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Marketing Management

Red Bull: 5 C Analysis

MARKETING MANAGEMENT

Red Bull: 5 C Analysis


Project Report

Submitted to: Prof Avinash G Mulky

20th October, 2010

Submitted By: Abhinav Pophali Anurag Oak Megha Goyal Snehil Raj Varun Rajani 1011004 1011020 1011034 1011061 1011069

Marketing Management

Red Bull: 5 C Analysis

Table of Contents
INTRODUCTION...........................................................................................................3 RED BULL:...............................................................................................................3 RED BULL: 5 C ANALYSIS............................................................................................4 1. Customer.............................................................................................................4 Decision Making Unit............................................................................................4 Buying Behavior...................................................................................................5 Need Triggers.......................................................................................................5 Evaluation of Alternatives....................................................................................5 Social Factors.......................................................................................................6 Cultural Factors....................................................................................................6 2. Company.............................................................................................................7 SWOT Analysis.....................................................................................................7 3. Competition.........................................................................................................8 1. Industry Competition:..............................................................................................9 2. Substitutes............................................................................................................9 3. Potential Entrants...................................................................................................9 4. Buyers...............................................................................................................10 5. Suppliers............................................................................................................10 4. Collaborators.....................................................................................................10 1. Retailers:............................................................................................................10 2. Gyms and Health clubs:.........................................................................................10 5. Context..............................................................................................................11 Regulatory Environment:...........................................................................................11 Political Legal environment:....................................................................................13 Demographic environment:........................................................................................13 Economic environment:.............................................................................................13 Economic environment: 6. References. 14

Marketing Management

Red Bull: 5 C Analysis

INTRODUCTION
ENERGY DRINKS:
Energy drinks are canned or bottled beverages sold in convenience stores, grocery stores, and bars and nightclubs (in mixed drinks). Most energy drinks are carbonated drinks that contain large amounts of caffeine and sugar with additional ingredients, such as B vitamins, amino acids (e.g. taurine), and herbal stimulants such as guarana. Energy drinks are marketed primarily to people between the ages of 18 and 30 and mostly males as a stimulant, which is why energy drinks have names that convey strength, power, and speed, and sexuality, such as Red Bull, Monster, Full throttle, Rock Star etc. In 2005, the sales of energy drinks in the US market were around $3.5 billion. A variety of physiological and psychological effects have been attributed to energy drinks and their ingredients. They lead to significant improvements in mental and cognitive performances as well as increased subjective alertness. Excess consumption of energy drinks may induce mild to moderate euphoria primarily caused by stimulant properties of caffeine and may also induce agitation, anxiety, irritability and insomnia. That is why Food Safety and Standards Authority of India (FSSAI) has now proposed a regulation for the drinks and has invited public opinion on the draft-regulation.

RED BULL:
Red Bull is an adaptation of the Thai energy drink Krating Daeng, which translates as "Red Bull". On the basis on the market share it the most popular energy drink in the world. The company was founded in 1984 by the Thai national Chaleo Yoovidhya and Dietrich Mateschitz. In 2009, the company sold nearly 4 billion cans of Red Bull Energy drink across 160 countries. Red Bull contains taurine, glucuronolactone, caffeine, vitamin-B, sucrose and glucose. Red Bull sugar-free also contains phenylalanine in place of sucrose and glucose. It is a premium priced energy drink that is distinctly associated with Sports, Music, Extremism and Parties. The marketing strategy and the competitive dynamics that the company faces makes it an interesting study. It was launched in 2003 in India whereby it introduced the Energy Drink segment to the

Marketing Management

Red Bull: 5 C Analysis

country. It has been the market leader ever since introduction but the cultural and social factors of India have made the company adapt itself in terms of marketing strategy and distribution.

RED BULL: 5 C ANALYSIS


In order to profitably satisfy customer needs, the firm first must understand its external and internal situation, including the customer, the market environment, and the firm's own capabilities. Furthermore, it needs to forecast trends in the dynamic environment in which it operates. A useful framework for performing a situation analysis is the 5 C Analysis. The 5C analysis is an environmental scan on five key areas especially applicable to marketing decisions. It covers the internal, the micro-environmental, and the macro-environmental situation. We have carried the 5C analysis in the Red Bulls context.

