STRATEGIC MANAGEMENT

DIVERSIFICATION FOR CREATING

BRAND AWARENESS

CASE OF RED BULL GmbH

 TABLE OF CONTENTS

EXECUTIVE SUMMARY 4

STATEMENT OF PROPOSITION 4

STRATEGIC ANALYSIS OF RED BULL GmbH 4

Five Forces Analysis 4
PESTLE Analysis 5
SWOT Analysis 6
Internal Factor Evaluation (IFE) 8
External Factor Evaluation (EFE) 8
IE Matrix of Strategic Decisions 8
Intensive growth Strategies 9

DIVERSIFICATION INTO THE SPORTS INDUSTRY 11

FORMULA 1 12
FOOTBALL/SOCCER 13

DIVERSIFICATION INTO THE MUSIC INDUSTRY 15

CONCLUSION 16

APPENDIX 16

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 EXECUTIVE SUMMARY

Red Bull GmbH is an Austrian-headquartered company founded by Dietrich Mateschitz in the mid-1980s. It
started as an energy drink company with Red Bull Energy being introduced in the market in April, 1987. To
date, the company has been highly successful, reporting large year-on-year growth figures in terms of sales
volumes (Appendix 3). Red Bull has sold a total of 75 billion cans since its introduction in 1987 1.

The global energy drink market was around $53.01 Bn in 2018 and is expected to increase at a CAGR of 7.2%
to reach about $86.01 Bn by 2026 2. In 2019, Red Bull sold a total of 7.5 billion cans worldwide in over 171
countries3. It captured about a quarter of the US drink market amounting to around $2.89 Bn in 2019 4. Major
players operating in this industry include Red Bull GmbH, PepsiCo, Monster Energy, Rockstar, Coca Cola, etc.
Different strategies employed by these companies to gain market share includes competitive pricing, product
development and sponsoring sports events.

Over time Red Bull has evolved with its footprint in various businesses ranging from caffeinated energy
drinks to extreme sports to media housing (Appendix 4 and 5). Red Bull’s dominant position in the fastest
growing energy drink segment can be attributed to its unconventional and innovative growth strategies. This
report discusses the various strategies adopted by Red Bull, including its novel marketing strategies, its
sports entrepreneurial approach and its unique diversification strategy. The initial analysis is focused on the
pre-diversification period before around 2004-05, post which after establishing a need of diversification, the
diversification process is discussed.

STATEMENT OF PROPOSITION

The prime objective of the study is to analyze the process and impact of diversification strategy on the
profitability, brand image and core competitiveness of Red Bull by identifying the factors making significant
contribution towards their overall profitability in both the pre-diversification and post diversification periods
and exploring the main sources of competitive advantage as manufacturers of energy drinks, the dynamics of
development and the attractiveness of the energy drinks market.

STRATEGIC ANALYSIS OF RED BULL GmbH

1. Five Forces Analysis

Competitive Rivalry – A large number of companies manufacture energy drinks, such as Red Bull, Monster,
Full Throttle, etc. The energy drinks industry has an impressive growth rate. It is very competitive. Thus, the
rivalry in the energy drinks industry is intense. Red Bull has a larger market share than the sum of all its
competitors in the energy drink segment and a relatively smaller market share in the soft drinks sector.

1 "Red Bull - Forbes." https://www.forbes.com/companies/red-bull/. Accessed 28 Jun. 2020.

2 "Energy Drinks Market Size, Share - Grand View Research, Inc.."
https://www.grandviewresearch.com/industry-analysis/energy-drinks-market. Accessed 29 Jun. 2020.
3 "Red Bull Energy Drink - Official Website :: Energy Drink :: Red ...." https://www.redbull.com/us-
en/energydrink/company-profile. Accessed 28 Jun. 2020.
4 "• Energy drink market share 2019 | Statista." 23 Jan. 2020,
https://www.statista.com/statistics/306864/market-share-of-leading-energy-drink-brands-in-the-us-
based-on-case-volume-sales/. Accessed 29 Jun. 2020.

3
Threat of new entrants – The entry barrier in the energy drinks industry is high. It is not easy for new players
to enter and sustain in the energy drinks industry without an innovative product. The investments made by
the incumbents are enormous, so the newcomers will require such investments in order to capture market
share. Along with this, establishing economies of scale and distribution channels is also tough. Therefore,
this makes the threat of new entrants low.

