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

Transcript from https://podmenti.com/t/8f1703e0c736c26c

I want to ask you about a product that
Turned out to be a little bit more than a little bit.
a huge winner which was um half and 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.
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 Bush's.
George Bush was president at the time.
And it looked like George Bush.
Not intentional, but that's she thought it was George Bush, that Arnold Baumberg?
I said they ignored the umbrella, they ignored all that golf references and Arnold Palmer on the front.
Yeah. But I said who cares? If they call it George Bush, that's fine, but me too.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements.
They built.
I'm Guy Roz, 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.
In the early nineties, bottled ice tea was dominated by three brands.
Nestie Lipton and Staple.
But around 1992, there was a new brand that started to pop up in convenience stores.
It looked like it came from a craft's 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 Ice T had nothing to do with the actual place Arizona.
It was launched by two guys in Brooklyn.
Don Voltaggio and John Ferrolito.
At the time, they weren't even teammakers.
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, but
They'd already launched a seltzer brand that fizzled and two mall 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.
Arizona took off almost
Instantly.
outpacing Snaple, rivaling the big beverage corporations,
And today, it's one of the best selling ice tees in America.
With billions in annual revenue.
But the real story?
how Don Voltaggio 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 Bottagio 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.
He's six foot eight inches.
When I was a kid I s and my mother told me.
You're tall.
Don't do bad things because people are gonna recognize you. You're gonna you're gonna stand out in the crowd. You're gonna be picked out for bad deeds.
Uh I also came to the conclusion back then I said I'm never gonna drink or smoke marijuana or any of that'cause I'm too big if I'm
Incapacitated.
Too h hard to handle, so I better not do any of that stuff.
And I think it kinda governs my life.
Being tall and being
different than most.
And you know, I used to be challenged because people thought I was really older than I was.
Did you play basketball?
No.
Were you a good athlete at all? I wasn't very athletic.
And we didn't talk about sports at the day, we talked about retail. We talked about
challenges of being a retailer.
My dad worked for the A and P and um 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.
He was a manager at an A and P market, right?
Yeah.
He used to say I leave 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.
He'd bring you because he wanted to show you or Yeah, he wanted to show me the the world.
But he knew.
And I think those things were very important to me in my experience in in business myself. I've see the things that happen
that most consumers don't recognize or realize, you know.
And Don, w I mean, I guess already in high school, I mean watching your dad at A and P I'm assuming you worked at A and P too, like maybe you bag groceries or stocked shelves, did you
Do that as a kid?
I worked at a place called Key Food.
And
My dad didn't want me to be a grocer.
But
When I graduated in nineteen seventy, I had no intention of going to college.
And he set up an a p uh a interview uh for a job at a brewery in Brooklyn.
Mm-hmm.
And that's how I started a beverage business.
It was called Peel's Brothers.
And they were on Bushwick Avenue in Brooklyn.
And this was a job to just do whatever they needed. I mean you're eighteen, so I'm assuming like
drive the truck or stuck the warehouse or whatever they needed.
Yeah, well it was um a merchandising I was in a sales department, so I didn't drive a truck there, but uh
You know, we build the display and put the signs up and
You know, when uh entice consumers to buy our product. So it wasn't like a muscle job. They you you were in a sales job early on.
Yeah.
When I started there, you know, I I lived a kinda quasi sheltered life with my
Parents and um
I wasn't well travelled.
I had never flew in an airplane till I was thirty five years old.
And I didn't
You know, from being a re in the 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 kinda carried over.
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 you were in that space. So so from what I understand, you went into
to go work for a beer distributor at that point, which I think around twenty, twenty one.
Um
This is the the you m you meet a guy named John Faralito and he's also a young guy like you.
And you guys become fast friends. You start to talk about ideas together. Tommy
Tell me w about about that time.
You know, we came from the same kind of background. Uh
You know, we were not middle class, lower middle class.
He was also Italian American, but I don't know if that mattered.
I didn't, but you know, it happened to be that we had things in common.
He was just a good guy.
You know
He was my best man at my wedding. Um and he was he was terrific.
I I asked this because
A lot of times when people are looking for co founders
You know, it's a it's a crapshoot. You just never know. It can be great at the beginning, get horrible at the end, ca a lot of things can happen, but oftentimes people say to me, Well, what should I look for? And I say
Shared values.
Right, which is a bit squishy, but I I I think that matters.
Did you guys
Have shares.
We did. But you know, like anything else, it's like picking a wife. Um
Sometimes.
the person you pick changes.
And maybe sometimes you don't change with them.
Um
So it's hard because if you say, Well, I wanna pick somebody today who's gonna be great forty 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, sa candidly
Part of the
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 kinda cool.
Uh.
Yeah.
Yeah. Alright, so it it's the early nineteen seventies, and I guess you
and John partner up and you start a beer distribution business. Tell tell me a a bit about what you were doing.
Um
You know
because of my experience at Peel's and John's experience working at the distributing company, we said we go to stores and offer them these popular brands of beer.
At uh
Not so much a better price, but more convenient. You know, we can deliver on Saturdays, we can deliver nights, that kind of thing. Yeah.
And then at some point later on we you know, we've started becoming more of a what 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.
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
uh you know, all kind of controlled
certain areas in markets this is a threat.

