How I Built This with Guy Raz - Don Vultaggio: AriZona Beverage Company - The Snap Decision That Outsmarted Snapple

Episode Date: September 1, 2025

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 tagFollow How I Built This:Instagram → @howibuiltthisX → @HowIBuiltThisFacebook → How I Built ThisFollow Guy Raz:Instagram → @guy.razX → @guyrazSubstack → guyraz.substack.comWebsite → guyraz.comThis 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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It had tall windows, beautiful old details, and plenty of space for all of us. And being in that home on Airbnb, right in the middle of Vienna, walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better your home might be worth more than you think find out how much at arbb.ca slash host i want to ask you about a product that turned out to be a huge winner which was 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 Bushes. George Bush was president at the time, and it looked like George Bush. Not intentional, but that's what a thing. She thought it was George Bush, that Arnold Palmer? 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 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. In the early 90s, bottled iced tea was dominated by three brands. Neste, 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 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 tallboy 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. It was launched by two guys in Brooklyn. Don Voltajio and John Farolito. 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 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 Snapple,

rivaling the big beverage corporations, and today it's one. one of the best-selling ice teas in America, with billions in annual revenue. But the real story? How Don Voltajio 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 Vultagio 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, 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 anything of that, because I'm too big if I'm incapacist. a day it'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, 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&P. 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. He was a manager at an A&P market, right? Yep.

You know, 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. to show you? 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, and see the things that happen that most consumers don't recognize or realize, you know. And Don, I mean, I guess already in high school,

I mean, watching your dad at ANP, I'm assuming you worked at ANP 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 1970, I had no intention to go to college. And he set up in an interview for a job at a brewery in Brooklyn. And that's how he started in a beverage business. It was called Peels Brothers. And they were in Bushwick Avenue in Brooklyn. 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? Yeah, well, it was a merchandising.

I was in a sales department, so I didn't drive a truck there, but, you know, we built the display and put the signs up and, you know, enticed consumers to buy our product. So it wasn't like a muscle job. You were in a sales job early on. Yeah. 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 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 kind of carried over. All right. So you start out in the beer business working for a brewery, and I think the peels folded a couple years after you joined. 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. Um, this is the, you, you meet a guy named John Farrellito 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 what 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 was. He was. 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 or my wedding. And he was, he was terrific. 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. 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 think that matters. Did you guys have shared values? 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. 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 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 kind of cool. 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. You know, because of my experience at Peels and John's experience working at the distributing company, we said we go to stores and offer them these popular brands of beer at 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, you know, we started becoming more of a, what's 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, you know, 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? 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. Schaefer beer. Yeah, that was produced in Brooklyn. Yeah. But, you know, 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 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. And and probably, you know, again, given that their unions involved and maybe some unsavory characters involved, like it's risky, right? I mean, I, Don, I read stories about your time in this business back in the day where, like, you were robbed on at least 100 occasions. You were at one point held in a closet at gunpoint in your office. What happened? What's the story? Well, you know, we were a company and a business that dealt a lot in cash because that's helped it.

Grocery stores paid. And people who worked for us knew that we had. 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 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 ahead with the gun.

And I believe 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. 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 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've got to respect the gun, right? Somebody's holding the gun. You've got to be very respectful for what he's telling you to do. Otherwise, you might be a victim of the gun, right? How quickly 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 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. 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 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 going to sell. Yeah, for the most part, we didn't buy things that were like hulu hoops. But back in the beginning, it was selling Schaefer to people who wanted Schaefer or Wrangled, who wanted Wrangell. It was just about price. Yeah, and I guess by the early 80s, things begin to shift because you actually decide

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 will get to what you started in just a second. But I wonder why. Like, why did you guys want to move from distributing beer to making it? 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 or Miller was from a distributor. And the distributors would have changing views on what they wanted to do. So we'd have 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 Anheuser-Busch said they don't want us to do that any longer. So we're always 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.

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 malt liquor. 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. It 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 a bottle and a product and all that. But it started with that one visit from this brewery from Rochester, New York. 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. The poster? You know it was controversial. Okay. And in part because I think the way it was marketed. First of all, there was an ad that was very 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 cells.

year, 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 critics were just wrong and unfair, or did you think they had some, there was some legitimacy to what they were saying? Well, it was, you know, a beverage category that was very popular. in America. We went at it in a in a in a, I guess a Brooklyn style where we said we got to 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. All right. The next product you launch was even more controversial. This one was called Crazy Horse and it had a label with a Native American and like a feathered headdress. It also drew a lot of negative attention. I mean, I think at one point the U.S. 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 Native American communities. I think 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 product, but you saw what we're people were saying about it. And what did you think about that criticism? Back in when we had been nitrag, and I would work to trade every day. And I saw what was happening in the coolers. And we said we want to do like an upscale malt liquor. Okay. 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. Yeah. And I said, boy, that's the bottle that 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. It was like a Santa Fe. motif home, right? 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.