Buyer’s power – Red Bull has captured a large portion of the market and has loyal customers. Thus, it has
some bargaining power against its buyers. Its target market is also not very price-sensitive, so, Red Bull can
look into increasing prices. At the same time, the switching cost for buyers is also very low. Thus, buyers hold
moderate power over Red Bull.

Supplier’s power – Suppliers have low bargaining power against Red Bull. Red Bull has a short supply chain
i.e., and it requires few readily available raw materials. Thus, its input cost is low. The number of suppliers is
vast, and the switching cost is low.

Threat of substitutes – There are many low-cost substitutes for Red Bull available in the market. Such as
coffee, which is cheaper than Red Bull and more readily available. But Red Bull has established its place in
the market, and customers seem to prefer it over other substitutes.

2. PESTLE Analysis
Political and Legal Aspects - Initially healthcare organizations labelled Red Bull as a new drug because it
contained controversial ingredients like taurine. To disprove these allegations, the ISME, in 1998 proved that
Red Bull does not create any kind of addiction. Despite this, the energy drink needs to be approved by each
country before entering its market and this approval process is often long and expensive. Only in 2008 was
the ban on Red Bull lifted in the key European markets of France and Denmark. Red Bull’s high levels of
caffeine and taurine content violated food health and safety legislation there.

Economical Aspect - Red Bull is not very exposed to economic cycles as it is a special drink that targets a
niche market. Included in this niche market are sports professionals, those who lead busy and active
lifestyles; essentially all those who require an energy boost. There are very few direct substitutes within the
functional drinks market, and thanks to intensive advertising, Red Bull have positioned themselves as the
world leader.

Socio-Cultural Aspect - When Red Bull was first introduced to the market in 1987, society was reluctant to
try new things. Nowadays however, thanks to a shift in the societal mindset, lifestyles have changed, and
people are much more open to experimenting new and intriguing products on the market; particularly
where they are marketed as fashionable and an essential in any Gen Y‟s hand. Research conducted by the
ISME confidently proves this point. The resulting image for Red Bull is very fashionable and their market
share has extended not only to bars but also nightclubs, where it has become a very popular vodka mixer.

Technological Aspect - Red Bull is manufactured completely in Austria and is exported from there to all
markets. There are two fundamental reasons for this: to ensure integrity of the brand and its flavor and to
ensure global continuity is maintained.

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Environment - Red Bull’s can is made up of recycled aluminum and therefore it is environmentally friendly.
As of lately topics such as ethics, environment and sustainability are gaining importance, this practice gives
the Red Bull a competitive advantage over its competitors.

3. SWOT Analysis
Red Bull brand is used by a quarter of American consumers and is a well-known brand in the beverages
industry with four decades of growth through innovative strategic marketing. In the past few years, the
brand has been encountering many challenges with respect to growing competition in the industry and
health concerns because of the ingredients being used in the products. Despite the challenges, Red Bull has
maintained a prominent position in the industry through critical SWOT analysis to identify various internal
and external strategic factors which have helped the brand grow to its current size. Using the same
framework, we have analyzed the SWOT factors below 5:
Strengths
1. Brand Power – In the energy drinks category, Red Bull is the most powerful brand and also its
greatest asset, followed by Monster energy drinks. Its signature color-based branding and ‘Gives you
Wings’ slogan provides a strong brand image. The brand is now almost synonymous with energy
drinks in several countries and is the industry leader overall.
2. Marketing strategies – Being a provider of energy drinks, their one of the most prominent marketing
strategies have revolved around sports and taken a re-defined approach by sponsoring a variety of
sports events, athletes and teams. This helps in putting Red Bull brand and drinks on consumer’s
mind throughout the day, making it dominate the market.
3. Vast geographic presence – The Company sells its products in over 70 countries, thereby ensuring
growth even if some of these markets go stagnant or mature.
4. Supplier reliability – They have a strong supplier base for raw materials, enabling them to overcome
supply chain related bottlenecks.
5. Customer relationship and satisfaction – With dedicated management departments of customer
relationship, Red Bull has achieved a high degree of customer satisfaction among consumers and as
a result good brand image among potential consumers.
6. Diversification – Red Bull is majorly known for its energy drinks but has achieved diversification by
operating in other sectors as well. The brand owns various lifestyle magazines, mobile phone service
operations, TV broadcasting, youth academics and football.
Weaknesses
1. Lack of Product Range – In the food and drinks segment, Red Bull entirely relies on its energy drink
and its sugar free counterpart. They just hold about 2% of market share in overall in the Soft drink
market due to threat from dominant players like Coca Cola and PepsiCo.
2. High Price – Red Bull’s product is marketed as a premium high-priced product. Although this
provides them with great profit margins but at the same time, it loses out on sales to comparatively
less expensive products, especially in case of Budget-conscious customers. Dropping the product
price may lead to increase in sales for Red Bull by decreasing some marketing expenses as it already
dominates the market.

