Founded in 1984 by Dietrich Mateschitz (49%) and Chaleo Yoovidhya (51%) Red Bull GmbH is an Austrian company. The head office is located in Fuschl am See, Austria. The firm is well known for selling a unique energy drink that combines different ingredients of high quality such as Caffeine, Taurine, B-group vitamins, Sugar, Alpine water.
The recipe was changed to comply to European needs, the first can was sold in Austria on April 1, 1987.
Then, Red Bull appeared 10 years later in America, precisely in 1997, taking more than 75% of the market. Available in more than 171 countries all over the world in 2016, with a total of 6.062 billion cans sold worldwide. Moreover, there are more than 11.886 employees (2017) working in the firm. The company's revenue in 2017 was a total of $7.391 billion (2017). (Anon, 2018).
Red Bull , which is considered the most famous energy drink brand, has been leading the market for decades. However, some may argue that it is a luxury brand. Finally, Red Bull is mostly famous among young adults.
Macro environnent PESTEL :
The report will now focus on the Macro environment of Red Bull as a company.
Many factors are involved in this study. We will focus on the political aspect first as it requires government policies and regulations that affect the company. The factors that directly impact the company are various such as the tax reforms that directly laid impact on the business, also the stability and instability of the region where the company is located. As well as a good intra-governmental are a source of opportunity for Red Bull. The research shows that, for instance, good economies such as the United States of America or Canada are more likely to perform better in terms of sales than third world countries. That is because third world countries are more focused on physiological needs.
Economic Factors :
Likewise Red Bull has always been into innovation that has helped maintain the firm's stability. For a company like Red Bull, the performance of this one is directly related to the economic stability of the state where the company is working. For example during the crisis in 2009 Red Bull's net sales went down 1,5% compared to the previous 12 months. (John Dudovskiy June 25, 2016) The country where the company is located impact a lot on the sales, more the country is developed more the sales get up. A possible treatment for Red Bull is the slowdown of the Chinese economy as this one has been considered one of the greatest economies in the world.
Social factors :
However, the social factors involved the beliefs and lifestyle of people and more than that the culture. Young people are more into energy drinks which is an opportunity for a company like Red Bull. But a population that is more aware of health care can be a threat for this one. It also has a great image due to the sponsoring of extreme sports and various teams.
Technological Factors :
Moreover, the technological factors, research and development in the sector of alimentation have always been a great opportunity for companies like Red Bull. And the most important one in the energy drinks industry is the internet that makes the product become more well known and create the needs to consume it.
Legal Factors :
In order to sell their products, Red Bull has to meet the legal requirements of the countries they are targeting. The company's priority is to make sure the drink is safe to be consumed by the targeted audience. However, a basketball player consumed the drink and it was the cause of his death (lien). Following this example, we understand that the brand doesn't meet the health requirements. This lawsuit cost Red Bull $85 million.
Because of that, it has been well documented that the energy drink is high in caffeine and, for that reason, some European countries such as France, Norway, and Denmark acted on it and banned the product. (UMP MARKET AUDIT - RED BULL. (2018))
Red Bull is trying to be environmentally friendly as their aluminium cans are lightweight which makes their carbon footprint smaller. The cans used are 100% recyclable and don't lose their quality. As a matter of fact, recycling is a positive aspect for the company as people are starting to be more aware and sensible about environmental issues.
Industry structure analysis :
Industry rivalry :
In its early beginning, Red Bull was the only energy drink in the market, but nowadays there are a lot of competitors in the market. The competition can be defined as the economic result of the rivalry between different companies. The structure of the market has changed from an earlier monopoly to an oligopoly nowadays.
There are two kinds of competition: direct competition when companies are selling energy drinks such as Monster and Burn and indirect competition coming from brands such as Coca Cola and Pepsi. The indirect one is made by a different product that responds to the same needs.
Monster is considered as a direct concurrent to Red Bull, this company was founded in 2002 in the USA. The European Food Safety Authority (EFSA) agreed to the distribution of the product considered safe for people with an adequate quantity of caffeine. The advertising of the company is mainly due to the sponsoring, as the company supports many extreme sports such as the MMA and the Motorsports. The company has a wide range of products under the monster brand special in North America. Monsterenergy.com. (2018).
Rockstar is the third on the podium, it was created in 2001 in the USA. There are more than 30 products available in the range. In 2009 it had 14% of the market. It's also a big sponsor for the sports events all over the world like its competitors Red Bull and Monster. By 2007, Rockstar was one of the top three energy drink brands in North America, with a 155% growth in sales in 2004 (Leith, Scott - May 29, 2005).
As a non- energy drinks company, the principal competitor to Red Bull is PepsiCo, founded in August 28, 1898, in the USA. The business had a total revenue of US$ 63.525 billion in 2017, with more than 263,000 employees. This company gets a hand on a wide number of products answering to different needs, such as Pepsi Cola, 7Up, Tropicana, Lipton Ice Tea, Quaker, Lay's among the principal ones. The headquarters are located in New York.,Pepsico.com. (2018)
Figure 1 : Red Bull Competitors.
