Bachelor Thesis – Red Bull 2011
MENDEL UNIVERSITY
Business Economic Faculty
1
BACHELOR THESIS
RED BULL
STRATEGIC MARKET MANAGEMENT
Written by Margaux Baïs
Bachelor Thesis – Red Bull 2011
TABLE OF CONTENTS:
1. INTRODUCTION
2
2. OBJECTIVE AND METHODOLOGY
3. RESULTS
a. MARKET ANALYSIS
b. INTERNAL ANALYSIS
c. EXTERNAL ANALYSIS
d. COMPETITORS ANALYSIS
e. ANALYSIS OF CURRENT BRAND POSITIONING AND SEGMENTATION
STRATEGIES
f. A REVIEW OF BRAND AND COMMUNICATION STRATEGIES
g. DISTRIBUTION STRATEGY
4. MIX MARKETING
5. DISCUSSION
a. THINKING ABOUT STRATEGY
b. THINKING ABOUT THE FUTURE STRATEGY
6. CONCLUSION
7. REFERENCES
Bachelor Thesis – Red Bull 2011
1. INTRODUCTION
Red Bull GmbH, Salzburg produces the world‟s leading energy drink. Red Bull is
exclusively produced in Austria and exported globally to more than 160 countries. With 4
billion cans sold in 2009, it is the most consumed energy drink in the world.
Red Bull has a market ranging from 70 to 90 percent across one hundred nations and
has been copied by almost 100 competitors, among them Coca-Cola. No one has ever
succeeded in taking its market share away or have even come close to reach the targets met by
Red Bull. It‟s an empire of 2 billion Euros, which is based on a strategy of buzz - marketing to
attract consumers in exclusive events and supporting many famous athletes worldwide.
Red Bull GmbH was founded in 1984 by Dietrich Mateschitz. Mateschitz was a
frequent visitor to Asia and was intrigued by the Thai „tonic drink‟ Krating Daeng; popular
among cab drivers and other blue collar workers. The formula for the beverage was not
protected by any patent, so Mateschitz began to open his own business which aimed to raise
awareness and introduce the energy drinks globally. He fine-tuned the product for a western
palate, developed a unique marketing concept and started selling Red Bull Energy Drink on
the Austrian market in 1987. Red Bull got off the ground in no time flat, giving people wings
right from the start. In 1992, Red Bull touched down in its first foreign market, Hungary.
Today, Red Bull is energizing 160 countries around the globe.
Red Bull continued its global expansion into Germany in 1992, the UK in 1994 and
the all important United States market in 1997. It was marketed to Americans as a noncorporate alternative to Coke and Pepsi, and both packaging and pricing helped set it apart.
Red Bull is much more than a soft drink – it is an energy drink. In short it vitalizes
body and mind. The systematic marketing campaign practiced since the beginning has been
vital and indispensible in its long term success.
The Red Bull brand image is characterized by individuality, innovation, competence
and non-conformism. These brand values are all reflected in the brand communication,
characterized by self-confidence, a fresh and witty approach and unique identity, as well as
self-irony. The Red Bull theme: “Energy” versus it‟s positioning: “Vitalizes Body and Mind”.
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Bachelor Thesis – Red Bull 2011
Number of Cans Sold (Bn)
4,5
4
3,5
3
2,5
2
1,5
1
0,5
0
number of cans sold
1997 1998 2006 2007 2008 2009
The mutation of sales from 1997 to 1998 stems from Red Bulls introduction to the
U.S. market. 2007 sales were up 17% to 3bn euro due to an accelerated performance of the
product in Africa/ South America and Asia. Red Bull‟s popularity soared again in 2008
following sponsorship of extreme sports teams. 2008 sales rose with the introduction of Red
Bull cola to the U.S. and European markets. Sales have increased from 2009 to now as a
result of introduction of Red Bull shots to the functional drinks market.
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Bachelor Thesis – Red Bull 2011
2. OBJECTIVES AND METHODOLOGY
Red Bulls adopts a diversification strategy and its competitive advantage lies in the
Red Bull experience it offers. I chose Red Bull because it is a company facing a marketing
challenge; not a sales challenge. I decided to base my focus on how does a premium good
can help to stay leadership in really competed market. In order to enhance this relation, I
mostly analyzed the Red Bull strategy.
Red Bulls number one brand attribute is innovation and its challenge is to maintain
that innovation. Where copycat brands have pushed beyond copying the product and are now
copying marketing strategies, Red Bull needs to continue to differentiate itself through
innovation and by maintaining its brand attributes: creative/ self-confident/ non-conformist/
self-ironic/ and unpredictable.
Red Bull's current goal is to expand its presence further in the energy drinks market by
capturing market share from the mature soft drinks market which was first introduced by
industry giants like Coca Cola and PepsiCo.
In this thesis most of the datas are from the year‟s 2009, actually it is quiet impossible
to find the recent Red Bull‟s datas because multinational companies avoid to show up their
numbers if they are not listed on the stock market. In fact if the results are public, competitors
can have an idea of the firm‟s economic situation and thus big companies release the least
amount as possible. So competitors can not have any idea of the firm health.
After having introduced the Red Bull Company, I am going to consider the energy
drink market. While remaining on the Red Bull example, I will proceed to an internal,
external and a competitor analyze. Then I am going to study the current brand positioning and
segmentation, to continue with a marketing mix study. After a review of brand
communication and distributions strategies, I could finally expose a discussion about current
and future strategies.
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Bachelor Thesis – Red Bull 2011
3. RESULTS
MARKET ANALYSIS
The energy-drink sector is relatively new and it was Red Bull who became the first
mover and managed to define this market. Red Bull merits itself on creating a new market,
different from the traditional soft drinks market that was pioneered by global giants Coca-cola
and PepsiCo.