5 "SWOT Analysis of Red Bull - PESTLE Analysis." https://pestleanalysis.com/swot-analysis-of-red-bull/.

Accessed 29 Jun. 2020.

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 3. Workforce attrition – Red Bull, in comparison with its competitors, have higher attrition rate and
require to spend more on training and development of its workforce.
4. R&D Investment – Investments made by Red Bull in R&D and innovation is above the industry
average but lower than the other leading companies in the industry and comes across as a mature
firm bringing out products based on features already tested in the market.
5. Limited Production facilities – According to Euromonitor, Red Bull is reluctant towards extending its
production facilities further than Austrian borders, which is a constraint against boosting production.
It sells in over 170 countries but majorly production takes place only in Austria, which leads them to
greater spending in shipment and distribution.
Opportunities
1. Emerging markets – With time as consumers earn more and get richer, growing countries like India
and emerging markets like that of Asia witness an increase in daily spending by consumers. These
developing countries and markets are good opportunities for Red Bull to market their product as
now the consumers might be able to afford it as opposed to earlier when they could not due to its
high price.
2. New and diverse products – As discussed previously, having their major revenue source from only 2
kinds of energy drinks can prove to be dangerous due to its high industry dependence. Red Bull can
consider launching new products like Sports supplements under their brand, appealing more to their
sports focused customers. In addition, healthy offerings like protein and vitamin drinks can be
considered as another product and rebrand themselves to include health drinks as well. This will
reduce the impact of major threats from competitors and dependence on the regulations present in
the industry.
Threats
1. Competition – This a great threat for all companies in any industry, especially for energy drinks due
to difficulty in protecting their recipes from their competitors. This will endanger their market
dominance as any competitor can re-create a new energy drink similar to the taste of Red Bull with a
significantly lower price, which when coupled with good marketing strategies can take away a
significant portion of Red Bull’s market share.
2. Staleness – Consumers tend to get bored of having the same drink and taste on a regular basis and
later to seek something new, there is a risk of losing a customer who might want to diversify their
option of drink. This calls for Red Bull to launch new energy drinks with different tastes as per
customer preferences under the same brand to retain consumers. For example, Monster offered 30
different brands of drinks under its umbrella in a variety of flavors while Red Bull was slow in its
responsiveness to competition and took 25 years to launch 3 new flavors.
3. Industry and health regulations – For Red Bull, the most endangering threat is the introduction of
new health regulations preventing their sales and reducing profits. For example, France and
Denmark governments had banned energy drinks in their country. It was even classified as a
medicine in Norway and was available only at pharmacies for a good period of time. This again calls
for the need to make health-conscious drinks under the Red Bull brand to sustain in the drinks
industry.
4. Negative publicity – While the brand is doing well in the industry with various marketing tactics, the
media globally reports Red Bull drinks to contain components like high caffeine which can be

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 harmful to health when consumed. Another misconception added was that the drink stimulates
mind and body, which acted a challenge for Red Bull sales.

4. Internal Factor Evaluation (IFE)

IFE Matrix is a strategy tool used for evaluation of a company’s internal environment by highlighting its
strengths and weaknesses based on the SWOT analysis conducted. A matrix containing the identified
strengths and weaknesses to evaluate the overall performance of Red Bull on these internal factors has been
created and is given in the Appendix section (Refer Appendix 1)
The internal factors evaluation matrix outputs the total score to be slightly above average at 2.739,
indicating that Red Bull is playing well on its strengths when it comes to marketing strategies, brand
recognition among the masses and vast geographic presence, given that the products are slightly high priced
but requires product diversification by venturing into the domain of health drinks and brand themselves
more in other sports-related field to prevent themselves from losses because of bad publicity, external risk
factors and to boost sales.
5. External Factor Evaluation (EFE)
EFE Matrix is a strategy tool used for evaluation of a company’s external environment by highlighting its
opportunities and threats based on the SWOT analysis conducted. A matrix containing the identified
opportunities and threats to evaluate the overall performance of Red Bull on these external factors has been
created and is given in the Appendix section (Refer Appendix 2).
The external factors evaluation matrix outputs the total score at 3.095. This means that it has a high level of
responsiveness, indicating that Red Bull is able to benefit from the opportunities such as tapping into new
emerging markets, establishing customer loyalty in a niche market segment and innovating to keep
customers interested. It is also able to reduce the risk of potential threats.
6. IE Matrix of Strategic Decisions

