You’ve probably had that feeling when you’re tired, but you’ve got to stay awake, so
you pop open an energy drink and boom, you’re hit by that familiar rush of energy.
It’s this feeling that has given rise to an industry worth approximately 64.7 billion
dollars as of 2015, and so this week’s Behind the Business video is dedicated to the beverage
that made all of that possible, Red Bull.
Surprisingly, Red Bull actually comes from Thailand.
Now, Thailand is a country that’s not particularly known for its political stability.
In fact, since 1912 Thailand has experienced a total of 21 coup attempts, about half of
which ended up being successful, for an average of one coup every 5 years.
The latest edition, by the way, was in 2014, but since their king died less than a month
ago, we’ll probably be seeing another coup attempt pretty soon.
Although today Thailand is a medium-income country with the 20th largest economy in the
world, for most of the 20th century it was extremely destitute.
Over 70% of the population lived in rural areas, and the average person got by on $2
a day.
The region of Thailand that interests us is the Phichit province, located in the center
of the country.
It is there that in 1923 a man named Chaleo Yoovidhya was born to a family of duck herders.
As you can imagine, herding ducks isn’t a very profitable business, and Chaleo grew
up in poverty with minimal education.
He was the third of five children, and as soon as he was old enough, his parents sent
him 330 kilometers south to work in his older brother’s chemistry shop in Bangkok.
Chaleo worked there as an antibiotics salesman, and over the years he learned a lot about
chemistry and marketing.
In 1962 he had saved enough money to start his own company, TC Pharmaceuticals.
Chaleo ran his business well, but in the early 1970s he made a very curious observation.
He noticed that the majority of energy drinks in Thailand at the time were foreign imports:
in fact, the most popular one, called Lipovitan-D, came from Japan.
These drinks were marketed mainly to the wealthier residents of Bangkok, which at the time was
Thailand’s largest international port and so most foreign imports went through it.
Chaleo realized, however, that the wealthy people of Bangkok weren’t the ones who would
need energy drinks the most.
Having come from crippling poverty himself, he knew all too well what it meant to be a
low-paid worker pulling tiresome night shifts.
Chaleo set about creating an energy drink of his own, and his first step was to analyze
the composition of competing drinks.
The primary ingredient in most energy drinks, including the ones sold in Thailand during
the 1970s, is a compound called taurine.
Now, taurine is a chemical of huge significance for the human body: it’s necessary for the
function of your cardiovascular system, skeletal muscles and central nervous system.
Contrary to the claims that you might find on social media, taurine isn’t made of bull
semen.
The reason it’s called taurine is because it was first isolated from ox bile.
Not only is taurine essential for the function of the human body, it’s a compound that
we naturally synthesize and to be honest, we should be glad about that.
Unlike us, some mammals can’t produce taurine on their own and have to get it from external
sources.
I’m looking at you, cats.
But even though we can produce small amounts of taurine on our own, dumping extra taurine
into your bloodstream can give you a significant performance boost, especially if you’re
sleep deprived.
It is precisely for this reason that Chaleo chose taurine as the primary compound of his
energy drink.
He also added caffeine to serve as a stimulant, a bunch of B vitamins to support cell metabolism,
and two forms of sugar to provide a source of energy.
With the chemistry figured out, Chaleo’s next step was to design his brand.
He wanted to convey the strength and potency of his drink, and so for his logo he chose
to depict the gaur, a wild bovine species native to Southeast Asia.
Gaurs are actually the largest living bovines, with adult bulls reaching up to 7 feet in
height and weighing over 3,000 lb.
Chaleo painted two red gaurs charging against each other in front of a golden disc, and
he called his drink Krating Daeng, which unsurprisingly means Red Gaur in Thai.
Having worked as a salesman for most of his life, Chaleo knew very well how to market
his beverage.
Instead of advertising in urban areas like Bangkok, Chaleo focused his efforts on the
provincial regions of Thailand.
One of his best ideas was to sponsor local Muay Thai events.
Muay Thai is Thailand’s most popular martial art, whose origins date back to the 16th century.
It was and still is an integral part of Thai culture, and it was actually the foundation
upon which the Japanese developed kickboxing in the 1960s.
Muay Thai became prominent internationally in the 1970s, and Chaleo managed to harness
this rising wave of popularity for Krating Daeng.
Thanks to a series of key event sponsorships through Thailand, in 1976 Krating Daeng was
off to a phenomenal start.
By the end of the year it had become the second most popular energy drink in Thailand, behind
only Lipovitan-D, which it managed to overtake just one year later.
Chaleo was lucky because from the 1970s up until the 1990s Thailand experienced a period
of unprecedented economic growth.
It’s GDP quadrupled, per capita income tripled, and Thailand was on its way to becoming an
economic powerhouse rivaling the likes of Taiwan and South Korea.
Krating Daeng became Thailand’s unofficial beverage during the boom years.
Unlike the foreign energy drinks, Krating Daeng captured the national spirit and became
a symbol for the perseverance of the working man.
At this point you might be wondering, “Well hold on a minute, wasn’t Red Bull actually
from Austria!”
Technically, you’re right.
I mean, if you open Red Bull’s website, that’s pretty much what they say.
You shouldn’t really look at a company’s website for an unbiased account of its history,
though.
Here is what actually happened: While Krating Daeng was conquering Thailand’s
energy drink market, an Austrian man named Dietrich Mateschitz was struggling to work
as a salesman.
He didn’t come from a particularly wealthy family:
his parents were primary school teachers, which is rather ironic considering it took
him 10 years to graduate from university with a marketing degree.
