Red Bull Business Model

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The Red Bull business model focused on attracting consumers to buy its energy drink using a story-performing marketing strategy instead of storytelling like other brands. This has helped keep the brand the first since it was first produced in 1984. The brand outsources operations like production and logistics and focuses on selling energy drinks. As no other brand does, Red Bull connects with its consumers through sponsorships and ownership of several sports teams.

Unlike conventional marketing schemes, the company uses story performance to connect with its consumers. It creates and produces its own story to give the consumers what they want, and a fascinating marketing strategy is set.

A brief history of Red Bull

A Thai businessman, Chaleo Yoovidhya, and an Austrian entrepreneur, Dietrich Mateschitz, established Red Bull in 1984. In 1982, Mateschitz traveled to Thailand while working for a German manufacturer, Blendax. Mateschitz met Chaleo, who owned TC Pharmaceuticals back then. There he found the energy drink called “Krating Daeng,” developed by Chaleo’s company in the 1970s, for his jet lag. He saw the market potential in the drink. He decided to partner with Chaleo to bring the drink to Europe. With the agreement, Chaleo and Mateschitz invested $500,000 each into founding a company they named Red Bull GmbH. Each agreed to own a 49% stake in the company, with the remaining 2% going to Chaleo’s son, Chalerm. It was also decided that the company would be left in Mateschitz’s care.

Red Bull modified the recipe for Krating Daeng between 1984 and 1987 to match the Europeans’ taste. It was carbonated, and the sweetness was reduced. The new drink was introduced as an energy drink in Austria in 1987 as Red Bull. After marketing it to young professionals, the brand became more successful in the early 1990s. In 1997, Red Bull started making commercials with its slogan: “Red Bull gives wings.” In 1997, it took over 75% of the market in the United States. Later, it expanded to about 171 countries and successfully sold over 5 billion cans, making it the world’s most-consumed energy drink in 2012. In 2018, the brand launched its organics soda named Organics by Red Bull, and most of it had no caffeine.

Over the years, Red Bull has maintained its logo. The logo features two bulls fighting right before a golden ring, referring to action, energy, and stamina, and under this eye-catching emblem is written, Red Bull. The brand’s merchandise is marketed through events, endorsements, advertising, music, and sports team ownership.

Who Owns Red Bull

Although Chaleo and Mateschitz founded the company, it was in Mateschitz’s care. Since Dietrich Mateschitz was left to run the company, he technically owns it. But on his demise, the ownership is left to his son, who has shown no interest in leading the company.

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Red Bull Mission Statement

The Red Bull’s mission statement is, “To give wings to people and ideas”.

How Red Bull works

Due to the energy put into marketing, Red Bull is seen as more of a marketing company than a company that produces energy drinks. A larger percentage of the company’s annual earnings is reinvested into its marketing campaigns. This ensures the company keeps its space in the energy drinks market. Fortunately, the brand has a great profit margin on its products. Through the use of a great outsourcing strategy with the help of its partner, Coca-Cola, the company maintains its profitability. A vertical integration strategy adds value to its business and supply chain. Red Bull has remained the leading brand for the longest time by having almost double the market share of its closest competitor. It owes its success and profitability to its robust marketing budget and strategy.

How Red Bull makes money

Red Bull generates revenue through many things, but especially by selling its energy drinks at a high price. However, the brand reinvests most of its profits back into marketing campaigns. The purpose of making such a high budget for marketing is to maintain awareness with its consumers, thereby boosting its sales and securing its spot as a market leader. It also owns sports teams.

Energy Drinks

More than half of the company’s revenues come from the sales of energy drinks. The company sold more than 7 billion cans in 2019, earning about $6 billion. The sales of energy drinks account for over 90% of revenue.

