A REPORT ON CASE STUDY ON RED BULL ‘SUMITTED IN PARTIAL FULFILLMENT FOR THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION 5.5 JAIN SUBODH P.G. (AUTONOMOUS) COLLEGE, JAIPUR 2021-2022 SBMITTED BY HARISH SHARMA SUBMITTED To ROLL NO 2041068 DR. PRITI GUPTA BBA 4 SEMESTERCERTIFICATE THIS IS TO CERTIFY THAT THE PROJECT REPORTENTITLED “CASE STUDY OF RED BULL” ISA RECORD OF PROJECT WORK DONE INDEPENDENTLY BY MR./MS. HARISH SHARMA UNDER MY GUIDENCE AND SUPERVISION ANDTHAT IT HAS NOT PRIVOUSLY FORMED THE BASIS FOR THE AWARD OF ANY DEGREE FELLOWSHIT ‘OR ASSOCIATE SHIP NAME FACULTY Dr,Priti Gupta SS.JAIN SUBODH P.G.(AUTONOMOUS) COLLEGE JAIPURDECLARATION | AM HARISH SHARMA STUDENT OF BBA SEM IV HERELY DECLARE THAT THE PROJECT WORK “CASE STUDY OF RED BULL” PRESENTED IN THIS REPORT IS MY OWN WORK AND HAS BEEN CARRIED OUT UNDER THE SUPERVISION OF GAURI DHINGRA OF S.S JAIN SUBODH P.G(AUTONOMOUS)COLLEGE. THIS WORK HAS NOT BEEN PREVIOUSLY SUBMITTED TO ANY OTHER UNIVERSITY FOR ANY EXAMINATION HARISH SHARMA $.S JAIN SUBODH P.G(AUTONOMOUS) JAIPUR*Certificate I *Declaration I *Acknowledgment Ii INDEX SR. NO TOPICE PAGE NO. ol Introduction 01-03 02 Product Detail 04-07 03 Production Process 08-12 04 Marketing Strategies 13-20 05 Environment 21-22 06 Strategic Evaluation 23-30 07 Market Assessment 31-32 08 Operations 33-35 09 Conclusion 36-36 10 Recommendation 37-37 11 References 38-38neuvu INTRODUCTION Red Bull, headquartered in Fuschl am see, Austria, manufactures energy drinks which are described as “functional beverages providing various benefits, especially in times of increased performance” (Red Bull, 2013), The product claims to improve concentration, alertness and most importantly reduces the feeling of tiredness and fatigue. As of today, over 35 billion cans of Red Bull have been sold in 165 countries throughout the world. Currently employing over 8,966 employees, Red Bull continues to see incredible company growth recording a 15.9% increase in 2012, Red Bull also saw profits increase by 40% in 2012 to €311 million from the financial year of 2011 Brief History: Originally Red Bull was based on a Thai drink, Krating Daeng, which was first introduced in Thailand by Chaleo Yoovidhya in 1976. It was popular among Thai truck drivers and laborers. In Thai, daeng means red, and krating is the reddish-brown bovine called a "gaur", which is an animal slightly larger than the bison. Mateschitz. was the international marketing director for Blendax, a toothpaste company, when he visited Thailand in 1982 and discovered that Krating Daeng helped to cure his jet lag. Between 1984 and 1987, Mateschitz worked with TCBG Pharmaceutical (a Blendax licensee) to adapt a favor and marketing strategy for the European market. At the sume time Mateschitz and Chaleo Yoovidhya founded Red Bull GmbH; each investing $500,000 of savings and taking a stake in the new company. Chaleo and Dietrich each held a 49% share of the new company. They gave the remaining 2% to Chaleo's son Chalerm, but it was agreed that Mateschitz would run the company. Red Bull was first sold in its home market of Austria on April Ist, 1987 and with this launch, Red Bull ereated a totally new “energy beverage” category within the consumer beverage marketplace. Since then Red Bull continues to succeed with their limited product line and has recently launched new variations of the drink including different flavours. Page |RedBull Oi Red Bull is sold in a tall and slim blue-silver can; in Thailand and in some parts of Asia it is sold in a wider gold can with the name of Krating Daeng or Red Bull Classic. The two are different products, produced separately. hai Re ottles: Page | 2In 1992, the product expanded to international markets: Hungary and Slovenia, It entered the United States via California in 1997 and the Middle East in 2000. In 2008, Forbes magazine listed both Chaleo and Mateschitz as the 250th richest people in the world with an estimated net worth of $4 billion. Company Goals: Red Bull is dedicated to upholding the highest industry standards, while maintaining their leadership position in the energy drinks category and delivering superior customer service in a highly efficient and profitable manner. Red Bull’s desire to maintain their leadership position is reflected in their mission statement “To spread our wings over the world” (Red Bull, 2013), as they continue to focus on global expans Nn. International Exp: Red Bull aims to strengthen its global position by focusing on their presence in Asia, Red Bull has been successful in the past with its aggressive intemational expansion, and plans on using a similar strategy to enter the Asian marketplace (Euromonitor, 2013). India is home to the highest number of 20-24 year-olds at 98 million, followed by China with 82 million and Indonesia with 21 million. Since Red Bull's prime consumers are in their 20s the large youth population in these Asian countries makes them an attractive market with large potential growth (Euromonitor, 2013). Page | 3RedBull setli: PRODUCT DETAILS RED BULL ENERGY DRINK Red Bull Energy Drink is @ functional beverage. Thanks to a unique combination of high quality ingredients Red Bull Energy Drink vitalizes body and mind, Numerous scientific studies on the product and the individual ingredients prove that Red Bull Energy Drink: + Increase performance + Increase concentration and reaction speed + Improves mental alertness * Stimulates metabolism Red Bull Energy Drink has been developed for people who want to have a clear and focused mind, perform physically, are dynamic and performance-oriented whilst also balancing this with a fun and active lifestyle. In short, Red Bull gives wings to people who want to be mentally a ly active and have a zest for life. What's inside? Caffeine + B-Group Vitamins + Sucrose & Glucose + Taurine + Alpine Spring Water Page | 4RAW MATERIALS © CAFFEINE Caffeine is known for its stimulating effect on psychological and physiological functions. One of caffeine's primary sites of action is the central nervous system, Amongst others caffeine consumption increases alertness, reaction speed, vigilance, the ability to concentrate and problem-solving ability. Further, it decreases mental fatigue, Caffeine also stimulates fat burning during endurance activities, Thereby it helps to use fat stores in the body for providing energy and preserving the glycogen (~sugar) stores, This means that caffeine intake during endurance