RED BULL GMBH IN SOFT DRINKS (WORLD) April 2013 SCOPE OF THE REPORT Scope . This global profile focuses on the industry trends in soft drinks. Disclaimer Much of the information in this . All values expressed in this report are retail/off-trade in US dollar terms using a briefing is of a statistical nature and, fixed exchange rate (2012). while every attempt has been made to ensure accuracy and reliability, . 2012 figures are based on part-year estimates. Euromonitor International cannot be held responsible for omissions or . All forecast data are expressed in constant terms; inflationary effects are errors. discounted. Conversely, all historical data are expressed in current terms; Figures in tables and analyses are calculated from unrounded data and inflationary effects are taken into account. may not sum. Analyses found in the briefings may not totally reflect the SOFT DRINKS companies’ opinions, reader discretion is advised. OFF-TRADE RTD VOLUME 534.8 billion litres While Red Bull remains the Bottled Water world leader in energy drinks, it 192 billion litres is facing growing competition from other players. TCCC in Sports and Fruit/Vegetable Bottled particular, with Monster in the Carbonates Sports and Energy DrinksEnergy US and Burn in Brazil, is also Juice Water 169.5 15 billion litresDrinks posing an increasing threat. 62.0 billion 205.1 billion These two markets are emerging billion litres 16.2 billion litres litres Concentrates as energy drinks battlegrounds litres and the implications are 43 billion litres considerable for Red Bull’s ability to remain the number one Concentrates RTD Tea RTD Coffee ranked player. 43.7 billion 30.1 billion 4.5 billion litres litres litres © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 2 STRATEGIC EVALUATION COMPETITIVE POSITIONING MARKET ASSESSMENT CATEGORY AND GEOGRAPHIC OPPORTUNITIES BRAND STRATEGY OPERATIONS RECOMMENDATIONS STRATEGIC EVALUATION Red Bull a pioneer in its category . The privately-owned Austrian Red Bull GmbH company Red Bull’s core business is energy drinks. Dietrich Mateschitz Headquarters: Fuschl am See, Austria and Chaleo Yoovidhya each owned a Regional involvement: Global 49% stake prior to 2012 when Mr Carbonates, sports and Yoovidhya passed away. Mr Category involvement: energy drinks Yoovidhya’s son Chalerm holds the World soft drinks share by off-trade remaining 2%. While Mr Yoovidhya 0.2% RTD volume (2012): was alive he acted as a silent World soft drinks off-trade RTD volume partner. 12.4% growth (2011-2012): . Red Bull has created the global market for energy drinks, and the pioneering Red Bull brand has became synonymous with energy drinks for a large number of consumers. Red Bull remains bullish and ambitious in their corporate brand. Despite rising competition, Red Bull continues to comfortably lead the global energy drinks market in both volume and value terms. However, the threat from The Coca- Cola Co (TCCC) has been mounting. © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 4 STRATEGIC EVALUATION Red Bull continues to see strong net sales growth . Red Bull operates many other businesses aside from energy drinks The company owns and manages a construction company, football clubs, youth academies and TV broadcasting and recently online clothing (Red Bull label only) sales. Additional media products include print magazines about football, motor racing, celebrity gossip and lifestyle. The company has even ventured into the mobile phone service business in Austria, Hungary, Switzerland and South Africa. As a privately-held company, financial information is limited however the company reported . Red Bull reported exceptionally strong net sales growth in South net sales of €4.9 billion in 2012 Africa (+52%), Japan (+51%), Saudi Arabia (+38%), France (+21%), and 5.2 billion cans sold, the US (+17%) and Germany (+14%). Red Bull cited efficient cost representing growth of 15.9% management and ongoing brand investment as underpinning its and 12.8%, respectively. growing profitability. © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 5 STRATEGIC EVALUATION SWOT: Red Bull GmbH STRENGTHS WEAKNESSES Category leader Broad geographic Category limitations Controversial presence . Red Bull has . Red Bull has a broad . In overall soft drinks, . The relatively high established a strong, geographic presence, Red Bull has a limited caffeine content of Red consistent brand image which should ensure product portfolio Bull makes the brand (an independent, edgy positive long-term compared to the rising highly vulnerable to brand) globally. Red Bull growth even if certain number of rivals with a regulatory control. is synonymous with markets reach maturity. plethora of flavour variants and categories. energy drinks in