Coke plans to expand distribution of Honest Tea's drinks into grocery stores, restaurants and other outlets. It will have the right to purchase the remainder of the company after three years.
Honest Tea was founded in 1998 by Seth Goldman and Barry Nalebuff, two entrepreneurs who were seeking to offer a healthier drink produced with a consciousness about the way the ingredients are grown
They brewed samples in Goldman's Bethesda, Maryland home and brought them to the regional office of a natural foods chain.
Since then Honest Tea has begun to expand into mainstream stores, but its distribution has been limited mostly to natural food retailers such as Whole Foods Market.
Nalebuff said: "This is our chance to bring organic beverages to the mainstream. Customers will discover that they can have it all -- great taste, less calories and organic. Honest."
In 2005 the company created Honest Ade organic thirst quenchers and last year it launched Honest Kids, a line of low-calorie organic thirst quenchers.
Deryck van Rensburg, president and general manager of venturing and emerging brands, Coca-Cola North America, said: "Honest Tea is on the forefront of the rapidly growing organic beverage business, and Seth Goldman and his management team have successfully anticipated and met consumer needs in this expanding category.
"This is a superb example of our mission in venturing and emerging brands to seek out and invest in the best beverage entrepreneurs and the highest growth-potential beverages."
The investment marks Coca-Cola's latest move into the non-carbonated drinks market following its acquisitions of vitamin water maker Glaceau and juice and tea maker Fuze Beverages LLC last year.