activities results in a more efficient supply of energy, especially in extended exertion it leads to significant improvement in such performance and endurance. Caffeine is contained in many foodstuff s coffee, tea or chocolate, DID YOU KNOW? The amount of caffeine in one Red Bull matches the amount of caffeine in one cup (250 ml) of coffee. + TAURINE Taurine is an amino acid which is naturally occurring in the human body. It is found in high concentrations in muscle, brain, heart and blood. A person weighing 70kg has approximately 70g of taurine distributed throughout the body, Put another way, a 70kg, person naturally has in his body 70 times the amount of taurine contained in one can of Red Bull Energy Drink. To date, more than 2500 scientific studies have been published regarding taurine and its physiological effects: Taurine is involved in vital functions of the human body. It acts as a detoxifying agent by binding with harmful substances and thereby accelerating their excretion from the body. Taurine is also involved in neurological processes and positively influences the performance of the heart. Further, taurine plays a role in thermoregulation, Page | 5RedBull rv Taurine is also contained in different foodstuffs like scallops, fish, poultry and most baby food. Have you heard about the origin of taurine in Red Bull? Many people bet it comes from some delicate parts of the strongest and most potent bulls in the world, Well, fact is that the taurine in Red Bull is produced synthetically by pharmaceutical companies and is not derived from animals. DID YOU KNOW? ‘The human body contains 70 times more taurine than one can of Red Bull. + GLUCURONOLACTONE Glucuronolactone is a metabolite of glucose naturally occurring in the human body. The glucuronolactone in Red Bull is synthetically produced which guarantees high and constant quality, Glucuronolactone, like all Red Bull ingredients, complies with food regulatory requirements or even pharmaceutical standards. The fact that ingredients are produced synthetically results in consistent high quality and safety. Of course these ingredients are as functional as their natural counterparts. In February 2009, the European Food Safety Authority (EFSA) published their scientific opinion on taurine and glucuronolactone. Their conclusion was that the key ingredients of ergy drinks (taurine and glucuronolactone), in the levels used in Red Bull, OUP VITAMI Vitamins are essential micronutrients that are required for maintaining normal physical functions. B-group vitamins play an important role in energy metabolism, such as the build-up and break-down of carbohydrates, fat and protein, The B vitamins contained in Red Bull are: * Niacin * Pantothenic Acid Page | 6RedBull ad PRODUCTION PROCESS ONE PRODUCTION HUB SERVI ‘THE GLOBE Red Bull's manufacturing base in central Europe has a lot of advantages: Red Bull guarantees that the same premium product quality is enjoyed around the world, thanks to our state-of-the-art production process and the use of high quality ingredients, such as locally- sourced alpine water New efficiency enhancing technologies which, in tum, help preserve natural resources can be implemented immediately. The energy used for production comes from the region; around 80% is sourced from renewable energies and Red Bull's working to improve this figure however possible. * THE CAN SETS OFF ON A JOURNEY Part of Red Bull's success lies in its efficient and highly modem production system, sending reclaimed material back into the loop - so it just might end up in your hands once again. * NOTA SINGLE GRAM OF ALUMINIUM IS WASTED All cans are 100% recyclable: once they've been collected and reached the recycling facilities, not the tiniest bit of aluminium is lost. And there's also absolutely no decrease in quality! © THE CAN - AN "ENERGY STORE” It's no secret that recycling makes good use of a precious resource and saves valuable energy. Using reclaimed aluminium comprises a 95% saving in energy as compared to using new aluminium, and cuts C02 emissions. That's why drink cans can be said to "Energy Store" - and that’s not even referring to their contents, Page | 8RedBull selim: * Vitamin Bo = Vitamin B12 These vitamins also support mental and physical performance. 100ml Red Bull Energy Drink contains 11g of sucrose and glucose together. This total amount of sugars is comparable to the amount in an orange or apple juice. The combination of sucrose and glucose gives you energy particularly during periods of exertion because they protect the muscle's own immediate reserves of glycogen and thus allow for longer and more intense activity. In other words a combination of sucrose and glucose gives you both instant and longer lasting energy. DID YOU KNOW? The amount of sugar in one Red Bull is comparable to the sugar level in an equivalent amount of apple juice or orange juice ALPINE SPRING WATER Naturally, water is a key ingredient of Red Bull, The water used for Red Bull is fresh alpine water of best quality which comes from springs nearby the production sites in Austria and Switzerland, This region, the Alps, is known as one of the world's biggest water reservoirs, where water as a resource is available in abundance and constantly replenished, Hence, to ensure consistency of the upmost premium quality around the world, Red Bull is produced in the Austrian and Swiss Alps Aluminium Red Bull has made a conscious decision to use aluminium cans, Today Red Bull cans weigh 60% less than a decade ago, which saves precious raw material, Once they are collected they are fully recyclable over and over again without any loss in quality. Page | 7RedBull seals: * EVERY CAN COUNTS The beverage can is the world’s most recycled drink packaging. Of course, this is only possible if the cans are collected and (re-introduced into the recycling loop. If'a can is left carelessly littering the landscape, naturally it can't fulfill its recycling potential Unfortunately, littering is still a problem in some regions. Making sure your can ends up in a waste or recycling bin helps keep our landscapes pristine, increases recycling rates and reduces energy consumption as well as the drain on natural resources. If your country has a dedicated aluminium recycling system please dispose your can correctly. © KEEPING IT SIMPLE: SMART PACKAGING As you may have noticed, Red Bull Energy Drink comes in a can made of aluminium. Red Bull made a conscious