Can Honest Tea Say No to Coke, Its Biggest Investor? | Hacker News Reader

Can Honest Tea Say No to Coke, Its Biggest Investor?

nytimes.com

61 pointsfogus47 comments

Here's how I would sell it to Coke.

"You guys have a large financial incentive to believe that HFCS is no different than sugar. Maybe it isn't. I'm obviously skeptical, but that doesn't matter.

What does matter is that a large and growing segment of the population does believe HFCS is bad for you and doesn't want to drink it. Chains like Whole Foods won't even carry your products because of it.

You invested in Honest Tea because we were eating your lunch in the iced tea and kids juice markets. We have competitors who are doing the same. You have your own iced tea and juice brands, and part of the reason some people choose ours over your older ones is the belief that HFCS is bad for you.

So even if HFCS is no different than sugar, as long as people think it is, that's going to remain a key reason why people buy products. Studies keep coming out and getting highly publicized saying it's bad for you. You can refute it all you want, but to the believers you just look like cigarette companies who say that smoking doesn't cause cancer.

So you have two choices. You can tilt against windmills and keep arguing HFCS is no different than sugar, which might even be true, but it won't matter because people will buy products that don't have it more and more over the coming years while our competitors eat our lunch. Or you can eat your own lunch.

What did Apple do when they realized that one day iPods would be obsolete because phones would play mp3s? They built a phone that played mp3s better than the rest. That's what you need to do.

And note that Apple is still selling more mp3 players than anyone too. So keep making your Hi-C with HFCS for the people who don't care, and let us monetize the people who do care for you. Someone's going to eat that portion of your lunch, it might as well be you."

I think this misses the issue I think Coke has on this subject. People believe HFCS is bad in part because companies like Honest are pushing against it. There's a real argument that public perception can be swayed one way or the other. You're assuming that the perception of people is preordained.

Yes, but the non-Coke-owned competitors of Honest Tea won't have any difficulty in touting the absence of HFCS. This is a prisoner's dilemma; it does no good for just one competitor to stop pushing against HFCS, you need them all to collude to stop together.

There's also arrogance on the behalf of Coke's execs. Not only do they think that these beliefs aren't preordained, but they believe that they themselves are doing the ordaining. It seems like they are myopic to the problems of competing in the space Honest Tea is in, and more interested in defending their cash cow.

I wouldn't call it a prisoner's dilemma - competitors that oppose HFCS have no incentive to make the switch as the perception (or reality) of better taste/health are their top selling point.

You don't fill up on salad before a pie eating contest and you don't get into the ring with Coca-Cola on their terms.

The problem here is that Coke has to decide between a unified front and hedging their bets. One way kind of undermines the other.

"you need them all to collude to stop together."

Not really, and this isn't anything like a prisoners dilema. Coke doesn't need everyone to believe them, or everyone to collude. First and foremost they need their current customers to hear a believable story that HFCS is just fine. "Let the hippies drink that expensive stuff, we've got science on our side". Their customers already want to believe this for various reasons, so they will keep up this front.

My opinions regarding HFCS is based on my limited review of the science, and I promote that view to friends and family. Coke stands no chance of winning by throwing advertising against word of mouth. Word of mouth takes awhile, but it's stronger. I think Coke will offer a sugar version of their main products in the USA soon.

Forget the limited science, the HFCS version of coke just tastes worse than proper coke.

I suppose if you grew up on the HFCS version you might be accustomed to it, though.

I grew up on the HCFS version and I still think the cane sugar version tastes best. And is more satiating.

Same goes for the sugar version of Dr. Pepper.

The sugar versions are smoother.

De facto they already are, for customers who care to chase it down. "Mexican Coke" has been getting easier and easier to obtain. And I live in Michigan.

PR often creates word of mouth, even when it's clearly nonsense. Look at Sarah Palin or the elite funded and organized "grass roots" tea party. Given a big enough soap box, you can sway opinion. Another example is the idea that democrats want to spend tax dollars and republicans want to be fiscally responsible. A whole lot of people believe this meme, a clear majority in fact. Yet the facts clearly show the opposite, and many people try very hard to spread this truth via word of mouth. Why do people believe the opposite? Because they hear it over and over again from a top notch PR machine.

