Contents- Page(s) 0.0 Abstract 2 1.0 Introduction 3 2.0 History 3-4 3.0 Does Red Bull® Revitalise the Body and Mind? 4-5 3.1 What are the ingredients in Red Bull®? 5 3.2 Red Bull®’s adverse health effects 6 3.3 Has Red Bull® profited from controversy? 6-7 4.0 Red Bull® a non-descript market? 7 5.0 How is Red Bull Marketed? 8 5.1 Sponsorship 8 5.2 Advertising 9 5.3 Brand Image 9 5.4 Some of Red Bull’s extreme sports athletes and events in pictures 10 6.0 Revolutionary Marketing 11-12 7.0 Maintaining market share 13 8.0 Competition and Intellectual property 14 9.0 Discussion 14 9.1 Diversification of product range 15-16 9.2 Drinks for the “Health Conscious” consumer 16-17 9.3 New Marketing Ideas 17 9.4 Expanding the business model 17 9.5 Business Ideas and Partnerships 18 10.0 Swot Analysis 1987 VS 2009 18-19 11.0 Conclusion 20 12.0 References 21-24 13.0 Appendix 25 Definitions: Well being; a person’s physical mental and environmental health Neutraceuticals; foods which have medicinal effects on human health Page | 1 When we first started, we said there is no existing market for Red Bull ... but Red Bull will create it. And this is what finally came true. Dietrich Mateschitz (Dolan 2005 p.1) Red Bull®’s 1987 launch established an “energy drinks” market. In 2009 they continue to dominate the globally. How did they achieve? How do they plan to maintain their stronghold? 0.0 Abstract In 1987, revolutionary marketing and advertising techniques coupled with fortunate circumstances enabled Red Bull to create the “energy drink” market. In today’s diverse and ever-expanding market of 228 competitors, Red Bull is likely to lose overall global market share. Ever optimistic, Red Bull continues with extreme sports sponsorship, creating events, nurturing the Red Bull® “lifestyle”, a strategic business plan including expanding into emerging markets and developing products and plans to include multi-million dollar resorts and theme parks. Red Bull® has every reason to be confident of its future. Page | 2 (You Tube [ca. 2004]) 1.0 Introduction In 2008, the worldwide Functional Drinks market was worth $26.9 billion. Relatively new and still developing, by 2013 the market is expected to expand by 64.3% to a value of $44.3 billion (Datamonitor PLC 2008), spread over three different categories: Sports, Energy, and Nutraceutical. These products aim to improve users, physically and mentally or just improve “well-being” (Moosa 2002; Datamonitor PLC 2008). With energy drinks being the largest sector at 47.3%, Red Bull®, was first of its kind, holding a 29% global market share in 2008. (Datamonitor PLC 2008). “Spreading its wings” internationally since its birth in 1987, 2008 saw Red Bull® GmbH worth €10.9 billion, selling over four billion cans worldwide in 70 countries (Müller 2009). Dietrich Mateschitz 2.0 History (Gschwandtner 2004). Red Bull® was the brainchild of Austrian, Dietrich Mateschitz, ex-managing director of toothpaste manufacturer Blendex, where he travelled widely, experiencing different cultures (Gschwandtner 2004). On one business trip, Mateschitz read that one of Japan’s highest taxpayers was Mr. Taisho, manufacturer of an energy giving drink. Later in Thailand, he learned that taxi drivers use these drinks to counter (Kratin Daeng fatigue. Mateschitz also noted that the drink’s ingredients lacked a patent [ca. 2008]) (Gschwandtner 2004). Armed with this information, in 1984 he approached Chaleo Yoovidhya, owner of Thai company TC pharmaceuticals, producer of the “Kratindang” energy drink (Gschwandtner 2004). Mateschitz’s concept was to form a company selling its own energy drink worldwide at a premium price (Keller 2004). Chaleo agreed, each took a 49% stake, investing half a million dollars. Chaleo’s son took the remaining 2%, and Mateschitz agreed to run Red Bull® (Dolan 2005). Red Bull® was first established in Austria. Initially wary of the product’s unusual ingredients, Austria’s government insisted on stringent scientific safety testing. Thus, Red Bull® was not licensed until 1987. Subsequently, this regulatory procedure proved a mixed blessing for Red Bull® (Gschwandtner 2004). Page | 3 The iconic eye-catching logo and slogan “red bull gives you wings” were then designed (Gschwandtner 2004). By 1990, despite high sales figures, and a lot of promotion, Red Bull®’s finances were in the black. To this point, funding had been 90% equity from the two partners and 10% bank loans (Gschwandtner 2004; Dolan 2005). Ambitious Mateschitz now believed Austria too small a market for Red Bull®. In 1993, Red Bull® moved into such countries as Hungary and Germany, planning to pre-market the little 250ml can by word of mouth across Europe (Gschwandtner 2004). Red Bull®’s Kraihamer commented, “We do not market the product to the consumer, we let the consumer discover the product first” (Keller 2004, p.119). This “Buzz” marketing proved highly successful, and inexpensive. Red Bull®’s controversial ingredients made it a “cool” fashion icon. Its mixability with vodka, coupled with extreme sports sponsorship, helped the drink tap into the young “hip” market (Cooney 2007; Gschwandtner 2004). By 1997, Red Bull® had conquered most of Europe including the UK. It then moved onto the USA, working state by state with a similar “buzz” technique (Hein 2001). Today Red Bull® is now Austria’s most successful brand, worth more than €10.9 billion, with diamond producer, Swartzkopf being worth half as much (Muller 2009). 