After the pandemic put some of its new product plans on hold, New York-based iced tea manufacturer AriZona Beverages is beginning to reload its innovation pipeline, beginning with an expansion of its Red Tea line this summer.
Last month, AriZona relaunched its African rooibos Red Tea in 20 oz. tall boy bottles, after the onset of the pandemic in March 2020 forced the company to pull back its rollout. Speaking to BevNET last week, CEO Abid Rizvi said the drink was originally introduced in 2019, but retailers – particularly in the convenience channel – wanted to prioritize established products during the 2020 lockdown period (however, the company decided to move ahead with its European rollout).
“Now, hopefully, with the pandemic going further and further back in our rearview mirror – I would hope – we are, as are others I’m sure, thinking about reigniting the innovation pipeline, and Red Tea is something that we’d already pretty much developed [that was] ready to go,” Rizvi said.
Red Tea is naturally caffeine free, made with 29 grams of sugar and 120 calories per bottle. The canned tea is produced in partnership with The Long Walk to Freedom Foundation, a nonprofit founded by late South African president and civil rights activist Nelson Mandela and his daughters to support literacy. Each unit will retail for $1.00 per unit and a portion of the proceeds will be donated to the Mandela Education program.
The new drink is currently available online and is serviced by AriZona’s own distribution network locally in New York. But looking to the summer, the company is gearing up to launch Red Tea nationwide on July 18, in commemoration of Nelson Mandela International Day.
Although there are some competing rooibos tea drinks in the U.S. market, including South African import brand BOS, AriZona’s high ACV and brand recognition could allow it to raise awareness of the ingredient. While he acknowledged that rooibos has been consumed “for centuries,” Rizvi said the product will help to introduce more mainstream American consumers to a type of tea that is regularly consumed around the world.
As well, Red Tea also sees AriZona introduce more clean-label and, albeit sweetened, better-for-you products to its lineup.
“If you look at the overall consumer, the consumer is realizing that nature is a really interesting teacher and a provider of a lot of nutrients that we sometimes haven’t fully appreciated,” he said. “So you’ve got the whole health and wellness trends going much more to the basics, and in some ways it’s a little bit similar to that. Let’s build on the wisdom that has existed for centuries, and now bring it to the masses in a great tasting liquid, in a package that jumps off the shelf and a price that’s fair.
The expansion of Red Tea arrives as AriZona has sought to diversify its portfolio offerings within and beyond ready-to-drink beverage. In 2019, the company added food products for the first time when it launched a line of fruit snacks and last year it introduced its Sun Brew line of ground coffee products in bags and K-cups. As well, Rizvi said the company is preparing to expand its premium line of cold brew teas into its nationwide distribution network, which he noted allows the company to command a higher price point than its signature $0.99 canned line.
AriZona has also been enjoying a moment in the spotlight in recent months as the company’s $0.99 23 oz. cans have become a symbol of stability for consumers feeling the pressure of rapid, cross-industry inflation, with Fortune dubbing the brand a “folk hero” thanks to its resistance to raising the price. Since April, AriZona founder Don Vultaggio has made multiple media appearances to double down on his dedication to the 99 cent price point, even as the company experiences tighter margins and smaller profits as the price of aluminum has doubled since last year and freight costs spike.
“I don’t want to do what the bread guys and the gas guys and everybody else are doing,” Vultaggio told the Los Angeles Times in April. “Consumers don’t need another price increase from a guy like me.”
Anchoring that ethos, Rizvi said, is Vultaggio’s roots as a working class delivery driver and desire to provide quality products to the average consumer at affordable prices. On top of the benefits for consumers, the 99 cent cans have also become a signature for the brand, inspiring internet memes and even an unofficial cryptocurrency called USDTea that is tied to the can’s price (Rizvi declined to comment in depth on the cryptocurrency project, but he confirmed USDTea is not affiliated with AriZona).
However, even as margins on the core products tighten, AriZona’s diversified portfolio is poised to open up new revenue streams with products at higher price points.
“I don’t think anything is going to change whether we expand in the coffee category or the tea category or the food snacks category,” Rizvi said. “Our secret has always been to make it look good, we make it taste good, and we price it fair. And if we can do those three things in other categories, we’re going to continue to expand into other things that are logical extensions of our core portfolio.”
According to NielsenIQ data, AriZona’s dollar sales were up 4.8% in the two-week period ending May 21, compared to 2% growth in the 52-week period, while volume sales fell 3%. Comparatively, dollar sales for the whole RTD tea category in retail grew 7.1% in the two-weeks. Pepsi/Lipton’s sales were up 2.3% in the two-weeks (volume fell 7.6%) and The Coca-Cola Company was up 3.6% (volume down 4.6%).
AriZona’s innovation push also comes as Coke prepares to shake up its mainstream tea portfolio. The company announced last week that it intended to discontinue better-for-you brand Honest Tea by the end of the year and would instead focus on introducing new innovations to its Gold Peak brand. Rizvi, however, said he didn’t believe the loss of Honest Tea would be significant to AriZona’s business, noting that in its 30 year history the company has seen numerous competitors come and go.
“The consumer at the end of the day, votes with their dollar,” he said. “We have continued to grow; we’ve grown pretty meaningfully even despite all the supply chain challenges that we have had. And frankly, we could have grown a lot more significantly if we didn’t have the supply challenges that we’ve had over the last year or two. And our consumer out there is looking for our brand, trusts our brand, and has given us permission to expand the brand into other categories that we weren’t even in before.”