Red Bull Case

Pricing

At an average global price of $1.64 per 8.3 ounce can, Red Bull commands the highest price per ounce of any other energy drink on the market.^[1] In terms of Red Bull’s competitors in the energy drink industry, all tend to have a parity pricing approach.  Many energy drinks are sold at prices that are very similar to one another – not only in the US but globally. In some markets, Red Bull retails for approximately twice as much as the next closest competitor. As a result, Red Bull is able to capture considerably more in profits compared to the next closest global competitors - Monster and Rockstar. Interestingly, Red Bull is able to command a higher price, despite offering nearly half the amount of fluids (8.3 ounces), in most markets.

While Red Bull is able to command a higher price point, there are many markets in which the company sells the same 8.3 ounce can for 1/3 of the price that the drink retails for in the US. Below is a snapshot of the US market, which is viewed as the most competitive market for energy beverage brands. The snapshot illustrates the higher average selling price of $2.42 per unit, compared to Red Bull’s international average selling price of $1.86.

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In considering Red Bull’s international pricing strategy, it is important to note its market position and therefore pricing power in the market. In terms of global market share, below are recent figures available (2014) from Euromonitor International:

Red Bull – 46%

Monster – 37%

Rockstar – 10%

NOS – 3%

Amp – 3%

As mentioned earlier in our analysis, Red Bull is considered the premium product within the energy drinks market & is priced comparatively high as a result. The company’s high price is an aim to justify in the mind of the consumer that the product is superior to its competitors. Compared to Monster Energy, for example, Red Bull is able to extract much more value and therefore, more revenue and profit. Certainly much of this phenomenon can be attributed to Red Bull’s first mover advantage, as they more or less created the market for energy drinks. In addition, Red Bull has established and maintained a high degree of brand loyalty, despite the abundance of less expensive offerings. By comparison, Coca-Cola’s Burn brand is about 40% less expensive than Red Bull in the US market.

Again, Red Bull wants to be perceived as has a luxury product (a la Starbucks) and the company is therefore fairly strict regarding both its image (as described earlier) and its pricing policy. For $2.50+ for an 8.3-ounce can, Red Bull’s retail price is at least double what you’d pay for a 12-ounce can of Coke. That said. Red Bull contains 80 milligrams of caffeine, which is more than double amount in the 12-ounce Coke serving.

Pricing Strategy

In considering its pricing strategy, Red Bull’s entrance into new markets should leverage a premium pricing strategy. The aim will be to deliver the consumer the desired lifestyle brand at a price that will still attract consumers to the product. At a high level, our analysis suggests that Red Bull should extend its current pricing strategy, which a premium price approach as it moves into new markets.