Were there dirt dirty tricks played on on upstarts like you guys?
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.
The Schaefer delivery guy.
We were delivering Schaefer.
Shape for beer. Yeah, that was m produced in Brooklyn.
Yeah. Um
But you know the
The guy on 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 if you're buying beer from a distributor who bought it w directly from the brewery
And then reselling it, they in some cases hated you, you know.
For that. And and probably, you know, again, given that there are unions involved and
maybe some unsavory characters involved, like
It's it's risky, right? I mean I I
John, I read stories about
your time in this business back in the day were like
You were robbed on at least a hundred occasions.
You you were at some one point held
Held in a closet at gunpoint in your office.
What
What?
Well you know we were a company and a business that
Tell you.
A lot in cash because that's how p grocery stores paid.
And um
people who work for us knew that we had a lot of cash coming in.
Um and they told their friends about it over a bar or in a restaurant and then they would come and stick us up.
Um
The time where I was held up, I was
I was in our office and I was held up.
Uh
And one of the guys I was with pushed the gun away from his head, then they hit him over the head with the gun.
And um
And I believe I I kinda cooled the situation down by kinda talking to these bad guys
in a very fatherly way.
Uh and then when they left
They put us in the closet. 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.
I mean, I have to imagine you had to have a gun in your desk.
Just out of safety.

I never I w 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 the gun, you gotta be very respectful for what he's telling you to do, otherwise you might be
A victim of the gun, right?
How how quickly did did your by the way, what did you guys call your business, your distribution business?
United.
United. Okay. And how quickly did it become
Profitable.

You know?
We we lived off it, so it was profitable from day one, you know. Um
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 pay payroll and how to pay the electric bill.
Um
And that went on I you know, I tell people if they say, Well, you're an overnight success, I said, Yeah, we were twenty years of nights because
Yeah.
The first twenty years of our business prior to Arizona.
was a struggle.
It was you know, we did business, we we supported our families, we pay for our homes and things like that, but it was always we're always on the edge.
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.
Yeah, for the most part, uh
We didn't buy things that were like hula hoops.
Uh but back in the beginning it was showing
Schaefer to people who want it Schaefer or Wrangled who wanted Wrangled.
It was just about price.
Yeah, and I guess
by the early eighties, um, things begin to shift because you actually decide to to buy the license for
I guess a failing brewing company and
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
But
I wonder why, like why did you guys want to move from distributing beer to making it?
Well,'cause we live through a time where
We always bought something from a distributor who bought it from the company that made it.
Uh we never bought it from the company directly. If we bought Budweiser or Miller was from a a distributor.
And
the distributors had would have changing views on what they wanted to do. So we'd have
Uh
good connection with a guy who sold Budweiser, then he'd call us one day and says I can't sell you anymore because Ann Heiser Bush said uh they 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 own 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.
Alright, so you guys decide instead of going into beer
go into malt liquor. This is a a beverage called Midnight Dragon. Tell me a little bit about
Why you decided to go into into mall liquor.
Well multi liquor in those days was a very popular category.
In the beer business.
And uh
I'll never forget it was a actually a beer manufacturer from upstate New York. He came to me with an idea about he wanted to do them all liquor.
And he asked us, he said, Well you guys know the category.
Uh 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.
Uh but when he left, John and Wright looked at each other and said, Why don't we do that?
Um and then we develop a label and and uh
And a bottle and a product and all that. But uh
It started with that one visit from this.
Brewery from Rochester, New York
Alright, Midnight Dragon. I wanna dig into this for a little bit.
Uh and it's a little bit uncomfortable, but I'm g I'm I think that that you know where I'm going with this. The poster You know was controversial. Okay. Uh and and in part because I think the way it was marketed. First of all, there was an ad that was very um sort of s sort of sexually suggestive. And
John.
was asked about this'cause 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.
Yep.
I mean wow, tell me about
Just kind of reflecting on that.
How did you feel about I mean did you think that the the critics were just wrong and unfair or or did you think they had a
Some
Mm.
Well it was you know, it was uh 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 say we gotta be a little outrageous because
What
In order to get some attention on the shelf we have to do something different.
And it worked out pretty good.
All right.
The next product you launch was even more controversial. This one was called Crazy Horse.
Um and it had a a label with a
A native American and in like a feathered headdress. It also drew a lot of negative attention. I mean, I think at one point the s US Surgeon General
Called it.
An insensitive and malicious marketing ploy,'cause um
He argued it was aimed at native Americans. Obviously there's a lot of alcoholism and
in in Native American communities.
Um
Th I think the the uh ATF, the Alcohol Tobacco Firearms Bureau even

