Red Bull Cola Case Study

Marketing Strategy

Case Layout

•In Class Group Task

•Company Overview

•Product Overview

•Irish Beverage Market

•Competitor Actions

•Task Review & Learning Outcomes

•Case Study Epilogue

In ClassGroupTask

Your group has been tasked with co-ordinating the launch of Red Bull Cola into the Irish market.

You have complete control over the communications mix and the strategy for the brand.

You have up to one hour of class to construct a clear business objective, and detail your chosen strategy as to how best achieve this objective.

YOUR GROUP SHOULD CONSIDER:

•target market (who are you selling to)•objectives (what is the purpose of the strategy)•type of product (what is the purpose of the product)•market structure (where does red bull cola fit)•stage of PLC (what strategies suit this intro stage)•distribution channels (where/how will you sell)•positioning (what does red bull cola represent)•resources (how much time/energy/man power will be

put into this)•pricing strategy (how much will you charge and why)•segmentation (what are the characteristics of your target)•research (what type of information is important)

Company Background

In 1984, Mateschitz founded Red Bull. He fine-tuned the product, developed a unique marketing concept and in 1987, started selling Red Bull Energy Drink on the Austrian market . This was not only the launch of a completely new product, in fact it was the birth of a totally new product category. Today Red Bull is present in over 160 countries.

Since 1987, around 30 billion cans of Red Bull have been consumed, more than 4.2 billion in 2010. The responsibility for the success of the world's No. 1 energy drink is shared by the company's 7,758 employees around the world (compared to 6.900 in 2009). The Red Bull headquarters are based in Fuschl am See, not far from Salzburg, Austria.

While the consumption was doubling year on year in Austria, Red Bull arrived in its first foreign markets, Singapore (1989) and Hungary (1992). The authorization for Germany was granted in 1994, the UK followed in 1995 and in 1997, the US business started in California. Red Bull has been available since 1987.

From 2007-2010 company turnover increased by 15.8% from EUR 3.268 billion to EUR 3.785 billion.Sales, revenues, productivity and operating profit not only matched 2007 levels, they significantly exceeded them to such an extent that the figures recorded were the best in the company's history so far.

The main reasons for such positive figures include outstanding sales in the Red Bull markets in Turkey (+86%), Japan (+80%), Brazil (+32%), Germany (+13%) and the USA (+11%), combined with efficient cost management and ongoing brand investment even in the challenging economic climate of recent years.

Product Overview

After creating and successfully leading the energy drink category for over 20 years, Red Bull is now entering the largest non-alcoholic beverage category in the world with a cola made of ingredients from 100% natural sources.

The cola from Red Bull is a unique blend of ingredients, all from 100% natural sources. In addition, it is the only cola which contains both the original Kola nut and the Coca leaf. Therefore, it is a very special recipe.

The result is a natural, not-too-sweet cola taste, which comes from using the right plant extracts. Red Bull Cola has initially launched in Austria, Switzerland, Italy, Great Britain, Ireland, Russia and Las Vegas.

Red Bull Cola contains 45 milligrams of caffeine per 355ml (12-ounce) can, it contains more than Coca-Cola (34 mg) or Pepsi-Cola (37.5 mg), but less than Diet Coke (47 mg) or Pepsi One (54 mg).

The cola contains significantly less caffeine than Red Bull's eponymous energy drink (80 mg per 250 mL).

The drink also contains sugar and caramel colour, lacking the phosphoric acid, high fructose corn syrup and artificial flavours of most commercial colas.

IrishBeverage

Market

IRELAND'S sports and energy drinks market grew by 15pc last year, more than double the 7pc growth rate across Ireland's soft drinks market.

New figures to be unveiled by Britvic today show the value of Ireland's soft drinks' market now stands at more than £530m.

Sports and energy drinks now make up a fifth of this market, after their bumper 2007 growth.

Meanwhile sales of carbonated drinks grew just 2pc during the year, amid an increasingly health conscious public.

