Red Bull has aligned its business model with its operating model
In 1987 an Austrian entrepreneur named Dietrich Mateschitz created an entirely new beverage category and a global market for energy drinks. Mateschitz discovered the drink as a Thai jetlag antidote during a business trip to Bangkok. Motivated by the effectiveness of this elixir called Krating Daeng, which translates to Red Bull from Thai, Mateschitz licensed the product from the its Thai manufacturer, Chaleo Yoovidhya.
The Business Model
Red Bull offers a caffeinated energy drink that the consumer perceives as fun, active, and edgy.
In 2014 Red Bull sold 5.612 billion cans of energy drinks and made €5.110 billion in revenue, splitting the profits with its Thai licensee.
The Operating Model
The Austrian company does not produce the energy drink, their Thai licensee does. While Mateschitz tweaked the original formula to appeal to the European palate, his company is not a drink manufacturer. Instead, Red Bull’s capital and labor are expended to create and maintain the strong brand image of the Red Bull name.
Red Bull sponsors a number of extreme sporting events including cliff diving, BMX, skiing, flying, downhill and free-ride mountain biking and skateboarding. Red Bull’s logo can be often spotted on the parachutes of base jumpers and wing-suiters. In 2012, Red bull even sponsored the world record-breaking skydive in which Felix Baumgartner broke the sound barrier in freefall.
Beyond sponsorship, Red Bull owns several extreme sporting events including Flugtag (an acrobatic flight competition), the Red Bull Air Races, and teams in multiple sports including F1, NASCAR, soccer, and ice hockey.
The Company Has Wings
Red Bull’s strong focus on the image of the brand rather than on product innovation aligns well with its customer value proposition.
Through the sponsorship and ownership of extreme sports teams, Red Bull continuously engages with the customer in deeper way than with traditional advertising: it allows customers to feel active and edgy by drinking from a can that bares the same logo as a Formula 1 car, a skateboard, and a record breaking parachute. To leverage this feature of its operating model, Red Bull often sells energy drinks on the site of the events it hosts or sponsors.
Red Bull’s more recent choice to sponsor olympic athletes such as Lindsey Vonn have allowed Red Bull’s name to also be associated with victory and success. Instead of spending marketing dollars to get Red Bull on the back cover of Sports Illustrated, the company spends sponsorship dollars to get on the front cover, increasing the perceived value of the drink.
The yearly Red Bull Flugtag, in which participants attempt to fly home-made human-powered flying machines off a pier about 30 feet high over the sea, serves to engage more intimately with customers and create a fun event for Red Bull drinkers to engage in. By doing so
The results of the strong alignment between sponsoring extreme sporting events and selling an edgy product have enabled Red Bull to remain the market leader in its category.
The Economist – Selling Energy [http://www.economist.com/node/1120373]
Red Bull Company Website [http://energydrink.redbull.com/company]
BBC Three – Secrets of the Superbrands (Food) [https://www.youtube.com/watch?v=zgQPZV31cAU]