Based on the internal and external factor evaluation, Red Bull lies in the II block in the IE matrix, which tells
us that the next strategic decision for Red Bull is to grow and build. In line with Red Bull’s ideal customer
base of Age 16-35 (students, night-life enjoying adults, adventure seeking and sports enthusiasts), its initial

7
focus was on growing organically in the European Market till around 1922 (students and night-life adults),
after which it entered the US market and started venturing into the sports industry to expand its customer
base to sports enthusiasts.

7. Intensive growth Strategies

Various growth strategies deal with product or market development to achieve growth objectives. Red Bull
uses these growth strategies to seek further market penetration and inclusion of wider customer base. Red
Bull’s growth strategy is based on a combination of main strategic streams pertaining to cost, differentiation,
and focus, which can be explained through Ansoff’s product-market expansion grid and includes the
dimensions of Market penetration, product development, market development, and diversification. These
are chosen on the basis of competition, growth objectives and characteristics of the target market to
maximize profits and increase market share to maintain market dominance and ensure growth in the long
term. Below are the 4 growth strategies undertaken by Red Bull and their contribution in growing sales 6:
1. Primary Strategy – Market Penetration
It involves increasing sales within the current consumer base to increase market share with focus on
existing products in the existing market.
● The strategy requires Red Bull to decrease prices and undertake a variety of promotional and
aggressive marketing strategies in the existing consumer segment by offering discounts, deals and
selling of products in packages to increase sales. Red Bull penetrated the market with induction of
adrenaline sports by attracting the world of sports. Their main strategy is attracting consumers
towards the product and not the other way round. For example, the company had its first Red Bull
Flugtag event in 1991 signaled their intention to develop their brand in the extreme sports world
and another event – Crashed Ice in 2011 i.e. 3 years before the launch of their drink. They also
sponsored over 500 action sports events, athletes, sky divers, free-runners etc. to build this brand.
● The decrease in product prices in this strategy is achieved through cost leadership by integrating
innovation and setting product differentiation. Despite market saturation, this helps in expansion of
the consumer base.
● Initially, this strategy with combination of cost and differentiation worked well for Red Bull with its
home consumer base and then later national level recognition helped in targeting new markets
globally. Resulting brand awareness earned by high market penetration was used as a tool for
offering newer products to both new and existing markets.

2. Secondary Strategy – Product Development

This strategy is adopted when firms find limited growth in the current market with the existing
product line due to intense competition. It includes modification in current products or development
of new ones to cater existing consumer base. This requires less time, efforts and resources as
existing customer loyalty and brand awareness is leveraged to introduce new product lines.
● Red Bull has considerably diversified with its product range since it was introduced in the industry by
introduction of different flavors in 2003, which allowed the company in hedging risks as it can
compensate the lost sales from one product with added revenues from other products.

6 "Red Bull Generic and Intensive Growth Strategies - Essay48." 10 Jan. 2018,
https://www.essay48.com/13783-Red-Bull-Porters-Generic-Strategies. Accessed 29 Jun. 2020.

8
 ● Red Bull uses its ability to produce differentiated products supporting their product development
strategy and process in the existing market through R&D investment. It created its own new and
innovative sport - Crashed Ice to reach out its target market and better its reputation by including
both men and women at a later stage and making it free for spectators.
● Red Bull can further undertake any of the three options available to succeed in product development
– Offering a new product closely associated with the existing ones, or offering products resonating
existing customers’ buying behavior, or develop and produce products that are entirely new by re-
inventing the current ones by continuously assessing consumer needs.

