HONEST TEA
Epilogue 2008
• Honest Tea sold a minority stake of 40% for $43 million to
Coke
• Honest Tea products soon got much wider distribution,
across the country
• Under this deal with Coke, Honest Tea retained control
over its products and contents
• Coke started vetting Honest Tea’s ingredients to comply
with federal requirements
• Honest Tea had sales of $72 million in 2010
(3 X more than what it was before)
National Entrepreneurship Network
Epilogue 2011
• Coca Cola Co. bought the rest of Honest Tea Inc. for an
undisclosed amount
• Coke to preserve Honest Tea's ‘entrepreneurial culture’
as standalone business under Chief Executive Seth
Goldman
• Honest Tea to remain based in Bethesda, while using
Coke's manufacturing and distribution network
• The deal gives Coke a greater presence in ice teas
National Entrepreneurship Network
The Honest Tea Growth
Video
National Entrepreneurship Network
What are the other decision points for
Goldman in this case?
• Did you notice any pattern of growth in start-ups in a
garage (kitchen!) scaling to corporate entrepreneurship?
• Do you think Goldman’s decision points would be
different at each stage?
National Entrepreneurship Network
Honest Tea: Revenue Growth
REVENUE/
PROFITABILITY
1996
1998
2000
2002
2004
2006
2008
TIME
Pre Venture
Raw Startup Early Stage
Growth
National Entrepreneurship
Network
Maturity
Raw Start-up
•
•
•
•
•
•
•
Getting First Customers
Product development – experimenting and rapid
prototyping of Product/Service
Raising Money
Setting milestones
Make assumptions
Test business hypothesis
Registering business as a legal entity
National Entrepreneurship Network
Early stage Start-up
•
•
•
•
•
•
Iterating Business Model (e.g. Sales vs. Cost of delivery
of product / service)
Identify target market segment / customer base
Refine / finalize product / service
Increase sales and customers
Achieve Cash-flow positive state sustainability
Institutionalize tracking cash–flow closely
National Entrepreneurship Network
Early Growth
•
•
Increase Sales!
Formulate Business Strategy
– Expanding Product/Service Line
– Expanding Customer Base
– Expanding Team
•
Develop and manage human capital
•
Stabilize Cash flow Cycle
•
Aggregate business activities into business processes
•
Brand building
•
Establish competitive advantage
National Entrepreneurship Network
Growth & Expansion
• Gain a larger market share
• Find new sources of revenue to increase/sustain
profitability
• Raise additional capital to support exponential growth
• Leverage and Maintain competitive advantage
National Entrepreneurship Network
Maturity
• Stability
• Governance Framework for organization
• Aggregate business processes into well identified
business functions – e.g. Marketing, HR, Finance
• Institutionalize accountability
• Systematic operations
• Harvesting – Exit / merger / acquisition
National Entrepreneurship Network
ypical Life cycle of a Successful Venture
REVENUE/
PROFITABILITY
Positive Cash flow
Break Even (Investment)
TIME
Turnaround (Cash-flow)
Pre Venture
Raw Startup Early Stage
Growth
National Entrepreneurship
Network
Maturity
Honest Tea Revenue vs. Life Cycle of Venture
REVENUE/
PROFITABILITY
Positive Cash flow
Break Even
1996
1998
2000
2002
2004
2006
2008
TIME
Turnaround (Cash-flow)
Pre Venture
Raw Startup Early Stage
Growth
National Entrepreneurship
Network
Maturity
All materials used in this session
are available in the NEN CD,
Kick-Starting the Entrepreneurial
Campus under Inside the
Classroom –
section “Entrepreneurship
Concepts”,
Sub-section “The Venture Life
Cycle”.
National Entrepreneurship Network