The Energy Drinks Market

1.Introduction: Red bull GmbH is a private company located in Austria. It was established in 1984 and in 1987 the actual production of Red bull energy drink has started in Austria. Red bull is energy drink which vitalizes body and mind. Red bull is leading energy drink producer in the world.(Red bull) The company sold 3.906 billion cans of its product worldwide, down from 3.921 billion in 2008, with revenues shrinking 1.7% year on year USD 4.43 billion in 2009.(Bloomberg Businessweek)

2.History: Red bull GmbH produces world’s leading energy drink. Red bull is available in 160 countries all over the world. Red bull holds 70% share of energy drink market worldwide. The origin of Red bull energy drink was in Thailand. The founder of Red bull has brought concept of energy drink to Austria from Thailand.(fundinguniverse.com)

3.Countries:

India: The population of India is 1.18 billion. The GDP per capita was $3200 in 2009 and that of growth rate was 7.8%. (CIA – The World Factbook) Red bull is known as pioneer energy drink all over the world and in India too. Red bull energy drink was introduced in 2003 in India. Though Red Bull brand has been keeping lower profile compared to coke and pepsi in category of drinks. But Red bull has created market for energy drink. According to Economics Times (30-05-08) the energy drink market in India is estimated round about Rs.100 crore.(marketing practice,2008)

3.1 Micro-Environments in India: The micro-Environment includes factors like competitors, customers, distribution channels, suppliers, and the general public which helps organization to perform operation management and decision making process.(Business dictonary)

Competitors: Burn energy drink and Power horse energy drink are the competitors for the Red bull energy drink in India. Coca-cola has introduced Burn energy drink in 2009. But real competitors for the Red bull are Pepsi and Coco-cola who have created their brand leadership in India .

Customers: Customers are key to sale.( Oxford University press)Red bull consumers in India are present on large scale. Different generations used to consume energy drink. In India youth are more attracted towards energy drink. This age group is 16-30 who are attending colleges and into sports. Even some professionals are also preferring energy drink for vitalizing their mind and body. Due to call center boom in India many software engineers and call center employees are consuming energy drink to be alert all the night. Extreme sportsmen and athletes prefer energy drinks.(Yaqoob,2008)

Distribution channels: As per Intensive distribution strategy, it aims to provide saturation coverage of the market by using all available outlets.(tutor2u.com)The outlets such as super markets, Gymnasiums, Coffee houses, In bars, college canteens, Ice-cream Parlors and convenient

Suppliers: Head office of Red bull is in Mumbai with 150 employee.(Red bull customer care) Supply of Red bull is done by head office to many distributors. Red bull is imported in India. Many suppliers are available in India for the distribution of Red bull to retailers and wholesalers.

3.2 Macro-Environment in India: Macro-Environment has been broken in homogeneous subcategories to make analysis more meaningful. Macro-Environment is also known as PEST/PESTEL etc.(Jie, 2005)

Political: The government in India changes in every five years. Policies changes from parties to parties. Non- alcoholic drinks come under food category of FDI. The rules of FDI are very flexible for internationalization. But the caffeine contain in the Red bull is more than government laws.

Economical: The economic growth of India is in inclined position. The GDP is in growing positively. GDP growth rate is 7.8%.

Social: Red bull is mostly used as mixer so sometimes in India it has considered as alcoholic drink. And social alcoholism in India is not allowed.

Technological: Technological changes create opportunities for new products. Due to call center boom in India may employees of BPO prefer Red bull who works in night shifts.

USA: The population of USA is 31 million. The GDP per capita was $46000 in 2009 and that of growth rate was -2.8%. (CIA – The World Factbook).Red bull has been introduced in USA in 1997 in California. Red bull had targeted four western states California, Oregon, Texas, and Colorado. (Funding universe)

3.3 Micro-Environments in USA:

Competitors: There are many competitors present in USA energy drink market such as Rock star, Burn, Full throttle, Monster etc.

enery market.png(Tyagi 2008)

Customers: In USA Red bull energy drink appeals to very specialized groups such as hip hop crowd, gamers and extreme sportsmen. Overworked executives or businessmen also prefer red bull. 65% teenagers drink energy drink in USA. The population of teen agers is near about 8 millions.