3. Supporting Strategy – Market Development

The primary aim of this strategy is to explore new markets for existing product lines.
● Red Bull has applied this supporting growth strategy with Market penetration and product
development strategies extensively and consequently is now present in 170+ countries, way more
than its competitors. In these markets, due to excess income earned by the consumers, Red Bull was
able to sell its products at affordable prices, great flavor and brand name. This was complemented
by on point marketing and celebrity endorsements for expanding the customer base to become the
market leader. It recognized a yet-to-be-explored niche market, before joining F1, by merging F1
elements with flying resulting to form a World championship of Air Racing in 2005 and challenging
best 10 pilots from 7 different countries, achieving live stream coverage on 66 media channels across
the world.
● Entering markets which are culturally distinct from the company’s home market is a risky affair as it
would require the firm to be culturally intelligent and develop proper and effective mechanisms for
knowledge management for the product to be accepted by the new consumers. Red Bull understood
the importance of this and integration of local norms and marketing campaigns for new geographies.
Red Bull’s cultural intelligence through effective research conducted about financial, operational and
market data has led them to be accepted in diverse markets by making right business decisions.

4. Supporting Strategy – Diversification

This involves launching new products in new markets. This diversification can be related or unrelated
where unrelated diversification could be riskier as firms launch products completely different from
their existing ones with no prior experience in new markets, whereas for related diversification,
existing resources and infrastructure act as supporting factors in portfolio diversification. For Red
Bull, this strategy also acts as a supporting strategy as it helps in achieving growth through market
penetration and product development. At present, they only have one product with three product
lines – Energy Drink, Energy Shot and Red Bull Cola, each having a regular and a sugar free version.
● Red Bull’s product diversification is supported by its cost leadership and existing infrastructure for
developing new products and entering new markets. Due to riskiness of unrelated diversification,
Red Bull focuses more on related diversification by leveraging their existing brand awareness. But to
keep the portfolio balanced against high market turbulence, Red Bull has also made unrelated
diversification moves by offering merchandise from shirts, fridges and pens.
● In case of related diversification as well, it is important to analyze customer expectations. Red Bull
did this by offsetting declining sales through green business practices and associating themselves
with business partners of positive image in response to the criticism made by media and various

9
 environment protection groups. Along with this, they started capitalizing on new forms of
organization by entering in F1 racing and purchasing and rebranding teams in football and ice
hockey.

As a growth strategy, Red Bull has diversified into different businesses altogether such as the sports industry
and music industry. An analysis of the innovative strategies it used and the results it obtained is presented.

DIVERSIFICATION INTO THE SPORTS INDUSTRY

During its expansion in the European and American markets targeting students and club people, Red Bull
decided to adopt a new strategy in parallel to establish the brand as a sports associated brand, initially
marketing its abilities of providing energy and stamina. Red bull targeted a niche segment of sports
enthusiasts and positioned its energy drink as being beneficial for athletes and a driver of performance
which has helped in Red Bull connecting with its young sports audience who are looking for excitement,
thrill, adventure, etc.

First such involvement took place in 1991, with the creation of the Red Bull Flugtag event in Vienna, Austria 7.
During Red Bull’s early growth, it focused on extreme and action sport sponsorships (events, teams, athletes,
etc.) in order to gain traction and popularity in the niche target market. In time, with increasing brand
awareness as can be seen from the timeline in Appendix 4, Red Bull expanded their strategy by sponsoring
sports events. The rationale behind choosing sports events was to select events that were capable of
attracting large audiences such as Football/Soccer and Formula 1 (F1) racing.

In time, Red Bull evolved its strategy to an ownership strategy from a pure sponsorship model and
therefore, redefined the concept of sports marketing, it is no longer about paying huge loads of money to
sponsor an event or team, and instead it is about taking ownership. A few examples for taking ownership
can be seen when Red Bull entered the world of Formula 1 in 2004 and football in 2005 8.

FORMULA 1

Red Bull was involved with Formula 1 long before owning a F1 racing team. Red Bull was the main sponsor of
the Austrian team Sauber. Formula 1 is one of the oldest and most prestigious international sports events
and is called “Queen of motorsport”. In 2005, Red Bull bought the Jaguar F1 racing team for a symbolic $1
from American car maker Ford Motors 9. And since then has completely rebranded the team and gone on to
win three constructors championships. They also own Scuderia Toro Rosso, another F1 team. Red Bull’s
decision to invest in F1 is clear as F1 is associated with speed, fearlessness, adventure and style, all things
Red Bull wants customers to see in the brand.

7 "Digital marketing case study - Digital Training Academy."