decision to use this material because... * Aluminium cans are oxygen-proof and neutral in taste, so the drink stays in fresh, top quality fora long time. This means it tastes as good at the source as at its destination. * Cans are light; Today, they weigh 60% less than only a decade ago. They're easy 10 carry and transport, Not to mention virtually unbreakable, Their durability is not only useful for transport; it also makes them very safe for physical activities and events. * The can is 100% recyclable. It can be melted down and reused an infinite number of times with absolutely no loss in quality - and with huge savings in energy + Beverage cans are ideal for transportation and stocking. Thanks to their compact and efficient form, they use about 40% less transport space than glass bottles and 30% less than PET bottles. * Once chilled, the beverage remains cool in the can for a very long time. This is essential to the perfect Red Bull drinking experience. « WHAT ARE THE ADVANTAGES OF WALL-TO-WALL PRODUCTION? At the production facil in Austria, creation of Red Bull Energy Drink follows what's known as the wall-to-wall principle - meaning that production and filling take place on the same site. The can is manufactured in one part of the factory, while the drink is prepared in another. Can and content are united in the filling unit. Page | 9Red Bull sellin EASY COME, EASY GO. What does this mean in numbers? Approximately two billion cans annually need no further transport or handling until they're ready to leave the facilities for their final destination. This saves the equivalent emissions of more than 10,000 truck journeys of 700 km each or more than 7 million km per year. LESS TRANSPORT MEANS LESS C02 More than 5,313 tons of C02 emissions are saved cach year, thanks to wall-to- wall production TRANSPORTATIONTO MORE THAN 160 COUNTRIES AROUND THE WORLD As soon as the Red Bull cans have been filled, they're transported from Austria and Switzerland to more than 160 countries worldwide, The cans travel long distances, whenever possible by ship and rail. Transportation by truck is the last resort when there's no other means of delivery - and it remains Red Bull's priority to allocate ever more transport to rail and shipping THE CAN IS AN IDEAL TRANSPORT PACKAGING, A can is easy to transport because of its form and low weight. Thus, it can be said that the can is an ideal transport packaging, especially when compared to other forms of packaging: it saves about 40% in truck loads compared to glass bottles and about 30% compared to PET bottles. RED BULL TASTES BEST ICE COLD. Whether its journey is to a supermarket shelf, a convenience store, a bar, club, event or restaurant - the can (and its contents) still have something important to do once they've reached their destination: chill. Page | 10RedBull sells: It's no secret that Red Bull tastes best cooled. That's why Red Bull works hard to make sure the drink is not only stocked on shelves, but somewhere with the perfect temperature = most frequently, this isin the specially-designed Red Bull coolers. ENVIRONMENTALLY-FRIENDLY IS COOL Thanks to their natural refrigerants, ECO coolers are considerably more environmentally friendly than conventional refrigerators, and use up to 45 percent less energy. The use of ECO coolers and refrigerants is an effective way to avoid greenhouse gases, that’s why Red Bull has made a commitment to distributing ECO coolers in the future, whenever local infrastructure allows. As of 2011, Red Bull already has 240,000 ECO coolers in use. WALL-TO-WALL PRODUCTION Saves resources through short distances Apart from using 80% of our energy from renewable sources, we implemented what's called "Wall-to-Wall! production at the production site. This means our cans are manufactured and filled on the same site - helping us save many miles of transport. Since we don't have to transport empty cans to the fill up plant, this reduces the footprint significantly! What does Wall-to-Wall mean in number: Approximately two billion cans annually need no further transport until th ready to leave the facilities for their final destination. This saves the equivalent emissions of more than 10,000 truck journeys of 700 km each or more than 7 million km per year. Wall-to-Wall production saves more than 5,313 tons of C02 emissions each year. Page | 11RedBull se SMART TRANSPORT Produces less C02 emissions Red Bull Energy Drinks travel to their destination predominantly by train and ship. We'll only use trucks when its absolutely necessary, Since our cans are compact in shape and light in weight, they are a more efficient transport packaging than PET or Glass Bottles. © In weight, they are a more efficient transport packaging than PET or Glass Bottles. © Glass Bottles need 40% more space © PET Bottles need 30% more space © The Can is light and compact AAs soon as the Red Bull cans have been filled, they're transported from Austria and Switzerland to more than 165 countries worldwide. The cans travel long distances, whenever possible by ship and rail, Transportation by truck is the last resort when there's no other means of delivery- it remains Red Bull's priority to allocate ever more transport to rail and shipping. A can is easy to transport because of its form and low weight. Thus, it can be said that the can is an ideal transport packaging, especially when compared to other forms of packaging: it saves about 40% in truck loads compared to glass bottles and about 30% compared to PET bottles. EFFICIENT COOLING Through ecofriendly coolers A can of Red Bull Energy Drink tastes best when ice cold, That's why the company has developed an environmentally friendly Red Bull ECO-Coolers which use up to 45% less energy than conventional refrigerators. Red Bull has installed 313,000 ECO Coolers instead of conventional coolers already. Page | 12RedBull sel MARKETING STRATEGIES 1) Products Red Bull has expanded their product line from the original Red Bull Energy Drink to Red Bull Sugarfree, Total Zero, Energy Shot, and most recently, Red Bull Euitions. Red Bull Editions is their line of fruit flavoured drinks which include cranberry, lime, and blueberry. Red Bull products continue to gain popularity with an increase in produet sales of 12,8% in 2012, resulting in 5.226 billion cans sold worldwide (Red Bull, 2013). The key ingredients in Red Bull are caffeine, B-Group vitamins, sucrose, glucose, taurine, and Alpine spring