Sports Teams

Asides from selling drinks, Red Bull also owns and promotes numerous sports teams like Red Bull Bragantino FC in Brazil, RB Salzburg in Austria, RB Leipzig in Germany, and New York Red Bulls in the American Major League Soccer. Red Bull had founded a brand-new soccer club in Germany named RB Leipzig and financed it. This soccer team plays Champions League and top-flight German soccer. Additionally, Red Bull owns 2 F1 racing teams. They sponsor many athletes that promote its products through events or online content. Red Bull uses sports ownership and sponsorship to diversify its earnings.

Content creation

On Red Bull TV, the brand creates content for extreme sports. The brand also owns a YouTube channel with over 10 million subscribers. According to research, it earns about $3,000 to $7,000 on every video it releases on YouTube.

Merchandise

Red Bull sells merch of the extreme sports athletes they support. Although, this might account for just a tiny bit of their revenue.

Red Bull Business Model Canvas

The Red Bull Business Model can be explained in the following business model canvas:

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Red Bull Customer Segments

Red Bull’s customer segments comprise:

  • Businesses: These brands run ads on Red Bull’s YouTube channel;
  • Young people: This includes different categories of youths – students, young men, and women in sports such as hiking, surfing, rally, windsurfing, mountain biking, cliff diving, BMX, parkour, breakdancing, motocross, kayaking, snowboarding, rowing, skateboarding; people who go on long drives, etc.;
  • People in highly demanding professions: Another segment of Red Bull’s customers are people in professions that require a high amount of energy, such as engineers, firefighters, miners, welders, etc.;
  • Athletes all over the world: The final segment of the company’s customers are professional athletes across the globe. This set of people needs a lot of energy to excel in their careers.

Red Bull Value Propositions

Red Bull’s value propositions are:

  • For businesses, Red Bull provides more exposure on their YouTube channel: The company offers more exposure and awareness to other non-competing businesses by running ads on its marketing channels. Red Bull uses its marketing channels to create value for consumers. For instance, it has a YouTube channel for content creation with over 10 million subscribers;
  • Red Bull gives more energy to young people: According to its slogan, Red Bull gives wings to young people and their ideas through their energy drinks. The company has about 150 related products in the energy drinks segment. In fact, they created that segment in the market in 1987, and they have been leading the industry since. Also,80% of the energy used for production is from renewable resources. This means Red Bull diversifies its energy supply and produces no greenhouse gasses, which causes air pollution. The company is not only passionate about providing consumers with the best energy drink, but it also ensures its activities do not harm the environment its customers live in;
  • For people in highly-demanding professions, Red Bull helps them perform better at work: The company’s energy drinks give more energy to people in energy-demanding occupations like industrial engineers, miners, welders, firefighters, etc.;
  • For athletes, Red Bull’s energy drinks enhance their focus: Athletes need energy and high mental focus for practice and performance on the field. Red Bull’s energy drinks help athletes to maintain focus, endure exercise workouts, improve performance, and stimulate alertness. 

Red Bull Channels

Red Bull’s channels include:

  • iTunes
  • TV
  • Video platforms
  • Red Bull House of Art
  • Retailers
  • Music
  • Video games
  • Sponsored
  • App stores (The iOS App Store and the Google Play Store)
  • Social networks
  • Wings team
  • Athlete community
  • Events (Red Bull Air Race, Red Bull House of Skate, and Red Bull Flugtag)

Red Bull Customer Relationships

Red Bull’s customer relationships comprise:

  • Sustainable
  • The clause “Red Bull gives you wings.”
  • Social media
  • Website
  • Eco-friendly
  • Adrenaline
  • Extreme sports
  • Adventure
  • Risk

Red Bull Revenue Streams

Red Bull’s revenue streams are:

  • Energy drinks sales
  • Sports teams
  • Content creation for entertainment 
  • Merchandise sales

Red Bull Key Resources

Red Bull’s key resources include:

