Prof. Honest Tea Dives Into Oats

Outside the bathroom in a downtown basement, Barry Nalebuff slipped me a palm-sized clear plastic packet filled with product.

Try it, he urged. It’ll blow your mind.

Nalebuff was hoping to get me hooked. He’s hoping to get millions of people hooked — not on mind-altering pharmaceuticals, but on a new way of eating breakfast. A healthful breakfast.

In the bag he handed me in that chance encounter moments before curtain time at the Yale Repertory Theatre were oats, chia seeds, dried mulberries. He told me to soak them in soy milk, stash them overnight in the fridge, then eat them in the morning.

Nalebuff is the Yale School of Management (SOM) professor who revolutionized soft drinks by inventing Honest Tea, natural, organic low-sugar iced brews. He not only had a good pun (as in ​“honesty”). He had a winner beverage: Coca-Cola bought his company in 2011. It now sells $500 million worth of the stuff a year.

Now Nalebuff has created a new product called ​“Maker Oats.” It offers him the chance to claim two new puns: He proudly declares himself a ​“cereal entrepreneur.” And the product itself is a riff on that most famous name in oatmeal …

… a company that just happens to be a subsidiary of Pepsi. Which has already bought Nalebuff’s product and in 2018 began marketing it across the country, on the web and at local stores like Whitneyville Food Center .

Fresh off hawking Maker Overnight Oats at the Expo West show in California, Nalebuff, who’s 60 years old, came into the WNHH studio this week to tell the story about how he came up with the idea, how it’s going, the continuing role Honest Tea plays in the fight against childhood obesity, and what he has learned about the potential to make the world better from within the belly of the corporate beast (my words, not his).

“The world has a problem,” Nalebuff, said. ​“None of us has time for breakfast. We’re crazed.”

A Recipe Hunt

Nalebuff started noticing this problem several years ago, along with people seeking to hack it by soaking oats overnight. Some people posted photos of their oats on Snapchat; others ​“were a little scared and were not sure about how to do it” themselves.

“The question is: How can you have a fantastic breakfast when nobody has time to make cereal or anything else? People talk about: I wait for the weekend when I have omelets … or have my oatmeal.”

So Nalebuff got busy in the kitchen. He worked up different combinations of oats, spices, seeds, oats. He picked up the idea of using mulberries, as a lower-calorie tastier alternative to raisins, during a visit to a cafe in California. From Irving Farm Coffee Roasters he discovered the wonders of apricot in the mix.

His family tasted his concoctions and offered feedback. He did market research. One woman in a focus group — he said this was a true story — ​“puts baby food in pouches and scarfs it down.” He met a couple who spoke of being so busy getting their kids out of the house in the morning that ​“they take turns figuring out who takes a shower” in the morning.

The goal for his breakfast product: Easy. Healthful. Filling. Tasty.

After trying ​“100 different recipes,” he came up with several favorites: apple coconut for ​“traditionalists,” mulberry chia for some ​“adventuresome” palettes, and for the ​“most adventuresome,” his favorite, coffee banana. He experimented with cow’s milk, macadamia milk, soymilk, kombucha, coconut milk.

It worked. Nalebuff believed he had a product people would pay for. Who has the time to collect mulberries and nuts and dates and the right spices and work out the right recipes? He could do it for them, faster, cheaper.

Time to go to market.

Pepsi’s 2nd Chance

That would be easier this time around.

In 1999, when Nalebuff and partner Seth Goldman founded Honest Tea, they built the company themselves. They arranged for the production, the distribution, the marketing. They sold (and cashed in on all that sweat and risk) to Coca Cola in 2011.

This time, Nalebuff figured he could sell directly to the big corporate guns from the outset. First target: Coke’s rival, Pepsi.

It didn’t hurt that Nalebuff personally knows Pepsi’s then-chairwoman, Indra Nooyi, an SOM grad who remained involved in the school and who had hired Nalebuff to conduct strategy sessions for her top execs.

Nor did it hurt that Pepsi had sought to buy Honest Tea, losing out to Coca Cola.

Nalebuff recalled shooting Nooyi an email: ​“Let’s do this one from the start.”

Soon Nalebuff had a meeting in Westchester with Nooyi and her senior leadership team. He filled bell jars with his concoctions, soaked overnight.

He also brought them the oatmeal that Quaker Oats, a Pepsi subsidiary, was selling. He had the assembled team sample both batches.

“Let’s put it this way,” Nalebuff said. ​“I won the taste test.”

