Red Bull Back In The Herd, But Ready To Bust Out

IT STARTED AS ONE product, in one flavor, in one package size. Little has changed since then, but to call Red Bull just an energy drink company today would be a disservice to the brand.

While other independent beverage companies have aimed to be the next Honest Tea or AriZona, Red Bull has styled itself more broadly, in the fashion of Virgin. Through a complex array of license and ownership agreements, Richard Branson’s erratic lifestyle brand has moved from a music label to a marketer of mobile phones, soft drinks, an airline, even a hot air balloon service. Red Bull, which makes a point of owning its endeavors, has yet to add internet florists or comic book companies to its portfolio (though it does now have a magazine, the Red Bulletin), but variations of its crashing bulls logo have appeared on everything from an international breakdancing competition to a record label to a disparate collection of sports franchises.

But, after two decades of growing the brand into sports and entertainment realms, Red Bull has returned to its core: beverages. In the last two years, while still pushing its freewheeling ethos into ever-more diverse cultural pockets, it has tinkered with its packaging, retooled its retail strategy and even shrugged off a fierce resistance to brand extensions to roll out two new beverage lines.

Red Bull has always intimated that its actions take place according to a grand design, but a survey of the competitive landscape makes it clear that external factors have likely played a key role in forcing the company’s hand. Its energy drink isn’t the only big player in the game anymore – in fact, since the emergence of Monster Energy, it doesn’t even sell the most product, although it continues to pull in the most cash. And while it’s built a strong U.S. distribution system, its biggest rivals, Monster and Rockstar, have struck deals with Coca-Cola and Pepsi.

For a brand that resisted adding so much as a new can size, having to vary product lines represents a big change. And with change – particularly the involuntary kind – comes the risk of failure. Already, there have been grumbles from distributors and retailers that the company waited too long, and that the kinds of products it has rolled out have yet to make a big splash.

Still, the brand is familiar with risk, from staking its marketing on a stable of adrenaline-fueled athletes to its non-traditional, guerilla entrance to the U.S. market. It is the marketing of risk that brought it to prominence, and the company is sticking with it.

“As a principle, we feel that it is worthwhile to take everything into question, to bypass traditionally strategies and mainstream activities and to focus on finding alternative concepts,” said founder Dietrich Mateschitz, in a recent e-mail interview.

Now, as the energy drink category matures and Red Bull strains to adapt, the company will find out if its insistence on playing on the edge will pay off. Given the big returns Mateschitz has received on past wagers, it’s probably not a good idea to bet against his new game.

SIMPLY COLA

The beverage world did a collective double-take last year when Red Bull announced the launch of a new, non-energy product: Red Bull Simply Cola. The premium offering, packaged in 8 and 12 oz. slim cans that can cost more than a 20 oz. Coke or Pepsi, boasts an all-natural formula and bears almost nothing in common with Red Bull’s core product. Sure, the cola packs slightly more caffeine (in this case, derived from coffee beans) than a mainline cola, but far less than an energy drink.

The move drew skepticism from beverage industry insiders – with one distributor saying it could either be product of the year or “shuffled off to Big Lots” – and continues to be defined by sharply divided opinions. Despite an unveiling that sent members of Red Bull’s “Air Force” diving off the roof of MGM Grand’s Signature Tower, even some of Red Bull’s self-identified fans aren’t convinced. Christina Mayrhofer and Jake Justice both list themselves as fans of the brand on Facebook. Both said they were excited when they heard about the product. Now, Mayrhofer says Simply Cola is her new favorite beverage, but according to Justice, “the flavor just didn’t do it for me.”

Why the company chose a natural cola remains a bit of a mystery. Red Bull’s promotional materials claim that Mateschitz’s dream of the cola extend back to the same time that he conceptualized Red Bull. But that was before CSDs began their highly publicized decline. So why now? Asked in a recent email interview what drove the decision, Red Bull spokeswoman Patrice Radden would only answer with a question of her own.

“Why not?” she said. “It’s an attractive, established, rather large category.”

Unfortunately, that nonchalance seems to have spilled over into the consumer side of the equation. The on-premise, late-night success that helped fuel the energy drink’s growth has not worked as well for Simply Cola. According to Las Vegas-based night club promoter Rob Castillas, Red Bull unsuccessfully pushed the new product as an up-sell in Vegas night clubs. For $2, club goers could substitute Simply Cola for whatever the club had on the soda gun.