What contributed to its unprecedented success was the launch of a new product
through non-conventional practices. Red Bull‟s ideas were not focused on "classical
marketing", but more on intuition, which enabled Red Bull to develop a marketing plan that
was both complex and innovative.
Starting from the analysis of the external environment, Red Bull managed to exploit a
sub-sector of the carbonated soft drinks market. A gap existed in this soft drinks market for
an energy drink that would have the same energizing properties as Krating Daeng; the Thai
energy drink on which Red Bull modeled it‟s formula. Red Bull has not presented a product
innovation within the soft drinks market, but has fulfilled a function different from the usual
use of carbonated beverages.
One can therefore say that Mateschitz has succeeded in creating a new business.
Through technology and innovation he managed to meet a different function and create a
segmented group of customers with a particular lifestyle.
Having identified the market and thus the business, it was necessary to fully exploit
the natural talent of Mateschitz to market, publicize and sell the new product. The challenge
was to create a new focus for Red Bull that differed from solely relying on taste alone; an
attribute which was constantly highlighted to promote the soft drinks market.
In the beginning difficulties were plentiful, but they were soon overrun by the rapid
growth in sales. In fact, the market did not feel the need for an energy drink; Red Bull had the
ability to give birth to the need in potential customers.
Red Bull has therefore implemented a strategy of focusing on one niche market and
differentiating its offering from that of its competitors in the wider soft drinks market. This
has allowed Red Bull to acquire a tremendous competitive strength in spite of reduced
resources. Red Bull has managed over the years through unique branding innovation to make
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Bachelor Thesis – Red Bull 2011
the term energy drink synonymous with Red Bull. Even today the situation has not changed
and competitors, despite massive investment and marketing research, cannot scratch the
position of advantage gained over the years by Red Bull. In recent years all segments of the
soft-drink industry recorded a contraction in sales and this has led the giants to invade the
niche segment of energy drinks.
The worldwide consumption of energy drinks increased in 2008 by 2% to 3.9 billion
litres. In 2003 consumption amounted to 2 billion liters, almost doubling in five years. The
average growth over the last five years was 14% per year. The slower growth in 2008 was a
result of negative consumption in Asia, due to the economic crisis.
North America is the leading region with 37% of global volume in 2008, followed by
Asia-Pacific with 30% and Western Europe with 15%. Eastern Europe has realized the most
significant gains in volume significantly over the past years and today this area represents a
market share of over 6%. Asia Pacific was the only region to record a decline in 2008, with
the decline in consumption by 18%. Sales decreased by as much as 41% in Thailand, mainly
because of the economic crisis. The country's truck drivers, who are among the heaviest users
of energy drinks, suffered many layoffs.
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Bachelor Thesis – Red Bull 2011
8
Turning to an analysis of the consumption of energy drinks at a European level, the
above pie chart shows that countries who consume the most energy drinks are: the United
Kingdom with 26.7%, Germany with 16.7% and Spain with 13%, these three countries alone
make up 56% of the European market.
The biggest growth market was France; this is ironic given the French governments
ban on Red Bull until it was lifted in April 2008. Ireland holds the record with regard to per
capita consumption (7.7 gallons of Red Bull per person each year).
The average growth rate of consumption of energy drinks is estimated to be 8% for the next 5
years; consumption in 2012 is estimated to reach 700 million gallons in the European market
alone.
Bachelor Thesis – Red Bull 2011
INTERNAL ANALYSIS
Marketing Analysis:
The main product of Red Bull GmbH is Red Bull Energy Drink, a particular beverage
that is an innovative mix of different and strong ingredients including caffeine, taurine,
glucose, sucrose, B-group vitamin and glucronolactone.
Red Bull is a product full of benefits; indeed it increases physical and mental
performance, stimulates metabolism and improves concentration, reaction speed, vigilance
and emotional status. These benefits are possible because Red Bull restores taurina, a
necessary amino acid that is usually eliminated by the body in moments of heightened stress.
Caffeine permits to better concentration and reaction speed. Metabolism is stimulated by Bgroup vitamin.
Red Bull‟s main consumers are busy professional, athletes, drivers, stressed managers,
students and “party enthusiasts” (Red Bull mixed with vodka, in fact, is one of the most
popular drinks on the global club scene).
In 2003, by changing only two ingredients, Red Bull created its second product: Red
Bull Sugarfree, an energy drink that contains acesulfame K and aspartame, instead of glucose
and sucrose. Red Bull Sugarfree allowed the company to reach a new consumer base: women
and those health conscience customers who are concerned about their sugar intake.
Recognizing that some consumers do not enjoy the taste of Red Bull but nonetheless consume
it for its performance benefits, the Company focused the same amount of ingredients into a
smaller quantity of beverage. Changing only the packaging, the concentrated, non-carbonated
Red Bull Energy Shot was introduced to the global market in 2009 in both normal and sugar
free versions. These shots are innovative in design and are handy for those who are on the go
and require a quick boost of energy in a format that can conveniently fit in your bag, the same
benefits with no hassle.
Red Bull Cola, instead, was a totally innovative product. When Red Bull was asked
“why this product?” the company answered “why not?” Indeed with this product the company
was able to enter into a very competitive market in the wider soft drinks market, against the
global leader Coca-Cola. Red Bull Cola differentiates itself from Coca-Cola by listing all the
ingredients on the label and their competitive advantage is that all their ingredients are 100%
natural.
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Bachelor Thesis – Red Bull 2011
Value Chain
Using Porters value chain, we can analyze the activities and relationships that give
Red Bull its competitive advantage. Porter's value chain is composed of two types of
activities: primary, which include inbound logistics and outbound logistics, operation,
marketing and sales and services and secondary activities which include human resources
management, firm infrastructure, procurement and technological development.
