Red Bull, a small can of energy drink, strengthens your physical resistance, makes it easier for you to concentrate, speeds up your reaction time, boosts your energy level, and improves your mood. Thanks to a skillful marketing campaign, excellent distribution, and good packaging design, Red Bull is now available in almost 100 countries around the globe. Invented by an Austrian entrepreneur, Red Bull targets young people and athletes, two market segments that are attractive but hard to conquer.
Dietrich Mateschitz, an Austrian entrepreneur, discovered Red Bull during a business trip to Hong Kong during the 1980s, when he was working for a company that manufactured toothbrushes. Based on a formula containing caffeine, taurine, and other stimulants, the drink was creating quite a stir. Mateschitz expected it to be a big hit throughout Europe, where there was no other such product. Most important, the young Austrian saw an excellent opportunity to become an entrepreneur.
Mateschitz began the difficult task of getting approval to commercialize the contents of the drink, which he called ‘Red Bull.’ The product – which contained three times more caffeine than ordinary soft drinks – was unfamiliar to the European public. Mateschitz had to wait three years to obtain a license in Austria – a delay that created anxiety among distributors, who had ordered large volumes of the drink as soon as the license was approved in 1987.
Meanwhile, a survey showed that 50% of consumers disapproved of Red Bull’s flavor. They thought the drink was too acidic, and it felt strange on the palate. Nevertheless, Mateschitz pushed on, and eventually succeeded in popularizing the product. “Long term, the power of advertising is much greater than that of promotional activity,” Mateschitz often says. Nowadays, he is ranked number 427 on Fortune’s list of the richest people in the world, with a net worth of about one billion dollars.
Two Powerful Icons
In forging a marketing campaign, Red Bull chose young consumers and athletes as the company’s two icons. Within these two segments, there are widely divergent groups, so the marketing team focused on extreme sports, and young people who identify themselves with risk-taking and overcoming challenges. That turned out to be a good combination. “Young people are excited about taking risks because they search for new experience, for activities that make them feel alive and in control, for anything that gives them a sense of security. In contrast, fear can make you take a false step and lose everything,” says Esteban Ferrari, professor at the Argentine Catholic University (UCA) and football-marketing consultant for the Independent Athletic Club.
“It makes sense for every brand to create some sort of tie-up with sports. In moderation, participatory sports have been shown to improve health and the quality of life,” notes Gerardo Saporosi, president of Franchising Group and vice-president of the Argentine Association of Marketing.
John Hudson, coordinator of the graduate business school at the UniversityofPalermo, agrees that sports – especially, extreme activities – are a niche worth targeting. Nevertheless, Hudson says, “Perhaps we should wonder if Red Bell will continue to target only that segment. The risk of having such a strong link is that consumers do not associate Red Bull with other things they do all day. They don’t think of Red Bull as an energy drink that is good for their mind and concentration.”
Throughout the world, Red Bull has sponsored prominent professional sports figures in such specialties as snowboarding, skiing, mountain climbing, kite winging, kite surfing and Formula 1 racing. The company has also been involved in other environments where participants are cool young people – such as skateboarding, bicycling and skating.
However, the rapid expansion of Red Bull in Europe and America involves some risk. The company has become more famous for its brand and its image than for the product itself. Many critics say the company has yet to learn how to explain the positive effects of the product on physical and mental activity. That is why Mateschitz had to wait years in several European countries to get approval to sell his product. Even today, many people do not know what taurine is or understand the effect of caffeine.
Nowadays Red Bull distributes a great deal of information about these topics. It is concerned about explaining that taurine is not an animal-based substance derived from bull testicles. Such a rumor has long circulated. In reality, taurine is a synthetic ingredient that helps accelerate the elimination of poisonous substances that accumulate in the body because of physical activity and stress.
Regarding the mystery that surrounds the drink, Saporosi says, “Unlike politics, marketing is not a system involving [real] power. Moreover, 99.9% of consumers do not know the composition of any foods or drinks they consume. It is erroneous and dangerous, from a philosophical point of view, to think that marketing has any power to impose a product [on consumers]. Success depends on many things, such as good distribution.”
Apart from focusing his marketing on young people and extreme sports, Mateschitz wanted the packaging to differentiate his star product from other drinks. So he arranged for a firm to manufacture aluminum cans that have unique, smaller dimensions. He also developed an exterior design with two colors – blue and silver – that is very easy to distinguish from other cans.
