Don Vultaggio: AriZona Beverage Company - The Snap Decision That Outsmarted Snapple

What does it take to turn a Brooklyn beer salesman into the king of iced tea? In the early 1990s, the iced tea market was dominated by Lipton, Nestea, and Snapple. But Don Vultaggio saw an opening. A single moment—watching Snapple cases fly off a truck in winter—sparked an idea that would change his life: why not sell tea in a tallboy can? AriZona exploded—outselling Snapple and becoming a multi-billion-dollar brand. Behind the success was struggle: Don fought to keep the company private. and faced a painful 10-year legal battle with his former friend and co-founder. In this episode, Don reveals: How he stayed independent in an industry dominated by giants. Why Snapple stumbled after being acquired—and how AriZona avoided the same fate. Why he wants AriZona to remain a multi-generational family business. Why packaging can be more powerful than advertising. How AriZona holds onto its 99c price tag Follow How I Built This: Instagram → @howibuiltthis https://www.instagram.com/howibuiltthis/ X → @HowIBuiltThis https://x.com/howibuiltthis Facebook → How I Built This https://www.facebook.com/howibuiltthis Follow Guy Raz: Instagram → @guy.raz https://www.instagram.com/guy.raz/ X → @guyraz https://x.com/guyraz Substack →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.substack.com http://guyraz.substack.com Website →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.com http://guyraz.com This episode was produced by Rommel Wood with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Iman Maani. Our engineers were Maggie Luthar and Gilly Moon. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 5:18Speaker 00

  I want to ask you about a product that turned out to be a huge winner, which was Half & Half, the Arnold Palmer. You guys partnered with this company or with him to bring it, to basically make a can, an Arnold Palmer can.

• 5:33Speaker 01

  Yeah. I came up with this look with Arnold on the front, and we introduced it. And I went to a sales meeting a couple of weeks in, and one of the sales ladies said to me, "I got an order today for four green tea and two George Bushes."

• 5:47Speaker 00

  What?

• 5:48Speaker 01

  George Bush was president at the time, and it looked like George Bush.

• 5:52Speaker 00

  George Bush.

• 5:53Speaker 01

  Not intentional, but that's what it is.

• 5:55Speaker 00

  She thought it was George Bush, not Arnold Palmer?

• 5:58Speaker 01

  I said they ignored the umbrella, they ignored all that golf references and Arnold Palmer on the front.

• 6:04Speaker 00

  Yeah.

• 6:05Speaker 01

  But I said, "Who cares? If they call him George Bush, that's fine, but me too."

• 6:15Speaker 00

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:26Speaker 00

  I'm Guy Raz, and on the show today, how a beer salesman made a split-second decision to get into the iced tea business and beat Snapple at its own game.

• 6:48Speaker 00

  In the early 90s, bottled iced tea was dominated by three brands: Nestea, Lipton, and Snapple. But around 1992, there was a new brand that started to pop up in convenience stores. It looked like it came from a crafts fair in New Mexico. The can was turquoise and pink, it had a huge logo printed across the front, and the can was giant, 24 ounces, as big as a tall boy beer. You'd see the word Arizona, and you'd imagine a scorching hot summer day, and a beverage that people in Arizona presumably would drink to quench their thirst. Except, Arizona iced tea had nothing to do with the actual place, Arizona.

• 7:32Speaker 00

  It was launched by two guys in Brooklyn, Don Vultaggio and John Ferolito. At the time, they weren't even tea makers. They were running a beer distribution business. But Don had noticed Snapple flying off the shelves, and he thought, this is an opportunity. It wasn't Don and John's first shot in beverages. They'd already launched a seltzer brand that fizzled, and two malt liquors, Crazy Horse and Midnight Dragon, that stirred up more controversy than success. But iced tea? That would become their empire. Don and John understood something simple but powerful: packaging can change everything.

• 8:13Speaker 00

  Arizona took off almost instantly, outpacing Snapple, rivaling the big beverage corporations. And today, it's one of the best-selling iced teas in America, with billions in annual revenue. But the real story? How Don Vultaggio came to own it all? How he ended up buying out his partner? And how that deal, ugly, drawn out, almost impossible, dragged on for a decade? Which we'll get to later on, because it's a fascinating story. But for now, let's start at the beginning. Don Vultaggio grew up in Brooklyn in the 1950s and 60s in a working-class Italian-American family. And Don stood out, in no small part because of his size.

• 8:58Speaker 00

  He's 6'8".

• 9:00Speaker 01

  When I was a kid, and my mother told me, "You're tall. Don't do bad things, because people are going to recognize you. You're going to stand out in the crowd. You're going to be picked out for bad deeds." I also came to the conclusion back then, I said, "I'm never going to drink, or smoke marijuana or any of that, because I'm too big. If I'm incapacitated, I'll be too hard to handle. So I better not do any of that stuff." And I think it kind of governed my life, being tall and being different than most. And I used to be challenged, because people thought I was really older than I was.

• 9:38Speaker 00

  Did you play basketball?

• 9:40Speaker 01

  No.

• 9:41Speaker 00

  Were you a good athlete at all?

• 9:42Speaker 01

  I wasn't very athletic. And we didn't talk about sports at the table. We talked about retail. We talked about challenges of being a retailer. My dad worked for the AMP. And so I grew up with that kind of environment. We were more of a focused on like, real-world stuff than like, what some athlete was doing.

• 10:02Speaker 00

  He was a manager at an AMP market, right?

• 10:04Speaker 01

  Yep. You know, he used to say, I leave even when it's dark and I come home when it's dark. And oftentimes, if they had a problem at one of the stores that he managed, he would wake me up and I'd go with him in the middle of the night to see what happened. Somebody broke in or broke a window, that kind of thing.

• 10:20Speaker 00

  He'd bring you because he wanted to show you?

• 10:22Speaker 01

  Yeah, he wanted to show me the world that he knew. And I think those things were very important to me in my experience in business myself. See things that happen that most consumers don't recognize or realize, you know.

• 10:36Speaker 00

  And Don, I mean, I guess already in high school, I mean, watching your dad at AMP, I'm assuming you worked at AMP too, like maybe you bagged groceries or stocked shelves. Did you do that as a kid?

• 10:46Speaker 01

  I worked at a place called Key Food. And my dad didn't want me to be a grocer. But when I graduated in 1970, I had no intention of going to college. And he set up a interview for a job at a brewery in Brooklyn. And that's how I started in the beverage business. It was called Peels Brothers and they were on Bushwick Avenue in Brooklyn.

• 11:11Speaker 00

  And this was a job to just do whatever they needed? I mean, you were 18, so I'm assuming like drive the truck or stock the warehouse or whatever they needed?

• 11:20Speaker 01

  Yeah, well, it was a merchandising. I was in a sales department, so I didn't drive a truck there. But, you know, we'd build a display and put the signs up and, you know, and entice consumers to buy our product.

• 11:32Speaker 00

  So it wasn't like a muscle job. You were a sales job early on?