Um
Again.
You know, you may have just been focused on making a business product.
But
You saw what people were saying about it and and what did you think about?
About that criticism.
Um
Back in one
when we had midnight track and I would work the trade every day.
And
Um I saw what was happening in the coolers.
And we s we said we want to do
Like it.
Upscale more liquor.
Okay.
And I was watching an old Western movie.
one night and they had uh
They used to break the bottle over the bar and use it as like a weapon.
Yeah.
And I said, Boy, that's the bottle that had a long neck on it, because all of
malt liquers 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.
Uh was
what inspired what came from my home.
You know, at the time I lived in a home in Queens that we uh my wife
Designed around the southwest.
Yeah. And it 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 w 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 the package.
Um then of course things happen, 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.
Uh. with Midnight with Midnight Dragon, you were fine.
Keeping our head above water. The Crazy Horse push pushed us over the head. Why?
Uh it was a high priced beer.
higher priced.
with lot more margin in it.
At that time in our lives it was
Pivocal to our success into the future.
Eventually you changed into Crazy Stallion.

I think the Crazy Stallion brand is still around, but Midnight Dragon is not, right?
Uh Midnight Dragon's no no longer sold. You're right.
Okay, but I think you guys were profitable, right? Your the business union was profitable.
Uh
And and what? Wha wh wh what do you think your revenue was around
Uh yeah. No no more than that.
Probably.
thirty, forty million.
Wow.
Significant business.
With a with a mullicker.
Mm. Well, and more liquor and other brands that we're selling.
That you are selling distributing, okay. Yeah.
Alcohol.
is a I mean certainly then I've of course out um I think d we know that that alcohol consumption's been in decline in the US and 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 uh the margins can be really good.
But it's a highly regulated business, and so
I would imagine that a smart
savvy person in the 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 nineteen ninety one.
Can you tell me the story of how you
First kind of had this
Uh Epiphany?
I was on a store on Broadway in Houston.
It was February.
Nineteen ninety one.
I was selling Midnight Dragon.
And
A snapple truck pulls up.
Snapple, I saw it happen in New York'cause it happened here. It started here in New York.
Uh and he starts peeling off
Like forty cases of iced tea.
So
I said, Hey
Ice T's not supposed to sell on a winter time.
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 into T business.
Right then.
Right then.
I I'm just curious, up until that point, February Ninety one.
Snapple was not on your radar at all?
So I wasn't really focused on the soft drink.
aisle. I was focused on a 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 on for me.
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 Roz, and you're listening.
how I built this.
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 Snaple is doing, and he thinks he can capitalize on it.
I think by that point, if I'm not mistaken, Howard Stern was already
Uh endorsing Snap on his show.
Oh yeah, sure.
Mm. 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.
Yeah, you know the the brand was started by a couple of
Window washers from New York.
One of them.
at a health st uh health food store like a health
I guess like a vitamin store.
Yeah.
And Snapple was selling
He they didn't start the brand, but they saw it there and then they took it over and da da da.
they became uh very successful.
Uh and I saw it firsthand. So so so really, I mean
you got really excited about
Ice tea.
And
And you started I guess you start to look for a plant that could produce those lug nut
Cap those wide mouth 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 and thought I'm I'm not gonna I can't out compete Snapple. There's no way I uh this is gonna be a this is gonna fail.
Well, John and I drove to a plant in New Trent, New Jersey.
Who was making Snaple.
And it's a man who ran the Peel's brewery. He was a production manager there.
And um
He asked whether we had a name. I said we didn't. We didn't have a
We didn't have a