“The consumers they tried to push it to didn’t like it,” Castillas said.

The product has also had trouble in the traditional beverage stronghold of convenience stores. Dana Sump, the beverage manager for the 1,400-plus location Casey’s General Store chain, has stocked Red Bull Simply Cola in each of his stores – even giving the product as much as a full shelf.

“I’m not seeing a ton of sales on it,” Sump said.

Sump plans to give the product a fair shake – up to an 8-month trial – but, he said, he “might have to go back to Red Bull and have the conversation they don’t want to have.”

Casey’s is based in Iowa, certainly not the sweet-spot for a premium, all-natural CSD, but Simply Cola also found a spotty reception in New England, a region with a high concentration of premium consumers. In one small-format convenience store in Boston’s working-class neighborhood of Dorchester, Simply Cola arrived with a branded barrel cooler placed just feet from the cash register. A few weeks later, the cooler was gone. So was Red Bull Simply Cola.

According to Rob Scoble, the Red Bull Off-Premise Manager for Auburn, Mass.-based Atlas Distributing, the cola is sticking in about half of his Red Bull accounts – mostly in affluent areas.

At around $1.50, “It’s a high price point for the 12 oz. can,” Scoble said.

Nevertheless, Scoble said the sales numbers were good for a new product, and “It is selling through” in the stores that give it “the visibility that it needs.” But, he added, retailers expected it to fly out of the store like its caffeine charged predecessor.

Scoble said he’s more excited by Red Bull’s second new product, Red Bull Energy Shot. The two SKU line packs the caffeine of an 8.3 oz Red Bull into a slim-can-shaped 2 oz. bottle. Red Bull has yet to complete its national roll-out, but the shot has received overwhelmingly positive reviews.

The product also has the advantages of playing to Red Bull’s strength – energy – and entering a more favorable market environment. Simply Cola amounts to an ambitious, but small, entry into a large, mature market dominated by corporate titans Coke and Pepsi. The shot, on the other hand, enters a small, but quickly maturing category with only one proven success story: 5-Hour Energy.

“Red Bull is a great, globally recognized brand. They have powerful distribution and are going to be a fierce competitor,” said Carl Sperber, vice president of marketing for Living Essentials, maker of 5-Hour Energy. “[But] NOS, Full Throttle, Rock Star, Amp and Monster have all found it hard to gain traction in the shot market. I don’t know if Red Bull will be able to overcome the problems those other big brands have experienced.” COMPETITIVE ENVIRONMENT

While Red Bull has been playing with new products, it has also made other changes to its core line, and to the way it does business.

Giving ground to distributors and retailers, Scoble said the company has relented somewhat on space demands. By way of example, he noted that Red Bull formerly reserved price breaks only for retailers that set aside several shelves for Red Bull products. Now the company sets those discount benchmarks much lower, and has rolled out a two for $4 pricing plan on 8.3 oz cans – a discount from the suggested price of $2.19. Sump said that plan has been so successful that about 40 percent of the 8.3 oz. Red Bulls sold in Casey’s General Stores sell in multiples.

“[Red Bull is] beginning to realize that they need to adapt to their consumers… instead of setting standards,” Scoble said. “They realize that they’re not the only game in town anymore. Once you reach your peak, you need to do something to take that peak to the next peak.”

And finally, they’re starting to seriously chase that other peak, the 16 oz. package. Shortly after announcing its energy shot, Red Bull started shipping its 16 oz. SKUs in new packages. The new cans, taller and slimmer than their predecessors, echo the proportions of the company’s ubiquitous 8.3 oz. can, uniting the entire line under a similar packaging aesthetic.

It’s an important change because Red Bull has yet to make major inroads on the 16 oz. side, where Rockster and Monster have climbed to the top of the cooler.

Rockstar and Monster may have chewed into Red Bull’s market share, but, Red Bull has an important advantage: it’s what people think of when they think of energy drinks.

