RED BULL GMBH IN SOFT DRINKS (WORLD) - April 2013

 
RED BULL GMBH IN SOFT DRINKS (WORLD) - April 2013
RED BULL GMBH IN SOFT DRINKS (WORLD)
April 2013
RED BULL GMBH IN SOFT DRINKS (WORLD) - April 2013
SCOPE OF THE REPORT

Scope

 This global profile focuses on the industry trends in soft drinks.                                 Disclaimer
                                                                                                     Much of the information in this
 All values expressed in this report are retail/off-trade in US dollar terms using a                briefing is of a statistical nature and,
 fixed exchange rate (2012).                                                                         while every attempt has been made
                                                                                                     to ensure accuracy and reliability,
 2012 figures are based on part-year estimates.                                                     Euromonitor International cannot be
                                                                                                     held responsible for omissions or
 All forecast data are expressed in constant terms; inflationary effects are                        errors.
 discounted. Conversely, all historical data are expressed in current terms;                           Figures in tables and analyses are
                                                                                                     calculated from unrounded data and
 inflationary effects are taken into account.                                                        may not sum. Analyses found in the
                                                                                                     briefings may not totally reflect the
                                        SOFT DRINKS                                                  companies’ opinions, reader
                                                                                                     discretion is advised.
                                   OFF-TRADE RTD VOLUME
                                      534.8 billion litres
                                                                                                        While Red Bull remains the
                                                                        Bottled Water                 world leader in energy drinks, it
                                                                                                      is facing growing competition
                                                                      192 billion litres
                                                                                                      from other players. TCCC in
                                                                                      Sports and      particular, with Monster in the
                              Fruit/Vegetable                Bottled
                                                                 Sports and Energy Drinks
  Carbonates                                                                            Energy        US and Burn in Brazil, is also
                                   Juice                      Water 15 billion litres                 posing an increasing threat.
       169.5                                                                             Drinks
                                62.0 billion               205.1 billion                              These two markets are emerging
  billion litres                                                                      16.2 billion    as energy drinks battlegrounds
                                    litres                    litres Concentrates
                                                                                         litres       and the implications are
                                                                       43 billion litres              considerable for Red Bull’s
                                                                                                      ability to remain the number one
                                                                                                      ranked player.
               Concentrates                  RTD Tea                    RTD Coffee
                43.7 billion                30.1 billion                 4.5 billion
                   litres                      litres                      litres

© Euromonitor International                        SOFT DRINKS: RED BULL GMBH                                               PASSPORT 2
RED BULL GMBH IN SOFT DRINKS (WORLD) - April 2013
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
STRATEGIC EVALUATION

Red Bull a pioneer in its category

 The privately-owned Austrian           Red Bull GmbH
 company Red Bull’s core business is
 energy drinks. Dietrich Mateschitz      Headquarters:                        Fuschl am See, Austria
 and Chaleo Yoovidhya each owned a       Regional involvement:                Global
 49% stake prior to 2012 when Mr
                                                                              Carbonates, sports and
 Yoovidhya passed away. Mr               Category involvement:
                                                                              energy drinks
 Yoovidhya’s son Chalerm holds the
                                         World soft drinks share by off-trade
 remaining 2%. While Mr Yoovidhya                                               0.2%
                                         RTD volume (2012):
 was alive he acted as a silent
 partner.                                World soft drinks off-trade RTD volume
                                                                                12.4%
                                         growth (2011-2012):
 Red Bull has created the global
 market for energy drinks, and the
 pioneering Red Bull brand has
 became synonymous with energy
 drinks for a large number of
 consumers. Red Bull remains bullish
 and ambitious in their corporate
 brand. Despite rising competition,
 Red Bull continues to comfortably
 lead the global energy drinks market
 in both volume and value terms.
 However, the threat from The Coca-
 Cola Co (TCCC) has been mounting.

© Euromonitor International             SOFT DRINKS: RED BULL GMBH                         PASSPORT 4
STRATEGIC EVALUATION

Red Bull continues to see strong net sales growth

 Red Bull operates many other
 businesses aside from energy
 drinks The company owns and
 manages a construction
 company, football clubs, youth
 academies and TV broadcasting
 and recently online clothing
 (Red Bull label only) sales.
 Additional media products
 include print magazines about
 football, motor racing, celebrity
 gossip and lifestyle. The
 company has even ventured
 into the mobile phone service
 business in Austria, Hungary,
 Switzerland and South Africa.
 As a privately-held company,
 financial information is limited
 however the company reported         Red Bull reported exceptionally strong net sales growth in South
 net sales of €4.9 billion in 2012    Africa (+52%), Japan (+51%), Saudi Arabia (+38%), France (+21%),
 and 5.2 billion cans sold,           the US (+17%) and Germany (+14%). Red Bull cited efficient cost
 representing growth of 15.9%         management and ongoing brand investment as underpinning its
 and 12.8%, respectively.             growing profitability.