Distribution channels: Red bull is very popular mixer in USA so it has more demand in bars as well as at party spots. Even Red bull is stocked in super markets and on petrol pumps. Long driving drivers used to drink energy drinks to keep themselves awake.(Tyagi,2008)

3.4 Macro-Environment in USA:

Economical: The GDP per capita in USA is $46000 and the GDP growth is negative. GDP growth is -2.8%. But the economy of USA is very strong and Reserve Bank is taking care of fallen economy in some parts of the USA market.

Social: Culture in USA is kind of free culture. Social drinking is allowed in USA so Red bull is mostly preferred as mixer in vodka. And alcoholism is part of social life and even consumption of energy drinks too.

Technological: USA is technologically very well developed so software engineers, overworked executives and businessmen prefer energy drinks to motivate themselves.

4. Marketing : The founder of Red bull stated “If we don’t create market, it doesn’t exists”(Gschwandtner, 2004). Mateschitz used buzz marketing to promote the product by giving customers free samples. Red bull is known for buzz marketing all over the world. In initial period Red bull used to invest very heavily. Red bull invests near about 30% of their revenue on marketing and advertisement but other companies invest near about 10% of their total revenue. (marketing practice). Some important strategies adopted by Red bull are as following:

Student brand manager: Red bull appoints trend setters in college campuses to organize and encourage parties. And to encourage youngsters by giving them free samples.

Indentify hot spot: The brand looks out for spots where opinion leaders or college boys gather. Such spots are called hot spots, bar and party areas are main hot spots. Once hot spot is identified brand campaigns in that spot.

Extreme Sports: ‘Energy, Danger and Youthfulness’ these qualities have been adapted by Red bull. So Red bull sponsors extreme sports and even Red bull owns Formula 1 racing team.

Athletes: According to Forbes, Red bull sponsors more than 500 athletes which gives high performance rather than sponsoring celebrities.

Quirky Ads: Red bull used advertising for reinforcement brand identification not for product selling. Ads of Red bull are very creative and with cartoon format.[marketing practice]

Buzz Marketing: Buzz marketing is type of communication which used short time period and high impact even that has unique goal of creating value for brand .(Salzman, 2003)

In Indian market Red bull energy drink posses 60% energy drink market share. And in USA Red bull possesses 50% energy drink market share even though it has too much competition in USA energy drink market.

5.1 Marketing Mix for India:

Product

Place

Red bull energy drink

Red bull sugar free

Super markets

Bars

Clubs

Gymnasiums

Ice cream parlors

College canteens

Pizza corners

Price

Promotion

One can of Red bull energy drink costs Rs.70 to 75

One can of Red bull Sugar free costs Rs.75

Globally online

Internet

Advertising

(television, magazines, posters, products)

Sponsorships

Promotional packages

Organization of parties and events.

5.2 Marketing Mix for USA:

Product

Place

Red bull energy drink

Red bull sugar free

Red bull cola

Red bull shots

Super markets

Bars

Clubs

Gymnasiums

Ice cream parlors

College canteens

Pizza corners

Offices

Price

Promotion

One can of Red bull energy drink costs $1.99

One can of Red bull Sugar free costs $1.99

Two cans of Red bull shots costs only $1

Globally online

Internet

Advertising

(television, magazines, posters, products)

Sponsorships

Promotional packages

Organization of parties and events.

The price of Red bull in India is slightly more than other soft drinks even same as USA. The parties in USA are mostly sponsored by Red bull. And even extreme sports are more popular in USA than in India. Red bull is most popular mixer with vodka in USA so Red bull sponsors bars and night clubs in wide range. Red bull is available in school canteens in USA but they are not allowed in India. Even not in offices in India. 65% of teen agers in USA drinks energy drinks. Near about 7.6 million teens and number of teen agers has been increased by 3 million by past 3 years in USA.

