Write an Executive Summary Case study analysis on Red Bull from the article provided
1. Introduction
Red Bull is one of the most successful companies in the world with an international market of 160 countries (ref). Red Bull’s initial success was based in its simplicity: its marketing strategy of a single product. Red Bull is the result of an adaptation of an existing Thai energy drink. Austrian entrepreneur Dietrich Mateschitz founded Red Bull in the 1980s in collaboration with the owner of the Thai energy drink, Chaleo Yoovidhya (Hayashi, Nitta, Snyder & Zelaney, 2012). Mateschitz has grown the company since the 1980s to be a global success in marketing and branding. Red Bull has focused on a one-product strategy since its inception and created a new product category: energy drinks (ref). This has informed its brand positioning, marketing its products as energy boosters and associating the product with daring acts of athleticism and extreme sports (ref).
However, its success is not without issues when you consider the brand in a global marketing context. A single-product strategy poses risks when competition grows. The below discussion analyses the challenges and risks associated with presenting a single product in the market and identifies managerial recommendations to address the global marketing risks. The issues have been identified as part of the case study written by Hayashi et al (2012).
2. Key Case Issues
2.1 Health Concerns
Red Bull’s use of Taurine, an amino acid, is the key ingredient in the drink. Red Bull has been criticised over the use of Taurine as in some countries it is considered a drug and banned, forcing Red Bull to seek government approval to market and sell the product (Grus, 2003). Further concerns have been raised over the trend of mixing Red Bull with alcohol and the health risks this poses, Red Bull has been linked to cases of deaths of young people after consuming numerous cans of the drink (Ursell, 2010). In some countries Red Bull has been required to place a warning on cans stating the drink should not be mixed with alcohol, meaning it cannot be marketed as a mixer. When doing business across national boundaries, this must be done in accordance with the host countries government policies and laws which may not align with that of the home countries (Kotabe & Helsen, 2020). Red Bull has faced on-going issues gaining government approval to market and sell the drink on a global scale due to using Taurine, raising concerns that Red Bull’s reliance on a one product marketing strategy puts them at risk of losing global market share, as there is no alternative product offered without Taurine.
2.2 Competition
There is increasing competition in the energy drink market, with over 200 new competitors in the current market. Red Bull’s competitive advantage is no longer unique to the brand as competitors have adopted a ‘Me-Too’ marketing strategy following Red Bulls lead in how to promote and market their product (ref). This extends from the packaging, product ingredients and flavour, through to mimicking the ‘dare devil’ campaign.
Red Bull’s one product marketing strategy was developed when the product was the first of its kind in the market. Over 35 years later, this strategy poses serious risks to the company’s future as there is no longer any major point of difference in the product across competing brands (ref). There is lost opportunity to increase profits and stand out from competitors by not expanding the brand beyond the one product offering.
2.3 One Global Brand Positioning Strategy
The global marketing message that “Red Bull gives you wings” has the potential to span all different cultures without needing alteration. The company uses this message along with sponsorships and events to promote the brand idea to the customer, rather than focusing on selling a product (Kotabe & Helsen, 2020).
This lack of focus on properly marketing the product has led to poor uptake some countries, requiring an increased focus on ensuring the product suits the intended customers, as with the initial launch into Japan, where an energy drink market already existed (Hayashi et al., 2012). From a global perspective, Red Bull focuses on promoting a way of life, rather than a product, with the assumption that all their target customers will like and consume their product if they want to be part of the brand culture.
2.4 Manufacturing Sites
Red Bull does not own any facilities to manufacture their product. They instead have a contract manufacturing partnership with the Austrian fruit juice company Rauch to produce all of their beverages (Hayashi et al., 2012). This is a long-standing partnership that is continuing to expand, with the two companies recently announcing their plans to build a drink canning plant in the USA (Lee, 2021).
Without complete control of their manufacturing, Red Bull is at risk of significant global supply issues if Rauch choose to end their partnership to bring their own energy drink into the market. With both manufacturing sites located in Europe, high shipping and exportation/importation expenses need to be factored into distribution of finished goods. The manufacture of a single, global product in few locations helps to improve production efficiency and reduce costs (ref), but may cause difficulties in modifying the product for smaller markets as required.
3. Managerial Recommendations
It should be acknowledged that Red Bull is an incredibly successful company, so it’s quite difficult to recommend drastic changes to a business that performs exceptionally well globally. However, it is sensible to suggest amendments and improvements to current strategies that will help boost sales and lead to greater brand sustainability. The four main issues that were raised above lead into three main managerial areas that should be addressed: brand positioning and content marketing in culturally appropriate ways, as well as developing new manufacturing sites and product innovation for high growth markets.