With Midnight Dragon? Yeah, Midnight Dragon, we're just keeping our head above water. The Crazy Horse pushes over the edge. What was it about Crazy Horse that did so much better? Why? It was a high-priced beer, higher-priced, with a lot more margin in it. At that time in our lives,

it was pivotal to our success into the future. Eventually, you changed in the future. a crazy stallion a couple years later, but initially it was crazy yours. I think the crazy stallion brand is still around, but Midnight Dragon is not, right? Midnight Dragon is no longer sold. You're right. Okay, but I think you guys were profitable, right? The business union was profitable. And what? What do you think your revenue was around under 10 million? Back in those days? No, no, more than that. Probably 30, 40 million. Wow. So you were out of significant business with a malt liquor. Well, and malt liquor and other brands that were selling. You were selling distributing. Okay. Yeah. Alcohol is a, I mean, certainly then, of course, I think we know that alcohol consumption has been in decline in the U.S. and beer and wine and it's still in decline spirits as well. But back then in the late 80s, 90s, 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 the space is thinking, what if we look into non-alcoholic beverages, which is what was about to happen. So let's talk about this. This is 1991. Can you tell me the story of how you first kind of had this epiphany? I was on 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 happened 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, ice 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 in the order I was trying to get on the beer. And I made the decision right there. I said,

I'm going into tea business. Right then. Right then. I'm just curious. I've been Until that point, February 91, 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 this the other day, entrepreneurs could tell you the time when the light goes on. And that's when it went off 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 Raz and you're listening to How I Built This. 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.

Oh, yeah, sure. 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 brand was started by a couple of window washers from New York. One of them had a health food store, I guess like a vitamin store. Yeah. 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 first then.

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 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 thought, I'm not going to, I can't outcompete Snapple. There's no way. This is going to be, this is going to fail. Well, John and I drove to a plant in Trent, New Jersey, who was making Snapple. And it's a man who ran the Peel's Brewery. He was a production manager there.

And he asked whether we had a name. I said, we didn't, 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, 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 look and label, but is that enough? You know, the same shape bottle. Are we going to get lost in the mix? And we kind of said, you know, something better stay in the beer business. We know that. Yep. Okay, for a couple of months, I mean, you put this out of mind, I'm not going to get into the T-business. Snapples are killing it. We're not going to do it. What changed? 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 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 is it this will this will be 50% larger than a 16 ounce snapable bottle 24 ounce can so a tall boy can so there was no gate that was the first time you saw what we now

called tallboy cans That was the first time you'd seen it. No one was doing it up until Gatorade? With a non-alc. With non-alcohol? Schlitz was doing it with the elk. 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 eight more ounces of product? Well, glass bottles were historically more expensive with a lug cap. They run slower. 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 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, are we going to make a killing on it?

The question was, can we get 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 entered the market with that big can. Okay, let's talk 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 beverage scientist and start working with him? 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 high school because I met her in high school. And I should have made her in high school. And I should make him. You married your wife in 76, Eileen.

I did. And you're still married today. Yes, we're going to celebrate our 49th wedding anniversary in a couple of weeks. Amazing. Thank you. Congratulations. Okay, let's go back to that. So anyhow, you know, now 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.

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

You do, really. For what? For any wine, beer, 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 years. But, you know, I was always someone who savored things.

And, you know, when I was working on the original. flavors, I knew what I wanted. I wanted tea character with true fruit flavor, with good clean up, good nose, and that's what I was striving for. And I was, of course, tasting the competition as well. 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, yeah, I had a little bit more lemon, had a little bit more sweetener? The flavors he brought in 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, 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 taste in tea. We came out with lemon and razz. Those were the top two flavors for Snapple. Great taste in raspberry flavor. a great looking can and 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 tallboy can, which is going to make it stand out. But that's not enough. You still need a brand. And 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? Originally the name was Santa Fe. Santa Fe. Good name, good name, Santa Fe Company, okay. Because our house in Queens looked like it belonged in Santa Fe. And when you say, look, let's just describe the house again.

So this is a house in Queens, in Rockaway Queens, it looked like it was in Santa Fe. So what does that mean? Like, what were the colors of the house? It was an Adobe style. And my wife, she said, I'm going to, I said, what do you want to do with it? She said, I'm going to 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.

Wow. And people saw it and loved 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 going to be Santa Fe, Santa Fe. But it's not called Santa Fe T. Well, 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.