Coke doesn't need everyone to believe them, what they need is to not lose their very large base so to speak. And for that they need a PR campaign that says what their base already wants to believe. Btw, their base will spread this via word of mouth just as rabidly as you will spread the opposite opinion.

excellent argument and choice of words

What somebody really needs to do is to take the fight to the US Government, to eradicate the sugar tariff system which keeps the US stuck eating liquefied corn (bleech) while the rest of the world munches down on delicious sugar from real sugar cane.

Alternatively, wait for global warming to convert Texas into a prime sugarcane-growing region.

I hope your Texas remark is a joke I'm just not getting because of the textual medium. The US is the 10th largest producer of sugar and Texas is one of four US states known for growing sugar cane.

Well, I'm just a Canadian looking in, but I thought a major part of the problem was that the corn subsidies made HCFS artificially inexpensive. If a hypothetical global warming scenario sets in where the corn and wheat moves north of the border into the arctic tundra, and the US jumps to a top 3 sugar producer, the tariffs and subsidies would certainly change.

It may be top ten, but it's only got 5% of the number one producer (Brazil) and less than half of relatively tiny countries like Thailand. A small part of Texas/Louisiana is suitable for sugar cane production, but basically the US climate is pretty sucky for sugar -- it's one of very few major crops that the US just can't produce in quantities that satisfy its needs. (At least, not without resorting to using corn for sweetening purposes.)

I just chose Texas because it's big, and likely to be on the front lines of an expanded subtropical climate in the US. The image of vast canefields stretching from Lubbock to Corpus Christi amuses me.

The fact that Coke have taken on an ethically-conscious company isn't going to directly impact on the way the public views Coke. I think, these days, the majority of people are too sophisticated for that kind of simple brand-arithmetic.

A battle with a larger corporation over marketing just makes Honest Tea seem more honest, and as the concept of 'honesty' is one its main marketing pillars, the spat could possibly lead to more profit (for both companies) as a result.

Even if this story doesn't involve a strategic decision, there could be a positive pay-off for both.

Indeed. No doubt the massive Coca Cola marketing team is salivating at the thought of spinning this.

I don't think The Coca-Cola Company cares what brand of sugar water they sell. So long as it's them it's being bought from.

I don't agree. I think they want to sell the brand of sugar water with the highest profit margins.

Touché

I think they want a diverse range of branded sugar waters. Allowing them to profit from multiple independent markets.

It's not one or the other - it's the whole spectrum.

This story was absolutely planted in the NYT by the Honest Tea people terrified that Coke would make this change - among others - when they complete the acquisition next year when Coke can do anything it wants with the company.

Or planted by the Honest Tea/Coke people as a bit of awesome PR for a brand they've invested in.

I have friends who are brand managers at Coke. There's absolutely no way this came from them. They're neither organizationally smart enough nor culturally astute enough to pull this off. Everything at KO is looked at through the lens of "how does this affect the Coca-Cola brand?"

I think it's safe to call them "ex friends" if they read this ;-)

If they read Hacker News, I think it's safe to say they're the outliers.

:D That's how I read it first, but the second and third sentences likely refer to Coke as an organization, not his friends at Coke. (Or, at least that's how I would spin it if I'm wrong.)

Part 2:

http://boss.blogs.nytimes.com/2010/07/14/how-honest-tea-stoo...

Makes you wonder how ActiveState got characterised as "an antispam software development company" when antispam is only one part of Sophos's product line, and nothing at all to do with ActiveState.

In the age of the Internet and Google, is it really still an issue? Unfortunately yes, but do we really have to passively take it any more? Do we really want to feel angst because a particular brand name might be corrupted?

Following brand names is much like following characters in comic books. Big Comic Company will pony up to get Mr. HighlyVisionary to do a revamp of NeatoMan to critical acclaim. There's hype floating about and there's true magic going on between the covers. (That's quotable, no?) Readers fall in love with NeatoMan again. After 9 issues, Mr. HighlyVisionary is off doing another project, but the soap-opera plot-line has the NeatoMan fans hooked and they go along with the decreased level of quality.

Following brand names is a similar mug's game. Is there any way we could follow passionate creators instead in the retail world? Maybe this is a startup idea in itself?

Disclosure: I am a long-time comics fan.

Sugar is sugar. Honest Tea is no healthier than Coke, at least not because they use sucrose instead of HFCS (maybe it is because they use less of it, but that's not at issue here). At least when people drink Coke, they know they're doing something unhealthy.