  • Ecosystem
  • Brand
  • Extreme sports connections
  • Mind-blowing marketing
  • Highest market share in the energy drink in the world
  • Almost 12,000 employees
  • Light-weight cans
  • 100% recyclable cans
  • Available in 171 countries
  • Over 62 billion cans have been consumed 

Red Bull Key Activities

Red Bull’s key activities comprise:

  • Media channels
  • Smart Transport (produces lesser than C02 emissions)
  • Marketing activities
  • Sponsorships activities
  • Wall-to-Wall production (saving resources through short distances)
  • Efficient cooling (with the use of eco-friendly coolers)

Red Bull Key Partners

Red Bull’s key partners are:

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  • Endorsements
  • Retailers
  • Network of distributors
  • Raw materials suppliers
  • Celebrities
  • Water from the Alps
  • Event companies
  • Sports sponsorships
  • Sports acquisitions

Red Bull Cost Structure

Red Bull’s cost structure includes:

  • HQs
  • Vehicles
  • Salaries
  • Content generation
  • Marketing
  • Events
  • Rent
  • Utilities for distribution centers
  • Materials or products
  • Media companies

Red Bull Competitors

  • Monster: Monster was founded in 1935 by Hubert Hansen, with its headquarters in Corona, California. It was previously called Hansen’s juice and soda company, where Hubert and his sons sold juice to studios and film retailers in Southern California before expanding to Hansen’s Juices and Shaun to, finally, The Fresh Juice Company of California. The brand faced many challenges over the years and even filed for bankruptcy in 1988, but surprisingly, it is now one of the world’s most successful beverage companies. In 2012, shareholders decided to rename the company Monster Beverage Corporation. Monster has been growing speedily since then. In 2015, it partnered with Coca-Cola, which acquired a 16% equity share, and this was another booster for Monster. The company’s main products brought about $3.2 billion in 2021, coming 2nd to Red Bull. Unlike Red Bull, Monster offers a wide variety of products such as soft drinks, coffee drinks, energy shakes, Full Throttle, tea-based beverages, Monster Energy Extra Strength, etc. Monster has a 23.2% market share and more than 3,666 workers worldwide. In 2019, it sold about 420 million cans in the States. The company promotes its products directly to retailers, mass merchandisers, wholesalers, clubs, etc.;
  • Rockstar Energy: Founded in 2001 by Russell Weiner under Rockstar Inc., Rockstar Energy has its headquarters in Las Vegas, Nevada. This beverage made history in the beverage industry by achieving a 155% growth record in the first five years of operations. Rockstar Energy gives athletes the extra boost to train harder and do more. The brand has a larger quantity, 16 oz, than Red Bull’s 8oz, but charges the same amount as Red Bull. After getting more exposure, Rockstar expanded and began to produce more flavors and varieties, such as sugar-free or low-carb drinks. Some Rockstar flavors are Roasted Espresso, Roasted Latte, Roasted Mocha, Punched Citrus, Energy Cola, Juiced Mangi, Recovery Orange, etc. In 2017, Rockstar had already captured 14% of the market share. In 2010, the Rockstar energy gum was introduced in iced mint flavors. Like Red Bull, the brand sponsors sporting events and, in March 2020, was acquired by PepsiCo for $3.85 billion;
  • NOS: NOS was founded by Fuze Beverage Company in 2005, with headquarters in Corona, California. Its special packaging design of a nitrous oxide system tank took over the industry as soon as it emerged. Although the packaging has been changed several times, the nitrous-like bottle remains a pleasant memory in the minds of consumers. The brand was named after a company that produces Nitrous Oxide Systems (NOS), Holley Performance Products. However, NOS energy drinks do not contain nitrous oxide or nitrogen, as their name suggests. Coca-Cola bought Fuze in February 2007 for $225 – $250 million. NOS Energy Drinks contain caffeine, taurine, guarana, and inositol, which increases oxygen and energy flow, giving tons of energy to help perform any activity. Because of its unique recipe, it has great taste;
  • Lucozade: It was founded in 1927 by Thomas Beecham, with headquarters in Coleford, Gloucestershire, United Kingdom. The energy drink started as Glucozade when Thomas invented glucose syrup to give enough stamina to sick people. Two years later, he removed G from Glucozade to create Lucozade. At its invention, it became a hit in medical facilities and among patients. Experts realized in 1985 that people could drink Lucozade every day. Thus, they chose a new slogan, “Lucozade helps recovery,” and dropped the former slogan, “Lucozade restores lost energy.” Again in 1985, Lucozade was introduced in its tablet form, and two years later, two more flavors were invented: orange and lemon. In 1996, the brand’s logo was rebranded. Its packaging was also rebranded after about a decade after the logo rebranding. The package rebranding increased the brand’s value to triple the sales before the rebranding. After the package rebranding, two more flavors were added: Tropical and Wild Berry;
  • Burn: Burn was founded by Tyler Benedict in 2002, with headquarters in Atlanta, Georgia. It was initially invented in Italy by its founder, Tyler Benedict. Currently, the brand is owned by Coca-Cola, which did not happen until 2012. Burn was able to hastily penetrate the market due to its higher percentage of caffeine of about 10% – 25% compared to other drinks. Its unique packaging and tropical flavors won the hearts of many. Burn’s slogan, “Fuel your Fire,” is quite catchy and endears the product to the market.  Burn contains caffeine, vitamins, inositol, taurine, coloring agents, guarana seeds, sodium benzoate, potassium sorbate, and calcium pantothenate. The company retains its market presence with grassroots marketing, shelf appeal, and unique taste. The energy drink is available in flavors like Apple Kiwi, Pineapple, Berry, Mocha Energy, Zero, Sugar-Free, Passion Punch, Tropical, Sour Twist, and Lemon Ice. All these flavors come with the same amount of caffeine in 25cl cans.

