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Red Bull: A trailblazer in marketing strategy ML00007-012 /Published 07/2012

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MarketLine Case Study�

Red Bull A trailblazer in marketing strategy� Reference Code: ML00007-012

Publication Date: July 2012

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Red Bull: A trailblazer in marketing strategy ML00007-012 /Published 07/2012

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OVERVIEW Catalyst Red Bull has essentially spared no expense in pursuit of its own path to market domination. The company’s philosophy has been to ignore traditional media advertising and marketing (bar its own unique set of comical cartoon adverts),

instead channeling money into sporting, music, and cultural events. Its efforts have been so extensive that the number of sportspeople and events sponsored total in the hundreds. In some areas the company has even popularized brand new

sports. This is of course not an entirely new method of gaining recognition – indeed companies have been sponsoring events for many years to become synonymous with a positive type of event – but Red Bull has taken this to a new level

by wrapping itself in such a network of projects that its intended image is without question. This method of recognition has been hugely successful, with a recent study estimating that spending money on traditional advertising methods to gain the same amount of recognition would cost around double what Red Bull currently invests, and so despite the

enormous amount of money dedicated to this type of marketing it remains economical. Another key indicator of Red Bull's dedication to its brand image is that its own website is dominated by the sports and events it runs, and information

about its own products takes on an almost secondary role. One developing challenge for the company is that competitors in the energy drinks sector have adopted a similar method of brand recognition and are having some success.

Summary • Red Bull was founded as an attempt to bring to the West a traditional Asian tonic drink and develop it for the

Western market. It first gained access to the Austrian market in 1987, then spread through Europe and now

trades worldwide, being one of the most well-recognized brands in any sector.

• Red Bull has forged an entirely new market segment with its unique product, and today is the number one worldwide energy drinks company. Its current sales volume exceeds 4 billion cans sold and it operates in 160 countries.

• Red Bull’s way of showing off its products and becoming recognized by its target audience is unusual but hugely successful, and despite its extensive investment is actually more economical than traditional advertising methods. Being a private company allows Red Bull the freedom to invest in marketing events, as it has fewer

concerns over maintaining shareholder profits, which some of its competitors have to deal with.

• The brand has been so extensively linked with the positive events that it invests in that its products have not needed to be hard sold or heavily discounted, and so the company remains the premium brand in the sector despite recording higher sale volumes than its competitors.

• The company may face some tough challenges from its competitors in the future, however, as they are now using similar techniques to get their own products recognized, which may negate Red Bull's current advantage.

Some of Red Bull’s main competitors are well-funded and operated by multinational corporations.

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TABLE OF CONTENTS Overview ............................................................................................................................................................................. 2�

Catalyst ............................................................................................................................................................................ 2�

Summary ......................................................................................................................................................................... 2�

Analysis ............................................................................................................................................................................... 5�

How it all started .............................................................................................................................................................. 5�

The origins ................................................................................................................................................................... 5�

A gap in the market ...................................................................................................................................................... 6�

The road to success ..................................................................................................................................................... 6�

Red Bull’s current position ............................................................................................................................................... 6�

The numbers ................................................................................................................................................................ 7�

The product takes on a secondary role ........................................................................................................................ 8�

Unique marketing ............................................................................................................................................................ 9�

Traditional methods of advertising ............................................................................................................................... 9�

The Red Bull way ....................................................................................................................................................... 10�

Non-product-related acquisitions ............................................................................................................................... 11�

Results of the efforts ...................................................................................................................................................... 13�

Economical ................................................................................................................................................................ 13�

Goodwill ..................................................................................................................................................................... 13�

Becoming cool ........................................................................................................................................................... 14�

Potential pitfalls ............................................................................................................................................................. 14�

Competitors ................................................................................................................................................................ 14�

Health concerns ......................................................................................................................................................... 15�

Access to new markets .............................................................................................................................................. 15�

Counterfeit products ................................................................................................................................................... 15�

Risk ............................................................................................................................................................................ 15�

Conclusions ....................................................................................................................................................................... 17�

The future ...................................................................................................................................................................... 17�

