Battling the bull

Red Bull has dominated the energy drinks sector since the mid-1990s, its success has made chief executive Dietrich Mateschitz a wealthy man and inspired an avalanche of rival brands. Three CEOs in the Middle East not only want to match his achievements but go one better

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By  Roger Field Published  February 16, 2006

|~||~||~|Red Bull’s chief executive Dietrich Mateschitz is a busy man and is gearing up to debut his latest Formula 1 team, Scuderia Toro Rosso, at the Bahrain grand prix next month. The team, formerly the low ranking Minardi outfit, was bought by Mateschitz last year and takes the number of F1 teams owned by the Austrian CEO to two – no mean feat considering motor racing is one of the costliest sports in the world in which to take invest and manage. And while Mateschitz could be forgiven for focusing on his latest purchase, nothing could be further from the truth as he’s busy buying the world’s best engines from Ferrari for the existing Red Bull Racing team. Late last year Mateschitz also snagged F1 wonder designer Adrian Newey from Mercedes McLaren for a rumoured US$10 million a year. Although both parties later downplayed the figure, it shows just how seriously the Austrian CEO is taking top class motor racing. However, should that plan fail or Mateschitz tire of the pit lane, Red Bull is involved in plenty of other high-octane sports to which the Austrian could turn his attention. There is an off-road motorcycle series, mountain biking, the Philippine men’s football team, the Red Bull world air race series, which made an appearance in Abu Dhabi last year, and plenty more. All of this is a long way from the Mandarin Hotel bar in Hong Kong, where Mateschitz sat in 1982 and first had the idea of marketing Asia’s so called ‘tonic drinks’ to non-Asians as energy boosting carbonated beverages. Although it took Mateschitz two years to get Red Bull off the ground, it wasn’t until 1987 that the company’s energy drink hit the Austrian market - from then on the business grew at a rate of knots. In 1992, Red Bull moved into Hungary and today the drink is sold in over 100 countries around the globe. The company now employs around 1850 staff, and sells more than a billion cans of Red Bull every year. Analysts put the brand’s market share at over 70% globally and at similar levels within the Middle East – a market that was just shy of the US$50 million mark in 2004 and growing at around 25% annually. This growth means Red Bull’s business is booming in the Gulf region, and the Austrian firm has been quick to capitalise on this growth by promoting itself in the local market. Taking the lead from its Austrian master, the firm has been heavily involved in sports promotions, as well as investing in serious point of sale materials in local supermarkets. Yet Red Bull is not alone in wanting to tap into the region’s energy drink growth, and a number of local chief executives are looking to battle the bull and take their share of the market. Richard Bradley is one such CEO. The head of Wild Horse, which was launched in the region in 2003, is following the Red Bull strategy of associating its energy drink with sporting events. And while Mateschitz has moved into F1, Bradley has set his sights a little closer to home by becoming the main sponsor of Team Saluki, a desert rally team based in Dubai. “We’re doing a lot of sponsorship and a lot of work with our clients and their retail outlets,” he says. Bradley believes that this form of marketing is key to the success of any new energy drink brand, and that those that see themselves as being a copycat of Red Bull’s strategy do so at their peril. “People seem to think that putting an energy drink on the shelf is the way to make money, [but it is not]… There are lots of new energy drinks that come and go all the time, because they’re not supported,” Bradley says. Rather than imitate Red Bull’s marketing strategy, Mohamed El-Gamal has taken a different approach to battling the bull. Instead of matching Mateschitz’s firm dollar for dollar, the chief executive of Power Horse International in the Middle East opted to attack markets that Red Bull was perceived to be weak in, notably Saudi Arabia and Yemen. To this end, Power Horse launched its product into Saudi Arabia five years ago. The firm, which also has Austrian parentage in the form of Linz that owns the company, now claims to be dominant in both the Kingdom and Yemen. “We were the first comers in Saudi Arabia and dominated that market. Red Bull is the leader internationally, but Power Horse has managed to grab the largest share of Saudi Arabia and Yemen,” says El-Gamal. This drive into Saudi Arabia and Yemen has led to further differences between Red Bull and Power Horse, with the former now considered an expatriates drink and the latter a beverage for nationals. “This is what distinguishes the one from the other. One is perceived as an Arab brand,” El-Gamal says. “Red Bull relates itself and associates itself with the expatriates,” he adds. While this may be beneficial in the GCC’s more Arab markets, and help Wild Horse protect its claimed market lead in Saudi Arabia and Yemen, it is a disadvantage in more heavily expatriate populated markets such as the UAE. “If you were to exclude Saudi and look at other markets like the UAE, we are only number two to Red Bull,” El-Gamal admits. “However, we are aiming to become a very close number two [to Red Bull],” he adds. Just how close Wild Horse gets to achieving its ambition is open to question. For instance, although the firm has sponsored events and continues to do so, it lacks the global marketing clout of Red Bull. In turn, this could impact on its ability to close the gap on the dominant market leader. “We are very realistic in our objectives and our financial resources. Also, Red Bull has built entry blocks, signing long term exclusivity agreements with some of these outlets and therefore it’s becoming very challenging for us to penetrate,” says El-Gamal. “However, we will drive the brand through major marketing activities and consumer programs, closing the gap in the rest of the Middle East versus Red Bull, while maintaining our leadership position in Saudi Arabia and Yemen.” A lack of marketing funds to take on Red Bull is not a problem faced by Wild Horse alone. New market entrant Bomba has a far tighter budget than the Austrian giant. However, the business’s general manager Pradeep Naik is still confident that he can dent the Bull’s horns. “We have certain budgets… [but] we want to develop our own business,” he says. “I don’t care who is the strongest competitor, we have our own strategy to enter the market. Although Red Bull is very strong, I believe people need more choice.” Bomba’s general manager is taking a more grass route approach to events marketing, in order to keep his spend in line with budgets while at the same time ensuring immediate customer contact and brand impact. To this end Naik has already promoted the drink through indoor cricket competitions, and is involved with a bowling team. He also believes Bomba’s distinctive glass, hand-grenade shaped bottle will be a key marketing point going forward. “When I started doing some research on energy drinks, I discovered that most of the products come in a typical narrow can. I went for this because it is a bottle — it’s eye catching,” Naik says. “If Red Bull has a 70-80% share [of the market worldwide], I’m looking for the maximum share of that 20-30% that is left. That would be about 3%-4.5%. I’d be happy with that,” he adds. Whether Bomba’s ambition is realised, Power Horse’s market advantage in Saudi Arabia protected, and Wild Horse’s efforts rewarded, remains to be seen. If the energy drinks sector, as so many markets in the region have already done, diversifies and local brands grow alongside local people’s drinking habits then Red Bull’s Middle Eastern rivals could have a fighting chance. However, with Mateschitz continuing to drive the dominant Red Bull forward, few would back the less experienced matadors in the short-term.||**||

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