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AriZona Beverages iced tea cans have cost 99 cents for over 30 years. But a legal battle between the two founders almost put that price in jeopardy.
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00:00Arizona Beverages makes about 4 million cans here every day.
00:06And on each can of iced tea, you'll see this.
00:10We've essentially had the same price for 33 years.
00:14If the company adjusted its pricing for inflation since 1992, a can of Arizona would cost $2.30
00:22today.
00:24But for one of its founders, that's not an option.
00:27The last thing they should do is raise price.
00:29It's the last thing you should do in business because it means you failed.
00:33But there was a time when the price Arizona is famous for was under threat.
00:38A legal battle between the two founders waged for nearly a decade over who would control
00:43the company and the price.
00:45They said, I want to sell.
00:46I said, well, that's not the deal.
00:47And that's when the fight began.
00:49So how, against all odds, is Arizona iced tea's $0.99 price tag still standing?
00:59Arizona beverages started more than 30 years ago.
01:02And they're still making new flavors.
01:05We get 30, 40, 50 samples with tweaking, touching, smell, finish.
01:10To this day, Arizona's co-founder and chairman Don Voltaggio still tastes every new flavor himself.
01:18It's not generally something that a chairman of a company gets involved in.
01:22But I'm not your typical guy.
01:25Don started out by selling something a little harder than iced tea.
01:29I was a beer distributor.
01:30I didn't know anything about iced tea other than I drank it when I was a kid.
01:35But all of that changed one cold morning in 1991.
01:38I bumped into a Snapple guy and he gets his big order for iced tea in the wintertime.
01:45And I said, I'm going in the tea business.
01:48I made the decision right there.
01:49The next year, Don and his business partner John Ferralito co-founded Arizona Beverages.
01:56But the competition was stiff.
01:59Hi from Snapple.
02:01Snapple was the leading ready-to-drink iced tea brand with 20% of the U.S. market.
02:07Lipton Original.
02:09That same year, Lipton teamed up with Pepsi to launch its first iced tea, Lipton Original.
02:15It's new.
02:17And it's extraordinary.
02:20And Coca-Cola and Nestle started selling canned Ness tea together.
02:25We didn't have the money or the wherewithal to do the advertising, the other stuff that
02:30our major competitors do.
02:31What I did notice and saw firsthand was consumers made a decision right at the cooler.
02:36Most packaging to me is boring, you know, they use traditional colors.
02:41The original designs came from my wife and my house in Queens.
02:44It was designed around the Southwest.
02:46That was the inspiration.
02:47That's also what inspired the name of the company.
02:50Despite the fact that...
02:52I had never been to Arizona, I had never been west of the Mississippi.
02:56Their next strategic decision was making their cans bigger.
03:00While their competitors sold 16 ounces of tea for $0.99, Arizona sold 24 ounces for
03:06the same price.
03:09But Don says the most important thing was making sure it tasted good.
03:14The first time you buy it is because you saw it and it looked good.
03:17But if it don't taste good, I call it game over.
03:19You don't buy it again.
03:21In the company's first three years, it sold 18 million cases of raspberry and lemon teas.
03:28Still far from the 55.6 million cases Snapple reportedly sold in 1993 alone, Don's strategy
03:36was working.
03:37It worked because consumers said, wow, let me try that.
03:41It looks great.
03:42The price is fair.
03:43They bought it and we delivered with great taste.
03:46Retailers could often change how much they charged at the store.
03:51So in 1997, Don decided to make a small tweak to the can's label.
03:56We put the 99 cents on the can.
04:00And I had a salesman at the time say, it's the dumbest idea you've ever come up with,
04:05boss.
04:06But years later, the price has become so synonymous with the brand it was spoofed on
04:11an episode of Atlanta.
04:13By the early 2000s, Arizona was reportedly outselling Snapple.
04:25When somebody lays their hard-earned dollar on the table and gets a can of tea or juice,
04:31and they say, wow, that's a good deal, I've now secured that customer.
