Professional Documents
Culture Documents
Red Bull and its successful innovations in the soft drinks market
Maria Alm Masami Kato Nima Obbohat Sanjeev Nanda Matthew Tippetts Maria-Christina Perez de la Sala
June, 2004
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EXECUTIVE SUMMARY........................................................................................................................4 INTRODUCTION TO RED BULL ........................................................................................................5 2.1 2.2 2.3 THE BIRTH OF RED BULL .................................................................................................................... 5 PHENOMENAL GROWTH THROUGH GLOBAL EXPANSION .............................................................. 5 THE PRODUCT ....................................................................................................................................... 6
THE INDUSTRY.........................................................................................................................................6 3.1 3.2 3.3 3.3.1 3.3.2 3.3.3 3.3.4 3.3.5 3.4 3.4.1 3.4.2 3.4.3 3.4.4 3.4.5 THE SOFT DRINK MARKET ................................................................................................................. 6 THE ENERGY DRINK M ARKET............................................................................................................ 7 VALUE CHAIN ANALYSIS.................................................................................................................... 7 Formula Creation...........................................................................................................................8 Concentrate Production................................................................................................................8 Packaging........................................................................................................................................8 Distribution .....................................................................................................................................8 Retail ................................................................................................................................................9 ENERGY DRINK INDUSTRY ANALYSIS - 1987................................................................................... 9 Internal Rivalry ..............................................................................................................................9 Barriers to Entry ............................................................................................................................9 Substitutes and Complements.....................................................................................................10 Power of Buyers ...........................................................................................................................10 Power of Suppliers.......................................................................................................................10
INNOVATIONS BY RED B ULL IN THE SOFT DRINKS MARKET .....................................11 4.1 4.2 4.3 4.4 PRODUCT INNOVATION...................................................................................................................... 11 M ARKET SEGMENTATION INNOVATION .......................................................................................... 12 CHANNEL INNOVATION ..................................................................................................................... 12 M ARKETING INNOVATION................................................................................................................. 12
ANALYSIS OF INNOVATION SUCCESS........................................................................................13 5.1 CROSSING THE CHASM ...................................................................................................................... 13 5.2 W ILLINGNESS TO PAY (WTP).......................................................................................................... 14 5.2.1 Product innovation.......................................................................................................................14 5.2.2 Channel innovation......................................................................................................................14 5.2.3 Marketing innovation..................................................................................................................14 5.2.4 Clever market segmentation.......................................................................................................14 5.3 RED BULLS UNCERTAINTIES AND RISKS....................................................................................... 15 5.3.1 External Uncertainties................................................................................................................15 5.3.2 Internal uncertainties..................................................................................................................15 5.3.3 5- I Framework.............................................................................................................................16
INCUMBENTS REACTION TO RED BULL.................................................................................17 6.1 COCA COLA REACTS.......................................................................................................................... 17 6.1.1 Burn/KMX .....................................................................................................................................17 6.1.2 BPM................................................................................................................................................18 6.1.3 Why Coca Cola failed..................................................................................................................19 6.2 COCA COLAS OPTIONS FOR THE FUTURE ........................................................................................ 20
FUTURE OF RED BULL........................................................................................................................20 7.1 ENERGY DRINK INDUSTRY ANALYSIS - 2004................................................................................. 21 7.1.1 Internal Rivalry ............................................................................................................................21 7.1.2 Barriers to Entry ..........................................................................................................................22 7.1.3 Substitutes and Complements.....................................................................................................22
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7.1.4 Power of Buyers and Suppliers..................................................................................................22 7.2 RED BULL TODAY............................................................................................................................... 23 7.2.1 Weaknesses....................................................................................................................................23 7.2.2 Strengths........................................................................................................................................23 7.3 FUTURE OPTIONS................................................................................................................................ 24 7.3.1 Threats ...........................................................................................................................................24 7.3.2 Opportunities................................................................................................................................25 8 CONCLUSIONS ........................................................................................................................................25
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1 Executive summary
Red Bull is an energy drink that was launched in Austria in 1987 by an entrepreneur, Dieter Matteschitz. He built the company up to annual sales now worth 1.5 billion. Red Bulls success story is remarkable as the soft drink industry is one with high barriers to entry and soft drink companies have to deal with high buyer power of distribution and retailers. This is all due to the dominant brands like Coca Cola and Pepsi having a tight grip on the retailers and their shelf space. Nonetheless, Red Bull has been able to enter this market successfully by innovating in a variety of ways: Product innovation: Red Bull created a product that fills the gap in consumer needs for a cold drink that gives mental energy. Market segmentation innovation: Red Bull used a very targeted approach compared to the mass marketing approach of the incumbents. Channel innovation: Red Bull used a pull strategy in order to gain shelf space in the retail channel. Pull is created by gaining popularity among the consumers by offering products in alternative channels, for example bars and health clubs. Marketing innovation: Red Bull has used creative onsite promotions instead of mass marketing approach of the incumbents.