water, With ingredients, like taurine and caffeine and the proliferation of energy drink consumption, Red Bull and the entire energy drink industry have come under scrutiny due to health concerns, As a result, new regulations on the sale of energy drinks are an ongoing concern for companies like Red Bull Red Bull's product line has also widened to include merchandise that is adorned with the company name such as hoodies, hats and shirts, due to their involvement in sponsoring athletes and events, Red Bull Energy Drink & Red Bull Sugarfree Page | 13,RedBull sellin DS i Red Bull’s premium focus will result in pressure on market share © Red Bull's sales in 2012 Red Bul Or-Trade Volume Sales 2012 “mained dominated by the US market, WienLees In most of its major markets the company has managed to retain its number one position in volume terms despite strong competition from newer entrants, The US is an exception where Monster owing to the strength of its alliance with TCCC combined with an aggressive marketing campaign has managed to topple Red Bull from first place. « In value terms however, the ed a ale company’s premium positioning has sieherans Ausiabn wun nO meant its ranking has remained more secure, As the dynamics of forecast demand shift to emerging markets, where consumers remain more price sensitive, this premium focus will result in growing pressure on Red Bull’s market share, TCCC and PepsiCo have emerged as the company’s strongest competition whether indirectly through distribution agreements such as TCCC/ Monster and PepsiCo/Rockstar and through their own directly owned brands such as Burn and Sting, respectively Page | 14RedBull slim: «Event and sports. sponsorship have been key elements for Red Bull’s marketing Red Bull strategy for eponymous brand has achieved remarkable global success and 30-40% of its sales are 1 invested back in marketing and promotional activity. Red Bull’s strategy has historically been a 3-pronged approach incorporating buzz marketing, sponsorship and. TV advertising. Buzz marketing, including handing out free samples at campuses and events where under 30s gather, is often used as a way of initially raising consumer awareness when entering new markets * In 2012, the company took its marketing literally to an entirely new level with the Stratos campaign which featured Felix Baumgartner in a record breaking 128,000 feet jump from the earth's stratosphere, making him the first man to break the speed of sound while in freefall The event was streamed live on line with viewers able to log in to post comments via Twitter and Facebook. Motorsports is another key focus for the company with its own very successful FI racing team. Page | 15Red Bull tries to stay true to its roots In a bid to stave off competition from rival brands, Red Bull launched the Red Bull Edition range in 2013 in select city markets in the US. The launch will likely be followed by a nationwide roll-out later in the year. Despite pressure from other energy drinks brands many of which have launched additional flavours Red Bull has stayed loyal to its original formulation and packaging. The launch of cranberry, blueberry and lime Red Bull variants is a major direction change for the brand, being its first major launch over the review period. In order to differentiate between Red Bull Edition and the original Red Bull the new cans received a facelift with the addition of new colours and a new bull design. CiRed Bull has not as aggressively as other brands launched into new packaging formats, remaining almost exclusively with slimline metal cans. It has however in some mature markets such as the UK launched into 1-litre PET bottles. This reluctance is in part due to the company’s strategy of retaining its premium positioning, Page | 16Market Share By creating a product that had never been seen before, Red Bull has made their name synonymous with the word energy drink. With Red Bull products sold in 165 countries, the ‘company holds an estimated global market share of 43% as of 2012 (MarketLine, 2012). This statistic becomes even more impressive when you consider that their closest competitor, Monster Energy Drink, only holds an estimated 16% market share (MarketLine, 2012), This market share and brand recognition has allowed Red Bull to hold their ground and fend off larger beverage ‘companies like Coca-Cola and PepsiCo. Even with such a dominant position in the energy drink market, Red Bull continues to grow. Figure 1 indicates the significant position Red Bull has over all other top competitors in the energy drink market. FIGURE 1: Market share for the top energy drink companies for 2012 50% as 40% 35% 30% RedBull Hansen Natural PepsiCo Rockstar Coca-Cola Page | 17Financial Performance RedBull sli In 2011, Red Bull had sales of $2.93 and made $3.06 billion in operating revenue. This led to profits of $402.4 million an increase of 35% from 2010. With $1.15 billion in current assets and $220.5 million in current liabilities, this results in an impressive current ratio of 5.22. Table 1 below goes into further detail on the financial performance of the company since 2007, TABLE 1: Red Bull GmbH Financial Summary thUSD 31 Dec 31 Dec 31 Dec 31 Dee 31 Dec 2011 2010 2009 2008 2007 Total Assets | 2,060,854 | 1,702,958 | 1,862,165 | 1,787,651 | 1,498,173 Shareholder | 1,606,122 | 1,243,655 | 1,136,385 | 1,040,675 | 1,065,000 Equity Operating 3,064,169 | 2,874,063 | 2,729,700 | 2,776,285 | 2,854,004 Revenue Cash & Cash | 383,590 129 10.281 36 35 Equivalent Net Income 402,390 | 298,797 177,368 181,971 345,273 (Source: Mint Global, 2013) Page | 18IL) Price The price of this product depends on the geographical area. Red Bull sells their products with a premium price strategy in the whole world, No matter about the country, they are always the most expensive drink in the energy market, In UK the price of Red Bull can be 70p and in India and like other countries it would be at minimum level. III.) Place Distribution means the distribution and provision of goods and Services, The distribution policy therefore includes all planned concerted measures for the distribution and provision of Products ‘on the way from seller to buyer. Red Bull is distributed in most grocery stores, convenience stores and gas stations in over 160 counties in the world, Some interesting facts about the Red Bull can in different countries: Red Bull was banned in France for a long time, but today you