Can AriZona’s 99-Cent Iced Tea Survive Trump’s Tariffs?

Don Vultaggio leaned over a table and spun a giant lazy Susan until a 22-ounce can of Arnold Palmer appeared before him. It was 2 p.m. and time for Mr. Vultaggio, the founder and chairman of AriZona Iced Tea, to hold his daily two-hour lunch and board meeting in his Southwest-themed office in central Long Island, N.Y.

Behind him was a wall of dozens of bottles and cans from the company’s deep roster of products, and a security monitor showing a live feed of the robot-powered storage and retrieval operations of its largest factory, which is in New Jersey.

It has been from this perch that Mr. Vultaggio has spent the last few weeks contemplating what he’s insisted, for most of his company’s three decades of existence, he would never do: raise the 99-cent price of its canned iced teas, AriZona’s calling card since 1997.

The Trump administration’s 50 percent tariff on aluminum imports may leave him no choice.

If the price of a tallboy of AriZona Iced Tea had kept pace with inflation, the company would today be selling it for $1.99. Instead, the 99-cent price remains so central to the company’s identity that the numbers are displayed on the can boldly and prominently.

AriZona uses more than 100 million pounds of aluminum a year for its cans, and about 20 percent of that comes from Canada. Mr. Vultaggio is hopeful that the tariff dispute will be resolved, but if it is not, he said, “at some point the consumer is going to have to pay the price.”

“I hate even the thought of it,” Mr. Vultaggio, 73, said, adding, “It would be a hell of a shame after 30-plus years.”

Southwestern Motif, Brooklyn Roots

AriZona’s affordability has its roots in Mr. Vultaggio’s childhood in the Flatbush neighborhood of Brooklyn, where his father managed an A.&P. grocery store. Dinner conversations, he recalled, focused on retail and labor issues, theft and profit.

“Know your costs and sell it for more than that,” Mr. Vultaggio said, reciting one of his father’s business principles. “Most companies to this day still don’t understand that.”

After high school, Mr. Vultaggio got a job at a brewery in Bushwick, where he quickly became more interested in the price of the bottles and other materials than in the actual brewing process. He started his own beer distribution business instead.

He was making a delivery in Lower Manhattan one cold afternoon in 1991 when he spotted a truck delivering cases of Snapple.

Iced tea was not supposed to sell in February, he thought.

“I went home that night and told my wife, ‘We’re going into the iced tea business,’” Mr. Vultaggio said. “I didn’t know beans about iced tea.”

He had no recipe, no name, no label design, nothing to set himself apart from the Snapples, Liptons and Nestlés of the world.

Turquoise and Pink Set the Scene

Ilene Vultaggio had only recently finished designing the family’s pueblo-style house in Rockaway Beach, Queens, when her husband came to her with his idea for a new beverage company.

“Everything in the house was Southwest to the extreme,” said Mrs. Vultaggio, 72, a pastel artist. “Turquoise. Pinks. Yellows. I always loved it.”

So when Mr. Vultaggio asked her to design a logo for the new company, she sketched what she knew: a turquoise, pink and yellow sunburst. The couple’s sons, Wesley and Spencer, helped color it in with crayons and colored pencils.

Then came the name. They wanted something customers would be familiar with that would stand out in the cooler, and landed on “Arizona.” Mrs. Vultaggio added flair to the lettering by capitalizing the “Z.” She would later design a label for the company’s green tea flavor with ginseng and honey that was inspired, in part, by one of her children’s coloring books.

A Business Model Built on Basics

Mr. Vultaggio said he has run his company according to three simple rules: Make it taste good, make it look good and price it right. In fact, starting in September, AriZona plans to lower its $1.25 plastic bottled beverages to $1.

But pricing it right has not always been easy, he said.

Just as AriZona was hitting the market, the aluminum industry and businesses that relied on the metal were alarmed as the Soviet Union, then the top supplier, suffered political and economic collapse. AriZona raised the price of its canned iced tea above $1. Sales immediately took a sharp hit, Mr. Vultaggio said.

But as aluminum prices eased, Mr. Vultaggio returned to the lessons his father had taught him at the A.&P., he said. He introduced the 99-cent tallboy in 1997. By 2000, he said, sales were up 30 percent.

Retailers initially bristled at Mr. Vultaggio’s insistence on printing “99 cents” on the can, locking them into that price. But the 99-cent selling point quickly became “like heroin” for customers, he said. They couldn’t get enough.

“Our marketing was never built on anything other than just common sense,” Mr. Vultaggio said. “And a lot of guts. But it was guts from years of business. I’m a consumer, too. I like deals. I like sales.”

AriZona, which is privately held, sells about two billion cans annually, roughly half of which are the signature tallboys, in addition to glass bottles and gallons of varieties of iced tea, juice, energy drinks and coffee, Mr. Vultaggio said. Gummy snacks, ice pops and promotional merchandise are also on offer. While the can prices have been frozen in time, the company said it had “adjusted prices where absolutely necessary” on its other products.

AriZona’s success at keeping prices low for three decades relies on other factors, too.

The company is largely vertically integrated, meaning that it controls every step of the production process. The company ran railroad tracks from a freight line so it could bring tankers of sugar directly to AriZonaLand, its factory in Keasbey, N.J., several times a day.

Mr. Vultaggio has no shareholders to answer to, and his company has no debt, he said.

“I hate the look of it, I hate the smell of it,” he said, adding, “I like to sleep at night.”

This combination gives Mr. Vultaggio “a lot of control over the operations,” said Jim Salera, a food and beverage analyst at Stephens, an investment banking firm. Inexpensive materials — water, sugar and other flavorings — have also probably helped AriZona stick to the 99 cent price, he said.

One key to the company’s success is strong brand loyalty among customers, many of whom are now old enough to have introduced AriZona Iced Tea to their children.

“They’ve not only survived, they’ve prospered,” said Stephen Zagor, an adjunct assistant professor at Columbia Business School. “They became one of those companies that not only sells a product, but tries to sell their culture. And they do it cheaply.”

These days, that culture includes collaborating with brands to put AriZona’s signature colors on Gen Z-friendly clothing, and focusing the company’s story on Mr. Vultaggio himself. At a recent storefront pop-up event in the SoHo neighborhood of Manhattan, 12-year-olds were asking for “Don,” whose fandom is growing on TikTok.

Tariffs Come for the Tea

Now they could become collector’s items.

About 80 percent of the aluminum AriZona uses to make its tallboys comes from recycled material produced in the United States. The rest is imported from Canada, and subject to a 50 percent import duty. Mr. Vultaggio declined to comment on any steps AriZona has taken to mitigate the financial impact.

“Our price has been dramatically bumped up because of this tariff talk,” Mr. Vultaggio said, adding that he expected the few domestic aluminum manufacturers to raise their prices in response to the tariffs.

President Trump has maintained that increasing tariffs on international goods would benefit the United States by boosting domestic manufacturing, addressing trade deficits and raising revenues for the U.S. government.

For the moment, Mr. Vultaggio is clinging to cautious optimism.

“What happens, happens,” he said. “We can find our way through it.”

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