4.

Red Bull Red Bull is an Austrian-produced energy drink that competes in a very narrow niche of the carbonated soft drink market. The product is an adaptation of a Thai beverage named Krating Daeng, which translated into English is Red Bull. An Austrian entrepreneur by the name of Dietrich Mateschitz first learned of the beverage while travelling in Thailand in the 1980s. In 1984 he approached the Thailand manufacturer, TC Pharmaceuticals, to pursue a licensing agreement to market Red Bull in other countries. They agreed and took a 51-percent stake in his firm, Red Bull GmbH. Red Bull was first introduced in Austria in 1987. Its first foreign market was Hungary in 1992. Today, Red Bull is available in 120 countries with sales of more than 2 billion cans annually. It is the worlds number-one energy drink. Red Bull has been supported with unique a unique and creative style of advertising. The slogan Red Bull gives you wings strongly suggests the brands physical properties and benefits. Red Bull is sold as an energy drink and is designed to combat mental and physical fatigue. It is the combination of ingredients interacting with each other that provides the energy-building benefit. The Product The key ingredients of Red Bull are taurine (1000 mg), glucuronolactone (600 mg), and caffeine (80 mg) in a 250-mL can. The product also contains sweeteners, such as sucrose and glucose. It is the combination of all the ingredients together that results in Red Bulls benefits. All ingredients are synthetically produced by pharmaceutical companies to ensure the highest quality. The composition and ingredients are uniform throughout the world, except for slight variations in vitamin content due to national regulations. Red Bull is a functional product developed especially for periods of increased mental and physical exertion. It can be consumed at virtually any time: during sports or work, or while studying, driving, or socializing. Red Bull promises to improve performance during times of increased stress or strain, increase concentration and improve reaction speed, and to stimulate ones metabolism. Essentially, Red Bull vitalizes the body and mind. To avoid any confusion, Red Bulls makers make it known that is not a beverage like, day, Gatorade. Gatorade and its direct competitors rehydrate the body. Gatorade is closely associated with exertion during sporting events, and athletes are shown refuelling their bodies on the sidelines during games. Red Bull has not been formulated to deliver rehydration, and in fact encourages people who engage in sports to drink lots of water during intense exercise. Because of the ingredients, people must also be concerned about how much Red Bull they consume on a daily basis. It is recommended that daily consumption of Red Bull

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should conform to a persons intake of caffeine, and this varies from person to person. The caffeine in one can of Red Bull equals that of one cup of filtered coffee. It is recommended to drink one can of Red Bull about 30 minutes prior to the start of a concentration task or the start of a sports game. This is the time required for the ingredients to become effective in the body. The Market The North American energy drink market is currently worth US$2 billion (2004). Canadian sales are not known at this time, but given the size of the North American market and the fact that Canadas market is not as developed as the U.S., the Canadian market can be reasonably estimated at C$100 million. Red Bull launched the energy drink market in the 1990s. The brand dominates the North American market and is well ahead of brands marketed by big companies such as CocaCola and PepsiCo. As the market leader, Red Bull currently owns a 50-percent market share. Hansen Natural Corporation, the manufacturer of brands Monster and Lost, ranks second, with an 18percent market share. PepsiCo markets two brands, Mountain Dew Amp and SoBe No Fear, and controls about 10 percent of the market. Coca-Cola follows with a 7-percent market share split between two brands: Rockstar and Full Throttle. Rockstar is produced by Rockstar Inc., which pays fees to Coca-Cola bottlers to distribute the brand. Rockstar was launched in 2001 and found success with a 500-mL (16-o.) can that helped differentiate it from Red Bulls 250-mL (8-oz.) can. The Coke deal will increase Rockstars availability in vending machines and venues such as college campuses and airports, where exclusive distribution agreements are in place. Despite the financial resources of Coca-Cola and PepsiCo, Red Bull has held its ground in the North American market. Niche brands have cachet that certain consumer segments value. Generation Y, for example, is less interested in popular brands and exhibits less loyalty. They like to try new brands that are marketed by less conventional methods and learn about brands from friends and opinion leaders instead of mass media advertising campaigns. Consequently, many popular mainstream brands are losing ground to niche brands in various food and beverage categories. The energy drink category is growing while the regular soft drink category is languishing. Given the trends that are occurring there is little doubt the big companies will continue to support their new energy drink brands. While still only a fraction of soft drink sales, energy drink volume grew by 75 percent in 2004 while soft drink volume grew by only 1 percent. The category offers attractive profit margins because most of the sales are in high-priced, single-serving cans.

Copyright 2007 Pearson Education Canada

Red Bull in Canada The launch of Red Bull in Canada has not been without controversy. Red Bull is not a health product, but its sale is approved by Health Canada. While Red Bull is approved for sale in Canada the label must carry a warning that reads as follows: Not recommended for children, pregnant or breast-feeding women, caffeine sensitive persons or to be mixed with alcohol. Do not consume more than 500 mL per day. Doctors and nutritionists have warned of the dangers of mixing caffeine and alcohol in excessive quantities but their warnings often fall on deaf earsthe benefits of mixing Red Bull with alcohol outweigh the risks. Red Bull has been linked to the death of a basketball player in Ireland and three consumers in Sweden. Countries such as Denmark, Norway, and France have banned the sale of Red Bull. Target Market Most energy drinks are targeted at the same customeryoung, urban males 16 to 29 years old. Typically, these males live on the edge or aspire to do so. They are interested in extreme sports and challenging recreational endeavours. To illustrate Red Bulls association with risk takers, the brand is directly linked to Formula 1 racing through its ownership of Red Bull Racing (Red Bull acquired Jaguar Racing from the Ford Motor Company). Red Bull also sponsors David Coulthard, one of the dominant and most popular racers on the F1 circuit. The brand is also strongly associated with extreme-style sports such as paragliding, hang gliding, skydiving, and BASE jumping (see the Red Bull website for more details). If image is everything, Red Bull has it in spades! The Challenge Red Bull has been operating profitably in a niche segment of the soft drink market. Until recently, the big companies such as Coca-Cola and PepsiCo werent participants so protecting and building market share was relatively easy for Red Bull. The presence of Coca-Cola and PepsiCo brands and their respective marketing clout will cause the niche to expand over the next few years. Coca-Cola has clearly stated its intentions. Its objective is to have a successful one-two punch [Rockstar and Full Throttle brands] in the profitable and growing energy drink category. The presence of these two brands and possibly other new entrants will expand the market by appealing to a broader target market. Red Bull will have to work harder to protect its position and build sales. New entrants at lower prices could pose a problem for Red Bull. Coca-Colas established distribution network will provide instant shelf space and credibility for its brands. Red Bull will have to adjust its marketing strategy in order to survive. What do you recommend?

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Questions 1. Should the target market for Red Bull be expanded? If so, describe the profile of the new target market. The description may include primary and secondary targets. 2. What consumer behaviour influences play a role or will play a role in the marketing strategy for Red Bull? 3. Is there a need for marketing research in order to develop a new marketing strategy for Red Bull? Should the company know more about its target market in order to devise a new marketing strategy? 4. What elements of the marketing mix need to be given priority in order to protect Red Bulls market share and to expand sales? 5. What specific recommendations can you make to build Red Bulls market share and sales volume? Justify your recommendations with appropriate and supporting rationale. Adapted from www.redbullusa.com; www.redbull.com; http://en.wikipedia.org/wiki/Red_Bull; www.homestead.com/prosites-prs/rockstar.html; and www.foodanddrinkeurope.com/news/print.

Copyright 2007 Pearson Education Canada