Figure 2 : Competition direct and indirect :
Threat of substitutes :
There is much threat of substitutes to Red Bull. Coffee is one of the most important alternatives to energy drinks due to its highest quantity of caffeine and the low price. Water, juices, and carbonated soft drinks are also substitutes of energy drinks. In the future, it's important to focus on the customers' needs and choices. Because they will be more orientated to healthier alternatives due to their increasing health-considerations. Nowadays, people try to take care of their health avoiding dangerous ingredients. As an indirect substitute for energy drinks, customers prefer to get enough sleep and to improve their lifestyle rather than consuming energy drinks as those replacements are free for the majority.
Threat of new entrants :
A threat of new entrants into energy drinks industry is moderate, in the drinks market it is really difficult to compete with the biggest companies in the world such as Red Bull and others when you are a new market player. The competition is already intense between them, with one exception: if you have an innovative product that can be new to the customers.
Getting to the distribution channel of those companies is hardly possible and have an impact on the customers that are already loyal to some brands of soft and energy drinks is hopeless. Moreover, an important capital is needed in order to start an energy drink company.
Bargaining power of buyers:
The bargaining power of the buyers is medium for Red Bull, even if in the energy drink market there are competitors, the market is a small one. Red Bull still controls the bargaining power over the buyers due to their loyalty. In fact, even if it increased the prices it wouldn't lose market shares. Energy drinks are already more expensive than other drinks and there is a specific category of people that can afford it so they actually don't mind if the prices change. Moreover, the caffeine in energy drinks makes people addicted to a certain extent.
Bargaining power of suppliers :
The bargaining power of Red Bull's suppliers is really low: due to the fact that it is a huge company that sells its product all over the world in big quantities any suppliers would want to be part of it. So changing company providers will not cost much to the company and it can be done easily, so the suppliers do not have a real bargaining power, and can't influence Red Bull's prices. Furthermore, some of them are known because they are Red Bull's suppliers.
The idea of Red Bull was inspired by an Asian product from Thailand called Krating Daeng, that is non-carbonised.
The name of the brand is easy to memorise in all languages and the logo is described by the name of the brand. As we can see in the logo we have two red bulls so it can be perceived that drinking Red Bull makes you as strong as a bull.
Red Bull energy drinks' ingredients are Taurine, Caffeine, Vitamin B, which are consumed by athletes, workaholics or youth.
Red Bull is a non-durable produce with a small range of 12 products. With Red Bull original in different sizes (250ml, 355ml and 473ml) known as the product leader all over the world and the most sold. There are also different varieties and flavours: Red Bull sugar-free; Red Bull Zero sugar; Organics by Red Bull with 4 products (Ginger, Cola, Tonic water and Lemon); and then the Red Bull Editions with five products (Orange, Orange sugar-free, Tropical fruits, Tropical fruits sugar-free and Blueberry).
Red Bull is really present on social media by using Facebook and Twitter but also some apps like Instagram in marketing campaigns and promotion. The social media is the easiest way for a bigger visibility of their target (13 years old to 34 years old) and those ones are the most active on social media. It sold more than 6.3 billion cans all over the world in 2017.
Red Bull also concentrates heavily on their sponsoring, we can find Red Bull in the biggest events all over the world and especially in extreme sports events. The company takes real risks, which helps it to reinforce their brand image.
In terms of distribution, the cans are transported in more than 165 countries, they are easy to transport because of their form and lightweight. We can find Red Bull in supermarkets even if it's considered as a luxury brand. In fact, we find it in all kind of shops, restaurants, casinos and nightclubs. It's also put in special refrigerators in supermarkets which attracts people more. There is a special company Red Bull Distribution)that was created just to distribute Red Bull in 22 states in North America, with more than 2000 employees. Anon, (2018)
There are two distribution channels that Red Bull is using: the direct channel is the one where they directly provide the product to the customers without any intermediary and the indirect one is the one that uses an intermediary between the customers and the company such as supermarkets.
The product is also sold online on different websites.
According to Maslow pyramid, buying an energy drink is more about self-esteem, so not everyone can afford it. Also considered a luxury brand due to its price of $1.99 for the original and sugar-free 250ml cans. The price can vary between countries and shops. But Red Bull focuses more on the quality of the product than the price.
Being the first energy drink in the market ensured RedBull consumer loyalty: customers prefer buying Red Bull cans rather than any other one so the sales will not decrease.
Red Bull's main way to promote the product is the sponsoring. It appears in all the biggest sports events as a sponsor such as cliff diving, BMX, skiing, flying, mountain biking, BMX, motocross, windsurfing, surfing, and skating. Red Bull motivates also artists by having a Red Bull House of Art encouraging them to display their art for 3 months at their exhibition. The drink is also present in a lot of music concerts, in shows and movies. They have their merchandise stores online and a magazine with all the extreme sports. Having Red Bull in all those events makes people think about Red Bull first when they just hear energy drinks and that increases the number of customers.
