Arizona Iced Tea Creative Strategy

Creative Strategy Brief: AriZona Iced Teas

Product Overview

AriZona Iced Teas are a brand of ready-to-drink beverages originating from New York. There are various different types of teas, with the main sections branching off to green, black, white, and herbal teas. However, extensions include diet teas, juice blends, concentrates, energy/sport drinks, decaf teas, and even flavoured bottled water. All beverages are made from 100% natural ingredients and each type of tea has its own story and health benefits.

Ferolito, Vultaggio & Sons originated as a New York City beer distribution company in 1971, founded by two friends, John Ferolito and Don Vultaggio. The company grew through the hard work and determination of John and Don, and, by the late 1980s, became one of New York City’s most successful beer distributors.

In 1990, Don encountered a Snapple truck delivering a huge shipment as he was making a regular drop of his, and, after talking with John, they quickly decided that a move into the tea business was the best step for them. By as early as 1992, the AriZona brand had been developed and launched. The unique packaging of the new product “literally stood head and shoulders above the rest” of the beverages shelved beside them, and AriZona Iced Teas quickly grew into a success. The packaging includes a series of 24 oz. cans, 20 oz. proprietary bottles 16 oz. cans, 12 oz. cans, 7.7 oz. cans and 12 oz. aseptic drink boxes.

Today, among the top �ready-to-drink’ tea brands, AriZona holds a 28.6% market share, with a 45% increase in dollar sales over the year of 2006.2 Not too long ago, AriZona and Coca-Cola Enterprises struck a distribution agreement, and added AriZona Iced Teas as a brand they distribute alongside Nestea, Gold Peak, and Enviga Teas.

Key Observations

Competition

Top ready-to-drink teas by brand *From: www.bevindustry.com/content.php?p=5&s=BI/2006/02

Brand Dollar Sales %Change Vs. Prior Year Market Share % Change Vs. Prior Year

Arizona $214,871,400 45.0% 28.6 5.3%

Snapple $97,525,640 6.2% 13.0 -1.5%

Diet Snapple $87,541,020 14.1% 11.7 -0.4%

Lipton Brisk $78,295,500 -8.1% 10.4 -3.0%

Nestea Cool $56,288,980 -16.7% 7.5 -3.1%

Lipton $54,408,740 204.7% 7.2 4.4%

Lipton Iced Tea $41,951,630 4.1% 5.6 -0.8%

Private label $27,476,830 16.1% 3.7 -0.1%

Nestea $14,853,450 13.0% 2.0 -0.1%

SoBe $14,798,130 22.3% 2.0 0.1%

Category total $750,577,300 18.3% 100.0 0.0%

We can see from the above chart that Arizona has 4 major competitors: Snapple, Lipton, Nestea and Sobe.

Originally Snapple was founded in 1972 by three people, Arnold Greenberg, Leonard Marsh, and Hyman Golden. It did not become the Snapple Beverage Corporation until 1992, when Snapple Holding merged into its subsidiary in preparation for public stock offering. The offering was an immediate hit, as the four million shares were snapped up, and the company's stock price was driven to $33. These results were reinforced at the end of the year, when the company posted annual revenues for 1992 of $231.9 million, more than double the previous year's tally. The company finished 1993 with sales up 119 percent from the previous year, as the company moved 55.6 million cases of beverage. This marked the third year in a row in which sales of Snapple drinks had more than doubled. One half of the company's revenues were still contributed by iced teas, with the remaining portion made up by its 10 flavors of fruit drinks (45 percent) and its 23 flavors of natural soda, fruit juices, and Snapple Sport drink. Today, Snapple Beverage Group, led by its more than 30 different-flavored namesake beverages, quenches parched throats throughout the world in, well, a snap. Cadbury Schweppes' Americas Beverages group, to which Snapple Beverage Group belongs, also includes Cadbury Schweppes Bebidas Mexico, Dr. Pepper and Seven UP brands, and Mott's. Snapple products are available at food and beverage retailers, mass merchandisers, and foodservice venues in the US and about 80 other countries worldwide.

Lipton was created at the end of the 19th century by Sir Thomas Lipton. The Lipton business was acquired by consumer goods company Unilever in a number of separate transactions, starting with the purchase of the US and Canadian Lipton business in 1938 and completed in 1972 when Unilever bought the remainder of the global Lipton business. The brand is well-represented in many countries across the globe, including the USA, France, Japan, Saudi Arabia, Australia, and Sweden. Lipton has always had a strong focus on innovation, given its continuous launch of both leaf tea and ready-to-drink tea products. Products are placed in the medium-quality and low-price range and target the mass market. The company employs professionals in tea growing, tasting, buying, blending as well as Research & Development teams. Unilever/Lipton owns Tea estates in Kenya and Tanzania, making it one of the few companies actively involved in the whole value chain of tea, from growing it to marketing it.

Nestea is a brand of iced tea manufactured by the Nestle and distributed by Nestle company's beverage department in the United States and by Beverage Partners Worldwide (BPW), a joint venture between The Coca-Cola Company and Nestle, in the rest of the world. NestlÐ"© is a multinational packaged food company, founded and headquartered in Switzerland. It was set up in 1866 by Henri NestlÐ"© to provide an infant food product. Several of NestlÐ"©'s brands are globally renowned, which made the company a global market leader in many product lines, including milk, chocolate, confectionery, bottled water, coffee, creamer, food seasoning and pet foods. Nestea provides a variety of "tea products," in regular and diet forms, including liquid and powdered tea concentrates, refridgeratable teas, and ready-to-drink bottles dispensed by vendor or vending machine. The beverage comes in several flavors, depending of the country. Nestea's biggest markets are the United States, Canada, Australia,