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. Okay. So Arizona, you said on the name of Arizona, and it's stylized, with a capital Z in the middle. Yep. My wife, she went to hunt to college, and she was an art major. I went home that night, I told Eileen, I said, Arizona, and she came up to 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 going to 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. The coolers in New York. convenience stores? Yeah. Because nobody was doing turquoise or pink.

Yeah. And so from the time that you saw the Gatorade cans to the time that you actually had product to sell, how long would you estimate that was? Probably under a year. So it's fast. 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. 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. Well, I had 12-ounce cans, you know, the standard. 12-ounce cans. Not the big can. Right, 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.

It doesn't break. And a freight is a lot more because it's heavy, you know. Right. The freight on glass has more. Right. Yeah. Okay. So you come out with this. I think, what was it in May of 92 when Arizona debuts? May 5th, 1992. First load comes to New York. Okay. So you've got, and your first run, how many, do you remember how many cases of it you made? I think we made 20,000 cases. 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 had iced tea. Will you put them 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 him. And he comes back and he got a drugstore, a gas station, a bodega, 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 ten stores sold the 48 pieces, which is two cases.

Okay, but just let me pause for it. How did you get the stores to agree to let you put it in their coolers? Because they have limited space. Well, somebody gets kicked out. Somebody gets moved over. You know, there's always room in a cooler, as long as you get the green light from the from the shopkeeper to move something. But what gave you the ability to do that?

Was it personal relationships? Because it's, right? You knew a lot of these store owners. Well, you know, if you're selling a guy something already, you know him. It doesn't mean he'll take a new product to 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, then 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 look so good, that the grocer said, yeah, shoot, why not? I think I could sell it. But you did not put any marketing dollars behind it. 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 buck a can. So then you were probably, what, making 20 cents on each can? Maybe. We were making 17 cents a can. So that was thin. You had to sell a lot to make money. Well, you know, back in those days, to make three bucks a case was pretty good.

Yeah. 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. 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 is 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. Well, exactly, because they made tea cool. Snapel 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. 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, you weren't really, hadn't penetrated every market yet. But those four places were doing very well. We did, I think it was 700,000 cases, year one of us, 800,000 cases. And I guess 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 chief operating officer for you and really started to push this product out nationally. Yeah. 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. I don't know if I'm reading this right.

That two years in, you're doing more than $150 million in sales. Does that square with your memory? Yeah. Well, year two, we did $100 million year two. Then year three, we did, we doubled it, more than double it again. So we got to like $400 million. That's unbelievable. Okay. So you've got, I think, 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. Yeah, I am. You are already. But Snapple went through multiple owners and they destroyed it. Right. Because they sold a Quaker and a bunch of different things. But again, when they sold a Quaker, you would think, oh, 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. 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. Yeah. But I want to ask you about a product that really just turned out to be a huge winner, which was half and half, the Arnold Palmer. Arnold Palmer's, right, everybody knows. You go to a restaurant, he asks for an Arnold Palmer, it's half lemonade, half iced tea. Arnold Palmer, great golfer. I think there was a company that had like a license to sell the drink and a round.

I think around 2001, 2002, maybe, you guys partnered with this company or with him to bring it to basically make a can, an Arnold Palmer can. Tell me a little bit about 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 of this? 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 arna 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 ony 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. Giant carton, 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 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 he had photographers who would follow him. And I asked on it, 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'm not going to give a nickel a can to some guy who put a photograph of him in play.

So we had this lady who did our graphic designs. She painted the first picture. 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 they looked like George Bush. Not intentional, but that's what it. She thought it was George Bush, not Arnold Palmer? George Bush. I love this George Bush iced tea. 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 with me too. And today it's our second bestselling 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. 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. 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 interest and have fun. But you guys are partners. You worked full partners. 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, 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's 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 okay with that? I was fine with it.

You didn't care. Because I never considered what I do work. I enjoy what I do. I enjoy what I do. And I also, and I said to him at one point, I said, we didn't fight. We had nothing. We're not going to fight now. Did you call him to consult with him on anything? Or, I mean, did you say, hey, I've got this new idea for a product, or was he completely out of the picture? There were times when I didn't speak to him for over a year. Wow. But also I knew that at that point in his life, it wasn't for him. And oftentimes, when I would make decisions, I did call him sometimes, but for the most part, I didn't because there 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. All right. So let's get to 2005. By 2005, he decides he wants to sell his half of the company. Now, he wanted to sell the company.

He wanted to sell the whole company. He wanted us to sell. He wanted you to sell, okay, because I guess there were people out there who were offering lots of money. 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.

I have two sons in the business, and I have four grandchildren. And I hope that one day my sons take over and then they have their children take over from them. maybe it's an old-fashioned approach, but I think the worst thing in life is that be wealthy and not having anything to do. You know, the guys from Snapple told me the worst day of his life was the day after he sold out. I believe it.