© Euromonitor International             SOFT DRINKS: RED BULL GMBH                           PASSPORT 5
STRATEGIC EVALUATION

SWOT: Red Bull GmbH
STRENGTHS                                                WEAKNESSES

Category leader            Broad geographic              Category limitations      Controversial
                           presence
 Red Bull has              Red Bull has a broad         In overall soft drinks,  The relatively high
 established a strong,      geographic presence,          Red Bull has a limited    caffeine content of Red
 consistent brand image     which should ensure           product portfolio         Bull makes the brand
 (an independent, edgy      positive long-term            compared to the rising    highly vulnerable to
 brand) globally. Red Bull growth even if certain         number of rivals with a   regulatory control.
 is synonymous with         markets reach maturity.       plethora of flavour
 energy drinks in many                                    variants and categories.
 countries.

OPPORTUNITIES                                            THREATS

Emerging markets              New production             Competition               High marketing costs

 Emerging markets        Red Bull is building a new  Monster represents the  Market maturity in
 represent newer          production facility in Brazil biggest threat to Red   developed markets will
 geographies for Red      which is likely to make its   Bull as it contains     make marketing to its
 Bull’s expansion.        retail price more             natural ingredients,    core consumers harder
 Accelerating the         competitive than imported which seem more             than in the past.
 marketing and            product prices. Building a desirable than Red Bull Constant communication
 sponsorships in these    site in Asia should also be for some consumers.       with consumers means
 markets is a wise move. considered.                                            high marketing costs.

© Euromonitor International                SOFT DRINKS: RED BULL GMBH                              PASSPORT 6
STRATEGIC EVALUATION

Key strategic challenges and objectives

It is not easy at the top                                  Red Bull stands up to health regulators

 Red Bull’s success has attracted considerable             While health officials continue to voice concerns
  interest from soft drinks multinationals, TCCC and        over energy drinks and the category remains under
  PepsiCo. TCCC in particular has been successful           threat from stronger regulation, energy drinks has
  at leveraging its distribution network to launch          seen relatively little impact in terms of sales. To
  Burn across many markets and to back Monster.             some extent this has added to the category’s
  Burn is a major threat to Red Bull in Brazil while in     “edginess” attracting young consumers and
  the US Monster has overtaken Red Bull in off-             generating consumer interest. There is little risk of
  trade volume sales terms. Red Bull will need to
                                                            Red Bull reformulating its product to cater to health
  find ways to hold onto its number one ranking
                                                            concerns and instead the company insists that its
  globally in energy drinks and stave off this
  competition.                                              products do not pose a health risk.
Will premium work in emerging markets?                     Red Bull breaks with tradition in 2013

 Red Bull has consistently maintained its premium          In 2013, Red Bull, for the first time in 15 years
 positioning from its slimline metal cans to its price      added new products to its energy drinks range.
 differential versus brands such as Monster. While          Edition is a range of three new flavours and thus
 this strategy has reaped dividends in the mature           far available only in the US market. The likelihood
 markets, it remains to be seen if it will sustain          however is that this range will be rolled out to other
 growth in the emerging markets. Brazil with its            markets. The move is a response to growing
 large population of lower-income consumers may             competition. Success for this launch will be crucial
 pose a challenge giving cheaper brands such as             to the company’s growth prospects in the mature
 TCCC’s Burn a competitive advantage.                       markets.

© Euromonitor International                  SOFT DRINKS: RED BULL GMBH                                PASSPORT 7
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
COMPETITIVE POSITIONING

Red Bull performance wanes towards end of review period

 Red Bull underperformed the overall energy drinks market in 2011-2012. While the company’s market
 share of the energy drinks market in the US increased in 2012, the market’s growth rate overall began to
 wane. Red Bull remains heavily dependent on the US for its global growth. Weakness here is reflected in
 the company’s weakening global performance in volume terms. The company however continues to enjoy
 the position of number one ranked player in energy drinks globally with a 21.4% market share.
 In terms of absolute volume growth however, the US remained Red Bull’s key growth engine in 2011-2012
 reflecting growth of 96% over 2007-2012. Brazil came second in terms of absolute volume growth
 expanding by 608% over the review period or 48% CAGR. This market was a particular focus for Red Bull
 with the company sponsoring various sporting events in order to raise the brand’s profile.

