Market Players
The main market competitors at the moment are Red Bull, Sting and Speed. Other brands like Blue Ox, Gatorade, Bomb etc. launched themselves but couldn’t survive in the market. The market currently is very much in the growth stage and international brands may look to launch themselves in Pakistan in order to get hold of a market that is yet to absorb the concept of energy drink. Hence, the opportunity is there to be taken and many more market entrants in the energy drinks industry would not be a surprise.
Operations and Departments:
Red Bull’s working hours are 10am to 5pm in all three cities. The departments of a Red Bull premise are as follows:
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Marketing Department: Their job is primarily to plan and execute BTL promotional activities for Red Bull. Understanding the consumer need and coming up with activities to fulfill them is one of their most important tasks. Pre and Post event communication of all promotional activities is also taken care of by this department. Every city has one marketing head and three Student Brand Managers hired from popular universities to work as a team. Marketing department also takes care of communication through social media like Facebook etc.
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Distribution & Sales Department: Since Red Bull is imported from Dubai (Asian Head Quarters), a production department is not required. The distribution department takes charge of the inventory management duties of Red Bull. Also, they conduct all distribution operations of the city.
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Finance Department: Finance Department requires precision and a dedicated full time team is posted for the job. The budget given to them for executing the marketing activities are all allocated accordingly by the finance team. Wage control system is also under their scope. The team also maintains and keeps track of monthly sales. Monthly reports of sales performance is submitted by this department to the head office in Dubai.
Marketing Mix:
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Product: Red Bull is an energy drink and its components are B vitamins, mix of elements and most importantly Taurine. Taurine was one of its key ingredients that separates Red bull from other energy drinks. It is majorly responsible for the energy revitalization of the body and mind.
The packaging of the drink itself is unique. Unlike an ordinary traditional soft drink, it’s not packaged in a 12-ounce can, nor sold in a bottle. Instead, it used an 8.3-ounce slim can.
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Price: A can of Red Bull is priced at Rs.130 in all retail stores. The on premise price i.e. price at cafes and restaurants varies between Rs.150-Rs.250 as per the allocated service cost of the respective café.
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Place (Distribution): Red Bull is distributed in all big retail stores, cafes and restaurants. Plus, it is also distributed at clubs, gyms and fitness centers. Red Bull’s distribution strategy is using a decentralized sales unit (sales persons) who are responsible for sales and distribution in their assigned area. They also hire their own workforce (usually students and teenagers), and provide Red Bull cars with the Red Bull logo to deliver their product. With this kind of system they are able to focus their entire energies on getting Red Bull fully stocked in stores with prominent shelf placement.
Another strategy was to focus on sheesha cafes and trendy restaurants as their key on-premise accounts. As they buy a few cases, they receive a Red Bull branded cooler and other promotional items, that’s when they start to do business officially. The reason why the sales team goes to on-premise accounts is because the product gets a lot of visibility and attention. It is also much easier and faster to deal with individual accounts as big chains have their authorization process.
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Promotion: Red Bull have adapted a very unconventional style of marketing in Pakistan which relies completely on Below-the-line activities. Unlike else where around the world, where there is a certain percentage of marketing activities done through TV, radio and print, they do not do ATL promotions in Pakistan. Some of the tools that Red Bull doesn’t use in Pakistan are television, radio, billboards, banner ads, taxicab holograms, and blimps.
Red Bull has strongly adapted the practice of ‘viral’ marketing by paying students and young opinion formers to organize Red Bull events at colleges and universities. They have also hired three Student Brand Managers from IBA, SZABIST and CBM which are the top three institutes of Karachi and have done the same in the rest of the cities. With students acting as their representatives, Red Bull provides them free cases of Red Bull and encourages them to throw parties and events. This results as an effective way to spread the good word about Red Bull as it doesn’t require a huge amount of money, it’s quick and the student advocates offer credibility to a product competing in the beverage market. Another advantage is that the student also provides research data that are valuable for the company.
Red Bull in Pakistan is still in the process creating a market. People still have to be educated about the concept of energy drink. Another promotional strategy involved in educating consumers is that Red Bull deploys staff that drives around in shiny silver off-roaders with giant, phallic cans of Red Bull strapped in the back. This in itself creates an impact considering the nature of Pakistani consumers who get attracted by glittery promotional stunts. Their mission is to find people who need energy and give them a free can of Red Bull. As cliché as it sounds, this strategy worked quite well on the basis of introducing the brand to the masses. By sampling Red Bull, consumers are being educated of the actual functionality of Red Bull which at the moment is lacking in Pakistan.
They also organize promotional events involving university and college going students with themes like sports, art, part and music. Although this serves to attract only a certain percentage of the market, this is all Red Bull relies on to communicate with its target market.