can buy Red Bull in France. In Norway and Denmark Red Bull is classified as a medicine At first Red Bull was available only in pharmacies in Japan IV.) Promotion The high sales volume of Red Bull is largely dependent on their extensive and well recognized marketing strategies. The brand continues to be successful by pushing boundaries and implementing campaigns that are unique and impactful Social Media Use With over 36 million “likes” on their Facebook fan page, Red Bull is one of the Top 10 most liked corporations on Facebook. Even though they generate multiple updates per day, itis a rare sight to discover a post that is dedicated to its products, Rather, Red Bull’s corporate strategy is to focus on promoting the athletes and events that they sponsor. This reinforces the notion of Red Page | 19RedBull sl Bull being a lifestyle choice rather than just an energy drink. Further, unlike other brands, Red Bull does not respond to user comments on Facebook and only replies to between 10 and 40 tweets per day, which promotes an elusive dimension to the brand (Moth, 2013). Publicity Stunts Although publicity stunts are nothing new in the market, the extremity of Red Bull stunts have gamered viral attention and unparalleled publicity. The Red Bull Stratos event in October 2012 was an ambitious stunt that funded Felix Baumgariner’s record-setting jump from the stratosphere. As the sponsor, it was a testament to Red Bull’s edgy brand through association with extreme events and their willingness to take risks. This stunt generated a media storm, with over 7.3 million live viewers on YouTube, and half the worldwide Twitter trends being connected to the event (McNaughton, 2012). By capitalizing on these public opportunities, Red Bull has been able to effectively increase its brand awareness through word of mouth. ‘Sporting Events and Acquisitions Unlike other soft drink companies who only sponsor events, Red Bull also implements an innovative strategy where they develop and run a wide range of extreme sporting events themselves. This added involvement in the events provides Red Bull with added control and flexibility, serving a competitive advantage. By actually purchasing the teams and relevant assets, such as stadiums and technical equipment, Red Bull aims to keep these teams in the long-run in hopes of achieving future success. Examples include Red Bull’s Formula 1 racing team, which went on to be one of the best funded teams, and soccer teams which helped gamer a larger mainstream audience (Market Line, 2012):These investments attract goodwill from sports fans, and supporters who are more likely to be influenced by brand recognition when selecting energy drinks. Page | 20Red Bull am Economic Dynamics Sales in the “functional water” industry have been significantly impacted by the ongoing economic crises globally. However, the energy drink sector has proven most resilient and outperformed other industry categories. It appears that consumers are cutting back on how many beverages they consume but maintain their habits in energy drink consumption. The growing and lucrative energy drink market has attracted large competitors, namely The Coca Cola Company and PepsiCo, to start offering their own products in the segment. However, despite these competitors dominance in other beverage segments, Red Bull has been able to maintain market leadership in the dynamic energy drink industry. (Euromonitor Intemational, 2012) Legal and Political Pressures Red Bull manufactures and distributes all of it’s products from it’s only factory in Austria (Euromonitor International, 2012). However, by manufacturing all products in one central hub, Red Bull is more susceptible to tax laws, tariffs, and high costs of distribution compared to competitors whom have multiple worldwide facilities. Their current differentiation strategy has allowed Red Bull to market and sell their products at a premium which is absolutely necessary as they incur greater costs relative to competitors. Currently, Red Bull is building a new facility in Brazil which is expected to service the America’s and reduce these costs to make Red Bull more cost efficient (Russell, 2012). The nature of Red Bull’s dominant product offering is a source of political and legal issues. France, Denmark and Norway had at one point banned Red Bull products because of some concems over the ingredients being used; these have all been lifted(FriedINews, 2013)(Euromonitor International, 2012). Additionally the high caffeine levels in Red Bull leave Red Bull vulnerable to regulatory controls. This issue is further amplified as Red Bull’s relies solely on energy drink produets Page | 21RedBull am ‘The United States, one of Red Bull’s key markets, has started to raise concerns over energy drink products as well. The city of Chicago is one area that is considering banning the sale of energy drink products to all consumers (Radar Staff, 2013). This is in light of increasing hospitalization ddue to the consumption of energy drinks throughout the United States (The Associated Press, 2013). The negative press i vithout a doubt becoming a matter of great concem for the sector as a whole, Page | 22Red Bull sellin STRATEGIC EVALUATION Red Bulla pioncer in its category ‘© The privately-owned Austrian company Red Bull’s core business is energy drinks. Dietrich Mateschitz and Chaleo Yoovidhya each owned a 49% stake prior to 2012 when Mr Yoovidhya passed away. Mr Yoovidhya's son Chalerm holds the remaining 2%. While Mr Yoovidhya was alive he acted as a silent partner. ‘* Red Bull has created the global market for energy drinks, and the pioneering Red Bull brand has become synonymous with energy drinks for a large number of consumers. Red Bull remains bullish and ambitious in their corporate brand. Despite rising competition, Red Bull continues to comfortably lead the global energy drinks market in both volume and value terms. However, the threat from The Coca-Cola Co (TCCC) has been mounting. Red Bull GmbH Headquarters: Fuschi am See, Austria Regional involvement Global 7 Carbonates, sports and Cao, ee energy drinks World soft drinks share by offtrade 9 99, RTD volume (2012) World soft drinks off-trade RTD volume 12.4% growth (2011-2012): Red Bull: Off-Trade Volume Sales and Energy Drinks Market Share 2007-2012 . 