October 14th, 2012 — millions of viewers watch as skydiver Felix Baumgartner ascends to the
edge of space, takes a small step, and then free falls about 120,000 feet down to Earth.
During his descent, he not only broke the sound barrier but a handful of world records as well.
However, this spectacle was not from NASA or Space X… When you look a little closer,
you see the unmistakable symbol of Red Bull.
Of course, this is just one of countless examples of Red Bull’s extreme and unorthodox
marketing strategies - they’re responsible for 10 story motorcycle jumps, snowboarding
down an active volcano, not to mention owning multiple racing, football and e-sports teams.
So how did this simple energy drink, which started out as an obscure,
medicinal syrup, become not only one of the biggest disruptors in
the beverage industry but also one of the best-marketed products ever?
By the end of 2022, the Global Energy Drink industry will be worth around $90 billion dollars,
and sitting on top of the caffeinated throne is Red Bull, who in 2021 alone sold more than
9.8 billion cans across 172 countries — more than one can for every person on the planet!
And yet despite this, Red Bull began from the most unlikely and humble of beginnings.
Chaleo Yoovidhya
was born in rural Thailand, and his parents were duck farmers who also sold fruit. They
had very little money, and couldn’t afford to give their children a formal
education. Thus Chaleo grew up working on a farm, with very little prospects.
However when his parents sent him off to Bangkok to go and work with his brother as
a pharmaceutical sales rep, he worked extremely hard, and saved up enough money that in 1956,
he was able to open his own small business which he called T.C. Pharmaceutical Industries.
Initially the business was designed purely to sell medicines, such as antibiotics he imported.
However, around this time, pharmaceutical companies in Japan had started creating
herbal syrups labeled “energizing tonics.” They were a big hit,
and soon started getting imported to Thailand as well.
After nearly ten years of running T.C. Pharmaceutical Industries,
Chaleo decided he wanted to create his own version of these energy tonics.
However Chaleo saw that the current products on the market were quite expensive and targeted
more towards wealthier consumers. Given that he came from poverty himself, he knew that it was
actually the blue collar working man who needed energy much more. Construction workers, farmers,
people doing lots of long physical labour which required constant attention and energy.
So after analyzing the formulas of other drinks on the market, Chaleo created his
own similar elixir containing caffeine, B vitamins, and a chemical called taurine. But,
what truly set Chaleo’s concoction apart from the competition was the inclusion of large amounts of
sugar, giving the syrup a more appealing flavor, and even more of an energy boost.
He named the beverage Krating Daeng. In Thai, Daeng means red, which, for him
symbolized perseverance. But Krating doesn’t technically mean bull. It actually means gaur,
which is a relative of the water buffalo, and the largest species of wild cattle in the world. The
reason for the choice is that Chaleo wanted the brand rooted in imagery of strength and power.
However, his new drink was hardly an overnight success. At the time,
products from countries like Japan and South Korea dominated the market.
But Chaleo’s decision to focus more on provincial and rural parts of Thailand,
unlike his competitors who focused on big cities like Bangkok, proved to be a wise choice.
To get things started, Chaleo gave some free samples to truck drivers who were
working long hours and needed help staying alert,
and pitched it as a stimulant to improve energy and concentration. It then steadily
grew via word of mouth and began to grow in popularity amongst Thailand’s working class.
Using the money from initial sales, Chaleo began sponsoring Muay Thai matches,
which was the most popular martial art in Thailand, and a big part of Thai culture.
This not only helped his drink get recognition, but created an association with high energy and
power. This was a great strategy, because most of the other energy drinks at the time
were pretty generic, whereas right from the start Chaleo focused on building a brand,
and his drink almost became a symbol of perseverance amongst the working class.
By 1980, his product had become a big success all over Thailand.
However, it was an unlikely encounter with an Austrian businessman selling toothpaste,
that would soon make this drink a multi-billion dollar global empire.
Whilst it was Chaleo who first created the drink that would later become known as Red Bull,
it was a man named Dietrich Mateschitz who helped the business become what it is today.