Red Bull, going by what they do around the globe, have adopted the same strategies in Pakistan as well. Despite the fact that majority of the population can be communicated to through mass-media, it still sticks to its strategies of unconventional marketing.
Financial Analysis
Since Red Bull only imports and distributes in Pakistan, the level of liquidity is high. Cash flow is not stagnant as they have adapted a no credit policy and take advance payment on booking and complete payment on delivery of stock to on premise accounts i.e. cafes, restaurants, fitness centers, gyms, clubs, university campus canteens etc. They buy in bulk monthly. Average turnover out of the three cities is highest in Karachi. Total sales in Karachi in terms of the number of cans is 220,000 cans and is sold at a price of Rs.114 giving a total monthly turnover of Rs.25,080,000. Retail price of Red Bull is Rs.130. These figures show trends of the last 12 months for Red Bull sales in Karachi. All the figures show that Red Bull is financially sound and performing pretty good in terms of sales, and above all the earnings are directly going into the business and operations are being run on pure equity since the inception, which also indicates sound working capital, hence efficient operations.Following is a breakup of the monthly sales of Red Bull in Karachi. We were able to get these figures from the marketing head of Karachi, Mr. Ali Hyder. According to him, the data below has remained consistent for the last 12 months.
Internal Factor Evaluation Analysis
The internal factor evaluation analysis comprehends that Red Bull has an average of 2.74, which is fairly high as compared to the industry average (2.5). Thus indicating that the company has a strong internal functioning and can use it to strengthen their position & help them work above optimum levels.
External Factor Evaluation Analysis
The external environment analysis shows a low average for Red Bull i.e. 1.95, as compared to the industry average (2.5). This shows that Red Bull is fairly slow in building new strategies to overcome the factors that may turn out to be major threats for the Company. It has to become more responsive towards competitor action. However the strong brand equity & well captured market share has promised a lot of opportunities for Red Bull in order to outstand against its competitors & diversify its portfolio.
Competitor Analysis
We identified Pepsi’s Sting as Red Bull’s only big threat as a competitor and have analyzed both of them against all relevant industry factors. Although Red Bull was first mover of energy drink product category in Pakistan and enjoys a substantial market share, it still is second best to Sting when analytically compared. Where Red Bull has the advantage of being the pioneer of energy drinks in Pakistan and also the backing of a very strong international brand image, Sting over powers Red Bull with its association with Pepsi, and hence, an extremely strong and wide distribution network which is second to none. Also, Red Bull’s marketing strategy of only promoting through BTL activities limits the number of consumers it can reach. On the other hand, Sting has been running an aggressive marketing campaign using all channels of communication, most significantly television, radio and print. Therefore, they have an edge over Red Bull when we talk about reaching new consumers, attracting them and finally acquiring them. Also, price factor plays an important role because Pakistani consumers are susceptible to be inclined towards low priced products. Hence Sting which is priced at half less than Red Bull offers an attractive package to consumers. Of course, we know that these ratings are relative but they give a clearer idea in regards to Red Bull bucking up and taking some extensive actions to establish their claim in Pakistan as Sting has been aggressively campaigning and started capturing the very much unexplored market of energy drink consumers.
Grand Strategy Matrix Analysis
Red Bull has evolved as a capable business because it occupies a position in an industry which has a constant and huge growth room thereby providing it a path way to establish itself as a powerful brand. With a very strong brand image, high brand equity and effective communication strategies it has proved to sustain and eliminate strong competitions. Thus, it is placed in the First Quadrant of the Grand Strategy Matrix. The business mind-set analysis suggests that Red Bull never backs out of challenges or is afraid of its competitors such as Sting, Speed etc and is constantly working to keep the differentiation alive in the minds of its customers. This in turn can be achieved by penetrating thoroughly in the target market, understanding their needs, delivering properly to them and make them ‘used to’ of the offerings. This initiative can also be assisted greatly by market development (by catering to unexplored markets). Since, Red Bull is too heavily dependent on a narrow product line (Normal Red Bull and Sugar-free) concentric diversification, (i.e. introducing new product lines and improving technological know-how) may reduce risks associated with it. Quadrant 1 firms can afford to take advantage of external opportunities in several areas. For example, doing aggressive ATL activities, sponsorships, celebrity endorsements, product diversification etc can open new horizons for Red Bull.
