Red Bull: Behind the Notorious Blue Can

Reading Time: 6 minutes

Red Bull is an energetic drink sold by the Austrian Red Bull GmbH in over 170 countries. It was introduced in the market in 1987 and, since then, it has achieved the selling landmark of 7.5 billion cans in a year, achieving market leader status with a market share of 43% in the energy drink market. You have probably heard “Red Bull gives you wings”, which has become one of the world’s most recognizable slogans.  

The brand was created by the Austrian entrepreneur Dietrich Mateschitz with Chaleo Yoovidhya, a Thai businessman who created the original Thailand Red Bull drink. With a slight modification to westernize the original energy drink, Dietrich led the company to worldwide success.  

In the more than 30 years since its inception, Red Bull has kept its essence as an energy drink, selling the same idea which sold in the beginning, despite some variations in taste and special editions. In fact, Red Bull remained very loyal to its strategy, only amplifying to a greater audience. It is a very loyal brand, associated with radical sports, such as Formula 1, Surf and Snowboarding. Furthermore, it also sponsors a lot of athletes and YouTube personalities. It is a brand associated with a healthy and active lifestyle and aims to portray these aspects in every marketing campaign. 

Global Energy Drinks Market Share 
Source: T4 Data 

The Business Model 

The Austrian energy drink has been the dominant brand in the industry, despite fierce competition from copy-cats. It can easily be argued that Red Bull’s unique business model is what gives the company an edge over the competition

An important aspect of the business model has been little to no diversification whatsoever. When it comes to the variety of products, Red Bull produces the very same product, although with some differences geographically. It has introduced special editions from time-to-time and, in total, 20 different variants, including a sugar-free version. Red Bull’s decision not to move to other segments in the food and beverage industry relates to their intent to preserve the values and principles of the firm. This strategy contrasts with what has been the golden rule in the industry of expanding to other segments to gain market power and benefit from synergies, exemplified by Coca-Cola’s rule in the beverage market, from sodas to tea and bottled water. Pepsi has followed Coca-Cola’s lead too, also producing energy drinks and even entering the food industry with Lays, Cheetos and Sun Chips, besides having the regular soda. 

Another peculiarity of the energy drink lies in the company’s operations, or lack thereof. The majority of consumer goods companies, especially in the food and beverages industry, such as the Coca-Cola Company, have a strict control of their operations for a quality guarantee standpoint, as well as to keep their formulas secret. Red Bull, on the other hand, is not in charge of its own production, which is outsourced to two companies licensed under the Thai Red Bull. In fact, Red Bull GmbH is not even directly responsible for the entirety of its distribution, relying on already established distributors to bring the famous blue can to some parts of the world.  

Outsourcing operations is not too uncommon in the corporate world. It is actually a way of bringing value to the value-chain that the company could not bring on its own. Nevertheless, it is uncommon for a brand the size of Red Bull to have so little control over its operations. This is not a result of poor resources or capabilities; it is part of a greater strategy to focus on what the company does best – marketing – which has been a winning formula so far. 

The famous blue Red Bull can 
Source: Red Bull 

Marketing as Core Activity  

Red Bull’s success was determined not only by the quality of its product, but also by its marketing strategy. Red Bull has the highest market share of any energy drink in the world, with approximate revenue of €6.07bn in 2019, a third of which was re-invested into marketing, which proves the importance of that department to the company.  

“In terms of attracting new customers and enhancing consumer loyalty, Red Bull has a more effective branding campaign than Coke or Pepsi”, says Koehn, professor of business administration at HBS. 

Rather than following a traditional approach to mass marketing, Red Bull has generated awareness and created a seductive “brand myth”. Their strategy has not focused on promoting the popular product, but rather to create a brand that embodies a distinct lifestyle and audience. 

Their advertisement objectives were to create a brand preference as their primary source of income within Generation Y’s young active males, but also to attract and maintain a secondary target market of older males needing energy to maintain their heavy workloads. 

