ChewsWise Blog

ChewsWise Blog

Seth, Why'd You Sell Honest Tea to Freakin' Coke?

Honest Tea announced today that it sold a 40-percent stake to Coca-Cola Co. I've written in the past about this great company, which for 10 years has been plugging away making a tasty, all organic, less sweet bottled tea product and growing like crazy. But when the email announcing the deal landed in my in-box, I had to do a double-take.

A double-take, even though I've seen nearly every major success story in the organic world gobbled up by a mainstream player. Even though, this deal makes so much sense I want to slap myself silly. Even though, Honest Tea was immediately de-cokifying itself on the founder's blog:

While Coke is now our largest shareholder, the agreement was negotiated to ensure that Honest Tea will not be managed or controlled by Coke.  We will continue to operate as an independent business with the same leadership and mission. (my emphasis).

Seth Goldman, who co-founded this company by lugging around bottles of tea in duffel bags, has seen it all. But when I talked with him, a couple of years back, he kept making the point of how hard it was to get on store shelves.

In the $50 billion bottled drink biz, making the flavored water (tea, juice, soda, vitamin water, whatever) is the easy part. The much harder part is getting others to sell it. We're talking distribution, shelf placement, getting eyeballs in front of the drink, so that consumers can give it a chance. Because once they try it, they'll probably come back. But getting to the starting gate is really, really hard.

Seth had to claw each step of the way. A deal with beer distributors in Chicago was a major coup. Finally getting into corner bodegas in San Francisco was a score. When he made Target, that was like being on deck in the World Series. All the time, he kept looking over his shoulder, hoping that he was keeping his core customers, like Whole Foods, happy, even as he expanded beyond their universe. After all, he had to, in order to grow. And, after nearly a decade expanding, he told me he was finally, finally breaking even. Not making money. But not losing any. Yeah!

To get to this point, he brought venture investors onto the team, and they tend to look for a return on investment. Put those two elements together -- the crying need for a distribution channel and an investor pay day -- and the company's fate was sealed. A sale of equity was all but inevitable. As Seth and his co-founder, Barry Nalebuff, a Yale biz professor (both pictured above), state on their blog:

Despite our 66% annual compound growth rate (70% in 2007), we still aren’t reaching all the people we want to reach. Our business has inspired many ... but we also want to see Honest be a change agent through our own actions. When we buy 2.5 million pounds of organic ingredients, as we did in 2007, we help create demand for a more sustainable system of agriculture, one that doesn’t rely on chemical pesticides and fertilizers. But when we buy ten times that amount, we help create a market that multiplies far beyond our own purchases.  When we sell 32 million bottles and drink pouches with less than half the calories of mainstream alternatives, as we did in 2007, we help displace 2,400,000,000 empty calories.  That’s important, but when we sell ten times that number, we help lead a national shift toward healthier diets.

But hold on there Seth ... I get the bigger is greener and more healthy part. But remember, you're getting into bed with the people who put high fructose corn syrup on the map. You're selling equity to the same people you want to displace. Is there something wrong with this picture?

The risks here are obvious, ending up as so much Snapple road kill, or worse, as you recognize:

So how do we move from the ideal to the real without screwing up what we’ve created?  The world of mission-driven business is littered with entrepreneurs whose companies lost their soul or at least lost their leadership.  Whether you talk to Ben Cohen from Ben & Jerry’s or Steve Demos from Silk, they will tell you that if they could do it over again, they would have done it differently.  I am determined to make sure that never happens with Honest Tea. Our challenge is to find a partner who wants to “buy in” to our mission, rather than one who wants us to “sell out”.  Any partner that we consider must understand that the “Honest” brand stands for great-tasting, healthier beverages that are produced in a more sustainable manner.  As long as that partner buys into our approach, we welcome the opportunity to expand the scale and reach of Honest Tea.

Funny, Seth, but when I talked with Steve Demos after he sold Silk he used the same language. Dean Foods was "buying in," he wasn't "selling out." But that's before he was kicked out the door.