04:36Over the years, that good deal has helped Arizona build a dedicated fan base.
04:41My name is Hannah Mead, I'm 26 years old, and I am a Zonie.
04:45Zonies are the name for Arizona tea superfans who incorporate their love of the brand into
04:51their daily lives.
04:54Hannah's passion has influenced her wardrobe, her room.
04:58Over the years, I've collected a lot of merchandise where to the point it's, if not the thousands,
05:04at least the hundreds.
05:06This one is older than me.
05:08This one, my dad actually gave to me because he had found it, and he knew that I was collecting
05:13cans.
05:14But most notably...
05:15This is my 2011 Hyundai Genesis Coupe.
05:25The design on my car is Arizona green tea, ginseng and honey.
05:30All the accessories that I have is Arizona.
05:36I tried the green tea when I was about, I want to say 11 or 12.
05:42And ever since then, I've just become an ultimate fan of the company.
05:45Hannah has spent the last five years transforming her car into Genizona.
05:51It's at least, at least $26,000.
05:55Everything is teal and cherry blossom.
05:57My headlights, when I have them on, I have a custom etched infinity mirror.
06:02That inside of it, it says Genizona.
06:05I've also painted the gauges with cherry blossoms on it.
06:09I have a cooler in the middle with displayed Arizona hearts.
06:15I get a lot of pretty exciting reactions, oh wow.
06:25You just look at it, is that Arizona tea?
06:29It's even gotten her noticed by the company.
06:31Somebody caught a roller of me, like a still shot of me going down Coastal Highway.
06:36And Arizona ended up posting that photo.
06:39The company has also leaned into its nostalgic 90s look by teaming up with brands like Adidas
06:45and Biri Lasry for Arizona-themed merch drops since 2019.
06:50Everybody has a story with the brand.
06:53Whether you were a younger kid and you had it, or you're in older years.
06:57The 99 cents overall pricing means that they're looking out for their customers.
07:03But how has Arizona been able to keep its 99 cent promise for so long?
07:09Many beverage brands are publicly traded under massive corporations,
07:13like Pure Leaf under Pepsi and Gold Peak Tea under Coca-Cola.
07:18Being privately owned has allowed Arizona to make all major decisions, like pricing.
07:24We can afford to hold the wine.
07:26We didn't have some bank or some board of directors or some stockholders saying,
07:30what are you doing?
07:31Take Snapple.
07:32Its 16 ounce bottle of tea cost 99 cents in 1992.
07:37The company went public later that year, and since then, it's changed hands multiple times.
07:43Being acquired by corporations like Quaker Oats, Triarch, and Cadbury Schweppes.
07:48Today, a 16 ounce bottle of tea costs around $2.00.
07:53We can't know for sure if going public caused the price increases, but most of Snapple's competitors sell their tea at similar prices.
08:01Most of the competitors are big, bigger corporations that can't be flexible, can't be intuitive, can't do things off the cuff.
08:10Don almost lost control in 2005 when his business partner, John, wanted Arizona to go public.
08:17At the time, Arizona was reportedly receiving buyout offers from major corporations like Nestle and Coca-Cola.
08:25What followed was a nearly decade long legal battle between the founders.
08:30An ownership agreement that Don and John made in 1998 required both founders to consent to the sale of any company shares to outsiders.
08:39In 2008, John filed a lawsuit claiming the agreement was unenforceable, but ended up losing the case.
08:47In 2012, Don elected to buy out John's steak in Arizona.
08:51But this decision fueled a court battle about how much the company was actually worth.
08:56During the 2014 trial, John's lawyers argued that the company was valued at $4.5 billion based on buyout offers.
09:04While Don's put the price tag closer to $426 million.
09:09The trial was also littered with accusations of fraud, oppression, and intimidation from both parties.
09:16John's lawyers claimed in one statement that Don sabotaged bids for Arizona in an effort to oppress John.
09:23Meanwhile, Don's lawyers, according to Fortune, accused John of trying to intimidate Don and Arizona's employees
09:30by bringing an NYPD detective and other armed men into the company's headquarters.