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Business models of F1 teams generally follow F1 teams trying to attract money from sources to develop their
cars (R&D) and achieve victory and title for more attractive sponsorship deals and prize money. Revenue
sources include sponsorship deals (around 39% of all income derived) 10, prize money from constructor
championships (around 34%) and teams owners (about 20%). Other sources of revenues include revenue
broadcasting rights for TV channels, etc. (Appendix 6 and 7)

Red Bull Racing has become one of the most successful and leading teams in Formula 1. To achieve this feat,
Red Bull majorly follows a combination of technology provider and talent provider business model. In
Formula 1, some teams are also the supplier of technologies and equipment for their competitors and pilot’s
talent is an important source of competitive advantage for the teams.

The Red Bull provider model is implemented using the company Red Bull Technology. Red Bull Technology is
engaged in the design and manufacture of racing cars and their components. The main unit of the company
is a racing team Red Bull Racing. The company supplies gearboxes to the second team Toro Rosso, and for
some time was a supplier for Lotus and Caterham teams.

To search for and develop pilots, the company started to implement the model of talent long before
purchasing Jaguar in 2005. In 2001, Red Bull founded the program of support and development of young
pilots11. Compared to other competitors who also have their own programs to support young drivers, Red
Bull has further developed this concept, having bought in 2006 Minardi team, later renamed Scuderia Toro
Rosso. In fact, Toro Rosso serves as a Red Bull Racing Youth Team with the main goal to prepare young
drivers for the performance in the main team. Another advantage of this model is that it enables Red Bull to
save on salaries of pilots who occupy a large part of the team’s budget. To participate in the program, pilots
enter into long-term contracts with the company on the conditions of fairly low wages. As of the 2016
season, Red Bull Racing drivers Daniel Riccardo and Max Verstappen got along just over $6 MM ($5.5 MM
and $0.512 MM) while the main competitors Mercedes and Ferrari spend on salaries of its drivers a little
more than $50 MM and $57 MM respectively.

FOOTBALL/SOCCER

In Western countries, youngsters are attracted by the game of football which is played by energetic athletes.
Red Bull felt that this sporting event will resonate well with the energy drinks which they have been
offering. So, Red Bull has founded as well as acquired some football clubs in Europe and America namely RB
Leipzig (founded in 2009), New York Red Bulls (acquired in 2006, earlier known as MetroStars), Red Bull
Brazil (founded in 2007), Red Bull Salzburg (acquired in 2005, earlier known as SV Austria Salzburg).

They have indirectly promoted the brand by taking ownership of these football clubs and endorsing the
sports. This way they were able to capture and inspire many football enthusiasts with their sponsorship
marketing strategy. They have been able to present football teams with an investment model that presents
both growth and support and spends $300mn yearly for advertising related to football clubs 12. This move

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https://www.raconteur.net/business-innovation/how-much-does-an-f1-car-cost. Accessed 28 Jun. 2020.
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12 "Red Bull's Success in Sponsorship, Marketing and Branded ...." 6 Sep. 2016,
https://puzzlelondon.com/2016/09/06/red-bull-sponsorship-marketing-content/. Accessed 28 Jun. 2020.

11
allowed them to engage with the customers in a deeper way than traditional advertising as it allows them to
feel active and edgy by drinking from a can that bears the same logo as that of a football club.

All the football clubs have been performing well which has allowed them to develop a wide fan base. The
two acquired football teams were previously performing poorly but after their acquisition, they started
winning competitions thus highlighting that Red Bull was investing a lot on these clubs, but in spite of that,
the reaction has not always been positive. Red Bull changed the club’s logo, name, jersey color etc. which
made fans unhappy and even led to protests on football grounds but later on as time passed by, the clubs
started gaining recognition after winning title and eventually, the protesters turned into supporters 13

Red Bull has also invested in youth soccer development programs, by partnering with regional development
schools and Red Bull academy teams. Through this initiative, there were quite a few homegrown players
who made it to the roster of the first team 14.The current market value of the New York Red Bulls is $178
million15, the German club RB Leipzig, which is also owned by Red Bull has a market value of $670.84 million
Euro16, Austrian club RB Salzburg has a market value of $110.35 million 17.

SWOT Analysis of Red Bull-owned football teams

Strengths

 Associated with a brand known worldwide so easier to advertise the club

 Red Bull owns the football stadiums and can make revenue by renting it to organize different events
 Branding is very unique and it is possible to get jerseys from players and fan accessories but people
can’t buy any other merchandising with Red Bull logo

Weakness

 They don’t have enough advertising outside social media

 They also don’t publish game day newsletters
 No relationship between logo of teams and soccer which has also led to complaints by many fans

Opportunities

 Creating a women’s soccer team will give their brand more popularity
 Sign more well-known players or international players

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29 Jun. 2020.
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mattersburg/vorbericht/spielbericht/2866491. Accessed 29 Jun. 2020.

