Red Bull's Strategic Plan Assessment
The Middle East's energy drinks sector is at its peak with unprecedented sales in the retail and hospitality sectors. Yet competition is fierce as international players strive to cash in on the trend. "The margins are so high in this sector that many companies come to take a piece of the pie and then disappear. Most of them are not surviving, as success is dependent on how long brands have been in the market," says Omar El Banna, Power Horse's regional marketing manager, Middle East. The margins are so high in this sector that many companies come to take a piece of the pie and then disappear. Most of them are not surviving as success is dependent on how long brands have been in the market. "Looking at Saudi Arabia, it is almost over-congested with energy drinks brands, with hotels and restaurants accounting for around 20% of our regional business this year, but Egypt holds potential and the entire energy drinks sector grew by 9% last year," he adds. Egypt is currently Power Horse's strongest emerging market, with rising numbers of clients in the hospitality sector including Marriott, The Ritz-Carlton Hotels & Resorts and InterContinental Hotels and Resorts. With ingredients including taurine, glucuronolactone, caffeine, and inositol, Power Horse first entered the region in Saudi Arabia in 1997, followed by the UAE, but it is now seeing demand from emerging markets like Qatar, Bahrain and Oman.
While energy drinks routinely combine methylxanthines, B vitamins, inositol, carnitine, creatine, glucuronolcatone, ginkbo biloba, taurine, ginseng, and maltodextrin, El Banna says Power Horse informs customers not to mix the drink with alcohol, however there are no strict regulations in place against the move, so it has become a regular feature on drinks menus. But is not just Power Horse that is popular in the market, with Red Bull taking the greatest share of the energy drink market in the region. A far cry from the modern packaging and dynamic marketing of today's brands, Japanese-based Taisho Pharmaceutical first introduced Lipovitan back in the 1960's. One of the earliest known energy drinks; the brown 100ml bottles became widespread in East Asia. However, it was Red Bull in its silver and blue bullet-can format - initially developed by Thai businessman Chaleo Yoovidhya as a drink called Krating Daeng - that really activated the presence of energy beverages on a global scale. Red Bull kick-started marketing campaigns for its namesake drink in Austria in 1987, and distribution expanded to Hungary, Slovenia, Germany, the UK and the US by 1997. The company achieved sales of 300 million cans in the following year, and boasted availability in more than 50 countries by 1999.Since its UAE launch in 1998, Red Bull has maintained its status at the top of the country's energy drink leader board, yet Raed Gerges, its director of communications, is confident the brand will continue to surpass rivals, due to its premium image and significant presence in the foodservice sector spanning every country in the Middle East. "The sales growth in the UAE has been rising in strength since its launch, so we are expecting further growth in this dynamic country for Red Bull, which created the category and has been leading since," comments Gerges. Breaking down its content, each 250ml can contains ingredients including 27g of sugar, 1000mg of taurine, 80g of caffeine, as well as sodium citrates, caramel and riboflavin colors and inositol, believed to serve as a source of metabolic regulators and as membrane anchors for certain proteins. Although a practice advised against on the labelling of most brands, the onset of the 21st century marked the commencement of energy components being added to alcoholic beverages, which continues to ramp up sales today. One-Armed Scissor, JägerBomber, Night Bandit and Black Bull have emerged as attention-grabbing names for mixtures of energy beverages combined with vodka, Jägermeister, whiskey and Guinness respectively.