© Euromonitor International              SOFT DRINKS: RED BULL GMBH                             PASSPORT 9
COMPETITIVE POSITIONING

Red Bull faces mounting pressure

 In value terms, the company’s performance was stronger in recent years although even in value terms the
 company’s performance fell below that of the energy drinks market overall. The energy drinks market has
 attracted a number of other players including Monster Beverage Co, and The Coca-Cola Co (TCCC) which
 marketed it own brands in the category including Burn as well as engaging in a distribution alliance with
 Monster Beverage Co. PepsiCo had a modest presence in energy drinks with its brand Sting; however like
 TCCC it maintained its own alliance, with Rockstar Inc.
 Red Bull’s sister brand non-carbonated Red Bull remains owned by TC Pharmaceutical which led the
 energy drinks category in China and was present in Thailand where it ranked second. TCCC’s Burn was a
 stronger performer in Latin America over the review period, though Red Bull continued to lead the
 category.

© Euromonitor International              SOFT DRINKS: RED BULL GMBH                            PASSPORT 10
COMPETITIVE POSITIONING

Top 10 players in soft drinks by off-trade RTD volume share

Soft Drinks: Global Top 10 Companies by Off-Trade RTD                                  The only significant movement in rankings to
Volume, Rank 2007-2012 and 2012 Share                                                  have taken place over 2007-2012 was the
                                                                                       split by Kraft into two separately traded

                              2007
                                     2008
                                            2009
                                                   2010

                                                                  2012
                                                          2011
                                                                         % company
Company                                                                                entities, which pushed Mondelez into the top
                                                                         share 2012
                                                                                       five based on its strong presence in
Coca-Cola Co,                                                                          concentrates. In market share terms, TCCC
                              1      1      1      1      1       1            21.2
The                                                                                    maintained a large gap between itself and
PepsiCo Inc                   2      2      2      2      2       2             9.9    PepsiCo. Indeed, the gap between the two
Danone, Groupe                3      3      3      3      3       3             4.7    widened slightly over the review period.
Nestlé SA                     4      4      4      4      4       4             3.7    PepsiCo’s recent focus has been on the
                                                                                       development of its snacks business and on
Mondelez
International, Inc
                              -      -      -      -      -       5             2.0    developing a “better for you” range of
                                                                                       packaged foods, hence possibly neglecting
Ting Hsin
                                                                                       its soft drinks business.
International                 7      7      7      6      6       6             1.6
Group                                                                                  TCCC has been active throughout the review
Dr Pepper                                                                              period moving beyond its core carbonates
                              -      6      6      7      7       7             1.5    base to fruit/vegetable juice, RTD tea, bottled
Snapple Group Inc
                                                                                       water and sports/energy drinks.
Anheuser-Busch
                                  - 33 31 30 29 27                              0.2    Red Bull as a premium player ranked much
InBev NV
                                                                                       farther down in RTD volume terms. The
Red Bull GmbH                 48 41 40 37 34 28                                 0.2
                                                                                       brand is also heavily reliant on the impulse
Otsuka Holdings                                                                        rather than grocery channel thereby
                                  - 32 33 32 32 29                              0.2
Co Ltd                                                                                 discouraging multi-pack sizes.

© Euromonitor International                                      SOFT DRINKS: RED BULL GMBH                              PASSPORT 11
COMPETITIVE POSITIONING

Top 10 players in soft drinks by off-trade value share

Soft Drinks: Global Top 10 Companies by Off-Trade Value,                              Danone’s volume share is significantly
Rank 2007-2012 and 2012 Share                                                         higher than its value share, due to its large
                                                                                      volume sales of low-priced bottled water in

                              2007
                                     2008
                                            2009
                                                   2010

                                                                 2012
                                                          2011
                                                                        % company     emerging markets, notably Aqua (Asia
Company
                                                                        share 2012    Pacific) and Bonafont (Latin America).
Coca-Cola Co, The             1      1      1      1      1      1            26.2    Meanwhile, Mondelez does not rank
                                                                                      among the top 10 in value terms due to its
PepsiCo Inc                   2      2      2      2      2      2            11.3    reliance on the low-priced concentrates
Nestlé SA                     3      3      3      3      3      3             2.8    category in RTD volume terms.