“Packaging is one of the most important variables of [consumer] marketing,” says Saporosi. “It’s usually more important than advertising campaigns. Some products have no advertising budget but they sell very well because of the way they look.”
According to Hudson, packaging “is an excellent way to achieve differentiation (as in the perfume industry, for example.) In the case of Red Bull, there is no doubt that the product is clearly differentiated from the typical soda.”
Moreover, a good deal of care went into choosing Red Bull’s logo and its slogan – “gives you wings.” “I believe they created a new category – a fiery bull that flies. This is precisely the sort of animal that never stays quiet. Red Bull has wings. It flies, and it encourages you to play and live with intensity,” says Ferrari. However, as Saporosi notes, all of these things together are not necessarily enough for a product to achieve success. Among other factors, distribution is also key.
Hudson says, “In the drink industry, distribution is an extremely important factor. Red Bull must always have a good distribution network, in order to keep growing.”
Red Bull’s blue and silver cans can be found in supermarkets as well as kiosks. However, another challenge for the brand is to achieve an effective channel of direct distribution to its most important customers – young people and athletes.
To do that, Red Bull relies on two different approaches. First, it organizes and manages events in cities, where the company distributes the drink to skaters, ice skaters and so forth. There are always brochures that explain the product and a person who answers questions. Second, Red Bull dispatches promotional teams in cars – specially painted with the company logo – to beaches, public squares, exhibitions, and meetings where young people congregate. The teams then give away free samples of Red Bull.
Young people who look healthy and athletic carry out all these activities, reinforcing the company’s concept. “The message comes from someone who is a credible leader of opinion, not someone who isn’t the real thing. You have to talk to people in ways that connect with them,” says Ferrari.
Nestor Braidot, a professor of administration and economics at the University of Salamanca, adds, “In highly developed countries, people are spending more and more time on sports … Using young people to promote products has several benefits,” notes Braidot. “It allows you do customer sampling in a pseudo-efficient way (since you are guaranteed that the person will receive your sample). It allows your target to associate your product with specific personal characteristics (since your promoters are attractive people who are stylishly dressed). Finally, the environment is right (a time and place appropriate for young people.)”
Other locations where the energy drink is popular include pubs, bars, and discotheques. However, this is not always very positive for advertising. A negative consequence for Red Bull and other [energy drink] brands is the practice of mixing such [energy] drinks with alcohol and drugs. Energy drink companies failed to foresee this development, and they can do nothing to prevent this dangerous cocktail.
Enduring Over Time
How far can the energy of Red Bull carry the product? “The company is dependent on just one product,” says Hudson. “So, for example, a price war in the energy drink sector could be dangerous.”
Another risk is consumer behavior. Saporosi suggests that “not all young people behave the same way. Generation X is not loyal to brands, but the generation that is younger than 25 tends to be more loyal.” Braidot adds, “Young consumers are not the most loyal when it comes to brands….and when it comes to styles, there is a youthful style that means being even less stable and fixed; it’s a style that involves searching for [the right] personality and people to contact.”
According to Hudson, “There are lots of books written about marketing and about the youth segment [of the market]. Experts do not entirely agree. Traditionally, they said that young people were not brand-loyal, but research shows quite the contrary. Young people are loyal; both to brands and styles, and this fact could affect Red Bull either positively or negatively.”
One fact is beyond doubt: Year by year, Red Bull’s sales are growing. Between 2002 and 2003, they grew by 10%, from 114.7 billion euros, to 126.1 billion euros. This year, the company will sell 1.5 billion cans – a remarkable number for a product that was initially dismissed as strange and not very reliable.
Nevertheless, Red Bull cannot afford to trust its competition. Other strong brands, including Speed, Rocket Fuel and Blue Demon, can become enemies if they make advances in the marketplace and deprive Red Bull of consumers. Like Red Bull, these companies are heavily promoting their products in pubs and discotheques in an effort to win the attention of the youngest consumers. “Strategically, Red Bull could be vulnerable to such giants as Coca-Cola and Pepsi, which can’t sit back and simply do nothing,” says Hudson. “They could wind up competing in the same segment. It would be hard to fight that battle.”