3.1 Brand positioning and content marketing in culturally appropriate ways
When it comes to content marketing and event sponsorship, Red Bull is well acknowledged as being king of content (Callahan, 2015). Clever guerilla marketing campaigns combined with clear customer profiling work exceptionally well for their target audience (Kunz et al., 2016). Brand ambassadorship is a crucial part to both its brand popularity and equity, with consumers truly devoted to Red Bull (Kunz et al., 2016). Red Bull’s sophisticated content strategies that focus on not only what the consumer is interested in but also where they are gives them a clear competitive advantage.
However, due to the standardisation of both product and promotion, Red Bull need to ensure that cross-cultural differences are acknowledged and used to their advantage (Kotabe & Helsen, 2020). Different cultures perceive the brand in different ways (Foscht, Maloles, Swomboda, Morschett & Sinha, 2008). For example, Singaporeans don’t connect with the extreme nature of much of the brand’s marketing activities (Foscht et al, 2008). It’s recommended that Red Bull create brand positioning strategies and content marketing that are suitable for local markets and that emphasise the product, rather than just the ‘way of life’. Using the Singapore example, Red Bull needs to adjust their strategy, tapping into cultural differences that value politeness over excitement as well as popular activities such as eSports (Sport Singapore, 2016). It is not recommended to change from current integrated marketing strategies but rather emphasise relevance to the target consumer to remain culturally concentrated and consistent.
Providing recommendations around Red Bull’s key ingredient of taurine is more difficult. Removing taurine from the product would alter it so significantly that it would taste different, not have the same effects on energy levels and would no longer be Red Bull. Clinically taurine is not a harmful ingredient (Shao & Hathcock, 2008) and can counteract harmful effects of caffeine (Schaffer, Shimisa, Jong, Ito, Azuma & Takahashi, 2014). Rather than looking at product innovation to address health concerns, it is recommended that Red Bull counteract the perception of taurine as a dangerous ingredient and emphasise the safety of the product through content marketing activity (ref). Red Bull could also increase safety messages around alcohol consumption as part of a corporate social responsibility effort (Kotabe & Helsen, 2020).
3.2 New manufacturing sites and product innovation for high growth markets
To address issues with competition, there should be a greater focus on targeting high growth markets more efficiently. This requires enhancements to Red Bull distribution strategies to leverage opportunities in growth areas, addressing issues with manufacturing sites. Globally the total market cap for energy drinks in 2020 reached just over $57 billion with growth rates due to increase around 7% through to 2025 (Fontinelle, 2019). This growth rate is due to surges in disposable income and a focus on sports activities, in part due to the recent COVID-19 pandemic (Fontinelle, 2019).
North America is currently the largest consumer in the world of energy drinks, with the Asia-Pacific region a close second (Fontinelle, 2019). As a new production plant has been opened in the United States (ref) a similar strategy should occur in the Asia-Pacific region. It is recommended Red Bull focus on manufacturing the product in either India (sales up 37%) or China (total market share currently 52%). Both countries have productive and innovative workplaces combined with high growth expectations for the energy drink market (ref). Opening a production plant in either country would enable Red Bull to gain larger market share in the regions while also cutting costs for distribution of the product. This will help boost total sales in the Asia-Pacific region as well as gaining a key competitive advantage in the largest growing global area.
Cultural differences within high growth markets should also be considered, with a recommendation to explore product innovation to address competitor issues and to increase consumer awareness of the product rather than the ‘way of life’ brand positioning. Red Bull have always been innovative, so they should continue to harness innovative ideas to differentiate themselves from the competition (Cocks, 2000). To appeal to different markets and fulfil customer desires, Red Bull have already altered the product slightly to create new products such as Red Bull Sugarfree. Further product innovation should be considered, using local brand managers to innovate products that tie into cultural tastes (Kotabe & Helsen, 2020). This worked successfully in the example of Japan and can be used more widely in local markets.
4. Conclusion
While Red Bull is a strong brand, the identified risks and issues are hindering growth. Issues with health concerns, the use of a singular marketing strategy globally, increased competition and outsourced manufacturing sites in minimal locations threaten the company’s ability to increase market share and sustainable growth. The recommendations have been shaped around increasing consumer confidence, using cultural differences as a marketing strength and practical recommendations for manufacture and distribution, allowing global markets to be better served by the company. By focusing on how they position their brand, market their content, and engage high growth markets, Red Bull can address its issues with competitors, health concerns and manufacturing locations. It can then increase its market share and continue to perform as one of the world’s most recognisable brands.
References
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