Red Bull Company Description Commerce Essay

An Austrian Company created Red Bull back in 1987. Red Bull is an energy drink and is also the worlds most popular energy drink, having sold 4.6 billion cans in 2011. The drink was first sold in Thailand and then modified to suit the tastes of people in the United States. A single can of Red Bull has the same amount of as a cup of coffee. Depending on the country, the level of caffeine in a can of Red Bill can vary, as some countries have restrictions on how much caffeine is allowed in drinks. The product is marketed through advertising events such as sport team ownerships, celebrity endorsements, and music. Unfortunately, Red Bull is not market approved in France, Denmark, and Norway. But Red Bull is legal in 164 countries around the world. Due to the potential health risks associated with the drink, Red Bull has been heavily criticized. We will further discuss in detail the health risks associated with the energy drink in the contents of our paper (redbull.com).

Mission Statement

According to Red Bull, “[Their] mission is to be the premier marketer and supplier of Red Bull in Asia, Europe, and other parts of the globe. [They] will achieve this mission by building long-term relationships with the people who can make it become a reality” (redbull.com). The company also has a vision statement that focuses on 5 aspects of their company values: People, Portfolio, Partners, Profit, and Productivity. Red Bull wants to be “a great place to work; where people are inspired to be the best they can be.” They want to “bring to the world a portfolio of quality beverages that anticipate and satisfy people’s desires and needs.” Red Bull wants to “nurture a winning network of customers and suppliers; together we create value.” They want to “maximize a long-term return to shareowners while being mindful of [their] overall responsibilities.” Red Bull also wants to “be a highly effective, lean, and fast-moving organization” (redbull.com).

Situation Analysis

Industry Analysis

Trends

In the drink market, energy drinks are arguably the fastest growing and most creative group. Since 2004, the mar has annually increased volume growth by about 14 %. Geographically, the most consumers are in Asia, followed by North America and Western Europe. According to the 2010 Global Energy Drinks Report, “Australia and Latin America are two regions that have recorded strong double-digit growth in energy drink volumes.” Availability is the key drive of sales and energy shots are quickly becoming the next “fab” (rcciinsight.com).

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Competitors

In the energy drink market there are numerous companies and a select few vying for Red Bull’s top spot. Rockstar, Monster, 5-hour energy, full Throttle, NOS, Pepsi Co., and Coca-Cola Co. are the main competitors. Monster energy drink with the logo of three claws in the shape of a “M” is distributed by Hansen Natural Corporation in Corona, California. With a fairly tolerable taste, this drink sparks you up and packs quite a vicious punch. Rockstar was formulated in 2001 and is one of the fastest growing drinks in the market. This brand also has products that figure in the list of energy drinks with alcohol. Full Throttle is produced by the Coca-Cola Company and debuted in late 2004. They are well-known for their great flavors (buzzle.com).

Consumer Profile

Demographic shifts, as well as changing consumer attitudes, will also have an impact on energy drink sales. Younger consumers have been the primary consumers due to their taste and image characteristics. From a consumption standpoint, energy drinks have benefited from their use as a mixer with spirits. However, promoting the use of an energy drink to younger consumers or as a mixer has led to negative publicity for some energy drink brands. According to Mintel principal trends analyst Richard Cope, “People are working longer into retirement and there is a greater need for products geared towards vitality and health in the senior workforce. At the moment energy drinks are marketed towards the youth market,” he said, “but they will become more about getting people through the day at an older age (rcciinsight.com).”

Technology

Technology, or more specifically the internet, has created another link between Red Bull and consumers. When visiting their website, people are able to view various aspects of the company. There are links for: products and company, videos, photos, music tracks, just epic, games, ted bulletin, redbull.tv, and red bull signature series. This technology does an excellent job of promoting the brand in many different ways (redbull.com).

SWOT Analysis

Strengths

Red Bull has numerous strengths. The company was founded in 1984 and by 1987 it launched its first product in a completely new category of drinks. Today Red Bull is sold in 164 countries around the world. Since its debut 25 years ago, Red Bull has sold 30 billion cans, with more than 4.5 billion last year. Due to their success both domestically and internationally, the company has expanded to over 8,000 employees worldwide (redbull.com).

