SWOT Analysis

Red Bull brand is used by a quarter of American consumers and is a well-known brand in the beverages
industry with four decades of growth through innovative strategic marketing. In the past few years, the brand
has been encountering many challenges with respect to growing competition in the industry and health
concerns because of the ingredients being used in the products. Despite the challenges, Red Bull has
maintained a prominent position in the industry through critical SWOT analysis to identify various internal and
external strategic factors which have helped the brand grow to its current size. Using the same framework, we
have analysed the SWOT factors below:

Strengths
1. Brand Power – In the energy drinks category, Red Bull is the most powerful brand and also its greatest
asset, followed by Monster energy drinks. Its signature colour-based branding and ‘Gives you Wings’
slogan provides a strong brand image. The brand is now almost synonymous with energy drinks in several
countries.
2. Marketing strategies – Being a provider of energy drinks, their one of the most prominent marketing
strategies have revolved around sports and taken an entrepreneurial approach by sponsoring a variety of
sports events, athletes and teams. This helps in putting Red Bull brand and drinks on consumer’s mind
throughout the day, making it dominate the market.
3. Vast geographic presence – The company sells its products in over 70 countries, thereby ensuring growth
even if some of these markets go stagnant or mature.
4. Supplier reliability – They have a strong supplier base for raw materials, enabling them to overcome
supply chain related bottlenecks.
5. Customer relationship and satisfaction – With dedicated management departments of customer
relationship, Red Bull has achieved a high degree of customer satisfaction among consumers and as a
result good brand image among potential consumers.
6. Diversification – Red Bull is majorly known for its energy drinks but has achieved diversification by
operating in other sectors as well. The brand owns various lifestyle magazines, mobile phone service
operations, TV broadcasting, youth academics and football.

Weaknesses
1. Product Range – In the food and drinks segment, Red Bull entirely relies on its energy drink and its sugar
free counterpart. Although this helps them in creating focussed marketing strategies but it also puts the
company at the risk of losing sales in this industry in case of unfavourable regulations or conditions,
coupled with an additional loss of revenue from brand loyal customers in case of a new product. They just
hold about 2% of market share in overall in the Soft drink market due to threat from dominant players like
Coca Cola and PepsiCo.
2. High Price – Red Bull’s product is marketed as a premium high-priced product. Although this provides
them with great profit margins but at the same time, it loses out on sales to comparatively less expensive
products, especially in case of Budget-conscious customers. Dropping the product price may lead to
increase in sales for Red Bull by decreasing some marketing expenses as it already dominates the market.
3. Workforce attrition – Red Bull, in comparison with its competitors, have higher attrition rate and require
to spend more on training and development of its workforce.
4. R&D Investment – Investments made by Red Bull in R&D and innovation is above the industry average but
lower than the other leading companies in the industry and comes across as a mature firm bringing out
products based on features already tested in the market.
5. Limited Production facilities – According to Euromonitor, Red Bull is reluctant towards extending its
production facilities further than Austrian borders, which is a constraint against boosting production. It
sells in over 170 countries but majorly production takes place only in Austria, which leads them to greater
spending in shipment and distribution.

Opportunities
1. Emerging markets – With time as consumers earn more and get richer, growing countries like India and
emerging markets like that of Asia witness an increase in daily spending by consumers. These developing
 countries and markets are good opportunities for Red Bull to market their product as now the consumers
might be able to afford it as opposed to earlier when they could not due to its high price.
2. New and diverse products – As discussed previously, having their major revenue source from only 2 kinds
of energy drinks can prove to be dangerous due to its high industry dependence. Red Bull can consider
launching new products like Sports supplements under their brand, appealing more to their sports
focussed customers. In addition, healthy offerings like protein and vitamin drinks can be considered as
another product and re-brand themselves to include health drinks as well. This will reduce the impact of
major threats from competitors and dependence on the regulations present in the industry.

Threats
1. Competition – This a great threat for all companies in any industry, especially for energy drinks due to
difficulty in protecting their recipes from their competitors. This will endanger their market dominance as
any competitor can re-create a new energy drink similar to the taste of Red Bull with a significantly lower
price, which when coupled with good marketing strategies can take away a significant portion of Red Bull’s
market share.
2. Staleness – Consumers tend to get bored of having the same drink and taste on a regular basis and later
to seek something new, there is a risk of losing a customer who might want to diversify their option of
drink. This calls for Red Bull to launch new energy drinks with different tastes as per customer preferences
under the same brand to retain consumers. For example, Monster offered 30 different brands of drinks
under its umbrella in a variety of flavours while Red Bull was slow in its responsiveness to competition and
took 25 years to launch 3 new flavours.
3. Industry and health regulations – For Red Bull, the most endangering threat is the introduction of new
health regulations preventing their sales and reducing profits. For example, France and Denmark
governments had banned energy drinks in their country. This again calls for the need to make health-
conscious drinks under the Red Bull brand to sustain in the drinks industry.
4. Negative publicity – While the brand is doing well in the industry with various marketing tactics, the
media globally reports Red Bull drinks to contain components which can be harmful to health when
consumed. Another misconception added was that the drink stimulates mind and body, which acted a
challenge for Red Bull sales.

