Intro Music I have to take a second and thank the viewers here because without your Suggestions I can confidently say that this video wouldn't exist I think I'm in the majority when I say I know about Arizona iced tea I've always seen them at the gas stations or convenience stores But I failed to realize just how big they were and how there's a great story behind this company the first time I remember Hearing this suggestion was back in December and I had overlooked them to such a degree Where I replied by asking if they were talking about the iced tea now, of course They were talking about the iced tea and they replied back saying as such made me feel silly so I do want to thank everybody who suggested this because you put something on my radar that probably should have been there anyway and Here's why it should have been there There's teas out there that you have to prepare and brew yourself But that's something else Arizona deals with teas that are already bottled and ready to drink and in that market in the United States They're typically the biggest brand even in a few years They weren't the biggest it wasn't by much and they were a clear second place and they sell so many different things They're probably most known for their cans of iced tea their green teas with ginseng and their Arnold Palmer Which is a blend of iced tea and lemonade just think about that Arnold Palmer is a pretty famous drink that takes its name from a pretty famous golfer and Arizona is the only company that has the right to call it that, but there's also Countless other products they offer their new thing is green tea cucumber with citrus There's Fruit Punches, Golden Bear lemonade, watermelon, mango aside from drinks They sell shirts hats shoes with their signature designs on them. They even sell nachos both with salsa and cheese dip last year all this stuff combined to bring in an estimated three billion Dollars in sales we can all agree This is a large company and you can better respect all this when you hear about how they got to this point Because they didn't start out big they started out just about as small as you can get it was two guys from Brooklyn John FeroIito and Don Vultaggio They were both very young not far out of high school and gaining some experience Working as beer distributors basically driving beer to different places one day They crossed paths and learned that they had the same dream of starting their own business So that's what they did the story goes that they bought an old Volkswagen Bus for a few hundred dollars and used it to start delivering beer all over Brooklyn in the beginning It was just part-time and most of their deliveries were to some pretty shady areas areas that were avoided by most other Drivers it was a tough start, but they got through it They grew as distributors and soon turned it into a full-time venture all of this took place in the early 1970s and it wasn't until the mid 80s when they actually started making their own products up until that point They were just distributing stuff that was made by other people Their first product was a flavored seltzer water called Spence and Wesley named after Vultaggio's sons But it didn't do very well. Their first successful product was a malt liquor named midnight dragon This product became a bit infamous for its controversial marketing I don't want to talk about it too much, but it was effective in 1988 Midnight Dragon sold an estimated 1 million cases Despite it only being available in New York City. In 1992 they had a big follow up to Midnight Dragon called Crazy Horse Which also became somewhat infamous for its controversial marketing. Native American groups found the name to be offensive. It was thought to be unfairly targeting Native Americans who tend to be susceptible to alcoholism. it was essentially banned by Congress in 1992 and followed by 12 years of litigation and settlements that eventually led to the drink being renamed. This is an unexpected origin story, isn't it? It's much more controversial than I would have thought but it's also just different than I would have thought when I think of Arizona I think of iced tea I'm sure I'm not alone in that. Yet, the story has already taken us into the 1990s and there's no mention of iced tea It's been all beer distribution and malt liquor. To this point it's been a great case study of how to get a small business off the ground within 20 years these two men turned the smallest business imaginable into a ten million dollar a year company. Which I'm sure most of us would be happy with but if you remember there now a three billion dollar a year company. I did some quick math for you and found out that that's 300 times larger and they did this of course, through their iced tea in early 1991 they recognized that iced tea would be a logical market for them to enter. It's something people love to get in the summer yet, still drink in the winter they saw that there was great demand for it. But, in my opinion their smartest observation was that they saw how there was already great supply for it. Sure people wanted iced tea, but Snapple was already providing it to them So their new question became how do we make people want our iced tea over Snapple? Which is a hard question to answer it took them a few months to come up with an answer. They ultimately came up with three ways to separate themselves all of which still apply today and can be seen by simply looking at their can. The first way: Make a bigger can a bigger can makes it look unique and stand out from all the other options, the second way print a unique design on that can Arizona uses these signature colors and patterns that are unlike anything else out there whether you think they're good or not they're going to capture your