Their leadership within the energy drinks market is sub-none. They are by far the most popular company. Top-seller Red Bull posted $2.3 billion in sales, which is a 14.3 percent increase, according to Symphony IRI data (bevindustry.com).

According to Red Bull, “Numerous scientific studies on the product and the individual ingredients prove that Red Bull Energy Drink: increases performance, increases concentration and reaction speed, improves vigilance, stimulates metabolism, and makes you feel more energetic and thus improves you overall well-being” (redbull.com).

Weaknesses

Despite having numerous strengths and worldwide popularity, Red Bull still has a few weaknesses. To begin with, Red Bull is in the above average price range of the energy drink market. Secondly, there is a substantial lack of innovation. Red Bull only offers a few products where as some of their competitors offer more. Third, Red Bull’s recipe is not patented. This could potentially lead to another company producing a very similar or exact product with just a different name. Fourth, Red Bull is not yet a large corporation as they still have less than 10,000 employees (Tyagi).

Threats

The biggest threat to Red Bull is Red Bull itself. The ingredient mix that their products contain is not FDA approved. On top that, government and scientists are finding that high amounts of caffeine, sugar, and taurine are extremely unhealthy and potential fatal. France and Denmark have gone to such measures as to ban Red Bull as a “cocktail of death.” High amounts of sugar have been found to cause serious health problems. A small amount of taurine, which is still a vastly unknown ingredient, is thought to be beneficial, but scientists are beginning to find health risks it causes. Red Bull energy drinks also contain a highly dangerous chemical called Glucuronolactone. The US Department of Defense developed this product during the Vietnam War as a hallucinogenic drug to stimulate troops’ morale. According to reports, “their effects in the organism were so devastating, that is was discontinued of the high index of cases of migraines, cerebral tumors, and liver diseases that occurred in the soldiers who consumed it” (Helmi). Red Bull must carefully watch its larger competitors, Pepsi and Coca-Cola, who would like nothing more than to obtain Red Bull’s consumers. Also, healthy organic energy drinks are starting to enter and become competitive in the market (Tyagi).

Opportunities

Red Bull’s greatest potential lies in its opportunities. Sales of energy drinks have taken on the energy of its products compared to a year ago. The energy drinks category increased 15.7 percent for $6.9 billion in sales, according to Symphony IRI Group, Chicago, for the 52 weeks ending May 15 in U.S. supermarkets, drug stores, gas and convenience stores and mass merchandise outlets, excluding Wal-Mart (bevindustry.com).To begin with, since they only have a few products, Red Bull has the opportunity to create new products. Second, they have an unlimited ability to advertise and promote their brand. Currently, Red Bull is the major player in the action and outdoor sports advertising. However, if they were to continue doing that, but also enter into another market such as UFC, boxing, or even mainstream sports such as football or baseball, this would create a potentially exponential consumer base. Third, if Red Bull could partner with a popular company such as Facebook or Apple, this would create more everyday exposure via social media (Tyagi).

Marketing Objectives

A marketing objective is a statement of what is to be accomplished through marketing activities. The goal of Red Bull is obviously increasing sales more than last year. Red Bull leads an energy drink industry so far; however, Monster has been catching up greatly in the past a few years. Therefore, they need to have a good marketing objective to keep the position of number one seller in an energy drink industry and increasing their sales. In order to accomplish their marketing plan, they need to cover several criteria of marketing objective such as realistic, measurable, time-specific, and compared to a benchmark (redbull.com).

Red Bull refused to publish their earnings, profits and specific marketing goal; however, increasing their profit than past years is clear and accurate their goal of every year. They also compute their annual profit end of a year every year. In 2011, Red Bull sold 4.631 billion cans worldwide. It represents an increase of 11.4% against 2010. Company turnover increased by 12.4%, from 3.785 billion Euros to 4.253 billion Euros. Therefore, their key areas such as revenues, sales, productivity, operating profit, and the figures recorded were the best in the history of the company so far. According to industry marketing reports, “The main reason for such progressive figures include exceptional sales, especially in key markets such as the USA (+11%) and Germany (+10%) and also in other markets such as Turkey (+86%), Japan (62%), France (+35%), and Scandinavia (+34%) combined with efficient cost management and ongoing brand investment.” The result of these figures indicate Red Bull continue increasing sales and accomplishing the goal. Red Bull is successfully growth because of their marketing plan that increasing their profit than past years and computing their annual profit end of a year are realistic, and time-specific (redbull.com).

