This report analyses Red Bull and the energy drink market it has created. It aims at discussing the strategies that Red Bull has used to become a market leader in the energy drink market. The report also sees how Dietrich Mateschitz as a leader of Red Bull has influenced Red Bull to be the leader of the segment. It also focuses on areas where red bull lags behind its competitors and recommendations have been proposed to overcome the competitors.
Red Bull was first created in the mid 1980’s by Dietrich Mateschitz, who created the unique formula for the energy drink and also developed the marketing concept for Red Bull. Since then the company has grown in to a multinational business with its product selling in over 165 countries. Red Bull has more than 8,500 employees as of 2012 and the number continues to grow. In 2012, the company’s turnover increased to over EUR 4.9 billion, which is a 15.9 % increase from its previous year. This positive figure can be attributed to the sales growth the company continues to achieve in various countries like South Africa, Japan, and Saudi Arabia etc… Measuring Success
The factors that define success vary from business to business, it is important to choose the relevant measuring factors to measure the success of a business or an organisation. Usually, analysts and managers use verifiable data to measure the success of an organisation and confirm that the business is running well. Here are some of the factors that define success for Red Bull. Profit
When measuring success, profitability is probably the first thing that comes to anyone’s mind. In simple terms profit can be defined as the money left after paying the monthly operating expenses and the debt of the company. In Red Bull’s case the profit in 2012 is expected to be around EUR 311 million (lifestyle, 2012), which is a 40 per cent increase from the previous year. Customer Base
To achieve the profitability desired it is important to keep the customer base growing. The growing customer base of a business is a sure sign of its success. Without reaching out to the target customer base the success of a business will be limited and the growth of the company will be tied back. With a market share of over 40 per cent Red Bull sure has a strong customer base and through its viral marketing techniques it reaches out well to its consumers.
Figure [ 1 ]: Energy drink market share 2012
Social Media is an important part in brand-building; it helps to create an awareness of the brand to social media users. Social media attracts customers to companies and helps in creating a loyal following. So in the current era it is important for an organisation to have a social media presence. With over 600,000 subscribers on Youtube and more than 26 million likes for its Facebook page Red Bull has a strong social media presence and shows the success of the brand. (Vaidya, 2012)
Reasons for Red Bull’s Success
Since its inception Red Bull has been a market leader in the energy drink segment, the key reason being its strong marketing techniques. Its innovative marketing has enabled Red Bull to bring people to the product and no the other way around. These are the various marketing strategies that Red Bull has employed to reach out to its customers. * Media Advertising
* Sports-and Event-Sponsoring
Red Bull makes use of all the media channels such as radio, television, cinema, press and internet to market its brand. Its primary focus being the young population it uses these channels to reach out to the young people. Red Bull uses humorous and witty cartoon campaigns to reach out to the young people. This simple idea is not only enjoyed by the customers but also helps them to easily remember what the product delivers and what it is called. Sports and Event Sponsoring
Sponsoring supports the brand image that Red Bull has created and maintained. They focus on sponsoring the athletes and extreme sports such as free climbing, paragliding, motorsports and other fun events, where Red Bull is needed. This method helps attract young people and helps them to easily connect with the image of Red Bull. Sampling
This method is tested and proven in many markets. As the major purpose of the Red Bull energy drink is to energise the company gives samples at the right place and right time where it finds its target market. This method has proven to be very successful for Red Bull. Target market
As Red Bull is consumed in many geographic locations it would not be right for Red Bull if it had segmented the market into geographic areas or psychographic segmentation. This is because a product like Red Bull cuts across demographics, socio-economic boundaries and lifestyles, and the best alternative would be to position the target market according to their behaviour that is, behavioural segmentation.
This method would be efficient because behavioural segmentation is about the individual’s connection with the product and the benefit from the product. Red Bull can be called as a utility drink instead of an energy drink because it can be taken for physical or mental exhaustion. But one thing that we can be sure of is that a typical Red Bull drinker is active and dynamic and it is more likely that the younger people who fall for Red Bull. So they segment the market into three categories which helps them to market their product efficiently. * The athlete
* The clubber
* The worker
An athlete is a person who takes his sport very seriously, which means that he will want the best out of his body. So in order to achieve that Red Bull can be added to part of his everyday diet and sport life. This will help in improving his speed and endurance levels.