Dietrich had studied World Trade at the University of Commerce in Vienna. Although between partying,
traveling, and chasing girls, It took him 10 years to graduate. However he was
always known for his wild imaginative ideas, and after graduating had worked
his way up to become international marketing director of a German company called Blendax,
who manufactured products like skin creams, shampoo and toothpaste.
As part of his job Dietrich had to travel all over
the world. This meant many long days and nights of airports and flights.
On one particularly exhausting trip from Europe to Thailand, where he was meant to be attending
an important meeting, he felt so tired that he went into a local store and asked if there was
anything that could help him. It was here that he discovered Chaleo’s energy drink, Krating Daeng.
Dietrich tried it, and in just a few minutes he not only felt much more energized,
he no longer had his jet lag. He became an avid drinker of
the product - but at the time it was only available in Thailand.
Shortly after this, Dietrich read in a newspaper that the highest tax payer in Japan,
was another one of these energy drinks. This confirmed to him just how popular
these products were in Asia - and yet there was nothing really like it in the west.
Now to be honest, Dietrich had been getting kind of bored of his job at Blendax,
and so he decided to make a very bold move. He quit his well paying job,
and tracked down Chaleo, saying he wanted to go into business with him. Dietrich’s plan was to
take Chaleo’s energy drink international and introduce it to European consumers.
After a little persuading, the two men went into business together,
each putting in $500,000 dollars of their savings. They agreed Dietrich would run the
operational side, whilst Chaleo would continue to focus on the product side.
They both got 49% of the company, with the remaining 2% going to Chaleo’s son.
Dietrich’s first big decision was that they should form a new separate company for this
called Red Bull, which would be simpler and more memorable than the literal translation of Red
Gaur. And thus, in 1984, Red Bull officially was founded in Dietrich’s home country of Austria.
However, before launching, they did some customer research to test how European audiences responded
to the product… and the feedback was awful. Trial groups said the drink tasted ‘disgusting’.
Market research suggested the drink was too unhealthy and not appealing at all.
But the two Red Bull founders so strongly believed in the idea, that they pushed on anyway. They made
some important changes using the feedback though - like carbonating the drink and switching to
a slimmer sleek silver can which looked more premium, and distinguished it from competitors.
Dietrich also said that in order to feel like a premium product,
they had to have a premium price - and so they charged nearly double what consumers
were used to paying for other carbonated drinks. Pricing this high seemed like a
very risky move, but would later prove to be crucial to the company’s success.
They also decided on the now famous slogan “Red Bull gives you wings” to represent a product
that provides energy, focus, and potential. This would later cause controversy though,
but for now in 1987, Red Bull was finally ready to be released in the West.
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On April 1, 1987, Red Bull launched in Austria - and to create the premium feel Dietrich wanted,
the beverage was initially offered at trendy Austrian ski resorts.
To begin with, Red Bull had a very small team of just a single secretary and a six-person
sales force. And since they had an extremely small marketing budget, Dietrich knew he couldn’t afford
expensive TV ads or elaborate campaigns like other drink companies. Instead, he initially
relied on more creative lower cost marketing strategies to spread the word about Red Bull.
Firstly, they reached out to popular, charismatic, and influential college
students. They would then give them cases of Red Bull for free and have them drive
around campus in Mini Coopers decorated with enormous Red Bull cans on top. They also gave
these students money to throw parties where Red Bull was given out. The idea was that
these popular students would shape the buying habits of their friends and fellow students.
In fact, they even started hiring attractive women to be “Red Bull
Girls” and just hand out free drinks on university campuses.
Meanwhile, Red Bull salespeople, called “Musketeers,” offered free coolers to bars,
inspiring bartenders to feature the beverage in new cocktails,
which helped Red Bull become known as a mixer with alcoholic drinks.
Red Bull even began leaving empty cans in bars and nightclubs,
so that people would constantly see the logo and be curious to try the drink themselves.
All these tactics proved successful, and Red Bull sold over 1 million cans in the first year.
However, financially, they actually made a loss that year,
since they’d given away so many free products as part of these marketing
schemes. But Dietrich knew that investing in their brand, especially in the early stages,
would pay dividends later. And he was right. By the second year, sales doubled to 2 million cans,
and again to 4 million cans by the third year. Red Bull spread across Europe, and at one point got so
popular in Germany that they actually couldn’t produce enough cans to keep up with the demand.