The inbound logistics is not a source of competitive advantage for the Red Bull. The
logistics industry output distributes products to present at national subsidiaries involved in the
distribution to individual states. Operations are carried out in establishments which are all
located in Austria.
The first activity that is a source of competitive advantage for Red Bull is Sales and
Marketing (“marketing operation”, which is responsible for managing the marketing-mix
price, promotion, distribution and product-)
EXTERNAL ANALYSIS
Macro Environment
Political and Legal Aspects
Red Bull was marketed as a new product and through innovation succeeded in creating
a new market; the functional energy drinks market. Initially healthcare organizations labeled
Red Bull as a new drug because it contained controversial ingredients like taurine. To
disprove these allegations, the ISME, in 1998 proved that Red Bull does not create any kind
of addiction. Despite this, the energy drink needs to be approved by each country before
entering its market and this approval process is often long and expensive. Only in 2008 was
the ban on Red Bull lifted in the key European markets of France and Denmark. Red Bull‟s
high levels of caffeine and taurine content violated food health and safety legislation there.
Economical Aspect
Red Bull is not very exposed to economic cycles as it is a special drink that targets a
niche market. Included in this niche market are sports professionals, those who lead busy and
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Bachelor Thesis – Red Bull 2011
active lifestyles; essentially all those who require an energy boost. There are very few direct
substitutes within the functional drinks market, and thanks to intensive advertising, Red Bull
have positioned themselves as the world leader.
Socio-Cultural Aspect
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When Red Bull was first introduced to the market in 1987, society was reluctant to try
new things. Nowadays however, thanks to a shift in the societal mindset, lifestyles have
changed, and people are much more open to experimenting new and intriguing products on
the market; particularly where they are marketed as fashionable and an essential in any Gen
Y‟s hand. Research conducted by the ISME confidently proves this point. The resulting
image for Red Bull is very fashionable and their market share has extended not only to bars
but also nightclubs, where it has become a very popular vodka mixer.
Technological Aspect
Red Bull is produced entirely in Austria and from there is exported to all markets.
There are two fundamental reasons for this: to ensure integrity of the brand and its flavor and
to ensure global continuity is maintained.
Environment
The can is made of recycled aluminum and is therefore environmentally
friendly. Since ethics and interest in environmental issues are increasingly important topics
(and the European standards in this are always higher) this gives the company an additional
competitive advantage over its competitors.
Bachelor Thesis – Red Bull 2011
COMPETITOR ANALYSIS
The market demand is being driven by the growing consumer awareness of the need
for more active and healthier lifestyles. Red Bull holds a 70% share of the world market for
energy drinks, or functional beverages. A category it was largely responsible for building.
However to compare its performance against competitors we must analyse the markets on a
local level.
Direct Competitors:
North America is the leading region within the energy drinks market with a 37% share
of global volume. The energy drinks market in the US alone became a $5.4 billion dollar
market in 2007, and Goldman Sachs predict that this will exceed $9 billion by 2011. The
market share in the US is as follows:
The U.S.A.
1,4
1,5
0,7
0,5
0,5
1
% Dollar Sales
0,44 0,4
0,4
2
Red Bull
Monster
4
Rockstar
8
40
AMP
Full Throttle
12,3
Doubleshot
NOS
23
No Fear
Private Label
Red Bulls principle competitor in the United States market and indeed globally is
Monster energy. Monster is distributed in the United States by the Coca-Cola company and
maintained a 23% share in 2008, this was down from 27.3 % in 2007. Monster lost some of
its share to Red Bull when it introduced Red Bull Cola to the market in mid 2008. Monster is
however, the number one selling energy drink by volume in the United States, Red Bull
maintains the number one selling brand by units. This is a direct result of Monsters larger can;
retailing at 500ml versus Red Bulls famous 250ml can. Monster adopts a more low cost
strategy and value proposition, advertising their product as “twice the size of Red Bull for the
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Bachelor Thesis – Red Bull 2011
same price”. Monster carries a three product folio; original, lo-carb and ripper. Monster has
acted as a trend responder and attempted to follow the marketing innovation set by Red Bull
by sponsoring the tech 3 Yamaha team for the 2009/2010 season. It has also expanded into the
UK/Ireland/Spain and Australia.
Rockstar is an energy drink created in 2001 and maintained 12,3% of the US market in
2008. It differentiates itself from the market leader Red Bull by offering twelve different
flavours in over 20 countries. Like Monster, Rockstar uses a 16oz against Red Bulls 8oz and
it markets itself as being better value. Rockstar switched distributors from Coca Cola to
PepsiCo in Spring 2009 and benefits from the established distribution channel and shelf space
that Pepsi offers. Like Monster, Rockstar also sponsors a range of events including the
Mayhem festival; a U.S. touring metal and rock festival.
Australia
Asia Pacific follows North America as the 2nd leading region with a 30% share of the
global market.
Red Bulls main competitor in the critical Australian and New Zealand market is
energy drink V, manufactured by Frucor. Together V and Red Bull account for 94% of sales.
V is the market leader with 53% market share in Australia ahead of Red Bulls 41%. However,
Neilson who compile these results do not capture on-premise sales in this category. Red Bull
sell huge volumes on-premise and overall sell more cans in Australia .
V is available in 5 varieties and has recently released 500 ml cans called “ V double hit”.
Mother is an energy drink marketed to Australians and New Zealanders and is a new
entrant to the Australasian market since 2008 by Coca-Cola. Coca-Cola undertook extensive
market research to rejuvenate the competition dominated by Red Bull and V. Coca-Cola
altered the formula of its original attempt and doubled its can size to 500ml, without affecting
the cost. In 2009, Red Bull in order to compete with the new emerging trend of big boxes,
published XXL Red Bull, a 473ml can.
