Entrepreneurs

How being the worst wrestler in school made Honest Tea's co-founder an epic entrepreneur

Co-founder of Honest Tea, Seth Goldman.
Photo by The Washington Post
Co-founder of Honest Tea, Seth Goldman.

Seth Goldman was making good money working in finance when he decided to quit his job to start a tea company. At the time, he had a wife and three kids. And he knew nothing about tea.

Goldman and his business school professor Barry Nalebuff built Honest Tea, which became a favorite beverage of President Barack Obama. They launched the company out of Goldman's suburban Maryland kitchen in 1998 and the Coca-Cola Company bought Honest Tea outright in 2011. More than one billion bottles of Honest Tea have been sold. The beverage company does about $170 million in annual revenue.

It's been one impressive ride. You might even say that Goldman's gotten pretty lucky.

But Goldman wouldn't say that.

"I really don't believe in luck. I believe the reason we're here is the perseverance," says Goldman, in an interview on the startup podcast, "How I Built This."

"And I've heard someone say, 'Well, you were in the right place at the right time.' And I say, well, you know, it took 10 years to get to that place. So this was not a this is not something that just happened overnight."

The idea for Honest Tea came when Goldman went into a convenience store in 1997 after a workout. All he could find were overly sweet drinks.

"They were almost uniform in their taste profile, their sweetness profile, which was six or seven teaspoons of sugar per eight ounces or none. Why isn't anybody making a drink with one or two teaspoons?" says Goldman.

Armed with a conviction that he could fill a gap, Goldman wasn't bothered by his lack of familiarity with the market. To the contrary, he saw his naivety as an asset.

"Having zero knowledge of the beverage industry in the beginning was actually a competitive advantage because we went in without any of the assumptions," says Goldman.

Goldman and Nalebuff secured a 15,000 bottle order from Whole Foods after bringing their home-brewed tea samples to the testing in cleaned out Snapple bottles. To fill the first order, they found an apple juice bottling facility in Buffalo, NY, that could rent out its equipment. They turned mesh bags intended to clean out pools into giant tea bags.

"Every once in awhile the bag would break and the pipes would, you know, clog. It was not pretty," says Goldman.

In the first days of the summer of 1998, Goldman and two interns stood around in Whole Foods giving out samples of Honest Tea. He says the two gave out more free samples than they sold in the early days. But by the end of the summer, Honest Tea had become the best-selling tea in the 17 Fresh Fields / Whole Foods stores in the mid-Atlantic.

As the company grew, distributors frequently rejected Honest Tea for being too expensive and not sweet enough. "It tastes like grass," the distributors said, Goldman remembers. Getting investors to believe in his mission during the dot com boom also proved challenging.

Goldman and Nalebuff stuck to their core mission despite the distractions.

"To take people in a different direction, you have to disrupt where they are going," says Goldman.

As part of an effort to identify emerging brands, The Coca-Cola Company approached Honest Tea in 2007. By 2008, the beverage conglomerate became a 40 percent owner of Honest Tea and in 2011, it bought the company in full. Today, Honest Tea is sold in 100,000 stores.

And though Goldman has made a lot of money along the journey, he still lives in his same suburban Maryland home.

As Goldman recalls all tea experiments in his kitchen, the risk and the rejections, he concludes that being a successful entrepreneur isn't about being lucky, it's about being persistent. And that's a skill he says he learned by being a terrible wrestler in high school.

"One of the best ways I developed resilience growing up was I wrestled in high school. I was the worst wrestler on the team. My first year I was 1 and 10 and that was only because somebody didn't show up and I got the forfeit. So I had learned how to fight off my back. And I had experienced rejection," says Goldman.

"It's so important to be able to bounce back from something, all the time, but in life and especially when you believe in it."