In their fun book, Mission in a Bottle, which is about the startup of their business, Honest Tea, Seth Goldman and Barry Nalebuff talk about a conversation Goldman had with Tom Szaky, the founder of up-cycling firm TerraCycle. Honest Tea, which bottles its Honest Kids fruit drinks in plastic and foil pouches, pioneered a promotion that asked people to send their empty pouches to TerraCycle for up-cycling into other products, while benefiting local schools. Szaky asked, how would Honest Tea feel about TerraCycle taking the pouch up-cycling promotion to a competing producer of kids’ pouch drinks?
It’s a question that comes up more often than you’d think in cause marketing. Do you maintain exclusivity or do you let loose your idea, and the competitive advantage it brings, to an even wider audience?
Here’s how they describe it in Mission in a Bottle, which is formatted like a graphic novel. Honest Tea looked at the kids juice market and found that it could bring its philosophy of drinks that were “sweet-enough” but no more, to kids and their mothers. Capri Sun, which owned the market segment, put its product in plastic and metal pouches. But that rankled Goldman because the pouches were basically impossible to recycle even if they used less material than any other kind of packaging. So he went to TerraCycle’s Szaky with an idea; up-cycling the pouches into something new.
“We’ve never done anything like this,” Szaky told Goldman, “but if you could send us the pouches, we could sew them together and make pencil cases, tote bags and the like.”
To test the collection half of the promotion, Honest Tea asked 100 schools to set up on-site collection points. To sweeten the pot, they offered the schools $.02 per pouch collected. Within 24 hours, all 100 schools signed on. Meanwhile, demand on TerraCycle’s end blew up, too.
This was August 2007 and in February 2008, the New York Times did a story on concert pianist Soyeon Lee making her Carnegie Hall debut in a gown made from 5,000 Honest Kids Goodness Grape pouches.
Not long thereafter, Szaky would come back to Goldman with his ticklish request. In the book, Szaky is depicted nervously sweating out his question; would Honest Tea allow Kraft Food’s Capri Sun, Honest Tea’s biggest competitor, to also do up-cycling with TerraCycle? And, more to the point, Bogart the whole approach, including using schools as collection points and offering them $.02 for each pouch redeemed?
Strictly speaking, up-cycling juice pouches is a business practice that can’t be owned in the same way that a trademark or patent could be. And it’s not a trade secret like, say, the recipe for Coke or the 11 spices in KFC’s fried chicken because there’s nothing you could put in a vault; everyone could easily understand how the promotion worked.
But you can also understand why Szaky might have been nervous when he called Goldman. In so doing, the least he risked was burning his bridges with Honest Tea and the most he risked was an infringement lawsuit.
Instead, Goldman told Szaky, “If we’re serious about making a change, our ideas need to go mainstream. I’d rather help to create something that takes a billion pouches out of the waste stream than own an idea that captures a million. Go for it.”
The deal between Capri Sun and TerraCycle came together quickly. In January 2009, I posted about their effort. Kraft Foods ran the same print ad activating the campaign again and again in magazines like Parents and Parenting. If you followed the link on the ad, TerraCycle said that it accepted juice pouches from Capri Sun, Honest Kids, and Kool Aid, which is also owned by Kraft Foods.
And it worked just as Goldman hoped it would. By 2012, the book reports, TerraCycle had up-cycled more than 140 million juice pouches that came to them from 67,000 collection sites.
All because one CEO cared more about a good idea than about owning his good idea.