Honest Tea: Seth Goldman

In 1997, after going for a long run, Seth Goldman was frustrated with the sugar-filled drinks at the corner market. So he brewed up a beverage in his kitchen, and turned it into Honest Tea. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 0:02Speaker 00

  So in 2003, we had a delivery of glass that was faulty. And so we ended up with some product in the marketplace that had broken glass inside the bottle. In fact, it was two different Whole Foods stores. And Whole Foods has a rule, three strikes and you're out. We knew we couldn't afford as a business to lose our largest customer. So we voluntarily withdrew all product from the market.

• 0:23Guy Raz?

  Every store?

• 0:24Speaker 00

  Yes. Everywhere, not just Whole Foods, everywhere.

• 0:27Guy Raz?

  Wow. How much did that cost you?

• 0:29Speaker 00

  It totally stopped our sales. It was just painful.

• 0:37Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 0:50Guy Raz?

  I'm Guy Raz, and on today's show, the story of how Seth Goldman and Barry Nalbuck took honest tea from a kitchen sink in suburban Maryland to the shelves of virtually every grocery and convenience store in America.

• 1:07Guy Raz?

  So the year is 1997. Seth Goldman is living in Bethesda, Maryland with his wife and three young kids. He's 32. He just graduated from the Yale School of Management. He's got this great job at an investment firm. But Seth, he's got an itch. He feels like he wants to start something, and it keeps nagging at him, day after day after day. So he starts thinking about different ideas, maybe a web-based system that would raise money for public schools by tapping into alumni networks. He came up with an idea to simplify diagnostics for urinary tract infections. There were a bunch of other ideas that would pop into his head, but nothing really got him excited.

• 1:50Guy Raz?

  Until one afternoon, when he finished a long run and walked into a convenience store, hot and sweaty.

• 1:57Speaker 00

  And I went to a beverage cooler and I said, there's nothing here.

• 2:01Guy Raz?

  Nothing seemed appealing?

• 2:02Speaker 00

  Yeah. And it was all 100 calories per eight ounces. And so the difference was fizz or no fizz, color, you know, different names, different bottles. They were almost uniform in their taste profile, their sweetness profile, which was, you know, six or seven teaspoons of sugar per eight ounces, or none. Why isn't anyone making a drink with one or two teaspoons?

• 2:21Guy Raz?

  Just like a little bit sweet?

• 2:22Speaker 00

  Yeah, just a tad sweet.

• 2:24Guy Raz?

  So how did you go from that to like, thinking about starting a tea company?

• 2:29Speaker 00

  So when I felt that thirst, I reached out to my professor from business school. And when I had Barry Nellboff, when I had been his student, we had done a case study of the beverage industry and we had agreed there was a gap, there was that space.

• 2:41Guy Raz?

  A sweetness gap?

• 2:42Speaker 00

  A sweetness gap.

• 2:43Guy Raz?

  Huh.

• 2:44Speaker 00

  So I reached out to Barry. I said, I think I'm ready to do something about this.

• 2:47Guy Raz?

  But you were not a tea expert.

• 2:48Speaker 00

  No, not a tea expert. And more importantly, not a beverage industry expert at all. No knowledge of that. And that was where having zero knowledge of the beverage industry in the beginning was actually a competitive advantage, because we went in without any of the assumptions. One of the things that happened, literally the same month that I went for that run in New York City, was that an investment my dad had made in 1977, so it was more than 18 years ago at the time, came to fruition. And I was presented with a check for $50,000. And that was kind of the risk capital.

• 3:20Guy Raz?

  Yeah.

• 3:21Speaker 00

  And it was enough for me to say, okay, well, look, I'm going to put this, if we lose this, we lose it. But this is what I'll bet.

• 3:28Guy Raz?

  But at the beginning, I mean, you were thinking, I'm going into this with two feet.

• 3:33Speaker 00

  Right.

• 3:33Guy Raz?

  I'm going to quit my job. But, I mean, you were still young enough where

• 3:36Speaker 00

  That's right.

• 3:37Guy Raz?

  you could always like, go back into finance.

• 3:38Speaker 00

  Yeah, that's right.

• 3:40Guy Raz?

  So you have a $50,000 check from your dad.

• 3:42Speaker 00

  Yeah.

• 3:43Guy Raz?

  And then, and was Barry able to put in a little bit of seed money?

• 3:46Speaker 00

  Oh, yeah. Barry had been on the board of a company that had gone public. So he put, because he kept his day job.

• 3:50Guy Raz?

  As a professor at Yale.

• 3:51Speaker 00

  As a professor at Yale, he's still a professor at Yale. What was funny was that before I went to submit my resignation at Calvert, I kind of called Barry for one last boost of confidence. I said, I'm going to go in there. You know, we just had our third son, but I'm going to step down. And there's this long pause. He says, well, I bet if you went to Calvert and asked to go on a sabbatical, I bet you they'd let you do that. And I said, well, that's not. I was hoping for the boost of confidence. You know, I knew I had to take the plunge. You couldn't get investors to invest or employees or buyers to commit without, you know, me being committed.

• 4:21Guy Raz?

  Can I just do a quick check, Seth?

• 4:23Speaker 00

  Sure.

• 4:24Guy Raz?

  You are a father of three kids with a good job at Calvert Investments, and you tell your wife you're going to quit to start a tea company, which is an industry you know nothing about. And nothing about that terrified you?

• 4:38Speaker 00

  More importantly, nothing about that terrified her. Yeah, I think it was, I believe in myself, probably a little bit of hubris, right? Like, I think I can do this, even though I don't know anything about it. Right? But I'm ready to try.

• 4:57Guy Raz?

  So you quit, and then basically you and Barry, what did you start to do? Like, how did you start to get? Did you start to raise money? Was that your first thing?

• 5:05Speaker 00

  So it was a little bit of the chicken and egg. So the first thing we did was I did write a business plan. These days, people really put together PowerPoints. They don't write business ones. But I wrote about a 20-page business plan that mostly showed the thinking behind the business. I think every potential investor wants to understand there's actually some thought here about where this goes and how it becomes something. I managed to secure an appointment with Whole Foods.

• 5:27Guy Raz?

  That early? Even before you had a product?

• 5:30Speaker 00

  So that was lucky because the marketing director at Whole Foods, or at that time it was called Freshfields Whole Foods, it was mid-Atlantic. He was a graduate of the Yale School of Management as well. So he helped me get an appointment with the buyer.

• 5:41Guy Raz?

  Wow. Seth, I just want to pause here for a sec because from what I have read about you, I understand that in the midst of all this happening with Whole Foods and all that excitement, your son, Ellie, got pretty sick.

• 5:56Speaker 00

  Well, it was the ultimate test in compartmentalizing because literally the day before the Whole Foods, our first presentation, when we're going to present the, so it's probably the most important day in the company's history where we're going to go present the tea. And Barry and I are in the kitchen and we've got mugs and bowls that we were brewing the tea and it was not an official looking lab. So the kitchen's full of all these things. My wife walks in with our middle son and she's got this ashen look on her face and I, oh no, she's so upset. We made the kitchen such a mess. And I said, we'll clean this up. And she says, that's not what I'm worried about. We just came back from the doctor and Ellie, our middle son, had a coarctation of his aorta. He was going to need major surgery within the month. And so that's a pretty heavy news to get.

• 6:38Guy Raz?

  How old was he at the time?

• 6:40Speaker 00

  He had just turned four.

• 6:41Guy Raz?

  Man.

