Assignment 1

Case Report: Red Bull

The Case Report on Red Bull will be completed using the models posted in Module 3, entitled Case Study Model, and,
Marketing Communications Plan Model streamlined. You will identify with Red Bull products and situations, and see
how they are marketed in Canada.

Naturally, cases become outdated as soon as they are written so it is assumed that you will conduct appropriate
secondary research to update essential case facts. The case provides some data about market size, sales volumes and
market shares, but conditions in the marketplace change quickly as new brands, new trends, and other external
influences enter the picture.

A blend of marketing communications is required to resolve the problem that is presented. Advertising will play a role in
the case. The other components of the marketing communications plan will depend on the recommendations your group is
making.

The Red Bull case is studied for the purposes of a written submission. (Later in the year you will study a case using a
written submission with a presentation.)

Red Bull synopsis

Red Bull is a mature brand in a saturated energy drink market. They have relied upon buzz marketing strategies to build
the brand and have been successful in doing so. New competition from Coca-Cola and Pepsi-Cola, extremely large and
resourceful brands, will force Red Bull to re-evaluate its marketing communications practices if the brand is to protect
and build its position in this growing market.

Red Bull Communications Brief

Red Bull Profile

Red Bull is an Austrian-produced energy drink that competes in a small niche of the carbonated soft drink
market. The product is an adaptation of a Tai beverage named Krating Daeng, which translated into English,
is Red Bull.

Dietrich Mateschitz, an Austrian entrepreneur learned of the beverage while traveling in Thailand in the
1980s. He approached the manufacturer and was granted a licensing agreement to market the product in
other countries. Red Bull is marketed internationally by Red Bull GmbH.

Red Bull is marketed in 120 countries and is the leader in the energy drink segment. Global sales are estimated
to be in the neighborhood of $2 billion.

Product Concept and Benefits

Red Bull’s innovative product created the energy drink segment. The drink is designed to combat mental and
physical fatigue. The combination of ingredients interacting with each other provides the energy-building
benefit. The key ingredients are taurine (1000mg), glucuronolactone (600 mg) and caffeine (80 mg) in a 250
ML can. Sweeteners such as glucose and sucrose are also part of the formula.

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Red Bull is a functional product developed especially for periods of increased mental and physical exertion. It
can be consumed at any time: at sport, while studying, driving and socializing. Red Bull promises to improve
performance during times of stress or strain; it will increase concentration and improve reaction speed; and it
will stimulate one’s metabolism. Red Bull revitalizes the body and mind.

Red Bull contains twice the amount of caffeine (80 mg) of a can of Coca-Cola and sells for twice the price (a
unique cost-benefit proposition). It is a berry-flavored beverage.

To clarify the product and benefit, understand that Red Bull is not a product like Gatorade. Gatorade and
its competitors re-hydrate the body and are products closely associated with exertion during sports
participation. Red Bull is not designed for this purpose and does not promote such a benefit.

U.S. and Canadian Market

The latest information available (2006) indicates the energy drink market in the U.S. is worth
$US540 million. Energy drinks are classified as “functional” drinks that include products such as sports drinks
and nutrient-enhanced drinks. Red Bull’s U.S. market share is estimated to be 46% and is therefore, the
commanding leader in the market segment with retail sales of $US248 million.

The Canadian market is estimated to be about 8 percent of the U.S. market. The retail market is valued at
approximately $44 million. Red Bull’s Canadian market share is 50% producing retail sales of $22 million.

Competition

Double-digit annual growth in this category has attracted the attention of large and resourceful national
competitors as well as small, regional competitors.

Both Pepsi-Cola and Coca-Cola are active in this market. Pepsi markets Mountain Dew Amp and SoBe No
Fear. Coca-Cola markets two brands under the names Rockstar and Full Throttle. Two other competitive brands
called Monster and Lost are marketed by Hansen Natural Corporation. Refer to Figure 1 for a summary of
market share data for North America.

Figure 1
Market Share – Energy Drinks North America

Brand Market Share

Red Bull 50
Hansen (Monster and Lost) 18
Pepsi-Cola (Mountain Dew Amp and SoBe No Fear) 10
Coca-Cola (Rockstar and Full throttle) 17
All Other (independent and regional brands) 5
Total 100

Coca-Cola and Pepsi-Cola stand to gain significant ground on Red Bull based on the strength of their
distribution network in North America. Their brand availability in supermarkets, vending machines and at

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college campuses where exclusive distribution contracts are in effect offers significant potential to gain market
share. At one time neither Coca-Cola nor Pepsi-Cola were in the bottled water business but now they control
the two leading brands (Dasani and Aquafina). Coca-Cola and Pepsi-Cola are leaders, not followers.

Consumer Behaviour

Red Bull has been able to hold its ground in the energy drink segment because consumers show preference
for niche brands. In this segment there is a certain cache associated with the name Red Bull.

Consumers of energy drinks seem to prefer non-traditional marketing approaches and are influenced more by
word-of-mouth and by opinion leaders than they are by traditional forms of advertising.
In accordance with the benefits offered by Red Bull and other brands, people consume energy drinks to stay
sharp; they are searching for products that will give them a “boost” during the day.

Consumers are curious about energy drinks and will try various brands while in the “trial” stage of buying.
Research studies indicate that taste is an important buying criterion.

Image

The category is experiencing negative public perceptions. Many critics of Red Bull cite the addictive nature of
the ingredients if consumed in large doses and potential long-term side effects. Doctors and nutritionists warn
of the dangers of combining caffeine and alcohol in excessive quantities but their warnings have fallen on
deaf ears—it’s more like an invitation for the target market to try the combination! Red Bull has been linked
to the death of a basketball player in Ireland and three consumers in Sweden. Denmark, Norway and France
have banned the sale of Red Bull. Image issues and effective marketing has produced some slang names for
Red Bull. Among these names are “liquid cocaine” and “speed in a can.”