To increase awareness among their most likely consumers, 18- to 34-year-old-males, Red Bull followed a marketing strategy with the aim of making the drink just edgy enough to grab the interest of this public (“Wing 1 of the Dragonfly Effect Model”). The focus was subtle branding that grabs attention, while having high production quality without an overproduced look. In addition, to start engaging with both its original and second target demographics, Red Bull began sponsoring “breath taking” stunts. Big doing so, RB subtly invites people both to take action and fulfil their biggest dreams. Besides sponsoring and participating in multiple sports, Red Bull also owns Red Bull TV Online, Red Bull Radio, and Red Bull Media House.  

Other revenue streams  

In 2019, Red Bull sold 7.5bn cans of their energy drink, for a revenue of over US$6bn. Despite the impressive numbers, this is not the only revenue stream that Red Bull is capitalizing on, especially given the decreased growth that they have observed since 2012, triggered by their one-product only strategy. Many of the marketing initiatives to promote the energy drink got a life on their own as businesses, in addition to serving as a support activity to the drink: 

  1. Media Production: They own Red Bull Media House, a globally distributed multi-platform media company that seeks to “inspire with ‘beyond the ordinary’ stories”, both direct-to-consumer and through partnerships. 
  1. Team ownership: Some of the Football teams owned include RB Leipzig, FC Red Bull Salzburg, Red Bull Brazil and New York Red Bulls, allowing them to take advantage of synergy. They also own teams in Hockey, EC Red Bull Salzburg, in Formula 1, Red Bull Racing, and other sports, such as MotoGP and Skateboarding. 
  1. Broadcasting: Inserted in their media house, they own Red Bull TV Online, where they share the exclusive images from the events they organise. This platform also includes radio, magazine, and digital platforms.

4. Contract Management: Red Bull established contracts with professional athletes that aim for the top brackets in their areas, adopting this as a way of promoting their brand.

Sebastien Vettel, F1 World Champion for Red Bull Racing
Source: Formula 1

Conclusion 

Red Bull is no ordinary company, with no ordinary business model. The Austrian company has taken advantage of industry best practices to create a brand bigger than its blue can, becoming the biggest player in the energy drinks industry in the way, with a market share of over 40% of the energy drinks market. Despite competition from industry giants, such as Coca-Cola, through Monster, and Pepsi’s Rockstar, Red Bull did what no other drink achieved – successfully marketing itself to a new customer base.  

What is more, the company created a media and advertising ecosystem to project the energy drink, which cemented its brand image as seductive ‘myth’, that is still the company’s biggest asset. As a result, that same media ecosystem that once started as a marketing campaign became a business of its own rather than an annual expense.   


Sources: Banknotes, Forbes, Inside Beer, Investopedia, MarketLine, Medium, Red Bull, Statista, The Economist, T4, Whide Group

Tiago Rebelo

Alexandre Bentes

Diogo Almeida

Electric rEVolution | Will Tesla win the race?

Reading time: 6 minutes

Tesla, the electric car company, has been making headlines on a regular basis, not only due to Elon Musk’s unique persona, but also owning to pioneering growing trends in the market, including driverless capabilities and car sharing.

The company’s innovative approach changed the landscape of the automotive industry from the process of buying a car all the way to what powers it. Its influence is so significant that the public’s changing perspective regarding electric vehicles has come to be known as Tesla effect, as a result of the role of the American manufacturer in marketing the segment as tech and performance oriented, rather than just environmentally friendly, as previously perceived.

However, Musk’s success in the automotive world may be short-lived as traditional manufacturers, such as Volkswagen, Volvo and Chinese brands follow suit and make a move to the now-mainstream electric vehicles, a market Musk essentially created, thus threatening Tesla’s dominance in the process.

A bubble waiting to burst?