Suntory Holdings Ltd          6      6      4      4      4      4             2.7    Red Bull GmbH however with its relatively
                                                                                      premium but small serving size Red Bull
Dr Pepper Snapple                                                                     brand ranks seventh in 2012. The
                              -      5      5      5      5      5             2.0
Group Inc                                                                             company’s narrow focus in soft drinks,
Danone, Groupe                5      4      6      6      6      6             1.9    being almost exclusively based on energy
                                                                                      drinks, continues to keep the company out
Red Bull GmbH                 7      7      7      7      7      7             1.6    of the top five in soft drinks.
Asahi Group Holdings                        10 10                                     TCCC and PepsiCo capture a stronger
                              -      -            8              8             1.5
Ltd                                          6 6                                      share in value than in volume terms chiefly
Kirin Holdings Co Ltd         8      8      8      8      9      9             1.4    due to their products, particularly
                                                                                      carbonates, being priced higher than local
Ting Hsin International                                                               brands and private label, benefiting from
                              16 13 12 10 10 10                                1.2
Group                                                                                 strong brand equity and extensive
                                                                                      distribution networks.

© Euromonitor International                               SOFT DRINKS: RED BULL GMBH                                  PASSPORT 12
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
MARKET ASSESSMENT

North America will continue to drive sales in energy drinks

 North America will continue to lead energy drinks in absolute volume growth terms over the forecast
 period. However, its CAGR of 8.1% over 2012-2017 represents a moderation from the 11.4% CAGR seen
 over 2007-2012. The Monster brand has led the market in the US over the review period in terms of
 absolute volume growth. Rockstar, due in large part to its alliance with PepsiCo, has also seen strong
 growth in this market.
 Red Bull entered China in 2011, however Asia Pacific remains the company’s weakest region in terms of
 market share. However, this region will be exceeded only by North America in terms of absolute off-trade
 volume growth over 2012-2017 which may raise some concerns for Red Bull. After a period of strong
 market share gains in this region between 2007-2010 its performance began to moderate. TC
 Pharmaceutical with its non-carbonated version of Red Bull is the regional leader. Despite the close
 relationship between Red Bull GmbH and TC Pharmaceutical with the latter having been founded by the
 late Chaleo Yoovidhya, the companies remain separate entities.

© Euromonitor International              SOFT DRINKS: RED BULL GMBH                            PASSPORT 14
MARKET ASSESSMENT

The Americas to lead growth in energy drinks

 In value terms, both Latin America and Asia Pacific gained in importance for Red Bull over the review
 period. Latin American sales represented 12% of global value sales in 2012 while Asia Pacific made up
 8%. In terms of growth prospects, the strongest growth will take place in North America where the market
 for energy drinks will expand by US$4.1 billion over 2012-2017. In CAGR terms however, the strongest
 performance will take place in Latin America which will see a 20% CAGR.
 Red Bull is ranked number one in both markets. In Latin America, its market share remains a healthy
 49.7%, however this represents a decline over 2007-2012 as the company faced strong competition from
 TCCC whose share has risen from 2.5% in 2007 to 14.9% in 2012.
 Growth in both Eastern and Western Europe will be a comparatively modest at 5% and 5.1% CAGRs,
 respectively. However, these exceed the CAGRs for soft drinks overall in these regions, which will be only
 2.7% and 0.5%, respectively.

© Euromonitor International               SOFT DRINKS: RED BULL GMBH                             PASSPORT 15
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Leading players in energy drinks by off-trade volume and value

© Euromonitor International             SOFT DRINKS: RED BULL GMBH   PASSPORT 17
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Red Bull shows some weakness in volume sales