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Bachelor Thesis – Red Bull 2011
Europe
The UK and Germany currently hold the largest markets for energy drinks in Europe,
with combined sales in 2009 of $4.6 billion. Red Bull is the undisputed market leader in the
UK with a market share of 60%, other players include Coca-Cola‟s Burn which was a new
entrant in 2008, it has however made little or no impact on Red Bull‟s market share. Many
UK super markets have launched their own brands of energy drinks at lower prices. These are
mostly manufactured by US beverage maker Cott. Tesco sell KX (formerly known as kick), is
sold in 250ml cans and 1L bottles, Sainsburys sell blue bolt, Asda sell Blue Charge.
In Ireland the line is still blurred between functional energy drinks and sports nutrition
drinks. For this reason, Lucozade remains the number one energy brand in the Irish market.
C&C Ireland introduced Club Energise in 2005 and BPB was launched by Coca-Cola in 2003.
In 2006 Club energise had 18.6% of the market, taking 14% from Lucozade. Powerade took
16.6% in the same year.
As of June 2009 there were 250 energy shot brands in the USA with 5 Hour power
owning 78% of the market share, its nearest rival is 6 hour power, manufactured by NVE
Pharmaceuticals with 7%. These are Red Bulls main competitors in its new energy shots
market.
Indirect Competitors:
In 2007 energy drink powders and effervescent tablets were introduced, in the form of
a tablet. These can offer a more portable option to cans and shots.
Red Bull‟s main
competitor here is Berocca.
Below, Red Bull‟s main global competitors can be categorised into three main global
competitors: Coca-Cola Company, PepsiCo and Independent manufacturers.
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Bachelor Thesis – Red Bull 2011
ANALYSIS OF CURRENT BRAND POSITIONING AND SEGMENTATION
STRATEGIES
Red Bull positions itself as the innovator. Creating this perception amongst customers
is easiest shown when it is based on product innovation. Perceived innovation can also be
driven by indicators of leadership and energy.
Strategic Position of Red Bull:
Product Category: Red bull created a functional energy drink – to vitalise the mind. It
targeted an edgier, more non-conformist type of person.
Maintaining Relevance: Red Bull maintains relevance by continuing to be a trend
driver and at times responder. Red Bull propelled the trends which defined the functional
drinks category. It also recognised the energy shots trend and sustained success in this
dynamic market.
Functional benefits: Red Bull is unique in the soft drinks industry as a result of the
attributes of its product, the presence of Taurine vitilises the body and mind.
Organisational Intangibles: Red bull loves to make product claims, its core slogans
include: “Gives you wiings” and “vitilizes body and mind.”
Red Bulls segmentation focuses on its brand loyalty. Red Bull rewards its loyal
customer by living up to expectations consistently, providing an ongoing relationship and
offering extras that surprise and delight.
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Bachelor Thesis – Red Bull 2011
4. MARKETING MIX
Product :
Red Bull is a unique product. It is not a soft drink, it is an energy drink. Drinking Red
Bull, the consumer can improve his/her performance, vigilance, and emotional status. The
company invests some 30% of its year on year revenue to establish this strong concept about
the product.
The packaging is an essential aspect. It was a difficult and well-thought choice. The
can is very different: it is higher and smaller (250ml) than its competitors. Red Bull pioneered
the design which has become known as the sleek can. Marc Gobè, (president and CEO of the
Desgrippes Gobé Group) calls it slim, sexy and powerful and he says that its “diminutive size
only bolsters Red Bull's reputation as a concentrated experience.”
Another important
attraction of this packaging is that Red Bull looks like a product from a global economy. It
doesn't look like a traditional American soft drink; it's not in a 12-ounce can, it's not sold in a
bottle, and it doesn't have script lettering like Pepsi or Coke. It looks European. It was the first
can with this form. It is easy to identify the product thanks to its innovative packaging.
The most remarkable thing about Red Bull's can is that it is the company's only
offering. Until 2003, Red Bull was one size, one color, one sticky, sweet taste (Mateschitz
added carbon dioxide to give it the western taste).
In addition the company chose the logo accurately. Indeed, Dietrich Mateschitz, the
mind behind Red Bull, refused 50 projects before choosing the right one. The logo; two thicknecked crimson bulls in opposing charge against a yellow sun, was the symbol of kinetic
virility and pugnacity. The leit motiv “Red Bull gives you wiings” is really strong.
There are now different versions of the product: original, shots and light. The
company reached a new target as a result of this diversification of its product. Indeed, with the
light product, for example, the company conquers the consumer base that cares for their
figure.
Red Bull Cola is an important new entry. This new and innovative product cleverly
contrasts the colossal Cola Coca. Red Bull Cola is manufactured with all natural ingredients.
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Bachelor Thesis – Red Bull 2011
Price :
The price is the only element of the marketing mix that gives profit. Red Bull uses the
high price to differentiate the product from others direct and indirect competitors. Indeed, the
price of a can of Red Bull is higher. The high price stresses the strategic position and
differentiation in the market and the target of the product.
In addition, the high price underlines the concept of the product: Red Bull is not a
simple soft drink, it‟s an energy drink, a life-style, it improves your performance thanks to its
unique ingredients (taurine) and quite simply “it gives you wiings!”
Costumers buy Red Bull because they recognize the quality of it and the properties of
Red Bull. As a consequence, the demand is not elastic to the price.
Promotion:
Red Bull has used three different systems of promotion:
The first has been used since the beginning. The company utilized non-conventional
marketing. It used unusual information channels, such as promoting extreme sports events.
The firm couldn‟t support costs to have personalized stadiums so it sponsored the athletes of
extreme and adventure-related sports, such as motor sports, mountain biking, snowboarding
and dance music.