Space Matrix Analysis
Red Bull’s directional vector appears in the ‘Aggressive’ Quadrant. Red Bull operates in beverage energy drinks industry which has started to grow and is now amidst stiff competition with names like Sting and Speed emerging. Not only the product quality matters but also the levels of prices are providing concerns to the customer. Since they are financially growing, and that too in a promising manner, they are in excellent position to use all their internal strengths to take advantage of all the opportunities that exists and overcome internal weakness and avoid threats. They must pursue market penetration strategy, to inculcate more in mind of consumers, because in such an ever growing industry with rapid change in consumer preferences, any thing that gets out of sight gets out of mind. They need to penetrate the market with the use of both BTL and ATL promotions and make sure that competition does not take over them.
QSPM Matrix Analysis
Through the Grand Strategy matrix we were able to come up with three strategies which we analysed in the QSPM matrix that is market penetration, market development, and diversification. Market penetration got the highest score of 7.16 as compared to 7.08 and 6.995 of market development and diversification respectively. We feel that market penetration is most suitable for the company keeping in mind its strengths, weaknesses, opportunities and threats. With competitors emerging in the existing market, Red Bull needs to further penetrate the marketing with extensive marketing efforts. It needs to start advertising itself through ATL activities so that it can communicate itself to a much a larger audience. Also, by adopting the market penetration strategy the company could try and increase the number of retail outlets it currently serves. Improve its distribution network so that it can reach the remotest of areas. Start in-store promotion and branding campaigns that make people aware of Red Bull’s presence. The company could use its brand name and equity to promote itself. Furthermore the company could try and create associations with its target market by sponsoring events, specifically student related since they are one of its main target markets. Moreover the company could start sponsoring sport related events which are held. Red bull being an energy drink mostly is consumed by athletes and all. Red Bull for its promotion could be endorsed by a well known sports personality. On a long shot the company could also become one of the main sponsors of the Pakistan Cricket team, with cricket being the most loved sport in the country and watched by all. Though this is an expensive proposition but the company has got a sound financial position which it could use to its advantage.
BCG Matrix Analysis
According to our analysis of the market and also based on the extensive interviews we held with the marketing head of Red Bull in Karachi, we concluded that Red Bull in Pakistan is a ‘STAR’ product. Being the pioneer in the market for energy drink Red Bull has gone a long way in establishing itself and hence enjoys a high market share. Also lack of stiff competition has helped Red Bull’s cause in Pakistan. The competition appeared and faded away helping Red Bull stick to its high market share. Also, the market for energy drinks is still unexplored and has a lot of potential for growth. Red Bull can still identify new market segments and expand itself in the market. The concept of energy drink is yet to be completely absorbed has potential for further growth.
Minor Problems
After extensive research, interviews and analysis of all the data we collected about Red Bull’s operations and performance in Pakistan, we identified the following minor problems:
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Poor Distribution Network: The reason why competitors might develop an edge over Red Bull is because Red Bull’s distribution network is not as strong as other competing brands like Pepsi’s Sting. Red Bull is only made available in posh areas at expensive retail stores and at major hyper markets. One will hardly find Red Bull at stores in the low profile areas of the city and that is why Red Bull looses on its sales. When you compare that to its biggest competitor Sting, they are backed up by Pepsi’s extensive distribution network and are available in as much quantity in areas like Gulistan-e-Jauhar or Nazimabad as they are in Clifton or Defence in Karachi. For Red Bull, they may have as big a brand name as they have, but that will count to nothing if customers do not find it at their nearest store to buy it.
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Non-diversified Product Line: Although this is a more long term problem, Red Bull still should always keep its non diversified product in line. The only two variants available are the regular Red Bull and the sugar free one. Any adversary with the brand could prove detrimental conserving its over reliance on just one product. Also, this limits the number of market segments Red Bull can potentially target. Women for instance, do not like the taste of Red Bull. They would prefer a flavor that is sweeter. Unfortunately Red Bull, unlike its competitor Sting that has sweeter flavors available, doesn’t offer any.
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Lack of Marketing Staff: Currently, the marketing departments in all three cities only consists of one Marketing Head and three to four Student Brand Managers who work part time and represent the most popular universities of the city. The marketing head is also responsible for keeping a check on the sales in collaboration with the sales department which is not his job. The fact that Red Bull’s campaigns in Pakistan are not so extensive comes down to the fact that they have lack of staff who can dedicatedly work to enhance marketing activities of Red Bull in Pakistan. There is dire need of more staff and also people who have expertise in Brand Management so that they can further enhance the performance of Red Bull in Pakistan.
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Implications of Import Duty and Taxes: The fact that Red Bull is manufactured in Austria and is imported from Asian Red Bull head quarters in Dubai is a problem because the price of Red Bull, which is already deemed as very high, can face serious issues if import duty or taxes change. Any small change in these figures forces Red Bull decision makers to fiddle with the price and increase it. Red Bull when introduced in Pakistan was priced at Rs.70 and now because of the ever increasing taxes and import duties and also the diverse effects of inflation it is not priced at Rs.130. This is way to high than competitors like Sting (Rs.60) who manufacture in Pakistan and are not effect by any import duties.
