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Energy drinks have been around for more than 120 years on the world market and have a turnover of approximately 2,500 million dollars in 2003. Just the United States of America had a value of more than 300 million dollar which was sold in energy drinks. Today there are more than 200 brands in the world who sell energy drinks. One of them is the Red Bull GmbH which I want to investigate in the following Marketing Strategy Analysis.
The company Red Bull has its origin in 1984. The Austrian businessman Dietrich Mateschitz was working for a toothpaste company in 1982 travelling around Asia. On his journey he discovered 'Krating Daeng' the equivalent translation for Red Bull in Thai. This was the favourite drink of the workers at a factory. Mateschitz contacted the owner and agreed to set up a new company together with his son. The birth of the Red Bull GmbH in Austria was in 1984. This year the successful story of the energy drink manufacturer began. The company has made excellent progress until 2010 and had a turnover of 5.12 billion dollars. The number of cans sold in 2010 amounted to 4.2 billion sales.
Red Bull has got a 70% market share on the worldwide market of energy drinks. They are sold in over 160 countries in the world and are the market leader in the USA as well as in 12 of 13 West European countries.
Red Bull is a lightly carbonated drink that enhances mental and physical activity. It is a blend of ingredients found naturally in your body. Next to the energy drink Red Bull created in 2008 a new drink named Red Bull Simply Cola. The product ingredients are 100% natural and Red Bull wants to reach a market segment that is unlike traditional cola's.
The target market of Red Bull is young, on the go people with an age between 18 to 35. Especially people who enjoy an active nightlife or do extreme sports the main consumers. Red Bull consumers are sceptical of traditional marketing. The price of Red Bull products differs from its markets but it is has a high price everywhere. A can of Red Bull costs three to six times more than a can of cola.
Porter's Five Forces
Michael Porter has identified five forces that determine the intrinsic long-run attractiveness of a market or market segment: industry competitors, potential entrants, substitutes, buyers, and suppliers. His model is shown and performed below:
Rivalry among existing firms (Result: Low)
Red Bull has about 100 competing companies, including the largest competitors 5 Hour Energy Drink and Rockstar Energy Drink. Next to the market of energy drinks there are several manufacturers of soft drinks who are competitors for the same market segment. Coca Cola for example with their products 'Full Throttle' and 'Monster' , Pepsi with their products 'AMP Energy Drink' or Gatorade with their rebranded products 'G' and 'G2'.
The growth of the energy drink market and high margins attract many large companies to enter. All competitors are trying to compete the Red Bull brand and to win market share.
On the market there are many companies trying to copy Red Bull. Red Bull claims, however, from its customers that they are very brand loyal. In a survey researchers note that 40% of Red Bull drinkers would buy a different brand, if not a Red Bull is available.
Because of many new companies a contradictory relationship has developed on the market. This led the market gain exposure for brand and product development.
Threat of New Entrants (Result: Medium)
The advantage as a new entrant of Red Bull in the energy drink market has declined because the market has changed. Red Bull is the market leader in the energy drink market such as Coca Cola and Pepsi in the cola market.
The positive economies of scale that are achieved by Red Bull, allow the company to offer a competitive price. The customers seem to accept the high prices and high profit margins, demonstrating the success of Red Bull.
Red Bulls as the market leader has a great power. The company is confident that customers remain loyal and continue to pay the high prices even if a large competitor such as Coca Cola comes with a rival product to market.
Determinants of Buyer Power (Result: Low)
The buyers in the energy drink market are not price-sensitive. They are at the upper end of the market. For most of the buyers, it is necessary to buy a drink at the end of the day regardless of price.
The relationship between manufacturers and traders has developed. During the life cycle, the power relations have shifted. Due to the popularity of energy drinks is a pull-effect emerged on the market, so that the negotiating position of retailers weakened significantly
Threat of Substitute Products (Result: Low)
Stimulating and refreshing drinks are leaving a Fast Moving Consumer Goods (FMCG), or commodity, and therefore, usually on the spur of the moment or impulse buying. Price sensitivity is low is in the target segments and the risk of substitution for a strong brand with a high customer loyalty like Red Bull is low.
As the market leader Red Bull is not forced to lower prices. On the contrary, as a leader they want to maintain the high prices for high quality.
On the beverage market, further drinks without caffeine are available that can give the body an energy boost. Smoothies for example produce a greater energy boost with less sugar and a combination of complex carbohydrates and protein. In addition, it is possible with plenty of fluids such as water and herbal tea to compensate a lack of energy balance.
Determinants of Supplier Power (Result: Low)
A relatively simple production process is very limited the power of suppliers.
With a relatively short supply chain, the value added at each stage leads to significant gains. However, the only access to this attractive market for suppliers with a trademark holder, pushing the balance of power in the favour of the latter.
Low capital costs
The overall evaluation of a company's strengths, weaknesses, opportunities, and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment:
External environment (OPPORTUNITY/THREAT) analysis
Internal environment (STRENGTHS/WEAKNESSES) analysis
Themost popularenergydrinkin the world
The demandforRedBullhas grown everyyear
RedBullreached a high number of population withinthetargetdemographicgroup
RedBullkeepsbrand selection varied,with onlya fewsmallitems
Increase awareness of Red Bull's dominance in the sport drink market
Strengthen the relationship between
Red Bull's target audiences.