He worked for half a dozen companies, including Unilever, before finally landing at Blendax,
a German-based company notable for its toothpaste.
In 1982 Dietrich travelled to Thailand for, *ahem*, business, of course, and after his
flight he felt very sleepy so he decided to buy an energy drink.
The drink he bought was Krating Daeng, and to his surprise it not only woke him up, but
it also cured him of his jet lag.
Dietrich got hooked immediately, drinking as many as 8 cans a day, and he liked the
drink so much he decided to try to import it back to Austria.
In 1984 he approached Chaleo with an offer: both of them would invest half a million dollars
each into the establishment of an Austrian company that would distribute Krating Daeng
internationally.
Dietrich would be in charge of the new company’s operations, while Chaleo would continue to
run TC Pharmaceuticals and Krating Daeng back in Thailand.
Dietrich’s first task would be to westernize Krating Daeng and make it appealing to its
European clientele.
He left the basic formula pretty much the same, and the only big change he made was
carbonating it.
Dietrich liked the brand’s overall design, but instead of going for its name’s literal
translation, he went for the more generic Red Bull.
In many ways Dietrich was faced with the same marketing challenge that Chaleo had overcome
a decade earlier.
Krating Daeng was successful because it represented the spirit of its buyers, the working class
of Thailand.
Unlike Thailand, however, the vast majority of Europe had a pretty decent lifestyle, so
Deitrich had to take a different approach.
He knew that Red Bull would work best as a party drink, but had to figure out how to
market it to a young generation of people who were firmly against traditional forms
of advertising.
This is where Dietrich struck gold.
He paid students to have their Volkswagen Beetles or Mini Coopers redone with large
Red Bull cans on top, and he also hired students to serve as “brand managers”.
These “brand managers” were essentially paid to throw huge parties, where they would
distribute free Red Bull cans to promote the brand.
From these parties have emerged dozens of cocktail recipes using Red Bull, like the
Vod-Bomb, the Jumping Jack Flash, and Liquid Cocaine.
As you can imagine this marketing strategy was brilliant, and during the first year of
its launch in 1987, Red Bull sold over a million cans in Austria.
From then on it spread like wildfire, hitting the shelves of Hungary and Slovakia in 1992
and Germany and the UK in 1994.
By the time Red Bull entered the US in 1997, it was selling 1 million cans every day.
During this dramatic expansion Dietrich developed another ingenious marketing tactic.
As an avid sports enthusiast and a proud owner of a pilot’s license, Dietrich was well
aware of the rise of extreme sports during the 1980s.
That’s one of the reasons why he gave the drink its emblematic slogan: “Red Bull gives
you wings”.
Dietrich’s first serious venture into the world of sport came in 1991 when he organized
the first Red Bull Flugtag in Vienna.
The event brings together competitors from across the globe who try to fly their homemade
human-powered flying machines, usually with minimal success, but great entertainment value.
The success of Flugtag convinced Dietrich to start hosting other sports events, and
to that end he’s been spending an ever increasing amount on this alternative marketing strategy.
In 2011, for example, Red Bull’s marketing budget amounted to 2.1 billion dollars, a
stunning 84% of their gross profit.
The list of events organized by Red Bull is truly impressive, and it features sports ranging
from freestyle motocross to downhill ice skating.
Red Bull has also acquired five soccer teams, including the New York Red Bulls, and three
stadiums to go along with them.
Over the years Red Bull has bought or sponsored teams across many different sports, but their
most notable acquisitions by far are their two Formula One teams.
That’s right, they’re bankrolling not one, but two teams participating in one of
the most expensive sports in history.
In 2011 Red Bull spent a third of their entire marketing budget on their Formula One teams,
which has more than paid off considering their impressive track record.
Scuderia Toro Rosso is the junior Red Bull team, which they bought from Minardi in 2005.
The best drivers from Toro Rosso usually advance to the senior team, Red Bull Racing, which
Dietrich acquired in 2004 from the Ford Motor company.
Red Bull Racing has won a total of 8 titles, all thanks to their star driver Sebastian
Vettel.
Today Red Bull is bigger than ever, with a 43% global market share despite the rise of
copycat brands like Monster and Rockstar.
Interestingly enough in 2013 they got hit by a class-action lawsuit that claimed their
“Red Bull gives you wings” slogan was tantamount to false advertising.
Of course, it’s doubtful that anyone ever bought a Red Bull can with the hope of eventually
growing wings, but hey, it’s the US so why not start a lawsuit, right?
Eventually Red Bull settled for 13 million dollars, about half of which ended up in the
hands of the victims whose dreams of growing wings had been shattered.
On a final note I’d like to share with you footage from the Red Bull Stratos project,
which in 2012 helped Felix Baumgartner skydive a record-breaking 24 miles from the stratosphere.
I recommend watching it to the end, since I’ve got a few special surprises for you
guys after, but for now, enjoy: Hey everyone, thanks for watching!
We hit 10,000 subscribers a few days ago and we've got a huge update for you guys in our
latest update video, which you can watch by clicking here.
Basically the channel is getting its own subreddit, a new editor, and a Patreon page.
In the update video I spend a lot of time explaining how all the different reward tiers
on Patreon work, sort of like a tutorial for those of you not familiar with the platform.
If tutorials aren’t really your thing though, you can also visit our Patreon page directly
and support us by clicking here in the middle.
In case you missed it, you can watch our previous video by clicking over here.
It’s about the history of Ferrari, from their earliest racing endeavours in the 1920s
to the latest special edition cars they’ve announced for their 70th anniversary.
You can also visit our subreddit and follow us on social media by clicking down here,
and as always: stay smart.