Product Background of Red Bull - Case Study Example

Product Background The Red Bull was derived from an Austrian carbonated soft drink and has become a recognisable brand in the market. From its humble beginnings, the product has become an important product in the industry of beverages. The product has been sold in 120 countries and it was estimated that approximately 2 billion cans were sold. This has translated to revenues of more than 2,000 million in 2004. The company is rapidly growing as evident in the sales increase of nearly 22%. In the industry, only Red Bull has experienced such unprecedented growth. Initially, the innovators of Red Bull observed that some individuals in Thailand drink some substance to keep their energy intact. Using the concept of the Thai workers along with some modifications in the taste have led to the evolution of one of the most successful energy drinks introduced in the market. Actually, the name was also patterned after a popular Thai drink. Since its release, the product has gained considerable rate of success. From the classic flavour, Red Bull today is produced In different versions catering the needs of various market segments. The product that served as the blueprint of Red Bull was prominently consumed in rural areas. Red Bull, however, attempted to penetrate urban markets and industrialised locations. The target of Red Bull innovators was to inform the working world of the energy drink's existence. Eventually, Red Bull has become a popular choice among individuals who require sustained energy during the course of their work. Product Attributes The main of components of Red Bull includes taurine, glucuronolactone, caffeine, and b-group vitamins. Taurine is a conditionally essential amino acid occurring naturally in human bodies. Basically, there are certain situations wherein taurine becomes as effective component. Glucuronolactone, however, exists in a form of a carbohydrate and serves as a vital facilitator of bodily waste elimination. Moreover, caffeine is an established ingredient that improves concentration and alertness. Finally, the b-group vitamins primarily function to develop the metabolism. Red bull has established a bandwagon because of performance. Indeed, there are several benefits that Red bull consumption provides. Basically, Red bull improves the performance of individuals in their work. Drinking Red bull also wakens the senses of drinkers improving their concentration. It has been observed that drinking Red bull improves vigilance and reaction to instantaneous events. Most important, Red bull is a helpful drink that simulates metabolism and facilitates the movements inside the body. These the fundamental reasons why Red bull has gained the most compared with other energy drinks. To prove its worth, Red bull has been used by several well-known athletes and personalities. The blend of quality ingredients and natural benefits combine to create one of the most dynamic beverages in the market. Aside from the top tier individuals, middle and low profile drinkers have recognised the effectiveness of Red bull energy drink. Definitely, drinking Red bull goes beyond replenishment as it is valued for its consistent performance. Industry Analysis The energy drink industry is relatively small compared with the scope covered by beverages. The industry, however, is gradually making a presence with the emergence of intelligent strategies and marketing initiatives. It is evident that the market catered by energy companies is young and shows trace of maturity. Another important attribute observed in the market is that some groups are portrayed as health conscious individuals. The market of Red bull and other energy drink manufacturers are teenagers and consumers in the stage of early adulthood and are considered as young professionals. Essentially, manufacturers of energy drinks consider their market as tight, but recent trends have indicated an expanding potentials and prospects. At present, there are no giant companies controlling majority of the market shares. Therefore, the competition is stiff and changes in shares control is a prevalent scenario. Red bull, however, has been the market leader with almost 60% of the market within its control. The ascendance of Red bull instantly paved the way for small players to come in the industry. It was estimated that there more that 1000 energy manufacturers operating globally. Although the top spot is firmly held by Red bull, other emerging producers are making their presence felt in the market. Unlike the beverage industry, the energy industry has only one giant in Red bull and the other companies are contented with playing catch up. Because of the saturated and filtered market, energy drinks manufacturers have use only selective approaches of marketing and limits production because of the absent large scale distribution. It is an apparent trend in the market that companies direct their products to specific consumers groups. Some companies even provide energy drink brand names associated directly with the targeted consumer groups. Advertising of products is primarily done using the television. Some companies even resort to supporting sport teams and conduct different sport events. Basically, sports events enable the companies to use their products and the athletes provide the testimonies on the products' efficacy. Red bull, for instance, have been sponsoring the participation of several teams and individual athletes in different sporting disciplines. It has to be noted that it is hard to distinguish the products all pictured as energy drinks. Possibly, most energy drinks have similar ingredients and benefits provided to the consumers. Given the situation, the course of competition shifts to another important aspect which the price. Usually, pricing is manifested s on the cost of inputs used in the production. In the energy drink industry, pricing is one of the keys to success. Basically, the availability of several alternatives makes it hard for firms to increase prices even in situation when economics dictates price movements in the industry. On the issues of government policies, energy drinks are permitted because there are no indications the shows these products as threat. Patents on products are required because there are possibilities that duplication of brand names will occur. The biggest debacle in the industry so far is the proposed banning of the product for minor consumption. It has been found out that some miss energy drinks with alcoholic beverages. Demand Drivers Energy is a basic human necessity. As an individual is exposed to work or performs extraneous activities, energy is depleted in a fast pace. To maintain the energy, it has been advised to take more fluids. Since water is less effective in sustaining high levels of energy, the concept of energy drink was created. Before, only athletes and workers were considered as the market. Slowly, the market expanded and the targets and potentials increased in number. Aside from physical activities, energy drink