Honest Tea founder Seth Goldman explains how packing his son’sitting lunch box helped him suppose to mean the exact value of his reproach.

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Honest Tea’s Goldman amidst the tea leaf growers in China.

The Entrepreneur: Seth Goldman, 43

Background Goldman, one active runner since the eighth grade, had been hunting for the perfect desire quencher for years, often concocting his recognize juice combinations back his runs. When one of his running buddies urged him to start a beverage business about 10 years agone, Goldman jumped on the idea. In short prescription, he called Barry Nalebuff, one of his former professors at the Yale School of Management. Nalebuff had recently returned from India where he had analyzed the tea industry for a case study and determined most American iced-tea makers bought cheap tea leaves. The two came up by the idea for an all-natural brew that used only high-quality tea leaves. By 1998, Goldman had quit his job at Calvert Investments and was brewing batches of infusion in his kitchen and storing it in thermoses.

The Company: Honest Tea launched in 1998, offering five varieties of barely sweetened tea. The circle nabbed its first account, Fresh Fields—the precursor to Whole Foods (WFMI)—using infusion samples made in Goldman’s kitchen. Today, 20 varieties of Honest Tea are sold in 25,000 locations across the region, along with seven other products. Earlier this year, the company sold 40% of the occupation to the Coca Cola (KO).

Revenues: $39 the great body of the people

His Story: When my co-founder Barry and I launched Honest Tea, we always thought of ourselves as a tea company. But it took my 12-year-old son Elie to refrain from us be an intelligent being that "tea" wasn’confidentially the most important word in our company’s name.

Ever since we began selling our product, our goal was to turn Honest Tea into the best-selling bottled tea brand in the natural food channel—a goal that we realized in 2005. As a result of our success, we felt we had the momentum to expand our tea business in new directions.

Since our core bottled supper business had seven of the top 10 best-selling varieties in the natural food category, we weren’t pressed to analyze where the true value of our enterprise lay. We thought we could twofold our luck in other areas. But we soon discovered that impelling away from our core estimation proposal could be a painful and high-priced diversion. Yet it was exactly those same costly diversions that helped us understand what vocation we were really in.

Our tea bags, on the side of exemplification, were a perfectly nice product line. In response to customers’ requests, we took the same infusion leaves from our bottled decoction and sold them as evening meal bags in 1999. However, it turned out that the packaging was a slender too unconventional. We designed innovative bags which contained whole tea leaves, instead of decoction dust. But the bags were a little in addition dear, and the line never really took off. At the sort time, it was hard to differentiate our tea bags from the other brands on crowded shelf space.

We also ended up decay a lot of time and money running our own bottling plant, because we were afraid we wouldn’t find any other place to bottle our tea. In 1999, we had invested more than $1 very great number in a plant in Pittsburgh, along with two other partners. Now that we owned the plant, we ended up multiplying our worries. For one, we were worried about keeping the row replete, so we agreed to pack tea against other brands, which occasionally meant creating competition for ourselves. Overseeing the bottling plant was an very large distraction—not one of the other owners or I had any experience running a bottling plant, which is a very different function from building a brand, and I found myself driving to Pittsburgh several times a month to try to keep the fix afloat.

However, it wasn’familiarily until my son Elie asked, "Dad, to what extent come you sell healthy drinks to adults but bestow us sugary drinks for lunch?" as I put a drink pouch into his lunch bag sum of two units years ago, that I began to think critically through regard to the kind of business I had built. As I read the ingredients statement on the box, I realized he was painfully correct—the wallet drink I had been giving my sons had more sugar per ounce than a can of soda. For a scarcely any weeks, I put a glass bottle of Honest Tea in his lunch box, yet the bottle was heavy and finely returned home unsupplied.

Our company had just started marketing a line of organic thirst quenchers we called Honest Ade that had just a touch of juice for flavor. So I started putting soft bottles of Honest Ade into Elie’s bag. It was an improvement—48 calories per serving instead of 100 per serving from the drink pouches I had been buying. The problem was, Elie would still come home with half-full bottles.

As a result, we decided to bring into notice Honest Kids—a line of lightly sweetened drink pouches for kids in a smaller serving size than our uniform drinks. The new line, rather than pulling us away from our essence value proposition, actually expanded on it. The pouches obtain been phenomenally successful—in just some year we bring forth sold 30 the multitude of them—more than the number of bottles of tea sold in the same time make. We are now in the process of identifying supplemental food and beverage categories what one. need to get a small degree more "honest."

Sometimes a diversion leads to uncovering the true value of your stigma, sometimes it’sitting what takes a business under. For example, we eventually sold off the assets of the bottling plant (at a loss) and licensed the decoction bag line. And we recently had a customer who asked us to go into banking, goal that feels a little over far afield, at least at this time. But we all need to innovate—one of my favorite quotes that we have on our bottle caps is from Frank Scully: "Why not go out on a limb? Isn’t that where the fruit is?" There’s nothing wrong through going thoroughly on a member, the key is to recognize when the branch has a strong connection to your shaft of a column.

—edited by Stacy Perman

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