Appendix ........................................................................................................................................................................... 18�

Sources ......................................................................................................................................................................... 18�

Further Reading ............................................................................................................................................................. 18�

Ask the analyst .............................................................................................................................................................. 18�

About MarketLine .......................................................................................................................................................... 18�

Disclaimer ...................................................................................................................................................................... 19�

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TABLE OF FIGURES Figure 1: Krating Daeng can ............................................................................................................................................... 5�

Figure 2: Red Bull can ......................................................................................................................................................... 6�

Figure 3: Red Bull revenues ................................................................................................................................................ 7�

Figure 4: Red Bull and Monster revenues ........................................................................................................................... 7�

Figure 5: Leading energy drinks players' market shares ..................................................................................................... 8�

Figure 6: Red Bull website contents .................................................................................................................................... 9�

Figure 7: Red Bull cartoon advert ...................................................................................................................................... 10�

Figure 8: Red Bull Racing Formula 1 car .......................................................................................................................... 11�

Figure 9: Red Bell New York ............................................................................................................................................. 12�

Figure 10: A Red Bull snowboarding helicopter ................................................................................................................ 13�

Figure 11: Valentino Rossi sporting the Monster logo ....................................................................................................... 15�

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ANALYSIS How it all started Red Bull is a formulation between Western product development and marketing and a traditional Asian tonic drink. The company was well-placed to exploit a gap in the Western market, and with its introduction to the drinks market in Europe

in 1987 created an entirely new product category. The result was that the company now dominates the international energy drinks market.

The origins Red Bull is a carbonated drink containing sucrose, caffeine, and taurine designed to give the user a burst of energy or, as the advertising slogan says, “gives you wings.” The drink was based on an energy drink found in Thailand and first sold

by Chaleo Yoovidhya under the name of Krating Daeng as a “tonic drink.” As shown in Figure 1, it was presented differently, and to the present day is sold as a separate product and distributed from a separate company in some regions. Krating Daeng was originally sold as an aid for lorry drivers, construction workers, and night staff, helping to

keep them awake and alert during long shifts. There is some early evidence of the marketing techniques that Red Bull would eventually adopt as Krating Daeng sponsored boxing events, a sport popular with its target audience, and the

product bares the logo of two wild gaurs (a type of Asian bison) charging at each other.

Figure 1: Krating Daeng can

� �� Krating Daeng website ��

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A gap in the market

Red Bull was set up by the partnership of Dietrich Mateschitz and Chaleo Yoovidhya. Mateschitz (an Austrian marketing executive) recognized that Krating Daeng had no Western equivalent, and so a potentially lucrative gap in the Western

drinks market had been identified. Mateschitz brought the drink to the West in partnership with Yoovidhya, and altered it for Western tastes and remarketed it, first gaining access to Mateschitz’s native Austrian market in 1987 and then rapidly

expanding throughout Europe and the Americas. Red Bull evolved into the number one energy drinks company in the world, and along the way created an entirely new product category, with large soft drinks companies such as PepsiCo,

Coca-Cola, and Hansen Natural slow to enter with their own energy drink products.

The road to success As of 2012 the company is present in 160 countries and is still growing. From the beginning of the company’s establishment in Austria, it began to sponsor sporting events, and in 1988 launched the Red Bull Dolomite Man, an

extreme endurance event involving alternative sports such as kayaking and paragliding. Four years later the company started the Flug Tag, a fun event where competitors were encouraged to build flying machines. From the beginning the

company was willing to invest in unusual causes and strategies to get noticed in specific sections of society. This trend has developed to such a point that today Red Bull's association and backing is the primary reason behind certain sports'

popularity, whereas previously the reverse would be true, in that companies would want to become associated with a popular sport for the positive connotations and ultimately the connected sales.

Red Bull’s current position Red Bull is currently showing large growth year-on-year and has experienced better than expected growth in some markets that are already developed. The strength of the company is evident in more than just the annual turnover,

however, as its brand strength, market share, and sales volumes are all high. Interestingly, the Red Bull product has been allowed to take on a secondary role to the company’s other activities; for example, the sporting events it runs are

Figure 2: Red Bull can

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sometimes easier to access information on than its own products.