12
  Since they own clubs in many countries, they could provide trips to its football stadiums in other
countries

Threats - Along with football there are various other famous sports events such as in US, baseball and
basketball are also famous so it is very difficult to make fans change their passion for a sports.

DIVERSIFICATION INTO THE MUSIC INDUSTRY

A small recording label founded in the year 2007 in California to promote small indie rock bands for free has
evolved into one of the leading music labels for new artists coming from diverse backgrounds such as
metalcore, rap, hip hop etc. The company has since expanded to different locations including Los Angeles,
New York and London. The label has signed over 20 artists and have since gone on to release full length
studio albums with each of them. The artists and their records have gone on to be certified multiple
platinum and gold for their sales.18

The label sells merchandise of the bands it has signed as well as tickets to the concerts. The company has
also launched Red bull Records Virtual Festival, wherein all the artists currently signed to it are going to
perform. The records have steadily increased with them frequenting the Billboard 100 charts. The single SAIL
by AWOLNATION became 6X Platinum which meant sales of over 6 million units and created a record for the
longest standing record by an independent artist. The records have also won numerous awards at the A&M
Music awards, have been nominated for Grammy awards and been featured on multiple movies, games etc.

Further Red bull Records also lists the songs on various streaming platforms, Spotify, Apple Music to name a
few. These streaming platforms pay the artists a varying number based on the number of streams of their
songs. The latest reports suggest the following, with YouTube being the cheapest at $0.00069 for one
stream. Spotify is a bit better at $0.00437. Apple Music is solid with $0.00735. Tidal upholds the best
position for artists at $0.01250 per stream. Amazon Music moderate at $0.00402. 19

When it comes to the business aspect for Red Bull Records, they make money from sales of the units,
merchandise sales, commission on concert ticket sales, earnings from streaming services and lastly they
charge a retainer to the artists. Furthermore, with increasing its global presence, it has signed a contract
with Sony Music which would distribute their records outside Japan, concentrating on Pacific region
comprising Australia and North America.20

The record industry is guided by technology, more so than any other part of the music business. Getting a
record from the studio to the final customer used to be a lengthy and costly process. Now, an album can be
produced on a laptop, and digital distribution via streaming has a zero cost — the structure of the recording
chain itself has radically changed. Red Bull Records chips in by Scouting for Talent, funding their music and
marketing the same via its preexisting base of RedBull customers. They display their music at their events

18 "About Us - About – Red Bull Records." https://redbullrecords.com/about/. Accessed 28 Jun. 2020.

19 "Here's how much a 'platinum' song nets you on different ...." 17 Jun. 2019,
https://happymag.tv/heres-how-much-a-platinum-song-nets-you-on-different-streaming-services/.
Accessed 28 Jun. 2020.
20 "Sony Music to distribute Red Bull Records worldwide outside ...." 31 Jan. 2015,
https://www.musicbusinessworldwide.com/sony-music-distribute-red-bull-records-worldwide-outside-
japan/. Accessed 28 Jun. 2020.

13
such as RedBull Stratos, at F1 races to name a few. They also license their music to events, movies, games for
additional fees that are then distributed amongst RedBull and their artists.

CONCLUSION

Red Bull as a brand has grown globally at an unprecedented rate, currently being valued at nearly $10 bn
within a span of just 35 just from its first sale in the year of 1987. The brand has always positioned itself as an
energy drink manufacturer and targeted the athletes that provide the greater appeal to the brand. The
brand has divested into multiple businesses ranging from Football to Formula 1 seemingly unconnected in
their fields, but have always been united as being a front to market their core product “ Red Bull “. The
unique tagline “It gives you wings” has also supplemented the efforts of marketing very well.

The brand has always divested into sports/fields that have athletes in them. The diversification has generally
started as a promotional activity which later became commonplace, post which the brand seeked to invest
and create a separate brand in that field itself. The rewards have correspondingly been very well as we can
see from the financial statements of Red Bull. Below we have a chart depicting the tweets that Red Bull got
when they did Stratos, a human jump from space sponsored by them. The next chart depicts the sales figure
for the brand during the year.

