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Diversification of retail outlets to these nations in order to better market the Red Bull energy drink product is, therefore, an opportunity for the oral’s leading manufacturer of energy drinks. Additionally, in view of the fact that Red Bull caters to a younger market whose primary target is male teenagers and people in their ass (Smith, Guppy & Guppy 2006) coupled with the fact that young people make up the fastest growing segment of the world population’ (Youth at a Glance’ 2007), the possibilities for business profitability are endless.
However, since people are increasingly concerned and aware of health issues and well-being, the threat of sustained patronage of the Red Bull product is looming on the horizon. Energy drinks contain a considerable dose of sugar and about as much caffeine as one cup of coffee (Cohen 2001), a recipe that worries nutritionists and doctors alike. Various news on the internet from reliable sources have cited instances wherein Red Bull was involved in such issues and, to a very damaging extent for the image of the company, even death from drinking said beverage.
In response to said developments and trends, Red Bull has taken measures to ensure the general public that drinking their product is safe and not harmful for human health. This campaign as launched specifically in their websites and various marketing efforts through the televisions and print media, coupled with sports and arts sponsorships globally. Their youth-centered marketing efforts have led the business to concentrate on clubs and bars of the countries in where they market their product, in addition to the already stated tactics of common marketing media, although not so visible on the latter tactics. B.
Economic The general picture of the world economy shows positive growth, in terms of global output (up by 5 in 2006 and 4. 4% in 20056) and dominated by technologically and lath-driven industries (CIA World Fastback 2007). However, in the developing economies where Red Bull targeted to expand its business operations, the income level over the last five decades has failed to grow causing an increase in an already high world inequality (World Economic and Social Survey 2007). Price ranges for the energy drink, on the other hand, remains stabilized due to the sustained patronizing for said beverage product by the market.
In line with such changes, Red Bull recognized the tendency of people to cut back on energy drink consumption and focus on more basic needs. Thus, their marketing strategy of giving away free Red Bull products to the markets where they are most profitable, particularly students and employees who work at night and need the necessary energy that Red Bull professes to offer may work in enticing people to buy their power drinks. C. Environmental Various environmental issues have bombarded contemporary business organizations and Red Bull is no exception to the rule.
Brenna (2006) stated that the energy consumed by the beverage industry in most countries, as well as the food industry, is a significant portion of the total energy used in manufacturing industry. Likewise, Hillary (200) noted that said industries are major producers of carbon dioxide. Since Red Bull is a privately held company, it is not very much subject to public scrutiny regarding environmental issues, unlike counterparts in the beverage industry like Coca-Cola and Pepsi who are publicly held.
There is little or no news on the web regarding environmental issues involving the energy drink world leader, which may mean two things: that it complies with global standards for environmental care or issues about it has not received much publicity. The firm’s product is mainly filled ND sold in aluminum cans and smaller share of Red Bull is marketed in single-use glass bottles. As a result, waste management is a big issue for the leading energy drink manufacturer.
Fulfillment of a part of the company’s corporate social responsibility to the environment is one of the main expectations of shareholders and Red Bull, as an element of their unique marketing strategies, have set forth ways to minimize waste and protect the environment by way of appropriate and sound waste management initiatives. In line with this vision in mind, the company sough ewe technologies that can eliminate, if not totally mitigate, the negative impact of the company’s production and business operation to the environment and the community (red Bull National Packing Covenant’ 2005).
In concrete terms, this has been established by the use of thinner, substantially reducing the amount of aluminum it used’ (red Bull National Packing Covenant’ 2005). D. Technological One of the main challenges facing the energy drink industry is not only the need to deliver optimum volume growth and adapt to changing consumer demands but also to stimulate demand itself through greater product innovation. This is particularly relevant for Red Bull who has been observed to have failed in diversifying into other product lines, much less a Red Bull energy drink variant.
Innovation, whether in terms of packaging or product formulation, has been widespread in the beverage industry over the last few years. Assures (2005) asserted that innovative premium priced energy drinks have witnessed rapid growth in the mature soft drinks markets of Western Europe and North America and are also generating substantial gains in the developing world. Hence, it is proven that innovation could help maintain momentum for the sector. The more complex drinks formulations like that of the Red Bull brand can pose significant analytical challenge for process management (Stratford, Hofmann & Cole 2000).