has become a favourite among individuals performing rigorous and time consuming activities. Demand is boosted by the quality of the product. Considering the experience of Red bull, its quality has become the important attribute. In matured markets, most consumers look at the quality first before the price. High quality products are consumed to great extent than mediocre commodities. Using quality as the tool to lure customers has been proven to be highly effective. Likewise, strategic pricing can boost the demand of the product. Combining both high quality and low price creates a rare product that will definitely be embraced by the market. Finally, advertising plays a vital role in improving the demand of the product. From the introduction of the product in the market to the different strategies to maintain the reputation of the good, marketing has become a primary instrument of success. Market recognition is an important aspect that needs to be established. In the same manner, the good reputation of the brand needs to nurtured and maintained. The elasticity of demand suggests that movement in price will likely affect the level of demand. When the price changes and significant shift in demand occurs, then the good is elastic. Conversely, the good is inelastic once the change in price will keep the demand the same. Although energy drinks are cheaper that other good, any change in price will definitely cause huge effects. It has to be noted that energy drinks have several alternative. The cheapest, which is water, can definitely replace energy drink adequately although not as effective. That notion points to the conclusion that energy drinks are luxuries; thus demand has to be aligned with price. It is easy to contend that energy drinks are cheap; hence are not classified as luxury. On the other hand, it can be argued that the term luxury refers to goods that are consumed beyond necessity. In past, several products were considered as luxuries but have inelastic characteristics. One good example is the computer, which despite of price increases continue to be purchased in the market. Perhaps this is the most compelling challenge that the industry needs to face. The shift of energy drinks from luxuries to necessities will eventually improve the demand for the products. Aside from the mentioned scheme, energy drinks manufacturer will have to improve the quality of their product. At present, it is observed that product development has been the focus of most manufacturers. Expanding the business portfolio also widens the market available for energy drinks producers. Moreover, advertising needs to be intensified along with the initiatives that improve the recognition of the consumers to energy drinks. Industry Prospects The limited market and the presence of substitute goods are threats. These aspects are possible risk catalysts that can hamper the development of newcomers in the industry. Although the possibilities of opening a business are profitable, current industry players are provided with the best advantages. Definitely, there are several considerations that have to be analysed before framing strategies. These are important core concepts that will form the management plan of the energy drink manufacturers to achieve both short-term and long-term success. Product development is a vital part of the companies' desire to be competitive. Basically, energy drink manufacturers have to devote ample effort and resources to push for the initiatives being carried out by the research and development. Because energy drinks appear to be similar, having an edge means producing products that provide different benefits. Basically, product development has to set its focus on creating energy drinks that suits the taste of different market segments. Also, the effectiveness of the energy drink needs to be emphasised in making new products. Moreover, the companies need to address the importance of quality in all the aspects of operations. Quality is a vital facet that improves demand. Even without the rigorous advertisements, energy drink manufacturers can gain more clients through word of mouth. The quality needs to be concentrated on making adjustments and exceeding the competitors. Producing high quality energy drinks can result to unlimited success. Finally, advertising needs to serve as the arm that channels information from the manufacturer to the customers. It was discussed earlier that most advertisements of energy drinks are television based. Some companies have financial flexibility to support events and sponsor teams. Aside from these options, there are several media where advertisements can exist. For instance, companies can take advantage of information technology as means of advertising. Red bull, through its website has established an online data bank that allows consumers to get acquainted with the developments and ask for queries that will improve their understanding. Venturing in the industry is feasible considering that only Red bull has an established reputation among all market players. For newcomers, there are critical reasons for such development to arise. First, energy drinks have yet to reach the highest potential in terms of being developed and experimented. Second, the market has untapped potentials that can be explored. The once limited market can be stretched further using basic strategies. Lastly, competition needs to be viewed in a positive sense. Apprenticeship in the market drives interests from prospects and especially for consumers seeking change. The success of Red bull depicts its capacity to balance all equations needed in the industry. Red bull was aggressive in pushing its identity and conservative in handling risks. The current trend suggests that Red bull is in the mood for expansion and extensive product development. Its core strategies and initiatives remain the foundation that will carry the company through the competition for years to come. References Fact Expert. (2004). "Energy drink industry." Date retrieved: 1 December 2006, from: GMA Smart Brief. (2006). "Red bull GMBH." Date retrieved: 1 December 2006, from: Red Bull. (2006). "Red bull - More than just a myth." Date retrieved: 1 December 2006, from: < http://www.redbull.com/> Wikipedia Encyclopaedia. (2005). "Red bull." Date retrieved: 1 December 2006, from: A. Demand Curve Price Quantity B. Supply Curve Price Quantity C. Elasticity of Demand The good is elastic when elasticity is greater than 1 The good is inelastic when elasticity is less than 1 The good is unitary when elasticity is equal 1 The demand for energy drink at normal price of 1 is 2 million cans. Subsequently, the demand for the good decreases to .8 million cans when the price increases to 2. Given this situation, the elasticity is computed as: Ed = (Percentage change is Qd / Qd) / (percentage change is Pd / Pd) Ed = (.6 / .8) / (.5 / 2) Ed = .75 / .25 Ed = 3, therefore, the good is elastic. D. Market Share E. Core Strategies Products Development Cost-effectiveness Quality Assurance Marketing Initiatives Read More