Red Bulls market entry was clever in several ways. Their focused segmentation and marketing efforts helped the company cross the chasm. Since the initial target customers extreme sports enthusiasts and clubberswere influential opinion leaders, the mass market quickly reacted to consume Red Bull. Furthermore, the segmented approach enabled Red Bull to offer its product at a higher price as the willingness to pay of their target segment was higher than the mass market. Although Red Bull now caters to the mass market, it has been able to maintain customers higher willingness to pay. Finally, Red Bull innovated new channels such as clubs and bars instead of relying on big retailers. This allowed Red Bull to shorten its time to marketwhich was an essential factor in fighting off mighty incumbents. Another factor that enabled Red Bulls success was its early solidification of a strong brand name before the incumbents entered the fight. This was another crucial factor that enabled Red Bull to maintain and grow its market share in spite of its extremely limited product portfolio. In order for Red Bull to grow in the future, we believe it is imperative to expand into new market segments as well as horizontally expand its product offerings (i.e. energy gel, alco-pops, etc). As the incumbents are now fiercely trying to overthrow Red Bull from its number one position, Red Bull must enhance its brand positioning in the market.
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Red Bull homepage (www.redbull.com), 2004 BBC News, Red Bull: Raging Success, July 2001 Euromo nitor Red Bull GmbH, 2004 Austrian News Digest, March 12, 2004
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remains private under the same ownership. With essentially one product from Asia, Dietrich became one of the most successful businessperson in the world, which is exemplified by his recent addition to the Forbes List of Billionaires.
Red Bull Energy Drink (Left) and Red Bull Sugar Free (Right) .
3 The Industry
3.1 The Soft Drink Market
The global soft drink market was roughly $307 billion in 2003, with a CAGR of 4.7% over the last 4 years. The market is dominated by Coca-Cola and PepsiCo that hold 6.7% and 3.3% share respectively. The remaining players have much less than 1% of the
Soft Drink Market (2003): $307 billion
4.1%
10.4% Carbonates Juices Bottled Water New Age Beverages Functional Drinks
18.9%
47.1%
19.5%
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market 6 . For example, Red Bull, even with its 2003 sales of $1.55 billion, only has 0.48% share of the market. Within the soft drink market exist a sub-category called functional drinks, which is further divided into sports drinks (Gatorade, Powerade, etc.) and energy drinks (Red Bull). The two are classified differently due to their differing functionssport drinks main function is to hydrate the body during or after exercise, while an energy drinks function is to energize the body, not to quench thirst. The soft drink market is generally considered to be a mature market, especially in carbonated drinks that control roughly 47% of the market. However, new segments such as bottled water, fruit juice and energy drinks are experiencing high growth and are expected to continue growing in the future.
