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CHAPTER 15: HONEST TEA
SUMMARY
The founder of Honest Tea started by meeting his own desire to have an organic soft drink.
Armed with a simple product sample, Seth Goldman pitched his new tea to a buyer of Whole
Foods. The buyer signed his first order and Honest Tea was founded. Now, there are 11 varieties
sold in thousands of retail outlets around the country. The company recently hit breakeven and
expects to continue growing at current rates.
More important than Honest Tea’s successful launch is its focus on social responsibility. Honest
Tea has become a role model of philanthropic business practices. Although the company is barely
at breakeven, it has already donated several thousand dollars to low-income communities. Seth
has partnered with South African farmers and the Crow nation, both areas with high
unemployment, to farm and sell crops for tea production. Not only does the purchase of the crops
benefit the farmers, Honest Tea donates 1% of all sales in royalty fees for community
development. Seth believes a social mission is not only socially responsible, but also financially
sustainable because it enhances customer loyalty. The hope is for Honest Tea to become a well-
known national brand and have impact around the world.
DISCUSSION QUESTIONS:
1. Honest Tea seems to be on the path to achieving a high “return on quality.” Why?
2. How do you think Honest Tea would score out on a SERVQUAL survey among its
customers?
3. Honest Tea has had an extended period in reaching a breakeven point. Should they re-think
their level of cause-related activity for the sake of profit?
1. Evaluate the actual benefit of the South African farmers and Crow Nation from an economic
perspective.
2. Go on the Web site and evaluate the prospects of Honest Tea as a successful brand. What are
the industry trends? What new products might they add to their product line?
