The Coca-Cola - Honest Tea Deal: Promoting Sustainability or Corporate Greenwashing?


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:
Case Code : BECG113 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate Sustainability
Case Length : 22 Pages
Period : 1998-2009
Pub Date : 2010
Teaching Note : Available
Organization : Honest Tea / Coca-Cola Company
Industry : Non-carbonated Beverages
Countries : US

Abstract:

US-based Honest Tea Inc. (Honest Tea) was founded by Seth Goldman and Barry Nalebuff in 1998, as all natural, bottled iced tea company. From natural tea, Honest Tea went on to sell organic tea in 1999. Since its inception, social responsibility and environmental sustainability were of prime importance to Honest Tea and were a part of the company's identity and purpose. Honest Tea partnered with local communities to procure organic ingredients. As Honest Tea procured fair trade products, the workers on the farms benefited as they were provided with better wages and working conditions.

In a span of ten years, Honest Tea's revenue growth witnessed a CAGR of 66%. The company's revenues reached US$ 38 million by 2008 from US$ 250,000 in 1998.

In February 2008, the Coca-Cola Company acquired an equity stake of 40% in Honest Tea. The agreement between the companies stated that Coca-Cola can acquire the remaining stake after three years. Seth Goldman maintained that Coca-Cola's acquisition of the stake would benefit Honest Tea, as it would strengthen the company's distribution capabilities. However, customers who lent their support to Honest Tea over the years were not happy with this deal. They said that Honest Tea was selling out to Coca-Cola, which had a history of environmental and labor abuses in some of its international markets. Some of the industry experts were of the view that Coca-Cola may discontinue Honest Tea's sustainable business practices.

Issues:

» Understand sustainability as a corporate strategy with reference to the incorporation and operations of Honest Tea.

» Understand the challenges faced by start-ups that adopt sustainable practices and the ways to overcome these challenges.

» Evaluate the methods by which companies can practice sustainability management and gain competitive advantage.

» Appreciate the emerging trend among the companies to assume responsibility towards the environment and society.

» Analyze the trend of multinational corporations acquiring a stake in companies involved in mission driven businesses and the consequences thereof.

Contents:

  Page No.
Honest Tea Sells Equity Stake 1
The Beginning 2
Going Organic 4
Distribution 5
Sustainability Practices 6
The Stake Sale 11
Customers Question Honest Tea's Honesty 12
Looking Ahead 13
Exhibits 15

Keywords:

Honest Tea, Coca-Cola Company, Organic Products, Corporate Sustainability, Corporate Greenwashing, Social Responsibility, Bottled Organic Tea, Seth Goldman, Barry Nalebuff, Environmental Sustainability, Organic Farming, Distribution, Sustainable Development, Fair Trade Certified Products, Environmental Footprint, Renewable Energy, Carbon Credits, Economic Viability

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