With this system, the company promoted the brand directly to Generation Y, the socalled “millennials”: people born after 1981 who were believed to be cynical of usual
marketing strategies. The company conquered these consumers also recruiting 'student brand
managers' who would be hired to promote Red Bull on university campuses and educate this
core market on the benefits of the product. Red Bull encouraged throwing parties at which
Red Bull would be distributed. For Red Bull's target audience being authentic means being a
little irreverent, a bit antiestablishment, and every bit different from your parents. In addition,
cans of Red Bull were given out free to people on the street who had been identified as being
in need of energy. The energy drink was given to club DJs and empty cans would be left on
tables in strategic spots like trendy bars, clubs and pubs. The brand managers would report
back to Red Bull, giving the company a low cost form of market research data.
Red Bull has created a successful brand built by word of mouth; person-to-person
marketing. In Europe, for example, collegiate buzz junkies have been successfully addicting
friends and classmates for years thanks to a foolproof branding plan: Red Bull provides
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Bachelor Thesis – Red Bull 2011
student reps with free cases of its drink and then encourages the students to throw a party. Red
Bull's target consumers began to adopt nicknames for the product such as 'liquid cocaine' or
'speed in a can'.
The use of this kind of marketing strategy is also called 'viral' marketing. Red Bull
does not use the traditional informative or persuasive communications; instead it uses the
youth 'underground' to spread the popularity of the drink. As Gobé, author of “Emotional
Branding: The New Paradigm for Connecting Brands to People” (Allworth Press, 2001) said:
“The beauty of Red Bull is that it's the antibrand, Red Bull doesn't have any of the
commercial trappings of a traditional, off-the-shelf product. It's underground, even when it's
above ground, and this appeals to the young people who drink it."
Secondly, Red Bull had cash and possibilities to create personal stands and “Red Bull
events” such as motorcycle races, surf competitions and snowboard challenges. In addition,
Red Bull used pick-up trucks as mobile displays, painted blue and silver with a giant can of
the drink mounted on top of the vehicle. Recently, Red Bull has organized events for
“normal” people, including “Red Bull Flugtag” and “Red Bull DJ contest”. Red Bull hired
équipes to drive vehicles that were painted blue and silver with logos on the side and a big
Red Bull can mounted on the back. The cars contained fridges stocked with cans of Red Bull,
which the teams handed out for free to “those in need of energy,” at truck stops, construction
sites, office buildings and gyms.
The third step is the use of common advertising channels like television and radio.
Red Bull still maintains its innovative and anti-conformist image however. Indeed, its spots
are original and more amazing than educative.
Red Bull never uses tools such as: banner ads, billboards, taxicab holograms, blimps,
Super Bowl spots. Paper advertisements, for example, don‟t reflect the brand image. They are
seen as too one-dimensional to capture the true essence of the Red Bull brand.
Red Bull used mass-media only to bolster its image. The main strategy was its “buzz”
marketing.
Red Bull is an example of a strong marketing promotion strategy. Buzz marketing has
a lot of advantages. The main advantage is that the company can find new functions for
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Bachelor Thesis – Red Bull 2011
product use. The company started to promote extreme sports, but it also obtained further
success because Red Bull is a perfect alcohol mixer.
Red Bull acquired two Formula 1 teams. This proved to be highly effective in
improving the image of the brand and it increased its target segment involving adult people
who like extreme sports. It‟s an important step as Red Bull manages these teams. The
company promotes and sponsors new pilots. Red Bull promotes and is active within this
extreme sector.
Placement:
Red Bull used sales reps to promote and sell its product. They were responsible for
their units and had to answer for their achievements within the company.
Red Bull chose a selective strategy. The product was sold only in selected bars and
trendy nightclubs, it was not distributed everywhere. They used DJs and popular figureheads
to promote the brand. In addition, they put empty cans in popular places.
Red Bull then started to sell the product using retailers, again using a selective
strategy. It maintained its exclusivity through its high price.
Position:
The emblematic phrase used to understand the concept of Red Bull is: “the Porsche of
soft drinks”. The company insisted on spreading this unique concept of its product. Red Bull
is not simply a soft drink; it‟s a powerful tool and a lifestyle choice which is absolutely
unique.
The company used all elements of the marketing mix to achieve its objective:
-
Price: Red Bull is more expensive than its competitors. The consumer pays more for
quality and performance;
-
Promotion: uses non-conventional marketing, called viral marketing or “buzz”
marketing;
-
Product: the packaging is innovative and easily identifiable over its competitors. The
logo stresses the power and the properties of the product;
-
Place: only sold in selective places.
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Bachelor Thesis – Red Bull 2011
INNOVATION
Position
Red Bull
20
FUNCTION
TASTE
Position
Coca-Cola
TRADITION
This map shows the concept of Red Bull in contrast with the leading soft drink brand
Coca-Cola. Red Bull is perceived as an innovative brand and as a beverage useful to improve
performance and increase emotional status.
With promotion, the firm doesn‟t use traditional advertising but it relies on a strategy
of word-of-mouth or “buzz” marketing. Red Bull concentrated on getting its word out through
different stealth marketing techniques, playing on associations with energy, danger and youth
culture, cultivating its mystique. The rumour that taurine is made from bull's testicles, for
example, added to its notoriety.
Generation Y (Aged from 18 to 29 years old) became the main target segment for the
company. These consumers perceived it as an anti-brand. While it was making its mark as an
energy drink, it was largely sold in clubs and bars as an alcohol mixer.
As the leader of the company (Mateschitz) said:
“We don’t bring the product to the people; we bring people to the product. We make it
available and those who love our style come to us. Red Bull isn’t a drink; it’s a way of life.”
The company invested a lot in sponsoring events and organizing events including:
BMX biking, kite-boarding, snowboarding, free skiing, paragliding and skydiving and also
Bachelor Thesis – Red Bull 2011
youth culture events like DJ competitions. More recently Red Bull invested in F1 and
motorcycle racing to broaden its reach.