• 11:36Speaker 01

  Yep. When I started there, you know, I lived a kind of quasi-sheltered life with my parents. And I wasn't well-traveled. I had never flew in an airplane until I was 35 years old. And I didn't, you know, from being in retail, because I worked in that grocery store, I was social with customers and I became comfortable with that. And when I became a salesperson, it just kind of carried over.

• 12:02Speaker 00

  All right. So you start out in the beer business, working for a brewery. And I think the Peels folded a couple of years after you joined. And but you were in that space. So from what I understand, you went into to go work for a beer distributor at that point, which I think you're around 20, 21.

• 12:20Speaker 00

  This is, you meet a guy named John Farolito and he's also a young guy like you. And you guys become fast friends. You start to talk about ideas together. Tell me, tell me about that time.

• 12:31Speaker 01

  You know, we came from the same kind of background. You know, we were not middle class, lower middle class.

• 12:38Speaker 00

  He was also Italian American, but I don't know if that mattered.

• 12:41Speaker 01

  I didn't, but you know, it happened to be that we had things in common. He was a good guy, you know, he was my best man at my wedding and he was terrific.

• 12:52Speaker 00

  I ask this because a lot of times when people are looking for co-founders, you know, it's a crapshoot, you just never know, it can be great at the beginning, get horrible at the end. A lot of things can happen, but oftentimes people will say to me, well, what should I look for? And I say, shared values, right? Which is a bit squishy, but I think that matters. Did you guys have shared values?

• 13:15Speaker 01

  We did, but you know, like anything else, it's like picking a wife. Sometimes the person you pick changes and maybe sometimes you don't change with them.

• 13:26Speaker 01

  So it's hard because if you say, well, I want to pick somebody today who's going to be great 40 years from now. It's hard, it's hard to think that far ahead, number one. And number two is it's hard because things change and things happen. And you know, candidly, part of, I call it the romance of the relationship between John and I, was the fact that we, you know, started out with nothing and then we turned it into something. It was kind of cool.

• 13:52Speaker 00

  Yeah, yeah. All right, so it's the early 1970s and I guess you and John partner up and you start a beer distribution business. Tell me a bit about what you were doing.

• 14:05Speaker 01

  You know, because of my experience at Peels and John's experience working at this distributing company, we said we'd go to stores and offer them these popular brands of beer at not so much a better price, but more convenient, you know, they can deliver on Saturdays, we can deliver nights, that kind of thing.

• 14:22Speaker 00

  Yeah.

• 14:23Speaker 01

  And then at some point later on, you know, we started becoming more of a, what are called like a primary distributor, where we actually had the exclusive right to certain brands. But back in those days was whatever sold, you know, we bought and we sold.

• 14:37Speaker 00

  Tell me a little bit about two young guys getting into the distribution business. I imagine there are a lot of vested interests, a lot of companies that had, you know, kind of controlled certain areas and markets. This is a threat to their business. Were there dirty tricks played on upstarts like you guys?

• 14:58Speaker 01

  Yeah, we were threatened a lot. You know, we were threatened by the Teamsters about, you know, you can't do that, you know, that's not allowed, you know, because the Schaefer delivery guy, we were delivering Schaefer.

• 15:11Speaker 00

  Schaefer beer.

• 15:12Speaker 01

  Yeah, that was produced in Brooklyn.

• 15:14Speaker 00

  Yeah.

• 15:15Speaker 01

  But, you know, the guy, the Schaefer delivery guy or the Schaefer sales guy didn't like us very much because we were selling beer that he says he could have sold. But there was always a rub because you're buying beer from a distributor who bought it directly from the brewery and then reselling it. They, in some cases, hated you, you know, for that.

• 15:34Speaker 00

  And, and probably, you know, again, given that there are unions involved and maybe some unsavory characters involved, like, it's risky, right? I mean, I, John, I read stories about your time in this business back in the day where like, you were robbed on at least 100 occasions. You, you were at some, one point, held, held in a closet at gunpoint in your office. What, what happened? What's the story?

• 16:02Speaker 01

  Well, you know, we were a company and a business that dealt a lot in cash because that's how grocery stores paid. And people who worked for us knew that we had a lot of cash coming in. And they told their friends about it over a bar or in a restaurant, and then they would come and stick us up. The time where I was held up, I was, I was in our office and I was held up. And one of the guys I was with pushed the gun away from his head, that they hit him over the head with the gun. And, and I believe I, I kind of cooled the situation down by kind of talking to these bad guys in a very fatherly way. And then when they left, they put us in the closet.

• 16:47Speaker 01

  Then when they left, I said, why'd you do that? He said, I don't like a gun to my head. I said, who does? Nobody likes a gun to their head.

• 16:52Speaker 00

  I mean, I have to imagine you had to have a gun in your desk just out of safety.

• 16:57Speaker 01

  I never, I was never a gun owner. If you're not Clint Eastwood. Where you can draw quick and shoot straight. You're better off not having one. But my dad told me, you gotta respect the gun, right? Somebody holding a gun, you gotta be very respectful for what he's telling you to do. Otherwise, you might be a victim of the gun, right?

• 17:19Speaker 00

  How quickly did your... By the way, what did you guys call your business, your distribution business?

• 17:24Speaker 01

  United.

• 17:26Speaker 00

  United, okay. And how quickly did it become profitable?

• 17:29Speaker 01

  You know, we lived off it, so it was profitable from day one, you know? But we were always reaching further than our finances were able to keep up with us. So, you know, we had some difficult times where there were some sleepless nights about how to meet payroll and how to pay the electric bill. And that went on. You know, I tell people, they say, well, you're an overnight success. I said, yeah, we were 20 years of nights because the first 20 years of our business prior to Arizona was a struggle. It was, you know, we did business, we supported our families, we paid for our homes and things like that, but it was always, we're always on the edge.

• 18:08Speaker 00

  But the beauty, it seems to me, of what you guys were in is it's not perishable and it's not like apparel where it just goes out of fashion, right? And so eventually you knew that all your inventory was gonna sell.

• 18:21Speaker 01

  Yeah, for the most part, we didn't buy things that were like hula hoops. But back in the beginning, it was selling Shafer to people who wanted Shafer or Rengold who wanted Rengold. It was just about price.

• 18:33Speaker 00

  Yeah, and I guess by the early 80s, things begin to shift because you actually decided to buy the license for, I guess, a failing brewing company. And at that time, you and John start to think about launching your own brand, which we'll get to what you started in just a second. But I'm wondering why, like, why did you guys wanna move from distributing beer to making it?

• 19:00Speaker 01

  Well, because we lived through a time where we always bought something from a distributor who bought it from the company that made it. We never bought it from the company directly. If we bought Budweiser, Miller was from a distributor. And the distributors had, would have changing views on what they wanted to do. So we'd have...

• 19:22Speaker 01

  A good connection with a guy who sold Budweiser, then he'd call us one day and says, "I can't sell you anymore because Annisa Bush said, "I don't want us to do that any longer." So we're always on, on the edge about our future. So we thought if we had a brand that we owned, that we can control, it could be something that we wouldn't have the uncertainty that we had buying beer from somebody else and reselling it.