1. Customer
In order to understand the consumer profile of the energy drink segment and Red Bull users we conducted detailed focused group interviews for 3 respondents using the laddering technique. Demographics of the respondents that were chosen for the interview are as below. Respondent 1: Age 24, Male, Urban, Student Respondent 2: Age 26, Female, Semi Urban, Student Respondent 3: Age 26, Male, Non Resident Indian (currently residing in India), Student The consumer profile analysis is based on the data available from the interview findings and secondary data. Laddering Chart
Enhanced Performer Vitality & Fitness Self Esteem

Delight & Coolness Keeps Awake

Kick or High

Instant Energy

Marketing Management

Red Bull: 5 C Analysis

Distinct Taste Caffeine Content Energy Supplements and Refreshing Essential Vitamins Chilled

Decision Making Unit


The decision making unit in the segment of energy drinks is not very elaborate. It usually consists of the user and some influencers like friends or colleagues. In case of first movers like Red Bull who have depended on Buzz marketing to reach the consumers, the initiators role has been played by the company itself. Several users of Red Bull have been introduced to the product at free give away campaigns at sports events, concerts, gyms etc.

Buying Behavior
Initially during the introduction phase of the product the consumers buying decision is mostly impulse. The consumer does an impulse purchase at a party or during extended work/study hours, gym workouts etc. As the consumer undergoes the first experience of consuming an energy drink and experiencing its effects, subsequent buys are based mostly on habitual behavior. The product is low involvement as there are not may attributes to evaluate.

Need Triggers
Need to stay up during travelling, long drives, jet lags.
Need to stay awake during extended study or work hours

Need for refreshing drink with a distinct taste Need for energy during workouts or jogs Need for a mixing drink during parties mostly with vodka (distinct high) Need to look stylish drinking a premium energy drink in public places

Evaluation of Alternatives
A typical consumer has the following alternatives of substitutes and competitive drinks of the same segment. Substitutes: Cola Drinks, Coffee, Gatorade, Delight

Marketing Management

Red Bull: 5 C Analysis

Competition: Cloud 9, Xplode, Burn, Monster

The buying decision is based on evaluation of 5 major attributes: Easy availability Taste Caffeine Content Price Sugar content Most products in the Red-Bull energy drink category are priced around the same and have the same caffeine and sugar content. Hence, a consumer in this category mostly chooses to buy the product on the basis of ease of availability. In a situation where the product or an alternative is not available the consumer quickly switches to a substitute like cola drinks or coffee which is much cheaper. Hence the category faces stiff competition not only from within the segment but from substitutes as well. The decision does not necessarily depend on structured evaluation model or heuristics. Mostly consumer uses lexicographic or availability heuristics to reach a decision.

Social Factors
The energy drink consumers have a strong need for affiliation, social belonging and status. Hence premium priced energy drinks with values like power, masculinity, energy, agility are more of choice to suffice to ones self esteem. The category is mostly famous in parties and intense work situations.

Cultural Factors
The first time users of drinks like red bull usually try it for the marketed kick or the high energy that one gets from consuming the drink. These users are young, urban and mostly male students with high educational qualifications or young working professionals in demanding roles. There are many perceived risks associated with the product like Physical risk because of

Marketing Management

Red Bull: 5 C Analysis

the high sugar and caffeine content in the drink. This prevents some of the health conscious consumers away from this category. Also the price of the product is much higher than the regular cola substitutes.

Personal Influences
Indian consumers primarily use this product as a stimulant to keep awake. It is also used as a mixer with alcoholic drinks to a large extent. Personal factors like health awareness, income, peer group, exposure to marketing campaigns and promotions have a huge impact on the buying behavior of the consumers in the energy drink category.