The numbers

As seen above, the company saw some fluctuation in year-on-year growth rates during the economic crash in 2008 and 2009, but the company has since returned to strong double digit growth. Red Bull’s closest competitor is Monster Energy, which has been showing good revenue growth, but Red Bull’s annual growth is higher despite its already dominant

market share.

Strength within the market

Red Bull’s strengths extend beyond its annual turnover and include some unusual elements not commonly seen in other

companies.

Red Bull’s brand currently holds 80th position in Millward Brown’s Global brand value listings for the top 100 brands. This is exceptionally high considering its products are limited to one specific niche market. Being a relatively new company,

the power of the brand and strength of its logo make it comparable to much larger corporations with larger advertising

Figure 3: Red Bull revenues

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Figure 4: Red Bull and Monster revenues

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budgets. For instance, BP and Nissan occupy 77th and 81st respectively. This brand strength allows Red Bull to punch above its weight in terms of recognition.

Red Bull has achieved a very unique position in the global energy drinks market. Its current market share is estimated to be 43%, while its nearest competitor holds a share estimated to be 16%. Due to its remarkable recognition strategy, the

company is able to hold off the advances of some of the largest drinks manufacturers and corporations in the world, such as PepsiCo and Coca-Cola.

Figure 5: Leading energy drinks players' market shares

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Red Bull as a product has become the primary name for the energy drinks sector; for instance, a popular alcoholic drink

in the UK is a measurement of vodka mixed with an energy drink, but the drink is referred to and advertised as Vodka Red Bull even when a different energy drink brand is being used. The benefit of this is enormous, as the company is the primary consideration when a consumer chooses an energy drink, in a similar way to Coca-Cola within the soft drinks

industry.

Red Bull achieved 4 billion can sales in 160 countries in 2011. In comparison with its major competitors, the Red Bull

serving is much smaller, yet the product is charged at the same price and sells in higher volumes. It is likely that Red Bull is viewed by the consumer as a higher end product, and yet sells in the quantities of a lower end product. Red Bull can

also charge more than its competitors, despite the fact that the standard serving of Red Bull is a 250ml (8.3oz) can, whereas all other competitors offer larger (often double the size) cans for the same price.

Red Bull's product range is not huge, and currently consists of Red Bull Energy Drink, Red Bull Sugar Free, Red Bull

Energy Shot, and Red Bull Cola. The company has spread all over the world, and has achieved higher than expected success in markets that are already well-developed, such as Japan and Turkey.

The company grew by roughly 700 employees in 2011 to reach 8,294 employees. This rate of growth shows the confidence that consistently growing revenues have brought the company.

The product takes on a secondary role Unusually, the Red Bull product is a secondary consideration on the company's website, which is devoted to the myriad

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different events it runs and sponsors, rather than its own product.

Red Bull has begun to display elements of reduced involvement in its own products through comprehensive investment

and backing of sporting and cultural events. Red Bull the investor and sponsor is portrayed as the primary activity of the company to the consumer. By associating itself in such depth with positive recreational activities, the company needs to devote less time to promoting the actual product. An intriguing part of Red Bull's own website is that the actual product

the company sells takes on a secondary role to its other activities. It is possible to view the product line, but this is placed in a separate list much small than its other activities. It is as a result of having a specific business philosophy and culture

that Red Bull can avoid hard selling its products, which further increases consumer goodwill toward the company and avoids the dangers of making consumers bored of the product.

Unique marketing Apart from the unusual methods of advertising that Red Bull has adopted, which will be examined later, the company has not shied away from traditional media, but with its own specific twist.

Traditional methods of advertising Efforts from the company in traditional spheres of advertising have included television and radio advertisements, but in typical Red Bull fashion they were unusual in their content and highly recognizable and stylized. In the UK, for example,

the adverts were based on a simple cartoon format, and almost all had a certain sense of levity, which was intended to make the viewer laugh at the ridiculous nature of the situation faced by the characters, with the message that Red Bull gives you wings (a common theme was that the characters grew wings and flew away after drinking the product). This

was a bold and successful strategy, and keeping the adverts amusing, ironic, and informal allowed Red Bull to build and add to its youthful, energetic, almost irreverent image.