• 19:43Speaker 00

  All right. So you guys decide, instead of going into beer, to go into malt liquor. This is a beverage called Midnight Dragon. Tell me a little bit about why you decided to go into, into malt liquor.

• 19:55Speaker 01

  Well, malt liquor in those days was a very popular category in the beer business. And I'll never forget, it was actually a beer manufacturer from upstate New York. He came to me with an idea about, he wanted to do a malt liquor. And he asked us, he said, "You guys know that category. What do you think?" And he showed me his package and his product and his name. And I thought it was horrible, but I didn't tell him. I said, "All right." But when he left, John and I looked at each other and said, "Why don't we do that?" And then we developed a label and, and a bottle and a product and all that. But it started with that one visit from this brewery from Rochester, New York.

• 20:36Speaker 00

  All right. Midnight Dragon. I want to dig into this for a little bit. And it's a little bit uncomfortable, but I think that you know where I'm going with this.

• 20:44Speaker 01

  The poster?

• 20:45Speaker 00

  You know, it was controversial.

• 20:46Speaker 01

  Okay.

• 20:47Speaker 00

  And, and in part because I think the way it was marketed. First of all, there was an ad that was very sort of, sort of sexually suggestive. And John was asked about this, because I guess the National Organization of Women had protested it. And he's quoted as saying, "Look, real men like sex and sex sells beer. I'm not interested in wimps and achievers who want to suck on a lime and drink Corona." That was his quote in the Wall Street Journal.

• 21:13Speaker 01

  Yep.

• 21:14Speaker 00

  I mean, wow. Tell me about, just kind of reflecting on that. How did you feel about, I mean, did you think that the critics were just wrong and unfair? Or, or did you think they had some, there was some legitimacy to what they were saying?

• 21:31Speaker 01

  Well, it was, you know, it was a, you know, a beverage category that was very popular in, in America. We, we, we went at it in a, in a, in a, I guess a Brooklyn style where we said, we gotta be a little outrageous because in order to get some attention on a shelf, we have to do something different and it worked out pretty good.

• 21:52Speaker 00

  All right. The next product you launched was even more controversial. This one was called Crazy Horse and it had a, a label with a Native American and, and like a feathered headdress. It also drew a lot of negative attention. I mean, I think at one point the US Surgeon General called it an insensitive and malicious marketing ploy because he argued it was aimed at Native Americans. Obviously there's a lot of alcoholism in, in Native American communities. I think the, the ATF, the Alcohol Tobacco Firearms Bureau even banned it at a certain point. Again, you know, you may have just been focused on making a business

• 22:33Speaker 00

  product, but you saw what people were saying about it. And, and what did you think about, about that criticism?

• 22:42Speaker 01

  Back in when, when we had been at Dragon, I would work the trade every day and I saw what was happening in the coolers and we, we said, we want to do like an upscale malt liquor.

• 22:58Speaker 00

  Okay.

• 22:58Speaker 01

  And I was watching an old Western movie one night and they had, they used to break the bottle over the bar and use it as like a weapon.

• 23:07Speaker 00

  Yeah.

• 23:08Speaker 01

  And I said, boy, that's the bottle. It had a long neck on it because all of malt liquors and actually all the beers in those days had these kind of rounded, not so pretty necks. And then the Indian on the front and the cowboy in the back and a story about the West was what inspired, came from my home. You know, at the time I lived in a home in Queens that we, my wife designed around the Southwest.

• 23:35Speaker 00

  It was like a Santa Fe motif home, right?

• 23:37Speaker 01

  Yeah. And we had a lot of, you know, Native American things in the house and decorations and stuff like that. It was very cool. And the package was terrific looking. And we went to a trade show, John and I, and we sold thousands of cases of it. Without even having a product yet, it was just the package. Then, of course, things happened, you know, to our surprise. It wasn't like we were trying to offend anybody. It was just, you know, we thought it was a cool look and it was because consumers loved it. It's actually, it's what saved our company because prior to that, we were floundering.

• 24:11Speaker 00

  With Midnight, with Midnight Dragon?

• 24:13Speaker 01

  Yeah, Midnight Dragon, we're just keeping our head above water. The Crazy Horse puts us over the edge.

• 24:18Speaker 00

  What was it about Crazy Horse that did so much better? Why?

• 24:22Speaker 01

  It was a high-priced beer, higher-priced, with a lot, a lot more margin in it. At that time in our lives, it was pivotal to our success into the future.

• 24:34Speaker 00

  Eventually, you changed it to Crazy Stallion a couple of years later, but initially it was Crazy Horse. I think the Crazy Stallion brand is still around, but Midnight Dragon is not, right?

• 24:44Speaker 01

  Midnight Dragon is no longer sold.

• 24:46Speaker 00

  Yeah. Okay, but I think you guys were profitable, right? The business union was profitable. And, and what, what, what do you think your revenue was around?

• 24:57Speaker 01

  Back in those days?

• 24:58Speaker 00

  Yeah.

• 24:59Speaker 01

  No, no, more than that, probably thirty, forty million.

• 25:02Speaker 00

  Wow, so you were at a significant business with the, with the malt liquor?

• 25:07Speaker 01

  Well, and malt liquor and other brands that we're selling.

• 25:09Speaker 00

  That you were selling distributing, okay.

• 25:11Speaker 01

  Yeah.

• 25:12Speaker 00

  Alcohol is a, I mean, certainly then, of course, I think we know that, that alcohol consumption's been in decline in the US. Beer and wine, and it's still in decline, spirits as well. But back then, in the, in the late eighties, nineties, this is a good business. I mean, because the margins can be really good, but it's a highly regulated business. And so I would imagine that a smart, savvy person in this space is thinking, what if we look into non-alcoholic beverages, which is what was about to happen. So let, let's talk about this. This is 1991. Can you tell me the story of how you first kind of had this epiphany?

• 25:55Speaker 01

  I was in a store on Broadway and Houston. It was February 1991. I was selling Midnight Dragon and a Snapple truck pulls up. Snapple, I saw it happen in New York because it happened here. It started here in New York. And he starts peeling off like 40 cases of iced tea. So I said, hey, iced tea is not supposed to sell in the wintertime. Number one. Number two is the order he was bringing into that store was far greater than the order I was trying to get on the beer. And I made the decision right there. I said, I'm going in the tea business.

• 26:32Speaker 00

  Right then?

• 26:33Speaker 01

  Right then.

• 26:34Speaker 00

  I'm just curious, up until that point, February 91, Snapple was not on your radar at all?

• 26:41Speaker 01

  So I wasn't really focused on the soft drink aisle. I was focused on the beer aisle until that day. And I said, I said this the other day, entrepreneurs could tell you the time when the light goes on and that's when it went off for me.

• 26:56Speaker 00

  When we come back in just a moment, the story behind the turquoise and pink paint job on the very first can of Arizona Iced Tea. Stay with us. I'm Guy Raz and you're listening to How I Built This. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents.

