“Why not increase the price and therefore increase the profit? We’re successful.” That’s Don Vultaggio, chairman and co-founder of Arizona Beverage Company, which currently does about $4 billion in annual sales. Remarkably, this company started by accident. To this day, Don claims he's never sent a text, an email, or even turned on a computer, yet his net worth is estimated at $6.5 billion.
Don isn't your average CEO billionaire. He’s committed to keeping prices low without compromising the quality of their drinks—a rare feature among modern CEOs. While most big companies cut costs and raise prices to increase profits, Arizona has maintained its famous 99-cent iced tea price for over 30 years. How did this accidental company achieve such success and maintain its pricing strategy?
The Accidental Beginnings
In 1992, in Brooklyn, New York, Don Vultaggio and his friend John Ferolito were running a beverage distribution business focused on beer and soda. One cold February morning, Don saw a Snapple truck being unloaded at a local retailer. Recognizing Snapple's growing popularity, he realized that iced tea could sell even in the freezing cold. Inspired by the success of Snapple, Don decided to create a similar product but in larger 22-ounce tall boy cans, which he was familiar with from malt liquor sales. The idea was simple: offer a bigger quantity for the same price as Snapple.
Don’s goal wasn't to create a huge brand but to add another non-alcoholic beverage to his distribution truck, selling it to retailers he already knew. By manufacturing the product himself, he could achieve better margins. His business model was straightforward: make it look good, make it taste good, and price it fairly. Despite skepticism from others, including his bank, Don persevered.
From Santa Fe to Arizona
Initially, Don named the company Santa Fe, inspired by the Adobe-style house he lived in. However, the name didn’t look right on a can, so he changed it to Arizona, associating the name with a healthy, clean, and dry feel—qualities he deemed important for an iced tea brand.
Iconic Can Design
The can’s design was crucial for standing out. Don's wife designed many of the initial concepts, incorporating bright colors, cool imagery, and a bold Arizona logo. The inspiration came from various items in their home, including a perfume bottle and their son’s coloring books. Despite initial skepticism about the colorful cans, Don believed in their appeal, particularly to women.
Innovation and Efficiency
In 1996, Arizona introduced their gallon jug of iced tea, a radical idea at the time. Despite initial doubts from retailers, it became one of their most successful products. Over the years, Arizona has improved its production efficiency, moving from 100 cans per minute at a Cincinnati brewery to 1,600 cans per minute at their New Jersey plant. They also use less aluminum in their cans, making them 50% lighter, and have multiple distribution centers to streamline deliveries.
Advertising and Marketing
Arizona’s minimal advertising has been a key cost-saving strategy. The can itself serves as the primary advertisement. Don famously handled all marketing initially, but today, his sons Spencer and Wesley are heavily involved. They have expanded the brand’s digital presence and merchandise collaborations, contributing to Arizona’s ability to maintain low prices.
Legal Battles and Company Growth
In 2012, a lawsuit between Don and co-founder John Ferolito over the company’s valuation reached the New York State Supreme Court, with Don ultimately buying out John’s half for $1 billion. Despite increasing competition, Arizona has expanded its product line to over 500 items, including sparkling water, energy drinks, and even food items.
Family-Owned and Anti-Capitalistic
Arizona remains a private, debt-free company, allowing it to operate independently and maintain low prices. Don takes pride in giving back to his employees and keeping the company true to its founding principles of hard work, consistency, fair pricing, and good deals.
Conclusion
Arizona Beverage Company’s story is a refreshing tale of a family-owned business that hasn’t sold out to a big corporation. Their commitment to quality and fair pricing stands out in today’s market. For more on innovative business stories, check out our video on a salad chain reinventing fast food.
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