And we essentially went through like what it would take. Well he said there's generic bottles, you know, with a lug cap, does a paper label.
We can find a flavor house for you.
And da da da. And then we're on the way home we stop at seven eleven.
And we buy some Snapple to look at on our way back to Brooklyn and we kinda talk ourselves out of the T business.'Cause we said, How are we gonna get somebody to buy us over Snapple?
How are we gonna get them or convince them to buy us?
Better looking label, but may is that enough to you know.
The same shape bottle.
Are we gonna get lost in the mix?
And we kinda said, you know, something we better stay in the
Beer business, we know that.
Okay, for a couple of months, I mean you put this out of your mind. I'm not gonna get into the T business, Snapple's killing it, we're not gonna do it.
What changed?
I walked into a seven eleven one morning.
Which I did every morning.
to buy coffee on the way to your office.
And they had catered and
A twenty four ounce can.
And I had never seen that before.
I knew that twenty-four ounce can'cause we John and I delivered uh Schlitz Bull was in a twenty-four ounce can. They were the only brewery using that can.
Uh I buy the can.
I take it back to the office.
I look on a side, it's Reynolds Metals making it.
We call up Reynolds, Reynolds says you could put tea in that can, but that's what I asked.
And I said now I got the package.

This the this'll this will be fifty percent larger than a sixteen ounce snapple bottle.
24 ounce can. So a tall boy can. So there was no gate that was the first time you saw what we now call tall boy cans. That was the first time you
You'd seen it. No one was doing it up until Gatorade.
Which with a non alk. With non alcohol, okay. Schlitz was doing it with the alk. 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 of product.
Well glass bottles were
historically more expensive with a lug cap they run slower.
uh in the beer business that we knew uh you know we knew the speeds of
Kans was faster.
Uh plus the fact
'cause we were you know, just looking at pure margin. We've said if
If we can be competitive and get people to buy it.
Then we'll figure out what we got.
Uh I wasn't so focused on well how are we gonna 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.

you know, stood out in the cooler, unique and different, um and
We we entered the market with that big camp.
Okay, let's talk about
about getting ready to enter the market.'Cause you're almost forty 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 w w like how did you do did you go to your kitchen and start playing around or did you find like a a a you know, a beverage scientist and start working with him?
Uh I looked at the back of a beverage magazine and it was an ad for a flavor house in New Jersey and I call it.
And they sent the salesman in.
Um
And we talked about
Uh his background.
And I realized that he went to the same high school and graduated the same year that I did.
Uh and my wife No.
in high school'cause she I met her in high school.
And um and I should mention you married your wife in seventy six, Eileen. I did.
And you're still married today. Yes, we're gonna celebrate our forty ninth wedding anniversary.
In a couple of weeks. Amazing. Thank you. Congratulations. Okay, keep going back to that. So anyhow, well you know, now we're we have this guy in the office and uh he's
Um
You know, he works for Flavor House in New Jersey.
And we start
Playing around with flavors.
Let me ask you about your palate.
I'm curious, right? Because
You were looking for a particular flavor profile.
Right.
Uh and and how did you know? I mean you're
I mean do you have a particularly good palate? Do you j
You do, really.
Uh for for what? For for for w any wine beer. Because you know, you have to have a you know, some people can drink something and say, uh I don't know, I don't get it or you know, maybe I develop 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 all of course tasting the competition as well.
And was it hard to do? I mean, or was he basically he knew what he was doing and you could just kinda taste it and say, Ah, add a little bit more lemon, add a little bit more sweetener.
Uh the flavors he brought in.
Uh at first were terrible.
And I said, Hey Joe, I mean, I want tea and he said, 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 T, you just put flavor, you can f kind of
Shake it up.