6.SWOT Analysis:

6.1 India

Strength

Weakness

Brand image

Market leader

Strong Promotions and campaigns

Eye catching Logo and slogan

High cost

Markets only one product

Lack of patent

controversies

Opportunities

Threats

Consumer Recognition

New venture with facebook

IT boom in the country

Consumer activists say the term energy drink is a misnomer

Tougher rules from government

Organic Energy drinks

Real competitors are Pepsi and Coca Cola

6.2 USA

Strength

Weakness

Market leader

Eye catching Logo and slogan

Strong Promotions and campaigns

Extreme popularity

Brand image

Social culture

High cost

Lack of patent

controversies

Opportunities

Threats

Consumer Recognition

Number of teen agers

Sponsoring Olympian medallists

Organic Energy drinks

Real competitors are Pepsi and Coca Cola

Entry of other energy drinks

Negative publicity.

The Red bull is highly successful company responsible for 70% sales in energy drink market. Red bull is known to “vitalize body and mind” for this purpose the product has been purchased by the customer. Red bull have strong competition but still Red bull is running as energy drink market leader with their innovative marketing strategy. As company has only one type of product, they can concentrate on it and make their sales power strong enough. Red bull has to go through negative publicity by media due to caffeine content in it. Red bull has ability to gain new customers and retain loyalty of current customers.

7.Recommendations:

For Indian Market: Red bull could introduce more versions of their products in India. Red bull could sponsor Cricket events in India because cricket is very popular in India rather than extreme sports. This change in their marketing strategy can help them to increase their sale rate.

For USA market: Red bull could sponsor baseball game and even American football to get new customers in USA market of energy drinks.

Referencing:

Fundinguniverse.com . Red bull GmbH

(18 Nov 2010.)

Bloomberg Businessweek.2010. Beverages,< http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=5503209> (16 Nov 2010.)

Fundinguniverse.com. International Directory of Company Histories, Vol.60. St. James Press, 2004. (18 Nov 2010.)

CIA-the world fact book (20 Nov 2010)

Marketingpractice.2008. Red bull :It gives you Wings(2o Nov 2010)

Business dictionary (21 Nov 2010)

Oxford University press

Yaqoob M. 2008. Red bull marketing Strategy < http://www.trcb.com/business/marketing/redbull-marketing-strategy-7375.htm >(1 Dec 2010)

Tutor2u.2005.< http://tutor2u.net/business/marketing/distribution_channel_strategy.asp> (1 dec 2010)

Red bull customer care (1 Dec 2010)

Jie X. 2005.Mearket Research Handbook. <[http://books.google.co.uk/books?id=73-eSezp7sAC&pg=PA23&dq=micro+environment+marketing+definition&hl=en&ei=SZEnTcW2GoiahQen7cWEAg&sa=X&oi=book_result&ct=book-thumbnail&resnum=1&ved=0CC4Q6wEwAA#v=onepage&q&f=false>

Tyagi N. 2008. Red bull energy drink.< http://www.slideshare.net/neha17tyagi/redbull-energy-drink>

Gschwandtner, Gerhard. “The Powerful Sales Strategy behind Red Bull.” Selling Power.

February 2004. < http://www.sellingpower.com/article/display.asp?aid=SP2229597>

(2 dec 2010)

Salzman L. 2003. Buzz:harness the power of influence and demand .< http://books.google.co.uk/books?id=sf85DYe9140C&pg=PA4&dq=buzz+marketing+definition&hl=en&ei=f6ooTarhFdC2hAfT9vS8Cw&sa=X&oi=book_result&ct=book-thumbnail&resnum=5&ved=0CEQQ6wEwBA#v=onepage&q=buzz%20marketing%20definition&f=false>