Datamonitor, Global Soft Drinks 2004 Datamonitor, Global Functional Drinks 2004
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Formula Creation
Concentrate Production
Packaging
Distribution
Retail
End consumer
3.3.1 Formula Creation Energy drinks formulae are usually created together with pharmaceutical companies that hold key ingredients as well as nutritional know- how and capabilities. Once a formula is created, it is rarely changed. As for Red Bull, the original formula was created by TC pharmaceuticals. It is essentially the same across the globe, except in a few countries where its caffeine content has been adjusted to fit local regulations. 3.3.2 Concentrate Production Based on the formula, the necessary ingredients are bought from pharmaceutical companies to create the concentrate. The concentrate is then mixed with carbonated water to complete the content formation. The process involves relatively little capital investment, and one plant can serve an entire country. Big players are Coca-Cola, PepsiCo, Cadbury Schwepps and Cott Corporation8 . Red Bull engages in this activity at its Austrian plant. 3.3.3 Packaging The finished mix is packaged into cans, bundled into cartons, and sent to distribution. This is a highly capital intensive operation that requires specialized high-speed lines. Red Bull is packaged at its Austrian Plant. 3.3.4 Distribution The distribution is often conducted by bottlers (Coca-Cola, PespsiCo, etc.) or through a solely owned distribution ent ity (Red Bull). From here, the products are sent to retail outlets for distribution to the end-customers. Red Bull has traditionally relied on its own distribution subsidiaries, but has recently decided to utilize outside distributors to enter new markets such as India.
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3.3.5 Retail The retail channel is the contact-point of the product and the end-consumers. For energy drinks, retail outlets include bars and nigh clubs, supermarkets, convenience stores, health clubs, etc. Red Bull is available in all of these channels, and is considered the number one energy drink brand in all of them.
High
Supplier Power Industry Rivalry Buyer Power
Low
Raw materials are commodity No Rivals (except in Asia)
High
Distribution End-consumers
Few
Substitutes/ Complements Substitutes Cofee Complements Alcohol (ex. Vodka) Extreme Sports
3.4.1 Internal Rivalry 1987: No rivals except in Asia In 1987, energy drinks were non-existent outside of Asia. On the other hand, Asia Pacific had numerous competitors such as M-100 and M-150 of Thailand and Oronamin C and Lipovitan D of Japan. As mentioned earlier, these Asian energy drinks were traditionally marketed toward blue-collar workers, unlike the Dietrichs Red Bull which later catered to a younger, more active and more hip crowd. 3.4.2 Barriers to Entry 1987: High but no incumbents Entry into the energy drinks market outside of Asia in 1987 had two barriers; capital intensity and distribution. The first is the necessity to set up a plant to mix, bottle and
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package the products. Clearly, these activities are not labor intensive and require substantial amounts of initial capital expenditures. Second, and more importantly, is the entry into the distribution. Since retail shelves are limited and are filled by other soft drinks, it is extremely difficult for an unknown product to win any shelf space. Comparatively, entry into the bar/night club market was relatively easier than retail for their relative ease to approach and negotiate. However in spite of these barriers, Red Bull enjoyed one key advantagethe lack of an incumbent brand to fight with. As the segment was non-existent, Red Bull was free to define the segment and monopolise it with their brand. 3.4.3 Substitutes and Complements 1987: Few substitutes and complements From a functional perspective of stimulants, coffee can be classified as a substitute. However, there are major differences (hot temperature, lack of recognition as a mixer, and unavailability in a can), that makes it a non-threatening substitute. Key complements to Red Bull are alcoholic drinks like vodka and tequila, which are used to make popular drinks at bars and night clubs. Furthermore, social factors such as night clubbing and extreme sports play a key role in building the brand image of Red Bull. 3.4.4 Power of Buyers 1987: High As with any other soft drinks, buyers have extremely high power in determining the success of a new product. First, the retailers play a crucial role by providing shelf space for the productsa key factor in pushing the products to the market. It is said that 60% of energy drinks are sold through supermarkets and convenience stores 9 . Since shelf space is a limited resource, retailers traditionally hold great power and are not shy to exercise their power in negotiations for price and product shipment priorities. Such power of the retailers acts as a significant barrier for start-up companies. Second, end-consumers, while not as strong as the retailers, play a key role in pulling the product to the market. Their power to ask for specific brands over retail counters and bars is substantial, thus many companies attempt to win their loyalty through extensive marketing activities such as branding, promotions and advertisements. 3.4.5 Power of Suppliers 1987: Low
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Raw materials for the energy drinks include concentrates (with energy-enhancing ingredients), soda, cans and a few other minor ingredients. All of these are commodities and can be procured easily, and therefore do not act as a key threat.