Of course, despite the growth, competing in mainstream advertising like TV ads
was still a very expensive option. But Dietrich had always loved extreme sports,
and realized very few big companies seemed to be sponsoring these events, like for example
cliff diving. Sponsoring extreme sports helped sell red bull as more than just an energy drink;
but a lifestyle. Red bull became associated with daredevils and high adrenaline activities.
By 1997, Red Bull was ready for its US debut. Although by that point,
the energy drink market had become a $1.7 billion business, and thus a lot more competition had
entered the market. And unlike beverage rivals such as Coca-Cola, Red Bull has no secret,
patented formula. All the ingredients are clearly labeled on the can. And initially
Red Bull literally just offered one flavor, which typically performed poorly in taste tests.
And yet despite this, Red Bull sales continued to rise. In an interview,
Dietrich was asked why he didn’t try to make a better-tasting product. To which he replied that
Red Bull was never about the product itself, but building a brand around an experience.
You see at its core, Red Bull never set out to be a beverage company. It was a story-telling
company. The goal was to bring customers into that evolving myth, instead of trying to cram
a product into their lives. To achieve this, the company has taken great efforts to attach
itself to a growing collection of events, and spectacles that entice customers to the brand.
Red Bull spends far more than most companies on marketing - but instead of merely running ads
on why you should buy the drink or sponsoring a single event, Red Bull will purchase entire
sports teams, construct in-house media companies, and host world-class events.
It all began with Austrian Formula 1 legend Gerhard Berger who became Red Bull's first
sponsored athlete in 1989. But today, the company sponsors over 500 athletes,
daredevils, and adventurers, spanning the entire field of professional and
amateur sports — from football to Ice Hockey, Formula 1, and even E-Sports. Interestingly,
this has actually opened up other revenue streams for the company - for example they make money
from formula 1 prizes and sponsorships, giving them yet more money to re-invest in marketing.
But this long-term approach is extremely effective, because for example, by owning
a team like the New York red bulls, every time the media or fans are discussing the
team it’s naturally bringing red bull into the conversation and people’s subconscious.
The company even invented its own sporting events. The Flugtag, created in 2000,
is the German word for “flying day.” During this event Red Bull created,
hundreds of teams worldwide compete in homemade flying machines to see how far
their wild creations can fly. And if you’re wondering, the current record stands at 258
feet. By creating events in which its product can be served and its brand narrative can unfold,
Red Bull has again successfully turned expenses into a successful revenue stream all on its own.
Outside of the world of sports, Red Bull also sponsors art and music events such
as Lollapalooza and Austin City Limits. And of course, by 2012, the company was sending
daredevils to the edge of space to jump out and free fall at over 800 miles per hour! And despite
taking years to plan and tens of millions of dollars, it seems like it was worth it.
The YouTube video of this set a world record for most concurrent live streams, and has gone on to
reach well over 120 million views. After right this, the company saw global sales rise by 13%.
When Red Bull create these memorable events or set world records, they’re often talked about
or watched long after they happen, providing a great steady long-term return on their investment.
But here’s the most interesting and unique part of Red Bull’s strategy:
during all these events and spectacles the company puts on, they hardly ever refer to their drink.
For example with Baumgartner's record breaking freefall, most companies would probably have made
sure that when he landed he was seen drinking a can of red bull - but there was no mention of the
drink. And that’s because Red Bull’s advertising so often doesn’t feel like advertising.
Red Bull aim for brand recognition rather than actively selling their product. They try to make
something exciting for their audience to simply associate their brand with incredible things.
And in a world where we are inundated with ads in our face and sales pitches,
this more subtle approach is effective. As then it doesn’t cheapen the spectacle.
It doesn’t feel like we’re watching an ad, it feels more like we’re just
watching something cool from a company who happens to also sell energy drinks.
The truth is Red Bull isn’t really a drinks company, it’s really a marketing company. And
as a result they’ve been able to position Red Bull as more of a premium lifestyle
product - which ironically is the total opposite of how it began in Thailand for blue collar
workers. Red Bull started out as the cheapest energy drink, now it’s one of the most expensive.
