Full version Red Bull

Red Bull

This print version free essay Red Bull.

Category: Business

Autor: reviewessays 20 April 2011

Words: 4150 | Pages: 17

1. Market Segmentation

1.1 Introduction

Red Bull is a non-alcoholic energy drink and therefore falls under the category of soft drinks. Soft drinks can be divided into sub-segments and one of these segments is energy and sports drinks. These can be divided again into three different categories:

• Glucose energy drinks

• Sport drinks

• High energy stimulation drinks

Since 1996 the market of soft drinks has grown by 5% and by 1997 it reached a total amount of Ј6.896bn, which is an equivalent of 10bn liters. Moreover we can say that the segment of energy and sports drinks represents 2.6% or Ј177m of the overall soft drink market. Since 1992 an increase of 64% in volume sales can be found within this very young market of energy and sports drinks.

The main differences of the three above mentioned sub-segments of soft drinks are as followed:

1.2 Glucose Energy Drinks

These drinks provide physical energy through glucose or a mixture of sugars. Originated from the Lucozade brand. These drinks do not contain any other substantial ingredients such as Lucozade Energy, Lucozade NRJ or Red Card. In 1927 they were originally positioned as a convalescence drink.

1.3 Sports drinks

Also known as isotonic drinks, replaces body fluids after sport activities or exercises. Sport drinks help to re-energize and re-hydrate the body and can be taken before, during or after exercises. That’s because you should drink it in great amounts and fairly quickly, they are usually still or low carbonated. Examples for this kind of drinks are Gatorade, Isostar and Dexters.

1.4 High-energy Stimulation Drinks

These drinks have ingredients such as caffeine and taurin, which help to increase concentration, endurance, alertness and reactions. This kind of drink is not only designed for sports men, it can be used nearly from everyone who wants to get stimulate and energize mind and body. Red Bull, Flying Horse and Virgin Hi Energy belong to the category of high-energy stimulation drinks.

Red Bull created this kind of sector in 1987 and the later segment makes up Ј14m or 8% of the value sales of the energy and sport drink market. Glucose energy drinks represent the majority of the volume sales with Ј126m or 70%. Sports drinks represent Ј39m or 22%

2. The Target Market

2.1 Introduction

Red Bull, who is originally from Austria where it is still produced, distributed their energy drink in over twenty countries. Countries like USA , New Zealand , South Africa , Eastern and Western Europe . So it would be not very useful to restrict the target market to the geographic areas as well as the psychographic segmentation for the targeted consumer that’s because for a product like Red Bull it would be far to narrow as it cuts across lifestyles, demographics and socio-economic boundaries. So the best solution would be to set the target market as a behavioural segmentation. The reason for that decision is because in a behavioural segmentation the individual’s relationship with the product and the use and benefit sought from the product. Red Bull is not just an energy drink it is primarily a utility drink to be taken against mental or physical weariness or exhaustion. It’s use helps to increase endurance and heighten alertness as well as reactions and generally spoken the use of Red Bull helps to cope with the challenges of every day life, which includes work, leisure and sports. Three main stereotyped uses can be identified.

2.2 The Athlete

It is usually a person who takes his sport very serious, what means he wants to get the best out of his body. Therefore you can say that Red Bull is part of his diet and sport life. So in this case Red Bull is for him a very good and easy way to improve his endurance or speed.

2.3 The Worker

This could be anyone who has to work hard such as a manager or a street worker. Anyone who wants to get pushed up and would rather like to have a Red Bull than a coffee.

2.4 The Clubber

This category is fairly new, in recent years the people found out that Red Bull can be used as a very good mixer with alcohol. Red Bull sells now 34% of its units on premise. It is almost impossible to find the right target group, the reason for that is because of the various applications of Red Bull. Hence a clear cut categorization in age groups and socio-economics groupings is not feasible. But what we can be shore of is that the typical Red Bull drinker is dynamic and active, the gender does not play any role at all. But it is more likely that more less younger people who really like to go out fall for Red Bull. Research (PHT, 11/97 Smith Kline Beecham Energy & Sports Drinks Report) has shown that 53% of the people who drink energy/ sports drinks are within the age between 14-34 years. Moreover they found out that the main reason for purchasing energy/sports drinks were to quench thirst (37%) and give boost.

3. The Macroenvironment

3.1 Political and Legal Aspects

Red Bull was introduced into the market as a new non-alcoholic drink with a new concept, namely energy drink.

At first the Health Organisation was suspicious that Red Bull could be a starter drug. Their scepticism even increased after rumours that Red Bull contains ingredients like bull’s galls. However, the fact that Red Bull has been used in Australia for 9 years and in Asia even for 30 years without any complaints led to increased confidence. Furthermore a study carried out by an independent institute (ISME) in 1998 proved that Red Bull has stimulating effects like caffeine, but does not lead to addiction.