Responding to whether Red Bull is promoted for use with alcoholic beverages, Gerges refutes the suggestion, saying it is sold solely for consumers to deal with the "daily demands of life". Red Bull, however, issues a warning that the products are not recommended for people sensitive to caffeine, pregnant women, children and diabetics. Dubai-based bars Après and Left Bank, however, which combined see 1600 covers weekly, have also reaped dividends from the growing shift towards energy drinks among customers. However, Francesco Leoni, executive bar development manager for Emirates Leisure Retail, is quick to emphasise that bar staff should monitor customers' intake of energy mixes. "They should be consumed in moderation as they automatically pump you up, whereas alcohol does the opposite, so I would stay away from mixes of simply spirits and energy drinks, and rather rely on more skilful recipes," Leoni says. Saying this though, Leoni highlights that energy drinks have become a ‘must' in mixology sessions, as they create different chemistries with tastes, aromas and textures, and in turn are big sellers. Away from the bright lights of Red Bull, other brands have set their mark in the Middle East in a bid to capture a share of the lucrative market. New-Zealand based manufacturer Frucor Beverages, for example, launched V in 1997, designed specifically for daytime use. Spurred by the success of other energy drinks, the market also continues to witness a surge of new launches. Another newcomer in the region is Effect from German-based MBG International Premium Brands, which joined forces with its UAE distributor Emirates Snack Foods (ESF), in June 2006, fuelled by its success in markets such as India, Europe and South America. With the hospitality sector now accounting for 25% of the brand's turnover and having captured the potential in bars and sports sponsorships, the brand's development of cocktail menus for bars using its core product have played a critical role in its turnover, with the future now looking bright. "We plan to continue growing, and aim to be a credible alternative to the leader, and our share of the hospitality segment is growing by the day as more outlets become convinced of our value proposition," comments Anusha Prabhakar, food service account manager, Effect.
Margins in the energy drinks category can double those of other carbonated drinks, so the category has become appealing for smaller producers, with the UK, Ireland and Germany currently positioned as the biggest markets in Europe. The global response to energy drinks has not always been positive, and in response, brands including Energy69 have emerged with alternative, healthy alternatives. Richard Horwell, the company's marketing director describes the reaction to the ‘non fizzy', Dutch-produced energy drinks as "nothing less than staggering". With ingredients including maltodextrin, which has a slower release than most other sugars, the range is set to debut in the UAE in the coming months. In the meantime, the energy drinks market continues to grow from strength to strength, as an energy booster, mixer or simply as an alternative to alcoholic drinks
Your team is hired as Market Strategists by Red Bull who intends to launch a new range of Energy Bars in the UAE. As a part of the group you are required to come up with a background of the market dynamics of the industry in the UAE. The team is required to discuss a feasibility and viability analysis for the launch of the Energy Bars into the UAE market which will be done with the help of analysis as suggested below. Your group work outcomes must be presented to your faculty in a maximum of 15 to 17 slides. You will then individually present a report on the presentation in not more than 2500 to 3000 words.
The assignment is divided into 2 parts to justify both practical as well as theoretical requirements of the module.
Task 01- Report [70 Marks] [2500-3000 words]
Executive Summary: You should summarize your strategic plan (no more than one page of A4 paper). This should outline the key messages and be prepared in a format that would be suitable for presentation to the senior management team for Red Bull. [5 Marks]
- Energy Bars Market: Critically evaluate the scope of the Energy Bars market in the UAE for Red Bull. Analyse the market with examples and data in form of graphs/charts/tables highlighting market size, CAGR, top players, investments etc. to support the analysis. [10 Marks]
- Strategic Plan: With the use and application of relevant strategic models; critically discuss and present the feasibility and viability for the launch of the Red Bull’s Energy Bars into the UAE market in 3 distinctive section as below. [30 Marks]
- Strategic Positioning
- Strategic Choice
- Strategy in Action
- Recommendations and Conclusion: Finally, summarize and discuss all the acquired findings and analysis and provide a conclusion. Communicate the recommendations for Red Bull to launch their Energy Bar in the UAE. [15 Marks]
- References and Appendices: Adhere to Harvard Referencing Style only. Make use of the additional resources provided and cite credible academic sources. Alternatively provide citations from credible commercial sources like PWC, Deloitte, KPMG, CB Insights, and/or Annual Reports to support your work. Use the section of appendices wisely to provide your analysis when using and applying the PESTLE, SWOT, Porter’s Framework, BCG Matrix, Ansoff Growth Matrix, etc. Captions should be provided for all insertions- tables/charts/diagrams/pictures/graphs etc. You can also provide screenshots of the PowerPoint Presentation if needed. [10 marks]
Task 02- PPT [30 Marks] [Max of 15 to 17 slides]
Present your strategic plan as part of a Group Presentation. This would be conducted during the final phases of the course on a mutually agreed time slot (between the learner and the faculty). The time allotted for the presentation is 30 minutes (20 minutes presentation followed by 5 minutes Q&A) and would be evaluated based on content, presentation skills and interaction. Before final submission, provide evidence of the presentation by pasting the screenshot of the presentation.