In recent years people have found that Red Bull can also be used as a good mixer with almost any kind of alcohol. And Red Bull sells about 34% of its units on ground. This helps the club going young people to stay awake longer and to report fewer symptoms like tiredness or sleepiness. This has helped Red Bull to boost its sales across the globe.
This could be anyone from a street worker to a manager in a multinational company. Anyone who wants to push up their energy level and get out of mental exhaustion prefers a Red Bull over a cup coffee these days.
Being a private limited
Although many people consider public listed companies to be more advantageous, Dietrich Mateschitz considers it to be an advantage for the organisation. Being a private company eliminates the pressure to meet the short-term goals of shareholders and also does not require the company to disclose information which can be an advantage to competitors. Also, private companies do not have to satisfy the requirement of the share holders and can invest in their long term goals. This will help them to invest their money and time in the areasthat is required for the growth of the organisation.
If a company goes public it is required that it follows certain rules when it comes to corporate governance. Being private does not have to follow these regulations and gives the organisation the freedom to do what is right for the company. It also gives the organisation more flexibility when it comes to its governance structure.
For people who know what business is, Red Bull is not just as energy drink, it is a product that redefined the tradition of marketing. Selling over four billion cans every year and dominating the energy drink market, with a 40% market (Aaker, 2012) share against its rivals Monster and Rockstar. The man behind the rise of Red Bull is Austrian Entrepreneur Dietrich Mateschitz-founder of Red Bull. By creating Red Bull he has not only created an energy drink, but he created a new market. Red Bull has always relied heavily on his carefully crafted guerrilla marketing approach.
This means shaping the product by taking up a creative and different strategy without deploying vast resources, and the result has been fabulous. Even when the competitors were already well established organisations Red Bull was set against them. Mateschitz has taught us how to exploit success; any leader will tend to concentrate more on the problems rather than focusing on opportunities. But, Mateschitz showed that the best chances for thriving is to capitalize on the success and use it as a platform for further development. He also showed the world that mass marketing is not the only effective way to reach out to consumers. Wings to Red Bull
When he first launched Red Bull 15 years ago, Mateschitz wrote a new chapter in the history of marketing. Mateschitz’s marketing’s techniques is what sets Red Bull apart from its competitors and is the critical factor in its success. When he was first about to launch his product he knew it would demand some extra effort in selling it. So, he left his job in Procter & Gamble and put all his marketing knowledge into his new business. He wanted to make his business a success so he took care of everything, from naming, branding, packaging and marketing.
It took Mateschitz more than three years to develop Red Bull’s image, marketing strategy and packaging before he launched the product in Austria. Instead of employing famous celebrities to endorse the brand, Mateschitz employed upcoming and unknown personalities to appear on marketing campaigns and Television ads. Red Bull spends about 30 to per cent of its revenue on marketing, whereas on the other hand Coke spends only about 9 per cent of its revenue on marketing. Instead of using the conventional marketing techniques, Mateschitz persuaded students to throw Red Bull parties with weird and catchy themes or drive around in Minis and Beetles with a Red Bull can that was fastened on to the top of the car. This relates to the type of person that he is, fun loving and wanting to explore. Red Bull also sponsors events such as Formula One motor racing and other extreme sports, the sort of events Mateschitz loves. These qualities as a leader have contributed majorly to Red Bull’s success and the image Red Bull has created over the years. Without Mateschitz Red Bull could have been any other conventional soft drink and not possible made it big.
Currently Red Bull is being produces only in Austria, where their head quarter is located. This is a disadvantage because it increases their transportation cost which reflects in their pricing. For the first time they are setting up a production unit outside Austria in Brazil , which will cater to the needs of the Americas. However, as these markets are starting to get saturated and there are still many untapped markets in the Asia pacific region they should set up a production unit in that region.
Although, the one product method is advantageous in the way that Red Bull can fully concentrate on its energy drink market it also is a threat to the company. Saturation of the energy drink market can prove to be fatal to the company. In order to avoid that they can diversify in to different product categories like Red Bull sports clothing or Red Bull energy bar or something that best suits their brand image.
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Leading players in energy drinks by off-trade volume and value
Most Dynamic Energy Drink Markets (Volume)
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