MARKETING

Global BRICs MBA (Assignment # 4 -Oct 6th)

College of Business Administration / Chung-Ang University

Name : CHOI JIN HYUK

Student ID: 2009121562

∴ Case Study: Red Bull

1. About Red Bull

# Overview :

Red Bull is an energy drink. Red Bull is an adaptation of the Thai energy drink Krating Daeng, which
translates as "Red Bull". Based on market share, it is the most popular energy drink in the world. The
company was founded by Thai national Chaleo Yoovidhya and Austrian national Dietrich Mateschitz.
Red Bull's slogan is "it gives you wings" and the product is aggressively marketed through
advertising, tournament sponsorship sports team ownerships (Red Bull Racing, Red Bull Salzburg,
Red Bull New York) and celebrity endorsements. In 2009 it was discovered that Red Bull Cola
exported from Austria contained trace amounts of cocaine.

2. Designing the product

Mateschitz adapted the product to Western tastes by diluting it, lowering the caffeine content, and
adding carbonation. Red Bull essentially invented the “functional energy” beverage category in
Western markets, named thus because the beverages were meant to be consumed for energy, not
enjoyment, purposes. Both the Thai version and Mateschitz’s version of Red Bull contained the
following energy-enhancing ingredients: caffeine, taurine, and glucuronolactone. One 250 ml can of
Red Bull had 80 mg of caffeine, about as much as a weak cup of coffee; a small coffee at Starbucks
may contain more than 200 mg of caffeine. Both taurine and glucuronolactone are chemicals that
occur naturally in the human body. Taurine is a conditionally-essential amino acid, a detoxifying
agent, and a metabolism transmitter. Glucuronolactone is a metabolism transmitter and a detoxifying
agent. These three ingredients, along with a variety of sugars and vitamins, contributed to the
following properties claimed by Red Bull:

• Improves physical endurance

Between 1984 and 1986, Mateschitz led a team of professional marketers developing the product and
packaging concept for Red Bull.
3. LAUNCH IN AUSTRIA

Red Bull encountered difficulty getting approved for sale in Austria. The Austrian government at the
time had three categories for food and drug: 1) traditional food, 2) dietary food, and 3)
pharmaceutical. Red Bull sought categorization as a traditional food, but this category restricted its
ability to make claims about performance benefits. Therefore, Red Bull lobbied to create an entirely
new category: functional food. Functional foods, which also came to be known as nutraceuticals, had
some medicinal benefits beyond a dietary product, but also contained food properties that made them
different from a pharmaceutical. The functional food category combined regulations from the three
other categories and required almost as much documentation as a pharmaceutical product.

4. Red Bull Target Market

Red Bull did not define a specific demographic or psychographic segment as its target market. Rather,
the company sought to reach a broad range of consumers based on their need for a stimulating drink.
Kraihamer said, “We only have two dimensions: people who are mentally fatigued and people who
are physically fatigued or both.” These consumers fell into five broadly-defined categories: “students,
drivers, clubbers, business people and sports people.” By not defining a narrow consumer target, Red
Bull ensured that it could grow into numerous market segments. In mature markets, Red Bull
achieved its highest penetration in the 14–19 age range, followed by the 20–29 range. As its
consumers aged, Red Bull hoped they would continue to use the product, increasing the older end of
the age distribution.

5. From Failure to Success in the United Kingdom

Red Bull varied its market entry strategy only in the United Kingdom, which it entered in 1995.
Believing the British market to be too different from Austria, the management team in the United
Kingdom altered the Red Bull marketing formula in three significant ways: 1) the company marketed
Red Bull as a sports drink, not a stimulation drink; 2) it did not pursue a word-of-mouth strategy,
choosing instead to sell via the largest beverage channels; and 3) it created new advertising and
focused on billboards rather than electronic media. As a result, Red Bull was considered a failure in
the United Kingdom after losing more than $10 million during the first 18 months in that market.
Consumers were very familiar with the sports drink category, but Red Bull did not meet their
expectations of what a sports drink should be. Usually, Red Bull sought to create its own new
category when it entered new markets, by changing the word “energy” on the can to “stimulation,”
and thus established a new category. After new management made the necessary changes, Red Bull
took off in the United Kingdom Between 1997 and 2001, Red Bull’s share of the sports and energy
drink market rose from under 2 percent to 48 percent. This share exceeded that of Lucozade, the
entrenched leader for the previous 74 years. Red Bull went from selling 3.2 million cans per year in
1995 to more than 290 million in 2000. The brand claimed an 86 percent share of the “functional
energy” drinks market in 2001.