• 6:42Speaker 00

  It was intense. And probably if that had happened a few weeks early, I probably wouldn't have left my job at Calvert because whether it's the health insurance benefits or just the risk level, I couldn't do that. But I'd already taken the plunge. I knew, you can bet that when I was at the Whole Foods meeting, I was selling with great intensity. I mean, it needed to succeed. And then while Ellie was in the hospital and I stayed with him that whole week, but I would go down at sort of after midnight, we had someone working on formulas, blends, and he would come in and meet me in the lobby of Children's Hospital and we'd taste tea together and go back up and sleep by Ellie's bed. And I

• 7:24Speaker 00

  think, you know, life happens. It's part of the experience. It's part of the journey. And I'm so thankful to have Ellie still with us and such a delight and such a wonderful presence, you know, for me and for all the people he touches.

• 7:42Guy Raz?

  Wow. You know, I'm thinking about you pitching this product at Whole Foods in the midst of all this. And what did you do? Did you bring them samples, like the samples that you made in your kitchen? Just put them in some random bottles or something?

• 8:00Speaker 00

  We got an empty Snapple bottle.

• 8:02Guy Raz?

  Used empty Snapple bottles?

• 8:04Speaker 00

  Yes, we had the pink Snapple. What's really funny is that Barry had sent over some thermoses one day in the mail. And when I met with the buyer and we poured out samples from the thermos, showed him my empty Snapple bottle.

• 8:17Guy Raz?

  With the honesty label on it?

• 8:19Speaker 00

  With the honesty label on it, of course. And he had said, "Well, look, this sounds interesting. We'll give it a try. We'll take 15,000 bottles," which of course was both terrifying and thrilling.

• 8:29Guy Raz?

  How did you make that? How did you make that much tea?

• 8:32Speaker 00

  That was the scary part. So we got this commitment from the buyer. And the next thing we did is we basically went up and down the East Coast looking at bottling plants. And we went to beer plants and soda plants, apple juice plants. So we ended up at a plant in Buffalo, New York that was making apple juice. Maybe it was a little down on its luck. It had some line time available. And they said, "How are you going to brew the tea leaves?" And so we brought in these mesh bags, these large mesh bags that are actually, can be used to clean a pool, like a filter. And so that was what we used.

• 9:03Guy Raz?

  You just filled them with tea leaves?

• 9:05Speaker 00

  And dunked it in boiling water. And every once in a while, the bag would break. And then the pipes would clog. It was not pretty.

• 9:14Guy Raz?

  How did you know the tea was, I mean, that the tea was going to be good?

• 9:17Speaker 00

  Well, that was so funny. You know, when I talked to Barry, he's very good at making things sound simple. And sometimes they are, sometimes it's a little more complicated. He's like, "Well, look, you take a tea bag, you dunk that in water. If you multiply it times 15,000..."

• 9:32Guy Raz?

  No problem.

• 9:34Speaker 00

  So theoretically, that works. What we found is that when you, especially in the beginning, too many tea leaves, you don't get the full infusion.

• 9:41Guy Raz?

  Yeah.

• 9:41Speaker 00

  No, the bag breaks, then you've really got a problem. So we just had to keep iterating. It was a very makeshift operation.

• 9:49Guy Raz?

  So, once you had all the bottles, I mean, how did it sell? Like, did it do well right away?

• 9:54Speaker 00

  So what happened was, you know, obviously, we went to the shelf. Nobody knew what it was. And so, all that first summer, this was 1998 now, all we did was give out. Like, our marketing effort was me and two interns giving out samples in Whole Foods stores. And we gave out more samples than we sold. But by the end of that summer, we were the best-selling tea in the 17 Freshfields Whole Foods stores in the Mid-Atlantic.

• 10:17Guy Raz?

  Wow.

• 10:18Speaker 00

  And so, what was then happening was that the consumers were starting to ask for the tea, which was really neat. And it was so different. And so, what was nice is, we have low switching. You know, some brands, maybe in the cereal category, if one, you know, if raisin brand's on sale, someone will go buy Post or whatever, you know? You switch back and forth. But with Honest Tea, if it's not there, you don't go back and buy Snapple or Arizona because the taste is so different.

• 10:42Guy Raz?

  Yeah.