As a consequence, the drink became associated with dangerous, adrenaline-fuelled
activities, such as the Red Bull King of the Air.
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For example, Red Bull organized events including:
-
Kite boarding event in Maui;
-
Big Wave Africa Surf Competition on the Cape peninsula;
-
The infamous Red Bull Flugtag (where amateur pilots build their own flying machines
and leap off a parapet into water);
-
Red Bull Music Academy (RMBA) (where aspiring musicians and DJs attend a two
week workshop and studio sessions, and listen to guest lecturers).
With regard to secondary activities, and in particular procurement, we see how this is
not a competitive advantage for Red Bull as it operates in the food and beverage industry; a
sector characterized by repetition of operation. The development activities are technological
development and Red Bull Austria is responsible for researching and developing the
production process. Regarding the human resources management, the company gives the
opportunity for anyone interested in working with the company to send their CV through the
website www.redbulljobs.com.
BCG Matrix
Initially Red Bull was placed in the "question mark"
category. In this place the Strategic Business Unit presents
new growth markets and requires substantial investments
that absorb cash flow. Now Red Bull is placed in the "star"
category thanks to its development policies implemented
over the years, it has managed to capture a large market
share in a segment which presents exponential growth rates.
Bachelor Thesis – Red Bull 2011
Marketing Strategy:
Red Bull has succeeded within a few years to reach very high market shares in the
functional energy drinks market (47% of U.S. market and 80% in other markets) due to its
innovative product and a very aggressive marketing policy. The significant market position
gained by Red Bull in the energy drinks market has allowed it to achieve high profitability
and high capacity to generate substantial cash flows.
When Red Bull entered the market, its product was a novelty in the beverage industry.
This enabled it, to expand rapidly and reach high levels of sales, with an effective marketing
strategy. Now that the energy drinks market is a mature one and affected by the presence of
strong competitors such as Coca Cola, who have a greater capacity to product innovation and
greater ability to lower costs of production and distribution, Red Bull must look to changing
its marketing strategy. In a mature market it is necessary to do more to diversify supply. Red
Bull needs to change from a growing strategy to product development. Currently its business
strategy has the typical characteristics of a penetration strategy, based upon the initial novelty
of the product and a high price niche.
Red Bull has until recently focused solely on the characteristics of the product and its
ability to increase physical performance of its consumers. It tried to retain customers rather
than vary the supply by diversifying the taste or the image of the product.
Red Bull has not substantially diversified its product line and has never expanded its
current product line. In a mature market it is necessary to offer consumers more products in
the same industry that can meet the different needs of customers. Recognizing this need, Red
Bull has begun to diversify its product line with the expansion of its current product to include
Red Bull Sugarfree and Red Bull Shots and in 2008 it created a new innovative unique
product in Red Bull Cola.
22
Bachelor Thesis – Red Bull 2011
SWOT Analysis
23
Strengths

-Effective communication

-Loyal customers

-Market share leadership

-Strong brand equity

-Reputation management
Weaknesses

-Higher price than its competitors

-Red Bull is only manufactured in
Austria
Opportunities
-Emerging markets and expansion
abroad
-New products e.g. Red Bull
vodka and Red Bull Iced Tea
Threats

-Economic slowdown

-European Laws against

-Lower cost competitors imports

Negative brand aspect & health
concerns (when combined with
alcohol)
Health Concerns
In May 2009, Germany banned Red Bull‟s new entrant to the market; Red Bull Cola.
It had found traces of naturally occurring cocaine in the drink.
After conducting a series of tests 4mg of cocaine were found to be naturally occurring
in Red Bull Cola. This amount is too little to have dangerous consequences on the health of
consumers, but is enough for Germany to place a ban on the product. Red Bull has responded
to these accusations, saying that it was not pure cocaine that was found in the drink, but the
coca leaf extract, which is used as a natural flavor, contains alcoide which was removed
chemically. Despite this, Germany still classifies Red Bull Cola as a narcotic drink product.
Bachelor Thesis – Red Bull 2011
A REVIEW OF BRAND AND COMMUNICATION STRATEGIES
Red Bull‟s branding is revolutionary. It has at times been referred to as an „anti-brand‟
strategy. In the beginning the company faced problems in the UK in particular where
Lucozade which was consumed by many young Britons, to recover from colds or flu, Red
Bull had to promote its brand differently.
The firm avoided usual methods of marketing relying on „buzz marketing‟ or word of
mouth. A brand image was created and cultivated which associated the drink with youth
culture and extreme and adventure-related sports, such as motor sports, mountain biking,
snowboarding and dance music. This viral marketing approach has been discussed above.
Red Bull‟s image gave the firm an edgier, even dangerous look, which appealed to its
gen y target. Younger consumers are drawn towards products that offer legal highs.
Red Bull‟s marketing focused heavily on getting product samples into the right hands.
Slogans including “Red Bull gives you wiings” and animated tv ads aimed at mature markets
were developed. What counts is what the consumer envisions about Red Bull when he holds a
can in his hand. Red Bull is not just an energy drink, it is a lifestyle. It is for this reason that
the company spends an astonishing 30% of its annual year on year revenue on its marketing.
This is in stark contrast to the 9% spent by global soft drinks giants Coca Cola.
Mateschitz had an uncanny instinct for successful product innovations, this marketing strategy
meant that this innovation was often copied but never equalled.
Red Bulls marketing strategy has been described as the three pillars: sampling,
advertising and sponsoring.
The brand awareness source for Red Bull brand equity notes that the key elements of
brand awareness: recognition and recall. If buy decisions are made at the point of purchase,
then brand name, logo, packaging etc are important factors. If the buy decision is made before
arriving at the point of purchase then brand recall is important. Red bull felt it productive to
spend time getting the logo, name and packaging perfect.