The recipe hasn’t really changed, that’s just the power of great marketing and branding.
As a result, in some countries today, Red Bull has more than 80% market share of
energy drinks. And since 1987, over 100 Billion cans have been sold worldwide.
However… you don’t become the number one energy drink without a little controversy…
Red Bull has been banned in numerous countries over the years, most famously in France. When
a teenager died after drinking multiple cans of Red Bull during a basketball match,
there was understandably a lot of panic. Now, there was no evidence actually found that red
bull caused the death, but it still prompted accusations that the drink’s caffeine content
was excessive and that some of Red Bull’s other ingredients might not be as safe as they made out.
However, by 2008, the full version of Red Bull was for sale in France again,
since Red Bull successfully argued that there wasn’t sufficient evidence that any of the
ingredients were harmful. I mean it wasn’t exactly healthy, but not unhealthy enough to be banned.
Then in Germany in 2009 red bull cola was found to contain trace amounts of cocaine,
causing some German states to pull the drink as well. But once again,
after further research it was found to be such a negligible amount that you’d have to
drink almost impossible amounts to actually feel anything, so the drink was reinstated there too.
In 2013, Red Bull came under fire again when it was sued for false advertising over its slogan
‘red bull gives you wings’. Now to be fair to red bull here, surely nobody actually expected
to grow literal wings and fly, so this lawsuit seemed like a frivolous cash grab. But they
managed to argue that since red bull didn’t give any functional athletic improvement,
it was false advertising - and Red bull ended up paying $13 million dollars to settle the lawsuit.
Now so far these issues all seem kinda harsh against Red Bull. But actually the
real controversy about Red Bull is the one that most people in the west don’t even seem
to know about. You see in 2012, the heir to red bull’s fortune, Chaleo’s grandson,
was accused of running over a policeman and killing him while speeding in his
Ferrari. It’s then reported he didn’t attend court, and instead fled the country. Despite
there being seemingly overwhelming evidence against him, the case has not been perused,
and in Thailand its seen as an egregious example of how the ultra wealthy and powerful are above
the law and can get away with anything. This prompted headlines like: Red Bull Heir Shows How
to Get Away With Killing a Cop in Thailand, with some even starting a campaign to boycott Red Bull.
Now to be fair, it’s not like the heir to Red Bull’s fortune
is actually involved in running the company, but it’s certainly
a strain on the perfect image that Red Bull spends so much money to maintain.
However, Red Bull’s original creator Chaleo would not be around to see that,
as he died just a few months before the incident in March 2012, aged 88. When he passed away he
was Thailand’s third richest person with an estimated $5 billion dollar fortune. And in
fact, still to this day, his co-founder Dietrich is the richest person in Austria. That’s because
Red Bull is still a private company; the founders never had to sell loads of their
equity as they had such great profit margins and could keep reinvesting back into the
business using the profits they made. So they both became obscenely wealthy. And actually,
I think there’s several lessons all of us should be learning from Red Bull…
Firstly, Red Bull is proof that sometimes you don’t need to invent something totally new,
you can bring an existing product to a new market
or audience and have massive success by just putting your own spin on it.
Secondly, it’s clearly a very effective strategy to find a product that’s cheap to manufacture,
and then invest heavily in marketing to create a more premium feel and brand image for the product,
so you can charge higher prices. That’ll give you high profit margins,
giving you huge amounts of money to invest in even more marketing,
and thus create a virtuous cycle of growth. For context, some sources have estimated
Red Bull costs about 9 cents per can to make, yet sell them for $1.79 or more.
And finally, Red Bull is a reminder that the best marketing is not just running ads
the exact same way everyone does, it’s actually doing something creative and original - because
the ultimate lesson from Red Bull is to not just sell a product, but sell a feeling. Sell an image.
And, there is perhaps just one company that has done an even better job of this than Red
Bull. If you wanna learn the dark secrets of how Coca-Cola make billions of dollars
despite all of the controversies they’ve been involved with, check out the disturbing history
of Coca-Cola by clicking right here. Trust me, it’s a crazy one. I’ll see you there. Cheers.