• 10:42Speaker 00

  And so, when we got somebody, and we were clearly not for everybody, they were very loyal.

• 10:48Guy Raz?

  What was like, what was the thing that made Honest Tea different from, like, everything else that was on the market at the time?

• 10:55Speaker 00

  So, two things. First of all, just much less sweet than everything else. But the other thing, and the reason the name Honest Tea made sense, is because what we learned is, most of the bottled tea in the US at the time, and still today, is not brewed with, you know, it's not brewed tea. It's a powder or a concentrate. It bears a relationship to the tea leaf, like the fish filet bears a relationship to the fish. You know, somewhere along the way, there was a fish. But our tea, we bring in the tea leaves to the plant, and we brew them there.

• 11:21Guy Raz?

  I mean, so, once you were in Whole Foods, pretty quickly after you launched, I mean, it seems like you were sat, like, I guess the impression of the average person would be, wow, you're sat, you're in Whole Foods.

• 11:30Speaker 00

  Keep in mind, it's only 17 stores. So, it was just a, it was a start. And so, but we had, I guess, proved the concept.

• 11:37Guy Raz?

  Yeah.

• 11:37Speaker 00

  And so, then we were able to go back out to investors and say, we proved the concept. Now, it's time to expand. So, we got more investment money raised. And then, we went to the other buyers, and the buyers for the, for the West Coast. And we went to buyers from other stores, you know? Moms, my organic market here in the Mid-Atlantic was one of our earliest accounts. And they, it was working there, and they started to bring it to their other stores.

• 11:58Guy Raz?

  So you're, I mean, you know, it's, it's, I mean, you're making lots of tea, you're growing. What were, what were the challenges at that point?

• 12:06Speaker 00

  Oh, there were so many because it was still, well, first of all, cash is always a challenge. We were, we were growing quickly, but we were spending money to do it. We had salespeople, we were doing marketing.

• 12:18Guy Raz?

  And then just probably getting the tea to stores, right?

• 12:21Speaker 00

  Getting tea to stores and, and we were still getting rejected by all these distributors.

• 12:24Guy Raz?

  So. And distributors are, they're the gatekeepers?

• 12:27Speaker 00

  They are.

• 12:27Guy Raz?

  They decide where your drinks go?

• 12:29Speaker 00

  Because this is unlike, you know, a tech company.

• 12:32Guy Raz?

  Yeah.

• 12:32Speaker 00

  No matter how good our product is, we can't ship it through the mail. Beverages are a high turnover product. And so as soon as a shelf empties of beverages, something takes its place. And so you need a distributor to be there to, to build, keep the shelf space protected. And so what happened was we were going to all the distributors of Snapple in Arizona.

• 12:53Guy Raz?

  And they were saying?

• 12:54Speaker 00

  When they returned our calls, they would just say, it's not sweet enough. It's too expensive.

• 12:58Guy Raz?

  Wow.

• 12:59Speaker 00

  It tastes like grass. It's not what we're used to, which of course it wasn't. And what they, where they were not effective was they, they were tasting it for their own palates. They weren't thinking that there's a whole population out there that, you know, has a different appetite.

• 13:14Guy Raz?

  Did you, I mean, when, when you pitched it to investors who invested in like these kinds of things, did, I mean, were they saying, oh, this is awesome. I can't wait to jump in. Or were they just saying, were they just saying, did you get a lot of no's?

• 13:27Speaker 00

  We got a ton of no's. The main reason we got so many no's is this was, now is sort of 1999, 2000. This was during the whole dot com boom.

• 13:33Guy Raz?

  Yeah.

• 13:34Speaker 00

  And we were a very old economy. And so, you know, people would much rather throw millions of dollars at, you know, something.com than put a few, maybe $10,000 or $20,000 into a beverage company.

• 13:46Guy Raz?

  Like you had investors come in and say, you know, you should follow our advice and do this. What were some of the things they told you to do?

