Honest Tea: Sell Up or Sell Out?

by: Andrew Hoffman

Publication Date: September 20, 2010
Length: 22 pages
Product ID#: 1-429-420

Core Disciplines: Marketing/Sales, Strategy & Management, Sustainability

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Description

Are “wide-scale distribution” and “sustainability” mutually exclusive? This case explores this question through the examples of Honest Tea, one of the fast growing companies in the Ready-To-Drink market, and Coca-Cola. Honest Tea faces a challenging decision: whether or not to sell part of its business to Coca-Cola. Honest Tea desires to stay committed to CSR goals and maintain its niche market appeal; however, it needs to expand its distribution network to make a large impact in the mainstream market, grow profitability, and affect positive change by introducing healthy, sustainable products to the beverage industry. This case asks whether it makes sense for Honest Tea to scale up its organic and fair trade beverages, and if the partnership with Coca-Cola is the best move. The case focuses on business strategy, and promotes understanding of the complexities of a sustainable business and the challenges that arise while trying to maintain growth.

Teaching Objectives

After reading and discussing the material, students should:

  • Describe Honest Tea's business model,
  • Discuss the target market of Honest Tea before and after its partnership with Coca-Cola,
  • Compare alternative strategies Honest Tea may have considered for reaching national scale instead of selling 40% to Coca-Cola,
  • Analyze Honest Tea's distribution networks and retail channel access prior to and after its partnership with Coca-Cola.
  • Debate the importance of consumer trust in a beverage such as Honest Tea and how that may differ from non-organic, non-fair trade beverages,
  • Describe general consumer trust at a company level,
  • Describe the importance of image and reputation to consumers of corporate conglomerates, such as Coca-Cola,
  • Compare organic food trends in the United States and their implications for both small companies, such as Honest Tea, and large organizations, such as Coca-Cola.