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• 31:04Speaker 00

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1991, and Don's made a snap decision to get into the iced tea business. He's seen how well Snapple is doing, and he thinks he can capitalize on it. I think by that point, if I'm not mistaken, Howard Stern was already endorsing Snapple on his show.

• 31:27Speaker 01

  Oh, yeah, sure.

• 31:28Speaker 00

  And that, I think, really supercharged that brand, because Howard Stern was talking about it in such a way that made it sound so appealing.

• 31:37Speaker 01

  Yeah, you know, the brand was started by a couple of window washers from New York. One of them had a health food store, like a health, I guess, like a vitamin store. And Snapple was selling, they didn't start the brand, but they saw it there, and then they took it over and da-da-da. They became very successful, and I saw it firsthand.

• 32:00Speaker 00

  So really, I mean, you got really excited about iced tea. And you started, I guess you started to look for a plant that could produce those lug nut cap, those wide-mouthed bottles, just like Snapple. But from what I read, once you did that and you went to that factory, you started to kind of have second thoughts and thought, I'm not gonna, I can't out-compete Snapple. There's no way. This is gonna be, this is gonna fail.

• 32:28Speaker 01

  Well, John and I drove to a plant in Trenton, New Jersey, who was making Snapple. And it's a man who ran the Peels Brewery. He was a production manager there. And

• 32:39Speaker 01

  He asked whether we had a name. I said, we didn't. We didn't have a, we didn't have a formulation. And we essentially went through like what it would take. Well, he said, there's generic bottles, you know, with a lug cap, there's a paper label. We can find a flavor house for you. And da, da, da. And then on the way home, we stop at 7-Eleven and we buy some Snapple to look at on the way back to Brooklyn. And we kind of talk ourselves out of the tea business. Because we said, how are we going to get somebody to buy us over Snapple? How are we going to get them or convince them to buy us? Better looking label, but is that enough to, you know, the same shape bottle? Are we going to get lost in the mix? And we kind of said, you know, something, we better stay in the beer business. We know that. Yep.

• 33:23Speaker 00

  Okay, for a couple of months, I mean, you put this out of your mind. I'm not going to get into the tea business. Snapple's killing it. We're not going to do it. What changed?

• 33:31Speaker 01

  I walked into a 7-Eleven one morning, which I did every morning, to buy coffee on the way to the office. And they had Gatorade in a 24 ounce can. And I had never seen that before. I knew that 24 ounce can because John and I delivered Schlitz Bowl was in a 24 ounce can. They were the only brewery using that can. I buy the can.

• 33:56Speaker 01

  I take it back to the office. I look on the side. It's Reynolds Metals making it. We call up Reynolds. Reynolds says, you could put tea in that can, because that's what I asked. And I said, now I got the package. This, this, this will, this will be 50% larger than a 16 ounce Snapple bottle.

• 34:13Speaker 00

  24 ounce can. So a tall boy can. So there was no, that was the first time you saw what we now call tall boy cans. That was the first time you'd seen it. No one was doing it up until Gatorade?

• 34:24Speaker 01

  Which with a non-alk.

• 34:26Speaker 00

  With non-alcohol. Okay.

• 34:27Speaker 01

  Schlitz was doing it with the alk.

• 34:29Speaker 00

  Right. So Schlitz had been doing it, but Gatorade in a can. And you said, wait a minute, we can sell it for the same price. How could you sell it for the same price if you're offering, you know, eight more ounces of, of product?

• 34:42Speaker 01

  Well, glass bottles were historically more expensive with a lug cap. They run slower.

• 34:48Speaker 01

  In the beer business that we knew, you know, we knew the speeds of cans was faster. Plus the fact, because we were, you know, just looking at pure margin, we were saying, if, if we can be competitive and get people to buy it, then we'll figure out what we got. I wasn't so focused on, well, how are we going to make a, you know, killing on it? The question was, can we get some consumers to buy it, see it and buy it? And I thought this was the angle, bigger can, very, you know, stood out in the cooler, unique, different, and we, we entered the market with that big can.

• 35:24Speaker 00

  Okay, let's talk about, about getting ready to enter the market because you're almost 40 at this point and you have a lot of experience now in beer distribution, the beverage industry. First of all, how hard was it for you to come up with a recipe for iced tea? Was that, like, how did you do? Did you go to your kitchen and start playing around or did you find like a, you know, beverage scientist and start working with him?

• 35:48Speaker 01

  I looked at the back of a beverage magazine and it was an ad for a flavor house in New Jersey and I called it and they sent a salesman in. And we talked about his background and I realized that he went to the same high school and graduated the same year that I did. And my wife knew him in, in high school because she, I met her in high school and.

• 36:12Speaker 00

  And I should mention, you married your wife in 76, Eileen.

• 36:15Speaker 01

  I did.

• 36:15Speaker 00

  And you're still married today.

• 36:17Speaker 01

  Yes, we're going to celebrate our 49th wedding anniversary in a couple of weeks.

• 36:21Speaker 00

  Amazing.

• 36:22Speaker 01

  Thank you.

• 36:22Speaker 00

  Congratulations. Okay, keep going back.

• 36:24Speaker 01

  So anyhow, you know, now we're, we have this guy in the office and he's, you know, he works for Flavor House in New Jersey and we start playing around with flavors.

• 36:36Speaker 00

  Okay, let me ask you about your palate. I'm curious, right? Because you were looking for a particular flavor profile, right? And, and how did you know? I mean, you're, I mean, do you have a particularly good palate?

• 36:50Speaker 01

  I do.

• 36:51Speaker 00

  Do you, you do, really?

• 36:54Speaker 00

  Uh, for, for what? For, for, for any wine?

• 36:57Speaker 01

  All kinds of stuff because you know, you have to have a, you know, some people can drink something and say, I don't know, I don't get it. Or, you know, maybe I developed it over the years, but you know, I was always someone who savored things. And, you know, when, when I was working on the original flavors, I knew what I wanted. I wanted, you know, tea character with true fruit flavor, uh, with good cleanup, good nose. And that's what I was striving for. And I was of course tasting the competition as well.

• 37:24Speaker 00

  Was it hard to do? I mean, or was he basically, he knew what he was doing and you could just kind of taste it and say, I add a little bit more lemon, add a little bit more sweetener.

• 37:31Speaker 01

  Uh, the flavors he brought in, uh, at first were terrible. And I said, hey, Joe, I mean, I want tea. And he's, oh, you really want tea? But it was interesting because, you know, the typical response in the flavor category was, uh, you know, you don't have to put a lot of tea in on a tea. You just put flavor, you can kind of fake it up. And then I realized that what other guys are not doing is putting real ingredients in because, you know, they choose to go a less expensive route. And we then said, let's make a great tasting tea. We came out with lemon and rasp. Those were the top two flavors for Snapple. Great tasting raspberry flavor, put it in a great looking can and put it on the shelf next to Snapple at the same price.