Thirty years ago, there would have been a limited set of equipment in the quality control laboratory for the majority of beverage factories. However, with the move to larger and more efficient factories with faster bottling lines, it has become critical to ensure that bottling formulation is correct before the product is packed (Assures 2005). Red Bull, in their attempt to answer to environmental issues while at the same time reducing company costs, have undertaken research and development to improve on their product over the years.
Dietrich Mathematics, founder of the Red Bull company, looked for a manufacturer who can deliver the quality that his product needs to be able to differentiate itself from other energy drink products in the market. The Red Bell father also stressed the focus on lowering aluminum content in their cans. There is currently no generic energy drink substitute to replace can best rival, more so supersede, the Red Bull product, which is why sustained profitability is still feasible. However, there is no mom to relax as competitors are always there aggressively eating away the company’s market leadership.
E. Political In response to the push for a more health-driven society, the government has begun inspecting the industry starting late 2006 (Kerrey 2006). Reasonable, Slink & Kids (2003) pointed out that the banning of soft drink products like Red Bull from schools in several county school districts in the USA is an important beginning for decreasing the incidence of Type 2 diabetes among children and teenagers. This is bad news for the energy drink industry in general, not only for Red Bull, because this means creased sales in the areas where such regulations are being implemented.
And the problem is that the United States is not the only country to take such actions. Also late last year, the world’s first agreement to prohibit direct selling of full-sugar energy drinks like Red Bull in New Zealand schools have been signed (World First Agreement on Soft Drinks in Schools” 2006). Likewise, stricter pollution laws, amended equal employment opportunity laws, sterner price control watch, modified product safety and advertising regulations have resulted to Red Bull drastically changing their racketing strategies.
Most prominent of this is their introduction of a sugar-free variant of their product in the market in order to counteract the negative effect on sales with the banning of full sugar energy drinks on institutions of learning in several countries. Also, a product safety measure is making Red Bull cans thinner so that there is less aluminum content in such package, making it more environmental- friendly. F. Cultural General public attitude towards the Red Bull product is acceptance and patronizing, although a number of health-conscious groups have started to aiming on some of the bad effects of the energy drink on human health.
Much of these criticisms to Red Bull, however, do not state that company is damaging to human health in itself. The product is popular among the club-hopping and athletic youth in Europe and the United States because of its successful creative approaches to delivering its overall marketing efforts conveyed through a set of initiatives which are culturally and sports-inclined. Among these are the Red Bull Music Academy, the Red Bull Acre team, the Red Bull Yamaha and Junior Teams and the Red Bull Barack Philippine basketball team (Schmitt 2003).
The Red Bull Music Academy is particularly interesting because the company created it for the exploration of music history, technology and business, and whose purpose is to offer a forum where enthusiasts from all over the world can share music, ideas and knowledge. These initiatives particularly reinforce Red Bull’s association with culture while creating an ideal environment for the product’s consumption. Like the customer’s acceptance of the product when it first came into the market, there is also the possibility that another beverage variant might be introduced in the market which would significantly crease the market share of Red Bull.
The recent trend of outsourcing business processes which requires employees of host countries to keep very late hours to go to work has likewise affected sales for the leading energy drink manufacturer. Since these groups of people needs extra energy to be able to stay up in the night to be able to perform their functions, Red Bull grabbed this market segment by a marketing strategy that puts their energy drink in the light as an energize needed by such people to carry out their work.
Since people have also started becoming health- unconscious and more involved in physical activities like sports, Red Bull launched their sugar-free variant in 2003 and involved the company in sports sponsorships such as basketball, motivators, cliff diving, skiing, skateboarding and BMW. It must be observed that Red Bull had begun sponsoring mostly extreme sports events, as they would like to build an image that those who drink their energy drink lives on the edge of excitement and healthy living- an image that has attracted more people than Red Bull has dared to imagine.
Task Environment A. Markets Smith, Guppy & Guppy (2006) observed that the major market segments that Red Bull s catering to are: (1) male teenagers; (2) people in their ass; (3) extreme-sports enthusiasts; (4) video-game players; (5) basketball fans; and (6) hip-hop fans. From the above enumeration, it could be said that the market segments that Red Bull is targeting is a very young and outgoing group of consumers, which makes it more difficult for the company to market their product.