Fuck Honest Tea and all of those other natural beverage peddlers that try to trick people into thinking that their bottled diabetes is somehow healthy because it's natural. There's nothing natural about drinking megadoses of disaccharides.

Erm, I think that Honest Tea was the only completely unsweetened tea in my local supermarket. "Was" because the glass-bottled, unsweetened teas are no longer being stocked there; only the apparently more sweetened plastic bottled teas remain.

I've also noticed that's becoming harder and harder to find unsweetened iced tea anywhere. Is it really that unpopular?

no there really are different kinds of sugar, each with different structures and effects. similarities? yes.

The differences aren't clinically significant. Sucrose disaccharides are broken down into glucose and fructose - the same things that are in HFCS - in the gut. HFCS has a slightly higher ratio of fructose to glucose, but not enough to really matter.

I drink Diet Coke.

If Coke had simply let Honest Tea be Honest Tea, there's a strong likelihood that no one would have ever even made an issue of their differing stances on corn syrup. By attempting to impose its will, however, Coke all but guaranteed that it would become a public matter and that the company would look bad in the process. And along comes the New York Times to stir the drink.

Coke is acting out of fear of future liability. Coke is fearing that someday HFCS will be proven to be materially more damaging than sugar, and when that day arrives the US Surgeon General will be pointing at the Honest Kids label as proof that Coke knew something was bad about HFCS but still continues using it in its other products.

I won't buy Honest Tea because of this: http://anerroroccurredwhileprocessingthisdirective.com/2009/...

The new bottle is designed to use less plastic. The design of the bottom of the bottle is necessary to the bottle's structure.

"Have your plastic bottles changed size?

Unlike other companies that are reducing the size of their products, ours still remains 16.9 ounces. We redesigned the bottle to use 22% less plastic and therefore lower our carbon footprint and utilize fewer natural resources. You’re still getting the exact same volume as before, just with a new design to help with stability and strength while having less plastic."

http://www.honesttea.com/mission/faqs/info/#15

They should tape a sample tea bag to the bottom.

An even more thorough explanation comes from Barry Nalebuff (Cofounder and Chairman) in the comments (http://anerroroccurredwhileprocessingthisdirective.com/2009/...):

When you pick the name Honest, you have to live up to the name. We recently switched to a thinner bottle, one which is 22% lighter. This saves us money and saves the world resources. The only problem is that the thinner bottle was getting dented. In fact, this was a big problem that forced us to redesign the bottle. To help keep its shape, the inside must be under pressure. When the bottle is filled with hot tea, the liquid expands and the plug on the bottom pops out. (If you squeeze real hard, you can make this happen.) Then as the tea cools, the plug pops back in and creates the pressure on the inside that prevents the bottles from being damaged. The thinner plastic means we needed much more pressure and hence a much bigger plug. There really is 16.9 oz. inside and we aren’t trying to pull a fast one. But I can see how you could get confused or could think that we are trying to be deceptive. Taller and thinner still means lots less material. That said, we clearly need to do a better job explaining why the bottle has this design. In the next label run we will definitely say something to explain this to our customers. I hope that makes you feel that you can still trust us and will stick with us. And thanks for helping keep us honest.

Maaaan, that's a lot of spammy advertising links at the start of the page. They all go to what looks like a site that doesn't know it's hosting spammy nonsense, and has presumably been hacked. So is AEOWPTD.com in on the hackery, or has it been hacked too? I don't see any other obvious sign of hackedness on the AEOWPTD page.

You must be using NoScript. That's a brand of worm that runs around adding itself to pages, then uses Javascript to hide itself. Someone must have decided this was likely to slip past the search engines; I have no idea if it works. Those of use who use NoScript then see the corrupted page.

Wow, that site has the most obnoxious SEO bullshit. (Anyone with noscript will see a host of search keywords in place of an article, doubtless intended to hoodwink spiders.)

From the link you quote:

"Even though they contain the same amount of tea, the one of the left looks larger!"

You won't buy it because... you want your bottles to look small? It doesn't seem to be a problem to me unless the two are sold side by side at different prices. The bottle contains 500ml, which in Europe is the normal size for e.g. a bottle of Coke. I don't know what it's competing with in the US.

It seems that the design is for stacking the bottles.

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