YouGov is a company that measures the public’s perception of brands across the spectrum of packaged goods: in its most recent data, measured via a “Brandindex” poll, 53.2 percent of male consumers between the ages of 18 and 34 had Red Bull on their minds – far ahead of Rockstar, at 33.9 percent, and Monster, at 23.3. Among female consumers, Red Bull had – 37.6 percent – ahead of Rockstar’s 21.6 and Monster’s 19.8.

“Red Bull is far ahead of these competitors in the amount of noise that it’s generating,” said Ted Marzilli, YouGov’s senior vice president of Brandindex.

And if there’s one thing that Red Bull has always relied on, it’s that ability to generate noise.

BIG AIR, BIG EVENTS

To that end, Red Bull has made an effort to raise the profile of its athletes and events while better integrating them with the brand. The company has long hosted the curious: soap-box derby races and the infamous “Flugtag,” where competitors hurl themselves and their home-made flying machines off a pier.

Now the brand has raised the stakes, creating big, flashy events with television airtime.

In February, Red Bull built a nine-story snowboard ramp in Manhattan’s East River Park and offered a $100,000 purse to 16 of the world’s best snowboarders, including Olympic gold medalist Shaun White. The event aired on NBC, and showed world-class athletes dressed in Red Bull gear hurtling through the frigid New York night to land on an A-shaped mound – bearing Red Bull’s logo – and then scraping to a halt in front of a Red Bull banner.

Other publicity stunts, like the live “New Year No Limits” event on ESPN featuring motocross rider Robbie Maddison jumping the Arc De Triomphe in front of Las Vegas’ Paris Casino, have taken on new life as TV commercials. Whether it’s Maddison peeling off his Red Bull branded-helmet, looking into the camera and declaring “Welcome to my world, the world of Red Bull,” or triumphant break-dancer Ronnie Abaldonado, surfer Ian Walsh or Red Bull Air Race pilot Kirby Chambliss, Red Bull’s internal editing team is trying to integrate its otherwise scattershot promotional ventures into a bold campaign that differs greatly from the squiggly, enigmatic animated commercials on which the brand previously relied.

In addition to moving their athletes to the fore, they’ve also added mainstream talent. The brand has long sponsored athletes in fringe sports, giving them small amounts of money to continue doing their thing – albeit while wearing Red Bull gear. But, earlier this year, Red Bull signed a sponsorship deal with Reggie Bush, running back for the New Orleans Saints and Red Bull’s first athlete in one of America’s top four professional sports leagues.

AWAY FROM THE FRINGE

That move came as little surprise to Vik Venkatraman, a former New York-based Red Bull brand manager and the founder of Star Power 100 percent Starfruit Juice. Venkatraman served with the brand from 2005 to 2006, and said he watched it strain to edge into the mainstream while keeping its personality intact.

During his time with Red Bull, he said, the brand agonized over the addition of 16 oz. cans. Monster, Rockstar and Full Throttle had proven that the larger packages worked – so well, in fact, that they rapidly eroded Red Bull’s market share – but Red Bull pegged part of its identity to its smaller packaging.

“[The company spent] at least eight months to a year trying to figure out whether they should do this thing or not – how to do it in a way that would make the most sense,” Venkatraman said.

In Venkatraman’s view, having a small number of total products – at the time, two formulations in two can sizes – allowed Red Bull to have the kind of focus “that you can’t have when you have 10 SKUs to think about.”

Because the brand didn’t have to explain an array of flavors or functions, it could focus on building Red Bull cars, dispatching guerilla sampling teams, assembling its stable of athletes and sports franchises and creating its unique array of airborne events.

Nevertheless, while it did that, flavors and functions became high priorities for many consumers.

Ticket prices and prize purses may pay back the company’s investment in its soccer and NASCAR teams, but Red Bull has spent considerable time and money crafting impressive (and sometimes bizarre) spectacles that don’t create a visible revenue stream. In the case of Red Bull Big Tunes, the company’s contest for music producers, Red Bull even paid to air the competition on BET.

Those endeavors build the brand’s image, Radden argues, and it’s hard to argue that they don’t.

But after all that effort to turn Red Bull into a lifestyle instead of just a beverage, the company has come to the grips that there are choices out there when it comes to both. After years of promoting the lifestyle, it’s coming to grips with the importance of the beverage. Maybe it’s found that you can’t have one without the other. •