In order to increase a profit of the company, advertisement is one of very important elements. Red Bull builds up unique marketing campaigns and many different kind of activities such as mountain biking, snowboarding surfing, skateboarding, freestyle motocross, and Formula 1 racing. They just succeeded in the marketing campaign “Red Bull Stratos.” Felix Baumgartner jumped at 128,000 feet above the Earth that reached a high speed of 833.9 miles per hour. People cannot get a picture of Felix without the Red Bull logo and that is their marketing strategy. Red Bull considers that marketing is not just department (Chun).

Their extreme sports activities contents represent the symbol of their brand; therefore, they launched Red Bull Media House service. Red Bull Media House is a multi-platform media company with a focus on sports, culture and lifestyle. They provide and distribute the videos, which are precious, cool, and adventurous; therefore, people are able to get thrills from the movies. The marketing plan of Red Bull Media House is making profit from its services. They also expect the service serve a function as an advertisement and help to increase sales of Red Bull. According to Red Bull founder and CEO Dietrich Mateschitz, he states, “In long term, we expect that Red Bull Media House to be profitable.” Therefore, their marketing objective of Red Bull media House is not clear. There is a realistic to achieve their goal when they consider long term to get profits from its Red bull media house services because especially the attentions from young people to extreme sports are increasing. Red Bull Media House also needs to become more popular to be profitable. Their goal is not measurable and time-specific because Dietrich just mentions Red Bull Media House will be profitable in the future. Their plan is too vague and they do not determine the date of their achievement such as December 31, 2015. However, at the same, they also consider Red Bull Media House is part of marketing content and desire that the services and the video of Red Bull Media House assist sales of Red Bull. Therefore, we can see the logotype of Red Bull on the players’ helmets, caps, and shirts in the movies from Red Bull Media House. They are excited to launch Red Bull Media House and provide the services; even though, they might not be able to make profits the first a few years because they tend to consider the loss of profits as expenditure of marketing (Iezzi).

Marketing Strategy

Target Marketing Strategy

A target market is a group of individuals that is most likely to buy a firm’s product based on similar characteristics, preferences, and lifestyles. From the beginning, Red Bull has set out to associate itself with youth culture and extreme, adventure-related sports. Red Bull’s target market is mainly Generation Y, aged anywhere between 18-35, who enjoy extreme sports and an active nightlife. This active group of individuals does not respond well to the typical, classic marketing strategies of most companies. Red Bull relies heavily on a strategy that has become known as “viral” marketing, or word-of-mouth, to spread the popularity of the drink, rather than traditional methods. Red Bull is trying to be as close as possible to its consumers in its distribution strategy and likewise in its promotion strategy by having a ‘street marketing’ strategy. They have put themselves in the center of their target market and made themselves an icon in a wide variety of sports such as mountain biking, motocross, BMX, windsurfing, snowboarding, skateboarding, kayaking, cliff-diving, surfing, rally, Formula 1 racing, NASCAR, desert racing, and even breakdancing. This may be a wide selection, but it is great for Red Bull because each sport is focused around Generation Y, which gives them a broad fan base.

Marketing Mix

Product

Red Bull is arguably one of the most publicized and well-known organizations in the action sports community, which is phenomenal considering they essentially only have one product. This one product was the first energy drink of its kind, and has basically remained the same ever since. They have added a few variations of the original, Sugar Free and Total Zero, along with Red Bull Editions that give a slight variety of flavor. Red Bull was developed specifically to increase mental and physical exertion, increase performance and concentration during times of stress, and improve reaction speed, which is where their slogan “Gives You Wings” started (redbull.com).