Mental Energy
Red Bull
Coffee
Sport Energy
Gatorate Isostar
Thirst quenching
Coke
Cold
Hot
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Red Bulls product innovation is the combination of the awakening effect of coffee mixed with the advantages of a cold drink. The product is innovative in its fit with the gap that is left at the cross section of soft drinks with coffee.
consumers to buy as the investments could not be earned back. And as Red Bull was not available in retail stores at first, onsite promotions could not be used to promote the product. In conjunction with its channel approach, Red Bull used targeted onsite marketing of its product with promotional caravans and high visibility at extreme events and beach parties. These methods of guerilla marketing warfare were used until the product had created enough pull from the public for it to be added to the retail product offering. After this availability Red Bull started using conventional means of marketing to get broader awareness for its product.
WTP
Red Bull came up with a new formula, different New formula (energy) from ordinary soft drinks. It contained extra New packaging (250 ml) Strong marketing ingredients and apart from being soft drink it also Clever distribution had an energy stimulating function. This extra Cool brand at cool places function differentiated it from common soft drinks Cost and increased the willingness to pay. So did the new packaging, both through the obvious reason, that it was attractively packaged in a uniquely shaped can, Red Bull manage to leverage from every innovation and also through the less obvious reason that the area in driving and capturing an increase in the willingness to pay. can contained only 250 ml, (The soft drink industry standard were 330 ml cans). Red Bull was priced at approximately double the price of a Coca Cola, but after taking into account the different volumes the difference in price was even higher. 5.2.2 Channel innovation Red Bull started off selling its products in small distribution outlets like bars and health clubs. Through their creative approach to distribution they could leverage from choosing more exclusive channels. This defined and cool environment helped increase the willingness to pay, because of the association of Red Bull with cool people in cool settings. These environments also made it possible to price discriminate as people expect to pay a higher price at bars as well as health clubs. 5.2.3 Marketing innovation Through clever marketing Red Bull managed to build an authentic, credible and qualitative brand which the consumers were willing to pay a premium for. Through targeted marketing campaigns and consistently choosing cool events to sponsor they built one of the strongest brand in the world. Red Bull built a strong identity from the beginning, focusing on a well defined niche, resulting in an increase in the willingness to pay. 5.2.4 Clever market segmentation Through clever market segmentation, where they focused on extreme sport and clubbing, they made it possible to price a premium for the product. Traditionally the soft drink market had not competed on price; a can of Coke was sold at the same price as a lesser known brand. Red bull managed to avoid this price boundary when defining the new energy drink market within the soft drink market. A new clearly
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defined niche market made it possible for price discrimination to capture the higher willingness to pay.
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Organizational uncertainty The initial buy-in risk was low as the two founder/owners contributed initial capital and Dietrich was a great inspiration to his company. Future opportunity risk needs to be considered as the one product company may need to innovate on new products ideas for growth and loyalty. 5.3.3 5- I Framework 5-I Risk Framework Impossibility Risk Incentives and controls Initial Market Choices Integration
Time to Market
Impossibility Risk p(internal success). Given the owners/founders had invested themselves on an idea that had worked well in Asia, the impossibility risk from inside the company would have to have been based on the ability to adapt Red Bull to western tastes and achieve marketing success. The product innovation as well as their marketing innovations where internal risks. Incentives and controls Controls on the owners were high they were spending their own money! On the flipside, company ownership incentives were low as ownership was held tightly with the owners. However the owners enthusiasm combined with global aspirations and an employee base which had a strong work ethic meant there were natural incentives in place. Also as the company started small scale (Austria!) and only expanded once it conquered that market and was able to self finance expansion, there was no incentive to overextend and to go global until the company was ready. Initial Market Choices Because of the high uncertainty risk involved in a mass market approach and high barriers to entry in traditional retail channels of distribution Red Bull selectively chose a smaller target market and new routes to market to decrease risks of failure. Inte rdependence P(success) Red Bull had no real interdependence with other external projects, but was highly dependent on internal interdependence of success in the different innovation activities; product, channel, marketing and market segmentation. For Red Bull to be able to survive the process of conception to consumer it would need to be successful in its innovations. The reduced risk could not erase the importance of external perceptiveness, the product must be adopted by the consumer and the chosen market segment, the distribution channels must be successful in reaching the end consumer and the brand image must be something that appealed to the target market.
