Wednesday, Jan. 9, 2008

Report: Coca-Cola may invest in Honest Tea

Bethesda company is nation’s top organic tea seller

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Bethesda organic beverage maker Honest Tea could soon have the nation’s top soda company as an investor, according to industry publication Beverage Digest.

Coca-Cola Co. of Atlanta is close to ‘‘making an investment” in Honest Tea, says the Bedford Hills, N.Y., newsletter, which covers the non-alcoholic beverage industry.

The investment would not be the first by a larger company for Honest Tea, which makes the nation’s top-selling organic ready-to-drink tea, according to natural products market research company Spins. About a year ago, Honest Tea attracted $12 million, including $5 million apiece from Londonderry, N.H., natural yogurt maker Stonyfield Farm and Swiss private-equity firm Inventages Venture Capital Investment.

Honest Tea spokesman Dale Crowell declined to comment on the Coca-Cola reports, which have also appeared in Money and Reuters. A Coca-Cola spokeswoman also declined to comment.

National sales of ready-to-drink tea and coffee jumped by 66 percent from 2003 to 2005, the National Association for the Specialty Food Trade reported.

Meanwhile, the U.S. carbonated soft drink market actually declined by 0.2 percent in 2005 and grew by only 1 percent in 2004, according to Beverage Digest.

Coca-Cola, which already sells Nestea and Gold Peak teas, saw its U.S. sales of carbonated soft drinks drop by 1.2 percent in 2006, according to Beverage Digest. Overall net revenues slowed in 2006 to a growth rate of 4 percent to $24.1 billion, following a 6 percent increase in 2005, according to the company’s most recent annual report.

Privately held Honest Tea had revenue of $23 million last year, Crowell said. That was up from $13.5 million in 2006 and $9.6 million in 2005. The number of employees has about doubled in the past two years to 52.

Previous investments have resulted in new board members and collaborations at Honest Tea, which formed in co-founder and CEO Seth Goldman’s home in 1998.

Gary Hirshberg, president and CEO of Stonyfield Farm, joined Honest Tea’s board when his company made an investment in 2002. In 2006, Stonyfield and Honest Tea partnered to mix Kashmiri Chai tea with organic vanilla ice cream to form Vanilla Chai ice cream.

Honest Tea moved to a new office last year in Bethesda. The office employs many environmentally friendly features, such as recycled rubber floors in the kitchen and hallways, a kitchen island made of recycled glass, and concrete and used bricks from a Baltimore construcion site in support columns.

This report originally appeared in The Business Gazette.