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Red Bull’s ban in some countries: Although Red Bull’s ingredients have been officially approved by European Commission’s health wing, health ministries of countries like France, Denmark and Norway have still banned Red Bull sale and consumption. This could well leave the current and potential customers of Red Bull in doubts about the safety of the ingredients being used in Red Bull. Also, this could lead to campaigns against sales and consumption of Red Bull in Pakistan which could prove devastating for the brand.
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Red Bull’s false association with Alcohol: There still exists are portion of customers in Pakistan that believes that Red Bull is nothing but another form of alcohol. In country that is filled with Islamic extremists, such a false association with alcohol can lead the detrimental problems. Campaigns against Red Bull sale can well take place at the hands of the extremist religious groups of Pakistan and that could become a major obstacle for Red Bull to recover from.
Major Problem
Red Bull, all over the world relies on unconventional modes of marketing to sustain and enhance its position in the market. It has identified its target market as cool and funky teenagers and young adults and solely depends on BTL promotional activities related to music, extreme sports, party, arts and craft etc. But the point of concern is that the target market in the rest of the world and here in Pakistan has a marked difference between them. The concept of crazy music, DJs, hard core parties, dance clubs, extreme sports and water sports are not something that the Pakistani teenager can directly relate to. You do not have extreme sports or water sports common here. The idea of crazy club partying doesn’t apply to Pakistan either. Hence, using those promotions will only help Red Bull acquire and keep hold of only a very small percentage of the market share. Their over reliance on BTL promotions is their problem because although it works wonders outside Pakistan, within the country it will face problem amidst stiff competition from brands like Sting. Red Bull does not use ATL promotions in Pakistan at all. The use of mass-media (television, radio, print etc.) is just not Red Bull’s style and they are continuing to do the same in Pakistan as well. This is where the problem lies. By not promoting through mass-media, they are not communicating to a large number of audiences. Red Bull may only be able to attract a few hundreds of people at its promotional events but by promoting through ATL activities, they may be able to reach to millions of potential customers. The lack of use of mass media will surely become a problem for Red bull slowly but surely. To aggravate this problem, stiffest competitor Sting has been using both BTL and ATL promotions extensively and this is why they have so quickly made a name for themselves and have started selling heavily. To sum up, they should not just be sitting back on relying on BTL activities, but should go one step ahead of its competitors and start communicating to their target market through mass-media as well. This otherwise will lead to loss of market share and Sting’s elevation in the market.
Future Outlook
During our detailed discussion with Mr. Ali Hyder, the marketing head of Red Bull in Karachi, he told us about some of the future plans of Red Bull in Pakistan amidst the current situation. He started off by firstly telling us that they plan to expand their staff and hire more people with expertise of Marketing and Brand Management. The staff currently handling marketing operations right now is clearly inadequate and not much can be expected from the Student Brand Managers as they are still students.
Addressing another important issue he informed us that there are two short term and long term plans Red Bull has in the pipeline in Pakistan. For short term, they plan to invest more in improving their current distribution system. Mr. Ali Hyder admitted that their current distribution network is bleak and resulting in lack of sales. Hence, they are planning to get distribution agencies on board who can make sure that Red Bull is being made available in all parts of the city. Also, the will be improving their ware house facility as well as their own transportation by buying new carriers. This way they can ensure they are taking adequate care of its distribution themselves. Talking about the biggest issue of Red Bull in Pakistan, he said that they do realize they need to start using mass-media to promote Red Bull and not rely on BTL promotion completely. However he said that they have to stay in line with marketing strategies of Red Bull around the world. On discussion he told us that they are currently in talks with Mohammad Amir, the young sensation of Pakistan cricket for official endorsement of Red Bull. Not just that, but they also are making long term plans of churning out new communication strategies. They are planning out ways of promoting through mass-media and how advertisements can be customized to match the Pakistani consumers. His honest admission of the stiff competition is a clear indication in itself that they are concerned about their current strategies and what they will have to do in future to sustain and perhaps enhance their position in the market of energy drinks in Pakistan.
At one glance, the figure below gives you a snapshoot at the results we have obtained by applying the matrices, our marketing mix learning’s and strategy derivation for Red Bull in Pakistan.
The Strategy –Formulation Analytical Framework
Table 1: Internal Factor Evaluation
Table 2: External Factor Evaluation
Table 3: Competitor Profile Matrix
Figure 2: Grand Strategy Matrix