For Arizona, packaging is the medium and message

There's more to the Ferolito, Vultaggio & Sons rags-to-riches success story than meets the eye: Two guys who delivered beer in New York City's toughest boroughs turned beverage kingpins, building its Arizona brand from zero to a half-billion dollars in just five years. Without going public. Without advertising. And creating, along the way, a portfolio of packages that are so beautiful, so eye-catching, so compelling-that consumers have made it the number three brand in the ready-to-drink tea market behind Lipton and Snapple, two brands that enjoyed a sizeable head start in the beverage business. It turns out that packaging has much to do with the company's meteoric growth. In fact, it's so important that the task is concentrated in the hands of its highest official-the chairman and part owner, Don Vultaggio. Few if any marketers of a company this size could probably make this claim. "We're a packaging company," says Vultaggio, who co-founded the firm in 1971 with his partner John Ferolito as a beer wholesaler in New York City. "Our only way to gain attention in the marketplace is via packaging. We try to take it to the extreme." The formula for FV&S, headquartered in Lake Success, on Long Island, two miles from the Queens border, is actually quite simple: Stop at nothing to create a product/package combination that looks, works and tastes better than any other on the shelf, and charge more for it. Even if it means doing the unthinkable, like running up packaging costs that would get people fired at other companies. Corporate MBAs and accountants, take note. "Take that shrink sleeve label that you see on our bottles," says Vultaggio. "Shrink labeling has been around a long time, but no beverage manufacturer ever used it until we did. It's expensive-they're about a nickel apiece. The machines that drop the labels on are about $300ꯠ apiece. And you need a bunch of them at each facility, because the bottles run faster than the machines can label. "But what it does for you is give you nine [gravure-printed] colors to work with. It gives you the ability to create a container, like with the sport can or our regular tea bottles, that makes it look like something other than what it is" (see Packaging World, Nov. '97, p. 28). Chairman as package designer To come up with innovative packaging that has already collected enough design awards to fill a dusty shelf, FV&S does not rely on what one might consider a traditional packaging development staff. "I'm the package designer," says Vultaggio. "We don't have a large marketing or design group here. That's what I do all day. I come up with ideas and fight to get them made. And it's a fight." Vultaggio recalls the creation of the Mississippi Mud beer bottle, packaged in a handled glass jug with a full-body shrink label designed to look like an old-time ceramic bottle. "Most of the guys in the glass business said we couldn't run a handle through a pasteurizer," says Vultaggio. "That was a big to-do, and we went through a lot of heartache." He eventually got his way, and the product has since become very successful in a 32-oz version for off-premise sales and a recently launched 16-oz version for on-premise sales. Vultaggio's background isn't in graphics or design. It's part talent, intuition, and a feel for what sells after years of running his beer distributorship in New York with his partner. "If there's one thing I have on my side, it's the fact that I've been into 10ꯠ grocery stores in my life. I've seen what sells, what motivates, what consumers want, what grocers want and what jumps out of the refrigerator." For source material, Vultaggio makes it a point to collect packages of all shapes, sizes and colors. Though the company works with an outside design firm, most of the ideas originate with Vultaggio. The outside design house "takes his creation and shapes it into what he envisions it to be," says John Balboni, executive vp of business development. "But he's the architect behind [the package design process]." Good looks & details, too Part of the secret behind the great-looking packages is attention to incredibly high-quality graphic reproduction. The hallmark of FV&S's labels is gravure printing in as many as nine colors. Many labels have a three-dimensional look. A good example is the just-re-leased Arizona brand diet tea drinks, which reached store shelves two months ago. The bottles burst with color, looking like freshly hand-painted ceramic containers. Each bottle features a colorful fruit vignette keyed to the flavor (raspberry, peach, and lemon) against a rich, deeply colored faux ceramic background. Subtle shading gives the entire bottle the illusion that the fruit vignettes are debossed into the seemingly ceramic surface. "It looks like an Italian vase," says Vultaggio proudly. "It is one of the best things we've done." Details are obsessed over. For example, pick up a four-pack of the new 16-oz Mississippi Mud bottle (shown on p. 22) and look at the faux distressed ceramic backgrounds on each of the bottles in the multipack. Each bottle in the multipack will have a slightly different background-a dark patch here, a scratch there, a discoloration-that varies from bottle to bottle. It requires stocking labels with several different backgrounds. That's a logistics headache for any plant manager, but necessary "to make it look like it's a hand-made bottle," says Balboni. "The level of detail that we get into, most packaging people wouldn't even think about doing." Innovating manufacturing This is definitely one company where marketing gets its way on the packaging line. "We bring a lot of innovation to [our] contract packers," says Balboni. "We work with them as far as supplying equipment and even support to get them to run a package." sometimes it's not easy, says Vultaggio. "Most suppliers-especially a few years ago-didn't want to hear from a small guy saying 'I want to be innovative.' It's harder for them because it requires them to take some chances and there's a risk, too." This whatever-it-takes packaging philosophy is markedly different from the common-and ostensibly sensible-approach of those companies who strive to balance the needs of marketing with those of manufacturing. "We need to do things that the Cokes and Pepsis don't do," says Vultaggio. "They're looking for something easy, something that works in their factories," without requiring an investment in new or exotic equipment. High costs, high rewards These investments are common for Ferolito, Vultaggio & Sons, which regularly faces costly capital machinery purchases when launching a new product and higher-than-normal contract packaging fees. And don't forget about the materials costs. "I would say our packaging materials run between 15 and 25 percent more expensive compared to a standard plastic or glass bottle," says Balboni. "Our labeling is very, very expensive. And we run anywhere from 25 percent to 200 percent more expensive on [ingredients]." A good example is the just-introduced Sport Can, which Vultaggio says is one of the most expensive packages FV&S has ever produced. Says Balboni: "We're paying substantially more [for the Sport Can compared to a standard container]. At the average Coke or Pepsi, the accountants would get ahold of this and would never run this product." Of course, premium product in premium packages sell for premium prices, too. And that's a cornerstone of the company's packaging strategy. "We want the guy or gal who says 'hey, a quarter more, it's worth it,'" says Vultaggio. "I look at it as an opportunity, because most beverage marketers are fighting on [price]. But there aren't that many people fighting for the higher-end consumer." Though the company isn't afraid to spend money when it feels it's warranted, it tries to avoid the spectacle of a traditional media-saturated product launch. "What we don't do is spend $55 million on TV advertising to launch a brand and then see what we've got," says Balboni. Instead the company will quietly conduct a market test, often right in New York via its own distribution network, to get a quick read on whether it's got a winner. Very little is spent advertising. Packaging powers growth Since it's a privately held company, FV&S has no reason to disclose revenues, market share or volume. But the company claims it has grown steadily, especially its Arizona brand. Much of the growth can be traced back to its intense focus on packaging. While other beverage marketers do occasionally adopt packaging changes pioneered by Ferolito, Vultaggio & Sons, the company isn't worried about another company imitating the company's packaging strategy. That's because very few companies of this size concentrate the packaging function at the highest levels of the organization. And fewer still are willing to risk huge packaging costs in a hyper-competitive beverage industry notorious for its low margins. "For most marketers, it's too much risk to go upstairs to the higher-ups and say, 'We want to do a revolutionary package and we've got to spend this amount of money to do it,'" says Vultaggio. "They'd say forget it. It just wouldn't fly, and that's why you don't see more of it."