Tesla’s impressive current market capitalization makes it the most valuable car company worldwide. In fact, its share price skyrocketed more than 700% just last year; if we went back a decade, then, since it went public in 2010, Tesla´s stock price registered no less than a monstruous 20,000% increase. However, digging deeper into production output and financial performance, there is not much significant substance to back up this massive growth, other than investors’ expectations.

Figure 1 – Tesla 5 years stock price performance
Source: Nasdaq

As a matter of fact, only last year was Tesla able to avoid a net loss (registering for the first time a positive $690 million net income), with a net profit margin of 2.2%. Adding this to an extremely high P/E ratio of around 1000, it is not difficult to reach the conclusion that Tesla is be overvalued.

Figure 2 – Tesla Net Income evolution 2011-2020
Source: Macrotrends

Nevertheless, we cannot possibly disregard the huge driving force that Tesla represents as the clear market leader among the EV (Electric Vehicle) market, being undoubtedly the main trigger of the electric revolution we are currently facing. Indeed, Tesla has a great lead in this ever-growing sector, both with its first-mover advantage and its crucial competitive advantage in terms of technology and batteries, as the partnership with Panasonic provided the manufacturer with the best-performing battery autonomy range in the market. Moreover, the fact that the company was able to experience such an impressive sales growth in a year in which many car makers saw their revenues decreasing is by itself a remarkable achievement, leading many to expect Tesla to become the future leader of the car industry.

Figure 3 – Global Plug-In Electric Vehicle Market Share between January and June 2020, by producer               
Source: Statista

A future market leader?

This poses the question of whether, once the EV market matures, Tesla will be able to maintain its position as market leader, with other historical giants of the industry massively shifting their production towards the electric sector. Most likely, the answer to this question will be directly linked to the direction towards which Elon Musk will decide to take his company; by all means, choosing to focus on high-performance vehicles or opting instead to pursue his original master plan of making cars affordable to all may dictate Tesla´s future fate in the car market.

Despite the fact that Tesla’s product portfolio is on the high-end side with prices up to $140k, the brand had long planned an affordable vehicle – Model 3. This is a $35k (in the USA) entry level car and bestselling EV with 365k deliveries in 2020, though the car is still rather expensive for most people, particularly outside the US. Moreover, it comes packed with technology and features seen as luxurious, which are not a priority for the majority of consumers who see price as a determining factor, especially now that EV are no longer a niche market.

Can Tesla withstand competition from legacy manufacturers?

As aforementioned, the company’s plan to dominate the industry is now threatened by conventional carmakers, such as Volkswagen, which is committed to this new market and even has an ambitious plan to knock out Tesla from the podium by 2025.

Last December, the new ID.3 from Volkswagen was the second most sold car in Europe, with 27,997 units sold, 3,430 more than Tesla’s Model 3. Volkswagen’s brand-new car has a slightly greater range (15km) and is cheaper (€4,000), but has lower power than Model 3, smaller cargo space and does not have autopilot. Most importantly, it does not seem to discourage consumers from buying a ID.3 instead of a Model 3, especially because the car already fulfils the needs of most consumers in a great package overall.

Figure 4 – New Volkswagen ID3, released in September 2020.

Competition also comes in the tech segment, mainly in China. The commanding position in the biggest electric vehicle market (China) is occupied by Tesla. Nonetheless, during last year, Tesla saw rivals such as Nio Inc., Xpeng Inc. and Li Auto Inc. catching up. The difference in cars sold between the trio and Tesla has been declining, reaching the lowest value in September 2020, amounting to a total of 1,000 cars. The rise of Chinese EV is strongly connected to Nio’s boosted sales, even though at a higher price tag than Tesla’s Model 3. The threat from China should not be ignored, since it is Tesla’s second largest market.

Figure 5 – Monthly EV Sales figures in China in 2020 by producer                    Source: CAIN

Which Tesla will we see in the future?