Central to Red bulls marketing is its Wiings team, as experienced during our
presentation. The team are professionally trained to educate consumers on the unique proven
benefits of Red Bull, this strategy highlights a core differentiation policy and high a value
proposition.
24
Bachelor Thesis – Red Bull 2011
Red Bull takes advantage of the sources of brand equity:
Brand awareness: Through its wiings team and global sponsorship deals
Perceived quality: Scientifically proven benefits of its product, yet to be equalled
Brand associations: “Red Bull gives you wings”, “vitalizes body and mind
Brand Loyalty: A major source of its success has been through word of mouth.
DISTRIBUTION STRATEGY
Red Bull’s Sales & Distribution Tactics:
Red Bull chose its distribution strategy carefully. The company has created a high
position and a perception of exclusivity of its product. The main idea was that Red Bull is
different to regular soft drinks. As a result, Red Bull has a decentralized sales department that
is responsible for marketing, sales and distribution in their own zone.
At the beginning people were reluctant to sell Red Bull; a drink that tastes like a
medicine! However, after three years, the product started to gain success. Sales reps for the
company contacted small distributors to distribute the product by a dedicated sales force.
They set up their own warehouse, bought vans, painted them with the company logo, and
hired their own deliverymen to pass out the product.
The firm had a selective sales strategy. They chose five key strategic accounts in their
area like cool clubs and bars. Then, they established an individual approach with DJs, bar
tenders and trend people. They gave them Red Bull to promote the brand and to improve the
brand visibility. Operating with these individual accounts, Red Bull obtained the advantage of
being fast. Other strategic places they chose were shops near universities and gyms.
The sales reps refused to sell the product everywhere and refused offers from other
distributors.
An innovative figure was used by the company: the student brand managers. They had
to promote the product into universities and refer information about the trends to the
company. With this system the firm could make market research, while boosting the products
notoriety.
25
Bachelor Thesis – Red Bull 2011
The company decided to also use large distribution measures and as a result Red Bull
was sold by more retailers than at the beginning. Red Bull however maintains its exclusivity
through its premium price and product placement.
Red Bull entered in the foreign markets using the local distributors to corner the
market, and then taking back the control. In USA, for example, Red Bull has established eight
own sales units. In each division, managers are responsible for how much they sell. They have
to find the strategic and trend places to sell the product and they have to obtain a minimum
target and specific objectives.
In addition, like Gatorade in 80‟s and 90‟s: it started to sell chilled Red Bull in places
where there was a lot of people that needed caffeine (e.g. athletes). As a result, Red Bull
distributed its own fridges to retailers to promote its prestige and visibility. Indeed, a research
from AC Nielsen stressed that 75% of Red Bull consumers tend to drink the product
immediately after they buy it.
Red Bull has used a short channel and so, it controls the distribution strategy and it can
use this strategy to branding its product.
75%
IMMEDIATE
USE
25%
POSTPONED
USE
45%
RETAIL
RED
BULL
55%
Prompt use
In 2003, 64% of volume was created by consumption in bars, clubs and petrol stationsaccounting for 79% of the value due to the price premium-while retail outlets made up the rest
36% of volume. Red Bull was facing considerable competition in the retail space, both from
beverage heavyweights like Coca-Cola and Pepsi, and from private labels. For example, in the
UK, Asda (part of Wal-Mart) launched its own energy drink branded Blue Charge.
The alliance with Cadbury Schweppes in Australia in 2003 is an example of the
company experimenting with the distribution mix. This kind of distribution contributed to a
26
Bachelor Thesis – Red Bull 2011
40% increase in sales between the summer of 2003 and 2004 across its existing core channels
of grocery, licensed premises and convenience stores. The managing director of Red Bull
Australia's, Stuart MacLean, said the mission of the partnership was to “allow more customers
to have access to Red Bull."
In 2009 Red Bull Australia severed ties with Schweppes leaving Red Bull with the
difficult task of organising distribution, a challenge which will require significant investment.
Schweppes, meanwhile, will lose one of their best selling products and it leaves them without
an energy drink product to market in Australia. It was suggested that as Red Bull seeks to
bring its Cola product to the Australian market, it was the right time to depart from
Schweppes, as they distribute Pepsi in Australia.
In addition, Red Bull considered using vending machines both to improve sales and to
reinforce its brands. Indeed, Coca-Cola and Pepsi and others soft drink manufacturers had
expanded sales and enhanced brand awareness using vending machines.
27
Bachelor Thesis – Red Bull 2011
5. DISCUSSION
Thinking about strategy
Red Bull is a company for profit and its main objective is to continually win new
market share. The energy drinks market has stabilized since 2006, but Red Bull continues to
state the importance of the brand among millions of consumers. This is thanks to its
expenditure of $600 million (approximately 30% of revenue) to ensure that the brand is
imposed on the market. Red Bull is automatically considered as the founder of the energy
drinks market and as a result of its first mover advantage can sell 700 million cans in 2006 in
the United States alone.
In terms of a growth strategy since the stabilization of the energy drinks market in
2006, Red Bull chose the Market Penetration option. This gave it the chance to double its
market share without having to invest heavily in product innovation. Nancy F Koehn, an
associate professor of business studies at the Harvard School of Business stated that:
"As a private company with a hands-off founder, Red Bull does not feel financial
pressure from investors and board members, the company can take its time with the brand,
and it should."
Red Bull is establishing itself as a very powerful mover in a relatively new and
evolving category. To do this, they are trying to, according to Koehn “get their knitting
exactly right before they start weaving."