• 38:14Speaker 00

  Okay. Now you've got a differentiated product because it is going to be in a tall boy can, which is going to make it stand out, but that's not enough. You still need a brand and Snapple. Snapple is a formidable brand. I mean, it has the wide mouth and still a big deal. So let's talk about how you started to think about what this was going to be. First of all, the name, let's talk about the name. How did you come up with a name?

• 38:42Speaker 01

  Originally the name was Santa Fe.

• 38:45Speaker 00

  Santa Fe. Good name, good name. Santa Fe Tea Company, okay?

• 38:49Speaker 01

  Because our house in Queens looked like it belonged in Santa Fe.

• 38:54Speaker 00

  And when you say, look, let's just describe the house again. So this is a house in Queens, in Rockaway, Queens, that looked like it was in Santa Fe. So what does that mean? Like, what were the colors of the house?

• 39:04Speaker 01

  It was an adobe style, and my wife, she said, I'm gonna, I said, what do you want to do with it? She said, I'm gonna make it look like an adobe style. And I didn't quite understand what that meant, but I said, it sounds great. But then she transformed it into a house that looked like it belonged in Phoenix, Arizona.

• 39:21Speaker 00

  Wow.

• 39:22Speaker 01

  And people saw it and loved the colors and the vibrancy, the turquoise's, the pinks, and the yellows, and the zigzags, and all kind of stuff. And that was the inspiration for the look of the can.

• 39:34Speaker 00

  And what about the name? Santa Fe. It was gonna be Santa Fe Tea, but it's not called Santa Fe Tea.

• 39:39Speaker 01

  Well, we put Santa, we put Santa Fe on the can, and I showed it to someone, and they said, it sounds like a train.

• 39:45Speaker 00

  Oh, yeah. The Santa Fe Railroad, yeah.

• 39:48Speaker 01

  And I said, oh, boy, I don't like that. So we had a map of the country on the wall. We said, Arizona. We wanted someplace dry, warm.

• 40:00Speaker 00

  Okay. So Arizona, you said on the name Arizona, with a, and it's stylized, with a capital Z in the middle.

• 40:07Speaker 01

  Yep. My wife, she went to Hunter College, and she, she was an art major. I went home that night, I told Eileen, I said, Arizona. And she came up with the big Z in the middle of it, something that made Arizona look kind of cute on the can. And there we go. I wrapped it around a can, and we said, wow, it's gonna stand out in the cooler. In those days, the coolers were a lot more drab than they are today. You know, there was all blues, and blacks, and reds.

• 40:35Speaker 00

  The coolers in, in convenience stores?

• 40:38Speaker 01

  Yeah. Nobody was doing turquoise, or pink.

• 40:41Speaker 00

  Yeah. And so, from the time that you, you saw the Gatorade cans, to the time that you actually had product to sell, how, how long would you estimate that was?

• 40:54Speaker 01

  Probably under a year.

• 40:56Speaker 00

  So it's fast.

• 40:57Speaker 01

  Yeah, well, I mean, today we do something in three weeks because we, you know, we're plugged in, but back then we had to get the can supplier and all that and.

• 41:05Speaker 00

  The brilliance of cans to me also seems not just it was going to differentiate the product. And by the way, just to be clear, no iced tea was being sold in cans at that point?

• 41:14Speaker 01

  Well, I had 12 ounce cans, you know, the standard.

• 41:16Speaker 00

  12 ounce cans.

• 41:17Speaker 01

  Not the big can.

• 41:18Speaker 00

  But nobody was doing the tall boy cans. So that was the first thing. And the second thing is it's lighter than glass, right? So that's got to save you some money, too.

• 41:25Speaker 01

  It doesn't break.

• 41:26Speaker 00

  It doesn't break.

• 41:27Speaker 01

  And the freight is a lot more because it's, it's heavy, you know, and they.

• 41:31Speaker 00

  Right. The freight on, on glass has more. Right. Yeah. Okay. So you come out with this, I think, what was it in May of 92, when, when, when Arizona debuts?

• 41:41Speaker 01

  May 5th, 1992. First load comes to New York.

• 41:45Speaker 00

  Okay. So you've got, and your first run, how many, do you remember how many cases of it you made?

• 41:50Speaker 01

  I think we made 20,000 cases.

• 41:54Speaker 00

  Okay. And now, how are you going to get them into stores? Because you had a distribution business, but so could you just literally say to these stores, hey, we got iced tea, will you put them on your shelves?

• 42:04Speaker 01

  The first weekend, we had Arizona delivered. It was early May, and I had my sales manager, I said, go out with a van and get me different types of stores. Let's place it. It was Friday. And then let's see what happens on Monday. Let's go back to him. And he comes back and he got a drugstore, a gas station, a bodega, a mom and pop supermarket. And he said, I placed it. He placed a case of each, put a sign on there, the price of Snapple, whatever Snapple sold for. It was usually a buck in those days, but some places had it for more. And then we went back on the following week and nine out of the 10 stores sold 48 pieces, which is two cases.

• 42:46Speaker 00

  Okay, but just, just let me pause for, how did you get the stores to agree to let you put it in their coolers? Because they have a limited space.

• 42:54Speaker 01

  Well, somebody gets kicked out. Somebody gets moved over. You know, there are, there's always room in a cooler, as long as you get the green light from the, from the shopkeeper to move something.

• 43:04Speaker 00

  But why would he, but what, what, what gave you the ability to do that? Was it, was it personal relationships? Because, because it's right, it's, you knew a lot of these store owners.

• 43:12Speaker 01

  Well, you know, if you're selling a guy something already, you know him. Doesn't mean he'll take a new product of yours, but it's more likely he will than he won't because he knows you and he knows that if he doesn't sell, you'll pick it up and take it home, you know, and give him credit on it. So it was relatively easy to get a grocer to take it on, plus the fact it looks so dynamic and the can looks so good, that grocers said, yeah, shoot, why not? I think I could sell it.

• 43:37Speaker 00

  But you did not put any marketing dollars behind it?

• 43:40Speaker 01

  Other than point of sale, like signs on stores and coolers, no.

• 43:44Speaker 00

  I'm curious, what was the cost to you per can?

• 43:49Speaker 01

  Back in those days, it was about a half a buck a can.

• 43:55Speaker 00

  So then you were probably, what, making 20 cents on each can? Maybe?

• 44:00Speaker 01

  We were making 17 cents a can.

• 44:02Speaker 00

  So that was thin. You had to sell a lot to make money.

• 44:07Speaker 01

  Well, you know, back in those days, to make three bucks a case was pretty good.

• 44:13Speaker 00

  Yeah.

• 44:14Speaker 01

  You know, because it was incremental. It was, we were going there already. The truck was there to take a few extra cases off the truck. The economics were great.

• 44:24Speaker 00

  And in a sense, I mean, the fact that Snapple was doing so well was good for you because they were paying for marketing and Coke and Pepsi's products were paying for marketing and all you really had to do was just kind of be next to them on the shelves and hopefully people would see this interesting can and say, oh, I'll try that.