Red Bull SWOT Analysis

Below, there is a detailed swot analysis of Red Bull:

SWOT Analysis of Red Bull - Red Bull Business Model

Red Bull Strengths

Here, there are some of Red Bull’s strengths:

  • Global Presence: Red Bull operates in diverse markets worldwide, from Asia, Africa, America, and Europe to Australia. Its large geographic presence enhances its stability and long-term growth;
  • Diverse Company Portfolio: Although most of the revenue comes from the sales of energy drinks, the company is also involved in other things like racing-car racing and air racing, arts, auto manufacturing, and assembly;
  • Fast and Steady Growth in Sales: Red Bull’s sales have grown rapidly and steadily over the years. For example, in 2019, the company’s sales increased by 12% in Eastern Europe, 9% in the United States, 12% in Austria, 37% in India, 25% in Africa, 30% in Brazil, and 15% in Germany, meaning more revenues and higher profits;
  • Intense Marketing: Red Bull engages in a highly intense marketing strategy by using social media and sports. The company’s racing division, Red Bull Racing, is said to be the 3rd best Formula One Team. Red Bull sponsors hundreds of athletes and teams across diverse sports;
  • Youthful Icon: The brand’s icon, though it has been in use since its creation, still maintained its youthfulness, attracting youths. Red Bull gives the impression that the brand is youthful and never ceases to exploit any effective medium to entice youths worldwide;
  • Strong Brand: Since the brand was launched, it has been consistent with its slogan, “gives you wings,” which sounds catchy and memorable. Over the years, Red Bull has groomed a strong brand that ranked 71st most valuable brand in 2019 and is valued at $9.9 billion;
  • Dominates the Market: Within its sector, the energy drink market, Red Bull tops the United States market. It is the global leader. Red Bull has the largest global market share, selling over 7 billion cans in 2019 and enjoying unfair merit over its competitors;
  • A Supply Chain that is Effective: Over time, Red Bull has developed a highly efficient supply chain with reliable suppliers and committed distributors. This has helped stop bottlenecks and ensures the availability of raw materials and a sufficient stock of products in retail stores worldwide.