Independent.ie 2007

Competitor Actions

Coca Cola will launch Burn Energy into 7000 outlets across Ireland in direct response to the Red Bull Cola launch

Coca Cola will compete on price in the energy market, openly intending to undercut Red Bull

Task Review & Learning

Outcomes

Students should consider the brand dilution from Red Bull’s core competency of ENERGY, to a non-energy Cola Product.

Red Bull is synonymous with Energy, Red Bull Cola confuses this.

Red Bull Cola is ‘strong & natural’ – how does this fit with existing Red Bull customers?

Are they concerned by natural products?

Does the ‘strong & natural’ tag creative a unique selling point?

What do you think of Coca Cola’s reaction of introducing their energy drink into the Irish market?

Was it naive of Red Bull to compete for Cola market share?

Do you think Red Bull needed to, or indeed need to, diversify their product range?

Given the financial strength of Coca Cola, would it be wise for Red Bull Cola to compete on price?

Given the greater of cost of a Red Bull versus other cola products, at what price point should Red Bull Cola be introduced?

In line with other Red Bull products?In line with other cola products?

MISTAKE 1

The parent brand to which they were tying this product could not be more at odds with a positioning based on completely natural and non-artificial ingredients. Even though I’ve never seen a brand equity monitor that includes Red Bull, I would be shocked if it included anything other than very low scores for image attributes like “natural” and “healthy’. I’m sure that seeing these 2 completely contrary positions allied together in one pack was quite confusing for the consumer.

MISTAKE 2

The pack itself doesn’t little-to-nothing to communicate it’s product USP’s to the target audience. It had already been hamstrung by the fact that it had to use the Red Bull color palette (blue and silver as natural appearing colours in the plant world anyone?), but there is hardly any reference to the make-up of the liquid on the front of the pack other than the one mention of natural.

MISTAKE 3

Finally, the launch of the product. Whilst they did some really nice stuff (as the sales presenter below attests), it’s fair to say that if you’re going to take on one of the biggest brands in the world you probably need to throw the full heavy artillery at it. Unfortunately, I can’t get any media spend figures: but I do know that there was no TV advertising in Ireland or the UK and from what I can tell it seems that there was limited print and outdoor spend on it. It seems strange to take the decision to enter the cola category and then not back this decision as it needs to be.

It is quite common for business students to fixate on one plan, or search for the optimum solution.

As business/marketing strategists, is the best advice your group can give in this situation “Do not enter the Irish market!!” Why? Why not?

Case Study Epilogue

Case Study Epilogue

Red Bull North America has discontinued production of its cola. Amidst a flurry of rumours last week, the move was not entirely unexpected, though Red Bull’s decision to pull the plug on the highly touted product is likely to surprise many within the beverage industry.

Red Bull will “sell through existing inventories of Red Bull Cola, but not proceed with additional production,” and refocus efforts on growth of its core brand within the rapidly expanding energy drink category, the company said in a statement e-mailed to BevNET.

Since its debut in 2008, Red Bull Cola has struggled to excite consumers and retailers in part due to its unique flavour profile and some controversy regarding the company’s use of coca leaves in the beverage. However, it may be the cola’s premium price point that has been its biggest impediment to success. A 12 oz. can of Red Bull Cola sells for around $1.50 in comparison to $1.00 or less for a similarly sized Coke or Pepsi product.

Nevertheless, with a nearly 40 percent share of the energy drink category – pegged by Mintel to grow to nearly to $8 billion by 2015 – Red Bull noted that the company has “ambitious plans for growth and is well-positioned to continue the momentum that has led to the brand’s dominance of dollar share within the category.”

case study author: Jeff Tayloremail: jeff@jefftaylor.iewebsite: www.jefftaylor.ielinkedin: http://www.linkedin.com/pub/jeff-taylor/41/993/635contact via email for guest lectures and academic seminars some facts and figures within the case have been altered for illustrative purposes