Arizona Iced Tea founder explains why it still costs less than $1 a can, in a move straight out of Costco’s playbook
Arizona Iced Tea founder Don Vultaggio has kept the price of his famous tea at 99 cents for 40 years even as inflation has pushed the cost of everything up.
For him, that’s exactly the point.
Even though Arizona’s own costs of production have gone up with inflation, Vultaggio said the company is in a strong enough position that it doesn’t need to raise the price of its signature beverage—just yet. In exchange, they hope to gain goodwill and positive attention from potential customers.
“We’re successful, we’re debt-free, we own everything,” he told Today in an interview. “Why? Why have people who are having a hard time paying their rent have to pay more for our drink?”
The move to keep a can of Arizona Iced Tea at 99 cents echoes Costco’s four decade effort to keep its hot dog combo at $1.50 despite rising costs—and, earlier, Coca-Cola’s half-century quest to keep a bottle of the drink priced at a nickel. Costco’s former chief financial officer told Fortune last month that keeping its hot dog price stable was essential to its success. And in one of his first public statements, the company’s new CFO, Gary Millerchip, said the $1.50 hot dog combo was “safe.”
Costco sells nearly 200 million hot dogs yearly at Costco food courts, Fortune reported, and the staple food has taken on a cultural significance of its own and built up goodwill for the brand.
The same goes for Arizona Iced Tea, Vultaggio said.
Arizona’s and Costco’s moves to keep a key product’s price stable stand in stark contrast to the profit-at-all-costs culture that has proliferated in corporate America over the past few years, especially with the rise of private equity. Prices have skyrocketed, due in part to massive inflation since 2021, but consumers have complained that many products have declined in quality.
Arizona has made cuts and changes to help maintain the price including by changing the can, running cans faster on the production line, and bringing more of its production to the U.S., Vultaggio said in a 2022 CNN interview.
Still, Arizona Iced Tea has also had to make some sacrifices. Last year, the cans dropped from 23 ounces to 22 ounces so the company could save money on aluminum by changing the lid. That decision in itself weighed on Vultaggio.
“I hate to raise prices, I’m an old salesman and the worst day in a salesman’s life is when he has to go to a customer and say, ‘you got to pay more,’” he told Yahoo Finance. “But on the other side of it, we’ve done all we can to hold [the] price.”
While Vultaggio couldn’t guarantee that the price of the 99-cent can will stay stable forever, he told Today that it’s here to stay for “the foreseeable future.”
“Maybe it’s my little way to give back,” he said.
