon as I heard CO's news about this I'm like oh my goodness that's some amazing shelf space that's going to be available pretty pretty soon who else do you think is competing for that shelf space I'm sure there's lots of folks who want it but if you if if you talk about organic fair trade certified less sweet bottled tea I don't know another brand out there and that's why uh justice tea which you know we've already now made and our going to start shipping out um is ready to capture that opportunity when I was at the New York Times we did did a case study where we talked to you about a decision you made where I believe coch came to you and said they did not want you to use the language no high fructose corn syrup on any of your products oh yeah and you fought them and said no this is part of our brand we insist on keeping it they obviously didn't want it there because they were selling other products that did use high fructose corn syrup I I'm curious I I was always amazed that you were willing to talk publicly about this in the New York Times no less did you get any push back as a result of that sure well from Coca-Cola not from a consumer but yeah no that's what I meant that's what I meant yeah they were not thrilled with that and but it was real and it was honest and um it certainly uh continued that language continued to be on the Honest Kids package uh even when Co bought the brand so even though they um had a a bit of a a hard I'm understanding it they eventually recognize that what I was saying was relevant for the consumer and I think the other piece that the meta way to look at this is brands have to have their own voice you can't uh people don't want just a mush they want a brand with an edge they want a brand that stands for something and so there's an Impulse or an urge tendency in large companies to try to make everything harmonize and and that just becomes the least appealing most you know vanilla image and it's just not something that it creates loyalty or passion among consumers you stayed on at coch for a little while as CEO of honeste even after Koke owned the whole business not just a little while by the way how long was it yeah so coke invested in 2008 and then they bought the brand in 2011 and then I through 2015 continue to work in a full-time role then in 2015 I shifted to halftime uh with Co in half time with beond me as executive chair of the board so I was with Coca-Cola longer than I was with honesty as an independent brand and uh you know I for me it was always clear what my job was it it wasn't to go out and sell fizzy brown liquid it was to go and build on his team and and everyone knew that I I never pretended I was going to be I me I did my best to be diplomatic and I was I was very well I was treated very well by everyone inside the company from the leadership down I was well you know it was respected and and and uh and I appreciate that and they you know whether it was launching onest te in Europe or um in these major chains they recognized that honesty and honest kids offered them something valuable they didn't have so um I have you know those were not painful years now I also made it clear I continue to be based up in Bethesda and I said um I can come down for once a month and I can spend you know a day one day inside of you know closed conference rooms but you ask me to do that too much you're going to just you know take away all the the passion and joy I have for this business and so you know they respected that did you feel as though you still had an an entrepreneurial side to what you were doing or did you feel was it that you felt comfortable being more of an employee I definitely had the mission element to what I was doing it clearly became less entrepreneurial um because as we got more integrated into Coca-Cola we had less discretion over where we could go for New Opportunities one example is uh we had developed a really um great organic sports drink but we could never get the funding for it and if I had gone out on my own I'm confident could have raised you know millions of dollars from investors to launch this organic sports drink we were trying to do it under the honest name so that meant we needed to do it inside Coca-Cola and they just within the portfolio part of the business we were in which was the T bus business they didn't have money to go support Sports string so that's just you know when when a company gets into silos they they they'll miss a lot of opportunities well that's interesting do you think you might pursue that going forward no no we're doing tea right now that's just ice te is the focus and of course you know Coca-Cola has scaled their um brand body armor and that's done well um but we've got our handsful with just ice tea did you make any attempt to buy the Honest Tea name back from Coke they made it clear right away that they were keeping the name because they still had on his kids and you know I I understood they would not let a brand that they own also be owned by somebody else it would have just created too many potential conflicts you mentioned beyond meat could you tell us quickly what your role has been there yeah so I was ex I um joined the board in 2013 and I was executive chair from 2015 through 2020 and you know helped that business grow and scale from really just around a million dollars in sales to you know going public and going International uh and now I'm chair of the board so as a governance role I'm I'm very engaged but I'm not part of the management team and tell us about e the change when did that start so that started in uh 2020 just after I uh stepped away from my um management role at uh Beyond me I felt there was an opportunity to uh move people diets towards Planet Friendly Foods uh and doing it through snacks and so uh I started this company with my co-founders chef Spike mendleson and our first product was a line of mushroom jerky and then we brought out some carrot snacks that are um delicious and more nutrient dense than a lot of the snacks out there for both adults and children and uh that business was growing and then then this iced tea opportunity got presented to us and so just iced tea will be part uh will be offered under the eat the change on umbrella but it will have its own name just iced tea and will you continue to do other things with eat the change the other the snacks and the stuff that you would previously been working on oh yeah for sure for sure yeah what now happens is we can create a a flywheel where the tea you know gets into the store and it can bring along the snacks or if we're doing a a sales promotion we get a endcap in a store and we'll have the bottle tea as a dominant offering but we'll have our snacks alongside it and that's that's wonderful because I I used to see Honest Tea you know on the end cap of a store end of an aisle and there'd be some other snack you know offered alongside it and now we get to have eat the change have the drinks and the snacks you're also co-founder of a vegan fast casual chain yes uh well