6. RED BULL IN THE UNITES STATES

For Red Bull’s 1997 entry into the United States, the company used a “cell” approach to divide key
markets in the country into targeted geographic segments, rather than attempt a nationwide launch.
When Red Bull entered a cell, it initially targeted high-end nightclubs, bars, plus exclusive health
clubs and gyms in order to reach the trendy and active consumers. Like it had done in Europe, Red
Bull gradually increased distribution to include down market bars and clubs, restaurants, convenience
stores, and grocery chains. Red Bull gradually expanded its distribution eastward in 1999, moving
first into Texas and then to mountain resorts in the Rocky Mountains. After establishing seeding
programs in the Midwest and Chicago area, Red Bull moved into the East coast and Florida in 2000.
Red Bull’s growth in the American market outpaced the company’s expectations. In 2000, the
company achieved sales of 108 million cans, well above the 80 million can target. That year, the
company’s U.S. market share stood at 65 percent.

7. The Product/ Competitors/Industry

1. Product

Red Bull is a sweet, caffeinated drink aimed to give consumers the high energy kick. Available only in
rather expensive 250ml cans, 350ml bottles, with 4 packs and only two ‘flavours’ (original or sugar-
free). It contains caffeine, taurine, glucuronolactone, and B vitamins. Founded in 1984 by Austrian
businessman Dietrich Mateschitz, Red Bull has become the worlds leading energy drink, a staple in
many young, and active people’s lives.

2. Competitors

Big global companies such as Coca Cola and Pepsi have introduced their own energy drink versions
to their product base. Mother (by Coca Cola), Amp (Pepsi), V, Battery, RedEye and Bennu being just
some in the ever-growing energy drink market. Competition also presents itself in original sports
drinks, such as Gatorade (Pepsi) and Powerade(Coca Cola). Furthermore, premixed alcoholic drinks
like the Smirnoff range form part of the competition.

3. Industry

Red Bull has becoming hugely successful and operates within the global soft drink marketplace.
Within the soft drink industry its niche is the ‘energy drink’ market, of which Mateschitz was largely
responsible for creating. Red Bull currently is the leading energy drink across the entire globe. It
holds 70% of the market worldwide (Gschwandtner, 2004). Once the drink was passed by health
ministries, Red Bull entered the Austrian market, soon thereafter then moved into Germany, United
Kingdom and the USA by 1997.

DISCUSSION QUESTIONS FOR READING ASSIGNMENT #4 (Oct 06th)

*CASE #4 Red Bull (p376)

# Brand building activities

These range from simple TV ads designed to create awareness and image, through
sponsorship designed to establish credibility, to events created to differentiate and engage.
All activities support the Red Bull tagline of “Red Bull gives you wings.”

# A premium price

A great, targeted brand can sustain a premium price that mass-market brands cannot. Red
Bull takes this to an extreme by charging three to six times more than Coca Cola. The
premium charged then fuels the next growth driver.

1-2. Has the product’s positioning changed over time?

Red bull adjusts its strategy per geographic market area.

1. In Asia

Red Bull increases its product mix in length and depth to stay in competition and in touch with trends.

2. North America

One of the Strategic was Marketing segmentation through demographic and psychographic segments

2-1. What is Red Bull’s success formula?

When Red bull lunched to market, Red Bull needed the difference to the other products. So, Red Bull
made strategy to appeal the differentiation what is High quality’s brand. Red bull’s product is smaller
than existing product (Red Bull-250 ml, Coca Cola-330 ml).

2-2. How does Red Bull know when to turn on the advertising?

When the customers watch the ads, they feel very familiar with Red Bull’s brand. Red Bull’s trade
mark is Bull and Red Bull used to pour dynamic image to bull. So, the customers feel that Red Bull is
so energetic beverage.

3. Assume tough competition is coming. What actions would you recommend?

Red Bull marketed its product to appeal to a broad range of consumers and to be appropriate in a
variety of usage occasions. Still, the vast majority of Red Bull’s business came from the youth market.
So I recommend that to develop the product is more powerful for the youth because they are energetic
and passionate for sport.