Because he said, now what? Yeah. 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 kind of, where the world kind of unraveled a little bit. Right. Because nobody, well, very few people 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 want buys into the company, they want to share. They want to control it generally. Sure. And for their obvious reasons. They're saying I put a lot of money up and I don't want this guy who's a founder to control my destiny. Of course. But I think it's a mistake because I think 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. And just to be clear, when it, when it became obvious, obvious that you were not going to sell, right, and that you were going to 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 going to last that long. Couldn't have imagined it lasting that long, right? Ten years of your life. Now, not every day you're in, not a quarter or depositions, but it's always hovering over you. There's a lot of stake. During that time, I said I was 70, 80% lawyer, 20% marketer

because it took up that much of my time. But I was able to, take that 20% of the time and keep running a business and keep growing a business. Even though it was very difficult at times to make decisions, 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 is going to 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 a year later, hey, by the way, 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 was kind of like frozen. For 10 years. Yeah. Okay. Why did it take so long? 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 fair analysis, and then let's see where the, you know, where the, where Lance? You know, if I look back at it and I would say, well, 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.

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 friend of mine. But John promised them all kinds of wealth. 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 did 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. I cannot imagine how expensive that was. Did it take a toll on your physical health?

Just sleepless nights or, I don't know. I don't know. You know, I've said 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 you're 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, you know. 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 O'O4, 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? Absolutely. You know, what we earned last year was what he got bought out for, you know? 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. 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 spoke 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. 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? Absolutely. That's why we've been able to do as well as we've done. I built a factory in New Jersey that we need it desperately. I'm very proud of it. It's a million 250,000 square feet 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. Yeah, let's dig into that. I read, for example, that you actually thinned the aluminum in the cans, which made them lighter and cheaper, for example. Yeah.

You know, aluminum is a component that when you buy cans at all level, aluminum goes up and down. Your price changes every 30 days. So taking aluminum out is a tremendous saving. But we didn't, we're not the only one that did it. Other people did it as well. Cam manufacturers did it because of the obvious reason. They used less material.

And I read, for example, like another way to keep your cost down is you use lightweight trucks. You use them at night to avoid city traffic. Is that right? 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 came to that conclusion I was going over to George Washington Bridge at, you know, one o'clock. It was a nightmare. Yeah.

You know, if you go after 8 o'clock, it's still a nightmare, but 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 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 is all about no sugar. I know you have a no sugar beverage too.

Or people say, oh, it's all about no carbs or it's all about, you know, clean ingredients. All kinds of things come and go. What is the secret of keeping your teas ahead of your competition? I think what we've tried to do when we continue to do is keep it simple. My belief is you've got to give a consumer a fair deal and then you can expect them to come back. If you don't, they're going to 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 it is the can.

And then from that point on, it's about it tastes good and it's price fair. And the can of tea is still, I guess, priced at 99 cents? Yes. But 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, you know, alternatives for them. Yeah.

And if they can't afford to do it, they've got to do something else. Okay, but so how have you kept it at a 99-cent suggested price all these years? 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, the easiest thing to do is 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 as long as we can. 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 time to pay that back to the company. Were there ever, I mean, there must have been or must be 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 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 the 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. 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, I think that's a good, that's a good story. When you think about the journey you took, and I mean, listen, it's not a secret.

You are a billionaire. I mean, you, you know, you entered a market dominated by big players and you're a massive product, right? You've created a massive product that outsells the big guys. And you are a big guy now. How do you, how much of where you got to do you attribute to how hard you worked and how much do you think has to do with luck, just timing and, you know, the world around you and circumstances? I mean, luck is an important thing in life, right? Luck to find a right wife, luck 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,

being a business that after 30 plus years, we can still have customers to say, I like that product. My mother liked it, now I like it too, which is a very difficult thing to do. Yeah. Don, Don, do you imagine, like, working until you're dying day, like going into the office every day? Yes. That's my plan. Actually last year, my plant manager in New Jersey, they got jammed up, forklifter operators and 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 at 10 o'clock in the morning and got off the machine at 8 o'clock at night, and I unloaded and loaded 57 trails.

Wow. And it was one of 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 Voltajillo, co-founder of Arizona Beverage Company. Would you ever consider doing a George Bush iced tea brand now, now that, you know? George, I don't know.

Or maybe it's all in Texas. Yeah, maybe. Maybe. Or maybe people would be like, who is that? We've got to do the VPs. I like Ike. Ice-T. 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 Ramele Wood with music composed by Rumtin Arableu. 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 Coates. I'm Guy Raz, and you've been listening to How I Built This.