Place/Distribution

Red Bull distributes their product through a few different distribution channels. The first is the Direct Channel where the producer interacts with the consumer. They set up booths or have the “Wings Team” drive their Red Bull cars to events and hand out their product to consumers first hand. The other distribution channel is the wholesaler channel in which Red Bull sells their product to a wholesaler, who then sells it to a retailer such as gas stations and convenience stores, who then sell it to the consumer. Red Bull is also involved in the bar scene and has strict rules about mixing “the right drink” and a bar. The barmen are instructed to give what remains in the can to the consumer to further Red Bull’s visibility of the product (Louvet).

Promotion

Red Bull’s promotion strategy began with the “Wings Team,” who were attractive female students, whose role was to establish a relationship with the consumers, to have them discover the product, and see what consumer opinion was. Red Bull’s first target was college campuses, because this is where they felt they could make the biggest impact, on students who were seeking an extra boost of energy. Red Bull would consult with the Student Brand Manager at school to ensure that Red Bull was present at every strategic moment on the social calendar such as sporting events and big parties. “The strength of Red Bull is an ability to instill a genuine passion for the brand in the Wings Team and the Student Brand Managers. Thus, these committed people are more likely to promote a good image of the brand and to have a greater positive impact on targeted consumers” (Louvet). Since this, Red Bull has expanded drastically and changed their promotion strategy.

Red Bull explicitly states that they do not involve themselves in print advertising such as newspapers and magazines; instead, they rely on television, social media, and outdoor media to advertise. Since 1992, Red Bull has created cheap cartoons with simple but recognizable drawings, telling funny and simple stories. These were a huge benefit for them because they were easily adaptable to markets all across the globe. Red Bull also displays outdoor media at every even possible with huge tents and exhibits, inflatable cans and arches; as well as custom painted helmets, racecars, helicopters, and airplanes for all of their athletes. Social media has become Red Bull’s best way of advertising. It is an easy way to get one simple picture, video, or message around the globe in less than a few seconds. They are famous for their viral videos, which are spread entirely by fans and followers. Red Bull currently has 34.5 million likes on Facebook, 480 thousand followers on Instagram, 843 thousand followers on Twitter. With all the advances in Internet and social media Red Bull has found a perfect niche market where the consumer spreads the word faster than the producer (redbull.com).

Price

Red Bull sees themselves as a high quality company that offers a high quality product, which is why they have a strict pricing policy. Their product is the most expensive amongst competitors because they are prestigious and have customer loyalty (redbull.com).

Implementation, Evaluation, and Control

Marketing Research

Red Bull has managed to revolutionize the world of energy drinks. It has permeated globally and hopes to expand into even more countries. Their success can be traced to a well-established marketing plan. Since their inception into the market, Red Bull has relied on their research to follow a successful path. According to Lamb, “marketing research can help managers in several ways, it improves the quality of decision making and helps managers trace problems” (pg. 292). By having a well-established marketing strategy a company can be very profitable. Red Bull has chosen to reposition themselves by targeting a specific market. They opt for targeting younger individuals involved in action sports and with a very active lifestyle. Red Bull has a very unorthodox way of marketing; they rely heavily on “buzz marketing” or word of mouth. It is amazing that a world renowned company reached such success simply with an effective marketing strategy and by word of mouth advertising. Another concept entailed in marketing research is, the ability to understand the ever changing marketplace. This is another factor that has contributed to their success because they are aware of the changing trends, especially amongst the younger population or in other words, generation Y (redbull.com).

Organizational Structure and Plan

According to Lamb, “many of the historic sources of competitive advantage-technology, innovation, economies of scale-allowed companies to focus their efforts internally and prosper” (pg. 7). In other words, Red Bull has been able to become successful because it has followed through the many factors that instill competitive advantage amongst other brands in the market share. Red Bull really takes into consideration the three factors that allow for a proficient organizational focus. These are customer value, customer satisfaction, and building relationships. Firstly, customer satisfaction is “customer’s evaluation of a good or service in terms of weather it has met their needs and expectations” (Lamb, pg 9). Customers that purchase Red Bull already have an opinion and know what to expect from the product. Secondly, building relationships, which is attracting new customers or maintain its current customers. “Companies can expand market share in three ways: attracting new customers, increasing business with existing customers, and retaining current customers” (Lamb, pg. 9). Thirdly, relationship marketing, as a strategy that focuses on keeping and improving relationships with current customers. All these components contribute to customer relationship management. In which, the company designs a business model to reduce costs and increase profitability by strengthening customer satisfaction and loyalty. Red Bull does a great job of implementing all of the three components in maintaining a good relationship with its customers. For example, a young person who is interested in extreme sports has loyalty to the product, because Red Bull is associated with the sport and it probably sponsors the popular athletes (redbull.com).

