Honest Tea Case Analysis

Since its startup in 1998 Honest Tea has grown tremendously under the leadership of Seth Goldman especially due to the unique business model of operating in the niche market of high growth low calorie nonalcoholic ready-to-drink beverage industry. While the global beverage revenue is expected to reach $994 billion by 2018 at a rate of 3.3% growth, the non-alcoholic, ready-to-drink is expected to grow at a compound rate of 5% and to reach a sales volume of over $200 billion by 2020 (Bailey, 2014). The slower growth in the global beverage industry is primarily influenced by the lower consumption of carbonated soda in developed markets as well as health consciousness in the millenniums. Additionally due to the high obesity rates, many developing
However, with oligopolistic structure and the low barriers in entry and exit in this market, the competition is very high, especially due to the new entrants are trying to take a market share with promising new innovations in the RTD tea segment. Based on the SWOT analysis, Honest Tea is not well established in terms of adequate financing options compared to the existing major competitors in the RTD team segment, which are primarily financed by the major beverage giants such as Pepsi Foods, Unilever, Dr. Pepper etc. Additionally, the growth opportunity in supply chain establishment, marketing and distribution requires substantial funding and industry expertise in order to compete with the market competition to increase profitability and lower operating cost. Similar to many other acquisitions and partnership, such as Pepsi Co. and Unilever, which has 40% market share of RTD segment, Honest tea can maintain its growth through the strategic partnership with Coca Cola, which itself is trying to strive its market share in the non alcoholic beverage industry due to its over dependency (70%) of revenue on the declining carbonated soda