Dive Brief:
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Coca-Cola will phase out its Honest teas product line at the end of 2022, the company said in a post on its website. It plans to continue manufacturing the “quickly growing” Honest Kids juice offerings.
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Gold Peak, a national brand, and the regional Peace Tea will now anchor the Coca-Cola’s ready-to-drink tea strategy in North America. In a tweet thread commenting on Coca-Cola’s Honest teas announcement, Seth Goldman, who co-founded the brand, called it “a gut punch.”
- Honest teas is the latest product line to be discontinued or sold by Coca-Cola. The Atlanta company has been shrinking its drink lineup to prioritize fewer, bigger brands that have the greatest opportunity for scale and growing profitably.
Dive Insight:
By ending production of its Honest teas line, Coca-Cola said moving from a three-brand tea portfolio to two will free up investment resources and supply chain capacity to attract consumers and grab market share.
“We believe Gold Peak and Peace Tea are best positioned to meet consumer preferences for high-quality brewed teas with different levels of sweetness and flavor,” Sabrina Tandon, group director of RTD tea with Coca-Cola’s North America Operating Unit, said in a statement.
Coca-Cola noted Gold Peak launched in 2006 and became a billion-dollar brand nine years later. It transitioned to a real-brewed formula in 2018 by appealing to people who value “tea-forward taste profiles” and high-quality ingredients. Peace Tea has built a loyal Gen Z following in the Midwest, Northeast and Southeast with its fruit flavors.
Both brands are driving growth in the RTD tea category, with sales increasing during the pandemic as shoppers turned to beverages with immune-boosting properties and multi-serve packaging options for at-home consumption, Coca-Cola said.
Meanwhile, the company noted Honest teas have been negatively impacted by a drop in immediate consumption sales and limited glass supplies. With ongoing supply chain challenges, Coca-Cola has been unable to meet consumer demand for Gold Peak and is opting to prioritize the production and distribution of certain product SKUs.
Tandon also cited some overlap among Gold Peak and Honest teas consumers. Given this repetition, ongoing market challenges, a company-wide change in strategy and the decline in sales of Honest teas, it makes sense for Coca-Cola to focus on a smaller tea portfolio. At the same time, Coca-Cola can direct its finite resources to grow brands like Coca-Cola Zero, or more recent acquisitions like Costa Coffee and sports drink BodyArmor.
Coca-Cola added Honest teas to its portfolio by purchasing a 40% stake in 2008 for $43 million. The company exercised an option three years later to purchase the rest of the tea brand for an undisclosed amount. In recent years, it has moved the brand into coffee, sports drinks, lemonades and kids’ beverages.
As more stores started selling Honest branded products and the items under its umbrella expanded, revenue soared. In 2018, Honest branded products made more than $500 million in revenue — up from $38 million a decade earlie r. With the brand posting annual growth in the double digits at the time, Coca-Cola at one point projected Honest to join the ranks of its billion-dollar brands in the U.S. by 2025 — and likely sooner if global revenue was factored in.
Just a few years later, the Honest brand is seeing the end of the signature tea that was responsible for getting the brand off the ground roughly two decades ago. It’s the latest offering to be cut by Coca-Cola as part of its 2018 strategy to focus on brands with the most growth potential. In recent years, the company also discontinued Tab, sold Odwalla to an investment firm and divested Zico coconut water to a private equity group founded by the brand’s creator. In total, Coca-Cola plans to eliminate an estimated 200 brands globally.