Financial Projections

Red Bull has made a few projections regarding its finances and advertising strategies. One of their strategies was to become more aggressive in their strategies, some were introduced at the end of the 2011 fiscal year. According to their website, “In 2011, 4.631 billion cans were sold worldwide. That is an increase of 11.4% since 2010. In all key areas such as sales, revenues, productivity and operating profit, the figures recorded were the best in the company’s history so far” (redbull.com). In other words, as of the end of 2011, Red Bull employed 8,294 people in 164 countries. The company’s marketing plan for 2012 stated that, ” 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” (redbull.com).

Implementation Timetable

In this section, the company implements the marketing strategy and establishes company goals. As explained previously, Red Bull hopes to generate more sales resulting from their new marketing plan. The company plans to advertise, on the web, trial, sponsorship, promotion, viral and on television. However, for the years to come they hope to shift their target market from young individuals to 35-65 year olds. The company also stated some goals for this year. They want to increase revenue by, “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” (redbull.com). This is to say that, the company has established goals that can be attained if their marketing plan is successful. It is very likely that it can accomplish those goals, simply because even after many years, it remains the top name in energy drinks.

Positives, Negatives, and Recommendations

Positives

The world’s most recognizable and profitable energy drink Red Bull posted revenue of more than $5.1 billion in 2010, and sales of the product are continuing to increase each year. Red Bull spends an unbelievable 30-40% of their revenue on marketing. The majority of Red Bull energy drinkers are between the ages of 18-34 year old males. The drink grabbed the attention of their target user and flawlessly grew, and become the brand marketing strategy that translated into “We are with you and one of you”. The recent 2011-2012 focus of Red Bull energy drink is trying to increase awareness among the 35-65 crowds, both male and female. The reason for Red Bull’s remarkable marketing strategy relies solemnly on the following four concepts (Andy):

1. Consumer engagement through sportsmanship

2. Videos of extreme athletic accomplishments posted on YouTube that go viral.

3. Brand recognition through logo saturation.

4. Attainment of widespread brand recognition and loyalty first among a core demographic, then building a credible bridge to achieve it.

Because Red Bull’s targeting audience is the “Y Generations”, the company has developed a “Wings Team” to develop and establish a relationship with the consumers and to discuss with consumers about their appreciation or dissatisfaction of the product. One of Red Bull’s strategies is to be present at school events, big parties, sporting events, and school/social calendars. One of the many strengths of Red Bull is their genuine passion for their brand and consumers who are committed to their energy drinks. These committed people are likely to promote a good image of the brand and have a greater impact on targeted consumers (Louvet).

Negatives

Even though Red Bull’s marketing strategy is proven to be the best, they are facing a negative publicity about the health risks that the drink leads to. Because of the many health risks associated with the energy drink, countries such as Denmark and France have banned the drink from their markets. The energy drink contains high level of sugar and caffeine and taurine, therefore causing a variety of health risks such as heart problems, vertigo, hallucinations, damaged tooth enamel, and other permanent problems. Some studies that were conducted showed that the product is linked to heart disease and high blood pressure. Unfortunately, the product has not been thoroughly “clinically” tested as of yet. A disadvantage of Red Bull is that the product is expensive compared to other caffeinated beverages. Due to these issues, Red Bull has recently developed Red Bull Cola, which is an all-natural, containing no synthetic preservatives or flavors energy drink (Louvet).

Recommendations

As a group, we concluded that Red Bull should try to decrease their pricing in order to maintain their target market of the young generation. If the energy drink continues to increase in price, it might push the product out of its prestige position in the market. Red Bull is known for campaigning at school events, extreme sporting events, etc. but this must be kept unchanged if the product wants to continue their strategic marketing plan. For the long run of Red Bull, the company should be thinking about some ethical aspects of the product, such as the negative health risk associated with the drink.