Red Bull Energy Beans
Red Bull Energy Beans: A Marketing Proposal
Red Bull GmbH is an exceptionally successful international brand. The company
founded by a Thai investor and brought to the world market by an Austrian
entrepreneur has defied all expectations. In 2007, sales of Red Bull energy drink
exceeded 3.5 billion units. For a company founded only twenty years ago, this is a
remarkable achievement.
Red Bull GmbH entered the Australian market in 1999. With the tenth anniversary of
that launch approaching, it is important that the company consolidate its position here
with a new product. It’s our opinion that Red Bull energy beans have both an exciting
future in Australia as well as overseas. Our marketing proposal follows.
Product Justification
Red Bull’s continuing success in Australia is dependent on the younger market
segments. In particular, those in the 15-35 age groups; encompassing students,
partygoers and young professionals. We propose a product which is consistent with
our target demographic and existing product range.
Red Bull energy beans complement the flagship Red Bull energy drink. Both products
offer shared benefits – especially the famous “energy boost” – thanks to similar
ingredients. In the same way that Red Bull represents an evolution of soft drinks; Red
Bull energy beans are an evolution of snack foods. Values like “originality”, “status”,
“focus” and “performance” are associated with our brand.
The product name conveys a lively image while reinforcing the Red Bull name. The
humourous connotation of “energy bean” will have great appeal in the core younger
demographics. For now, consumers frequently consume Red Bull drinks alongside
unhealthy snacks. Red Bull energy beans are designed to complement the drink’s
effect and flavour, and have greater nutritional value than many rival snacks.
An excerpt from Confectionery: The Industry in Victoria (2001, p. 5), reassures the
marketing team that Red Bull energy beans have a bright future:
‘Australian consumers look for something that is genuinely new and different, not just
a ‘me too’ version of an existing product. Successful new products are often linked to
established brands’.
Product
Energy foods have an Australian market value in the hundreds of millions of dollars.
Products range from high-energy, high-performance bars such as Musashi and
PowerBar to powder supplements like Sustagen and the more traditional jelly beans.
The market is segmented into high-protein, high-carbohydrate, sugared and sugar-free
products. All have varying nutritional value. Consumers of energy foods consist of
two categories; those for whom taste and function are important (regular consumers),
and those seeking a more functional product (serious athletes).
Features
To be produced under licence in Melbourne, Red Bull energy beans are a non-durable
functional food. They will be similar to jelly beans in style, but differ in substance.
For one, the energy beans will all be of the same colour (red-purple), contain many of
the energy drink ingredients, and be embossed with a small Red Bull logo
(comparable to M&Ms). In light of the company mantra, ‘Red Bull gives you wings’,
it’s important that caffeine and taurine are active ingredients. Taurine, an organic
acid, is said to stimulate the metabolism and increase alertness. The exact
composition of the energy beans is still to be determined, but the core focus is a food
that provides an energy boost, tastes good, is low in fat and satisfies consumer
expectations regarding quality and efficacy.
Target Market
Red Bull energy beans are broadly targeted at two groups of people (regular
consumers and serious athletes), but will probably appeal more to the former group.
There is inevitably a tension between taste and performance-enhancing effects, and
we can fairly assume that sportspeople will continue to prefer “high-octane”
PowerBars over Red Bull energy beans. Regular consumers also constitute the bulk
of the market. Our marketing strategy is to focus mostly on secondary and tertiary
students, clubbers, those in mentally and physically-demanding occupations, and
anyone else seeking a “rush” to help them through the day. In general, any consumer
who is “on-the-go” and needs a “boost” is part of our target market.
Age is not necessarily indicative of potential consumers, but we anticipate few
consumers in the 35-plus age group. As a consequence, advertising and promotion
will focus on those in the 15-35 age groups. Further market research, including focus
groups, should be conducted before any product launch to clearly determine the
preferences of our target market.
Packaging
The Red Bull drink can is an icon of modern design. To differentiate Red Bull energy
beans from pharmacy-style jelly beans, the product should be packaged in metallic
rectangular containers embossed with the Red Bull livery. The metallic container,
which would open like a cigarette case, conveys to consumers a higher value than
paper packaging. This will help attract style-conscious people to the product, and
provide social cachet.
The following should be included on the containers: product description, nutrition
information, excess consumption warnings, best before date, recycling information
and website details (www.redbull.com.au). A separate website for this product was
considered but it was decided that consumers may not remember the address; it is
more convenient to channel consumers through the main website.
Size
It is anticipated that Red Bull energy beans will be offered in one size only to begin
with. That size has not been finalised but is expected to be 70 – 150 grams including
container. This corresponds to the size of Gold Cross jelly beans sold in pharmacies.
Assuming the product launch is successful, Red Bull may then want to introduce a
second size and / or a sugar-free version of energy beans.
Price
The fundamental objective of any pricing strategy is to cover the costs of production,
while charging a premium that reflects the product’s value and captures the
consumer’s willingness to pay.
