A Brief History Of Arizona

AT THIS POINT, it would have to be considered an iconic package in American beverages: the 23 oz. “big boy” AriZona Iced Tea can, prepriced, of course, at a measly 99 cents. As hard-pressed consumers flock to the brand and make it a rare continued success story in a once-surging iced-tea segment, it’s worth taking an appreciative look at its history and influence.

Let’s start with the colorful history behind the early-1990s launch. Founders John Ferolito and Don Vultaggio were inner-city-focused New York distributors who’d made their first real money devising a pair of malt liquors called Midnight Dragon and Crazy Horse that had sparked no end of controversy with their marketing and positioning. Envying Snapple its comparatively hassle-free growth, they figured they’d try their hand at an NA brand. Their first effort, Wesley & Spencer – named after Vultaggio’s young sons, both now grown and working in the business – was a 16 oz. canned line that didn’t get far.

For their next try they went long, utilizing the 23.5 oz. big boy beer cans familiar to them from the malt liquor business. As I recall, Vultaggio’s wife Eileen had become enchanted by Southwestern motifs during a trip to Arizona and, since the name also conjured up the feeling of “hot,” the partners figured the brand name might work for a tea and juice line. They enlisted the New Jersey woman, Jean Pettine, who’s served as their one-woman virtual design department over the years, to do up their initial sketches. When the can debuted, branding experts derided the result as too recessive to stand out on a store shelf. Nobody does pastel hues on packages, they pronounced. Though novices at the game, Vultaggio and Ferolito figured that if they violated the rules that everyone else was following their brand actually would stand out. Of course they were proved right. The brand proved a revelation, offering a chunk of perceived value and superior taste to the chemical “burn” of the dominant canned lines at the time, Lipton Brisk (from Pepsi’s partnership with Lipton) and Nestea (from Coke’s partnership with Nestle), which only offered 12 ounces for about the same money. And the package clearly fascinated consumers, as was clear to me on an early visit to the company’s digs, then in the Gravesend section of Brooklyn, where airplanes, lamps and other contraptions that had been elaborately fashioned by consumers from their used cans were on display.

Though the line proved an instant winner in New York, its expansion wasn’t an entirely smooth ride. Early on, brewing giant Stroh decided to launch a tea line called Chaos in similar big cans, using the buying clout conferred by its large malt liquor business to corner the market in big cans and squeeze out AriZona. (Back in my Brandweek days, that enabled me to write the delicious headline, “Stroh Kicks AriZona’s Can – Right off the Shelf”). The scrambling partners brilliantly improvised another unique-to-beverages package, the 16 oz. wide-mouth glass bottle, to this day a mainstay of its premium line. (Vultaggio seemed to get the idea cruising the steak sauce and salad dressing aisle of the supermarket.) When Chaos was discontinued, the emphasis could tilt back to the can.

In contrast to Snapple, the company struggled to make its juice lines work as well as its tea lines, and it also navigated a famously bumpy ride with DSD distributors, entering and exiting houses with abandon until it evolved to a unique hybrid melding of direct shipping, non-exclusive DSD and company-controlled distribution in three key markets. Through this evolution, marketing experts periodically would decry the company’s failure to take on an ad agency to do “real” marketing, warning that it would wake up in a few short years and realize it didn’t have a brand. More than 15 years later, that wakeup call still hasn’t come.

Essential to the success has been the company’s strategy of pre-pricing the cans at 99 cents – a tactic detested by retailers for constraining their register ring but hard to question for its effectiveness. For a brief period over the past year, as critical materials like aluminum and corn syrup surged in price, the company had to hedge its reliance on the tactic, putting some cans into the market without the 99-cent price and launching a 20 oz. plastic-bottle line prepriced at $1. Any sigh of relief breathed by rivals was short-lived, though; as soon as prices subsided, the company went back to prepricing all its big cans. Of course, there’s a downside to the strategy: distributor margins can be skimpy and, even in the brand’s home market of New York, retailers in more affluent neighborhoods refuse to carry the package, seeing no benefit to trading down customers who’re willingly pay $2 or more for other items in the cooler.

The power of this idea – which Vultaggio in the past has modestly minimized by saying “put tea in a big can and paint it real pretty” – is more apparent than ever today, as the tough economy reinforces the notion that elegantly packaged value sells. No surprise, then, that the ranks of big-can pretenders has been growing. Cintron was launched by a former AriZona Iced Tea employee, and brands like Xingtea (from New Age, in Colorado) and Black Jack (from Polar, in New England), have been launched by distributors who, like Ferolito and Vultaggio before them, figure their street savvy should yield a more credible entry than anything ivory-tower marketers at big companies can come up with. Even Dr Pepper Snapple Group is about to copy its copycat, planning a test of a 16 oz. can of Snapple prepriced at 79 cents. Over in the organic aisle – that bastion of rarified pricing – Steaz is pushing aggressively with a canned line sporting intriguing graphics of the farmers who grow its tea and Sweet Leaf seems to be heading in a similar direction.

The influence has seeped out to other sectors, too. It’s probably no surprise that the creator of Monster Energy, who found success by “improving” on Red Bull’s dominant 8 oz. canned entry with a brilliantly rendered 16 oz. can at the same price, is a former AriZona exec. Truly, the list goes on and on.

Though I usually confine my greatest enthusiasm for brands that are able to command a premium – and whose owners are able to maintain trusting relations with their distributors – AriZona Iced Tea continues to demonstrate that an easily understandable product proposition – you don’t have to put on your reading glasses or visit a web site to know what AriZona Iced Tea is all about – and a sense of solid value are eternal lures to consumers. No wonder distributors during these harder times are flocking to other brands that offer a similar product proposition, such as the shelf-stable versions of Sunny Delight and Nesquik. There are definite lessons there for all of us, even those who like to move consumers more toward the premium space.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.