Red Bull is a product of the Austria based company Red Bull GbmH. It is an energy drink. In the energy drink industry, Red Bull has the largest market share in the world with more than six billion cans sold in the year 2016. Red Bull was inspired by a Thailand based energy drink called Krating Daeng. Red Bull is a modified version of that drink to suit the taste of western consumers. Red Bull comes in 19 different variants based on different flavors. Red Bull remains intensively involved in the sports industry by sponsoring many extreme sports such as cliff diving, crashed ice, and air race. Red Bulls also owns a number of sports teams such as the New York Red Bulls. Red Bull has become popular throughout the globe and is continuously working to enter new markets that can further help it grow and increase its market share.
Following is a detailed Porter Five Forces Model Analysis of Red Bull:
Competitive Rivalry – High
There are a number of beverage companies that manufacture energy drinks such as Monster, Rockstar, and Full Throttle. However, the market share of Red Bull is greater than the market share of all the competitors combined. The industry is continuing to grow at an impressive rate offering opportunities for the competitors as well. The competitors are following in the footstep of Red Bull and diversifying their businesses and becoming involved in various sports. Although Red Bull is the market leader in terms of market share in the industry, the high number of competitors means that the competitive rivalry being faced by Red Bull is high.
Threat of New Entrants – Low
Entry into the energy drinks industry is not easy unless the new entrant has an innovative idea that will make it stand out in the industry immediately. The entry barriers are sufficiently high. The existing players in the industry have made huge investments to get where there are today. A new entrant will also have to spend a large amount to start off. Establishing economies of scale will also take time. Developing a global distribution or even a national distribution is an entry barrier for the new entrants (Dudovisky, 2016). Grabbing market share would be the toughest aspect as the existing players have developed strong brand images. Thus, the threat of new entrants is low for Red Bull.
Bargaining Power of Suppliers – Low
Red Bull follows a simple production process that requires only a few raw materials. Red Bulls requires those materials in massive quantities making it ideal for any company to become a supplier of Red Bull. The switching cost for Red Bull is also low if Red Bull switches suppliers. This leaves the suppliers with no bargaining power or ability to attempt to influence the prices of Red Bull. Many suppliers are known just because they are the suppliers of Red Bull. This reflects low bargaining power of the suppliers against Red Bull.
Bargaining Power of Buyers – Medium
Although there are competitors of Red Bull, the energy drink market is a small market that is known for brand loyalty. Due to high market share, Red Bull holds a certain bargaining power over the buyers. It can increase its prices moderately and still will not lose market share as it holds extensive brand loyalty. Since energy drinks cost more than normal beverages, the consumers are the higher earners of the society that are not much sensitive to price changes (Shakarishvili, 2016). Red Bull also contains caffeine, which makes the consumer addictive to certain extent. Therefore, the bargaining power of the buyers is moderate.
Threat of Substitutes – Low
The substitutes of Red Bull are coffee and homemade fruit smoothies. Although in the case of fruit smoothies, the product is natural, the time to stimulate, caloric intake, and convenience are the cons. However, there has been a number of controversies surrounding Red Bull on not being healthy which can lead to increase in the use of substitutes. Red Bull has tackled this by ensuring that the products it uses are of the best quality, still, the controversies exist. Despite this, regular consumers continue to consume and not move towards substitutes. This makes the threat of substitution low for Red Bull.
References
Dudovisky, J., 2016. Red Bull Porter’s Five Forces Analysis. [Online] Available at: http://research-methodology.net/red-bull-porters-five-forces-analysis/ [Accessed 30 Aug 2017].
Shakarishvili, S., 2016. RedBull Analysis. [Online] Available at: https://www.slideshare.net/ShotaShakarishvili/redbullanalysis419 [Accessed 30 Aug 2017].