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WHEN he launched Red Bull, a sweet and tangy energy drink in a slim silver can 15 years ago, Dietrich Mateschitz wrote a new chapter in marketing history. The Austrian entrepreneur not only created a new beverage category: the global market for energy drinks now doubles every year. His gut feel for branding made Red Bull a global cult drink, with euro1.4 billion ($1.3 billion) of sales last year.
“We don't bring the product to the people,” says Mr Mateschitz, a bronzed and energetic 57-year-old. “We bring people to the product. We make it available and those who love our style come to us.” What Red Bull showed, according to Nancy Koehn, a historian of brands at Harvard Business School, is that mass-market advertising was not the most effective way to reach and keep customers.
Instead Mr Mateschitz launched the brand by persuading students to drive around in Minis and Beetles with a Red Bull can strapped on top, or to throw Red Bull parties around weird and wonderful themes. The company's only advertisements are a series of whimsical television cartoons. Red Bull's marketing folk gloat that a recent British survey described their product as a “non-marketed brand”.
It takes lots of marketing to sustain that illusion. Mr Mateschitz spent three years developing the drink's image, its packaging and its low-key, grassroots marketing strategy before testing the product on the Austrian market in 1987. He now ploughs around 35% of turnover, some euro400m last year, into marketing, sponsoring events that fit the Red Bull image, from soapbox races to Formula One motor racing. They are, in fact, the sort of events Mr Mateschitz loves himself. With his passion for flying, snowboarding and motocross, he is an unusual figure, especially in staid Austria.
His formula seems to work: last year Red Bull sold 1.6 billion cans in 62 countries, an increase of 80% over 2000. Potential growth is still huge. In the United States, where Red Bull has built up its own distribution network from scratch, starting in California in 1997 and reaching Florida at the end of last year, sales still average only one can per person. If Americans eventually drink even half as much as the Irish, who top the charts with 11 cans apiece, the company would sell over a billion cans a year in America alone.
Red Bull, a mix of taurine, detoxicants, caffeine, sugar and vitamins, is “a beautiful product”, according to Mr Mateschitz. He discovered it in Bangkok when he was international marketing director for Blendax, a German toothpaste maker that is now part of Procter & Gamble. His Thai licensee, Chaleo Yoovidhya, had a tonic syrup called Krating Daeng in his portfolio. Mr Mateschitz was hooked. He always got the taxi-driver to stop on the way from the airport to buy a bottle. “One glass and the jet lag was gone,” he says.
The idea of marketing the stuff in Europe came to him when he read in a magazine that Taisho Pharmaceuticals, a producer of tonic drinks (and many other health-care products), was Japan's biggest taxpayer. In 1984, he set up a company with Mr Yoovidhya and his son Chalerm. Today, they own 49% of Red Bull; Mr Mateschitz owns another 49%; and the remaining stake is in a trust. They played around with the drink's formula, translated the name into English and applied for authorisation to sell the sugary brew in Germany and Austria.
Mr Mateschitz is now based in Fuschl, a tiny lakeside village nestling in the Austrian Alps close to Salzburg and the German border. The company is building a new headquarters that will represent two interlocking volcanoes in a lake, erupting with a huge sculpture of running bulls.
Nurturing the Red Bull image is the key to remaining market leader in the energy-drinks business. Last year, Coca-Cola, PepsiCo and Anheuser-Busch, an American brewer, each launched an energy drink, attempting to get a slice of the market in which Red Bull currently has a 70-90% share. Mr Mateschitz is not worried. “The market isn't generic; it doesn't exist if we don't create it. It's a branded market,” he says.
Mr Mateschitz now plans to spend two days a week coming up with wacky ideas to promote Red Bull. Already, the company sponsors an annual Flugtag, when contestants build their own flying-machines and leap off a parapet into water, true to the Red Bull slogan: “It gives you wings”. His latest project is to build a huge glass hangar at Salzburg airport to house his collection of ancient aircraft, including a DC-6 that once belonged to Marshal Tito, and to host airshows.
How long can Red Bull remain cool? Its carefully nurtured brand faces several challenges. It is now a mass-market product—and its first generation of users is growing older. “We need to get a new generation of 16-year-olds on board every year,” says Mr Mateschitz. Those who are no longer students are still “users”, even if they drink less and for different reasons. When they grow old, he says, “they'll find that it is the most efficient geriatric product on the market.” Then he shakes his head. A geriatric Red Bull can't work. He himself drinks a special sugar-free version of Red Bull, but weight-watching is too wimpy for the Red Bull image so it won't appear on the market.
That suggests another challenge. “It makes no sense to build a company on one product,” says Mr Mateschitz. So far, he has largely isolated the Red Bull brand. To launch three new-age health drinks, he set up a separate company. The only other drink to carry the bull logo is LunAqua, water bottled during a full moon and sold at Red Bull Full Moon parties.
That will change. “We have to go for diversification and acquisitions, and we are investing lots in R&D. We already have concepts and brand formulations for five years' time,” says Mr Mateschitz. But if Red Bull becomes a sort of Austrian Coca-Cola, that carefully cultivated ethos will vanish like bubbles in the brew.
This article appeared in the Business section of the print edition