What other guys are not doing is putting real ingredients in.
Because
You know, they choose to go w
A less expensive route.
And
We then said let's make a great taste in tea.
We came out with lemon and ras, those are the top two flavors for Snapple.
Great taste of raspberry flavor, put it in a great looking can.
I put it on the shelf next to Snapple at the same price.
Okay, now you've got a differentiated
Product because it is going to be in a tall boy can, which is gonna 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
B first of all
The name.
Let's talk about the name. How did you come up with the name?
Originally the name was Santa Fe.
Santa Fe.
Good name, good name. Santa Fe T Company, okay. Because our house in Queens looked like it belonged in Santa Fe.
Um
And when you say look, let's just describe the house again. So this is a house in Queens, in Rockaway, Queen, it looked like it was in Santa Fe. So what does that mean? Like what were the colors of the house? It was in Adobe style.
And my wife uh
She said, I'm gonna t I said, What do you wanna 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, Sounds great.
But then she transformed into a house that looked like it belonged in Phoenix, Arizona.
Wow.
And people saw it.
and love the colors and the vibrancy, the turquoises, the pinks and the yellows and the zigzags and all kind of stuff.
And that was the inspiration for the look of the can.
And what about the name? Santa Fe. It was gonna be Santa Fe T.
But it's not called Santa Fe T. Well we put Santa we put Santa Fe on the can and I showed it to somebody and they said it sounds like a train.
Oh yeah.
The Santa Fe Railroad, yeah. 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 some place.
Dry, warm.
Okay.
So Arizona, you said on the name Arizona, with a l with they and it's stylized with a capital Z in the middle.
Yep. My wife, she went to Hunter College and she
Choose a
An aught 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
Kinda cute on the can, and there we go.
I wrapped it around the can.
And um
We said wow, it it's gonna stand out in the coolant.
In those days the coolers were a lot more drab than they are today. You know, there was all blues and black and reds.
The coolers in in New York.
Cause nobody was doing turquoise.
Or pink.
Yeah.
And so
From the time that you d you you saw the Gatorade Cans.
to the time that you actually had
product to sell. How how long would you estimate that was?
Probably under a year.
Yeah.
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 then.
The brilliance of cans to me also seems not just it was gonna differentiate the product.
Just to be clear, no iced tea was being sold in cans at that point.
Well they had twelve ounce cans.
You know the standard.
Not the big thing.
So that was the first thing. And the second thing is lighter than glass, right? So that's gotta save you some money too.