many countries. OPPORTUNITIES THREATS Emerging markets New production Competition High marketing costs . Emerging markets . Red Bull is building a new . Monster represents the . Market maturity in represent newer production facility in Brazil biggest threat to Red developed markets will geographies for Red which is likely to make its Bull as it contains make marketing to its Bull’s expansion. retail price more natural ingredients, core consumers harder Accelerating the competitive than imported which seem more than in the past. marketing and product prices. Building a desirable than Red Bull Constant communication sponsorships in these site in Asia should also be for some consumers. with consumers means markets is a wise move. considered. high marketing costs. © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 6 STRATEGIC EVALUATION Key strategic challenges and objectives It is not easy at the top Red Bull stands up to health regulators . Red Bull’s success has attracted considerable . While health officials continue to voice concerns interest from soft drinks multinationals, TCCC and over energy drinks and the category remains under PepsiCo. TCCC in particular has been successful threat from stronger regulation, energy drinks has at leveraging its distribution network to launch seen relatively little impact in terms of sales. To Burn across many markets and to back Monster. some extent this has added to the category’s Burn is a major threat to Red Bull in Brazil while in “edginess” attracting young consumers and the US Monster has overtaken Red Bull in off- generating consumer interest. There is little risk of trade volume sales terms. Red Bull will need to Red Bull reformulating its product to cater to health find ways to hold onto its number one ranking concerns and instead the company insists that its globally in energy drinks and stave off this competition. products do not pose a health risk. Will premium work in emerging markets? Red Bull breaks with tradition in 2013 . Red Bull has consistently maintained its premium . In 2013, Red Bull, for the first time in 15 years positioning from its slimline metal cans to its price added new products to its energy drinks range. differential versus brands such as Monster. While Edition is a range of three new flavours and thus this strategy has reaped dividends in the mature far available only in the US market. The likelihood markets, it remains to be seen if it will sustain however is that this range will be rolled out to other growth in the emerging markets. Brazil with its markets. The move is a response to growing large population of lower-income consumers may competition. Success for this launch will be crucial pose a challenge giving cheaper brands such as to the company’s growth prospects in the mature TCCC’s Burn a competitive advantage. markets. © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 7 STRATEGIC EVALUATION COMPETITIVE POSITIONING MARKET ASSESSMENT CATEGORY AND GEOGRAPHIC OPPORTUNITIES BRAND STRATEGY OPERATIONS RECOMMENDATIONS COMPETITIVE POSITIONING Red Bull performance wanes towards end of review period . Red Bull underperformed the overall energy drinks market in 2011-2012. While the company’s market share of the energy drinks market in the US increased in 2012, the market’s growth rate overall began to wane. Red Bull remains heavily dependent on the US for its global growth. Weakness here is reflected in the company’s weakening global performance in volume terms. The company however continues to enjoy the position of number one ranked player in energy drinks globally with a 21.4% market share. In terms of absolute volume growth however, the US remained Red Bull’s key growth engine in 2011-2012 reflecting growth of 96% over 2007-2012. Brazil came second in terms of absolute volume growth expanding by 608% over the review period or 48% CAGR. This market was a particular focus for Red Bull with the company sponsoring various sporting events in order to raise the brand’s profile. © Euromonitor International SOFT DRINKS: RED BULL GMBH PASSPORT 9 COMPETITIVE POSITIONING Red Bull faces mounting pressure . In value terms, the company’s performance was stronger in recent years although even in value terms the company’s performance fell below that of the energy drinks market overall. The energy drinks market has attracted a number of other players including Monster Beverage Co, and The Coca-Cola Co (TCCC) which marketed it own brands in the category including Burn as well as engaging in a distribution alliance with Monster Beverage Co. PepsiCo had a modest presence in energy drinks with its brand Sting; however like TCCC it maintained its own alliance, with Rockstar Inc. Red Bull’s sister brand non-carbonated Red Bull remains