21

The jump garnered the brand such a foothold that their sales grew from $4.25 bn in 2011 to nearly $5 bn in
2012, a jump of nearly 17.5% y-o-y. Furthermore Red Bull became the first constructor in F1 to win 4 titles in
a row since Ferrari in the year 2013-14. Their football team RB Leipzig on the other hand secured back to
back promotions to play in the German Top League in 2015-16. The results of this increased awareness can
be seen in the revenue jump of nearly 15.5% from $5.11 bn in 2014 to nearly $6 bn in the year 2015. This can
be conclusive evidence that the increased brand awareness through their diversification process has resulted
in increased sales and profits for the company. Red Bull have also been prudent investors in their respective
fields, generally buying out struggling teams from the bottom of the pyramid and then pumping investments

21 "• Statista - The Statistics Portal for Market Data, Market ...." https://www.statista.com/. Accessed 29
Jun. 2020.

14
at a steady rate to ensure the quickly became their face in that field. Examples include buying out fifth
division side SSV Markranstädt in the German footballing market, buying Jaguar F1 for a symbolic sum of $1
in year 2005 to New York Red Bulls in 2005. Each team were struggling to make an impact in their field, with
Jaguar F1 on verge of collapse, New York Red Bull unable to win a championship neither qualify for
champions league and SSV Markranstädt unable to secure promotions. In a span of less than 10 years, each
team has gone on to become a top contender in their field with many winning titles and championships. This
shows their proficiency in analyzing and investing funds to generate brand awareness. A clue can be found in
the names of all their acquisitions which either have their initials in their name or the entire name “Red Bull”
in their name.

The above image shows the progress Bundesliga has made in viewership over the past, thereby increasing
the branding of Red Bull globally.

Hence we conclude that Red Bull as an energy drink maker has successfully divested to increase their brand
awareness through acquisitions in sports and allied fields. Each of the investments has later even turned out
to be a separate entity tasked with the dual purpose of improving the Red Bull brand as well as becoming the
top contender in their field.

15
 APPENDIX

Appendix 1. Internal Factor Evaluation matrix (IFE)

Rating scale – 1 (Very Weak Strategic Response) : 4 (Very Strong Strategic Response)

S. No. Internal Factor Weight Rating Score

Strengths

1 Brand Power 0.083 4 0.332

2 Marketing strategies 0.1245 3 0.3735

3 Geographic presence 0.083 4 0.332

4 Supplier Reliability 0.0415 3 0.1245

5 Diversification 0.1245 3 0.3735

6 Consumer relationship and satisfaction 0.0415 3 0.1245

Weaknesses

1 Product range and diversity 0.1245 2 0.249

2 High price 0.083 2 0.166

3 Workforce attrition 0.0415 2 0.083

4 R&D and Innovation 0.083 2 0.166

5 Limited Production facilities 0.0415 1 0.0415

6 Negative publicity and misconceptions 0.1245 3 0.3735

Total 1.0 2.739

Appendix 2. External Factor Evaluation matrix (EFE)

Rating scale – 1 (Very Weak Strategic Response) : 4 (Very Strong Strategic Response)

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 S. No. External Factors Weight Rating Score

Opportunities

1 Emerging Markets 0.135 4 0.54

2 New and diverse products 0.1 3 0.3

3 Established position as world leader and brand 0.125 4 0.5

loyalty

4 Entry barrier is high in energy drink industry 0.095 2 0.19

5 Shift in societal mindset 0.08 3 0.24

6 Environmentally friendly 0.065 3 0.195

Threats

1 Intense rivalry in energy drink industry 0.13 3 0.39

2 Staleness 0.07 2 0.14

3 Industry and health regulations 0.11 3 0.33

4 Negative publicity and misconceptions 0.09 3 0.27

Total 1.0 3.095

Appendix 3. Financials

17
 The above Image shows the sales for Redbull as a group from the year 2011-17

Globally in the energy drink industry, Redbull has a comfortable lead over Monster Energy, its nearest
competitor.

18
 Appendix 4. Milestones Red Bull

19
 Appendix 5. Multi-structure Red Bull

20
 Appendix 6. Economies of Formula 1 for the 2015 season 22

22 "The economics of Formula 1 - Raconteur." https://www.raconteur.net/infographics/the-economics-

of-formula-1. Accessed 28 Jun. 2020.

21
 Appendix 7. The cost of placing a sponsor advertising on Red Bull cars23

23 "The economics of Formula 1 - Raconteur." https://www.raconteur.net/infographics/the-economics-

of-formula-1. Accessed 28 Jun. 2020.

22