Nevertheless Red Bull still needs to be approved by each country where it shall be sold, which is a very time consuming and therefore expensive.

Some countries still have doubts about Red Bull like e.g. Hungary where Red Bull is forbidden. Initially this was also the problem in the UK , where Red Bull was only allowed to be sold after its harmlessness had sufficiently be proven.

3.2 Economical Aspects

Red Bull faces little exposure to economic cycles as it is a special drink, serving a niche market. Their target market are sportsmen/women as well as hard working people, who need a “push up”. There are few substitutes and through their well positioned advertisements their sales are increasing.

3.3 Socio-Cultural Aspects

Unlike the 1980’s, where nobody wanted to try it, people are now much more open for new experiences, as their lifestyles are changing and getting more and more influenced by ethnical groups. Furthermore they are confident to try it, because any health concerns were cleared by organisations like the ISME. The consumers are male and females regardless of age, who are very sporty or work very hard. At the moment Red Bull has a very trendy image and gets sold in a lot of bars and clubs, where it is often mixed with Vodka.

3.4 Technological Aspects

Red Bull gets exclusively produced in Austria from where it is exported to 28 countries. There are two reasons why it does not get produced in any other country. First it guaranties consistency in taste. The Fanta sold in Brazil tastes for examples slightly different from the one sold in Europe , in order to meet domestic preferences. Red Bull wants to ensure that it tastes the same all over the world. Secondly in that way the recipe will be kept safely in one place.

Red Bull is normally produced in 250ml cans, but glass bottles are an alternative in the case that they run out of cans -which has happened before.

3.5 Environment

The can is made of recyclable aluminium and therefore environmentally friendly. Glass bottles can also be recycled and therefore do not harm the environment either. This might give the company a competitive advantage when regulations become stricter and more equal throughout Europe as well as in the rest of the world.

4. The Competitors

4.1 The Market

Energy Drinks have become very famous in the last decade. During the last ten years, there were established hundreds of them around the world. The following list shows the most common in Europe :

220 - Afri Guarana - Aqvino - Bio Volt - Black Booster - Black Panther - Black Power - Black Spark - Blaue Sau - Blondi - Blue Bell - Blue Jeans - Body up - Bull Frog Fred - Bull it - Celeste - Cool Fire - Cult - Dark Bording - Dark Dog - Dark Rider - Devil - Dexters - Dogadong - Don Promillo - Dynamite - EE - Elite - Erektus - Excalibur - EXEX - Fighter - No.1 - Fit for fun - Fit for the road - Flash Power - Flying Horse - Fortitudo - Full Power - Full Speed - GoGo - Gong - Guarana - Guvi - H.I.V. - Hot Stuff - Independence Day - Lipovitan B3 - Lola Blue - Mach 6 - Magic - Magic Man - My Way - Mystery - NRG Energy - NRG Vodka - Oetschi - Pole Position - Power Kid - Power Point - Power Horse - Qarana - Reactor - Reanimator - Red Bull - Red Devil - Red Eagle - Red Horse - Red Hot - Red Tiger - Ritual - Semtex - Sitting Bull - Smart - Space Kid - Start me up - Take off - Take Power - Taurus - The lost world ( T-Rex ) - Top Secret - UFO - verde strong - Villa Wahnsinn - Virgin hi Energy - Warning-X - Warp 4 - Will Power - X-plosiv - XTC

All of them contain the same ingredients: Guarana (extracted from a rare Brazilian plant; an energy spender), Ginseng (known to relieve stress), Taurine (an aid in increasing muscle mass, energy and speed up the combustion of fat) Vitamins and Caffeine (serves as accelerator to increase the effects of taurin). And most of them are sold in 250ml bottles or cans.

All of them are marketed as energy spending and as very suitable mixer with alcohol.

Anyway, in the UK there has only been a very moderate development in the energy drink market. Although, all of the above are prepared to penetrate the market very soon, there are only very few serious competitors of Red Bull in the UK . So far the serious direct competitors of Red Bull in the UK are the following:

4.2 Direct Competitors

Purdey’s Gold High Energy

Ingredients: Vitamins, Sugars, Herbs and Carbohydrate

Design: Golden 325ml bottle

Price: Ј 1.03

Family: Glucose and High Energy Drinks

Indigo

Ingredients: Wolberry, Guarana and Schizandra

Design: Blue 375ml bottle

Price: Ј 0.79

Family: Glucose and High Energy Drinks

Marketing: Natural Quality Refreshment; Sampling and Press Ads

Lipovitan B3

1997 launched in the UK , in Japan since 1962

Ingredients: Taurin and Caffeine (smaller amounts)