And a freight is a lot more because it's uh it's heavy, you know? And they're the freight on s on glasses heads more.
Right, yeah. Okay, so you
Come out with this.
What was it in May of ninety two when when s when Arizona debuts? May fifth, nineteen ninety two. First load comes to New York.
Okay. So you've got and and your first run, how many do you remember how many cases of it you made?
I think we made twenty thousand cases.
Okay.
And now
How are you gonna get them into stores because
You had distribution business, but so could you just literally say to these stores, Hey, we had Iced T, will you put'em on your shelves?
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'em.
And uh he comes back and he got a drugstore, a gas station, a bodega, a bumper pop supermarket.
And
He said I place it. He place the case of each, put a sign on there the price of Snapple.
Whatever Snap will solve 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 ten stores sold the
Forty eight pieces, which is two cases.
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 limited space.
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.
Why would he do it?
But what what what gave you the ability to do that? Was it was it r personal relationships?'Cause'cause it's right, it's you knew a lot of these store owners. Well the you know
If you're selling a guy something already, you know him.
Uh it doesn't mean he'll take a new product of yours, but it's more likely he will than he won't because he he knows ya and he knows that if it 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 that it looked so dynamic.
And the can look so good.
That growth just said, Yeah, sure, w why not? I think I could sell it.
But you did not put any marketing dollars behind it.
Uh other than point of sale like signs on stores and coolers, no.
I'm curious, what was the cost to you per can?
Back in those days it was about
A half a bucker can.
So then you were probably what making
Twenty cents on each can.
Maybe. But we're making seventeen cents a can.
So the m that was thin. You had to sell a lot to make money.
Well.
You know, and back in those days, uh, to make uh
Three bucks a case was pretty good.
Yeah.
You know?
Because it was incremental. It was we were going there already. The the truck was there with ha to take a few extra cases off the truck.
The economics were great.
And it in s in a sense, I mean the fact that Snaple was doing so well was good for you because
They were pay for marketing and and coke and and Pepsi's
products were paying for marketing, and all you really had to do was just kinda be next to them on the shelves and hopefully people would see this
interesting can and say oh I'll try that.
Well exactly,'cause they made tea cool, snappled it at least.
And then walking around with that big can was cool for kids.
But
I think packaging is what did it, and the colours and uh the look of the can as well.
And I should mention the first year.
Uh
I think
Eighty percent of the sales were in four states, four places. New Jersey,
New York, Miami, and Detroit. So you were not
Oh in
You you weren't really hadn't penetrated every market yet. I mean but but those four places were were
Doing very well.
We did
I think it was seven hundred
Thousand cases.
Year one of us eight hundred thousand cases.
And I guess
the the uh another turning point was Detroit. There was a guy in Detroit c call Michael Schott.
who um was handling distribution for you. He did such a good job. You guys brought him on as a
As a uh chief operating officer for you.
And
really started to push this product out nationally.
Yeah, by by ninety three 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 ninety four.
You know, we became a powerhouse.
I I don't know if I'm reading this right.
Two years in.
You're you're doing more than$150 million in sales.
Does that square with your memory?
Yeah, well year two
We did a hundred million dollars year two.
In year three we did we double it, more than double it again.
So we got to like four hundred million.
That's unbelievable. Okay.
So you've got, I think by by the early two thousands.
Arizona, which had started in ninety two.
is already uh producing more iced tea than Snaple.
I don't know if you're outselling Snapple by that point.
P maybe you are. Yeah, I am. You are already. But Snapple went through multiple owners and the
Destroyed. But but again, when they sold a Quaker, you would think oh they're they're gonna be huge now. They got a huge marketing team behind them and a huge
company behind them.
But it it didn't actually happen. It didn't become this threat.
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 to destroy them.
And that's what happened to Snapple. That's what's happened to a lot of brands.
You see acquired and then look, what happened?
Yeah.
But I wanna 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 Palmers, right? Everybody knows. You go to a
Restaurant, he has 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 basically make a can, an Arnold Palmer can. Um tell me a little bit about that the genesis of that idea.
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 Honor Palmer's a half and a half.
But he told me about it and he had sold us
Company flavor.
Um California.
And they came out with an auto palmer and a

F gallant.
And I said, Well send me it because she said it didn't do very well.
He said, Would you be interested?
He sent it to me and the picture on the carton was awful.
Didn't look like Ani.
And the product was awful.
And being a big size container for somebody who says Oh, I wanna try it but I wanna invest in you know, in a half gallon of it. Giant carton, yeah. Yeah.
So I said you did a lot of things wrong, I said to myself.
Mm.
She said, What do you think? You wanna 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 that he had photographers who would follow him.
And
I asked Honey, 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 gonna give a nickel a can to some guy who f
P uh photograph of him.
in play. So we
We had this lady who design did our graphic designs.
She painted the first picture.
Put it on a can, put some of his highlights of his career.
Uh 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 they look like George Bush.
Not intentional, but that's the thing. She thought it was George Bush, not Art Palmer. I love this George Bush iced tea.
I said they ignored the umbrella, they ignored all that golf references and Otto Palmer on the front.
Yeah. But I said who cares? If they call the George Bush, that's fine, but me too.
Uh
And today it's our second best selling flavor.
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.
Welcome back to how I built this. I'm Guy Raz.
So it's 2005, and Arizona Ice 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.
when Arizona started and it became very successful.
Uh he became
more remote and more um
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 and uh John not as active or involved as he was.
He was pursuing other interests at that point.
And our success.
gave him opportunities that he never we didn't have before and he like golf and he w ended up buying a golf course and
And I said go pursue your interests and have fun. But you were guys are partners. You were full partners.
And and I wanna be very sensitive here because John is not we know, this is not a documentary show. We're interviewing one founder at a time.
And your co founder, John.
And so we're w we're gonna talk about it.
Him respectfully. I mm oftentimes when one partner is doing more the work.
It can create tension because one person's like, Hey, I'm doing all the work and you're getting all the
Profit.
You can have the profit here.
Did that create any tension or were you okay with it? I was fine with it. You didn't care?
Uh, because I I never considered what I do work.
I I enjoy what I do.
And I also
And I said to him w at one point, I said, We didn't fight we we had nothing, we're not gonna fight now.
Did you call him to consult with him on anything or or w I mean did you
say hey I've got the we got this new idea for a product or or was he completely out of the picture.
There were times when I didn't speak to him for over a year.
Oh.
But
Also I knew that
At that point in his life it wasn't for him.
And oftentimes I I
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.
Alright, so
Let's get to two thousand five.

