Red Bull: A Background and Some Facts - Essay Example

Red Bull: A Background and Some Facts The company Red Bull Gmbh is headquartered in Fuschl, Austria, a lakeside village outside of Salzburg. The company was formed by a Fuschl resident and entrepreneur named Dietrich Mateschitz. Traveling in Asia in the 1980s, Mateschitz came across a syrupy tonic favored by ricksha drivers, and discovered that its key ingredient was an amino acid called taurine, which occurs naturally in human and animal bile. He adapted it to a palatable drink and launched Red Bull in his home country in 1987.Founded in 1987 by Dietrich Mateschitz, the company Red Bull now employs 200 people in Austria and 1850 people allover the world. Dietrich Mateschitz, aged 60, ranks 406th in Forbes.com's list of the world's richest people, worth $1.4bn. Red Bull founded after an Asian locally-brewed tonic in Thailand now markets its eponymous functional energy drink in more than 100 countries. (Wikipedia) Product: Red Bull is a non-alcoholic drink contains the amino acid taurine, B-complex vitamins, caffeine and carbohydrates. Red Bull claims that the body needs more taurine, an amino acid than is produced normally during the physical exertion of the human body. The drink has grown quickly worldwide capturing about 80 percent of the world's energy drink market. Although the company is of Austrian origin, the recipe for the drink Red Bull is said to come from Thailand. (Red Bull Company Profile- Yahoo Finance) The berry-flavored beverage is spiked with additives like taurine and glucuronolactone. And at $2 for an 8.3-ounce can, Red Bull's retail price is at least double what you'd pay for a 12-ounce can of Coke. But it does pack some energy. Red Bull, with 80 milligrams of caffeine, has more than double the dose found in the larger Coke serving, and it has 110 calories per serving versus Coke's 140.The consumption of Red Bull was 1.9 billion cans of in the year 2004, generating just about $2 billion in revenue. In some countries Red Bull commands an 80% market share. In the U.S., where Red Bull enjoys a 47% share of the energy drink market, sales are growing annually at a 40% clip. In the year 2004 it sold 700 million cans in the U.S.; and in 2005 it hoped to sell 1 billion. (Kerry A. Dolan 2005) Customers: Red Bull is popular with college student and nightclubbers, whom the company aggressively targets. But its most public tactic has been to wrap the drink in the sweaty mantle of extreme sports. To that end, Red Bull sponsors its own stunts and competitions in relatively obscure disciplines like street luge, waterfall kayaking, and freeskiing. (Rob Walker 2002) Marketing: Since introducing Red Bull in 1987, Red Bull has invested heavily in building the brand. In 2004 the company spent $600 million, or 30% of revenue, on marketing. (Coca-Cola spends 9%.) But unlike rivals who pay millions of dollars for superstars like Britney Spears, Red Bull relies on cheaper talent: hip youngsters, students and a legion of fringe athletes. Red Bull sponsors some 500 athletes around the world, the type who will surf in Nova Scotia in January or jump out of a plane to "fly" across the English Channel. Every year the company stages dozens of extreme sporting events, like the climbing of iced-down silos in Iowa or kite sailing in Hawaii, as well as cultural events like break-dancing contests and rock music jam sessions. Then there is Hangar-7, an eye-popping structure of glass and steel that the company Red Bull erected next to the airport in Salzburg, Austria. The building serves as a chic eatery for club crawlers and provides shelter for the Flying Bulls, a fleet of 15 show planes that appear at air shows around the world. Red Bull has purchased a Formula One racing team, an extravagance that will absorb $100 million a year to keep on the track while generating only $70 million in revenue. All these activities are geared to achieve the objective of expanding Red Bull's presence amid a deluge of new energy drinks being introduced by upstarts and beverage behemoths like Pepsi and Coke. (Kerry A. Dolan 2005) In forging a marketing campaign, Red Bull chose young consumers and athletes as the company's two icons. Within these two segments, there are widely divergent groups, so the marketing team focused on extreme sports, and young people who identify themselves with risk-taking and overcoming challenges. That turned out to be a good combination. (Knowledge @ Wharton 2004) Other Attributes for the Success of Red Bull: Apart from focusing his marketing on young people and extreme sports, Mateschitz made a differentiation in the product from other drinks by making the packaging unique and different from others. This he achieved by arranging a firm to manufacture aluminum cans that have unique, smaller dimensions. He also developed an exterior design with two colors - blue and silver - that is very appealing to the eyes and easy to distinguish from other cans. Moreover, a considerable research and care has been put into the choosing of the Red Bull's logo and its slogan "gives you wings". Effective distribution of the product is the key for the success. The distribution is being done by organizing and managing events in cities where the company distributes the drink to the skaters, ice skaters and so forth; secondly Red Bull dispatches promotional teams in cars- specially painted with the company logo to beaches, public squares, exhibitions, and meetings where young people congregate. The teams then give away free samples of Red Bull. (Knowledge @ Wharton 2004) Financials: The Financial position of the company for the period from 1996 -2001 is depicted below in the table. In Million Euros Details 2001 2000 1999 1998 1997 1996 Operating Revenue 686.490 568.600 380,200 196.400 128,000 85.600 Sales 654.790 551,100 366,400 189,200 123,800 84,800 Profit (Loss) Before Tax 110,900 91.900 43.700 10,310 (1000) (2700) Cash Flow 72,900 43.800 31,000 8,200 200 (1500) Total Assets 264,300 201,800 133,600 68,300 58,600 40,100 Shareholders Funds 144,300 91,500 50,400 21,500 14,900 15,900 Current Ratio 2.43 3.22 2.4 1.51 1.13 1.3 Profit Margin (%) 16.15 16.16 11.49 5.25 (0.78) (3.15) Return on Shareholders Funds (%) 76.85 100.44 86.71 47.95 (6.71) (16.98) Return on Capital Employed (%) 71.58 60.27 48.78 32.35 (4.26) (13.19) Solvency Ratio (%) 54.60 45.34 37.73 31.48 25.43 39.65 The fact remains that Year by year Red Bull's sales are growing. Between 2002 and 2003, they grew by 10%, from 1.147 billion euros, to 1.261 billion euros. For the year 2004 the sales was almost $ 2 billion. Being a private company there are no precise financial figures published for the information of the public. References: 1. Kerry A. Dolan (2005) the Soda with Buzz http://www.forbes.com/free_forbes/2005/0328/126.html 2. Knowledge @ Wharton (2004) How Far Can Red Bull Fly http://www.wharton.universia.net/index.cfmfa=viewfeature&language=english&id=775 3. Rob Walker (2002) the Marketing of Red Bull http://www.robwalker.net/html_docs/redbull.html 4. Red Bull Company Profile- Yahoo Finance http://biz.yahoo.com/ic/101/101316.html 5. Wikipedia Red Bull http://en.wikipedia.org/wiki/Red_Bull Read More