The male teenagers who form part of their market will not be male teenagers for long, they will soon grow up and move to the early twenties segment of the market, which, fortunately, still belongs to the market captured by Red Bull. Even though these teenagers and early twenty consumers may grow up to become adults, Red Bull will not find scarcity in the said segment, as the continuous growth of the world population is a source of steady sales for the energy drink producer.
These two market segments are distributed normally in the places where Red Bull sells their product, so geographical distribution is more or less a controlled factor. Extreme sports enthusiasts, on the other hand, are geographically dispersed, and have observed concentration only in developed and some developing countries where the locations are conducive to extreme sports activities. Their ages range from early twenties to late forties at the most, and whose segment size is steadily growing, given the tendency of people nowadays to look for adventurous and exciting ways to chill out.
Video-game players, as prompted by society’s addiction to technology, are likewise a market segment that patronizes Red Bull, with the latter’s claim to improve reaction times and assist in keeping people up and about for long-standing periods of time. Obviously, these are what video game addicts need and the said marketing ploy of the Red Bull firm seem to be working with this particular market sector. Basketball fans, on the other hand, are drawn by Red Bull’s marketing strategy with its promises of boosting energy needed to play the exhausting game.
As evidenced in the Philippine scene, the Red Bull Barack team being one of the strongest basketball teams in the country, and aside from the fact that basketball is the most-loved and most-watched sport in the islands, the product is getting really impressive and extensive marketing exposure. This scenario brings to mind the equally popular Storage, whose sponsorship as the National Basketball Association’s (NAB) official sports drink has gained the PepsiCo reduce unequalled media coverage.
Lastly, hip-hop fans as a sizeable segment of the Red Bull market has been brought up by the entry of Pit Bull Energy drink in the market in November of 2000 (McKenna 2004). Due to the fact that the latter product has gained considerable market share in the hip hop segment which Red Bull has neglected until Pit Bull’s emergence, the company under analysis significantly made changes in their marketing efforts to include said segment as part of their target markets. The Red Bull Music Academy, as part of Red Bull’s effort to capture the hip- hop people, caters largely to hip-hop fans around the globe. B.
Customers The goal of all businesses, not only those engaged in the energy drink industry, is to generate revenues and ensure the growth of their enterprises. Salespeople understand that there are distinct phases of the customer buying process, no matter what market segment they may belong. The key, according to Rosen (2002), is, therefore, providing the information that customers need to move through each phase of the process so that they arrive at the decision to make a purchase. These includes: (1) Need identification; (2) Research; (3) Product Selection; (4) Product Purchase; and (5) Post Purchase Behavior.
The need identification phase is when a real or apparent need triggers or inspires someone to be interested in the product Jacobs & Stone 2001). The second phase is research wherein alternative solutions are looked for by the consumer, which could be as simple as reading a label on a product seen at a grocery store or as complex as hiring a firm to research the issues and perform an analysis (Sunshades 2000). The third phase, which is product selection, involves the consumer choosing on which of the available alternatives to purchase, which leads to the next buying phase- the actual purchase of the product Historic 2000).
Baker (2001) explained that the last stage of the buying process, which is post purchase behavior, is mainly dealt with for purposes of customer retention and gaining their loyalty. Customers and potential buyers of Red Bull rate the energy drink industry players based on a number of combined factors: (1) personal experience; (2) media exposure; (3) market following; (4) immediate availability in the market; and (5) price range relative to quality (Coachman 2005).
Although different market segments follow the same buying process when deciding to patronize an energy drink, they have different needs that they want to be individually addressed by the energy drink provider. For instance, sports people want the beverage for the second wind that it could give them, while male teenagers purchase it to be ‘in’. The exponential growth of Red Bull came about not only because of the unusual ingredients of the drink, but because of focused experiential platform.
Red Bull’s experiential positioning is ‘energy in a bottle’; its PEP is ‘strengthening the heart, accelerating the metabolism and fighting stress’ (Schmitt 2003). The implementation hem of their marketing efforts is centered on staying fit for all sorts of social fun activities. For the clubbing crowd worldwide, drinking Red Bull is like injecting a dose of energy and stamina that helps them move faster and faster to the escalating beats of electronic and trance music. C.
