Red Bull: Market Analysis - Essay Example

? Red Bull: Market Analysis Table of Contents Table of Contents 2 Introduction 3 Summary of the Task 3 Red Bull: A Brief Overview 3 Strategic marketing Plan 4 Marketing Audit 4 SMART Marketing Objectives 6 Strategies 7 Segmentation Targeting and Positioning 8 Control and Evaluation 9 Ethical Issues 9 Reference List 10 Appendix 13 Introduction The world has now entered into an era of conclusive change, unprecedented breadth, scope and pace. Whether in the context of business, economic, political or social environment, every navigational landmark which used to act as a pathway or guide have been obliterated (oasisadvantage, 2013). Furthermore, with increasing expenses, severe competition, low profitability margins and increased labour cost, companies around the world are passing through a turbulent state (Casali, 2008; Tolentino, 2000; Accuval, 2010; Anderson, 2011). As a result of that organizations are trying to increase the loyalty of the consumers and are attempting to satisfy them by offering products or services that exactly matches with their requirements (Kamin, 2006). The pressure from internal and external environment has also been increasing at a rapid pace and that further raises challenges for the company. In such scenarios, companies have no option but to carry out an in-depth assessment of the environment in which it operates. Apart from identifying the scenarios of the business environment, the companies also need to accurately forecast the needs of the consumers. This will not only mitigate the risk of the company but will also allow them to generate higher profits. Summary of the Task This report aims to shed light on the internal and external environment of Red Bull, the Austrian energy drinks giant. In this report, an in-depth analysis of the marketing strategies of the company will be also carried out. The report will then carry out a marketing audit of the chosen company and will ultimately present a strategic marketing plan. The plan will embrace the recommended strategies, implication, control and evaluation. However, before getting further deep into the study, a brief overview of the company is presented below. A brief introduction of the company will help in better understanding of the study. Red Bull: A Brief Overview Red Bull is a popular energy drink being sold by Red Bull GmbH, an Austrian based multinational company. The company was founded in the year 1987 by Austrian entrepreneurs named Dietrich Mateschitz and Chaleo Yoovidhya. However, the business idea was not fully original and was basically taken from an energy drink named as Krating Daeng, which was first produced and marketed in Thailand. Some of the product variants of the company are Original, Sugarfree, Red Edition and F1 Edition among others (Buchholz, 2008; Riedel, 2007; Onkvisit and Shaw, 2008). The company is also involved in several other social and sporting events. Red Bull Racing, FC Red Bull Salzburg and Red Bull Brasil are some of the sports teams or franchises of the company. In the similar way, the company is also involved in different altruistic or philanthropic activities. For example, the official charity of the company “Wings for Life” aims to raise money for research works related to spinal injuries (Jamesallenonf1, 2012). The company usually markets its products through retailing and direct selling. Around 40% of the revenue comes from retailing whereas 60% comes through direct selling in petrol station, clubs and bar. In the year 2011, the company sold a whopping 4.6 billion cans of energy drink which itself was a milestone (Bodner, 2011). Strategic marketing Plan Marketing Audit Marketing audit is a process of examination by which reviews as well as an analysis of the company’s marketing activities are undertaken (Ashurst, 2008; Chandrasekaran, 2012; Hill and Jones, 2009). In the context of Red Bull, the company is involved in the production and marketing of energy drinks that are solely targeted for the young people. However, apart from targeting the young people, the company also targets people who are involved into arduous activities. This generally encompasses factory labour, athletes and other workers among others. The marketing audit for the company will be carried out in the form of internal and external analysis and will simultaneously present the internal strengths and weaknesses of the company and external opportunities and threats. Internal Analysis One of the biggest strengths of the company lies in its strong position in the market. The company has been operating in the market since 1987 and has been able to continuously increase the market share. In comparison to 2011’s 4.6 billion, the company hit record high with 5.226 billion sales thereby reflecting a steady growth (Rga, 2009). In addition, the company also has strong and effective communication techniques and embraces a pool of loyal customers. This gives an added advantage to the company. However, the company operates with only five major variants and the price is comparatively higher than that of the competitors. This in turn has become a cause of annoyance for the company. The company has a sole manufacturing plant situated in Austria, but due to less number of factories the company often fell short of market demands. External Analysis A number of external factors are likely to impact Red Bull’s business operation as well as marketing activities. The energy drinks are highly vulnerable to regulatory control as it contains the bulk amount of caffeine contents. In addition, European laws pertaining to mineral and vitamin enriched products in Denmark and France is also a cause of concern for the company. The company may also get affected by the social factors. For example, health conscious people may boycott the consumption of energy drinks due to health concerns. Moreover, this group can also hinder the consumption of energy drinks of their friends and relatives. However, with rapid globalization and reduced trade barriers, the market is simultaneously providing the companies with a number of opportunities. Hence, the company has the chance to undergo further geographical expansion. Presently