2 | i [ i Ei Ul 2» 2008 20102011 20072008, 2012 Yemarket share ‘Vola sale ition oBESS88 8 mOPTrade Volume Sales (mn litres) @ Energy Oninks % Market Share Page | 23RedBull sl: Red Bull continues to see strong net sales growth Bitone Red Bull operates many other businesses aside from energy drinks The company owns and manages a construction company, football clubs, youth academies and TV broadcasting and recently online clothing (Red Bull label only) sales, * Additional media products inelude print magazines about football, motor racing, celebrity gossip and lifestyle. The company has even ventured into the mobile phone service business in Austria, Hungary, Switzerland and South Aftica. * As a privately-held company, financial information is limited however the company reported net sales of €4.9 billion in 2012 and 5.2 billion cans sold, representing growth of 15,9% and 12.8%, respectively. Red Bull: Net Sales and Cans Sold 2010-2012 1 2012 2010 201 NetSeles(ebn) Cans (bn) © Red Bull reported exceptionally strong net sales growth in South Africa (+52%), Japan (51%), Saudi Arabia (+38%), France (+21%), the US (+17%) and Germany (+14%). Red Bull cited efficient cost management and ongoing brand investment as underpinning its growing profitability Page | 24RedBull seal SWOP: Red Bull GmbH STRENGTHS: * Category leader: Red Bull has established a strong, consistent brand image (an independent, edgy brand) globally, Red Bull is synonymous with energy drinks in many countries. + Broad geographic presence: Red Bull has a broad geographic presence, which should censure positive long-term growth even if certain markets reach maturity, WEAKNESSES; * Category limitations: In overall soft drinks, Red Bull has a limited product portfolio ‘compared to the rising number of rivals with a plethora of flavour variants and categories. © Controversi ‘The relatively high caffeine content of Red Bull makes the brand highly vulnerable to regulatory control. OPPORTUNITIES: + Emerging markets: Emerging markets represent newer geographies for Red Bull’s expansion, Accelerating the marketing and sponsorships in these markets is a wise move, # New production: Red Bull is building a new production facility in Brazil which is likely to make its retail price more competitive than imported product prices. Building a site in Asia should also be considered. THREATS; © Competition: Monster represents the biggest threat to Red Bull as it contains natural ingredients, which seem more desirable than Red Bull for some consumers. High marketing costs: Market maturity in developed markets will make marketing to its core consumers harder than in the past. Constant communication with consumers means high marketing costs, Page | 25Key strategic challenges and objectiv Ttis not easy at the top Red Bull's success has attracted considerable interest from soft drinks multinationals, TCCC and PepsiCo. TCCC in particular has been successful at leveraging its distribution network to launch Burm across many markets and to back Monster. Bum is a major threat to Red Bull in Brazil while in the US Monster has overtaken Red Bull in off-trade volume sales terms. Red Bull will need to find ways to hold onto its number one ranking globally in energy drinks and stave off this competition Red Bull stands up to health regulators While health officials continue to voice concems over energy drinks and the category remains under threat from stronger regulation, energy drinks has seen relatively little impact in terms of sales. To some extent this has added to the category's “edginess” attracting young consumers and generating consumer interest. There is little risk of Red Bull reformulating its product to cater to health concerns and instead the company insists that its produets do not pose a health risk. Will premium work in emerging markets? Red Bull has consistently maintained its premium positioning from its slimline metal cans to its price differential versus brands such as Monster. While this strategy has reaped dividends in the mature markets, it remains to be scen if it will sustain growth in the emerging markets. Brazil with its large population of lower-income consumers may pose a challenge giving cheaper brands such as TCCC’s Burn a competitive advantage. Red Bull breaks with tradition in 2013 In 2013, Red Bull, for the first time in 15 years added new products to its energy drinks range. Edition is a range of three new flavours and thus far available only in the US market, The likelihood however is that this range will be rolled out to other markets, The move is a response to growing competition, Success for this launch will be erucial to the company’s growth prospects in the mature markets Page | 26RedBull sellin COMPETITIVE POSITIONING Red Bull performance wanes towards end of review period Red Bull ve World Energy Drinks Market (Of-Trace Volume - milion litres) 2007-2012 mere axez0e ama mewn wove nesta iets © Red Bull underperformed the overall energy drinks market in 2011-2012. While the company’s market share of the energy drinks market in the US increased in 2012, the rmarket’s growth rate overall began to wane. Red Bull remains heavily dependent on the US for its global growth. Weakness here is reflected in the company’s weakening global performance in volume terms. The company however continues to enjoy the position of number one ranked player in energy drinks globally with a 21.4% market share. # In terms of absolute volume growth however, the US remained Red Bull’s key growth engine in 2011-2012 reflecting growth of 96% over 2007-2012. Brazil came second in terms of absolute volume growth expanding by 608% over the review period or 48% CAGR. This market was a particular focus for Red Bull with the company sponsoring various sporting events in order to raise the brand’s profile. Vivek College of Commerce Page | 27RedBull am Bull moi Red Bull vs Word Energy Drinks Market (Off-Trade Value - US§ milion) 2007-2012 5 a ® 5 ° 7 e728 neee8 ‘aemame anon aoitao res but ete In value terms, the company’s performance was stronger in recent years although even in value terms the company’s performance fell below that of the energy drinks market overall, The energy drinks market has attracted a number of other players including Monster Beverage Co, and The Coca-Cola Co (TCC) which marketed it own brands in the category including Burn as well as engaging in a distribution alliance with Monster Beverage Co. PepsiCo had a modest presence in energy drinks with its brand Sting; however like TCCC it maintained its own alliance, with Rockstar Inc. Red