By 2005, he decides he wants to sell his half.
Now he wanted to sell the company.
He wanted to sell the whole company.
Not that.
He wanted you to sell, okay? Because
I guess there were

Um
Why weren't you interested in selling? I mean b apparently there was billions of dollars at stake here. There's arguments to be made. Hey, two thousand five, we're on top of the world, let's cash out.
Uh
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.
Um
Maybe it's an old fashioned approach, but the I th I don't I
I think the worst thing in life is that 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.
I believe it.
You know?
Yeah.
But I also understood that
If he wanted to sell, I said, Hey, sell it to somebody
Cool. Get into your shoes.
And get the same benefit you've been enjoying.
That's fine.
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 there.
Big mits on him.
On the brand.
And that's where it kinda kinda
Where the world kinda unraveled a little bit. 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 they couldn't control the business, right? Because if if an outsider private equity or a big firm won't buy us
into the company they want to share. They want to control it, generally.
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.
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 but and just to be c 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
Uh pretty complicated, but but suffice it to say
Uh John thought the number should be much higher, like i in the low billions, and you said
The number should be low.
And so this began
a ten year legal battle that I'm assuming
neither of you knew was gonna last
that long.
Now, not every day you're in out of court or depositions, but it's always hovering over you.
There's a lot of stake.
During that time I said I was
Seventy, eighty percent lawyer.
twenty percent marketer.
Uh because it didn't it took up that much of my time.
Um
But I was able to
Um
Take that twenty percent of the time and
Keep running the business and keep growing the business.
Um
even though it was very difficult at times to make decisions and and also
It was difficult for me to tell
Uh an applicant.'Cause 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, by the way, we
Got bought by Coke.
And you're out of a job.
Uh I wasn't able to
in good conscious to recruit good people.
to grow my business and I wasn't able to make
the kind of investments that our businesses need the if you've grown your business. So I I was kind of like frozen.
For ten years.
Yeah.
Okay, but why'd it take so long? Like it's uh 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 um do a fair analysis and then let's see where the you know, where the where it where it lands.