• 44:44Speaker 01

  Well, exactly, because they made tea cool. Snapple did at least. And then walking around with that big can was cool for kids. But I think packaging is what did it and the colors and the look of the can as well.

• 44:55Speaker 00

  And I should mention, the first year, I think 80% of the sales were in four states, four places, New Jersey, New York, Miami, and Detroit. So you were not in, you weren't really, hadn't penetrated every market yet. But those four places were doing very well.

• 45:17Speaker 01

  We did. I think it was 700,000 cases year one or 800,000 cases.

• 45:25Speaker 00

  And I guess the another turning point was Detroit. There was a guy in Detroit called Michael Schott, who was handling distribution for you. He did such a good job. You guys brought him on as a as a chief operating officer for you and really started to push this product out nationally.

• 45:45Speaker 01

  Yeah, by by 93, we knew we had something and Mike was the first real serious guy outside of New York, New Jersey to take the brand on and they did very well that year. And from that, we became a national brand by 94. You know, we became a powerhouse.

• 46:03Speaker 00

  I don't know if I'm reading this right, that two years in, you're you're doing more than $150 million in sales. Does that square with your memory?

• 46:12Speaker 01

  Yeah, well, year two, we did $100 million year two. Then year three, we did, we doubled it more than doubled it again. So we got to like 400 million.

• 46:22Speaker 00

  That's unbelievable. Okay. So you've got, I think by by the early 2000s, Arizona, which had started in 92, is already producing more iced tea than Snapple. I don't know if you're outselling Snapple by that point. Maybe you are.

• 46:40Speaker 01

  Yeah, I am.

• 46:40Speaker 00

  You are already.

• 46:41Speaker 01

  But Snapple went through multiple owners and they destroyed it.

• 46:44Speaker 00

  Right, because they sold to Quaker and and a bunch of different things. But but again, when they sold to Quaker, you would think, oh, they're they're going to be huge now. They got a huge marketing team behind them and a huge company behind them. But it didn't actually happen. It didn't become this threat.

• 47:00Speaker 01

  Most most entrepreneurial companies that are bought or consumed by larger companies usually don't fare very well. Because that little thing that happens in entrepreneurial companies can't happen in these large companies. So unintentionally they destroy them. And that's what happened to Snapple. That's what's happened to a lot of brands that you see acquired and then look what happened.

• 47:24Speaker 00

  Yeah. And I want to ask you about a product that really just turned out to be a huge winner, which was um half and half, the Arnold Palmer. Arnold Palmer's, right? Everybody knows. You go to a restaurant, you ask for an Arnold Palmer's, half lemonade, half iced tea. Arnold Palmer, great golfer. Um, I think there was a company that had like a license to sell the drink in around, I think around two thousand one, two thousand two, maybe. You guys partnered with this company or with him to bring it to basically make a can, an Arnold Palmer can. Um, tell me a little bit about that, the genesis of that idea.

• 48:04Speaker 01

  That flavor house I mentioned, the guy I went to high school with, brought it in to me. And he said, what do you think it is? Now, I play golf, but I didn't, I never heard the term Arnold Palmer's a half and a half. But he told me about it and he had sold this company flavor out in California and they came out with an Arnold Palmer in a dairy half gallon. And I said, well, send me it because he said it didn't do very well. He said, would you be interested? He sends it to me and the picture on the carton was awful. Didn't look like Arnie. And the product was awful. And being a big sized container for somebody who says, oh, I want to try it, but I want to invest in, you know, in a half gallon.

• 48:49Speaker 00

  Giant carton, yeah.

• 48:50Speaker 01

  Yeah. So I said, you did a lot of things wrong. I said to myself. She said, what do you think? You want to try it? And I, I said, let me put some thoughts behind it. And I came up with this look with Arnold on the front. Arnie didn't control a lot of photographs of himself. So they had photographers who would follow him. And I asked Arnie, I said, you got some pictures? He said, well, call these guys. And I did. And they said, well, all right, give us like a nickel a can. I say, I'm not going to give a nickel a can to some guy who put a photograph of him in play. So we, we had this lady who did our graphic designs. She painted the first picture.

• 49:30Speaker 01

  Put it on a can, put some of his highlights of his career on the side of the can, and we introduced it. And I went to a sales meeting a couple of weeks in, and one of the sales ladies said to me, "I got an order today for four green tea and two George Bushes." George Bush was president at the time, and it looked like George Bush. Not intentional, but that's...

• 49:55Speaker 00

  She thought it was George Bush, not Arnold Palmer?

• 49:58Speaker 01

  George Bush.

• 49:59Speaker 00

  George Bush. I love this George Bush iced tea.

• 50:02Speaker 01

  I said, "They ignored the umbrella, they ignored all that golf references and Arnold Palmer on the front."

• 50:07Speaker 00

  Yeah.

• 50:08Speaker 01

  But I said, "Who cares? If they called him George Bush, that's fine, but me too." And today, it's our second best-selling flavor.

• 50:17Speaker 00

  When we come back in just a moment, the end of a partnership and the beginning of a 10-year legal battle over what the brand is worth. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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• 51:33Speaker 00

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2005 and Arizona Iced Tea is doing incredibly well, even outselling Snapple, the brand that inspired it. But behind the scenes, the partnership behind the brand between John and Don is starting to sour. In fact, it turns out that John has been drifting from the business for quite some time.

• 51:57Speaker 01

  When Arizona started and it became very successful, he became more remote and more away from the business. It was what the evolution of a partnership that started with us both working together and then it turned into mostly me and John not as active or involved as he was. He was pursuing other interests at that point. And our success gave him opportunities that we didn't have before. And he liked golf and he ended up buying a golf course. And I said, go pursue your interests and have fun.

• 52:32Speaker 00

  But you guys were partners. You were full partners.

• 52:34Speaker 01

  Yep.

• 52:35Speaker 00

  And I want to be very sensitive here because John is not, you know, this is not a documentary show. We're interviewing one founder at a time. And your co-founder, John, is not here to give his side. And so we're going to talk about him respectfully. I mean, oftentimes when one partner is doing more of the work, it can create tension because one person is like, hey, I'm doing all the work and you're getting all the profit, you're getting half the profit here. Did that create any tension or were you OK with that?

• 53:01Speaker 01

  I was fine with it.

• 53:02Speaker 00

  You didn't care?

• 53:03Speaker 01

  Because I never considered what I do work. I enjoy what I do. And I also, and I said to him at one point, I said, we didn't fight when we had nothing. We're not going to fight now.

• 53:15Speaker 00

  Did you call him to consult with him on anything? Or, I mean, did you say, hey, I've got, we've got this new idea for a product? Or was he completely out of the picture?

• 53:26Speaker 01

  There were times when I didn't speak to him for over a year.

• 53:30Speaker 00

  Wow.

• 53:31Speaker 01

  But also, I knew that at that point in his life, it wasn't for him. And oftentimes, I, when I would make decisions, I did call him sometimes, but for the most part, I didn't because it was, you know, he had trust in me and I had trust in the fact that what I was doing, I felt was the best for both families and we succeeded. It was great.