Red Bull‟s strategic competitive advantage lies in the fact that it was the founder of
the energy drinks market and has a young target audience that can count not only on the huge
expenditure for mass marketing, but also on a widespread buzz that will enable revenue and
market share to grow even higher.
While being aware that it can penetrate certain markets, Red Bull has to take into
consideration certain adverse political and socio-cultural barriers. France had a ban on Red
Bull in place until April 2008, as the caffeine levels contravened state legislation, to keep its
consumer base within this market Red Bull needed to focus on resilient guerrilla marketing
and promotion.
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Bachelor Thesis – Red Bull 2011
Thinking about the future strategy
Red Bull has a lot of challenges for the future. It has for example to maintain its
market share, it has big competitors, and it has legal challenges and more. As regard the
marketing mix elements there will be big changes and big opportunities but also many
obstacles.
In June 2009, Red Bull was working on the launch strategy for its Energy Shot brand
in the UK following its successful US debut the month before. After the launch of the Red
Bull Cola, last year, this new product is the latest in a series of brand extensions by the
company. This item could herald a new era of innovation in the sector of soft-drinks.
This year the company plans to spend more than £2m on marketing the new Red Bull
shot in the UK. It has already rolled out a TV campaign and sampling program. The target
comprises consumers from 18 to 35 years old. Red Bull will have to move quickly if it is to
prevent Quick Energy's lead becoming unassailable.
This is a competitive challenge because there are big and aggressive competitors.
Indeed, a spokeswoman for the British Soft Drinks Association said: “The UK food and drink
market is active and fluid so there is always room for new products if they can appeal to
consumers, but only the most successful products will survive.”
The advantage of the 'shots' category is that these products are seen as a newsworthy
alternative to larger-format energy drinks because they provide energy loads in small doses.
Shots are also considered healthier inasmuch they can avoid the use of sugar, although Red
Bull's Energy Shot in the US contains sucrose, glucose and sugar substitutes.
Another competitor is Pepsi who have a citrus-flavoured energy shot brand in the US
called Amp. However, there are no immediate plans for Pepsi to launch the product in the UK.
Coca-Cola, instead, launched its Relentless energy drink in 2006 in the UK. It posted sales of
£40m in the 52 weeks to 17 January 2009.
The choice of Red Bull to bring its Shots to the UK is an evident indication of the
potential growth within a nascent area of soft-drink innovation. The market of sports and
energy drinks in UK grew 15% in 2008. The forecasts suggest that strong growth is likely to
continue.
29
Bachelor Thesis – Red Bull 2011
The soft-drinks market is a highly competitive market. Indeed, by 2004, the worldwide
energy drinks market was worth an estimated £1.6 billion. Red Bull had reached a market
leading position, with a market share of 70%.
The company is perceived as a non-conventional firm and so it‟s important for it to
spread its concept through the use of traditional channels. It has to be careful when using a
traditional channel to continue to maintain its innovative image.
As discussed, Red Bull promotes a lot of events and for the future it will continue to
sponsor a lot of challenges and races.
Red Bull has a lot of challenges for the future. The drink was banned in France and
Denmark, is considered a medicine in Norway and it‟s sold only in Chemists in Japan. With
regards its on-premise sales, Red Bull has to tackle the ever increasing problem of passing
off.
The company will maintain the high concept of the product and will not change the
target. It will continue to conquer new markets and always present a high quality
product…“the Porsche of soft drinks”!
30
Bachelor Thesis – Red Bull 2011
6. CONCLUSION
Through this thesis, we tried to understand how does a premium good can help
to stay leadership in really competed market. To make it, we analyzed strategically Red Bull‟s
position as leader in the niche market it created, it is clear that the company faces many
challenges from a marketing perspective. As the functional energy drinks market becomes
saturated, Red Bull will need to do more to further differentiate itself from its competitors
who are fast gaining market share, particularly in the Australian and U.S. markets.
Red Bull needs to build on the brand it has already created; which in itself acts as its
competitive advantage and focus its resources on maintaining brand loyalty, through the
various measures as mentioned above.
Product diversification has been successful for Red Bull thus far and in order to
remain competitive in the now saturated energy drinks market, Red Bull needs to look further
into diversifying its product range.
A more aggressive expansion into the once leading Asian market will allow Red Bull
assume a larger share of the global market through a local distributor may be another success
story on Red Bull‟s already flawless resume.
So Red choose the diversification to maintain his leadership in the energy market, but
Now that the energy drinks market is a mature one and affected by the presence of strong
competitors such as Coca Cola, who have a greater capacity to product innovation and greater
ability to lower costs of production and distribution, Red Bull must look to changing its
marketing strategy to maintain and win some market share.
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Bachelor Thesis – Red Bull 2011
7. REFERENCES
http://outside.away.com/outside/news/200204/200204red_bull_1.adp
http://www.earthtimes.org/articles/show/254168,red-bulls-growth-rate-halved-in-2008.html
32
http://www.marketingmagazine.co.uk/news/916633/Red-Bull-X-Fighters-partner-TV-channel-Dave/
http://www.marketingmagazine.co.uk/News/918277/
http://www.redbull.com/cs/Satellite/en_INT/Red-Bull.com/001242745950125
http://findarticles.com/p/articles/mi_m0BDW/is_22_42/ai_75286777/
http://experiencethemessage.typepad.com/blog/files/Speed_In_a_Can.pdf
http://www.beverfood.com/v2/news+article.storyid+1976.htm
http://www.beveragedaily.com/Markets/Energy-drinks-market-will-grow-says-report
http://tg24.sky.it/tg24/cronaca/2009/08/13/cnr_riischio_energy_drink.html
http://www.zeusnews.com/index.php3?ar=stampa&cod=10424
http://www.redbull.com/
www.australianfoodnews.com
www.glaxosmithkline.com
www.energyfiend.com
www.bized.co.uk