Have you ever heard of the brand Honest Tea? In 2013 the sales of Honest tea were worth a whopping $112 million. But in 1997, just 19 years ago, it was simply two men and an idea. Seth Goldman, an active young man, was continually searching for the perfect drink to quench his thirst after a run or a game of basketball. All the drinks available at the local convenience stores had either too much sugar in them, or too little.

Finally, in 1997, after a run returning from his usual jog in New York City, he decided that it was time to do something about the problem. He immediately contacted his old Harvard Business Professor, Barry Nalebuff, with whom he’d discussed the issue many times. He told Barry that he was ready to try to solve this problem and asked if he would still be interested in joining in the venture. Barry had been working on the problem himself, and already had come up with an idea for the brand name, Honest Tea.

Seth immediately got to work brewing batches of organic tea in his kitchen. He quit his job at Calvert Mutual Funds and delved into the task full time. Within five weeks he had perfected his recipe. Seth bottled some of the sample tea in used Snapple jars, and put his own label on them. The prototype was ready, and the two men headed to the local Whole Foods Market to present their sample.

The local market loved the tea and immediately ordered 15,000 bottles. The two men were in business and quickly went about figuring out how to produce this many bottles of tea. They did, and the business hasn’t stopped growing since.

As their name indicates, Honest Tea strives to promote honesty and integrity in their product and business dealings. They are also heavily involved in many social projects in Africa, Asia, and Latin America.

Although it has not all been smooth sailing, Barry and Seth have guided the company to huge success. Here is a scale showing how much they’ve grown (in gross revenue):

  • First 5 years – $16.3 million
  • Second 5 years – $90 million
  • Last 5 years – $392 million

In 2008, the Coca-Cola Company purchased a 40% stake of the company for $43 million. Three years later they bought the rest of the company.

The story of Seth and Barry and the success of Honest Tea is amazing. It shows the opportunity available in a niche market. Even one that is hidden in the midst of such a competitive industry. Seth says that many times they encountered doubters who told them it wouldn’t be possible to crack the drink industry, so inside the company’s main headquarters they have a sign with the Chinese Proverb,

              “Those who say it cannot be done should not interrupt the ones doing it.”