Red Bull Company Research Paper

Patrick Davis

Red Bull

11/1/2012

Executive Summary

        Red Bull makes a premium energy drink for students, drivers, clubbers, business people, and athletes around the world to revitalize their bodies and minds.

Problem:

Red Bull, the leader in the energy drink sector of the soft drinks market, has seen its market share drop from 75% in 1998 to 47% in 2005. For the first time in the young energy drink sector, competitors have developed a legitimate share of the market: Hansen Natural’s Monster with an18% share and Rock Star with a 16% share. What actions need to be taken in order for Red Bull to solidify its market leader position?

Answer:

Red Bull should create a line extension offering either a diet drink to appeal to the recent trend of health conscious consumers or a new flavor while also changing their price point to be more sensitive to the consumer. By doing this, it will allow Red Bull to fight its competition in a very similar fashion to how they began to lose their market share (competitive pricing and a variety of options).

Rationale:

Red Bull has the strongest brand awareness in the energy drink segment which provides instant credibility to any line extension they may come out with. Red Bull has the extensive distribution network to make sure the product reaches the consumer no matter where they are. Market trends are currently in Red Bull’s favor as they show the customer wants options; giving Red Bull the perfect opportunity to develop a new product. Red Bull has the financial resources to take a risk like this, especially considering the rapid growth and acceptance of the energy drink sector. Simply put if Red Bull stands still Monster, Rockstar, Pepsi and Coke will continue to close the gap on them.

Situation Analysis:

Red Bull entered the United States market in 1997, by launching the product in “cells” beginning in Santa Cruz, California in popular night clubs. The thought was that these accounts would be able to give more attention to Red Bull than a retailer would and party goers are more open to try a new product. As word-of-mouth started to grow in one cell, the product began to sell itself; it would then be introduced into a new cell, and so on. Red Bull was looking to give its product a feeling of exclusivity through not only its market introduction strategy, but also in its pricing. Red Bull sees itself as a nutritional item and thus prices their product that way. The company sets their prices at least 10% above competitors despite offering a product much smaller in actual size.

Red Bull currently spends approximately 30% of their worldwide sales on marketing and advertising which equates to 600 million dollars. Most of Red Bull’s marketing efforts are put towards buzz; sponsoring people and events that represent what the more typical Red Bull user would enjoy. For example, Red Bull has sponsored many extreme sporting events including but not limited to skydiving and paragliding. In addition, Red Bull has funded musical events around the world, typically with an emphasis on hip-hop. While people believe these events are inexpensive it is not the case. Only 18% of their marketing efforts are through a measurable media, as they have said they would plan a media push only once the market has matured so they could reinforce the brand.