• 13:52Speaker 00

  Everything, you know, so we, yeah, we had these. Fancy investors from Boston, they said, you know, well, you know, you could, you should be an energy drink because that's really growing, or you should be a dot com. You know, if you made the product cheaper, you could make better margins on it. I said, it sounds like you're interested in the opportunity, except everything that we do. But we also knew that to really succeed in the long term, we had to be different than all the other big companies out there. And if we, you know, to create a sweet tea, there were tons of companies already doing that.

• 14:22Guy Raz?

  But when you were in those early days, when people are saying, this doesn't taste great, or they're pricing like, add more sugar, did you ever think, hmm, maybe they're right?

• 14:29Speaker 00

  Well, there's no question that would have led to faster growth, but it would have diluted what we were building. This was about building something that we could always believe in, that we would, that would be meaningfully different, and that, you know, to take people in a different direction, you have to disrupt where they're going.

• 14:50Guy Raz?

  Seth Goldman. In a moment, when we come back, Seth explains how Honest Tea became an actual political issue in the 2008 presidential campaign. I'm Guy Raz, and you're listening to How I Built This from NPR. It's How I Built This from NPR. I'm Guy Raz. So by the early 2000s, Honest Tea had become one of the highest selling beverages at Whole Foods stores, and things were going pretty well. But then, there was a hitch. At the time, the company had its own bottling plant here in Pittsburgh, and something happened

• 15:33Guy Raz?

  there that could have completely destroyed the company.

• 15:36Speaker 00

  So in 2003, we had a delivery of glass that was faulty. And there were a lot of blisters in the, in the glass, literally, you could look at it and see little bubbles. And so, we ran it on the production line. And the way the line works is that if it ever sees a defect in the bottle, it's supposed to kick it out, reject the bottle.

• 15:55Guy Raz?

  Yeah.

• 15:55Speaker 00

  But the line didn't do that. And so, we ended up with some product in the marketplace that had broken glass inside the bottle. In fact, it was two different Whole Foods stores. And Whole Foods has a rule, three strikes and you're out. Fortunately, no one got hurt or injured, but we did have bottles with pieces of broken glass in them. And we-- Knew we couldn't afford as a business to lose our largest customer. So we voluntarily withdrew all product from the market.

• 16:20Guy Raz?

  Every store?

• 16:21Speaker 00

  Everywhere, not just Whole Foods, everywhere.

• 16:23Guy Raz?

  Wow, how much did that cost you?

• 16:24Speaker 00

  Oh, it was, well, we were doing about three million, four million dollars in sales and it totally stopped our sales. So we lost several months of sales, so several hundred thousand dollars. I don't know that it cost a million, but a huge, you know, just momentum stopper. Here you are trying to build, you got your salespeople out trying to sell product instead. Now they're trying to take product.

• 16:42Guy Raz?

  Did we call it all and you destroyed it?

• 16:43Speaker 00

  We destroyed it all and it was just painful. We're profitable until the eighth year or so. I mean, it took a long time. Now, we kept things really lean, so it wasn't like we went on a spending spree. We were sharing hotel rooms and cutting corners everywhere we could, not on the ingredients, but you know, just trying to keep the lights on.

• 17:02Guy Raz?

  So what were you, like, what were you paid as CEO?

• 17:05Speaker 00

  My first year salary was at 50,000. Literally, I took that 50,000 dollar check and it was even, it was tax inefficient because I invested in the company and then I paid myself. I don't think I got over 100,000 and for, probably not for the first five years. And then, you know, it grew, but the stock obviously really grew.

• 17:26Guy Raz?

  So during this time, were there like lots of other companies that were offering to buy you guys out?

• 17:31Speaker 00

  Yeah, we were approached by lots of companies along the way. I mean, it was very, partially because we were growing quickly and partially because we were doing something others weren't doing. So really, from the first year, we, every year or so, we'd be approached by a major food or beverage company that wanted to buy us.

• 17:48Guy Raz?