• 53:53Speaker 00

  All right. So let's get to 2005. By 2005, he decides he wants to sell his half of the company.

• 54:02Speaker 01

  No, he wanted to sell the company.

• 54:04Speaker 00

  He wanted to sell the whole company, not his.

• 54:06Speaker 01

  He wanted us to sell.

• 54:08Speaker 00

  He wanted you to sell, okay, because I guess there were people out there who were offering lots of money. Um, why weren't you interested in selling? I mean, apparently there was billions of dollars at stake here. There's arguments to be made, hey, 2005, we're on top of the world, let's cash out.

• 54:26Speaker 01

  I have two sons in the business and I have four grandchildren. And I hope that one day they, my sons take over and then they have their children take over from them.

• 54:37Speaker 01

  Maybe it's an old fashioned approach, but I don't, I, I think the worst thing in life is to be wealthy and not have anything to do. You know, the guys from Snapple told me that the worst day of his life was the day after he sold out.

• 54:52Speaker 00

  I believe it.

• 54:53Speaker 01

  Because he said, now what? You know?

• 54:55Speaker 00

  Yeah.

• 54:56Speaker 01

  But I also understood that if he wanted to sell, I said, hey, sell it to somebody who will get into your shoes and get the same benefit you've been enjoying. That's fine. I can't have a guy buy you out and then say, I want to run the company because I know what they do to entrepreneurial companies. And I was concerned about then my stake would be hampered by some large company putting their big mitts on them, on the brand. And that's where it kind of, where the world kind of unraveled a little bit.

• 55:25Speaker 00

  Right. Because he, because nobody, well, very few people would, would accept that deal. They would say, oh, they wouldn't buy out his share only, not, you know, only to be in a situation where they couldn't control the business, right? Because if an outsider, private equity or a big firm buys into the company, they want to share, they want to control it generally.

• 55:43Speaker 01

  That's true. And for their obvious reasons, they say I put a lot of money up and I don't want this guy who's the founder to control my destiny.

• 55:50Speaker 00

  Of course.

• 55:51Speaker 01

  But it's, I think it's a mistake because I think the, the reality of it is who better to run something is the guy who started it and who's got vested interest in it, you know?

• 56:01Speaker 00

  And, and, and just to be, and just to be clear, when it, when it became obvious that, that you were not going to sell, right, and that you were gonna have to buy John out, the real dispute began, right, over what the company was worth, right? And this gets pretty complicated, but suffice it to say, John thought the number should be much higher, like in the low billions, and you said the number should be lower. And so this began a 10-year legal battle that I'm assuming neither of you knew was gonna last that long.

• 56:36Speaker 01

  Couldn't have imagined it lasting that long, right?

• 56:38Speaker 00

  10 years of, of your life. Now, not every day you're in and out of court or depositions, but it's always hovering over you. There's a lot at stake.

• 56:48Speaker 01

  During that time, I said I was 70, 80% lawyer, 20% marketer, because it, it took up that much of my time.

• 57:00Speaker 01

  But I was able to take that 20% of the time and keep running the business and keep growing the business.

• 57:09Speaker 01

  Even though it was very difficult at times to make decisions and, and also it was difficult for me to tell an applicant, because oftentimes I'll interview people, to say, come on board without the certainty of where the company's gonna be a year from now. And I felt it was wrong for me to have somebody leave his job, come work here, and then tell him a year later, hey, buddy, wait, we got bought by Coke and you're out of a job. So I wasn't able, in good conscience, to recruit good people to grow my business and I wasn't able to make the kind of investments that businesses need to keep growing your business. So I, I was kinda like frozen.

• 57:49Speaker 00

  For 10 years?

• 57:50Speaker 01

  Yeah, yeah.

• 57:52Speaker 00

  Okay, why did it take so long? Like, again, I get it and you get mad. I mean, and it gets personal, but I wonder, why didn't the both of you just go to a third-party mediator and say, okay, you value the company, do a, do a fair analysis, and then let's see where the, you know, where the, where it lands?

• 58:12Speaker 01

  You know, if I look back at it and I would say, well, what, what could have been done differently? Could that have worked? But there were other issues going on. There was family issues, but there were ex-employees that went over to his side.

• 58:30Speaker 00

  Right.

• 58:32Speaker 01

  And so I was fighting on multiple fronts because I had people who, my former CFO, was on his side of the table, who was, who was a friend of mine. But John promised them all kinds of wealth and, and there were lots of sticky issues. See, when I represented the company as I did and the profits of the company were shared 50/50, not a nickel went to me over what John had received. I gave him half. But do we think it was going to last 10 years? No. Did we think the money that was spent on legal fees would have been possible? No.

• 59:10Speaker 00

  I cannot imagine how expensive that was. How did it, did it take a toll on your physical health? Just sleepless nights or, I don't know?

• 59:20Speaker 01

  I don't know. You know, you know, I've said when they, when you've had guns to your head in multiple times, those things are things that kind of stand out. But, you know, my wife often said to me, how long are you going to fight? How long you want to keep this up? What are you doing? You know, kind of thing. But I realized there were thousands of people who worked for me who depended on the decisions I was making for their future as well.

• 59:43Speaker 00

  Yeah. Okay, this case was settled or a court ordered settlement was reached between you and, you and John in 2015. The public amount is a billion dollars and then you guys reached a settlement on a four, but okay. A check was written to him. Do you think if he did nothing, if he just kept his 50% share, he'd have more money today?

• 1:00:04Speaker 01

  Absolutely. You know, what we earned last year was what you get bought out for, you know?

• 1:00:10Speaker 00

  So, so again, I think this is not an indictment of you or John, it's just sad. It's a sad story and it's sad because this happens in business and money just messes with our minds.

• 1:00:22Speaker 01

  I, I don't, there's no, I don't have any harsh words for John, I really don't. I don't know what he thinks of me, right? Because I haven't spoken to him since the lawsuit ended, but I wish him well. And I'm hope he's happy because I'm happy. There's more important things in life, there really are.

• 1:00:37Speaker 00

  Yeah. Okay, he's out of the picture at this point and now it's all behind you. Okay. Now that the legal battle is over, does it allow you to do things that you couldn't do before?

• 1:00:51Speaker 01

  Absolutely. That's why we've been able to do as well as we've done. I built the factory in New Jersey that we needed desperately. You know, I'm very proud of it. Uh, it's a million, 250,000 square feet of, of a building that every single piece of it we own, we paid for. We don't have any company debt, we have no banks, we have no lending institutions. I mean, it's incredible. You know, our cost of making a can today is less than it cost us 33 years ago to make the same can.

• 1:01:26Speaker 00

  Yeah, let's dig into that. How, I, I read, for example, that you actually thinned the aluminum in the cans, which made them lighter and cheaper, for example.

