Can open business practices survive an acquisition?

It ain’t easy being open in today’s corporate environment. It’s even harder for an open company to stick to its knitting when it joins forces with a much larger, much more entrenched player in its industry. Is it possible for a small company to stay true to its more 21st century values if it hopes to reach the heights of its 20th century predecessors?
Well, if anyone’s got the incentive to be open and transparent in its approach towards its customers, it’s a company whose very name evokes one of the tenets of the open source way. Consider Honest Tea, a small beverage company began in 1998 by a business school professor and a former student with a shared passion for tasty beverages. Under the tagline “Be Real, Get Honest”, the Bethesda, MD based company sells a variety of healthy non-carbonated beverages with such exotic names as Mango Acai White Tea, Jasmine Green Energy, and Peach Oo-la-long.

According to their mission statement, Honest Tea “strives for authenticity, integrity and purity, in our products and in the way we do business. In addition to creating a healthy alternative beverage with a lot less sugar than most bottled drinks, Honest Tea seeks to create honest relationships with our employees, suppliers, customers and with the communities in which we do business.”

In early 2008, the Coca-Cola Company took a 40 percent interest in the Honest Tea with the hopes of expanding its selection of lower-calorie drink options. Both companies saw the benefits of such an arrangement: Coke plugged a hole in its product portfolio while Honest Tea enjoyed vastly wider distribution than it could ever hope to attain on its own. Coke has an option to buy the whole company in 2011.

In a recent case study about the company, the New York Times details how, almost immediately following the deal, friction emerged between the two companies. In an effort to stay the course of their mission statement, Honest Tea added a “no high-fructose corn syrup” label to the packaging of its Honest Kids line of children’s drinks. Coke saw this label as disparaging and potentially damaging to its other product lines and asked Honest Tea to change or remove the claim from its labels.

The question emerged: should Honest Tea compromise its values and beliefs in the interest of its business partner? Or should it stay true to its promise to “create honest relationships with its customers?” What do you think?

In a follow-up, the NYT gathered opinions on the matter from several other leading businesspeople who have experienced similar dilemmas. I particularly liked the advice of Gary Hirshberg, chief executive of Stonyfield Farm, who is still with the company after it was acquired by Group Danone:

“My advice to C.E.O. Seth Goldman: Stick to your knitting. Keep the honest in Honest Tea. If you don’t, you’ll regret it. And so will Coke.”

The NYT ultimately posted an update detailing, in his own words, how co-founder Seth Goldman responded to Coke’s requests. Honest Tea declined to make the packaging changes requested by Coke.

When asked if business dealings with Coke have chilled since the decision, Goldman responded with a nod to another key open source principle.


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