How does Red Bull make Money?

 

How does Red Bull make money? Does it grow only by selling Energy Drink Cans, or is there much more behind what they do? Let’s have a look at the Red Bull Business Model.

Red Bull was founded in 1982. The Austrian Businessman Dietrich Mateschitz once tasted the drink ‘Red Gaur’ on one of his trips to Thailand and thought to bring it to his home country – Austria. He named it Red Bull. He successfully launched it in the year 1987.

Slowly the product got popular in Austria, then Germany and it spread slowly in the whole of Europe, leading to popularity in US as well.

Red Bull Gmbh is an Austrian Company that sells energy drinks under the name ‘Red Bull.’ In 2019, they sold about 7.5 billion cans, which means there was one can for every person on the planet!

So how did it achieve this?

Dietrich created a new business model for the brand. He focused only on the downstream activities of the value chain i.e., Marketing, thereby outsourcing the production, filling the cans and Logistics. This clearly means that the Red Bull company was not producing the drinks themselves. Their focus was only one thing – SELLING THE DRINKS.

Red Bull also charges much higher prices than its competitors due to its brand value which you can say  is developed by their excellent marketing efforts. A can’s production costs Red Bull only $0.09. The Retail selling price for a can is $3.59. Walmart and other grocery stores, who are their biggest customers, pay Red Bull approximately $1.87 per can, which is 20 times more than Red Bull’s cost of production. By this data, you can guess how much profit Red Bull makes.

Red Bull does not tell a story, but they perform their story and produce with their own media house – ‘Red Bull Media House.’ You would have seen the video of Felix Baumgartner jumping from space in 2012. This was an advertising stunt by Red Bull. The project cost them $50million, but the global reach of the video was worth $6 billion. Hence, it was exceptionally extremely worth it for Red Bull.

But Red Bull knew it could not grow further by relying on just one drink. So they started investing in other areas in an attempt to diversify and create additional value chains for their business. They invested in sports activities, media production, Team Ownerships, and Contract Management. Sponsorships and sports ownership are two of Red Bull’s essential Marketing strategies, which are not traditional advertising in nature. They sponsor thousands of athletes and run a media production. They have 2 Formula 1 team, 5 Professional Football Clubs, and 1 Ice Hockey Team.

Till now, 97% of Red Bull’s revenue comes from an energy drink, and they mention other diversifications as Brand Investment. The Future knows where the brand will lead to and how much they can make out with their investments. 

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