Pricing Strategy
Red Bull should price at a level that reflects energy beans’ uniqueness. It is not
simply another competitor in the market. Red Bull energy drink has a price premium
over Coke; and Red Bull energy beans should be no different. The functional benefits,
such as its ability to ‘revitalize body and mind’, should be properly accounted for in
the price.
In terms of a broad strategy, penetration pricing is much more appropriate than
skimming. While Red Bull energy beans are positioned as a premium product, the
pricing difference is not substantial relative to other snacks. As the demand for snack
foods is fairly elastic, penetration pricing is doubly important to ensure decent market
share.
Estimating Costs
 Fixed costs (R&D, production, advertising) and variable costs (raw materials,
packaging, distribution).
 As Red Bull operates in a market with low barriers to entry, the price must be
vaguely comparable to its competitors.
 The final price will be determined in consultation with market researchers and
company finance experts. Something in the order of $3 to $4.50 is envisaged.
Estimating Demand
According to the Global Marketing Information database, the demand for nonchocolate confectionery in Australia has ‘followed an upward trend since 2002’
(Euromonitor, 2007), and is expected to continue growing in the years ahead. The
chart below details how the industry retail value in 2007 comfortably exceeded $300
million. Specific demand for Red Bull energy beans is expected to be in the hundreds
of thousands of units in the first year, with potential for substantial increases in
subsequent years.
Extruded Snacks Retail Volume/Retail Value
2002
2003
2004
2005
Etruded snacks - Retail Volume - '000 tonnes
14.5
15.2
15.9
16.6
Extruded snacks - Retail Value RSP - A$ mn
253
269
284.3
298.5
GMID - Global Market Information Database (Euro monitor, 2007)
2006
17.3
312.8
Anticipating Competitive Strategies
Red Bull energy beans are a unique product. Although there are no direct competitors
(except perhaps for regular jelly beans), there are substitutes. Companies with
existing products marketed as being ‘energy boosting’, such as Starburst, may attempt
to stifle demand by reducing prices. But as Red Bull energy beans possess many
qualities that these competitors do not, it will not resort to price-based competition. In
the event that direct competitors appear, pricing will be maintained at a constant level
to guarantee the ‘industry leader’ image. This is consistent with the Red Bull drink’s
price premium despite an onslaught from Frucor’s V and Coke’s Mother.
In the introductory phase, Red Bull energy beans will be offered in convenience stores
(7-Eleven, petrol stations) as part of a bundle; the bundle will contain two cans of Red
Bull and one package of energy beans, offered at a 15% discount to the regular price
of each item. These discounts are for a limited time only, and will be offered
periodically to stimulate demand.
Promotion
Red Bull should undertake a number of activities to promote the new product.
Critically, however, Red Bull should not stray too far from the tactics used to promote
its energy drink. The promotional activities for the drink have been such a success
internationally that it would seem counter-productive to move in a new direction.
Instead of attempting to launch the product via television advertising, for example,
Red Bull should begin by leveraging its existing consumers and promotional
activities.
Advertising
Red Bull should seek to foster the product’s growth by targeting their brand-loyal
customer base. In Australia, this would be students, partygoers and young
professionals. As a result, promotional activities for Red Bull energy beans can easily
complement existing activities in place for the energy drink. Free samples could be
offered on campuses by student “product champions”, along with the message that the
energy beans and drink together ‘revitalize body and mind’.
With the launch of energy beans, Red Bull is pioneering a new product category; the
‘energy snack’. Therefore, Red Bull’s advertising should pursue an ‘information
objective’. They should seek to raise awareness of the product’s existence in the
market. But more importantly, Red Bull should convey the product’s benefits and the
purpose it serves.
2007
18
326.9
Communication Strategy
Red Bull’s communication strategy should focus on the ‘reactor’ in the target market.
The message should concentrate on the revitalizing qualities of energy beans. The
intention is to arouse consumer curiosity so that they verify the claims about Red Bull
energy beans’ performance-enhancing qualities. Once consumers try it, they will feel
the immediate results – and Red Bull will have succeeded in translating product
awareness into product trust.
Red Bull’s choice of communication tool has historically been a real competitive
differentiator. Rather than building hype through expensive advertising campaigns,
we have always sought to develop understanding and interest from the ground-up.
Establishing a ground-swell is more natural and powerful than what traditional
campaigns usually produce. In order to communicate the message, events such as the
Red Bull Birdman Rally and Red Bull Billy-Cart Grand Prix should be leveraged.
Already an avenue to promote the drink and its qualities, through the use of free
samples, trials of Red Bull energy beans should be offered. Similarly, roaming Red
Bull cars can provide samples alongside the drink. Focussing on areas frequented by
the target demographic like university and TAFE campuses, and through the use of
student-champions, Red Bull should be able to cement a knowledge and appreciation
of the product within its target segment. The fact that Red Bull is an established brand
encourages new product acceptance, and halves promotional costs relative to new
brands. This is a considerable advantage.
Only once these seeds have been sewn should Red Bull seek to employ a limited
media campaign to enhance awareness (for the uninitiated) and act as a reminder (for
