Energy Drink and Red Bull

Red Bull is the leader of the energy drink market. Red Bull is an Austrian produced energy drink. It competes in a very narrow niche of the carbonated soft drink market. The discovery of Red Bull was made during a business trip to Hong Kong in the 1980’s by an Austrian entrepreneur, Dietrich Mateschitz. Its main focus was Europe, as this part of the world was yet to be established within the energy drinks market. Though, the unusual high quantities of caffeine in the ingredients, was going to prove a difficult task to do. Red Bull is a non – alcoholic energy drink. This product falls under the category of soft drinks which can be divided into sub-segments of which one of these is energy and sports drinks. Since 1996 the market of soft drinks has grown by 5% and by 1997 it reached it a total amount of £6.89bn, which is an equivalent of 10bn litres.

Red Bull is the leader of the energy drink market. This company performs an annual turnover of more than 3 billion Euros. As we will see in this report, polemics, nonconformist, genius marketing are, among others, the ingredients that made Red Bull the star product of Energy Drink Segment in the world. For more than 20 years, Red Bull has managed to establish itself brilliantly in the world. The reason for choosing Red Bull?

Most of the people have one day see or heard about the brand Red Bull. Red Bull is an energy drink that comes from the adaptation of the Thai energy drink “Krating Daeng”, which means “Red Bull”.

The reason of choice results in a cultural factor. In fact Red Bull is a product that is targeting young customers. It means that, students are the most concerned by Red Bull so this is a product that can affect any of us. Besides it is a “trendy product” in others words a fashionable product: nowadays everyone has already tasted a Red Bull. In this report, we will analyse Red Bull and the environment in which the company evolves, its target and positioning trough marketing tools. It will enable us to understand how Red Bull managed to reach its leader position.

Marketing Audit
Product portfolio
Red bull has within its portfolio, 4 successful products; red bull energy drink, red bull sugar free, red bull cola and red bull shots. To see how each product lies within its market share, the BCG matrix model can be used. This type of analysis provides a useful insight into likely opportunities and problems associated with a particular product. (Brassington & Pettitt, 2005, pg 400) HIGH MEDIUM Question Mark

Red bull Cola
Star
Red bull energy drink
Red bull sugar free

Cash Cow
Dog
Red bull shots
LOW

The BCG matrix suggests following strategies:

* Promotion of Red Bull cola should be carried out globally to spread awareness * Product Development by introducing taurine free red bull and other flavours

Sales forecasting

Goals Recorded are for the following year (March 2011‐February 2012) * Revenue
Through the following year, Red Bull has set a goal to increase revenue by 20% $6.22 billion. By gaining customers in a new demographic, as well as releasing a revamped campaign, Red Bull believes this is possible. * Market Share

Red Bull anticipates through the following year to be able to increase its market share by 10%, raising it to 58% of the market share. Through various media channel, Red Bull has set a goal to set itself further ahead from all competitors and build an undeniable brand loyalty among a different demographic. The Macroenvironment

* Political and legal
Red Bull was introduced into the market as a new non-alcoholic drink with a new concept, namely energy drink. At first this proved to be very difficult as Health Organisations was suspicious that Red Bull could be a starter drug. Their thoughts and suspicions even increased after rumours that Red Bull contains ingredients like bull’s galls. However, the fact that Red Bull has been used in Australia for 9 years and in Asia even for 30 years without any complaints led to increased confidence. A study carried out by an independent institute (ISME) in 1998 proved that Red Bull has stimulating effects like caffeine, but does not lead to addiction. Red Bull still needs to be approved by each country where it shall be sold, which is a very time consuming and therefore very expensive. Some countries still have doubts about Red Bull like e.g. Hungary where Red Bull is forbidden. Initially this was also the problem in the UK, where Red Bull was only allowed to be sold after its harmlessness had sufficiently be proven. * Economical

Red Bull faces little exposure to economic cycles as it is a special drink, serving a niche market. Their target markets are athletes, students and hard working people, who need a lift, a boost of energy. Through their well positioned advertisements their sales are increasing. * Social

Unlike the 1980’s, where nobody wanted to try it, people are now much more open to new experiences. There is more of a confidence to try it, because any health concerns were cleared by organisations like the ISME. The customers are male and females, who are very sporty or work very hard. At the moment Red Bull has a very trendy image and gets sold in a lot of bars and clubs, where it is often mixed with Vodka which is also known as white bull.

* Technological
Red Bull gets exclusively produced in Austria from where it is exported to 28 countries. There are two reasons why it does not get produced in any other country. This guaranties that it has the same in taste. Red Bull wants to ensure that it tastes the same all over the world. Red Bull is normally produced in 250ml cans, but glass bottles are an alternative in the case that they run out of cans -which has happened before. * Environment

The can is made of recyclable aluminium and therefore environmentally friendly. Glass bottles can also be recycled and therefore do not harm the environment either. This might give the company a competitive advantage when regulations become stricter in the rest of the world.