Red Bull Weaknesses

Here, there are some of the weaknesses that Red Bull has:

  • Issues in Enforcing Patents: The recipe used in creating the Red Bull recipe is difficult to keep because the company did not make it. The company did not create the ingredients. Companies can create a similar product closely related to Red Bull but with a different taste, and they won’t be questioned about it;
  • Lack of Variety: In any case, products displayed in markets require options because consumers demand them. There are various products that the company can offer, like beverages, iced tea, sweets, and the like, but the company has insisted on staying on only two, which are sugar-free and sugar-rich energy drinks. Consumers may get tired and move on to another brand ready to give them tantalizing options;
  • Offering Unhealthy Products: People are becoming more conscious of their health daily. They avoid taking risks with their health and cut off sugary and unhealthy products. Unfortunately, Red Bull is bent on constantly producing sugary and unhealthy energy drinks;
  • Expensive: Red Bull products have been placed, advertised, and marketed as premium with unreasonably high price tags, making them off-limits to the middle and lower classes. This also exposes the company to the risk of losing its customers and market share to competitors selling at more affordable prices.

Red Bull Opportunities

The following are the opportunities that Red Bull can maximize:

  • Focusing on Emerging Markets: The Red Bull markets in the United States and Europe are the energy drink’s major markets. Unfortunately, they are saturated with various brands competing for market share. The company should also focus on other emerging markets in Africa, Asia, and Latin America that are emerging to get an advantage from the unsaturated growing middle class;
  • Introducing Healthy Products: Red Bull can leverage the rate at which people are getting more conscious of their health to introduce new healthy products, thereby increasing their consumers and sales;
  • Full Engagement in Sports: With the experience Red Bull has in sports as a sponsor, the brand can focus on making Red Bull Racing one of the best in F1, thereby developing its business and sales;
  • Extend Product Lines: The company should extend its product lines to create more and to offer consumers more variety. These varieties can come in different flavors to satisfy the consumers’ palate for more space in the market.

Red Bull Threats

Some of Red Bull’s threats are:

  • Rising Costs: From the rising prices of raw materials to the marketing costs that are getting unreasonably high, there is a tendency to incur a loss;
  • Looming Global Recession: When there is economic hardship, expensive and luxury products are the first to be removed from the budget. And with the threatening global recession, Red Bull’s sales and revenues are at risk since its products are expensive;
  • Increasing Health-Consciousness: Most energy drinks, including Red Bull, have unhealthy ingredients, like flavors, caffeine, concentrates, etc. This exposes the brand to the ever-increasing number of health concerns. Red Bull revenues will decline if consumers choose healthy options like fruit, milk, or water;
  • Increased Imitations: All over the world, people are consuming energy drinks that taste like Red Bull. Some even go as far as packaging it to look exactly like Red Bull. The more companies arise to imitate Red Bull’s valued products, the more Red Bull’s sales, revenues, and profits are threatened;
  • Stiff Competition: Aside from Monster, Red Bull faces competition from smaller companies, targeting the same consumers with quality but cheaper energy drinks. If there is more competition from these companies, Red Bull will most likely lose its global recognition as the best energy drink;
  • Tougher Rules: Countries try to manage the spread and emergence of known and unknown diseases. In due time, governments of some countries might decide to pass stricter rules to ban products with unhealthy ingredients.

Conclusion

Red Bull shows how far your passion can take you. In 35 years, the company has moved from being just an idea to the energy drink dominating the market with the largest market share in the energy drink sector. Its success is due to its excellent business plan, focus, and commitment to giving wings to ideas to people. The brand still maintains its position at the top of the market because of its business model based on its consumers. Although, it might be at high risk due to its high price and focus on only one product if an urgent move is not made to expand its market into sports and create healthy products to attract new consumers and keep the existing consumers.

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