2. Company
Red Bulls product line-up includes
Red Bull Energy drink- 250 ml flagship product Red Bull Cola 250 ml sugar free variant Red Bull Energy Shots- 60 ml SKU

Red bull launched in India in 2003. The company has maintained a dedicated one brand distribution network operated by self across the country. This has played a significant role in the products success across geographies. Currently in India, the flagship Red Bull drink is priced at Rs. 85/- per can. This is the most premium product across all cola/caffeine/non-cola soft drink categories. The high price is also because the product is manufactured only in Austria. The drink is imported and packaged in India.

SWOT Analysis
Strengths
1. Created the product category first mover advantage. Market leaders with strong brand name 2. Aggressive marketing through Buzz marketing: Tournament sponsorship, Racing team

ownerships, celebrity endorsements, Record Labels, music concerts and college festivals

Marketing Management Red Bull: 5 C Analysis 3. Association with sports has helped it claim the sports drinks market. It promoted the clubbing

scene where it became a popular mixer, by sponsoring schools for DJs & Music Academy 4. Certified by authorities as Kosher and Halal Weaknesses
1. Adverse health effects due to the levels of caffeine and sugar in Red Bull Several legal

lawsuits filed against the company


2. Banned in France, Norway, Denmark and parts of Germany several times- Bad publicity

3. Strong dependence on a single product 4. Lack of a USP with new products entering the markets 5. Reliance on a relatively small customer base 6. Relatively higher prices as compared to competition Opportunities 1. Expand the product line in order to widen the customer base 2. Deeper penetration of current markets 3. Access to new markets focus on expansion in India, Africa, Russia and Japan 4. Corporate tie-ups Threats 1. On-going legal battles regarding the ingredients of the drink 2. Negative publicity leading to customer aversion resulting from lack of knowledge 3. New energy drinks with controlled levels of caffeine

3. Competition
Competition to Red Bull includes all the actual and potential rival offerings and substitutes a buyer might consider. As per Michael Porters competitive framework we can divide the competition and the intrinsic long run attractiveness of the segment into five
Suppliers Buyers Industry Entrants Potential Substitutes (Buyer (Supplier Power) Competition to (Threats (Threats from (Segment rivalry) mobility) Power) substitutes)

Marketing Management

Red Bull: 5 C Analysis

In the Red Bull context all these five forces play a significant role. Not only is there intense rivalry within the energy drinks segment but there is also stiff competition from the substitutable drinks that are available in the market. Analyzing each factor from the Red Bull Context: 1. Industry Competition: Red Bull dominates Indian market in the energy drinks category and holds about sixty per cent market share which is indicative of its great success in Indian market. But there are many brands that are giving it a tough competition. In India its main competitor is Cloud 9 whose strategy is to directly attack the Red Bulls share. Coca also launched its premier niche energy drink Burn in India. Apart from this there are other small players in this category in various countries like Monster, Full Throttle, Rockstar etc. The market share of these other brands is small as compared to Red Bull but still in certain segments they are much popular. 2. Substitutes: The most potential threat to Red Bull comes from the substitutable drinks that are available in the market and the ones that are very popular among the people. Red Bulls real competitors are the market leading cola companies- Pepsi & Coca Cola, who have created a brand leadership in the Indian market. Pepsi also has its sports drink segment under the brand name of Gatorade which is a preferred drink among most of the sports players. There is also a fruit juice segment in India (Real, Tropicana etc) which is preferred by the segment which is fitness freak and health conscious. In India, there is also a big industry of milk drinks that also competes in the drinks category. Furthermore, Coffee is also a strong substitute for Red Bull. 3. Potential Entrants: In India there are many local players that have successfully launched some potential products that have gone on to become popular in international market as well.