 The rankings of the leading players in energy         The Lucozade brand has faced strong competition in
 drinks vary significantly by volume and value. Red     its domestic UK market from Red Bull. In 2012, GSK
 Bull commands a stronger market share in value         announced a strategic review of the Lucozade and
 than in volume terms reflecting its relatively high    Ribena brands, which may lead to possible
 price points and reliance on the mature markets,       divestment.
 particularly the US, for its sales. The company   Red Bull has been constrained to some extent in
 however maintained is leading position by both    volume terms by its highly concentrated production
 measures in 2012 although in both cases it has    infrastructure. Up to 2012, the company produced
 seen its market share plateau over 2007-2012.     exclusively in Austria leading to high shipping and
 The major winner over the review period was      production costs, which opened up the emerging
 Monster Beverage Co, which until 2012 was known markets in particular to less expensive energy drinks
 as Hansen Natural Corp. Underpinned by its        brands. In 2012, the company announced plans to
 distribution agreement with TCCC the brand has    build its first factory abroad in Brazil which may help
 made rapid gains in both value and volume terms.  improve its competitiveness.
 The brand’s success has been driven by its North  Rockstar’s distribution agreement with PepsiCo did
 American performance where it generated 90% of    not bring in the same share gains as the Monster
 its volume sales in 2012.                         and TCCC alliance. Rockstar made few share gains
 In contrast GlaxoSmithKline (GSK) and its              globally, with sales mainly coming from developed
 Lucozade brand have been losing market share. In        Western markets where Red Bull continues to lead.
 volume terms, GSK has lost 2.4 percentage points        PepsiCo may have found it hard to drive Rockstar
 in market share over 2007-2012.                         sales in these mature markets in the face of TCCC’s
                                                         penetration and Red Bull’s dominance.

© Euromonitor International                SOFT DRINKS: RED BULL GMBH                            PASSPORT 18
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Most dynamic energy drinks markets over forecast period

© Euromonitor International             SOFT DRINKS: RED BULL GMBH   PASSPORT 19
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Red Bull tries to counter weakness in key markets with new launch

 While the US will lead growth in energy drinks in       The UK ranks among the top five most dynamic
 both volume and value terms over 2012-2017 there         markets in both volume and value terms. While
 are clear differences among the top 10 rankings by       Lucozade remains the leader here, its fortunes
 both measures.                                           have waned. Red Bull was responsible for much of
 China will push ahead of Brazil in volume growth        Lucozade’s market share loss in the early part of
 terms. The market for energy drinks in China is          the review period. However, later in the review
 more mature than in Brazil. Unit price growth in         period, smaller brands are increasing
 Brazil will as a consequence be higher than that in      fragmentation. The UK is becoming increasingly
 China allowing it to take second position in terms of    fragmented as newer and smaller players have
 value sales growth. In China, Red Bull’s sister          entered the market.
 company TC Pharmaceutical with its Red Bull is           In 2013, Red Bull launched three new flavour
 the overwhelming category leader with a market           variants in the US market. This marks the first
 share of 81.2% in off-trade volume terms in 2012.        major launch for the brand in the energy drinks
 Markets entering the top 10 in volume terms             category over the review period. The new range
 include the Philippines and Vietnam both relatively      called Edition includes cranberry-, blueberry- and
 price-sensitive markets. Per capita consumption          lime- flavoured variants packaged in red, blue and
 however in both markets is higher than the global        silver cans, respectively. The move may help to
 average. Energy drinks in many Asian markets             invigorate consumer interest in key markets such
 have a long history of being consumed by truck           as the UK and the US where the range of energy
 drivers and labourers as a temporary energy boost.       drinks options has increased considerably. It is
 These products were in fact the original inspiration     recommended that the range be rolled out to other
 for Red Bull; a Westernised version of the potent        markets where market share has weakened.
 drinks sold through by Thai pharmacists.

© Euromonitor International                SOFT DRINKS: RED BULL GMBH                            PASSPORT 20
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Top US brands in energy drinks

© Euromonitor International             SOFT DRINKS: RED BULL GMBH   PASSPORT 21
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Red Bull and Monster look to high-adrenaline sports sponsorship

Monster pulls ahead in volume sales                     Threat from consumer health

 The Monster brand pulled ahead of Red Bull in the      Both Monster and Red Bull have also been
 US energy drinks market in 2009 in volume sales         challenged by the 5-Hour Energy brand from Living
 terms but remains second to Red Bull in value           Essentials, included in Euromonitor International’s
 terms. Monster has achieved wider presence in           Consumer Health database as a tonic and bottled
 supermarket and forecourt retailers. TCCC has           nutritive drink. This product has been heavily
 leveraged its strong distribution network through       marketed on US television and offers a small pack
 both channels thus giving Monster an edge in            size (57ml) and the benefit of being sugar-free.
 terms of volume sales.                                  While Monster is targeted primarily at younger
 The Monster brand has also been supported by           male consumers, 5-Hour Energy is positioning
 sponsorship of high-adrenaline sports such as           itself as a pick-me-up for office workers and
 MotoGP, NASCAR and Freestyle Motocross which            working mothers.
 is a direct challenge to Red Bull, which also relies    The addition of new flavours in 2013 will help to
 on sponsorship of these sorts of events to maintain     reignite consumer interest. Red Bull’s success in
 consumer interest. Another reason behind the            the US has been due in part to its success in the
 disparity has been the fact that Red Bull sells         on-trade which has helped to introduce the brand
 primarily in smaller 8.3oz cans, whereas Monster is     into the off-trade. Educating consumers about how
 sold in larger 16oz cans at a relatively cheaper        the new flavours can be mixed with alcoholic drinks
 price. Red Bull has since begun to offer its product    in the on-trade should form part the marketing
 in a wider variety of sizes and in 2012 trumped         campaign to launch the brand.
 Monster with Red Bull Stratos, sponsoring Felix
 Baumgartner’s free-fall from over 128,000 feet.