But, I know, I know. With ubber social capitalist Gary Hirshberg of Stonyfield on your board, you believe that this can be done. Hirshberg's argued for years he's doing it with Danone. And Coke will support your mission because your mission will make them money. Plus, you cannot remain small and independent in the drink market and survive. No one has. Can't be done.

And I know why Coke is buying you. The soda business is not just stagnant, it's shrinking. The market for bottled water and less-sweet, low-caloric drinks is going through the roof. Coke and the others need a new game in town. You're it.

But remember your name, Honest Tea? The name implies that there is something less honest or dishonest out there that is being sold, and you are the alternative. Being the alternative - it's part of your DNA.

So you have to make the case that Coke will not compromise all that your brand stands for, and has stood for, over the years. Heck, all that YOU stand for.

And that, frankly, is going to be the toughest sale of your career. Because it has less to do with selling Honest Tea than it does with selling Coke.

I wish you luck.

- Samuel Fromartz

Macabre Medical Mystery at Minnesota Meat Plant

The Times had a truly weird medical story today on a disease affecting workers at a Minnesota pork plant, apparently caused by a high-pressure air hose blasting the brains out of pig skulls. No, it's not mad cow. But you wouldn't want this neurological illness. The stuff you find out when you begin to look at the food system is beyond bizarre. (Thanks Clare for the "heads up" - so to speak).

Surf & Turf: The Good, Bad and Ugly

By now, you've probably heard about or seen the video released by the Humane Society depicting the unspeakably grotesque, not to mention, illegal, inhumane treatment of animals at a slaughterhouse in California. Workers rammed the animals with a fork lift and stun guns to try and get downer cows to stand up and qualify for a meat inspection so they could be slaughtered. This meat was destined for school lunch programs.

This video was shot by an employee working undercover with the humane organization and was so shocking it elicited a comment from the USDA Secretary. Even in the wake of Eric Schlosser's Fast Food Nation, continual scandals about e. coli in meat, repeated embargoes on US meat exports because of inadequate inspections, this type of thing occurs. The USDA is asleep at the wheel - or worse, has put on blinders to avoid the obvious.

Lest we get direly pessimistic, there was faintly encouraging news on the fish front, where more retailers are moving towards certified sustainable fisheries. The Marine Stewardship Council is the recognized certifier in this field. The Economist reports that:

Rupert Howes, the MSC’s chief executive, says that while it took seven years for the first 500 MSC-labelled products to appear, the next 500 took only another nine months.

Today there are 1,123 products with an MSC label around the world. Although consumer recognition remains low today, many wholesale buyers recognise the label, and demand for sustainably sourced fish is growing fast.

Wal-Mart has taken a major step, with one-quarter of its seafood counter now MSC certified (and prompting a mea culpa from one friend of mine). If you include fish Wal-Mart sells that are on the way to certification, that moves up to 50-60 percent. Globally, MSC certified stocks represent only 7 percent of the fish supply, but they are fast increasing -- and more importantly, putting increasing pressure on retailers to move in this direction.

With the USDA losing credibility, might a private regime similar to MSC's have more credibility in the meat market and with consumers? Will private certification schemes fill the humane vacuum? Or will we rely on assurances from the USDA that it will get things right?

- Samuel Fromartz

Watching a Bluefin Tuna's Global Travels

This scientific group has been tagging bluefin tuna and tracking their movements, back and forth across the Pacific, clocking over 45,000 miles. Click on the map to see the actual movements over time, though why a bluefin feeding off the coast of California would travel to Japan and back - twice - is beyond me. Maybe they're globalists. (Nod to SeaNotes blog for pointing this out).

European Retailers Boycott Bluefin, Will US Chefs Follow?

In response to dramatic overfishing of bluefin tuna in the Mediterranean, a number of major European retailers took matters into their own hands and declared a boycott on selling the endangered fish, WWF said in a press release.