fast I guess fast food is called a plant Burger we have 12 uh restaurants all plant-based featuring uh Burgers Shakes and fries and this is a fun one it's you know I would say it's indulgent plant-based food it's it's it's not a it's healthy in the sense that it's um plant-based as opposed to animal based but it isn't positioned as a a health food store it's it's a delicious Burger concept and and Chef spike is a co-founder on this one as well this might sound Flip I don't mean it to why are you doing this I I I'm guessing it's you don't need the money at this point but you're you're obviously working very hard at a time you don't have to be working very hard yeah H it's never been about the money for me it really isn't back in college I thought I was going to be going into politics you know I thought that would be the way to make change happen and I obviously haven't gone that route I don't have any regrets about that so for me it's how do I make change happen and that was a good call right if we had a healthy population and we didn't have a climate crisis maybe I'd be you know uh enjoying different parts of life but I for me this is work this is work with purpose it's work I care about and um I really wouldn't want to be doing anything else how many hours a week are you working uh it's easy to imagine a lot I you know I I don't keep track of the Lauren I just because it doesn't feel like work you know I mean I was on the phone last night I don't know 9:30 PM with our New York distributor and and of course this is someone I've worked with you know for decades and we're trying to solve some um issues and it's like oh this is important part of the work and you know the wonderful thing is my wife and my family have been just incredible incredibly supportive and they believe in it too you know when we got the news about Coca-Cola discontinuing on his tea I would say my three sons took it harder than anybody so they were they were really upset and angry about it and you know we had to talk to them about why what's their age range now oh well my oldest just turned 30 and my youngest is 25 uh and they're all in their own group you know doing entrepreneurial Mission based work themselves is it easier this time because the work life balance thing with your family is less of an issue with grown kids uh it's mostly easier because I know more about what I'm doing so I don't feel the same level of stress uh but I don't want to suggest it's easy it's still hard work you know this is still um we're challenging the predominant diet we're challenging the what's right out there on the Shelf so this is not a layup what's your biggest near-term concern what it what are you what challenge are you facing that you're not completely sure yeah we've got to commercialize the tea and then we've got to make sure we bring along the snacks with them and then we got to create awareness like I said we're not going to spend we're not going to do a national ad campaign we're not going to be um doing you know by huge media buys and so we've got to make sure people know about these products and and discover them and of course enjoy them and tell others but we want this to be a discovery brand we want people to find it love it and share it with other when you go into a national retail chain to what extent do you feel the onus is on you to drive sales through your own marketing versus their um being in a position to to make sure that those sales happen it's always on us you know everything's on us and that's that's the Challenger mindset that maybe uh that the the non- Challenger thinks oh I'll just I'll just put it there and someone else will you know take responsibility it's always on us we always have to um control our destiny so um we have to earn the Shelf space and then we have to earn the consumer's attention that moves it off the shelf and frankly look when we sold honesty to Coca-Cola that was the beginning of of an effort too and you could say we didn't succeed I mean we we certainly got the business scaled we kept the mission intact but the brand didn't ultimately survive and that's that's a shame so it's it is nice to get this next opportunity could you imagine one day selling this one to Coca-Cola I I all I can imagine is building something valuable that's the goal and I you know I never had when we started on back in 1998 there was never oh we're g to sell this and flip it it's it's build something valuable and if you do that the right way and one of the best pieces of advice I got from one of my board members was build a company like you are going to own it forever and like you want to own it forever and and if you do that you build it right um opportunities will emerge Seth did I miss anything important that you can think of here's the overriding lesson for me um which is that whether you call it karma or just doing right um it really pays off there it is a real thing and and what I mean by that is there's no way I could have launched a brand from idea to Marketplace in three months if we hadn't treated the people right all along the way the employees who who came back and joined you know this effort the retailers the suppliers all of them stepped up most of them before I had the chance to reach out to them because they value the way they've been treated before and so there really is no downside to doing right by people and right by your partners and I think there's also no downside to acting in a way you believe because as upsetting as it was to see honesty discontinued even before we decided to get back into it I didn't have any regrets I mean I I I had built the brand with integrity and it and those values stayed intact uh and so of course you know to be able to go back again and in a sense double down on those values is is an incredible opportunity but even if honesty had disappeared it was just so gratifying to hear how much that brand meant to so many millions of people emerging entrepreneurs themselves consumers retailers Brokers Distributors all really took pride in that brand and I hope we're able to give them that same feeling with just IC te my thanks to Seth Goldman uh Seth I really appreciate you're taking the time um best of luck with this I hope uh we can talk again when you're a little further down the road and uh we can hear how it's going thank you Lauren great to be with [Music] you wait wait don't leave yet if you have a question or a comment that you'd like the 21 hats owners to address send it to me by replying to your Morning Report or by email at Lauren 21h hats.com that's l r n at 21h hats.com do it now before you forget and don't be afraid to tell Jay what you really think he can take it and if you got something out of this conversation help us reach more business owners tell a friend subscribe and review us wherever you get your podcasts follow us on Twitter subscribe to the morning report at 21h hats.com this episode was produced by Jess Theron founder of blank word Productions okay now you can leave thanks for listening everyone