Competitors The energy drink industry is not dominated by large drink companies, as witnessed in the soft drink industry, but instead characterized by stiff competition among a continuously increasing number of smaller companies, all catering to a very select consumer base (Smith, Guppy & Guppy 2006). Still, major soft drink companies like PepsiCo and Coca-Cola was not stopped at producing energy drinks of their own- SOBS Adrenaline Rush and AMP Energy Drink for PepsiCo and Full Throttle for Coke.
An energy drink beer for Budweiser, called Budweiser BABE (Bud Energy) has also recently started to be carried by sports bars (Coachman 2005). Following are some of the better known rivals of Red Bull in the industry (red Bull Gumbo’ 2007), coupled with brief descriptions of their strategies, strengths (SST), weaknesses (W) and sizes (S): (1) Lilliputian. SST: predates Red Bull in the energy drink industry and a major force n Japan. W: heavily dependent in the Japanese market and inadequate brand strategy.
S: Taoist Pharmaceutical, which is the producer of Lilliputian, has sales of $2. 3 billion in 2006 and has 5,191 as of last year; (2) Rocks. SST: Edgy advertising campaigns and has a variety of product offerings W: Not very effective management and features of popular personalities as marketing tactic is not gaining much exposure as originally expected; (3) Go Fast! SST: They have other product offerings aside from their energy drink and their sports orientation is strong. W: Not enough experience in the industry; (4) Enhancers-Bush’s 180.
SST: They are prominent in the United States. W: Their focus is not mainly on energy drink production S: They currently have 12 breweries in the US; (5) Hansen Red and Monster Energy Drink. SST: Edgy Packaging and strong sports sponsorship. W: Their focus is not mainly on energy drink production. S: 290 employees with 348. 9 million in 2005 revenues; (6) Chronic 187. SST: Hip-hop concentrated segment market. W: Not much taste differentiation. Red Bull genuinely defined and, then, seized the market.
As a result, the company continues to hold the surging and clear advantage. It knows that the iris mover edge is formidable, particularly when it is driven by real experiences of people identifying with tangible results from the product. Red Bull has resisted rolling out additional products in ancillary markets such as apparel and the like, choosing to remain steadfast with one product. The only exception to this is Red Bull’s sugar-free, low-Carr version, a smart move, in light of the Atkins craze, which shows no sign of abating (Miller & More 2004).
To this end, the future trends of the energy drink market will more probably be initiated by Red Bull, as it has done so many times in the past. The shift to a substitute product other than energy drinks is not an immediate threat, as driven by the apparent lack of innovation anywhere near the industry. D. Distribution and Dealers Red Bull has 250 distributors, in stark contrast with their industry counterparts Go Fast! , who only has 35 (Helm, 2005). When it first came out of the US market, they were distributing it free to parties, making them unofficial hosts of said events.
Then they invaded the club scene, and distributed their product for free in clubs and other night spots in the US. Red Bull’s global launch was identified with alternative striation channels – like local gas stations – where their target market tended to hang out, especially in the European region (Seafood & Lindquist 2004). They had created and dominated the energy drink category with marketing savvy, guerilla tactics and unusual distribution methods. The firm’s consistent strategy with distribution has been to ‘open up’ a market by securing unusual distribution channels.
First piggybacking with established distributors, then narrowing distribution by contacting smaller distributors, then setting up warehouses and hiring college students to deliver its products and finally, hiring hip locals Who embody the spirit of Red Bull’ in target areas to drive around in a Red Bull logged car, hand out samples and educate consumers about the product (Lamb, McDaniel & Hair 2005). Overall, this is what was known in business Jargon as ‘grassroots marketing’s. The ability of the Red Bull brand to reach customers in their natural or everyday environment has very bright future potentials.
Since the brand has more opportunity to offer a more personal interaction with the prospective customer, customers will be more comfortable with the product and the brand will have enhanced chances of grabbing more market share. E. Suppliers Caffeine and terrine are two of the most controversial ingredients of the Red Bull energy drink, aside from acculturation, sucrose, glucose, calculates K, aspartame/sucrose and a-Group vitamins 1, all of which are synthetically produced by pharmaceutical companies.
