Red Bull is an energy drink brand owned by the Austrian company Red Bull GmbH. The company was founded in Austria in 1984 by Dietrich Mateschitz and Chaleo Yoovidhya and it has since become one of the most recognizable brands in the world.
Red Bull enjoys a dominant market share and, with a value of $8.143 billion, is the third most valuable soft drink brand behind Coca-Cola and Pepsi.
Understanding Red Bull’s business model
Red Bull’s business model is based primarily on experience selling. The company is associated with extreme sports such as Formula One and motocross and even sponsored Felix Baumgartner’s world record jump where he broke the sound barrier in freefall.
The company has operated the Red Bull Air Races (until 2019) and the acrobatic flying event known as Red Bull Flugtag. The company also owns teams in other sports such as NASCAR, football, and ice hockey.
No matter the sport, Red Bull targets predominantly younger males who desire the Red Bull experience and lifestyle. This means the company focuses on the perception of its brand and is less interested in product innovation.
Below, we’ll explain the key components of Red Bull’s business model in more detail.
The Red Bull experience
When Red Bull associates itself with extreme sports, it enables consumers to feel active, excited, brave, and trendy when they consume a beverage that bears the same emblem as an F1 team, BMX rider, or skateboarder. In this way, Red Bull is both an experience and a way of life.
Red Bull products are about more than simply quenching one’s thirst. The company’s oft-repeated slogan “Red Bull gives you wings” revolves around the idea that its products provide consumers with the extra push they need to realize their dreams or conquer their fears.
The company’s affiliation with extreme sports means it is also associated with athletes who embody desirable traits that enable them to succeed in their endeavors. When consumers attend a competition, for example, they associate these traits with the brand and not necessarily with the consumption of Red Bull itself.
Red Bull can charge premium prices for its products because it has created a brand image and reputation associated with quality and uniqueness.
Here are three factors that contribute to Red Bull’s premium price strategy:
Product differentiation and packaging
The Red Bull energy drink formula is different from competitor products which creates a perception of quality and uniqueness. The company’s exact formula is a trade secret, but the drink is known to contain caffeine, four B-group vitamins, the amino acid taurine, and mineral water sourced from the Austrian and Swiss Alps.
The iconic Red Bull product packaging also contributes to a sense of quality and uniqueness. The tall, thin, aluminum can quickly became a hallmark of the company, enabling it to stand out from its competitors and as a pioneer of energy drinks.
The can’s portability, durability, and simple, uncluttered design also add a premium feel. The same can also be said for its relatively small volume of 250ml, which Red Bull uses to communicate that its product is about quality, not quantity
Many of the sports Red Bull sponsors are niche in the sense that consumers find it easier to connect with lesser-known (and thus more relatable) athletes. Others sports that the company affiliates itself with, such as football, have broader appeal but passionate fan bases.
In either case, the company creates a sense of community and belonging among those with similar interests. This is supported by a global network of sponsored athletes and a strong social media presence that creates a perception of exclusivity around Red Bull products.
- Red Bull is an energy drink brand owned by the Austrian company Red Bull GmbH. The company was founded in Austria in 1984 by Dietrich Mateschitz and Chaleo Yoovidhya and it has since become one of the most recognizable brands in the world.
- Red Bull’s business model is based primarily on experience selling. The company is associated with extreme sports such as Formula One and motocross and also owns various professional sports teams.
- Red Bull targets predominantly younger males who desire the Red Bull experience and lifestyle. When they consume Red Bull, they align themselves with extreme sports athletes who embody desirable traits. The company’s business model is also supported by product differentiation, product packaging, and a community that fosters exclusivity.