Although Tesla has surprised us before, its best chances are to stick to its current target market of high-performing cars, that offer the best technological features to consumers who value those features and are willing to pay a premium. In this area, Tesla has a big advantage that allows it to exercise a fierce competition with its direct rivals: no other car company has yet been able to offer the same high-speed range in an EV and battery autonomy like Tesla. However, it is unclear whether the company will be able to sustain this competitive advantage in the long term, as the tendency is for other companies to be able to eventually reach the same technological potential. Moreover, even with superior features, Tesla has not been able to convince a big share of the loyal consumers of long-standing companies, who prefer to abdicate some horsepower for the quality and reliability traditional automakers have left us accustomed to. Most importantly, legacy manufacturers seem to be transporting the driving essence people are familiar with to electric cars, making the move to electric easier, which might make Tesla’s job to win over customers certainly more difficult.

Notwithstanding, Tesla has been especially successful in captivating the American market, with more than 50% of its sales being centred in the US, a fact they have most definitely taken into consideration, as it has been made clear with Tesla’s bet on the innovative Cybertruck, surely having this prosperous target market in mind.

Regardless of Tesla being or not the biggest manufacturer in 5- or 10-years’ time, one thing is certain: Tesla has accomplished every objective the company established back in 2006 when Musk released The Secret Tesla Motors Master Plan. Furthermore, the brand shed light on a fundamental aspect, the sustainability of transportation, a sector responsible for 28% of all greenhouse gas emissions. Whether you buy a Tesla, a Volkswagen ID or any other electric car, you are proving Elon was right in pursuing the sustainable energy project.


Sources: Business Insider, CAIN, Car and Driver, Cleantechnica, Forbes, Inside EV, Macrotrends, Marketline, Nasdaq, Statista, Tesla, Volkswagen.

Tiago Rebelo

João Correia

Inês Lindoso

Market Democratization and a new wave of investors

Reading time: 6 minutes

Greater ease of access to information and technology created a new paradigm in the market that was further accentuated by the COVID-19 pandemic. The result has been a new balance of forces in the market, as seen in recent events. Whether this new paradigm will last, only time will tell… or the SEC.

Financial markets have long been associated with high-net-worth individuals and institutional investors. In fact, as of 2017, according to the National Bureau of Economic Research, the top 10% in the United States were in control of 84% of the total value of stocks, bonds, trusts and business equity. Much of this wealth is managed by institutional investors, such as hedge funds, commercial banks, or mutual funds – the so-called “smart money”. The dominance over the market by institutional investors meant that retail investors – individual investors often referred to as “dumb money”, due to the belief that these lacked the expertise, as well as the understanding of market forces – were undermined by hedge funds managers and investment banks for a long-time.

However, greater ease of access to information and technology created a new paradigm in the market that was further accentuated by the Covid pandemic. The result has been a new balance of forces in the market as seen in recent events. Whether this new paradigm will last, only time will tell…or the SEC.

The rise of retail investors

The coronavirus outbreak in the mid-quarter of 2020 triggered the growth of retail investors, which translated into a revolution in the stock market. With millions of people worldwide confined in their homes, their attention to the stock market increased, with more than 1 million new online brokerage accounts opened in the first three months of 2020. The new market participants were mainly young investors with little or no expertise who disregarded risks while pursuing new opportunities.

According to Deutsche Bank, “increased retail trading is ‘largely responsible’ for elevated stock prices and record-high options activity”, showing how these individual investors are driving the stock market. In addition, this increase in the number of call-options was mainly evident in small companies with low profitability. Retail investors are trading speculative stocks with low share prices, due to zero-commission investing apps and online brokerages. The New York Stock Exchange report demonstrated that, during several months in the Spring and Summer of 2020, more than 25% of the shares traded in the U.S. stock market were in companies with a share price below $5. To reinforce this tendency, Goldman Sachs, an investment bank, provided an index of non-profitable technology stocks, usually one of the main drivers of stock market valuations, which has raised nearly 400% since mid-March of 2020.

Source: Bloomberg

What lies behind that surge?

