Honest Tea: Organizational Structure Summary: Honest Tea (U.S.) is a bottled organic tea company based in Bethesda, Maryland. The company is a wholly-owned subsidiary of the Coca-Cola Company. Honest Tea is known for its organic and fair trade products and is one of the fastest-growing private companies. Honest Tea started off with a handful of employees bringing out five products, three of which are still in the market. Today the company has over 35 package varieties of not only tea but other beverages as well. Honest Tea caters to a group of customers that prefer organic or low-calorie beverages over other types of beverages. Honest Tea finds that it must continually adapt to changing circumstances and environments. Initially organic or low-calorie tea was the only product, but the firm has expanded to various other beverages. Honest Tea believes that growth is continuous; the firm should never consider that they have finished achieving what it set out to accomplish. Task: Read the “Honest Tea: Organizational Structure” case below and then consider the following questions. >> The ideas for Honest Tea started back in 1995 when I was at the Yale School of Management. And my professor Barry Nalebuff was doing a case study of the beverage industry. And we talked about what was missing and where the opportunities were. And I certainly knew I was missing a drink that had a mid to low-calorie profile. At the time all the bottled teas had sort of 100, 120 calories per serving or zero calories and artificial ingredients. And I knew that I was thirsty for that. I'm Seth Goldman. I'm the Co-Founder and TEO of Honest Tea. It wasn't until a few years later after I had graduated from the School of Management, had moved down to Bethesda, Maryland that I came back to the idea, had enough experience working in the private sector, and maybe a little more confidence in my own abilities to say I think I am ready to do something about this. And, of course, Barry was the first person I reached out to. It was, for both of us, our first, you know, entrepreneurial undertaking. And at the same time, it was a really good combination because he kept his day job. He's still a professor. But he was the Chairman of the company, and I was the TEO, the person, you know, getting everything done. And it was great to be able to turn to him for advice, to get his input, and yet he also had enough distance from the business, he wasn't involved in every day-to-day decision. He wasn't feeling the same pressures around cash flow that I was feeling. And so all throughout we continued to grow the business and had a really symbiotic relationship. This company actually is really based on economic theory. We basically came to this whole category as a challenger. There was a missing opportunity, a point of difference, and we really were able to capture it. There were a lot of points where the strategy and the alternative thinking really were put to work. We were doing things differently in almost every way. We were, you know, making a tea with a lot less sweetener. We were sourcing ingredients differently, purchasing different ingredients, making the product differently. It was a little bit like, "Who wants this drink?" And it was a little like crickets out there. Not many people had that appetite for that. And we kind of learned that you know, we were on the bleeding edge. We, it was challenging to grow. We have our original business plan posted on our website at HonestTea.com, and what's striking about it is what we describe there in terms of the brand vision is really brought to life. I think what we aspire to is really what we're building. What's notable in terms of what's missing in that business plan is any discussion of distribution and production, which turns out in the beverage industry is pretty important. When we got started, it was really hard to find bottling plants willing to produce our product. And so we owned a third of a bottling plant outside of Pittsburg. And it was just a huge drain of money, of attention, of energy, and it was barely staying in business. And it wasn't making great products for us either. And so I think about how much time I put into keeping that plant afloat. If I could have been putting that into building the brand, it would have been a great, a much better use of my time, and building something, you know, building a bottling plant was not building the value of this brand of this enterprise. And so it was really after we were able to sell off our interest in the bottling plant that we were able to, that I was able to really accelerate the growth of this business. When we started it was really me working out of my house. We brought on some interns. And then we had three employees in our first year. We brought five products to market. Discuss how Honest Tea falls into customer departmentalization. In what ways did the change in the relationship between Honest Tea and Coca-Cola succeed?