  And I read like one of those, one of those companies was Tetley Tea?

• 17:52Speaker 00

  Tetley, yeah.

• 17:53Guy Raz?

  And they, they kind of threatened you, right? They said, if you don't, if you don't sell to us, we're going to crush you.

• 17:58Speaker 00

  We're going to go, right, we're going to do exactly what you're doing and just do it bigger. And we were always, that was another thing I couldn't lose sleep about, which was there was always competition.

• 18:06Guy Raz?

  And you and Barry owned like, what, like 90% of your company, right? Even though you had tons of investors. How were you able to do that?

• 18:14Speaker 00

  Well, this was one of the key strategic elements that Barry brought to the company. And he is, literally is a professor of game theory. And so he said, you know, the problem with so many startups is the entrepreneurs give themselves all these penny stocks in the beginning. And as a result, they start with just much more stock than everybody else. And then everybody else just kind of just comes along for the ride. He said, but what if instead you started the founders at the same place as the other investors? And only when the company grows in value, do the founders get more equity. And that's, it was a reverse structure. And what that did was it helped as we grew and we raised more money, we didn't get diluted. And the other thing was we relied on angel investors.

• 18:55Speaker 00

  So a lot of entrepreneurs in the venture capital mode is basically they're incentivized to own more of the company, they're incentivized to exit quickly. And we didn't take that kind of money. And I'm very glad we didn't. I think that was a key piece that let us keep control.

• 19:10Guy Raz?

  When did you, when did you start to realize that, you know, like honesty was becoming part of like the cultural zeitgeist?

• 19:17Speaker 00

  We had some funny moments. There was a moment in 2008, President Obama had become an honest tea drinker. I guess at the campaign for 2008. And the McCain campaign had criticized him for being, you know, out of touch with the American people.

• 19:30Guy Raz?

  What was his favorite one?

• 19:31Speaker 00

  He had the Black Forest Berry.

• 19:33Guy Raz?

  Black Forest Berry, right.

• 19:34Speaker 00

  And McCain's campaign manager had criticized Obama for, you know, drinking organic, you know.

• 19:40Guy Raz?

  But like he kept, Obama kept like a stock of it in his, like with him all the time, right?

• 19:44Speaker 00

  I told him he still did. In fact, I had an encounter with him a few years ago and he brought over his, the Body Man, the first of the best courses. He was, Barb, what, tell them, tell them what I drink and what do I always have to have with me?

• 19:54Guy Raz?

  Wow. So at what point were you able to kind of just feel like, okay, this is going to work?

• 19:59Speaker 00

  Well, I would say, so when Coca-Cola became an investor in 2008, that was a surreal experience because.

• 20:06Guy Raz?

  They approached you.

• 20:07Speaker 00

  They approached us, well, they approached us in 2007 and they had just created this group of entering and emerging brands. And their goal was to invest in and build the next billion dollar brand for Coca-Cola. And so, you know, going to the headquarters in Atlanta, sitting down with the president of Coke North America and then the chairman. And, and, you know, sort of part of you was like, looking down like, I'm really here. We're really having this conversation. So that was the first moment like this, this is actually going to work. This is going to be around.

• 20:32Guy Raz?

  Coke bought about 30% of the company.

• 20:34Speaker 00

  Forty percent.

• 20:35Guy Raz?

  Forty percent of the company. And, and they bought an option to buy a majority, which eventually they did. They bought the company out fully in 2011. But like, this was your company. I mean, did you feel like you were, you were giving away control?

• 20:47Speaker 00

  Well, you know, the story, so often when a brand is sold, the entrepreneur gets really frustrated and, and they butt heads and the entrepreneur rarely lasts a few months.

• 20:56Guy Raz?

  Yeah.

• 20:57Speaker 00

  The friend of, my friend of mine who was ran Vitamin Water said, he said, nah. And he left shortly after Coca-Cola bought it. He said, you know, the first few, first few weeks, they want to know your opinion. And the next few weeks, they want to know your phone number. So after that, they don't want to know you. You know, you're, you're irrelevant.