France's Auchan group, with a nearly 14 percent share of the retail fish trade, declared its boycott on December 28, noting that scientists had advised a 15,000 metric ton ceiling on annual catches, while the international tuna management body was allowing a 2008 quota of 29,500 tons.

Carrefour in Italy, Coop in both Italy and Switzerland, and ICA in Norway also stopped selling Mediterranean bluefin tuna.

"This year we have seen it all - fishing during the closed season, use of illegal spotting planes, massive over-quota catches, an international web of fraud to conceal the catches, fish laundering – the stock does not stand a chance under this onslaught and the failure of ICCAT contracting parties to implement the adopted management plan renders it devoid of content and of any meaningful conservation impact. The situation could not be more serious," said Marine Conservationist Sergi Tudela of WWF.

“It is the most scandalous case of fisheries mismanagement currently happening in the world and certainly one of the worst I have ever witnessed."

So will American chefs stand up as well and stop serving an endangered species?

What Fish Should I Eat? Get a Cell Phone Guide

With all the recent news on overfishing and toxicity in fish, it's easy to get the message that we shouldn't be eating fish. That isn't the case, since there are sustainable fisheries -- that is populations where the fishing is well-managed for the future -- that deserve support. Alaskan salmon, cod and halibut are often mentioned. But there are many others as well.

Many organizations offer wallet-sized cards on making smart seafood choices, but here are a list of web sites that I found especially helpful.

Monterey Bay Aquarium's seafood watch program has a wealth of information that is easy to search. They've also just issued their 2008 pocket guides of seafood choices, based upon where you live. Or better yet, link the browser on your cell phone to www.seafoodwatch.org to call up the guide in a restaurant or while shopping.

Blue Oceans Institute, founded by MacArthur Fellow and author Carl Safina, is very active in this area as well. It has a Guide to Ocean Friendly Seafood, with five ratings from green to red. But what I really like is their text-message service, fish phone, that immediately tells you about the fish you're ordering. Text 30644 with the message FISH and the name of the fish in question. "We’ll text you back with our assessment and better alternatives to fish with significant environmental concerns," they say. I tried it. It works. And it's very easy to use in the market or a restaurant.

Environmental Defense has an eco-friendly seafood selector, available on the web or in a pocket guide. ED has done a lot of good  work on toxicity, and the choices in their easy-to-read guide emphasize that point. Here's a link to their green choices, which include Alaskan salmon, farmed-raised mussels and oysters, trout, catfish (domestic),  tilapia (domestic) and yellow fin tuna. Also available in a pocket guide.

Finally, for kids, check out Kids Safe Seafood, which looks at these issues (especially toxicity), specifically for children.

The point is that there are good choices available for seafood. You just gotta do the legwork.

Mercury Rising in Tuna, But Will Concern Last?

Image source: New York Times

Marian Burros of the Times had a revealing piece today on tuna sushi, showing that restaurant and store samples had so much mercury that six pieces a week would be deemed a health risk by the EPA.

The story ranked as the most emailed item on the Times' web site, evidence of just how much health concerns prompt reaction from readers and eaters.

The question, though, is whether this concern will last.

When stories came out on the risk of PCBs in farmed salmon, sales dipped by about 20 percent for about six months. But Tim Fitzgerald, a scientist in the Oceans Program at Environmental Defense, told me in a phone call this morning that sales rebounded and "now they're higher than ever."

This parallels food scares in general. An immediate high-profile story will lead to a change in habits, but then memories will fade and habits return -- that is, if there are habits to return to. To gradually change consumer tastes over the long-term is more difficult, but doable, and takes work on the chef side. For if restaurants don't serve it, diners won't eat it.

In the case of tuna, Burros quoted a restaurateur and retailer who expressed surprise at the findings. (Reminds me of that line from Casablanca, "I'm shocked, shocked to find that gambling is going on in here!") If you are in the seafood business, you'd have to be deaf, dumb and blind to ignore the mercury warnings on tuna, especially in larger species like bluefin where mercury are known to accumulate.

