final report- 5c red bull print

Marketing Management Red Bull: 5 C Analysis

MARKETING MANAGEMENT

Red Bull: 5 C AnalysisProject Report

Submitted to: Prof Avinash G Mulky

20th October, 2010

Submitted By:

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

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Table of ContentsINTRODUCTION...........................................................................................................................................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

6. References.……………………………………………………………………………………………………………………………………14

INTRODUCTION

ENERGY DRINKS:

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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

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.

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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 Bull’s 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

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Distinct Taste Caffeine Content

Energy Supplements

Chilled and Refreshing

Essential Vitamins

Keeps Awake

“Kick” or High

Instant Energy

Delight & Coolness

Enhanced Performer

Vitality & Fitness

Self Esteem


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

Competition: Cloud 9, Xplode, Burn, Monster

The buying decision is based on evaluation of 5

major attributes:

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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 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

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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 Bull’s 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

product’s 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

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

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Industry Competition (Segment rivalry)

Buyers (Buyer Power)

Potential Entrants

(Threats to mobility)

Suppliers (Supplier Power)

Substitutes (Threats from substitutes)


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 Porter’s competitive framework we can divide the

competition and the intrinsic long run attractiveness of the segment into five broad forces:

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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 Bull’s 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 Bull’s 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.

'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.

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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

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 Tawalkar’s. The availability of the product in these gyms, help the gym

owners as they gain a rub off from Red Bull’s premium positioning.

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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 Bull’s 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 Café, 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.

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

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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.

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.

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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.

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.

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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/cons-products/food/Coca-Cola-to-take-energy-drink-Burn-to-top-cities/articleshow/5894128.cms

http://daily-india-live.com/2010/04/05/energy-drink-companies-take-health-route-to-gain-market/

http://www.rediff.com/money/2006/apr/19spec.htm

http://www.researchandmarkets.com/reports/469643/the_2007_2012_outlook_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-Drink-021242751115866#/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/Company-021242900504130

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