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Although it is impossible to exactly evaluate the probability of success it is still possible to make some simple assumption to show that although reducing the risks the combined probability for success could still have been less than 50%. Probability of success (Product innovation) x P. success(market segmentation innovation) x P P.success(marketing innovation) x P.success(channel innovation) = 1 x .9(influential and easily influence market) x .8(clever marketing but no guarantee of success) x .5(difficult to determine success) These are estimates. = 36% chance of success! Integration time to market/downstream intermediaries. Red bull shortened their time to market. They were vertically integrated from production to most distribution so they had good control over this. Expectations for Innovation Outcomes The founder/owners had high expectations. They believed in their innovative ideas. Thus they set their expectations high based on their entrepreneurial enthusiasm rather than their interdependence risk.
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KMX is based on one premise: living life means being aware of all that surrounds you. Gaps between the obvious, the expected and the easily perceived- these are when things really get interesting. The space between a yellow and red light when its entirely black . That certain song you can actually taste as it flows through you. The powerful yet unseen energy that pulses around a crowd of people on the dance floor. KMX was created from a desire not only to be aware of these bits of life, but to seek them out and embrace them fully. Simply put KMX is made for the people who depart from the beaten path in order to find these special experiences. KMX. Ignite the mind.
In the 3 years that KMX has been in the market it has only gained a 5.2% market share in the US energy drinks market. Its near term strategy is to continue pushing KMX. KMX is desperately trying to appeal to consumers, its website asks customers what flavours they want, what events or athletes they should sponsor and what are good serving ideas for KMX. It also has started to do what they call innovative marketing by selling over the internet10 .
Burn was launched in 2001 and is still available in some parts of the trade sector but has never crossed over into supermarkets. Burn is now available in Holland, Spain, Ukraine, UK, Germany and Greece.
6.1.2 BPM BPM stands for beats per minute and Coca Cola introduced it into Ireland to compete with Lucozade and Red Bull. It is being introduced into the UK in Summer 2004. It is
10
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differentiating itself with its coloured plastic bottles instead of the traditional aluminum can.
Also in the UK Coca Cola is planning to roll out yet another energy drink called Full Throttle, which launch has already been delayed until the end of this year. This introduction of a new competing product and its delay indicates the lack of coordination and overall strategy Coca Cola has for its share of the Red Bull space. Thus Coca Colas reaction to Red Bull has not been terribly effective. Coke still lacks a popular entry in the highly profitable energy-drink category to compete with Red Bull. KMX continues to sputter11 . 6.1.3 Why Coca Cola failed The Strategists at Coke must see many new little upstarts come up with new formulas or even new ideas for the soft drinks market and obviously most of them fail. Therefore when Red Bull appeared on the market place, they must have watched with little interest. In fact they were probably quite comfortable in the knowledge that if any drink did become popular, they would be capable not only of imitation but also of domination. Coca Cola, with its enormous marketing budgets and supplier power was not ready for the dark horse, or rather the Red Bull about to create new space in their safe territory. First, Red Bull was a clever entrant in a high barrier to entrant market. It did not compete with Coca Cola head on rather it sought other routes to market. Red Bull innovated with product, marketing and distribution. Using these innovative techniques (as discussed in the previous chapters), it was able to cleverly target its end user. The brand succeeded on its inexpensive targeting to influential users of the
11
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soft drink market. This enabled them to cross the chasm with out much difficulty and is a text book example of the tipping point at work. It appears that Coca Cola was not prepared for the innovative Red Bull product or market space it had created. This unawareness combined with little focus on innovation and internal wrangling meant Coca Cola was not only slow on the uptake but responded poorly. For example Coca Cola pulled out of negotiations to buy Gatorade because of internal disagreements. Gatorade was immediately snapped up by Pepsi and is now number one in the sports energy space.