• 21:12Guy Raz?

  So why didn't that happen to you?

• 21:14Speaker 00

  Because, and I give Coke a lot of credit. They understood this is a brand that is, that is different than what they sell in market. They couldn't connect with the organic consumer or the natural foods marketplace. And so they gave us this incredible latitude and autonomy. And there were moments where we ran up against them around regulatory language or, or just marketing approaches and they respected what we did. So what's so, continues to surprise me is this brand is still my brand. And, and the biggest part was the distribution. We were in 15,000 stores when Coke invested. Now we're in over 100,000 stores. So that's, that's where the difference is.

• 21:53Guy Raz?

  I, I hope my numbers are right, that early investors, people who put in $50,000 in the company at the beginning, made a return of $1.25 million 10 years later.

• 22:03Speaker 00

  That's right. That's right. Yeah. 26 times their, their early investment.

• 22:07Guy Raz?

  How many, do you know how many millionaires were created by honesty?

• 22:10Speaker 00

  I don't know. Well, to me, what was so exciting was some of our employees were, were made millionaires as well. And that to me was, you know, that was all sweat equity that they earned. So that was especially meaningful.

• 22:21Guy Raz?

  This is a question I've asked everybody who's been on the show. How much of what happened with you and Barry and honesty was because?

• 22:30Guy Raz?

  You guys are just really good at what you do. And how much of it was just luck?

• 22:33Speaker 00

  I really don't believe in luck. I believe that the reason we're still here is the perseverance. And to the extent there's luck, you know, it's the timing, the way the consumer has evolved. But, you know, I've heard someone say, oh, you know, you were in the right place at the right time. I said, well, you know, it took 10 years to get to that right place. So this was not a, this wasn't, you know, something that just happened overnight. A friend of mine likened it to water. You know, eventually water finds its way to, you know, comes going downhill and it gets to where it needs to go. And I think we finally got to a place where we could connect with consumers and do it in a way that was still meaningful.

• 23:12Guy Raz?

  So I'm curious, Seth, as you kind of like look back on all this, is there like one trait that, like one really important trait that you either developed or just had or have that you think all entrepreneurs need to have?

• 23:26Speaker 00

  Well, you have to be resilient. And this is, this is something that's so important, you know, to put this on the bigger picture, just for our, for like our economy, we, people have to be resilient. So one of my, one of the best ways I developed resilience growing up was I wrestled in high school. I was the worst wrestler on the team. My first year, I was one in 10, and that was only because somebody didn't show up and I got the forfeit. So I, I had learned how to fight off my back, you know, and I'd experienced rejection. And it's so important to be able to bounce back from something like, not just, I mean, all the time, but in, in life and especially when you believe in it, it makes it that much easier.

• 24:08Guy Raz?

  That's Seth Goldman, founder of Honest Tea. By the way, the company has now sold more than a billion bottles of its beverage. It's now completely owned by Coca-Cola with annual sales of more than $170 million. Seth is no longer formally involved, and though it made him a rich man, his life hasn't actually changed all that much. Seth still lives in the same house in suburban Maryland where he made that first batch of Honest Tea.

• 24:40Speaker 02

  And please don't turn us off just yet. In a moment, we're going to hear from you about the things you guys are building. Hey, thanks for staying till the very end because we are now at the part of the show where we get to hear a great story about something you guys are building.

• 24:58Speaker 03

  My name is Glenn Auerbach, and I'm in Minneapolis, Minnesota. And I've created Nice Mug.

• 25:04Speaker 02

  And the idea for Nice Mug came about totally by accident. It was on one of those freezing winter mornings in Minnesota when Glenn went outside to his backyard, and he picked up a jug of water that had frozen overnight.

• 25:17Speaker 03

  Nature freezes water in a jug from the outside in and from the bottom up. So you get kind of a hockey puck-type freeze at the bottom. But there's this really interesting cavity that freezes last. And that's an iconic shape.