Competitors
Energy Drinks have become very famous in the last decade. During the last ten years, there were hundreds of them being established around the world. All of these are successfully marketed as energy spending and the drinks are a very suitable mixer with alcohol. In the UK, the development in the energy drink market has only grown slightly compared to that of America. There are only very few serious competitors of Red Bull in the UK . So far the serious direct competitors of Red Bull in the UK are the following: Purdey’s Gold High Energy

Ingredients: Vitamins, Sugars, Herbs and Carbohydrate Design: Golden 325ml bottle Price: £ 1.03 Family: Glucose and High Energy Drinks http://www.drawert.com/red_bull_5.php

Indigo
Ingredients: Wolberry, Guarana and Schizandra Design: Blue 375ml bottle Price: £ 0.79 Family: Glucose and High Energy Drinks Marketing: Natural Quality Refreshment; Sampling and Press Ads Lipovitan B3

1997 launched in the UK , in Japan since 1962
Ingredients: Taurin and Caffeine (smaller amounts) Design: Golden 250ml can Price: £ 0.99 Family: High Energy Drinks Marketing: High Quality, delicious and healthy, extensive TV Ads, Press Ads, Outdoor, Sampling Lucozade Energy

Ingredients: Caffeine, Glucose (aimàimitate Red Bull) Design: 350ml can / 300ml bottle in Lucozade design Price: £ 0.49 Family: Glucose and High Energy Drinks Marketing: Fitting the Lucozade Family

Indirect competitors are those from the glucose energy drink family. The largest distributor of those drinks in England is Lucozade with a huge product range because it offers many different flavours. Lucozade owns approximately 90% of the market share of sports drinks which probably is the result of high media spending and the tradition of the company (1927). It is a family brand name that has past down from generations.

Swot analysis
* Strengths
Its market leadership – globally within the energy drinks market. Marketing effort – a lot of promotions and its well targeted campaigns and sponsorships. Its brand identity – it is strong, fresh and fashionable.

* Weaknesses
Its prices are well above the average for this drinks market. Its lack of innovation – there are a lot of competitors in the market who have their own unique selling point which leaves Red Bull behind. Its failure to hide the recipe – which is printed on the side of the can. * Opportunities

To extend its product line further – to help retain the market share. To go hard on the process of advertising and promotions.
The customer recognition through sponsorship or sports events. * Threats
Health concerns – the government is tightening up on its rules for a high caffeine content. Its customer’s awareness of health and well being – people may turn to an alternate drinks as they may seem healthier. Organic products are becoming more popular so may steal some of Red Bulls market share. Segmentation

Red Bull looked at its customers lifestyles, not only to cover the demographics of its product but to get a real sense of the its customers attitudes, beliefs and aspirations. Plummer (1974) was an early exponent of lifestyle segmentation, breaking it down into four main categories: activities, interests, opinions and demographics (Brassington & Pettitt, 2005, pg 117). Red Bull used this as part of their segmentation process. This is how it sees its target customer. * Demographic

This is a big age group of 15 – 60. Though it specifically thought that Red Bull was originally aimed its product at students, it was also produced to appeal to sports men and woman and extreme sports person. Our athletes are getting younger and as a country there is also the promotion of a healthier lifestyle. * Psychographic – opinions

Red Bull needed to appeal to customers who indulged in content. These people are also very conscious of their image. So rather than purchase an average energy drink, regardless of price the need was to have the best energy drink and most widely known. This would also lead to influential marketing. These types of people love to be influenced and are not able to control it. * Activities – behaviour

This type of person has the need to spend a lot of money. Money may or not be an issue but for this type of person, money is not an issue rather than a need. There is also the need to fit in a club or society and it is highly fashionable to be in a trend. * Interests

This is aim at people with high physical active lifestyles. Red Bull is the correct drink to keep them high in energy. We also look at people who enjoy going out to dine a lot. It is especially in the younger market to now drink red bull or have a vodka and red bull mix with your food, commonly known as white bull. When we look at the above analysis, it is clear to see this revolves around the needs, wants and demands. There are three basic needs that Red Bull satisfies, physical, social and individual. It is very interesting to see that Red Bull is not only a drink but is a motivator. We can see how from Maslow (1954) hierarchy of needs theory that until the bottom theory has been fulfilled we are unable to motivate ourselves to the next. Physiological needs are basic feelings such as hunger and thirst that can be potent driving forces. (Brassington & Pettitt, 2005, pg 79) Though Red Bull has distributed its drinks in over twenty countries it would not be very useful to restrict the target market to the geographic areas as well as the psychographic segmentation for the targeted consumer that’s because for a product like Red Bull it would be to far to narrow as it cuts across lifestyles. So the best solution would be to set the target market as a behavioural segmentation (Drawert 2011).

Viral Marketing
In recent years, the viral marketing strategy is widely practiced by companies because it meets the key desire of marketers in terms of buzz and spreading the word around in a very quick and inexpensive way. Now many companies use a lot of social networking sites as part of their viral marketing strategy. The success of a viral marketing campaign is based on the principles that people want to be funny, cool, rich and loved. Red Bull gives people the opportunity to believe or achieve in one of these principles by them entering an extreme sports competition. This then develops a very funny viral video which is used in the viral marketing adverts and is aimed for the people to pass around, so there is the continuous success of promoting red bull.