those already familiar with energy beans). In particular, the cartoons advertising the
energy drink should be adapted for energy beans. As demonstrated by the disastrous
initial launch in the UK (where $10m was lost within eighteen months), Red Bull
should build anticipation, demand and understanding before launching a media
campaign (Keller, 2003, p. 77). This approach has succeeded in markets all over the
world.
Place
Red Bull energy beans are a convenience product, so their distribution will be
extensive to ensure their availability at a significant number of locations. This
product is characterised by the young age of its consumers, their tendency to be loyal
to Red Bull but notoriously fickle toward other brands, and the impulsiveness of many
purchase decisions.
Distribution Channel
Red Bull enjoys a good relationship with its downstream wholesalers and retailers.
By using a vertical marketing system, Red Bull energy beans will follow short channel
strategies and will use different intermediaries to reach target markets. This indirect
system will be cost-efficient and offer superior customer reach. These intermediaries
have the requisite experience and possess economies of scale and scope. Red Bull
energy beans will use the parent’s current logistics system to ensure on-time
deliveries to wholesalers and retailers, whatever the seasonal demand.
Convenience of Location
A major focus of Red Bull energy beans will be its availability and accessibility for
customers. As our product hopes to secure a sizeable market share it will be available
at most convenience stores, supermarkets, cafes, school canteens, and other small
operators so the customer endures the least time and hassle to access the product.
Distribution will initially focus on Australia’s five leading cities (Sydney, Melbourne,
Brisbane, Perth and Adelaide). Provided the response meets expectations, the
remaining state capitals and major regional centres will be included in the distribution
network. Further expansion would depend on the relevant costs and benefits therein.
This limited introduction is broadly consistent with the cell-by-cell strategy used in
the United States (Keller, 2003, p. 78).
Role of Retailers
It is critical that Red Bull energy beans gain the support of trade customers. If the
product fails to interest retailers and distributors, the launch could well fail. Retail instore promotions strongly affect consumer purchase decisions as a good percentage of
buying is impulsive. Retailers should suggest customers try the product. The ability
of the retailer to do this depends on the incentives Red Bull is prepared to offer. In
some contexts though, retailers are not prepared to “spruik” products. For example,
supermarkets generally do not push products at the point-of-sale. Moreover, aisle
displays at Coles and Safeway are expensive to buy, and may not necessarily justify
the expense. Convenience stores such as 7-Eleven and major service station chains
represent the best hope of in-store promotions.
Product Placement
According to the Australian Confectionery Industry Profile (2004), 70% of
confectionery products are bought on impulse. In the introductory phase, Red Bull
energy beans demand prominent shelf space. Product placement is particularly
critical at this stage, so any displays should be in positions that are visible to
customers as they enter or queue. Such high-visibility spaces include counters and
displays near the point-of-sale. This encourages impulse purchases and product trials.
Red Bull-branded mini refrigerators attract attention in stores and consequently
generate sales. It seems natural that Red Bull energy beans should either be stocked,
in whole or in part, on or in the fridges. For this to occur though would depend on
product composition effects and consumer taste tests (whether ambient or refrigerated
temperatures improve the taste).
Online Order Placement
For the ease of retailers and wholesalers, Red Bull will provide an online portal
through which they will be able to place orders well in advance. This helps to
centralise much of the relevant product information; and improves stock control, sales
data and forecasting efforts.
Conclusion
Developing a new product is often fraught with difficulty. The Red Bull marketing
group have faith in the merits of Red Bull energy beans, but acknowledge that
questions remain about the exact ingredient composition, the final price, and aspects
of promotion and in-store placement. We regard this proposal as a genuine blueprint
for our product, but accept that some important decisions are yet to be made.
Even so, we have confidence that Red Bull energy beans will be embraced by
Australian consumers. After all, our product is high-energy, low-fat, accessible, styleconscious and designed specifically for our target market. Its promotion relies on
well-established strategies used in similar markets overseas.
Finally, Red Bull energy beans is leveraging the success of its famous parent product
– and for that reason – it’s critical that energy beans satisfy consumer expectations in
order to preserve the good name of the flagship Red Bull energy drink.
BIBLIOGRAPHY

Australian Confectionery Industry Profile (2004), Confectionery
Manufacturers of Australasia Limited, Source:
www.candy.net.au/cma2006/extranet/uploads/files/Consumer/Industry_Profile
.pdf, accessed 22 May 2008.

Confectionery: The Industry in Victoria (2001), Victorian Government,
Source:
www.business.vic.gov.au/BUSVIC/STANDARD//pc=PC_60184.html,
accessed 20 May 2008.

Global Market Information Database, Euromonitor International, Source:
www.euromonitor.com/, accessed 15 May 2008.

Keller, K.L (2003), ‘Red Bull: Building Brand Equity in New Ways’, in Best
Practice Cases in Branding: Lessons from the World’s Strongest Brands, pp.
69-92, Prentice Hall, Upper Saddle River: NJ.

Lee, J., Carson, V. ‘Mother of energy drink battles is on’, Sydney Morning
Herald, January 8 2007.

Lecture material from Marketing Management, Semester one, Melbourne
University.