Target Market

Most brands including Red Bull target young urban males 16 to 29-years old (though others in need of a boost
do consume the drink). Typically, these males live on the edge or aspire to do so. They are interested in
adventure, extreme sports, video games and challenging recreational activities.

This description defines the generation of consumers referred to as Generation Y or the millennial generation.
It is widely believed by many, that this generation is cynical of traditional marketing strategies. As well, they
are perceived to be a notoriously fickle bunch by marketers.

In a more general sense anyone, be it a busy executive working long hours or a truck driver putting in
long hours, is a candidate for an energy drink.

Marketing and Marketing Communications Strategy

Red Bull presents itself as kind of an “anti-brand” based on the type and style of marketing it undertakes.
Consequently, Red Bull has an almost “cult-like” following. It’s one of those brands like Harley-Davidson or
Apple that are set apart from the mainstream.

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In terms of marketing and marketing communications Red Bull avoids mass marketing preferring to
focus on “buzz marketing” strategies and word-of-mouth to build the brand.

Red Bull, like Coke and Pepsi, uses distribution to its advantage, but in a very different way. Rather than
being readily available, Red Bull actually restricts distribution in order to attract “opinion leaders” who in
turn help create good word-of-mouth for the brand.

Considering the target market profile, Red Bull associates itself with adventure and risk-taking sports. Red
Bull sponsors Formula One racing teams, motorcycle racing, and mountain bike and snowboard events. On an
international scale Red Bull has a sponsorship presence in the following events:

 KTM Factory Motocross Team

 Champ Auto Car Racing
 Formula One Racing
 World Rally Car Championships
 BMX racing

Red Bull actually owns two Formula One racing teams: Red Bull Racing (formerly Jaguar Racing) and a
newly formed team called Scuderia Toro Rosso Racing. Of the $600 million Red Bull spends annually on
marketing, $100 million is devoted to these racing teams, a venture that only generates $70 million in revenue.

Red Bull is also active in soccer, a very popular sport in Europe, South America and Africa. Red Bull recently
purchased two soccer teams, one in Europe and one in North America. The team SV Austria Salzburg is now
called Red Bull Salzburg and the New Jersey soccer team in the North American Soccer League is no called
Red Bull New York.

Red Bull’s advertising efforts have been restricted to a campaign using the theme and slogan “Red Bull gives
you wings.” The slogan aptly summarizes the primary product benefit. The commercials employ an
animation technique and its impact may be wearing thin with potential customers. Television ads for this
campaign typically play on cable channels attractive to the primary target market.

Red Bull employs street level marketing activities to deliver its message. Some recent street activities
include the following:

 Small pickup trucks are painted in the Red Bull blue and silver colors; a giant can of Red
Bull is in the back of the truck. The vehicle is a mobile display in urban areas

 Giving free samples away on the street to people who look like they need a “boost.”

 Giving free product to DJs for distribution in clubs. Empty cans left on tables help create some buzz for
the brand.

Present Situation and Challenge

Red Bull has been operating profitably in a niche segment of the market but the presence of Coca-Cola and
Pepsi-Cola brands could change things. Strong financial backing and lots of mainstream marketing by Coke

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and Pepsi brands will expand the niche over the next few years. Their efforts will attract new and different
users. Red Bull will have to work much harder to protect and build its position and in doing so may need to
consider adding mainstream media and marketing communications activities to its mix.
Red Bull has experienced incredible success but it can now be classified as a mature brand in a saturated
market. Several challenges lie ahead:

 The original target market is growing up so a new youth group must be attracted to the brand

 A different image may be needed to meet the needs of the existing yet older target market (a repositioning
strategy)

Whatever is recommended the overall goal is to expand Red Bull’s presence in the energy drink market. What
message should Red Bull be delivering and what media and marketing communications activities should be
employed to deliver the message?

Part of the challenge is to establish a reasonable media and marketing communications budget for the
Canadian market. Knowing the market is worth $C44 million at retail and Red Bull has 50% market share,
annual sales revenue at retail are in the area of $22.0 million. To arrive at sales revenue at the point of
manufacture, retail and wholesale mark-ups (30%) must be deducted. Therefore, Red Bull (the company)
generates $16 million in sales in Canada.

What is a reasonable amount to spend on marketing communications over a 1-year plan period in the Canadian
market?

Procedure Guidelines

Prior to undertaking this challenge you should research the energy drink market further in order to update
case facts and to ensure you are familiar with the latest trends in the market, and with the latest marketing
communications activities of Red Bull and its key competitors.

You must prepare a media and marketing communications plan that will include the components of the
marketing communications mix that you recommend. Refer to the marketing communications plan model in
the textbook or any other model your instructor may provide you to complete this task.

Sources:
Elizabeth Furman, “Rush of Energy,” Beverage Industry, July 2006, www.bevindustry.com, “Global Energy
Drinks,” The Information Shop, www.the-informationshop.com, www.wikipedia.org/wiki/Energy_drink, “A look at a key feature of
Red Bull’s business,” www.buzed.ac.uk/compfact/redbull/redbull7.htm, Roger Dillworth, “Double- digit growth – health is main
market driver,” Soft Drinks International, April 2005,
www.beveragemarekting.com/news3d.htm, Kerry A. Dolan, “The Soda with Buzz,” Forbes, March 28, 2005,
www.forbes.com, www.redbull.com, www.redbullusa.com.

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