When Red Bull first hit the UK market it is believed that its branding strategy was revolutionised by using a tactic called anti-brand. This strategy is used because the competition Red Bull faced was from Lucozade. Not only had this been the biggest energy drink in the UK for many years, it was also used by all ages as a medicine type product in the aid to soothe colds and flu. Red bull relied on unusual methods of marketing such as buzz marketing or word of mouth. To do this with an instant effect, it needs was to create a brand image that is associated with the youth as there was no possibility of winning over the older generations who had a strong belief in the product they had always been associated with, Lucozade. It associates itself with the youth culture with adventure related sports such as mountain biking, snow boarding, motor sports and dance music.

To ensure that viral marketing worked well, Red Bull has ensured that its brand is visible on the street by the following: * Its eye catching logo was designed to promote Red Bull as a youthful energy drink. * DJs are given free Red Bull and asked to leave their empty cans on hotspots such as trendy bars, pubs and clubs. * People on the street who are spotted as being in need of energy are often stopped and given a free can of Red Bull. * The use of cars and trucks as a display. They are painted red and silver with a giant Red Bull can on top of the vehicle. Who is likely to miss that. One of its most effective communication strategies is how Red Bull uses above-the-line advertising as a tactic to build up its image and awareness. It introduced the campaign called ‘Red Bull gives you wings’ to reflect the brands personality of being charming, witty and unpredictable.

Marketing Mix
Red Bull has a great image and is the market leader. Therefore is has two objectives: Maintaining the lead and trying to extend it by creating further consumer needs for Red Bull * Product
The product is fine as it is, over 60% of the under 30 year old Germans recognise the brand unassisted. People are happy with the product. Only the image can be strengthened. * Price
Also the price should stay the same, a high price is inadmissible to keep the image of a high quality product. Only place and promotion can add further value to the image.

* Place
In 1998 only 20% of Red Bull’s sales were distributed through retail. As Red Bull is a utility drink, consumers only buy it occasionally. Therefore they do not necessarily buy the drink in supermarkets, but rather at petrol stations or off-licence retailers. As Red Bull has already reached market leadership in the rest of Europe with rising sales figures, the company will have a influence on the wholesalers product displaying policy ( PDP). In the near future Red Bull will become a more established and demanded brand. * Promotion

Red Bull has already increased its budget; the goal is up to 50% of revenues. A high percentage of the budget is spent on sponsoring. In the future Red Bull should extend the promotion and ad-activities in order to maintain their leader position; there shall be more Red Bull stands at ski huts giving a way Red Bull mix drinks, which are a mixture of Red Bull and champagne.

Conclusion
How far can Red bull continue to carry this product?. Even though the company does produce other products, we can see from the BCG Matrix model that its star product is the original Energy drink. The star promotes a successful leadership product but for how long? There is also a concern of the target market generation ‘y’. For how long can a trend develop for and how long will this youth continue to be brand loyal especially with so much unemployment, which is can they afford to be loyal? I believe Red Bulls biggest fears are there competitors. Giants such as pepsi and coke do not have to go to the same advertising lengths as Red Bull.

They are so well known globally and they both have huge product portfolios compared to Red Bull. These products could also become major factors in the energy drink category too. Mateschitz, t he founder of Red Bull believes that he created this market and if its product is appreciated, that the only product in this category is the original product. Who wants to buy a Rolex which is made in Taiwan. If Red Bull wants to continue with its market position then the company do really need to consider extending the Red Bull brand or is will Red Bull slowly fade from the energy drinks market. The one prospect that Red Bull has is that even in tough economic times, every year the company profits still continue to grow. May be Red Bull need to reconsider its marketing segment because at the moment people only associate Red Bull with a particular activity or need at a particular time of the day. The need maybe to turn it around as a more socially used beverage and just not for those who lack energy.

Bibliography

Brassington, F.,Pettitt,S. (2005) Essentials of Marketing. Harlow: Pearson Education Limited

Drawert, (2011). The Marketing Strategy of Redbull [Online], Available at <http://www.drawert.com/red_bull_1.php> [Accessed 28th May 2011]

Scribd, (2011). Red Bulls Marketing Mix [Online], Available at <http://www.scribd.com/doc/19489027/Red-Bulls-Marketing-Mix > [Accessed 22nd May 2011]

Redbull, (2011). Products and Company [Online], Available at <http://www.redbull.co.uk/cs/Satellite/en_UK/red-bull-energy-drink/001243026254412> [Accessed 10th May 2011]

Yaqoob, M. (2011) Red Bull Marketing Strategy. The Red Carpet Broadcast [Online], Available at <http://www.trcb.com/business/marketing/redbull-marketing-strategy-7 375.htm> [Accessed 20thMay 2011]