Marketing Management

Red Bull: 5 C Analysis

'Current' brand from Gujarat established by Nayan Shah, with production facilities in Malaysia, took the market by storm in 2006 and by 2007 its revenues had already touched Rs 3.5 crores. Current is presently popular in countries like Dubai, UK and Africa. Stamina, a sports drink that belongs to the Gujarat Co-operative Milk Marketing Federation is cheaply prices at Rs 12 for a 200-ml Tetrapak and competes with fitness drinks like Godrej Foods' soya-milk brand Sofit. XXX, the sensational energy drink from GT&T India Pvt. Ltd, a part of JMJ group, also went international with expanding into countries like Dubai and UK. So the market is very unpredictable with launches from the local players also posing a potential threat. 4. Buyers: Red Bull is a sweet tasting drink, so it is preferred mostly by women and children. It targets the customers in the age band of 15 to 60 years. 65% of the drinks market consists of male customers who prefer drinks with strong taste. So the buyer preferences and their buying power is also a factor to be taken account into the competition aspect for Red Bull. 5. Suppliers: The channel of distribution plays a very important role in the case of such consumable drink products. There is a competition at the retailer and the wholesaler level to position the brand in the market. Retailer relationship plays is important in this context.

4. Collaborators
Red Bull competes in what is termed as the energy drink market. This actually indicates a much wider ambition than the initial positioning as a sports drink. It also allows the firm to seamlessly move into health benefits category without major marketing investments than being a pure sports drink. By defining itself as energy drink the brand has collaborated various focused partners to find and reach the target consumer in the best possible manner. 1. Retailers: Due to its premium pricing, Red bull expects to see maximum off-take from big retail chains. The priority for these retail chains is low inventory, high stock turnover and high margins in that order. Red bull as a product has high gross margins. It can thus, adequately support all three priorities of this set of collaborators. The overall volumes related to other

Marketing Management

Red Bull: 5 C Analysis

product categories would be very low for Red Bull. By managing its own inventories Red Bull helps establish its product as a sustainable source of revenue. It also invests and incentivizes the retailers by investing its promotional spends in on ground activations at point of purchase. This helps increase the off-take with again mutually beneficial results. 2. Gyms and Health clubs: Red bull ties up with many gym chains which are coming up in India, for example Tawalkars. The availability of the product in these gyms, help the gym owners as they gain a rub off from Red Bulls premium positioning.

3. Sports and other lifestyle events: Another important partner for Red Bull are the various sports events. The events gain a rub-off from Red Bulls premium image while Red Bull is able to establish itself in its target consumers mind more effectively. Red Bull obtains a lot of support by using majority of its promotional spends on sponsoring these events and also creating co-branded merchandise and other opportunities. Some of the major sports events like xtreme biking, F1 racing, Football, Air-craft races, Xtreme sports, etc. Red Bull is also strongly associated with Rock concerts and other music events across the globe. It has its own music academy which promotes young musicians. These collaborations effectively allows red bull to reach focused consumers and connect to them in close and effective environment. 4. Hospitality partners: Another way for Red Bull to target its customers is through up-market bars and chains like Hard Rock Caf, which are about a lifestyle and not simply alcohol. It positions and makes Red Bull available in these locations. It also pushes for it to have cocktails and mock tails which incorporate Red Bull as an essential ingredient.

Marketing Management

Red Bull: 5 C Analysis

5. Context

Regulatory Environment: Energy drinks are non-alcoholic beverages which are intended to provide a quick burst of high energy to the consumer. These may be prepared with a composition of methylxanthines, caffeine, natural flavors, some herbal components or specific vitamins like Vitamins B. They may also contain taurine, guarana, maltodextrin, ginseng, carnitine, inositol, glucuronolactone, creatine and ginkgobiloba.. A review published in 2008 by Cardiovascular Research Centre in Australia found no negative health effects associated with the amount of guarana, taurine, and ginseng being used in energy drinks. However, caffeine and sugar are present in amounts known to cause a variety of adverse health effects including risk of strokes and heart attack. Countries like Norway, Uruguay and Denmark have banned them. The regulation for energy drinks in other countries is different. The European Union does not set an upper limit for caffeine but requires only labelling of caffeine content greater than 150mg per kg with High Caffeine Content (Xmg/100 ml). Coffee and tea are exempted. In Canada, caffeine is allowed at the level of up to 200mg/per litre in cola type beverages. Beverages containing 320 mg of caffeine per litre have been approved by the Canadian Health Authority as a natural health product requiring listing contents and nutritional facts. US FDA regulates caffeine content in soft drinks but does not regulate caffeine contained in energy drinks. Caffeine is considered generally regarded as safe under US Code of Federal Regulations. In India, there are no standards for energy drinks under PFA Act, 1954. The standards of carbonated water under PFA Rules, 1955 specify the maximum limits of caffeine of 200ppm. Manufacturers have used this loophole to challenge the categorization of the product as a carbonated drink. However the scientific review of energy drinks has thrown up a series of health concerns due to the high levels of caffeine.