the company operates in and around 165 countries around the world. In addition to geographic expansion, the company can also increase their market size and target customers more efficiently by the use of technology (Euromonitor International, 2012). Hence, technological development will act as a business driver for the company. Competitor Analysis With the liberalization of the economy as well as increased opportunities of the market, has increased the competition levels of an industry to quite a large extent. As a result of that it has become an indispensable task for the business houses to measure the capability of the competitors. Competitor analysis is also an integral part of the strategic planning process of a company (Riley, 2012). Moreover, several studies have also shown that competitors are important in shaping the functions of a company. In case of Red Bull, the major competitors of the company are PepsiCo, Inc., Monster Beverage Corporation, Dr Pepper Snapple, Suntory Holdings Limited to name a few (Hoovers, 2013). Red Bull is often considered as the stalwart in the energy drink industry and is also the market leader with 39% share globally. On the other hand, the second position is being held by Monster with a share of 28.9%. Rockstar is currently holding the third position in the market with a market share of 9.8%. The remaining share of the market is being held by the other players. Figure 1 – US Market share of Energy Drinks (Source: fpujolmri, 2012) The key issues that have been identified for the market analysis are that the company has limited number of variants and as a result of that the company is unable to provide wide options to the customers. Moreover, due to bulk amount of caffeine contents in the energy drink, the product is vulnerable to regulatory control in some countries. The energy drink industry is also intensely competitive and threat of new entrants is also high. SMART Marketing Objectives Every business houses around the world need a certain set of objectives. These objectives in turn drive the companies to function in the marketplace (Hoskisson, Hitt and Ireland, 2008; Roger, 2010; Rugman, 2003). Hence, objectives are pivotal part of a business as it also allows them to explore the opportunities of the market and also assess their capabilities (Shils and Shike, 2006; Shachman, 2004; Starbard, 2009). As a result of that, Red Bull is also recommended to undertake objectives that are SMART as it will help in assessing the viability of the objectives and test the ways by which it can be achieved. One of the objectives of Red Bull is to increase the market share in the health drink energy sector by 5 % by the end of 3 years. The company should aim to increase the number of product variants to 10. This will allow the company to offer wide options to the customers. The Company should also aim to improve the overall productivity of the company. Given the modern equipments and technology, Red Bull has the ability to achieve the same. Another objective of the company is to launch new advertisement campaigns so that the products can be repositioned the brand as a healthy product and is safe. Strategies This section of the study will underline the strategies to be undertaken by the company in order to satisfy the intended objectives. The strategies are developed keeping in mind the existing resources of the company. The current strategy being pursued by the company is considered to be one of the most successful strategies. In order to create awareness of its products, the company basically depends upon “word of mouth” promotion rather than relying on mass media promotion. Furthermore, the company also engages itself into sponsoring and hosting large sports events (Steen and Ashurst, 2008). Despite that, the company needs to bring in certain changes in their way of generating awareness about the offerings. The subsequent section will recommend and justify the strategies and will also provide insights into the implication of those strategies. Cost Reduction: - The Company is recommended to reduce the cost of operation which in turn will allow them to offer the customer products at a low price. This strategy will also permit the company to target the market that was not targeted previously for high prices. Hence, the strategy is fully justified (M. Tehran and R. Tehran, 2010). Due to less number of manufacturing units, the distribution cost of the company is huge. Hence, the company can set up new manufacturing plants in different parts of the world. This will further provide the company with the opportunity to satisfy the increasing demand of consumers. The impact of this strategy is that it will lead to increased profitability, greater revenue generation and more productivity. However, reducing the numbers of manufacturing units may result in lower production but it can be balanced by implementing improved technologies in the existing manufacturing units. Boosting mass-marketing campaign to entrench the likeness of Red Bull – It has been observed from the case that, Red Bull pursues a niche strategy, but since they are recommended to pursue a more mainstream approach certain modifications in the way they interact or communicate with customers need to be made. For example, getting into close contacts with the customers will allow the company to know their needs in a better way. On the contrary, their niche strategy is actually hindering them from exploring the other options and opportunities of the market. The Company is therefore recommended to use traditional techniques such as posters, billboards, banners and wall painting. This strategy is justified because it will boost company’s visibility at a low cost. The impact of this strategy is that Red Bull will be able to maximize their contact with customers and can be more approachable. Increasing advertising on the internet: - One of the objectives of the company is to increase the market share of the company. In order to achieve, the company is recommended to adopt internet marketing strategy. Through internet advertisements, the company will be able to reach out to mass population and will provide them with the opportunity