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.”