Intensive growth Strategies

Various growth strategies deal with product or market development to achieve growth objectives. Red Bull
uses these growth strategies to seek further market penetration and inclusion of wider customer base. Red
Bull’s growth strategy is based on a combination of main strategic streams pertaining to cost, differentiation,
and focus, which can be explained through Ansoff’s product-market expansion grid and includes the
dimensions of Market penetration, product development, market development, and diversification. These
strategies are chosen on the basis of competition, growth objectives and characteristics of the target market to
maximize profits and increase market share to maintain market dominance and ensure growth in the long
term. Below are the 4 growth strategies undertaken by Red Bull and their contribution in growing sales:
1. Primary Strategy – Market Penetration
It involves increasing sales within the current consumer base to increase market share with focus on existing
products in the existing market.
 The strategy requires Red Bull to decrease prices and undertake a variety of promotional and
aggressive marketing strategies in the existing consumer segment by offering discounts, deals and
selling of products in packages to increase sales. Red Bull penetrated the market with induction of
adrenaline sports by attracting the world of sports. Their main strategy is attracting consumers
towards the product and not the other way round. For example, the company had its first event –
Crashed Ice in 2011 i.e. 3 years before the launch of their drink.
 The decrease in product prices in this strategy is achieved through cost leadership by
integrating innovation and setting product differentiation. Despite market saturation, this
helps in expansion of the consumer base.
 Initially, this strategy with combination of cost and differentiation worked well for Red Bull
with its home consumer base and then later national level recognition helped in targeting
 new markets globally. Resulting brand awareness earned by high market penetration was
used as a tool for offering newer products to both new and existing markets.
2. Secondary Strategy – Product Development
This strategy is adopted when firms find limited growth in the current market with the existing product line
due to intense competition. To resolve this, the strategy includes modification in current products or
development of new ones to cater existing consumer base. This requires less time, efforts and resources as
existing customer loyalty and brand awareness is leveraged to introduce new product lines.
 Red Bull has considerably diversified with its product range since it was introduced in the
industry by introduction of different flavours in 2003, which allowed the company in hedging
risks as it can compensate the lost sales from one product with added revenues from other
products.
 This strategy is even more useful if significant investments are made in research and
development to add new and innovative products. Red Bull uses its ability to produce
differentiated products supporting their product development strategy and process in the
existing market.
 Red Bull can undertake any of the three options available to succeed in product development
– Offering a new product closely associated with the existing ones, or offering products
resonating existing customers’ buying behaviour, or develop and produce products that are
entirely new by re-inventing the current ones by continuously assessing consumer needs.
3. Supporting Strategy – Market Development
The primary aim of this strategy is to explore new markets for existing product lines.
 Red Bull has applied this supporting growth strategy with Market penetration and product
development strategies extensively and consequently is now present in 170+ countries, way more
than its competitors. In these markets, due to excess income earned by the consumers, Red Bull was
able to sell its products at affordable prices, great flavour and brand name. This was complemented
by on point marketing and celebrity endorsements for expanding the customer base to become the
market leader.
 Application of this strategy to expand the value chain was also made possible by the firm’s ability for
cost minimization, thereby achieving cost leadership. It also supports more investment to enter new
markets.
 Entering markets which are culturally distinct from the company’s home market is a risky affair as it
would require the firm to be culturally intelligent and develop proper and effective mechanisms for
knowledge management for the product to be accepted by the new consumers. Red Bull understood
the importance of this and integration of local norms and marketing campaigns for new geographies.
Red Bull’s cultural intelligence through effective research conducted about financial, operational and
market data has led them to be accepted in diverse markets by making right business decisions.
4. Supporting Strategy – Diversification
This involves launching new products in new markets. This diversification can be related or unrelated where
unrelated diversification could be riskier as firms launch products completely different from their existing ones
with no prior experience in new markets, whereas for related diversification, existing resources and
infrastructure act as supporting factors in portfolio diversification. For Red Bull, this strategy also acts as a
supporting strategy as it helps in achieving growth through market penetration and product development. At
present, they only have one product with three product lines – Energy Drink, Energy Shot and Red Bull Cola,
each having a regular and a sugar free version.
 Red Bull’s product diversification is supported by its cost leadership and existing infrastructure for
developing new products and entering new markets. Due to riskiness of unrelated diversification, Red
Bull focuses more on related diversification by leveraging their existing brand awareness. But to keep
the portfolio balanced against high market turbulence, Red Bull has also made unrelated
diversification moves by offering merchandise from shirts, fridges and pens.
 In case of related diversification as well, it is important to analyse customer expectations. Red Bull did
this by offsetting declining sales through green business practices and associating themselves with
business partners of positive image in response to the criticism made by media and various
environment protection groups.