to increase market share. Diversifying Product Range: - The Company currently operates with five products and as a result of that the company is recommended to diversify their product line. In this context, the company can launch a product that is low in caffeine content and sugar free. This will allow Red Bull to target customers who are health conscious. However, there is a concern over the delivery of energy benefit but this challenge can be surmounted by using other energy rich compounds and can act as a refresher. For example with “Diet Red Bull”, the company can target ever middle aged health conscious customers resulting in broader market size. Hence the strategy is fully justified. Brand Repositioning: - The Company can also adopt brand repositioning strategy by which they can position their product as safe and healthy. Together, the implementation of these strategies will help the company to deal effectively with the existing completion of the industry. Segmentation Targeting and Positioning The company currently segments their market on the basis of demographic and psychographic factors. It encompasses age, attitude as well as the working activities of the individuals. The primary targets are young people aged between 18 and 30 years old and are involved in arduous activities. However, with new product and sales channel, the company can target other groups as well. One possible group can be health conscious people above 35 years age. One of the reasons for choosing this group is that a majority of working professional who are above this age often feel tired due to their work activities and in that case the Red Bull energy drink can act as a refresher. From the company’s perspective the market size is significantly large and can offer high value to the company. Targeting is another critical element of a company’s marketing activities. The present target populations of the company are young people aged between 18 and 30 years old. Furthermore the recommended target group is health conscious people above 35 years age. In order to effectively target these groups, the company should make use of a combination of the traditional and contemporary marketing activities. Currently, Red Bull is positioned as a product providing extra energy. The positioning statement of the company “Red Bull gives you wings” also reflects the same (Boyle, 2009). However, slight modification can greatly help in satisfying the intended objectives. With low caffeine content and zero sugar, the product can be positioned as a drink acting as a refresher without any health issues. Control and Evaluation Success can be measured through various parameters. Some companies measure it on the basis of the overall revenue and profit generated, while some others consider the overall productivity and an increase in the number of loyal customers. However, the most common indicating factor is the market share of the company. Although, increased market share does not signify a company’s growth but in most of the cases it reflects a company’s progress. In the context of Red Bull, the company can measure their performance by taking into consideration the share of market. Since, the company has already been recommended to pursue a cost - reduction strategy their revenue may be less but profit will increase. However, an increased market share will certainly reflect Red Bull’s progress. The company is also recommended to undertake periodic evaluation of strategic impacts of the strategies on the company. In order to ensure successful implement of this plan the company can set up a new committee for overseeing the progress and should a follow a timeline to determine the progress. Ethical Issues The ingredients used by Red Bull in the production of energy drink are under scanner due to the outbreak of the news, three Swedish people dying after the consumption of Red Bull energy drink. The scenario further worsened when new death reports in the US and Europe came into light. As a result of that Red Bull was banned from a number of countries. In some countries, Red Bull is only available in medical stores. However, to surmount the ethical issues, the company has come out of a statement that elucidates company's intentions towards following ethical guidelines. The company mentioned that the product contains amino acids, which increases the metabolism rate of the body. Furthermore, the company also mentioned that the Caffeine and Taurine content is as per the guidelines is absolutely safe for consumption. In addition, the company is also recommended to provide nutrient information in the packaging so as to remain transparent. Reference List Accuval, 2010. Carbonated Soft Drinks: Is Demand Fizzing Out? [online] Available at: [Accessed 03 April 2013]. Anderson, S., 2011. Beverages –Soft Drinks. [online] Available at: [Accessed 03 April 2013]. Articlesbase, 2010. Xs Energy Drinks/shots Showing Up At Bars, Gyms And Salons. [online] Available at: [Accessed 09 August 2013]. Ashurst, P. R., 2008. Chemistry and Technology of Soft Drinks and Fruit Juices. New Jersey: John Wiley & Sons. Bodner, B., 2011. Company Analysis of Red Bull. Munich: GRIN Verlag. Borsellino, 2012. SHS Students Energy Drink Preference Matches National Trends. 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New Jersey: John Wiley & Sons. Steen, D., and Ashurst, P. R., 2008. Carbonated Soft Drinks: Formulation and Manufacture. New Jersey: John Wiley & Sons. Tehran, M. and Tehran, R., 2010. Advertising and Sales Management. New Delhi: FK Publications. Tolentino, P. E., 2000. Multinational corporations: emergence and evolution. London: Routledge. Zenithinternational, 2012. Global energy drinks market spurts ahead to $37 billion. [online] Available at: [Accessed 09 August 2013 Appendix Figure 2 - Nutritional Information (Source: Decker, 2013) Figure 3 – Energy Drink Calorie in Value (Source: Sec, 2011) Figure 4 – Energy Drink Category (Source: Sec, 2011) (Source: zenithinternational, 2012) (Source: articlesbase, 2010) (Source: Borsellino, 2012) (Source: competitionjunkie, 2012) (Source: competitionjunkie, 2012) (Source: competitionjunkie, 2012) (Source: competitionjunkie, 2012) Read More