© Euromonitor International               SOFT DRINKS: RED BULL GMBH                            PASSPORT 22
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Leading players in Brazilian energy drinks

© Euromonitor International             SOFT DRINKS: RED BULL GMBH   PASSPORT 23
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Red Bull vs Burn in Brazil

TCCC pushes Burn                                          Localisation of production will help Red Bull

 Strong growth in the Brazilian energy drinks             Localising production in such a key market is a
 market has attracted a wider number of players,           wise move for Red Bull. It also gives the company
 many of whom have focused on the emergent C               stronger capacity more widely in Latin America
 socioeconomic class, launching energy drinks at           where the markets for energy drinks in Colombia
 lower prices in 1-litre PET bottles. Examples             and Mexico are also set to see strong growth.
 include BadBoy Power Drink from Horizonte and             While Red Bull’s number one position remains safe
 Orbit from Bebidas Chiamulera. These moves have           for the time being, reducing the price premium with
 helped to fuel growth overall in the category.            TCCC is recommended. This will be supported by
 TCCC has made significant gains in the market            significantly reducing costs associated with
 with its Burn brand investing significant resources       importing the product from Austria.
 in marketing. Like Red Bull, TCCC has targeted            The entry of Anheuser-Busch InBev NV was a key
 high-adrenaline sporting activities, announcing in        development in the market in 2011. By 2012, the
 2012 its sponsorship of Kimi Raikkonen’s Lotus F1         Fusion brand had managed to capture 0.2% of
 team. The brand competes directly with Red Bull,          sales in off-trade volume terms which, while
 packaged similarly in a slimline metal can. Its price     modest compared to the Red Bull brand at 19.8%,
 points however are typically lower than those of          indicates strong potential for further growth.
 Red Bull giving it a stronger presence among              Marketing initiatives centred around the popular
 lower-income groups.                                      Big Brother Brazil TV programme in 2012 helped to
 In 2012, Red Bull announced plans to begin               increase awareness of the brand among young
 producing its energy drinks locally.                      people.

© Euromonitor International                 SOFT DRINKS: RED BULL GMBH                            PASSPORT 24
CATEGORY AND GEOGRAPHIC OPPORTUNITIES

Worlds apart: A tale of two Red Bulls

                                                       The relative weakness of Red Bull from Red Bull
                                                       GmbH in Asia Pacific is due in part to the strength
                                                       of sister brand Red Bull from TC Pharmaceutical. A
                                                       more cohesive international strategy should be
                                                       developed by both companies.
                                                       The strongest prospects for the two players is in
                                                       China, however opportunities are also being
                                                       missed in markets such as the Philippines,
                                                       Thailand and Indonesia. TC Pharmaceutical sales
                                                       here in energy drinks have been virtually flat over
                                                       the review period, as newer, more dynamic brands
                                                       such as Cobra from Asia Brewery and Sting from
                                                       PepsiCo in the Philippines have invested heavily in
                                                       marketing and advertising.
                                                       A decisive entry for Red Bull GmbH in key Asian
                                                       markets will be complicated by the presence of TC
                                                       Pharmaceutical’s Red Bull. However, both
                                                       companies could benefit from working more closely
                                                       together including on the production side to reduce
                                                       costs and widen their distribution network. The
                                                       sudden death of TC Pharmaceutical founder
                                                       Chaleo Yoovidhya in 2012 may present a
                                                       challenge however in ongoing collaboration.

