Red Bull's - Company Synopsis, Exercises of Marketing

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Red Bull’s

Company Synopsis

Group 4:

Michael Costley CEO

Rolando Fuentes Ruiz COO

Helen Shi CMO

Michael Wong CFO

Karsten Huynh CHR

Introduction

Red Bull, headquartered in Fuschl am see, Austria, manufactures energy drinks which are described as “functional beverages providing various benefits, especially in times of increased performance” (Red Bull, 2013). The product claims to improve concentration, alertness and most importantly reduces the feeling of tiredness and fatigue. As of today, over 35 billion cans of Red Bull have been sold in 165 countries throughout the world. Currently employing over 8,966 employees, Red Bull continues to see incredible company growth recording a 15.9% increase in 2012 (Red Bull, 2013). Red Bull also saw profits increase by 40% in 2012 to €311 million from the financial year of 2011. Brief History In the Mid 1980’s Dietrich Mateschitz developed the recipe for Red Bull and formed the company Red Bull GmbH. Originally Red Bull was based on a Thai drink, Krating Daeng, which was created by Chaleo Yoovidhya (Red Bull, 2013). Mateschitz then partnered with Yoovidhya and reformulated the drink to Western palettes. Red Bull was first sold in its home market of Austria on April 1st, 1987 and with this launch, Red Bull created a totally new “energy beverage” category within the consumer beverage marketplace. Since then Red Bull continues to succeed with their limited product line and has recently launched new variations of the drink including different flavours.

vitamins, sucrose, glucose, taurine, and Alpine spring water. With ingredients like taurine and caffeine and the proliferation of energy drink consumption, Red Bull and the entire energy drink industry have come under scrutiny due to health concerns. As a result, new regulations on the sale of energy drinks are an ongoing concern for companies like Red Bull. Red Bull’s product line has also widened to include merchandise that is adorned with the company name such as hoodies, hats and shirts, due to their involvement in sponsoring athletes and events. Market Share By creating a product that had never been seen before, Red Bull has made their name synonymous with the word energy drink. With Red Bull products sold in 165 countries, the company holds an estimated global market share of 43% as of 2012 (MarketLine, 2012). This statistic becomes even more impressive when you consider that their closest competitor, Monster Energy Drink, only holds an estimated 16% market share (MarketLine, 2012). This market share and brand recognition has allowed Red Bull to hold their ground and fend off larger beverage companies like Coca-Cola and PepsiCo. Even with such a dominant position in the energy drink market, Red Bull continues to grow. Figure 1 indicates the significant position Red Bull has over all other top competitors in the energy drink market. FIGURE 1: Market share for the top energy drink companies for 2011

• (MarketLine, 2012)

Financial Performance In 2011, Red Bull had sales of $2.93 and made $3.06 billion in operating revenue. This led to profits of $402.4 million an increase of 35% from 2010. With $1.15 billion in current assets and $220.5 million in current liabilities, this results in an impressive current ratio of 5.22. Table 1 below goes into further detail on the financial performance of the company since 2007.

TABLE 1: Red Bull GmbH Financial Summary

th USD 31 Dec

31 Dec

31 Dec

31 Dec

31 Dec

Total Assets 2,060,854 1,702,958 1,862,165 1,787,651 1,498,

Shareholder

Equity

Operating

Revenue

Cash & Cash

Equivalent

Net Income 402,390 298,797 177,368 181,971 345,

*(Mint Global, 2013)

Current Strategy

The high sales volume of Red Bull is largely dependent on their extensive and well recognized marketing strategies. The brand continues to be successful by pushing boundaries and implementing campaigns that are unique and impactful.

technical equipment, Red Bull aims to keep these teams in the long-run in hopes of achieving future success. Examples include Red Bull’s Formula 1 racing team, which went on to be one of the best funded teams, and soccer teams which helped garner a larger mainstream audience (MarketLine, 2012). These investments attract goodwill from sports fans, and supporters who are more likely to be influenced by brand recognition when selecting energy drinks.