Marketing Management

Red Bull: 5 C Analysis

In the wake of these developments Food Safety and Standards Authority of (FSSAI) has now proposed a regulation for the energy drinks in India. This will enable fixation of the ingredient levels, caffeine content and address other risk factors and appropriate regulation of the product. Certain key observations and issues raised by the expert group are:
The new Standard will be applicable to caffeinated beverages as distinguished from

caffeinated soft drinks. There will be a minimum caffeine level to ensure this differentiation.
It is also proposed that appropriate provisions should be made for labeling of the product to

discourage its use by the young population and pregnant women


Another issue of concern is the name of energy drink which tends to create an impression

that taking an energy drink is required to boost energy. A suggested alternative which has been adopted by Australian New Zealand Food Authority is to call it caffeinated beverage and this may be used in India too. Due to the possible introduction of such a regulation Red Bull may have to relook into their product and ensure that it meets all the requirements laid down by the FDA authorities in the coming future. There will be large implications on the marketing strategy consequently.

Political Legal environment: The political legal situation is also critical to understand because unforeseen crisis may arise which can affect the brand negatively. There was an issue in the past where carbonated drinks manufacturers were targeted and blamed for producing contaminated products for e.g. Coca Cola was said to contain pesticides beyond acceptable limits. This issue was highlighted by social activist group (CSE) but later one the centre and state governments too got involved and imposed bans and conducted independent investigations. The whole industry faced a setback and the sales dropped significantly. The companies had to fight back with advertisements and reports validating their claims that their products were not contaminated. Similarly in case of the energy and sport drinks too complications could arise, so the companies should have correct processes to monitor and ensure that the concentration level of residuals should not exceed the level prescribed by law. Also marketing strategy should be such that the consumers develop trust and faith in the quality of the product. The companies cannot afford to have the image for their brands tarnished by this kind of allegations.

Marketing Management

Red Bull: 5 C Analysis

Demographic environment: The knowledge of the demographic profile of the country is also necessary because energy drinks are usually targeted to urban youths and middle aged executives. The distribution of age and the population in the urban cities will enable the energy drink manufacturers to forecast sales volume and hence profits. Economic environment: Certain patterns of growth in the average household income per year and the expenditure pattern of the consumers in the urban centres over the years can be used effectively to determine the pricing strategy of the products. The specific spending pattern of the consumers on the health drinks and similar products can be obtained to better forecast the demand and the sales.

6. References
Red Bull promotional Brochure http://www.redbull.com/ http://www.indiaprwire.com/pressrelease/food/2010021643698.htm http://economictimes.indiatimes.com/news/news-by-industry/consproducts/food/Coca-Cola-to-take-energy-drink-Burn-to-topcities/articleshow/5894128.cms http://daily-india-live.com/2010/04/05/energy-drink-companies-take-healthroute-to-gain-market/ http://www.rediff.com/money/2006/apr/19spec.htm

Marketing Management

Red Bull: 5 C Analysis

http://www.researchandmarkets.com/reports/469643/the_2007_2012_outloo k_for_energy_drinks_in.pdf http://www.the-infoshop.com/report/go15248_sports_drink_toc.html http://www.currentenergydrink.com/news4.html http://www.speedace.info/red_bull.htm http://www.redbull.com/cs/Satellite/en_INT/Products/Red-Bull-Energy-Drink021242751115866#/product-FAQ http://altmedicine.about.com/od/completeazindex/a/energy_drinks.htm http://en.wikipedia.org/wiki/Energy_drink http://en.wikipedia.org/wiki/Red_Bull http://www.redbull.in/cs/Satellite/en_IN/Products/Company021242900504130

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