identified. To understand the future options for Red Bull we have to understand Red Bulls strength and weaknesses today and then derive possibilities and threats that can be seen, both from an internal view and in the context of other competitors. The following chapter will analyze the industry and the situation that Red Bull is facing today and also the possible development for the future.
High
Supplier Power Industry Rivalry Buyer Power
Low
Raw materials are commodity Intensifying multiple products
High
Distribution End-consumer
Few
Substitutes/ Complements Substitutes Cofee Complements Alcohol (ex. Vodka) Extreme Sports
7.1.1 Internal Rivalry 2004: Intensifying Although Red Bull is said to have anywhere between 70-90% share of the energy drink market, many competitors, both big and small, are entering the growing and attractive market. For example, Coca Cola entered with its KMX and PepsiCo with its Amp and SoBe in 2001. Together with Red Bull, these brands are said to
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comprise as much as 90% of the global market today12 . In addition to the big players, multiple small companies are entering the brand with many copy cat products such as Red Rhino , Mad Bull, Red Dragon, Red Devil and Red Batjust to name a few. Currently, Red Bull is constantly engaging in lawsuits against such imitators. All in all, the energy drink market is now comprised of more than 150 products 13 . 7.1.2 Barriers to Entry 2004: High In addition to the capital intensity and distribution barriers, the brand name of Red Bull is probably the biggest barrier for a new entrant. Today, the brand name of Red Bull is so powerful that customers ask for it by name when ordering energy drinks. Such loyalty is what the competitors are trying to break, and what Red Bull is trying to protect. For example, Red Bull is often involved in lawsuits against bars and clubs that serve a competitors brand when the customer explicitly asks for a Red Bull. 7.1.3 Substitutes and Complements 2004: Few substitutes and complements The threat from substitutes and complements are moderate but growing. New substitutes within the functional drink segment are emerging mostly more healthy alternatives due to a growing health trend. Vodka is still a big complement but as it still is a popular drink base and is used together with Red Bull it is more a position enhancer than a threat. 7.1.4 Power of Buyers and Suppliers 2004: High for buyer power and low for supplier power No Substantial change from 1987.
12
The New York Times, Energy drinks charm the young and caffeinated, April 4, 2004 Beverage Net, December 2003
13
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7.2.1 Weaknesses Innovation need The breakthrough for Red Bull was to innovate the soft drink market, but since it has built its strength in its field on market leadership and brand awareness more than innovation. A number of new competing drinks have been launched in the last years with new packaging (e.g. PET, 33 cl) and ingredients; Red Bull has stuck to its original format and concept. Brand expense It has relied heavily on a clear and differentiated brand but keeping the lead has become increasingly expensive as competitors also invest heavily in marketing. The brand is becoming more and more generic with lower resistance to substituting energy drink brands which dilute the value of the brand investments. Small Product base Red Bull markets only two products, the original Red Bull and a sugar free version. It has no portfolio of products and is therefore more sensitive to changes in the market, especially when the energy drink market is considered to be the relatively smallest niche within the soft drink market. With an increasing health trend the demand for caffeine drinks risks to decrease. 7.2.2 Strengths The two most obvious strengths that Red Bull has today is its market leadership and brand awareness. Market Leadership Red Bull markets its product in more than 100 countries and it has approximately 70% of the market share in the world wide energy drink market. The rest of the top 20 brands take a combined 17% share 14 . No clear competitor has crystallized; e.g. Coca Colas competing energy drink Burn is absent from the top 5. Brand Awareness The intense promotion of Red Bull has not only established the brand but also driven
14
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the growth of the market of energy drinks as a whole. Within its target group the brand awareness is significant. The brand equity has developed during a number of years and is very hard to copy. They have managed to build an authentic, credible and qualitative brand which consumers have been willing to pay a premium for. Their advertisement through extreme sport events and similar opportunities has through its unexpected and outstanding approach established the Red Bull brand awareness.