3.0 Does Red Bull® “Revitalise the Body and Mind” ? Red Bull® is billed as a drink which: Red Bull® is best consumed:, • Improves physical endurance, • At times of increased mental and physical strain, • Stimulates metabolism and helps • On long sleep-inducing motorways, eliminate waste substances, • During intensive working days, • Improves overall feeling of well-being, • Prior to demanding athletic activities, • Improves reaction speed and concentration, • Before tests and exams, • Increases mental alertness (Keller 2004). (Redbull.com (a) [ca. 2009]). Some consumers are easily convinced of Red Bull®’s effectiveness. Nicknames such as “liquid speed” and “liquid cocaine” along with peer pressure build hype around the product (Kumar, et al. 2004). American college student Kaytie Pickett illustrates this: “Maybe I think it works just because they say it works... I’m a slave to peer pressure” (Walker [ca. 2009]). Page | 4 Other consumers are more sceptical. Brandweek reported in 2008 that Red Bull® was one of the UK’s lowest ranked companies in a survey of perceived brand value (Brandweek 2008). Despite the odds, studies proved the drink’s effectiveness. One such study was on ten individual graduate students, five of which were given a placebo, the rest Red Bull®. Conducted before and several hours after consumption, the results proved conclusively that: ...the mixture of three key ingredients of Red Bull Energy Drink used in the study (caffeine, taurine, glucuronolactone) have positive effects upon human mental performance and mood (Seidl, et al. 2000). Whereas most products spell out exactly what they do, Red Bull® uses vague terms, “Vitalizes Body and Mind” (Walker [ca. 2009] p.2) relying on consumers to purchase the drink and discover its effects themselves. (Walker [ca. 2009]) 3.1 What are the ingredients in Red Bull®? Red Bull® 250ml cans contain; Taurine is Red Bull®’s most controversial ingredient. In • 80mg of caffeine, organic form, it was discovered in the bile of a bull (Irving • Taurine, Sax, et al . 1987 ). This is the likely source of not only the • Glucuronolactone, name, but also rumours that it is made from “Bull Testes” • Sugars, or that it contains “Bull Semen” . In the drink, taurine comes • Vitamins (Keller, 2004 p.117). in synthetic form (Redbull.com (c) [ca. 2009]; Walker [ca. 2009]). Human beings produce taurine in a form similar to that of an amino acid. During extreme physical activity, the body may require more taurine than is produced. Taurine's metabolic stimulatory effects help the body work harder. (Keller 2004; Healingdaily.com 2009). Equally, its detoxifying effect helps counter fat build-up on the liver caused for example by excess binge drinking (Healingdaily.com 2009; McCall 2005). Glucuronolactone is a naturally occurring amino acid in human beings, produced by glucose breaking down in the liver. It also removes toxins from the body and is a metabolic stimulator, fighting fatigue, and producing a feeling of “well being” (Keller 2004). Theoretically, these supplements should help the body to perform better, when under stress, fatigue, or performing physical exercise. Page | 5 3.2 Red Bull®’s adverse health effects Red Bull in suspected link to deaths (BBC News Online 2001) Despite Red Bull®’s beneficial effects, some users have had adverse effects from consuming it, and as many as five people have died. A 16-year-old volleyball player would faint during games, and gain a heart rate increase of 30bpm. Diagnosed with “postural tachycardia syndrome” , she told the doctor that during the week she would drink four to five cans of Red Bull® daily. Returning to normal a month later having stopped drinking Red Bull®, doctors believed that high concentrations of taurine in the brain might have interfered with her cardiovascular system (Terlizzi et al. 2008).1 In 2001, an 18-year-old basketball player shared four cans of Red Bull® with friends, played a game, then later died of Sudden Adult Death Syndrome. An investigation was recommended into high caffeine content drinks (Medicalnewstoday.com 2004). Two clubbers died in 2001 after drinking Red Bull® with vodka, a third died after drinking it after extreme physical exercise. No results were published into the relationship between Red Bull® and their deaths (BBC News Online 2001).