Pepsi agreed to buy the idea from Nalebuff; he’d be paid primarily through future sales. He would work with an in-house team on developing it. Each team member received a job title riffing on the maker concept; Nalebuff’s is ​“chief troublemaker.”

“I was assistant troublemaker,” he said. ​“Then I made enough trouble” to get promoted.

Maker Oats hit the market in January 2018. Nalebuff projected annual sales will increase from $1 million to o $3 million in 2019.

Honest Tea’s Moment Of Truth

I asked Nalebuff if, based on his experience with Coca Cola, he worries about corporate ownership diluting the quality or mission of his inventions, which aim not just for profits but for more healthful eating. By selling to a multinational corporation, he surrenders control.

Coca Cola had considered upping the sugar content of Honest Kids, Honest Tea’s organic juice line aimed at children. At that time, Nalebuff served on a board of advisors for the division. He urged the company to abandon plans to spend money on focus groups with kids. The tests proceeded; 85 out of 100 kids said they would prefer sweeter iced tea. Coke started considering boosting the sweeter.

Uh oh. Part of the point — in addition to using real, organic teas — was to keep the caloric count below 100 per bottle, a way to combat childhood obesity and poor nutrition. Honest Tea had 40.

“They completely misunderstood what the product design was,” Nalebuff recalled ​“We weren’t selling the pouches to the kids. We were selling the pouches to their parents.

“Their parents weren’t buying it based on the taste, but based on the label. Our goal was: How sweet can we make it so the kids would still drink it but not need to be bribed to drink it? We want the kids to be hydrated. We want them to be happy. We don’t want them to be over-caloried, over-sugared.”

Nalebuff’s argument prevailed. Honest Kids remained at 40 calories.

Meanwhile, a funny thing happened: Capri Sun dropped the caloric content of its own kids drink from 110 to 80. To compete. Lipton came out with a lower-calorie iced tea, as did Snapple. That meant that many more kids were drinking less sugar thanks to Honest Tea, whichever brand they were buying.

Then Coke struck a deal with McDonald’s to include Honest Kids in Happy Meals. Which meant hundreds of millions of additional sales with less sugar, with natural sweetener rather than high fructose corn syrup.

Coke’s size has offered other advantages in meeting the original Honest Tea mission, too, according to Nalebuff: It can buy bottles for 11 cents. Before Coke bought Honest Tea, Nalebuff had to pay 19 cents. So Coke can afford to sell Honest Tea more cheaply as a result.

Another goal was to buy ​“fair trade” ingredients. Coke has abided by that commitment, Nalebuff said. Which means that he has had a far bigger impact on that issue than he could have as an outside activist.

“I could jump up and down on the corner all day talking about fair trade, changing what farmers are doing,” he said. ​“But if I can sell a billion bottles of tea that is fair trade, I’m doing a lot more. You start changing what farmers are doing. And you demonstrate that this is an economically viable approach that other people can copy.”

Nalebuff retains confidence that Coke will retain Honest Tea’s social-responsibility mission in the product itself. If it’s good for you, it will sell. Unlike, say, Ben & Jerry’s ice cream — which clogs your arteries and makes you fat, but from the start dedicated profits to socially responsible causes.

One Final Question

That all sounded inspiring. But I was left with one nagging question about the mission behind Nalebuff’s latest product aimed at bettering our lives.

If people’s lives are so busy they have to resort to junk breakfasts or even baby food, why not offer them a life hack rather than a product hack? It takes me four minutes to get a pot boiling with fresh oats, banana slices, raisins, and cinnamon. It’s ready to eat, and cheap and delicious, by the time I finish my morning prayers.

Why not help people find the time to cook fresh oatmeal or omelettes, say, rather than prepare them packets of pre-mixed flavored oats for people to soak overnight? Evangelize for a meaningful life that wouldn’t require quite so many working hours, perhaps, or expensive cable bills?

Nalebuff rejected that either-or choice. He embraced the idea of finding more time to follow your bliss. Maker Oats, he argued, can help in that cause too.

“Use that time to spend reading with your kids. Play sports, soccer exercise,” he suggested.

“I’m totally down with enjoying life. But my view is, I don’t necessarily need to run around the kitchen finding my mulberries and my ginger and cinnamon. That’s not for me a great source of joy. Let us do the drudgery for you.”

Click on the Facebook Live video below to watch the full interview with Barry Nalebuff on WNHH FM’s ​“Dateline New Haven”: