Honest Seth

By LYNNE MEREDITH SCHREIBER

(Copyright 2008 World Jewish Digest. Reprinted with permission, www.worldjewishdigest.com)

It was an unusual Rosh Hashanah sermon, to be sure. Tall, lanky Seth Goldman stood before a crowd of 1,000 members of his Reconstructionist synagogue, his voice reverberating off the ceiling. As chair of Adat Shalom’s High Holiday campaign, Goldman spoke about the old wine barrel in his backyard, where eggshells and vegetable scraps mix into compost with “a robust finish and hints of boysenberry.” After the laughter subsided, the Honest Tea co-founder made an analogy between his redolent barrel and his synagogue’s work of turning old scraps of meaningful stuff into rich, identity-building soil in which a new generation of Jews can plant roots.

“It was a brilliant speech and funny,” recalls Rabbi Fred Scherlinder Dobb, spiritual leader of the Bethesda, Md., congregation. “It was an education on social and environmental principles. And it was a reminder of the power of community. Seth stands for all that and more.”

The 42-year-old activist and CEO is more than just your average entrepreneur. As much as Goldman focuses on the bottom line at his 10-year-old Bethesda-based company, he also seeks to build communities, aid downtrodden people and create a healthful, tasty product. He accomplishes those goals by allowing Jewish and environmental values to inform his business model. Honest Tea is certified organic and kosher, and makes fair trade an essential part of its operations.

‘The social action part of Judaism, that’s part of my core beliefs I carry into the business,’ Goldman says. ‘Very much committed to social justice as well as to not being bound by traditional structures.’

Last spring, Avodah: The Jewish Service Corps named Goldman its 2007 Partner in Justice honoree. Among his qualifying accomplishments, Goldman was cited as an entrepreneur who has made service integral in his work and life. In a release, Rabbi David Rosenn, Avodah executive director, lauded Goldman for rejecting “conventional wisdom that business exists in a moral vacuum.”

“The social action part of Judaism, that’s part of my core beliefs I carry into the business,” Goldman says. He sees himself much the way he views his tikkun-olam-focused shul: “Very much committed to social justice as well as to not being bound by traditional structures.”

It would be nice to say that Goldman always wanted to sell healthy drinks. But growing up in Wellesley, Mass., the youngest of four and the son of professors, Goldman spent his time playing sports, not concocting future businesses.

“I ran cross-country, so I was always thirsty,” Goldman chuckles. “[Other kids] would come to my house [after a run]. We usually just drank orange juice.”

There was a lone lemonade stand, for which Goldman can’t take much credit. After all, he was only 4, sitting beside his entrepreneurial sister, Karla, who sold a cupful with golf balls they found loose on the course nearby. “The golf balls were the more profitable part of the business because there was no cost of goods,” he laughs.

Honest Tea was founded a decade ago by Goldman and his Yale School of Management professor, Barry Nalebuff. Inspired by a class discussion involving a Coke vs. Pepsi case study, the pair connected over their desire for a less sweetened, flavorful beverage.

By 1997, the idea hadn’t withered, even though Goldman was working for Calvert Group, a mutual fund company specializing in socially responsible investing. One day, he started mixing flavors. Then Nalebuff returned from India, where he had been analyzing the tea industry. U.S. companies didn’t bottle India’s high-quality tea, he learned - they got the scraps after fine tea was produced. Nalebuff and Goldman reconnected and launched Honest Tea (so-named by Nalebuff ) in February of 1998.

Tea, which is produced by some of the world’s poorest countries, was an ideal medium for Goldman to marry his ethical and business interests. Honest Tea is brewed from certified organic leaves, so no chemicals, petrochemicals or fertilizers are included in the end product. “Tea leaves are never rinsed, [so] any surface chemicals are going to stay on and they’ll be washed into [what] you drink,” Goldman explains.

Honest Tea works with certified fair-trade farms that practice sustainable farming and demonstrate respect for their workers. At the same time, the tea is certified kosher by the O-U. “If we can source the product from a garden where the working conditions have been inspected and meet a standard that is safe and fair, that’s a positive thing,” he says.

Five varieties of freshly brewed, barely sweetened tea hit store shelves that June. In its first year, the company generated sales of $250,000. Since then, Honest Tea has had an annual compound growth rate of 66 percent, says Goldman, with 2007 sales heading toward $23 million, a 70 percent increase over 2006. With an estimated 33 million bottles sold in 2007, Honest Tea has come a long way from first-year sales of 300,000 bottles.

With such soaring success rates, it’s hard to believe that in the company’s early days, big-time distributors wouldn’t touch the product. “A lot of them didn’t believe there was opportunity in the organic, natural, less-sweetened business,” Goldman says. “We had to find other ways to get to market.”

Even if it meant via a gourmet cheese distributor or a truck carting corned beef to delis. “We [even] worked with a charcoal distributor in Washington, D.C. We were going any place that was bringing something on a truck,” Goldman says. “Eventually, that created enough visibility that beverage distributors said, ‘O.K., there is opportunity there.’” Five years ago, Timberland CEO Jeff Swartz called Goldman on the advice of his friend Billy Shore, head of the anti-hunger group Share Our Strength.

“I cold-called Seth and said, ‘Billy said to say hello,’” recalls New Hampshire- based Swartz. “I went to the hole in the wall that was his office and absolutely loved him. The passion that he feels, it was so distinct and palpable. As he talked, I said, ‘How are you financing the business?’ He said, ‘desperately, from [hand] to mouth.’ I said, ‘let me invest.’ He said, ‘great and glorious.’”

Five years later, Swartz is glad he plunked down an undisclosed amount of cash. “It’s a wonderful business, and he is an extraordinary guy,” Swartz says. “You’ve got a passionate, purposeful entrepreneur in a more three-dimensional sense than the standard entrepreneur - here’s a guy [who], from the beginning, insisted on the principles of how he wanted to [run] his business. From the beginning, his brand was connected to a personality [and] a purpose. It was attractive then, and it’s attractive now.”

‘When you care about something, it’s so much easier to get excited about it,’ Goldman says. ‘To wake up in the morning and feel I’m going to work in what I believe in is incredibly energizing.’

When Goldman accepted his Avodah award last spring, he quoted a passage from the Talmud, supplied during an email exchange of divrei Torah with Swartz. “He said, ‘When you are judged [in the world to come], the Gemara said the first thing you’ll be asked will be, ‘Did you make your business with emunah, with faith?’ We have conversations that go beyond the five-year plan - [things like], what are we going to say to our children to justify the time we spend on our businesses?” “When you care about something, it’s so much easier to get excited about it,” Goldman says. “To wake up in the morning and feel I’m going to work in what I believe in is incredibly energizing.”

The company’s latest product is Honest Kids, a low-sugar juice that was inspired by one of Goldman’s three sons, Elie. When there wasn’t Honest Tea to pack in his lunch, Elie grabbed a Capri Sun or other sugary drink. One day, he turned to his dad and asked, “How come you’re selling healthy drinks to adults and I’m taking this sugary stuff [to school]?”

Goldman peered at the ingredients panel. “There’s more sugar per ounce in these juices than in soda, and I’m giving that to my kid.” Honest Kids launched this year. While Honest Tea bottles have a message from “Seth and Barry,” Honest Kids products are signed by Elie.

Goldman and his wife, Julie Farkas, are raising Elie, now 13, Jonah, 15, and Isaac, 10, in a kosher-vegetarian home. Being Jewish for his family means merging their beliefs with everything they do.

Those beliefs informed the design of Honest Tea’s new 4,800-square-foot headquarters, built last summer in a leafy industrial park in Bethesda. Goldman chose a location near a bike path so all 23 employees can ride their company-bestowed Jamis bikes to work. The office is eco-friendly - windows open, floors of renewable bamboo and recycled rubber, and desks purchased used. Brick columns came from a Baltimore construction site instead of going to a landfill.

“This is [what] I preach about,” says Rabbi Dobb. He quotes a tract of Talmud, from seder z’raim, or Seeds, illustrating that “the so-called green revolution is central to Jewish identity. [Tracts on] agriculture link social justice with ecological sustainability - crop rotation and letting the land lie fallow in the sabbatical year are next to stuff like leaving the corners of the field or the dropped gleanings for the poor or the stranger. Honest Tea using organic ingredients, donating to worthy causes and establishing strict fair trade criteria that give growers of the tea a living wage, these are all brilliant modern reconstructions of core Talmudic principles.”

Goldman is more humble in his assessment. “We’re not a perfect organization,” Goldman says. “I don’t even like the word socially responsible. We try to make decisions with [a] sense of justice in mind, and I’m sure we fall short. But it’s a consciousness...we’re seeking to maintain what’s important to us.”

News Update! Coca-Cola takes stake in Honest Tea

The Coca-Cola Company said Tuesday, February 5 it will buy a 40% stake in Honest Tea, a 10-year-old organic bottled tea upstart that grew its sales 70% last year. While Goldman acknowledged that some customers will be concerned to see a small, ethically-run company sell a stake in its business to a multinational, he believes that the deal will have a net positive effect in expanding the organic market. “You partner with the whole organization, but we’re marketing the part that’s the solution. This isn’t us selling out—this is them buying into what we’re doing.”—Seth Goldman