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.
Right.
Um
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 a who was you was a friend of mine.
But John promised them all kinds of wealth and
And there were lots of sticky issues. See
One
I represented the company as I did and the profits of the company.
We shared. Fifty fifty.
Not a nickel went to me.
over what John had received. I gave him half.
But
Did we think was gonna last ten years? No. Did we think the money that was spent on legal fees would have been possible? No.
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. I don't know. You know. You know, I've said when a when you've had guns to your head in multiple times, those things are
Things that kinda stand out.
But
You know, my wife often said to me
how long you gonna fight, how long you wanna keep this up, what are you doing, you know that kinda thing. But I realized there were thousands of people who work for me who depended on
the decisions I was making for their future as well.
Oh yeah.
Okay, if this case was settled or the a court
Ordered
uh settlement uh was reached between you and you and John in twenty fifteen
the public amount is a billion dollars and and then you guys reach a settlement I don't know what for but
Okay.
A check was written to him. Do you think if he did nothing, if he just kept his fifty percent share, he'd have more money today? Absolutely.
You know, what we earned last year was what you got bought out for.
Yeah.
Again, I 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.
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?'Cause I haven't spoken to him since the lawsuit ended, but
I wish him well.
And I'm hoping he's happy.
Because I'm happy.
There's more important things in life.
There really are.
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, w does it allow you to do things that you couldn't do before? Absolutely. That's why we've been able to do as well as we've done. I built a factory in New Jersey
that uh we need it desperately.
You know, I'm very proud of it. Uh it's
A million two hundred fifty thousand square feet.
of um 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
Bacon egg.
A can today.
Is less than it cost us.
thirty three years ago to make the same can 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.
Yeah.
Yeah, aluminum is a component that uh
when you buy cans at our level aluminum goes up and down, your price changes every thirty days.
Uh so taking a little more out is a tremendous saving. But
We didn't we're not the only one that did it. Other people did it as well. Canned manufacturers did it because of the obvious reason. They use less material.
And and I read, for example, like another way to keep
Your cost down is um
You use lightweight trucks. You use them at night to avoid city traffic. Is that 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.
Yeah, it was a nightmare. Yeah.
You know if you go after eight o'clock it's still a nightmare, but it's it's a short nightmare. Less 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 tastes 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. No, you have no sugar.
uh beverage too, but it or people say, Oh, it's all about no carbs or it's all about
You know, clean ingredients, all the all kinds of things come and go.
What
is the secret of keeping your tees
Ahead of your competition.
I think what we've tried to do and we continue to do is keep it simple.
My belief is you gotta give the consumer a fair deal and
then you can expect him to come back. If you don't, you'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.
And and the
Can of tea is still, I guess, priced at ninety nine cents.
Yes.
But it not all stores sell it for that price. 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 o you know alternatives for them.
Yeah. And if they can't afford to do it, they gotta do something else.
Okay, but so
How have you kept it?
At a ninety nine cent suggested price all these years.
I'm asked that question like ten thousand times, right?
And my normal reaction is I don't know how I do it.
But that's not true, right?
The fact 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 the raise the price.
go into a customer and tell them hey it's going up on March first.
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 gonna continue doing it as long as we can.
Don I'm curious, after you
You know.
You had to sp
basically pay a lot of cash out, right? And I know it took a 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? Yeah, sure.
And what's your response?
I'm not for sale.
You don't even want to entertain the offer.
No, because you know, I I know what it means. It means I'm gonna be
Uh unemployed. And my kids are gonna be unemployed.
I don't like that. You know, uh ten years ago when I settled the case with John, my gr first grandchild was born that night.
I went from signing a document to the hospital.
To see
uh hers at at the first time. Now she's ten years old.
And I tell her.
One day you're gonna be running this company.
Um
I hope.
That's a reality. I hope that's something that uh
this company becomes multi generational and run by my grandchildren at some point.
And you know, I that's a good that's a good story.
When you think about
the the journey you took. And I mean listen, it's not a d uh a secret. You are a
you are a billionaire. I mean you m you know, you
U you entered a market dominated by big players.
And your
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 timing and
Yeah, the world
around you and circumstances.
I mean
Luck is a important thing in life, right?
Luck to find a right.
Wife.
Like to have good kids.
Good grandkids.
I've had
good health in my life, which is also
Something you can 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 be in a business that
After thirty plus years we can still have customers who say, I like that product. My mother liked it, now I like it too, which is a very difficult thing to do.
Yeah.
Done.
Don, do you imagine like
Like working un until your dying day, like going into the office every day.
Yes.
That's my point.
Actually last year um
My plant manager in New Jersey
They got jammed up, Falklift operators didn't come to work.
So I said, I'm I'm coming in 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 at ten o'clock in the morning and got off the machine at eight o'clock at night.
And I unloaded and loaded fifty trails. Wow. And it was one of the more interesting, exciting days of my life. It was great.
So really, I mean
You are there until the very end, as far as you're concerned.
And hopefully the very end is a ways off.
That's Don Voltaggio, co-founder of Arizona Beverage Company.
Would you ever consider doing a George Bush uh iced tea brand now? Now that you know, I don't know, we're in Palmer work. Yeah, maybe maybe. Maybe or maybe people be like, Who is that?
We gotta do the VPs.
I like I Ice T. Eisenhower Ice T.
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 guyros.com or on Substack.
This episode was produced by Ramel Wood with music composed by Ramteen Arablui. It was edited by Neva Grant with research help from Iman Maani.
Our engineers are Maggie Luthar and Gilly Moon. Our production staff also includes Casey Herman, Alex Chung, Carrie Thomson, Katherine Seifer, Carla Esteves, Nor Gill, Sam Paulsen, Andrea Bruce, and Elaine Coates.
I'm Guy Raz and you've been listening to how I built this.