attention the final way make it 99 cents The can has costs 99 cents since the very beginning and that has never changed. They print it on the can itself so it's yet another way to draw your attention and plus that way the place that's selling it can't really mark it up. Picture this you walk into a gas station looking for something to drink you walk over to the refrigerated section to go grab a Snapple then out of the corner of your eye you notice a tall can with a unique pattern on it you see that it's 99 cents for 24 ounces while the Snapple you are about to get cost more and is smaller Even, if you haven't heard of the Arizona brand, it's probably enough to make give them a try This isn't a decision like buying a car. You're not researching it for weeks You might not have anything in mind when you're walking over to that section. It's a decision that's made in seconds and Arizona has found an effective way to convince you in that short amount of time The obvious question here is how are they able to sell it for so cheap and a world where inflation exists and the price of just about everything is constantly rising. How has Arizona been able to sell their can for the same price for the past 26 years? The simple answer is that they've cut costs they've managed to run their business very efficiently compared to 26 years ago their can use half the material the distribution system is remarkably efficient. Almost any way that you can cut costs without sacrificing the quality of the product, they've found a way to do it in addition to a very small marketing budget. Their marketing is done with their cans in that moment when people are making their decision not with commercials and billboards It's hard to say if it's a good strategy or not. I'd say they would benefit from a few commercials I think it's the reason I overlooked them initially. I don't believe I've ever seen an advertisement from them so as I said before they weren't really on my radar, but then if you do spend money on Advertisements they may be forced to raise that price which they definitely do not want to do. It's a very deliberate strategy that they seem to feel very strongly about it's worked very well for them over the past 26 years. But one has to think this could eventually turn into a negative for them. Obviously They can't keep that price tag forever 50 years down the line. It'll be absurd to sell something for so cheap. In many cases it's already cheaper than a bottle of water. They are heavily reliant on that 99 cent price tag, if they raise it by just a penny it could mean a massive reduction in sales. Which is not a good position to find themselves. I don't know how long they could manage to keep it at that price. They've already done it for longer than many people thought was possible, but there will come a time where it's no longer practical,k maybe at that point They'll reduce the size of the can but then that's taking away from one of the three things that makes them stand out It'll be something to keep an eye on what not. This exact strategy is sustainable forever I say absolutely not but it's gotten them where they are today within about ten years Arizona went from not selling any iced tea at all to becoming the number one iced tea brand but if we look at this graph I showed earlier. It does appear that they've been losing market share The market for iced tea is becoming more evenly distributed. Now there's countless potential reasons behind this, but here's one that people like to point to the two owners Vultaggio and Ferolito remember the two guys who met each other on their delivery routes and started the whole company Well, those two have not been getting along stemming back to 1994 They've had trouble agreeing on big decisions and management styles in 1998 They signed an agreement that said they would remain 50/50 partners in ownership and voting rights But Vultaggio would more or less be running the company soon after Ferolito wanted to be done with the company Altogether and just sell it but Vultaggio didn't want it to go to someone that would demand more control of it long story short after years of legal proceedings It was finally settled in 2015 when a court ordered that voltagio Would have to pay Ferlito around 1 billion dollars for his share of the company Vultaggio scraped together the money from the company and took out a loan and was able to get the money together and become 100% owner of the company that's where everything stands today But it's believed that all of this had a negative impact they were so distracted by court cases and wrapped up in legal fees that they let their market share slip and the Competitors took advantage of the situation not to mention the billion dollars that the company paid out to Ferolito now Vultaggio, the current 100% owner assures that his full focus is back with the company and he has some big things planned He recently revealed plans of international expansion and product expansion He says he would like to double the size of the company within the next five years now I haven't seen much evidence of success or failure of these plans yet probably too soon to tell but I'm excited to see what happens Let me know in the comments What do you think will happen will this company double in size over the next five years or continue to slide down? He'll there's no doubt that the feud between the owners was bad for the company But can we point to it as the reason for their small decline or are there other big factors and finally did you? Underestimate the company in the same way I did Do you think there's strategy of low prices and very little marketing is sustainable for the future? Or is it time to make some adjustments? I'd like to hear what you have to say. Thank you for watching