© Euromonitor International             SOFT DRINKS: RED BULL GMBH                            PASSPORT 25
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
BRAND STRATEGY

Red Bull’s premium focus will result in pressure on market share

                                             Red Bull’s sales in 2012 remained dominated by
                                             the US market. In most of its major markets the
                                             company has managed to retain its number one
                                             position in volume terms despite strong competition
                                             from newer entrants. The US is an exception
                                             where Monster owing to the strength of its alliance
                                             with TCCC combined with an aggressive marketing
                                             campaign has managed to topple Red Bull from
                                             first place.
                                             In value terms however, the company’s premium
                                             positioning has meant its ranking has remained
                                             more secure. As the dynamics of forecast demand
                                             shift to emerging markets, where consumers
                                             remain more price sensitive, this premium focus
                                             will result in growing pressure on Red Bull’s market
                                             share. TCCC and PepsiCo have emerged as the
                                             company’s strongest competition whether indirectly
                                             through distribution agreements such as TCCC/
                                             Monster and PepsiCo/Rockstar and through their
                                             own directly owned brands such as Burn and Sting,
                                             respectively

© Euromonitor International   SOFT DRINKS: RED BULL GMBH                             PASSPORT 27
BRAND STRATEGY

High octane sports drive home Red Bull message

                                         Event and sports sponsorship have been key elements
                                         for Red Bull’s marketing strategy for many years. Red
                                         Bull’s eponymous brand has achieved remarkable
                                         global success and 30-40% of its sales are re-invested
                                         back in marketing and promotional activity. Red Bull’s
                                         strategy has historically been a 3-pronged approach
                                         incorporating buzz marketing, sponsorship and TV
                                         advertising. Buzz marketing, including handing out free
                                         samples at campuses and events where under 30s
                                         gather, is often used as a way of initially raising
                                         consumer awareness when entering new markets.
                                         In 2012, the company took its marketing literally to an
                                         entirely new level with the Stratos campaign which
                                         featured Felix Baumgartner in a record- breaking
                                         128,000 feet jump from the earth’s stratosphere,
                                         making him the first man to break the speed of sound
                                         while in freefall. The event was streamed live on line
                                         with viewers able to log in to post comments via Twitter
                                         and Facebook. Motorsports is another key focus for
                                         the company with its own very successful F1 racing
                                         team.

© Euromonitor International   SOFT DRINKS: RED BULL GMBH                             PASSPORT 28
BRAND STRATEGY

Red Bull tries to stay true to its roots

                                      In a bid to stave off competition from rival brands, Red
                                      Bull launched the Red Bull Edition range in 2013 in select
                                      city markets in the US. The launch will likely be followed
                                      by a nationwide roll-out later in the year. Despite pressure
                                      from other energy drinks brands many of which have
                                      launched additional flavours Red Bull has stayed loyal to
                                      its original formulation and packaging.
                                      The launch of cranberry, blueberry and lime Red Bull
                                      variants is a major direction change for the brand, being its
                                      first major launch over the review period. In order to
                                      differentiate between Red Bull Edition and the original Red
                                      Bull the new cans received a facelift with the addition of
                                      new colours and a new bull design.
                                      Red Bull has not as aggressively as other brands
                                      launched into new packaging formats, remaining almost
                                      exclusively with slimline metal cans. It has however in
                                      some mature markets such as the UK launched into 1-litre
                                      PET bottles. This reluctance is in part due to the
                                      company’s strategy of retaining its premium positioning.

© Euromonitor International   SOFT DRINKS: RED BULL GMBH                              PASSPORT 29
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
OPERATIONS

Expanded corporate operations

                                           Red Bull GmbH

                    Red Bull Soft Drinks                          Other Businesses

                                                                          Motor Racing, Media,
                              Red Bull Energy Drinks                      MVNO, Fashion Online
                                                                                Retailing

                              Red Bull Simply Cola,
                                  Carpe Diem

© Euromonitor International                  SOFT DRINKS: RED BULL GMBH                          PASSPORT 31
OPERATIONS