I was also surprised that so many of the restaurants were actually serving bluefin tuna, a species that is so close to collapse (that is, disappearance) that eating it is akin to dining on an endangered species. There have been gobs of articles on the plight of the bluefin for years, and this illuminating piece from 60 Minutes this past weekend that is worth watching if you haven't seen it. But since this warning has clearly not yet struck a chord, chefs continue to turn a blind eye and serve the fish up. (Not to oversimplify, since some chefs and groups such as Chefs Collaborative do emphasize sustainable fish).

Now, I imagine, this series will alter menus, at least initially. Fearful of mercury poisoning, eaters will shy away from tuna and restaurants will have to avoid bluefin, unless they want to put warning signs on their menus. The upshot: maybe bluefin will now have a chance at rebounding, if restaurants switch to other more sustainable and lower toxicity species, such as yellow fin tuna.

But if chefs don't respond, diners will continue to get doses of mercury until the big tuna run out.

To see how restaurants and supermarkets fared in the actual tests, check out the Times' nifty graphic.

- Samuel Fromartz

The Beginning of the End of Plastic Bags?

BYOB: Bring Your Own Bag. Simple idea. Difficult to execute. I've got several reusable shopping bags and about half the time I run out the door to go shopping and forget to take them to the market. But I'm getting better. And so are some retailers.

Whole Foods announced today it's going to stop using plastic shopping bags by Earth Day, April 22. And for one day only, today, it is giving away reusable bags. I hope it keeps a spotlight on that goal, so that this doesn't just lead to a spike in the use of paper bags as replacements. What percentage of people bring their own bags to the market? I'd take a wild guess and say it's probably under 2 percent, but maybe this will help it grow. It's an easy fix, even though behavior is hard to change.

"...We estimate we will keep 100 million new plastic grocery bags out of our environment between Earth Day and the end of this year alone," Whole Foods President A.C. Gallo said.

- Samuel Fromartz

Pennsylvania Does About-Face on Milk Labeling

Under pressure from consumer groups, dairy associations and farmers, Pennsylvania did a 180-degree turn Thursday and decided not to limit milk labeling standards. (See our previous story for an in-depth look at this issue).

The decision means that farmers and processors can continue to state on milk labels that they do not use synthetic growth hormones - rBST or rBGH - a label that many consumers seek out. The state had sought to limit those statements beginning in February.

The Philadelphia Inquirer reports:

The ban was to take effect Feb. 1, to the dismay of consumer activists and many smaller dairies who choose not to inject their cows with hormones. But the move was superseded by new standards issued today, after a review by the office of Gov. Rendell.

Rendell ordered the agency to review the policy after consumer outcry, his spokesman said

"The governor's position was relatively simple: he wanted the labels to be accurate and informative," said Rendell's press secretary Chuck Ardo.

"It's basically a complete back-down," said Michael Hansen, a senior scientist at the nonprofit group Consumers Union, which had opposed the ban.

Given the firestorm over this issue, expect to see similar "absence" claims once cloned animals and their progeny hit the food supply: "This milk produced without clones and without rBGH".

- Samuel Fromartz

Cloning a Post, Cloning a Post, Cloning...

For those interested in the flood of news and analysis on the cloning decision by the FDA, check out the Ethicurean's "issue watch" round up of articles, blogs and press releases on the subject. (I've cloned their bovine graphic at left). Once again, the blog is proving itself as the must-eat salad bar for food-related news and opinion.

