Coke buys remaining stake in Honest Tea

NEW YORK Tue Mar 1, 2011 12:35pm EST

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NEW YORK (Reuters) - Coca-Cola Co (KO.N) said on Tuesday that it acquired the remaining stake in Honest Tea for an undisclosed sum, giving the world's largest soft drinks maker a stronger position in bottled tea.

Coke said Seth Goldman, Honest Tea's founder and chief executive, will continue to run the business as an independent unit within Coca-Cola, whose tea portfolio has lagged behind those of rivals such as PepsiCo Inc (PEP.N), whose teas include Lipton and Tazo, and Dr Pepper Snapple Group Inc (DPS.N), which makes Snapple.

Honest Tea, which sells bottled teas and other juice drinks, was started in 1998 with a socially and environmentally conscious mission. Analysts and other industry watchers have said it remains to be seen whether the company can keep up its philosophy once it gets fully swallowed by Coca-Cola.

"It's a legitimate concern and I'd say it's still a risk," Goldman said in an interview.

Still, he said Coke was honoring the product, including by setting up a high-quality tea brewing system and using only fair-trade tea. In addition, Goldman said he expects the drinks will always be sweetened with organic cane sugar, instead of the less-expensive high-fructose corn syrup that goes into many other Coke products.

Goldman has reinvested most of his proceeds from the sale back into the brand, the companies said.

Coke first bought 40 percent of Maryland-based Honest Tea in February 2008 for about $43 million, with an option to buy the rest.

Honest Tea had gross sales of $71 million in 2010.

Coke shares were up $1.17, or 1.8 percent, at $65.09 on the New York Stock Exchange.

(Reporting by Martinne Geller, editing by Gerald E. McCormick and Gunna Dickson)

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