Coca-Cola Purchases 40% Stake in Honest Tea

"Coca-Cola Co. has agreed to purchase about a 40% stake in Honest Tea Inc., a fast-growing maker of premium and organic bottled teas, for about $43 million, according to people familiar with the deal.

In addition, Atlanta-based Coke will have the right to purchase the remainder of the company, currently valued at $110 million, after three years, these people said.

The investment in the maker of Heavenly Honey Green, Peach Oo-La-Long, and other teas, comes as the world's largest beverage giant has been under pressure to improve its lineup of ready-to drink teas, which make up a tiny but fast-growing beverage category in the U.S. Coke lacks a strong contender in the popular beverage segment, whose volume rose 24% in the first nine months of 2007, according to Beverage Digest, an industry publication. The company's tea brands, with Nestea as its largest, rank a distant number four in U.S. market share to PepsiCo Inc., which commands the leading share with Lipton tea, marketed in a joint venture with Unilever PLC."

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