Now my 2 cents:

For now, it appears, mainstream food companies are being very cautious about the cloning technology, now wanting to upset or get ahead of consumers. But it will be interesting to see what happens as more progeny of clones appear. Will they enter into the food supply in a stealth manner, like genetically modified crops? Business Week pointed out that Monsanto targeted industrial crops for GMOs so that consumers would be one-step removed from them: they appear largely as components in food ingredients (as animal feed, high fructose corn syrup, and soy derived products such as vegetables oils and lecithin) or now as ethanol. So pehaps the first cloned products will be industrial dried milk products used in processed foods. When the public is aware of GMOS, they tend to get queasy -- hence the dramatic rise in demand for milk from cows that have not been treated with genetically modified growth hormones.

While GMOs took over the US commodity corn and soybean market, they are still highly controversial overseas. Given the extreme difficulty US beef exports have had overseas in places like South Korea and Japan, due to concerns about the USDA's inadequate inspection regime and mad cow disease, cloning won't help this market. (Asia has shifted largely to Australian sources). The US is creating a high-tech food supply that the rest of the world would rather do without. And don't be fooled that this technology is about feeding the world: it is extremely expensive and creates intellectual property for the owners behind it. What it does not do is create the means for food-scarce people to feed themselves.

So what's the alternative? Organic, since the cloned animals are (and progeny will likely be) banned from organic methods under USDA regulations, according to this National Organic Program memo (pdf) and Q&A (pdf) on the subject.

- Samuel Fromartz

Behind the Most Traded Animal Commodity - Fish

Fish from all over the world are on display at Brixton Market in London.
Image source and caption: New York Times

"There are no fish in the sea here anymore," says one Senegalese fisherman. Without a livelihood, he tried to immigrate to Europe, following a route that has claimed 6,000 lives, including his cousin's. He failed but will try again.

This is just one of the revelations that appear in a New York Times story on the disappearance of African fish, due to foreign fleets plying the waters without oversight. Europe, facing its own fisheries collapse, is importing its supply globally, aided by such companies such as "China National Fisheries Corporation, one of the largest suppliers of West African fish to Europe." In the second story in the series, the Times points out:

Fish is now the most traded animal commodity on the planet, with about 100 million tons of wild and farmed fish sold each year. Europe has suddenly become the world's largest market for fish, worth more than 14 billion euros, or about $22 billion a year. Europe's appetite has grown as its native fish stocks have shrunk so that Europe now needs to import 60 percent of fish sold in the region.

None of this is particularly new -- you can read Charles Clover's book The End of the Line, which documented the practices that led to the collapse of cod stocks in the North Sea and which also spent many pages on the free-for-all underway in Africa.  (I interviewed Clover, Environmental Editor of the London Telegraph, on Salon). But it is news on this side of the pond, where we see very little about the depletion of distant fisheries, such as those in Africa.

The impact of that decline is measured in attempts by idle African fisherman to immigrate to Europe, the  disappearance of subsistence fish protein for Africans, and the rising price of fish in London.

Prices have doubled and tripled in response to surging demand, scarcity and recent fishing quotas imposed by the European Union in a desperate effort to save native species. In London, a kilogram of lowly cod, the traditional ingredient of fish and chips, now costs up to £30, or close to $60, up from £6 four years ago.

It's doubtful that Europe will be able to control or manage this global fish trade responsibly, given its consistent inability in the Mediterranean of staving off the collapse of blue fin tuna. (That link, by the way is to Carl Safina's blog -- the MacArthur fellow who wrote an amazing narrative on the blue fin's plight in his book, Song for the Blue Ocean).

As for sustainable alternatives, a Times sidebar pointed to a fish and chips joint in London where the chef is sourcing all his stocks sustainably -- at a price. A portion costs 10 pounds (about $20).

What the series so far has not examined are the use (or misuse?) of sustainable fisheries. Clover, in his book, for example, revealed that McDonald's Filet-O-Fish sandwich is sourced from sustainable fisheries certified by the Marine Stewardship Council, such as Alaskan cod and pollack. (You wouldn't know it, since McDonald's does not pay the licensing fee to use the MSC certification seal on its meals).

Is this practice still underway and does it extend to Europe as well?  I'd like to know...

- Samuel Fromartz