How Red Bull Makes Money

Summary

Red Bull's global success extends beyond its 7.5 billion cans sold in 2019. The brand's unique marketing, including sports sponsorships and media production, creates a powerful image. Founded by Dietrich Mateschitz after a Thai energy drink eased his jet lag, Red Bull's strategic outsourcing and high-profit margins fuel its diverse ventures. However, with health concerns growing, the company's heavy reliance on its energy drink faces risks, prompting investments in sports teams and media to diversify its brand.

Takeaways

• 🌍 Red Bull sold 7.5 billion cans in 2019, reaching nearly every person on the planet.
• 🏎️ Besides the energy drink, Red Bull operates in sports with two Formula One teams, five football clubs, and an ice hockey team.
• 🎭 They also organize events and sponsor thousands of athletes, showcasing a diversified business model beyond beverages.
• 💡 The company's origin story began with Dietrich Mateschitz's experience with Krating Daeng, leading to the creation of Red Bull.
• 💸 Red Bull's strategic business model focuses on downstream activities, outsourcing production and logistics to concentrate on sales and marketing.
• 💰 They achieve high profit margins by selling each can for significantly more than the production cost, leveraging brand power.
• 🎉 Red Bull's marketing strategy targets the club scene and uses 'student brand managers' to promote the drink among young adults.
• 🚀 The company is known for its 'story-performing' approach, creating and producing its own content, exemplified by Felix Baumgartner's space jump.
• 📉 Despite significant marketing investments, Red Bull's revenue growth has slowed since 2012, highlighting the risk of relying on a single product.
• 🏋️‍♂️ Health and nutrition trends could pose a threat to Red Bull's core business due to the energy drink's association with obesity, insomnia, and diabetes.
• 🔄 Red Bull's investments in sports teams and media production aim to diversify and create additional revenue streams beyond the beverage sales.

Q & A

How many cans of Red Bull were sold in 2019?

In 2019, Red Bull sold 7.5 billion cans.

What other businesses does Red Bull operate besides selling energy drinks?

Red Bull operates two Formula One teams, five professional football clubs, one ice hockey team, and also organizes events like the Crashed Ice Challenge and the Wings for Life Run.

What was the inspiration behind the creation of Red Bull as an energy drink?

The Austrian businessman Dietrich Mateschitz was inspired by a local Thai drink called Krating Daeng, which helped him with jet lag, leading him to create Red Bull.

What was the initial challenge Red Bull faced when entering the market?

Red Bull initially faced the challenge of Western investors not seeing a market for the product outside of Asia, which led Mateschitz to create the market himself.

How did Red Bull overcome the initial ban in Germany?

Red Bull profited from the ban in Germany by gaining a reputation as an outlaw brand, which attracted young Germans to cross the border to Austria to buy the banned drink.

What is Red Bull's strategy for outsourcing production and logistics?

Red Bull outsources operations such as production and logistics, allowing the company to focus solely on the downstream activities of the value chain and commit resources to selling the drink.

What is the approximate cost for Red Bull to make one can of their energy drink?

Red Bull makes each can for approximately 9 cents.

How does Red Bull's marketing strategy differ from traditional advertising?

Red Bull's marketing strategy involves creating and performing their own stories rather than traditional advertising. They engage customers through sponsorships, ownership of sports teams, and their own media production.

What was the cost and estimated media value of Felix Baumgartner's space jump sponsored by Red Bull?

The project cost Red Bull 50 million USD, but the global reporting about the event was estimated to be worth approximately 6 billion USD.

How does Red Bull use its multiple football clubs to its advantage?

Red Bull uses its multiple football clubs to develop talent synergistically, allowing players to progress through the clubs from smaller leagues to the Champions League and eventually to Major League Soccer.

What is the current revenue contribution of Red Bull's beverage sales to their total earnings?

Beverage sales represent approximately 97% of Red Bull's total earnings.