Will Arizona Iced Tea Keep Its 99-Cent Price Despite Tariff Challenges?

Arizona Beverages has maintained its iconic 99 cents price for a 22-ounce can of iced tea since its founding in 1992, a rarity in today's fluctuating market. Despite rising costs and international trade pressures, co-founder Don Vultaggio insists on keeping prices stable to provide value to consumers.

Last updated: 21 August 2023 (BST)

Key Takeaways

• Arizona Beverages has kept its iced tea price at 99 cents since 1992.
• Co-founder Don Vultaggio is committed to maintaining this price amid rising production costs.
• Increased costs are primarily due to tariffs on aluminium and steel imports.
• Vultaggio believes in growing sales volume over raising prices to offset costs.
• The company is exploring alternatives like using plastic bottles to manage expenses.

Maintaining Tradition in a Changing Market

Founded in 1992, Arizona Beverages has become synonymous with affordable refreshment. The brand's 99-cent iced tea can has become a staple in convenience stores and supermarkets across the United States. Vultaggio’s commitment to this price point reflects a desire to offer value in an increasingly expensive market.

The company's success stems from its ability to adapt while holding onto its core value proposition. As inflation and global trade tensions rise, maintaining this price may seem challenging, yet Vultaggio remains resolute. “We’re trying to hold the line,” he states emphatically.

Understanding the Costs Behind the Price

Vultaggio has been open about the financial pressures that come with maintaining such a low price. He reports that the cost of aluminium for their cans has risen significantly, with costs increasing by approximately 40%. This means that Arizona Beverages is now paying around £40 million more annually for aluminium alone, a substantial expenditure for a company that relies on this material to package its products.

In a bid to offset these costs, Vultaggio is seeking to increase sales volume. He believes that by selling more units, the company can compensate for rising production expenses without passing those costs onto consumers. “Nothing solves problems like volume,” he states, emphasising a strategy focused on growth rather than immediate profit margins.

Responding to Tariffs and Trade Policies

The introduction of tariffs on aluminium and steel imports has significantly impacted many companies. In June, the White House announced that tariffs on aluminium would double from 25% to 50%. This shift has exacerbated the financial challenges faced by Arizona Beverages and many others in the beverage industry. While Vultaggio acknowledges the difficulties, he also points to the fact that a large portion of the aluminium they use is recycled within the U.S., which mitigates some of the impacts of these tariffs.

Exploring Alternatives: Plastic Bottles

In addition to maintaining the iconic 99-cent price point for iced tea, Arizona is also diversifying its product offerings. The company is set to introduce a new price for its 20-ounce plastic "tall boys," which will be priced at £1 instead of £1.25. This move signals a strategic pivot towards more plastic packaging, potentially allowing for cost savings in the long run, despite the environmental concerns associated with plastic.

Vultaggio’s approach prioritises offering value to consumers, especially during times of financial uncertainty. He notes, “Offering value is always a good idea, and when you can do it, you should.” This commitment to affordability sets Arizona apart from many competitors who have opted to increase prices in response to rising costs.

Consumer Loyalty and Brand Identity

Part of Arizona Beverages' enduring success can be attributed to its strong brand identity, which resonates with consumers. Vultaggio’s personal story, growing up in Brooklyn and working for minimal wages, informs his commitment to providing affordable products. He understands the economic realities faced by many of his customers and aims to offer them a refreshing beverage that doesn’t break the bank.

“I respect the value of £1,” he asserts, highlighting his dedication to keeping prices low. This philosophy has helped cultivate a loyal customer base that appreciates the brand's commitment to value.

The Future of Arizona Beverages

Looking ahead, Vultaggio remains focused on growth. He acknowledges that if he were to raise prices significantly, he could risk losing customers. “I’d rather grow the business than raise prices,” he explains. This forward-thinking mindset positions Arizona Beverages to continue thriving, even amidst economic challenges.

As the company navigates these turbulent waters, it will be interesting to see how they balance cost management with consumer expectations. Their ability to innovate while staying true to their roots will likely play a critical role in their ongoing success.

Conclusion: A Commitment to Value

Don Vultaggio’s steadfast dedication to maintaining Arizona Beverages' 99-cent iced tea is a testament to his understanding of consumer needs and market dynamics. By prioritising value and volume over short-term profit, he aims to ensure that his products remain accessible to all. As the market continues to evolve, Arizona Beverages stands as a reminder of the importance of affordability in consumer goods.

FAQs

Why has Arizona iced tea remained at 99 cents for so long?

Arizona iced tea has maintained its 99-cent price since 1992 due to the company's commitment to providing value to consumers, despite rising production costs and tariffs.

How is Arizona Beverages responding to increased production costs?

The company is trying to offset rising production costs by increasing sales volume and exploring alternatives like plastic bottles to manage expenses effectively.

What impact do tariffs have on Arizona Beverages?

Recent tariffs on aluminium and steel imports have increased costs for Arizona Beverages, prompting the company to absorb these costs while maintaining consumer prices.

What is the future outlook for Arizona Beverages?

Don Vultaggio aims to grow the business without raising prices, focusing on maintaining affordability while navigating challenging economic conditions.

Will Arizona Beverages increase prices in the future?

While there are no current plans to raise prices, the company is closely monitoring costs and market conditions to ensure they can continue offering affordable products.