Red bull Swot :
First of all, we will concentrate on the strength of the company. Red Bull is available in more than 171 countries worldwide and sold more than 6.3 billion cans in 2017.Anon, (2018). These numbers display the leadership owned by Red Bull in the energy drinks market. This shows the impact of the brand and the attitude that the public has towards it. The loyalty of the consumers is also demonstrated by the drink's unique taste. The firm also has a really good marketing strategy, we find Red Bull in a lot of international competitions due to the sport sponsoring.
- Weaknesses :
Moving on to the weaknesses, Red Bull can be dangerous for the health of the consumers as it contains ingredients that accelerate the heartbeat. Dasey stated in his article ‘'Matthew Penbross, 28 years, collapsed after downing the popular drinks, each containing 80 milligrams of caffeine, last Sunday.” (Dasey, D. 2018).
The absence of choice for the consumers can be considered a weakness because customers can have a wide choice that increases their expectations and influence their behaviour. Compared to the other energy drink brands, Red Bull is one of the most expensive ones.
Moreover, as an opportunity, Red Bull can extend the market and get into new countries such as China that would lead to a value and volume growth. In 2013, Red Bull agreed with a Chinese manufacturer to launch an international version of Red Bull energy into selected urban areas (Food Navigator Magazine, 2013). It also helped Red Bull to extend the sponsorship events making it attract a large audience. It can also extend its range of goods giving the customers a bigger panel of products answering their needs.
- Treats :
The success of the brand brought with it some threats and competition is the most important one nowadays for Red Bull. When it appeared in the market in 1980 it was a unique product. However, it is not anymore as the dominance of Red Bull is currently menaced by the entry of Coca Cola into the industry. “Burn' is a direct competitor to Red Bull in emerging markets in Latin America” (Euromonitor, 2014). “While in the US, another energy drink produced by Monster Beverage Company, ‘Monster' has now overtaken Red Bell in terms of volume sales” (Euromonitor, 2014).
Product cycle life:
When you first create a product, you spend an important budget in marketing and promoting the product trying to build an identity for it, hence it generates an extra cost. This is a period where you're not sure about the product and you have high risks of losses. It's the phase when Red Bull tried to be known to the customers, with a selective distribution and important promotion to develop an awareness of the product.
Then you have growth, which is the period when the sales and the profits are increasing. The competition takes place in this period, the product builds its identity and gains the loyalty of the customers which is what makes the company gain the markets share. For Red Bull in this period the distribution began to grow, with an increasing in the demand. It also generated an amelioration of the features and quality.
According to the fact that Red Bull already has a strong identity and the sales are still going up, I suppose that it's in the maturity period due to the fact that the sales are consistently increasing with new marketing strategies to face competitors and stay competitive in the market.
Finally, the last period is the decline when the product disappears and Red Bull has not and will not reach this period in the future.
Ethical aspects :
Red Bull is taking care of its ethical image, the cans are 100% recyclable, and recycling a can consumes 95% less energy than creating a new one. Red Bull is also using a wall-to-wall production that not only saves more than 12,700,000 km of truck travel annual and energy but also helps reduce pollution. The fact that the manufacturing and filling can be done in the same place economises more than 6,641 tons of CO2 emissions each year.
Moreover, there is a campaign which is called “Red Bull Wings of Life” that finances cutting-edge research toward spinal cord injury.
Finally, Red Bull uses a technological implement called Eco cooler that saves more than 45% of energy compared to using refrigerators. 980,000 ECO Coolers are set up to data, that represents 80% of red bull cooling equipment. In addition, the company is using 80% of its energy from renewable resources.Anon, (2018)
To conclude, we can say that Red bull company is one of the biggest in the world having total revenue of $7.391 billion in 2017, and available in 171 countries all over the world. (Anon, 2018). Thanks to PESTEL analysis we underline how the company could be impacted in the future by the society. The company is constantly in development following the contemporary world, by research and development and be aware of the environmental. Then we've focused on the industry structure analysis by showing that Red Bull has a big number of direct and indirect competition. But the 3 most important are Monster, Rockstar and Pepsico company. Moreover, we had some substitutes as the juices and the coffee that are less expensive. But Red bull had gained the loyalty of its consumers. Red Bull had a small range of products that include 12 drinks, that are available in all the restaurants, supermarkets and nightclubs all over the wolds with a price around $1.99.
However Red bull is using the sponsoring as the main way to promote the product.
in addition, we've done the Swot analysis of the company to illustrate what the company needs to know to be most efficient as possible according to the market share. Thanks to the weakness we've focused on the company know which sectors it has to improve to switch them as a strength. Furthermore, we defined which opportunities can be taken by the company which can help them to develop their business and reduce the threat. Likewise, the life cycle of the product is in its maturity period which mean that the product has already built a strong identity and the sales are still going up and will probably plateau if the company doesn't innovate.
Generally people are thinking that big companies don't really consider their ethical in pact over the society, however, Redbull is proving that this argument is not reliable due to the fact that is engaged in this aspects by recycling the cans and trying to save the energy.
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