Seth Goldman | Crain's Utah

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Seth Goldman

Background:  

Founded in 1998 in Bethesda, Md., Honest Tea is the top-selling organic bottled tea company in America, specializing in beverages that are “Just a Tad Sweet.” Honest Tea’s product lines include bottled teas, Honest Kids organic juice drinks, and zero calorie sodas. The Coca-Cola Company acquired Honest Tea in 2011. The company recently announced that McDonald’s will start carrying Honest Kids juice drinks in its Happy Meals, starting in November.

The Mistake:

For Honest Tea the mistake was pretty clearly our decision to become a part owner of a bottling plant.

We’d been building the Honest brand, and we thought when we were building the business, that we were a tea company. We assumed tea was the most important part of our proposition. It was only through this experience that we realized what we really were building was the Honest brand, and that’s much more powerful than tea.

In our very first year, we had two struggles around production. We’d go to different bottling plants and ask them to make our product. Most of the time they’d say no, until someone finally said yes. It was an apple juice packing plant, and that was fine until it was apple season. Then they said, “Well, we have to be making our apple juice, and there’s no time to make your product.”

We realized that if we can’t make our product, then we’re out of business. So we went around to different plants, and finally found one that was available for sale. We partnered with two other companies to buy the plant. The two other owners were similar to me—they had brands they were trying to build and needed line time. But they were also similar in that they didn’t have any experience running a bottling company.

We each ended up spending hundreds of thousands of dollars trying to keep this bottling plant in business. We were each devoting lots of energy to worrying about machine parts and boilers, and licenses from Pennsylvania—all types of things that had nothing to do with building a brand.

We owned the plant for six years—the six longest years of my life! The plant was outside of Pittsburgh and I lived in Maryland—that’s a four-hour drive. I was getting up at 2 a.m. to get to the plant by 6 a.m. I’d leave the plant by 4 p.m. to get home by 8 p.m. On those days I’d be drained for the week. It was taking a lot of my physical energy and my mental energy. It wasn’t so much that I was unskilled at it, but it really wasn’t my passion and it wasn’t what I was best at. I was putting a lot of energy into things that weren’t the best use of my energy.

We eventually ended up selling the plant to somebody else. And when we finally did that, all of a sudden I had all this energy and time that I’d been wasting on something else. As a result I was able to sharpen my focus and realize that we’re really building this brand. It’s not about tea, it’s about this word “honest”—organic, authentic, healthier products. When we were able to just focus on building the brand, it became a much more effective business proposition.

It’s not about tea, it’s about this word ‘honest’—organic, authentic, healthier products.

The Lesson:

One of the lessons I learned is to make sure you understand what you’re building, and focus on developing that. Make sure you’re really building what’s most valuable about the business. Honest Tea eventually sold to Coca-Cola and the last thing Coca-Cola needed was another bottling plant, because they’ve got those. And we certainly weren’t running a bottling plant that was a model of incredible efficiency.

By contrast, we were building a brand around organic, healthier ingredients, and authenticity, and that was something that was tremendously valuable to them.

The other lesson is to think about where your energy goes. As an entrepreneur, people say the most valuable resource you have is time. I actually don’t think it’s time, I think it’s energy. Because then the question becomes, what do you do with your time?

I like to think I have more energy than the typical person, and I’ve been told I do, but at the end of the day there’s only so much of it. So for me to be putting so much of my energy into a bottling plant that wasn’t really building the kind of value that ultimately was the source of value for the enterprise, that wasn’t useful. Fortunately, I was able to adjust and we made a much more effective use of my time and energy.

Seth Goldman is on Twitter at @HonestSeth and Honest Tea is at @HonestTea.

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