Bull’s sister brand non-carbonated Red Bull remains owned by TC Pharmaceutical which led the energy drinks category in China and was present in Thailand where it ranked second. TCCC’s Burm wa stronger performer in Latin America over the review period, though Red Bull continued to lead the category. Page | 28Soft Drinks: Global Top 10 Companies by Off-Trade RTD Volume, Rank 2007-2012 and 2012 Share 5 8 8 & = S %company Company BBR BRB share z0!2 Goat, dad ome The PepsiCo Inc eee 25 222 99 Danone, Groupe 3 3 3 3 3 3 47 Nestlé SA 444444 37 Mondelez Intemational, Inc a ai Ting Hsin Intemational Ue ie Ge 16 Group Dr Pepper Snapple Group Inc eB et . Anheuser-Busch InBev NV - 33:31 30 29 27 02 RedBullGmbH 48 41 40 37 34 28 i Otsuka Holdings Coltd - 32 3 32 32 2 02 RedBull sli # The only significant movement in rankings to have taken place over 2007- 2012 was the split by Kraft into two separately traded entities, which pushed Mondelez into the top five based on its strong presence in concentrates. In market share terms, TCCC maintained a large gap between itself and PepsiCo. Indeed, the gap between the two widened slightly over the review period. PepsiCo's recent focus has been on the development of its snacks business and on developing a “better for you” range of packaged foods, hence possibly neglecting its soft # TCC has been active throughout the review period moving beyond its core carbonates base to fruit/vegetable juice, RTD tea, bottled water and sportslenergy drinks. # Red Bull as a premium player ranked much farther down in RTD volume terms, The brand is also heavily reliant on the impulse rather than grocery channel thereby discouraging multi-pack sizes. Page | 29Top 10 pl: Soft Drinks: Global Top 10 Companies by Off-Trade Value, Rank 2007-2012 and 2012 Share hk Orn com EER GR oe Coca-Cola Co, The £1 D014 262 PepsiCo ine 222723 13 Nestlé SA $3333 3 28 Suntory Holdings lid 6 6 4-4 4 4 2 mck Snapple 55555 20 Danone, Groupe 5466668 19 Peron H 16 Asahi Group Holdings ©1010 gg a ud 6 6 Kinn Holdings Cold 898 8 8899 14 ‘Ting Hsin International Group 16 13 12 10 10 10 12 RedBull sli: © Danone’s volume share is significantly higher than its value share, due to its large volume sales of low- priced bottled water in emerging markets, notably Aqua (Asia Pacific) and Bonafont (Latin America). Meanwhile, Mondelez does not rank among the top 10 in terms due to its value reliance on the low-priced concentrates category in RTD volume terms. ¢ Red Bull GmbH however with its relatively premium but small serving size Red Bull brand ranks seventh in 2012. The company’s narrow focus in soft drinks, being almost exclusively based on energy drinks, continues to keep the company out of the top five in soft drinks. TCCC and PepsiCo capture a stronger share in value than in volume terms chiefly due to their products, particularly carbonates, being priced higher than local brands and private label, benefiting from strong brand equity and extensive distribution networks. Page | 30MARKET A [ENT + North America will continue to lead energy drinks in absolute volume growth terms over the forecast period. However, its CAGR of 8.1% over 2012-2017 represents a moderation from the 11.4% CAGR seen over 2007-2012. The Monster brand has led the market in the US over the review period in terms of absolute volume growth, Rockstar, due in large part to its alliance with PepsiCo, has also seen strong growth in this market. # Red Bull entered China in 2011, however Asia Pacific remains the company's weakest region in terms of market share. However, this region will be exceeded only by North America in terms of absolute off-trade volume growth over 2012-2017 which may raise some concems for Red Bull, After a period of strong market share gains in this region between 2007-2010 its performance began to moderate. TC Pharmaceutical with its non- carbonated version of Red Bull is the regional leader. Despite the close relationship between Red Bull GmbH and TC Pharmaceutical with the latter having been founded by the late Chaleo Yoovidhya, the companies remain separate entities. Red Bull GmbH: Energy Drinks Off-Trade RTD Volume Presence 2012 and Growth Prospects by Region 212-2017 - : » e 2 s+ a, ia Westen ucpe Netbesics ‘Medle Gost ons Aten “nn @ on ‘ | Ensim vag | | | a no a 0 a 1.000 1m 1 1600 0 Wat size 2012 (atfxace RTO vole smite Re) Noe: Bubbeste sons corgary shreoleponin 30:2 Rangedi4jnd 208% Page | 31RedBull slim ‘The Americas to lead growth in energy drinks secacR 20122017 In value terms, both Latin America and Asia Pacific gained in importance for Red Bull over the review period. Latin American sales represented 12% of global value sales in 2012 while Asia Pacific made up 8%. In terms of growth prospects, the strongest growth will take place in North America where the market for energy drinks will expand by US$4.1 billion over 2012-2017. In CAGR terms however, the strongest performance will take place in Latin America which will see a 20% CAGR. © Red Bull is ranked number one in both markets. In Latin America, its market share remains a healthy 49.7%, however this represents a decline over 2007-2012 as the company faced strong competition from TCCC whose share has risen from 2.5% in 2007 to 14.9% in 2012. ‘© Growth in both Eastem and Western Europe will be a comparatively modest at 5% and 5.1% CAGRs, respectively. However, these exceed the CAGRs for soft drinks overall in these regions, which will be only 2.7% and 0.5%, respectively. Red Bull GmbH: Energy Drinks Off-Trade Value Presence 2012 and Growth Prosoects by Region 2012-9017 @ Lainkovcn § 4g MideEastend tee ‘ilo ‘ 0 @ dsatecte 0 Exsantumge i Net Aaa 0 1g 200 omer Steg Marts 2012 (USS eon) Nee Babies eho onary sta efmgin 2012 Rargesepyed 1 L44T%, Page | 32RedBull sellin. OPERATIONS Expanded corporate operations Red Bull GmbH SoM esroi@ ey least aa MVNO, Fashion Online eer ine] Page | 33RedBull sell: Red Bull looks to diversi + Red Bull is diversifying into other businesses, rather than limiting itself to energy drinks. In recent years, it has been branching out and became a media company in its own right. The participation in sports sponsorships and events connects the company with a global brand that has passion and excitement associated with it. The company is also present in RTD tea and bottled water with the Carpe Diem brand which it launched to target the health and wellness trend in soft drinks. Carpe Diem Kombucha is a premium