Design: Golden 250ml can

Price: Ј 0.99

Family: High Energy Drinks

Marketing: High Quality, delicious and healthy, extensive TV

Ads, Press Ads, Outdoor, Sampling

Lucozade Energy

Ingredients: Caffeine, Glucose (aimаimitate Red Bull)

Design: 350ml can / 300ml bottle in Lucozade design

Price: Ј 0.49

Family: Glucose and High Energy Drinks

Marketing: Fitting the Lucozade Family

4.3 Indirect Competitors

Indirect competitors are those from the glucose or conventional energy drink family. The largest distributor of those drinks in England is Lucozade with a wide product range in terms of flavor. Lucozade owns approximately 90% of the market share of sports drinks which probably is the result of high media spending and the tradition of the company (1927).

5. The Brand Positioning

Red Bull represents a new category of drinks, the energy drinks. In this new market sector Red Bull is perceived as a premium\high margin brand product.

Pricewise Red Bull is in position in which it can command a premium price because there simply nothing to compare it with. It is a unique functional drink, promising and delivering benefits that no other drink can offer.

In the UK the average price of a Red Bull can is 1.05 which is clearly above its competitors average price of 1.03. The price expresses superiority of Red Bull and furtheron it proves that there is no substitute.

The positioning policy of the company is : premium product, premium price and premium profitability.

In contrast to the original Marketing Mix Theory based on the 4 PÒ‘s, Red Bull Ltd. introduced its own Marketing Mix Strategy. This can be best explained in form of a three pillar system, consisting of the media\advertising category, sports-and event sponsoring and sampling. In 1998 the budget Red Bull spend on marketing in the UK covered the amount of Pound 6 million. Their marketing formula is based on classic creative advertising; precision-targeted sponsorship and events; and right-place, right time sampling when consumers needed.

6. The Marketing Mix Strategy

6.1 Media Advertising

Red Bull uses all the available media channels, meaning cinema,TV, radio, press and the internet. In other words the company focuses on the media through which it reaches its primary target market-young people.

Therefore they advertise in TV shows like T.F.I. Friday and in magazines like Time Out and men’s health. Their advertisements in the different media channels are very successful. They allow the consumers to interpret the product and the moments of use themselves. Red Bull achieves this by a humorous and witty cartoon campaign, transferring the message that this energy drink helps you to escape by `giving you wings ґ. The idea of communicating with the consumer in form of a simple cartoon has got the advantage that the message is easy to understand . People do not only enjoy the campaigns they even remember what the product is called and what it delivers, which is the most important characteristic for a successful campaign.

6.2 Sports-and Event-Sponsoring

The company also implements sponsoring in their marketing mix strategy. Sponsoring supports the image, the credibility and the visibility of the product.

On the one hand Red Bull sponsors the athlete target market in either extreme sports such as freeclimbing, paragliding and motorsports or fun sports, but always where Red Bull is needed.

This strategy contributes to Red Bull that the brand appears ( logos and stickers) and that the product Ò‘s target market is more precisely defined.

On the other hand Red Bull does event sponsoring. The company either creates its own events (i.e. Red Bull Music Academy .......) where the whole events are promoted by Red Bull or they promote other events (i.e. Speed Ski World Championship ) .

Eventsponsoring attracts people’s attention towards the product and connects them.

6.3 Sampling

Sampling is another very important part of the three pillar marketing system. The methods used are well tested and proven in other markets. As the major purpose of Red Bull is to energise the company samples at the right place at the right time, where it finds its exact target market.

Examples of usage are driving, studying, working night shifts and sports. Red Bull is following the basic sampling rules consisting of:

• never impose the product

• always explain the benefits of the product

• drink always a full can( 250 ml)

• It must always be chilled

• Always being cautious about whom your are sampling the product

This year 8 teams will sample 400,000 consumers across the entire country.

7. Future Recommendations

7.1 Red Bull

Red Bull has a great image and is the market leader. Therefore we have two objectives:

• Maintaining the lead

• Trying to extend it by creating further consumer needs for Red Bull

• Product

The product is fine as it is, over 60% of the under 30 year old Germans recognise the brand unassisted. People are happy with the product. Only the image can be strengthened.

• Price

Also the price should stay the same, a high price is inadmissible to keep the image of a high quality product. Only place and promotion can add further value to the image.

•

Place

Table 5.1 showed us that in 1998 only 20% of Red Bull’s sales were distributed through retail. As Red Bull is an utility drink, consumers only buy it occasionally. Therefore they do not necessarily buy the drink in supermarkets, but rather at petrol stations or off-licence retailers.