Increase Red Bull's sales in new markets such as Brazil, India as well as more Western markets.
Not a patented drink product
Health risks associated with over consumption.
Competition is increasing
As the market leader and international operating company Red Bull pursues several objectives on the market of energy drinks as well as on the market for non-alcoholic drinks. On the one hand the strength of Red Bull in market share and revenue should be preserved and on the other hand new markets should be opened up.
As mentioned there are two main objectives for the future:
1. To maintain the position as the leader in energy drinks Red Bull wants to increase their target segment as well as their revenue growth. Until today the main target group were people from the age 18 to 35. The group will now extend by males and females from the age 35 to 65. Next to the new target segment Red Bull wants to get a new position in the market. The Red Bull Energy Drink should be seen as an alternative to coffee n the future.
2. Red Bulls plan to expand in new markets in 2011 are focussed on the Brazil, India, as well as some more Western markets. Another big step in the plans of Red Bull enlarging is to enter the Chinese market.
The demand of Red Bull increases and the company gets a growth of revenue each year. Not on every market in the world the market share rises, but because of entering new markets the company wants to raise their overall revenue in 2011 again.
Like all successful companies Red Bull's marketing strategy includes the Marketing Mix with the 4 P's. These contain:
The marketing communication strategy from Red Bull is based on five columns. These are Above-the-line Advertising, Opinion Leader Marketing, Event Marketing, Sampling and Sport Marketing. Red Bull is a company who wants to act different in all ways compared to others. It is the same thing in marketing. Red Bull does not follow the traditional media guidelines; instead they use untraditional platforms (Hein, Kenneth).
1. Above-the-line Advertising
'Red Bull gives you wings' is the advertising message.
Because the life gets more and more stressful, the people look for products with the extra ingredient energy. Red Bull and its campaign 'Red Bull gives you wings' represents a lifestyle that should help people during longer working days and strains of everyday living. The campaign reflects the personality of the brand. Cheeky, witty, self-ironic, unpredictable and unique are the characteristics the company wants to contribute to the consumers.
2. Opinion Leader Marketing
Opinion Leaders, especially in the sport and cultural area, are a perfect target group for Red Bull. Red Bull has relationships with celebrities same as over 250 top athletes in the world.
3. Event Marketing
Red Bull doesn't sponsor events; they create and support their own innovative events. Red Bull's event marketing covers sports same as culture. Famous events organized by Red Bull were Flugtag, Music Academy or Local Hero Tour.
Sampling is done by highly motivated and well educated employees. Their task is easy. Find tired and exhausted people at the right time at the right place. These places are concerts, parties, festivals, sport events or high way rest for drivers where all people need an energy boost.
5. Sport Marketing
Since a couple of years Red Bull has forced their involvement in sports marketing. Today they have an own formula one team, an own soccer team in New York as well as many further sponsoring commitments.
Red Bull sells their products with a premium price strategy n the whole world. No matter about the country, they are always the most expensive drink in the energy market. Depending on the different markets Red Bull is 3 to 6 times more expensive than a coke.
Distribution means the distribution and provision of goods and Services. The distribution policy therefore includes all planned concerted measures for the distribution and provision of Products on the way from seller to buyer. Red Bull is distributed in most grocery stores, convenience stores and gas stations in over 160 countries in the world. Some interesting facts about the Red Bull can in different countries:
Red Bull was banned in France for a long time, but today you can buy Red Bull in France
In Norway and Denmark Red Bull is classified as a medicine
At first Red Bull was available only in pharmacies in Japan
Red Bull is a product especially developed for periods of increased mental and physical exertion. The time for consuming is the whole day during sports, work, studying, driving or just socializing. Red Bull promises to vitalize the body and mind for a better performance.
Very special is the recipe of the product. It is the same in the whole world and it is not patented so everybody can copy it easily. While other companies change their composition in respect to every country, Red Bull does not.
Conclusions and Recommendations for Change
The analysis of the Red Bull GmbH shows a global company that is well positioned in the market. The development since the foundation points out a continuous increase in sales. Red Bull is very interesting in its development from a marketing point of view. While other companies are considered in an international strategy, to follow the characteristics of each country, this is not the case at Red Bull. Previously there was only one product and one marketing strategy for every country. Today, Red Bull has launched two other products on the market, but they bring currently still very low turnover to the company. Despite the new products Red Bull remains their own strategy which is contrary to the global existing marketing theories in international marketing.
During the last years a change is seen at Red Bull. The Energy drink as such had problems to conquer and get market share on new markets at all. The drink was sometimes classified as harmful and sometimes even prohibited. The high content of caffeine was the reason for this development. It is therefore the position of the beverage to change. Rather than position the drink as a pure energy drink I would suggest that beverage be positioned as a sports drink. The new position of the product would be easy to reach because Red Bull who do a lot of activities in sports marketing can spread a good foundation for the future. Just for entering new markets such as China or South America, this would alleviate some barriers.
Summing up all the info together it can be stated that Red Bull is a viable company, although they must be careful in a rapidly developing market not only to focus on them.