August 2018
Volume 9, Issue 8

Outside Perspective: Don Vultaggio and Reinventing a Business

The Founder-Owner of AriZona Beverages spills about service, relationships, and building a corporate family

Daniel Alter, MSc, MDT, CDT

"Conventional" is not a word that would best describe the Long Island, New York, headquarters of AriZona Beverages or its founder and owner Don Vultaggio. From a reception desk shaped like a can of iced tea and walls lined with steer skulls to the 1950s-reproduced Brooklyn Diner cafeteria and New York subway-styled lounge, signs of Vultaggio's unorthodox approach to a work environment and culture are as unique as his business philosophy and premier product, AriZona Iced Tea.

A towering figure (nearly 7 feet tall), the 66-year-old Vultaggio learned early on that standing out in a crowd has its distinct advantages and, today, skillfully mixes that competitive strategy with his Brooklyn-bred "can't fail" moxy. His introduction to the beverage industry began in the 1970s while he was working for one of Brooklyn's local breweries. Within several years, these kinds of breweries were being threatened by industry giants like Anheuser-Busch and MillerCoors, whose price-cutting measures were driving their smaller competitors out of business. This also threatened the small mom-and-pop neighborhood stores that didn't have the money or the credit to buy the minimum orders these larger commercial breweries demanded. Vultaggio's solution? Become a distributor of all brands of beer and a service provider to the small mom-and-pop stores, often located in tough neighborhoods others didn't want to service. It was a strategy that paid off, and by 1980 he was running a highly successful wholesale distribution company that represented beer-makers from around the country and the world. That is, until one fateful day in the 1990s when he saw a Snapple truck unloading cases and cases of iced tea in the dead of winter.

Daniel Alter, MSc, MDT, CDT, IDT Executive Editor, joined Vultaggio for lunch at AriZona's company headquarters to talk about how that moment one winter night inspired him to build a $3-billion-a-year business that landed him a spot on the Forbes 400 list in 2017 as one of the richest people in America.

Daniel Alter: What was it about the encounter with Snapple that drove you to the decision to become a manufacturer of iced tea?

Don Vultaggio: First, it was the realization that iced tea is a year-round drink that obviously is in great demand. Second, Snapple was delivering to the same stores I was servicing. And third, adding this product to my existing distribution line was a natural synergy. I had the warehouses, trucks, salespeople, and a billing and collections department, and I had relationships with canning and glass companies. I could add this product to my existing line and sell to our regular clients without any added expenses. That said, even though I knew how to make a beverage, the one thing I didn't know was how to make iced tea. Nevertheless, I went home that evening and told my wife, "We are going into the iced tea business."

DA: In a market dominated by big players such as Snapple, Lipton, and Nestea, how does a new start-up make inroads into such a highly competitive market?

DV: We had to create a product that stood out on the shelf. I believe the first reason someone buys a product is the packaging. We buy with our eyes. So package design was key. My wife, who is extremely creative, had renovated our new beach home in a Southwestern adobe motif, a style that no one was doing in New York. Everyone who walked into our home was wowed by the bright Southwest colors, which were more fitting of a home in Arizona than New York. I knew from their reaction that this flamboyant pastel color motif and the brand name AriZona would really stand out on a shelf filled with iced tea beverages that were primarily packaged in basic red, green, and silver color schemes. But to even further differentiate our product, we chose to package the iced tea in tallboy cans that offered 23 ounces versus the shorter 16-ounce bottles of our competitors. And we priced the iced tea at 99 cents a can. We had a product that was bigger, bolder, and better priced. By 1994, we had become a national brand. However, I also knew that the primary reason customers buy a product over and over again is product quality. The product can look great but if it's not of quality, people won't buy it after the first purchase.

DA: And how did your clients react to this new addition to your product line? Did they immediately buy into your AriZona iced tea concept?

DV: It's much easier to sell a new idea in a business you are already in and know. It makes the conversation much easier. Selling new services to existing clients also generates greater revenue. I would suggest that any business owner exploit and grow the relationships that already exist. Building new relationships offers many hurdles to overcome, and there is more opportunity to fail. For me expandable relationships are incredibly important, from the client to the packagers. That's why when people ask me what kind of business I am in, I always answer: "I am in the relationship business."

DA: Beyond your existing clients, how did you take this local business concept and make it a national success?

DV: Our philosophy and our success has always centered around efficiency. For example, one concept that drastically changed our business model was selling direct to large corporations such as Walmart and Walgreens. We sold wholesale to their depots, which, in turn, distributed AriZona iced tea across their national network. We also always made our deliveries at night, again thinking efficiently about driving time, vehicle wear and tear, and labor. It was a tremendously different approach than our competitors who were making daytime deliveries in heavily congested downtown Manhattan, making fewer stops per truck. If you're able to do things behind the scenes to increase efficiency and get a quality product to the market at the right price, you have a better shot that the client will buy your product again. If you find that your price is too high, then it's up to you to figure out how to make that product more efficiently in order to get to a price the market is willing to pay.

DA: How has technology affected your business?

DV: Equipment and technology have tremendously affected our manufacturing processes and allowed us the opportunity to be more efficient. It's the reason why we've been so successful in keeping the same price point for our can of iced tea as first offered in 1992. The control that technology and software offers us has truly revolutionized the way our business is conducted.

However, as much as all this technology helps us to become more efficient, it's the people operating these technologies who are most important. You have to treat them right, treat them with respect, compensate them well, and make them feel comfortable. That's why this office is an extension of their homes, even down to the bathrooms. When people come to work, they deserve to have a great working environment. If you provide that, I think you have a better opportunity to find and maintain top-quality employees who truly care about your business's wellbeing, its products, and its customers.

DA: What business advice would you share with a small to medium-sized business looking to grow or a large business wanting to remain viable?

DV: For large businesses I would say not to take things for granted. You should not become complacent. If you are not challenging the system every day, you could be setting yourself up for failure. You have to constantly reinvent yourself and constantly look for what's new and challenge yourself to innovate. Surround yourself with talented people who bring value. Many people in my company have great ideas, and it is my job to engage them.

Smaller businesses are hard. Many try to turn themselves into large business, but end up turning themselves out of business. If you reach too far, you may get yourself in trouble. I started as a small business, and it is very hard to find good talent when you can't afford it.

You need to be willing to work hard and be tireless. Some people call me an overnight success, but I say it's 20 years of nights. There is no easy way to be successful, but there are many pathways to success. Be a focused listener and take in the pieces of a conversation that you need. Be careful of too much information because it could paralyze you. Sometimes you try listening to everything, and you end up absorbing nothing. Take in what is important and what you need, and shut out the rest of the noise that's out there.

DA:  You generously pass down the company's success to your employees by providing them with many amenities and internal services such as a dry-cleaning service, gym, putting green, and rooftop terrace for networking and parties.

DV: You need to acknowledge what type of work environment you would want to have as an employee. I was very fortunate to learn at a young age from my employer and mentor, a gentleman who owned a neighborhood grocery store. Almost 50 years later he is still a friend of mine. He was very generous and giving, not only of material things, but also very generous with his time. He taught me a strong work ethic, and although he was tough, he taught me that what you get in life is what you are willing to put into it. I didn't go to business school or go to college, but I had good parents and a great role model as a businessman. All these years later, I try to emulate what he taught me. "If you have the means, you should definitely provide a culture of generosity for your employees. If you don't, you should aspire to do it." I think it is prudent because you get more back than you invest. A good business culture makes a happy employee, and a happy employee will always produce better for your business. I think it's healthy for people to come to work because it's fun. I have fun all the time and still get excited coming in every day!

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