• 25:33Speaker 02

  And that shape was a glass, like the kind of glass you would put on your dinner table, perfectly formed, made of clear ice.

• 25:40Speaker 03

  So being the resourceful people that we are, with a beer in our hand, we poured a beer in, and Nice Mug was born.

• 25:46Speaker 02

  I mean, can you say "USA" any more clearly than "a cold beer in a glass made of ice"? Anyway, the first thing Glenn did naturally was to take the ice mug into his backyard sauna. And it held up pretty well until, you know, it melted. So then...

• 26:05Speaker 03

  I started messing around with different molds and different ways that we could freeze ice.

• 26:09Speaker 02

  And as he experimented, Glenn came up with a plastic mold that seemed to do the trick.

• 26:15Speaker 03

  But it was a massive challenge for me to make clear ice. And without clear ice, you get leaks, and leaks are no fun.

• 26:23Speaker 02

  The leaks actually come from air bubbles in the ice. And Glenn tinkered for years to come up with a mold that would make a mug without the bubbles. And finally, he nailed it.

• 26:34Speaker 03

  It never leaks, and I'm really proud of that.

• 26:37Speaker 02

  Glenn now sells the molds all over the country. You fill it with water, freeze it overnight, then pop out your own ice mug. And this past year, some executives at Coca-Cola actually called him up and said, "Hey, we want to use ice mugs in one of our ads."

• 26:51Speaker 03

  Yeah, it was quite a rush. You know, the biggest beverage company in the world, making nice mugs, putting Coca-Cola in there. We just had a great time.

• 26:59Speaker 02

  For the time being, Nice Mug is still Glenn's side hustle.

• 27:02Guy Raz?

  He's not planning on quitting his day job as a salesman anytime soon.

• 27:06Speaker 03

  You know, if we could send our kid through college with the proceeds for Nice Mug, well, I couldn't be happier.

• 27:12Guy Raz?

  And if you're wondering how long the ice mug actually lasts in your hand before it, you know, melts.

• 27:17Speaker 03

  We can have Nice Mug that lasts like 30 minutes, 45 minutes. I mean, I suppose the one thing that's cool about Nice Mug is when your ice has melted, you're done drinking.

• 27:27Guy Raz?

  Glenn Arbach, founder of Nice Mug. He lives in Minneapolis, Minnesota. Hey, we love hearing your stories about the things you're building. If you want to tell us about them, go to build.npr.org. That's B-U-I-L-D dot NPR dot org.

• 27:45Guy Raz?

  Hey, thanks for listening to the show this week. If you want to find out more or listen to previous episodes, you can go to howibuiltthis.npr.org. And if you have a chance, please subscribe to our show through iTunes and let other people know about it. You can also write us directly at [email protected] or tweet us. That's at How I Built This. Our show was produced this week by Ramtin Arablouei, who also composed the music. Thanks also to Neva Grant, Sanaz Meshkhanpour, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This from NPR.

• 28:20Guy Raz?

  Hey, I just want to tell you about something happening the weekend of January 14. If you listen to the NPR News Quiz show, Wait, Wait, Don't Tell Me, and you love and worship Peter Sagal, like I do, well, I have a treat for you because that weekend, Tom Hanks has tied Peter Sagal up, and he's going to be hosting the show himself. So listen to Wait, Wait, Don't Tell Me with special guest host Tom Hanks. You can find it on the NPR ONE app and at npr.org/podcasts.

• 28:51Speaker 04

  This is Tom Hanks. Do you know an undiscovered musician who deserves a break? Well, we have an idea for them. NPR Music is holding a Tiny Desk Contest to find one great unsigned musician to play the iconic Tiny Desk Concert Series and tour the United States with NPR Music. All you have to do is shoot a video of your musical act, playing an original song behind a desk, and submit it by January 29. Learn more at npr.org/tinodeskcontest.