A global pandemic marked the year of 2020, as well as the stock market. While markets flopped and recovered in the first half of the year, retail investors sought an opportunity to try to take advantage of the circumstances to invest. The coronavirus pandemic led to an increase in retail investing. With the majority of people working remotely and having more free time to spare, many experimented the investment world. Nowadays, retail investors dispose not only of more financial information, but also of better investment education and trading tools. Furthermore, the $1200 COVID-19-relief check the US Government issued in April 2020 helped fund the trend, as shared by many redditors, users of the online social media platform Reddit where investors gathered in the R/WallStreetBets forum to discuss investments.

Another boosting factor that allowed the rapid growth of retail investment were online brokerages, enabled by the payment per order flow, which is the form of compensation for the firms charging zero-commissions to traders. These online intermediaries enabled investors to swiftly and easily sign up and try investing, this being far more accessible when compared to traditional intermediaries. At the end of 2019, most major online brokerages eliminated commissions for online stock trades. One example in which it is clear that this cut provoked a rise in retail investing is Robinhood. This investing app offers commission-free stocks, no minimum balance and permits the acquisition of fractional shares. From the beginning of 2020, Robinhood had reported 3 million new accounts, being half of them the first accounts of the investors.

The combination of these factors supports the idea of financial democratization that was accelerated in 2020 when millions of consumers where confined.

What does it mean for the stock market?

The impact of this increased predominance of retail investors is significant for all parties.

The first outcome would be the democratization of the markets in the sense that new trading platforms eliminate some barriers that restrict access to the market, namely commissions or capital requirements. As a result, financial gains from the stock market are more equally spread over the population. On the flip side, loss of capital is more harmful for retail investors, especially considering the frequency of bet-like investing behaviour among zero-commission trading apps through high leveraging and options that some do not fully understand.

This has been a major critic from hedge funds, which argue that the lack of expertise may affect basic market assumptions, such as the efficient allocation of resources, besides overinflating prices. For instance, despite the fact that retail investors provide liquidity when institutional investors pull back, that increased activity from herd behaviour creates volatility, which may ultimately affect the liquidity of that “hot” stock, as well as lead to panic selling. Therefore, retail investors end up underestimating their own market power.

For that reason, there have been calls for the SEC to implement more regulation on trading apps, and, consequently, on retail investors. The way these apps work is also under scrutiny, owing to the gambling experience they provide, by rewarding and incentivizing purchases rather than serving as simple intermediaries, which blurs the line between investment and entertainment.  

One way of reducing the negative aspects of a broader market access is through financial literacy. If the process is accompanied by proper education on financial markets, new investors will be equipped with the tools they need to make rational investments, instead of gambling on stocks. This would not only benefit them, but also institutional investors, by solving the most prevalent argument invoked by the latter.

How does GameStop fit into all this? GameStop was one of the “meme stocks” the new wave of investors, armed with new trading technologies and funded by savings and stimulus checks, laid their eyes on. The army of traders working together in a short squeeze exerted enough strength to force a bailout on a number of hedge funds betting against the company. Without going into detail on the structural problems of payment per order flow or the technical terms behind the short squeeze, the case of GameStop shows individual investors are a force to reckon with.

There is, however, one important aspect to consider. Retail investors have flooded the market before whenever barriers to the market decreased. The phenomenon first occurred in the 70s, through discount brokers, and then in the 90s, as a result of online trading. The newest trading platforms have eliminated almost all barriers. Consequently, trading volumes are now twice as much as in 2010, whether this trend will continue is contingent on action from regulators. The scandal over the brokerage app Robinhood will likely lead to action either from Congress or the SEC, which, in turn, may affect how these apps function and access to market.     


Sources: ABC News, Business Insider, Financial Times, Market Watch, Medium, Nasdaq, National Bureau of Economic Research, Statista, University of Chicago, Wall Street Journal

Tiago Rebelo

Raquel Novo