RTD tea sold in Western Europe. The brand is also in bottled water in Switzerland and Austria using plant extracts and slight carbonation to offer a healthy alternative to carbonates. + The company owns two Formula One teams (Red Bull Racing, Scuderia Toro Rosso), a NASCAR racing team as well as several football teams in Brazil, the US and Germany. # In South Africa, the company is partnering with Cell C to offer voice and broadband services as a mobile virtual network operator (MVNO), ie a company that provides a mobile phone service but does not have its own lice ised frequency. Red Bull Mobile will be the second MVNO in the county, after Virgin Mobile, # Italso sponsors many events - from cliff diving to air races - and subscribing to Red Bull Mobile is a way for people who like the brand to access further benefits when they attend these events. These kinds of partnerships between operators and consumer brands are common in Europe. In Germany, for example, one operator, E-Plus, has 19 such partnerships. It isa way for these brands to get closer to their target group, # The Group also includes Austrian ‘TV station ServusTV, lifestyle and fashion magazines and a construetion company called Bull Bau, # Red Bull had 8,966 employees in 165 countries as of 2012. The company, which is not listed, traditionally finances its investments from its cash flow. Page | 34RedBull sel: Red Bull expands production outside Austria for first time © Red Bull received approval from the Brazilian government to build its first production facility in the country in early 2010. The company’s initial investment in the project is expected to be around US$I11 million, This will also be the company's first production facility outside its home market, indicating a shift from a single production site and the importance of the Latin American market to Red Bull. ‘© The sustainability of its growth and strong position is questionable as the competitive en most of ynment changes. While its products are present in more than 160 countries its soft drinks sold around the world come from one single site, ‘© The company is known for combining the production of the can packaging material and filling at one site in order to save on transportation time and costs. The key advantages of one single site include consolidated management, an up-to-date inventory and energy savings. The main downside of a single production site is perhaps the extra distance needed to ship all its finished goods to different parts of the world. Being unable to produce locally to supply regional markets can make retail prices less competitive than those of local products, In Brazil, Red Bull's retail price is 40% higher than that of Burn, © In 2011, the rumour that TCCC may look to fully acquire or partially acquire Monster surprised analysts and should have alarmed Red Bull. If Monster were to be under TCCC's full control, their combined volume sales would be very close to those of Red Bull and would certainly pose a threat to Red Bull's global leadership. Although TCCC ddid not acquire Monster at that time, the possibility of an acquisition has not been ruled out and the company was the subject of more takeover rumours in early 2013. © As Red Bull entered China in 2011, the company could also consider building a facility there to serve the Asian market over the medium term, There are strong arguments for combining forces with sister company TC Pharmaceutical to better penetrate Asia Pacific markets. Page | 35RedBull sell Conclusion Red Bull has come a long way in the last 25 years. Beginning in a practically non-existent market, today the market is extremely diverse, saturated with competitors, Revolutionary marketing techniques created the Red Bull “buzz” coupled with controversial ingredients ensured the drink was advertising captivated a sdgy”, and the product sold itself. Non-spec non-descript audience, whilst sponsoring extreme sports and events proved effective in not only publicising the drink, but also making it become a “way of life”. Competitors such as Monster may well gain global market share. However, diversifying into “Organic energy drinks” such as Cape Diem and Red Bull simply Cola, and ereating a “lifestyle” to match, Red Bull has entered hi million dollar island resorts and theme parks coupled with Red Bull’s expansion into new and a new market for the th conscious consumer”, The latest business plan to include multi- developing markets, will not only spread the name of Red Bull but also boost sales, Despite the “credit crunch”, Red Bull's future looks bright. Page | 36RedBull RECOMMENDATIONS Holding onto top spot in energy drinks Brazilian production Establishing production in Brazil is a wise move for Red Bull. Relinquishing to some degree its highly centralised production model will help it to better compete in the emerging markets. The move to Brazilian production will also open up new opportunities in the Americas. The Brazilian market however is crucial to the company’s ambitions given the level of growth expected to take place here. Work for benefit of both Red Bulls in Asia Pacific The failure of TC Pharmaceutical and Red Bull GmbH to work together for a cohesive Asia Pacific strategy will expose both players to competition from Japanese brands and from US-based multinationals such as TCCC and PepsiCo, The Thai Red Bull brand has along history in this region and is suffering from waning consumer interest in the face of new and exciting launches. Red Bull GmbH’s opportunities will continue to be limited for the time being as a result Edition range While this report does not cover on-trade sales, popularity in this channel has a subsequent benefit for off-trade retail sales, The launch of the Edition range should be extended to the on-trade with a marketing campaign to educate consumers about how to mix the new flavours, Rolling out the range to other markets where market share erosion has taken place such as the UK is also recommended, Premium positioning Monster and Burn will remain major threats, The price differential between these brands should be reduced. Red Bull can continue to position itself as premium and maintain a price premium but in order to gain better traction among younger consumers and access toa wider demographic the company should focus on driving volume growth particularly in emerging markets or risk market share erosion from TCCC-backed energy drink brands. Page | 37