Figure 6: Red Bull website contents

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The Red Bull way Despite these attempts in normal advertising spheres, from the beginning Red Bull was forging a new method of recognition. The company drew on the relatively common methods of backing positive sporting and cultural events, which

many companies have used before, but also became involved in the actual running, development, and creation of these events. Rather than paying for its name to be placed in a visible location during a game, Red Bull actually buys the team,

sets up its own managerial team (usually consisting of the best people available), and buys relevant assets such as stadiums, arenas, and technical equipment. Examples of this are Red Bull's ownership of two soccer teams, the New

York Red Bulls in the US and Red Bull Salzburg in Austria. These are not short-term publicity stunts, and the aim is usually to remain in possession of these teams long term and ultimately to achieve success while in possession of them. For example, the Red Bull racing team in Formula 1 quickly became one of the best funded teams, and dominated the

championship contest for two consecutive years in a sport that is notoriously expensive to operate and requires very high levels of technical expertise.

Figure 7: Red Bull cartoon advert

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Non-product-related acquisitions The company has acquired a large number of teams, events, and personnel to add to its already extensive profile.

The company owns two teams in Formula 1, under the names Red Bull Racing and Scuderia Toro Rosso. Red Bull

Racing has been hugely successful, with two overall championship wins from driver Sebastian Vettel in the 2010 and 2011 seasons and two constructors’ championship awards in the same years. Red Bull also runs extensive development

programs and a new drivers program, which trains talented drivers to be able to eventually break into the primary and secondary teams, proving the company’s long-term dedication to the sport.

Figure 8: Red Bull Racing Formula 1 car

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In the World Rally Championship the company has applied its usual formula of gathering the best talent in the industry to achieve success. Sebastian Loeb is the eight time winner of this event, and he appears with Red Bull livery, clothes and

car. The Red Bull soccer teams have allowed the company to enter more mainstream audience markets, and their ownership of the stadiums allows the Red Bull logo to be displayed on buildings with a large footfall, where music events

and other sporting events are held. In the US, the New York Red Bulls have been successful, coming top of their league in 2010 and fighting for top spot again in 2012. Similar to its other operations, Red Bull has also brought high profile stars such as Thierry Henry to the club in order to increase both its success and fan base.

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By coming to the aid of ailing sporting teams, Red Bull attracts goodwill from fans of the sport, such as with its 2012

purchase of the bankrupt ice hockey team Red Bull Munchen. Apart from team sports, the company also sponsors individual athletes, which allows it to access less popular sports and more niche target audiences. For instance Red Bull sponsors large numbers of individual athletes, including surfers, skaters, mountain bikers, basketball players, American

football players, parkour athletes, snowboarders, base jumpers, and many others.

The purchase of equipment allows its teams and individuals to perform more “extreme” stunts and events in the most

remote locations; for example, the Red Bull snowboarding teams have helicopters to allow them to access unused mountain ranges. The main benefit of investing in this expensive equipment for its teams is that the videos these athletes

then publish can become very popular, especially when they feature unique daredevil feats. This allows Red Bull to gain significant recognition for providing the resources for this to happen.

Figure 9: Red Bell New York

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Figure 10: A Red Bull snowboarding helicopter

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Red Bull's World Series touring events have actually created new sports and spread them around the globe. They

include unusual versions of sports designed to provide an enthralling spectacle. One common theme to increase the attractiveness of the event is that danger is implied, such as with the base jumping and cliff diving events. Some

examples include Red Bull X Fighters, a type of freestyle motor cross event that has become the most well-recognized tour within the sport; Red Bull Crushed Ice, a combination of ice hockey and cross country skating; Red Bull Cliff Diving, a competitive cliff diving event; and Red Bull Air Race, a tournament for stunt pilots. Providing these expensive and risky

events is very unusual, although the benefits and recognition gained through creating and popularizing an entirely new sport and having the Red Bull brand displayed on all equipment and competitors are significant.