09:36As the pair fought, Arizona was at a standstill.
09:40I couldn't make necessary investments.
09:42I couldn't do things for the future.
09:44I couldn't do technology.
09:46I was kind of being scrutinized.
09:48Finally, in 2015, Don was ordered to pay John $1 billion for his 50% stake in the company.
09:56Marking the dispute as the biggest corporate dissolution case in New York State history.
10:02I had to because I had thousands of employees that would be unemployed.
10:07And there are some people going to business and there are gamers to sell.
10:11That's not my game.
10:17After it was behind me, I said, now it's our time to build a good foundation.
10:22But keeping the low price tag has been more difficult.
10:27The cost of aluminum has more than doubled since Don founded the company.
10:32And he worries things could get worse since he imports most of the fruit.
10:37It's been a little challenging lately with the tariff talk.
10:40We buy about 100 million pounds of aluminum every year.
10:43In 2020, Arizona reduced its can size to 22 ounces.
10:48While Arizona told Business Insider they changed the size for efficiency and to use less aluminum,
10:55some think it's an example of shrinkflation, a strategy used by many other companies in recent years.
11:02Three years later, the company raised the prices of its 20-ounce plastic bottle,
11:07which jumped from $1 to $1.25.
11:10It's something fans noticed and have occasionally called out.
11:15The company has taken trucks off the road during the daytime to reduce transportation costs
11:21and introduced new machinery to help speed up production.
11:25When we first started the business, the can lines ran at about 100 a minute.
11:29Now we run them up to 1,500 cans a minute.
11:32And to keep it affordable, we've got to be very modern and very efficient.
11:36Don says he also spent very little on traditional advertising.
11:40I don't think it works.
11:42What we found was if a consumer gets a good value,
11:46he's a good consumer for the retailer as well because he becomes loyal to that store.
11:50Don is also strategic on how he adds new flavors,
11:55like the green tea with honey and ginseng he introduced in 1995.
11:59My wife and I were on a plane going to Hong Kong and she ordered green tea
12:03and told me how healthy it was.
12:05And I tried it.
12:06I said, tastes disgusting.
12:07I said, if we can make it taste good, it'd be great.
12:10His wife was, again, the designer behind the iconic floral can.
12:14And one of my sales guys at the time said,
12:16men are not going to buy a product with pink flowers on it.
12:19I said, great.
12:20We'll get all the women to buy it.
12:21Today, the green tea is one of Arizona's best sellers and most recognizable cans.
12:28Over the years, the company has faced several lawsuits related to misleading labeling on their products,
12:34including one that claimed the green tea had no ginseng in it.
12:38That suit was settled in 2023, according to Bloomberg law.
12:42Arizona also released dozens of other flavors, including mango, watermelon and peach.
12:48Mango out west is our number one seller.
12:51Watermelon in Mexico is our best seller.
12:53I like Arnold Palmer.
12:55I like the zero sugar one I drink all the time.
12:58Tastes great.
12:59I met Arnold over 20 years ago.
13:01I liked lemon and tea mixed together.
13:04And I liked him.
13:05He was a terrific man.
13:06And we introduced it today.
13:08That's our second best seller.
13:10We sold last year over a half a billion containers with his face on it.
13:13Pretty good.
13:14Since the settlement, Don and his team have produced new items like snacks, coffee and energy drinks.
13:24He's even gone back to his alcohol distributing routes with some of the brand's newest products.
13:29Students are hard with vodka.
13:32But even in this new era for Arizona, Don says he has no plans to raise the price of the 22 ounce cans.
13:40I want to grow like a weed.
13:42Every morning I'm excited to do what I do.
13:45I got the satisfaction of what we're doing here is right.
13:49Because I saw expressions.
13:50I saw people's emotions.
13:51It's great.
13:52And that's the big payoff for me.
13:55I used to have this dream about a gate that would open and I'd pull in.
13:59And the guard knew me and he opened and let me in.
14:02That was a dream I had when I was 10.
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