• 1:01:34Speaker 01

  Yeah. You know, aluminum is a component that, uh, when you buy cans at our level, aluminum goes up and down. Your price changes every 30 days. Uh, so taking aluminum out is a tremendous saving. But we didn't, we're not the only one who did it. Other people did it as well. Can manufacturers did it because of the obvious reason, they use less material.

• 1:01:55Speaker 00

  And, and I read, for example, like another way to keep your costs down is, um, you use lightweight trucks. You use them at night to avoid city traffic, is that right?

• 1:02:04Speaker 01

  That's right. Well, you know, if a trucker has eight hours to work and he's stuck on the George Washington Bridge for six hours, it's only one move, you know. I, I, I came to that conclusion. I was going over to George Washington Bridge at, you know, one o'clock. It was a nightmare.

• 1:02:18Speaker 00

  Yeah.

• 1:02:18Speaker 01

  You know, if you go after eight o'clock, it's still a nightmare, but it's, it's a short nightmare.

• 1:02:23Speaker 00

  Bless of a nightmare. Yeah. So what are you doing to stay ahead of, I mean, again, there's so many brands that we've done on the show that lose market share, that do start to fade. And sometimes it's a bad executive that comes in, or a bad series of decisions, or just taste change, or consumer interest change, right? And things have changed over the years, people. Some people say, oh, it's all about, the future's all about no sugar. I know you have a no sugar beverage too, but, or people say, oh, it's all about no carbs, or it's all about, you know, clean ingredients. All, all kinds of things come and go. What is the secret of keeping your teas ahead of your competition?

• 1:03:05Speaker 01

  I think what we've tried to do, and we continue to do, is keep it simple. My belief is, you gotta give a consumer a fair deal, and then you can expect them to come back. If you don't, they're gonna go someplace else. There's too many choices in America. And, you know, quality of the beverage is, to me, the most important, because the first reason they buy is the can, and then from that point on, it's about, it tastes good and it's price fair.

• 1:03:29Speaker 00

  And, and the can of tea is still, I guess, priced at 99 cents?

• 1:03:35Speaker 01

  Yes.

• 1:03:36Speaker 00

  But it, not all stores sell it for that price.

• 1:03:38Speaker 01

  No, it's a suggested price. Some retailers choose not to sell it for that price, or can't afford to sell it at that price, and we have other, you know, alternatives for them.

• 1:03:47Speaker 00

  Yeah.

• 1:03:47Speaker 01

  And if they can't afford to do it, they gotta do something else.

• 1:03:50Speaker 00

  Okay, but so, how have you kept it at a 99 cent suggested price all these years?

• 1:03:57Speaker 01

  I'm asked that question like 10,000 times, right? And my normal reaction is, I don't know how I do it, but that's not true, right? The facts are, there are multiple things you need to do behind the scenes in order to give consumers and continue to give them value. Because oftentimes, companies say, the best thing to do, or the easiest thing to do is to raise, raise the price. Go into a customer and tell them, hey, it's going up on March 1st, but... To me, as a salesman, that's the worst day in your life because you don't want to tell a grocer or a customer by the way you have to pay more and then you have to charge more to your customer walking in the door. And can I do it forever? I don't know, but we're going to continue doing it as long as we can.

• 1:04:39Speaker 00

  Don, I'm curious, after you, you know, you had to basically pay a lot of cash out, right? And I know it took a little bit of time to pay that back to the company. Were there ever, I mean, there must have been or must be over, over the years, private equity or other big beverage brands that have come to you and have said, "Hey, we're interested in buying you." Has it happened?

• 1:05:04Speaker 01

  Yeah, sure.

• 1:05:06Speaker 00

  And what's your response?

• 1:05:08Speaker 01

  I'm not for sale.

• 1:05:09Speaker 00

  You don't even want to entertain the offer?

• 1:05:12Speaker 01

  No, because, you know, I know what it means. It means I'm going to be unemployed and my kids are going to be unemployed. I don't like that. You know, 10 years ago, when I settled a case with John, my first grandchild was born that night. I went from signing a document to the hospital to see hers at the first time. Now she's 10 years old. And I tell her, "One day, you're going to be running this company."

• 1:05:38Speaker 01

  And I hope that's a reality. I hope that's something that this company becomes multi-generational and run by my grandchildren at some point. And, you know, that's a good, that's a good story.

• 1:05:52Speaker 00

  When you think about the, the journey you took, and I mean, listen, it's not a secret. You are, you are a billionaire. I mean, you, you know, you, you entered a market dominated by big players and you're a massive product, right? You've created a massive product that outsells the, the big guys. And you are a big guy now. How, how do you, how much of, of where you got to, do you attribute to how hard you worked? And how much do you think has to do with, with luck? Just, just timing and, you know, the world around you and circumstances?

• 1:06:26Speaker 01

  I mean, luck is a important thing in life, right? Luck to find the right wife. Luck to have good kids, good grandkids. I've had good health in my life, which is also something you could attribute to luck. I've been consistent in my life. So I'm a very, very lucky guy and I'm lucky to have, uh, being a business that after 30 plus years, we can still have customers who say, I like that product. My mother liked it and now I like it too, which is a very difficult thing to do.

• 1:06:57Speaker 00

  Yeah. Don, Don, do you imagine like, like working until your dying day, like going into the office every day?

• 1:07:06Speaker 01

  Yes. That's my plan. Actually last year, um, my plant manager in New Jersey, they got jammed up forklift operators didn't come to work. So I said, I'm coming here to help out tomorrow. He says, what do you want? I said, I want a forklift with, fill it up with fuel and a bottle of water on it. And I got there 10 o'clock in the morning and got off the machine at eight o'clock at night and I unloaded and loaded 57 trails.

• 1:07:32Speaker 00

  Wow.

• 1:07:33Speaker 01

  And it was one of the more interesting, exciting days of my life. It was great.

• 1:07:37Speaker 00

  So really, I mean, you are there until the very end, as far as you're concerned.

• 1:07:42Speaker 01

  And hopefully the very end is a ways off.

• 1:07:46Speaker 00

  That's Don Vultaggio, co-founder of Arizona Beverage Company. Would you ever consider doing a George Bush iced tea brand now, now that, you know?

• 1:07:57Speaker 01

  George, I don't know.

• 1:07:58Speaker 00

  The Arnold Palmer work?

• 1:07:59Speaker 01

  Maybe it's selling Texas.

• 1:08:00Speaker 00

  Yeah, maybe, maybe, or maybe people would be like, who is that?

• 1:08:04Speaker 01

  We gotta do the VPs. I like Ike iced tea.

• 1:08:07Speaker 00

  Eisenhower iced tea. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas and lessons from some of the world's greatest entrepreneurs, please check out my newsletter. You can sign up at guyraz.com or on Substack. This episode was produced by Rommel Wood with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Iman Maani. Our engineers were Maggie Luthar and Gilly Moon. Our production staff also includes Casey Herman, Alex Chung, Carrie Thompson, Catherine Seifer, Carla Estevez, Noor Gill, Sam Paulson, Andrea Bruce, and Elaine Coats. I'm Guy Raz and you've been listening to How I Built This.