The events are not limited to sports-based projects, however, as the company also promotes music and cultural events. These include the Red Bull music academy, an Internet radio station, a television station, a record label, and music

festivals. There have also been efforts from the company to represent urban and street cultures, as with the breakdancing competitions that feature live music and celebrities from that genre. These businesses may not be profitable, but they allow Red Bull to further increase its recognition within the lives of its target audience and ultimately

this further enhances its profile and sales.

Results of the efforts The huge amount of investment that Red Bull pours into these events results in an efficient advertising campaign, goodwill from spectators (which is a more intangible and immeasurable benefit), and becoming a brand that is associated with positive events. These are all reflected directly in the company’s revenues, sales volumes, and market share.

Economical All of this effort and investment could be considered wasteful, but the product following it has created means it is able to dominate the market while spending less than other companies on product development. The basic product has not

changed significantly since its introduction to the Austrian market in 1987, but the company has seen significant growth in developing markets and still predicts continued growth in existing ones.

Goodwill The amount of support that Red Bull puts into certain events means their existence is solely dependent on Red Bull's involvement, which in turn makes those who take part in the activity extremely loyal to the company, and so the brand

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logo is present all over the clothes and equipment of said individuals. This builds a huge amount of goodwill, as fans and supporters will likely to be influenced by brand recognition when choosing an energy drink product (and potentially pay

the more expensive prices per Red Bull can to repay the support). The money Red Bull invests in these activities, or more precisely, the success its sponsored athletes have, has a direct effect on its own revenues. This can clearly be

seen in the Red Bull Formula 1 wins in 2010 and 2011, where corresponding company revenues were boosted significantly.

Becoming cool An interesting side effect of the sponsorship is there is a demand for Red Bull merchandise among fans. The company runs a detailed section of its website where fans of any of the activities and events can buy specific merchandise including clothes, posters, and related accessories. This provides additional value for the company, as the Red Bull logo

is present on all these items, which increases the company’s visibility.

Attempts to become “cool” and associated with youth culture are typically unorthodox and visible in the company’s use of

profanity on its website; under one category link called “Holy Shit” viewers can watch clips of extreme sports and performances. The company has traditionally been linked with younger consumers, as many of the activities it sponsors

are supported and practiced by younger consumer groups. However, there has been an attempt to engage with a wider range of age groups, as the involvement in Formula 1 (a long running motorsport that is more mainstream in its audience base) shows.

Potential pitfalls Despite the international success of Red Bull, there are issues that the company will have to contend with over the

coming years. These include its competitors, counterfeit products, health concerns, access to new markets, and risky investments.

Competitors The Monster and Rock Star brands from Hansen Natural and PepsiCo are developing, and have adopted similar

techniques for becoming recognized. Monster has also become synonymous with extreme and alternative events such as Moto GP and the Isle of Man TT. It also runs new and unusual events such as Ken Block driving performances, and

sponsors celebrities and musicians such as Snoop Dogg, Rob Dryzek, and the band Bullet For My Valentine, who can regularly be seen wearing the monster logo. Rock Star has a greater range of flavors and products available to

consumers, and regularly appears in offers and price drops, making it perhaps a more accessible alternative. Both companies offer better value for money in terms of the size of the product and the price.

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Figure 11: Valentino Rossi sporting the Monster logo

� �� MONSTER ��

Health concerns The energy drinks sector is one that still suffers from some stigma and bad press, in the sense that the high sugar and caffeine content of the products can of course be considered unhealthy if consumed in inappropriate quantities. There have been instances of libel cases where the product has been said to have a negative effect on a person’s health.

Whether these cases are justified or not, the bad image they create is a continuing battle for the industry. This is despite the European Food Safety Authority declaring that the ingredients in the quantity used in these drinks are safe.