Environment

Economic Dynamics Sales in the “functional water” industry have been significantly impacted by the ongoing economic crises globally. However, the energy drink sector has proven most resilient and outperformed other industry categories. It appears that consumers are cutting back on how many beverages they consume but maintain their habits in energy drink consumption. The growing and lucrative energy drink market has attracted large competitors, namely The Coca Cola Company and PepsiCo, to start offering their own products in the segment. However, despite these competitors dominance in other beverage segments, Red Bull has been able to maintain market leadership in the dynamic energy drink industry. (Euromonitor International, 2012) Legal and Political Pressures Red Bull manufactures and distributes all of it’s products from it’s only factory in Austria (Euromonitor International, 2012). However, by manufacturing all products in one central hub, Red Bull is more susceptible to tax laws, tariffs, and high costs of distribution compared to competitors whom have multiple worldwide facilities. Their current differentiation strategy has allowed Red Bull

to market and sell their products at a premium which is absolutely necessary as they incur greater costs relative to competitors. Currently, Red Bull is building a new facility in Brazil which is expected to service the America’s and reduce these costs to make Red Bull more cost efficient (Russell, 2012). The nature of Red Bull’s dominant product offering is a source of political and legal issues. France, Denmark and Norway had at one point banned Red Bull products because of some concerns over the ingredients being used; these have all been lifted(FriedlNews, 2013)(Euromonitor International, 2012). Additionally the high caffeine levels in Red Bull leave Red Bull vulnerable to regulatory controls. This issue is further amplified as Red Bull’s relies solely on energy drink products. The United States, one of Red Bull’s key markets, has started to raise concerns over energy drink products as well. The city of Chicago is one area that is considering banning the sale of energy drink products to all consumers (Radar Staff, 2013). This is in light of increasing hospitalization due to the consumption of energy drinks throughout the United States (The Associated Press, 2013). The negative press is without a doubt becoming a matter of great concern for the sector as a whole.

Strategic Challenges

Maintaining Market Leadership in a Growing Competitive Market According to a global study in 2011, Red Bull is leading the energy drinks market with a market share containing 43% of the world’s value, and 21.5% of the world’s consumption (Passport,

pricing, it may have adverse effects on its edgy brand image. This is due to the fact that Red Bull may become viewed as being “uncool” and common place. Fortunately, Red Bull’s growing presence in the nightclub scene may help Red Bull remain relevant as an edgy brand among its core audience. Expanding in the Soft Drink Industry The soft drink industry includes the energy drinks segment and is lead by Coca-Cola and PepsiCo. Ranked seventh in terms of world value, and unranked in volume sales, it is unlikely that Red Bull will be able to break into the top five of soft drink companies unless it expands its portfolio (Passport, 2012). In addition to expanding the amount of products it has to offer, it is important that Red Bull effectively manages its marketing among its products. The recent abysmal performance of Red Bull’s new product Red Bull Cola in contrast to its current main product, emphasizes the need to effectively allocate resources. In addition, Red Bull’s highly caffeinated drinks may put its product at risk of regulation and inhibit its global growth.

References

Euromonitor International. (2012, March 9). Red Bull GmbH in Soft Drinks (World). Retrieved from Euromonitor: http://www.portal.euromonitor.com/ Euromonitor International. (2012, March 9). Red Bull plans Asian Expansion. Retrieved from Euromonitor: http://www.portal.euromonitor.com/ FriedlNews. (2013, March 15). Red Bull Sells More Than 5bn Cans Worldwide. Retrieved from FriedlNews: https://www.friedlnews.com/article/red-bull-sells-more-than-5bn-cans- worldwide MarketLine. (2012). Red Bull: A trailblazer in marketing strategy. Retrieved from MarketLine: http://www.ebscohost.com/academic/business-source-complete McNaughton, Marissa. (2012, October 16). How Social Was The Red Bull Stratos #LiveJump Publicity Stunt?. Retrieved from The Realtime Report: http://therealtimereport.com/ Mint Global. (2013, March 13). Company report of Red Bull Gmbh. Retrieved from Mint Global: https://mintglobal-bvdinfo-com.proxy.lib.sfu.ca/version 2013226/Search.Quick.serv?_CID=2&conext=1R5H8NV59MZIRKP&FromId=Home Moth, David. (2013, February 21). How Red Bull uses Facebook, Twitter, Pinterest and Google+. Retrieved from Econsultancy: http://econsultancy.com/ca Radar Staff. (2013, January 18). It’s No (Red) Bull! Chicago Considers Banning Highly Caffeinated Energy Drinks. Retrieved from Radar Online: http://radaronline.com/exclusives/2013/01/Energy-drink-ban-ordinance-chicago-ed-burke/ Red Bull. (2013, March 18). The Company Behind the Can. Retrieved from Red Bull: http://energydrink.redbull.com/company Russell, M. (2012, January 27). BRAZIL: Red Bull gets green light for Brazil facility. Retrieved from just-drinks: http://www.just-drinks.com/news/red-bull-gets-green-light-for-brazil- facility_id106124.aspx The Associated Press. (2013, January 16). Emergency treatment for energy drinks rising in U.S. Retrieved from CBC: http://www.cbc.ca/news/health/story/2013/01/16/emergency-treatment- energy-drinks.html