With the power of science as a potent tool, chemical compounds that form the basic ingredients of the energy drink under analysis can be very expensive but more profitable for the company who utilizes it. The pharmaceutical industry is forecasted to experience an increased number of developments, through integration of activities at various phases, laboratory automation for method development and more effective experimental designs (Hard 2003).
Thus, the stability of supply for the Red Bull firm can be guaranteed in the years to come, with production processes for such synthetically produced ingredients becoming more and more cost effective, efficient and environmentally friendly. F. Facilitators and Marketing Firms Since grassroots marketing is Red Bull’s concept of global distribution, and not the significantly more expensive traditional distribution channels, Red Bull cuts back on costs for this particular area of marketing.
This is balanced by the huge amount of many resources spent on product research and development. The outlook for the availability of transportation services, warehousing facilities and financial resources of the company is pretty positive, with the abundance of vehicular means of moving goods to and from nations and vacant local warehouses and the continued profitability of the firm. G. Publics The sports sector and the medical profession present opportunities and problems for the company, respectively.
In the sports sector, because in an increasingly health- conscious world where people are becoming sports-oriented, Red Bull stands better Hansen of sustaining market leadership with this particular market segment. The medical profession has been questioning the alleged ‘benefits’ of Red Bull to its drinkers from day one, and they show no signs of tapering off in the near future. As for the sports sector, Red Bull has already started marketing their products to them through a bevy of sports sponsorships.
Red Bull is well-known to sponsor events such as the Formula One racing, extreme sports, snowboarding, basketball and motocross and has successfully become the drink of choice for extreme sports fanatics. The deiced profession has been dealt with by Red Bull through a number of grassroots campaign which educates people about the ingredients of the energy drink and busts myths about their terrine content being from bull’s testicles and Red Bull causing death if taken with alcohol. PART II.
MARKETING STRATEGY AUDIT Since they are not publicly-held, Red Bull may have found it unnecessary to declare a mission statement in their website. However, various statements from Red Bull officials will lead an individual to believe that the company’s mission is to become the world leader in the provision of energy drink to all walks of life and to become known s a firm who is personally involved with its customers in an attempt to reach out to them and make them more comfortable with the product.
With regards to the feasibility of the implicit business mission, it could be said that given the current situation in the industry where no major player has yet overtaken Red Bull in their global market leadership, the business mission is very reasonable. B. Marketing Objectives and Goals Lamb, McDaniel & Hair (2005:15) defined marketing objective as ‘a statement of what is to be accomplished through marketing activities’.
Again, the marketing objectives of he company are not stated explicitly in any of the resources available on the company, although gathering from the accessible information regarding the leading energy drink manufacturer, marketing goals and objectives must be stated clearly enough within the confines of the Red Bull organization (or at the very least, the marketing department of the firm). This is because marketing performance results show that their efforts at marketing the product worldwide are by far very successful and, at the same time, highly talked about.
Taking from their current marketing activities, implied marketing objective would be to reach all possible market segments with the use of the least resources, thus the grassroots marketing approach. Given the company’s current position in the industry, their vast resources, marketing ingenuity and the opportunities that lay ahead of them coming from the widely untapped markets of the rest of the world yet unconquered Pant being the foremost target), their marketing goals and objectives of Red Bull Gumbo are seemingly quite appropriate. C.
Strategy The low-key grassroots marketing strategy of Red Bull is evidently well-articulated for its marketing team, resulting to success in their marketing efforts. Their spot-on approach, wherein the products are distributed to the places where the target market frequently hangs out (for example, gas stations in Europe and clubs in the United States), catered first to a specially-targeted niche market group rather than starting its brand life within a community. Since the success of the strategy, they had correctly relied on it to drive the product’s success.
Instead of depending on the traditional channels of TV and print media, Red Bull chose to diversify its message and use direct marketing as its major tool. This enabled the firm to constantly alter he message to fit the type of audience with whom they were communicating (Seafood & Lindquist 2004). Their strategy is appropriate given that their core market are teens, who would obviously not be teens forever, so this ability to constantly alter their message depending on the generation that they are dealing with is fitting for the energy drink brand.