Access to new markets Red Bull has a continuing battle to gain access to certain international markets, as due to health concerns the company sometimes struggles to secure market authorization. For example, Red Bull has been trying to enter the Chinese market

for some time, although currently a version of the drink is sold via an entirely different company called Red Bull Vitamin Drinks, which was recently removed from shelves due to concerns over “unauthorized additives” in the products. This company is owned by Krating Daeng, the original Thailand-based company. Yoovidhya owned specific distribution rights

for Krating Daeng in the Asia region, but it may be more likely that the Western version of the product will be able to enter the Chinese market after recent concerns in China over Krating Daeng ingredients and the recent death of Yoovidhya.

Counterfeit products With such a popular and well-recognized brand, the possibility of counterfeit products is very high, and this is a subject that Red Bull takes very seriously, maintaining a section of its website designed to explain to consumers why it matters to

the company and to the consumer to stay away from counterfeit products. All this is an indication of how the company’s brand is almost more important than the product.

Risk It can prove to be a costly problem when Red Bull’s activities prove to be unsuccessful, as with the US Red Bull Nascar

team, which withdrew from the event and sold its cars to a competitor in 2011. It is estimated that reviving this two car team for the next season would have cost in excess of $30m, and Red Bull racing was involved with Nascar for four

years. As the main aim of Red Bull is to become synonymous with success in a particular sport to help drive its image and eventually sales, on occasions where this is not possible it can be a waste of resources and time for the company.

Becoming so deeply involved in these sports represents a potential risk to the company’s image, as certain sports can fall into disrepute, as Formula 1 did following its decision to go ahead with the race based in Bahrain in April 2012,

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despite protests and riots near the track. However, while such moves represent a substantial risk to the company, with the necessary precautions it should be able to manage this risk accordingly.

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CONCLUSIONS The future Red Bull's success has certainly not developed entirely from marketing alone. The company introduced a completely new product category, and the strength of the product itself is evident in the sale volumes. However, the power of its

marketing plan has turned Red Bull from a simple drinks company into the recognizable face of extreme and alternative sporting events, which has protected the product from devaluation while elevating Red Bull into a popular and liked

company among its target audience.

Red Bull is likely to continue to dominate the market in the immediate future. However, due to the developing profile of

competitors, especially Monster Energy, there are likely to be some concessions to those companies in terms of market share in developed regions. But as long as Red Bull remains innovative with its marketing strategies the company is likely to continue to dominate. A potential future problem is product development, and as its rivals develop new and fresh

products there may come a time when Red Bull needs to invest in research and development in order to create new and fresh products of its own to prevent it becoming outdated, although the strength of its own current formula may render

this unnecessary. One avenue for exploration within the Red Bull product range is positioning Red Bull as an alternative to coffee. This remains a continuing goal for the company, as the global coffee market was estimated to represent

$50.2bn in 2010.

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APPENDIX Sources http://www.guardian.co.uk/business/2011/sep/26/red-bull-racing-formula-one-profits

http://en.wikipedia.org/wiki/Krating_Daeng

http://www.monsterenergy.com/

http://en.wikipedia.org/wiki/Red_Bull

http://news.xinhuanet.com/english/china/2012-02/11/c_131404801.htm

http://www.formula1blog.com/2011/09/29/red-bull-owner-toro-rosso-not-for-sale-plus-more-money-talk/

http://www.thegrocer.co.uk/fmcg/red-bull-profits-take-a-pit-stop-as-sales-lose-momentum/219069.article

http://www.just-drinks.com/news/red-bull-still-waiting-for-approval-to-enter-china_id107092.aspx

http://www.sueddeutsche.de/sport/red-bull-uebernimmt-ehc-muenchen-eishockey-fuer-muenchen-mit-hilfe-aus-

oesterreich-1.1362002

http://www.ft.com/cms/s/0/8733b030-de30-11e0-9fb7-00144feabdc0.html#axzz1xlVuypT8

http://www.ebrolcreative.com/marketing_gallery/Red_Bull_Marketing_Plan_2011.pdf

http://en.wikipedia.org/wiki/Scuderia_Toro_Rosso

http://www.tcpharmachem.com/th/home

http://sports.espn.go.com/rpm/nascar/cup/columns/story?columnist=blount_terry&id=6687020

Further Reading Global Functional Drinks Industry Profile

Red Bull Company Profile

Sponsorship and Sport Case Study

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