Red Bull looks to diversification

 Red Bull is diversifying into other businesses, rather than limiting itself to energy drinks. In recent years, it
 has been branching out and became a media company in its own right. The participation in sports
 sponsorships and events connects the company with a global brand that has passion and excitement
 associated with it. The company is also present in RTD tea and bottled water with the Carpe Diem brand
 which it launched to target the health and wellness trend in soft drinks. Carpe Diem Kombucha is a
 premium RTD tea sold in Western Europe. The brand is also in bottled water in Switzerland and Austria
 using plant extracts and slight carbonation to offer a healthy alternative to carbonates.
 The company owns two Formula One teams (Red Bull Racing, Scuderia Toro Rosso), a NASCAR racing
 team as well as several football teams in Brazil, the US and Germany.
 In South Africa, the company is partnering with Cell C to offer voice and broadband services as a mobile
 virtual network operator (MVNO), ie a company that provides a mobile phone service but does not have its
 own licensed frequency. Red Bull Mobile will be the second MVNO in the country, after Virgin Mobile.
 It also sponsors many events - from cliff diving to air races - and subscribing to Red Bull Mobile is a way for
 people who like the brand to access further benefits when they attend these events. These kinds of
 partnerships between operators and consumer brands are common in Europe. In Germany, for example,
 one operator, E-Plus, has 19 such partnerships. It is a way for these brands to get closer to their target
 group.
 The Group also includes Austrian TV station ServusTV, lifestyle and fashion magazines and a construction
 company called Bull Bau.
 Red Bull had 8,966 employees in 165 countries as of 2012. The company, which is not listed, traditionally
 finances its investments from its cash flow.

© Euromonitor International                  SOFT DRINKS: RED BULL GMBH                                 PASSPORT 32
OPERATIONS

Red Bull expands production outside Austria for first time

 Red Bull received approval from the Brazilian government to build its first production facility in the country
 in early 2010. The company's initial investment in the project is expected to be around US$111 million. This
 will also be the company's first production facility outside its home market, indicating a shift from a single
 production site and the importance of the Latin American market to Red Bull.
 The sustainability of its growth and strong position is questionable as the competitive environment
 changes. While its products are present in more than 160 countries, most of its soft drinks sold around the
 world come from one single site.
 The company is known for combining the production of the can packaging material and filling at one site in
 order to save on transportation time and costs. The key advantages of one single site include consolidated
 management, an up-to-date inventory and energy savings. The main downside of a single production site is
 perhaps the extra distance needed to ship all its finished goods to different parts of the world. Being unable
 to produce locally to supply regional markets can make retail prices less competitive than those of local
 products. In Brazil, Red Bull's retail price is 40% higher than that of Burn.
 In 2011, the rumour that TCCC may look to fully acquire or partially acquire Monster surprised analysts and
 should have alarmed Red Bull. If Monster were to be under TCCC's full control, their combined volume
 sales would be very close to those of Red Bull and would certainly pose a threat to Red Bull's global
 leadership. Although TCCC did not acquire Monster at that time, the possibility of an acquisition has not
 been ruled out and the company was the subject of more takeover rumours in early 2013.
 As Red Bull entered China in 2011, the company could also consider building a facility there to serve the
 Asian market over the medium term. There are strong arguments for combining forces with sister company
 TC Pharmaceutical to better penetrate Asia Pacific markets.

© Euromonitor International                SOFT DRINKS: RED BULL GMBH                               PASSPORT 33
STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CATEGORY AND GEOGRAPHIC
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
RECOMMENDATIONS

Holding onto top spot in energy drinks

Brazilian production                                      Work for benefit of both Red Bulls in Asia Pacific

 Establishing production in Brazil is a wise move for     The failure of TC Pharmaceutical and Red Bull
 Red Bull. Relinquishing to some degree its highly         GmbH to work together for a cohesive Asia Pacific
 centralised production model will help it to better       strategy will expose both players to competition
 compete in the emerging markets. The move to              from Japanese brands and from US-based
 Brazilian production will also open up new                multinationals such as TCCC and PepsiCo. The
 opportunities in the Americas. The Brazilian market       Thai Red Bull brand has a long history in this
 however is crucial to the company’s ambitions             region and is suffering from waning consumer
 given the level of growth expected to take place          interest in the face of new and exciting launches.
 here.                                                     Red Bull GmbH’s opportunities will continue to be
                                                           limited for the time being as a result.
Edition range                                             Premium positioning

 While this report does not cover on-trade sales,         Monster and Burn will remain major threats. The
 popularity in this channel has a subsequent benefit       price differential between these brands should be
 for off-trade retail sales. The launch of the Edition     reduced. Red Bull can continue to position itself as
 range should be extended to the on-trade with a           premium and maintain a price premium but in order
 marketing campaign to educate consumers about             to gain better traction among younger consumers
 how to mix the new flavours. Rolling out the range        and access to a wider demographic the company
 to other markets where market share erosion has           should focus on driving volume growth particularly
 taken place such as the UK is also recommended.           in emerging markets or risk market share erosion
                                                           from TCCC-backed energy drink brands.

© Euromonitor International                 SOFT DRINKS: RED BULL GMBH                             PASSPORT 35
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