As Red Bull has already reached market dominance in the rest of Europe with drastically rising sales figures, the company will have a significant influence on the wholesalers product displaying policy ( PDP). In the near future Red Bull will become a more established and demanded brand.

• Promotion

Because of the high correlation between marketing expenditure and the sales of Red Bull in the past, the marketing budget should be significant. Red Bull has already increased the budget immensely; the goal is up to 50% of revenues. A high percentage of the budget is spent on sponsoring. In the future we should extend the promotion and ad-activities in order to maintain the leader position; there shall be more Red Bull stands at ski huts giving a way Red Bull mix drinks (RB-Champagne)etc.

7.2 White Bull

• Product

White Bull is a soft high quality mix drink (long drink), containing Vodka and Red Bull. The name “white”, because Vodka is crystal clear. There will be a light Bull and a White Bull light with a lesser extent of alcohol. The drink will be presented in a luxury 300ml bottle. The idea of the product is that all the people who use Red Bull as an Energizer at daytime shall have a drink for the night. The motto is:

Cool goes hot

Light goes night

Red goes white.

The image shall be that white bull helps you to fly even longer, so you can survive the night in a club; and you can enjoy it even more intensive.

• Price

White Bull shall have a luxury image, but the target group is everybody. Whether it is a business woman in the Country Club, who only wants to have one drink and does not want to buy a whole bottle of Vodka, or whether it is a teenager, who just wants two Vodka Red Bull for the night in front of the TV. The price shall be around twice as high as a beer, a little bit higher than a Hooch, but still cheaper than a self-mixed Vodka Red Bull. That means that it shall cost round about Ј2.28 in the supermarket.

• Place

“White Bull” will be distributed literally at the same places as “Red Bull”. We are firstly talking about Bars, Pubs and night-clubs, petrol stations ( not in the UK , more likely in Germany i.e.) and small off-licence retailers. Once Red Bull is fully established in supermarkets, White Bull will fill the shelves in the supermarkets as well.

• Promotion

White Bull will be promoted in a similar kind as Red Bull, through events organised together with Vodka-producers, VIP-Parties, etc.. Also, as by-product to Red Bull on Ski huts. Definitely at evening events rather than sports events at day time. Advertising will be on TV and fashionable magazines (Time Out; Cosmopolitan). White Bull will be promoted with the slogan: “White Bull gives you horns”. This may cause some controversy, but gives us a lot of extra publicity, as well as it differentiates the product from Red Bull.

7.3 Sports-Clothing

We thought about introducing a small selection of very extraordinary sports clothes. Red Bull is sponsoring a lot sports events. Almost always sports who are rare, and only a minority is doing them. First aim is to make some extra money, second is to get extra attention through people wearing the clothes.

• Product

Products of the Clothing Selection shall be very limited. There shall be a jacket for skiing and snowboarding for instance, a hat for spare time, Shorts for biking, bath suits, etc. The product shall be of high quality where the Red Bull logo is a cult, and shall be bought in addition to the cult objects (e.g. Burton Snowboard pants)

• Price

Clothing shall be a lot more expensive than no-name clothes, but a bit cheaper than Burton , Tommy Hilfiger, etc. The strategy shall be similar to Kookai.

• Place

The “Sport Clothing” sector will be distributed very selectively. Therefore they will be sold in only a few, selected stores that target young, sportive and active people who desire functional and durable clothing. They also will be sold in places such as skiing resorts. We will try to establish specific “Red Bull” rooms or corners in famous stores.

• Promotion

The Clothing will mainly be advertised in sports magazines and promoted through sports sponsoring (Formula One, Snowboarding, etc.).

7.4 The “Red Bull Energy Bar”

• Product

A City-Bar for business people to take a light lunch and to meet. In the style of an Airport VIP-Lounge, customers have the possibility to plug in their computers (Internet, Email), send and receive faxes and to be financially informed over a large screen showing stock exchange quotes.

Products will be salads, healthy sandwiches and juices, and of course Red Bull

•

Price

The price will be as high as in any other City-Bar and in addition phone line charges. The Bar should reflect a high standard, but it should be affordable very regularly.

• Place

The “Red Bull Energy Bar” will firstly be established at a few, very selective places. Our primary target market-professionals \ managers-will be perfectly reached in the City. All offices and banks are situated in the city, where professionals take a lunch break to energise. “Red Bull Energy Bar” will firstly be established in selected major European capitals, i.e. London , Paris , Berlin . Once this business is established we are going to expand it.

• Promotion

The Red Bull Energy Bar does not need a lot of media advertising, because it will be placed in an area where people pass by very frequently. This gives a great word of mouth attention (see Hдagen Dazs). There will be opening events attracting the press. Nevertheless, infrequent advertising in specific magazines (Business Week, Time Out Eating & Drinking Guide, etc.) will take place.