7.3.1 Threats The energy drinks market is maturing and the threat of substitutes is getting stronger. As the brand is getting more and more generic the barrier for the consumer to switch to substitutes decreases. This together with increasing health awareness, when people might be concerned about the caffeine content, could threaten Red Bulls position. Health awareness One can see a growing health awareness which might change the market demands. The demand for carbonated water and similar products has increased 15 which changes the demand profiles within the functional drink market and may move it from the energy drink niche. Red Bull has answered these trends by introducing a sugar free version, but people might still be concerned about the caffeine content. Maturing market Red Bull has been driving the growth of energy drinks but as the market matures the growth has slowed down. This is a threat to Red Bulls future expansion. Substitutes/competing brands Competing energy drink brands and substitutes, such as other functional drinks and carbonated water, have strengthened their positions. Although Red Bull still has a strong brand, these substitutes clearly mitigate this strength. This threat is getting stronger as Red Bull is becoming a more generic brand. People are more willing to test new brands and when a customer demands a Red Bull they might be satisfied with any energy drink.
15
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7.3.2 Opportunities We believe that to survive in an increasingly competitive and mature market it has to continue to think creatively and look for opportunities to renew its approach to the functional drink concept. Two ways of keeping the ir competitive advantage is through extension of the existing product line/target market and distribution diversification. This would address the threats that have emerged. Extension Red Bull has a strong brand which might be leveraged by possible extension of the product line, but also an extension of what market to target. When it was introduced it changed the soft drink market and created the energy drink market. A wider definition is the market for functional drinks where we see a possibility for Red Bull to extend the product line and diversify the portfolio of products, capitalizing the established brand. Red Bull could also look into new packaging and format possibilities for example PET and 330 ml cans to further defend and develop its market leadership. An extension would make it less sensible for demand changes within the energy drink market as well as opening new business opportunities in the functional drink market. Maybe it is time to think out of the box and look into new non drink products to complement the energy drink and secure growth. Energy gel, energy candy and ready to go alcoholic blends could be possible ideas. There is a clear risk with continuing to have too few eggs and in the same basket. Distribution diversification As it once successfully managed the challenge of distribution there are still development possibilities to stimulate growth. For example there is still room for expansion using the vending channel, but Red Bull should also analyze other possible retail options.
8 Conclusions
Red Bull is considered a miracle within the soft drink ind ustry. What began as one mans idea in a bar metamorphised into a respectable venture with annual sales of $1.5 billion over a fifteen- year timeframequite impressive for a privately owned company with only one product. Although Red Bull was not a case of pure product innovation, its success was crafted through extremely innovative and canny marketing efforts. Red Bullthe mystical energy drink from Asiawas adapted to the European tastes to make it the perfect drink not only for extreme sports enthusiasts, but also night crawlers at bars and clubs. This made Red Bull into a hip drink among young and active crowd of Europe, which pushed Red Bull to become one of the most sought-after drinks. However, Red Bull was careful and did not rush its expansion. It started out small in Austria to create a solid winning marketing formula before expanding into global markets. Many wonder why mighty incumbents like Coca-Cola and Pepsi were so slow to react. Perhaps they were overconfident of their ability to crush a mosquito player like Red Bull. This cost the incumbents a high price. Once they decided to overthrow
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Red Bull, the energy drink market had already branded itself as a Red Bull category. However, Red Bull will face stronger threats in the future as the market matures and incumbents begin to scale up their marketing efforts. We believe it is now time not only to expand Red Bull into more countries, but also to expand its target market as well as horizontally expand into new products. With such re- innovation efforts, Red Bull will be able to enter into a new stage of growth to become a truly global brand and perhaps one day it will become the new Coca Cola .
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