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It’s a (Red) Bull Market After All

The controversial energy drink in the slim little can has a simple but crafty grassroots marketing strategy that’s winning hordes of loyal gen-Y fans. Two branding experts think Coke and Pepsi should be taking notes.

During the height of dotcom mania — a dimly remembered time of roll-away office cots and 10 PM conference calls — Red Bull energy drink became the fuel of choice at West Coast kitchenettes, predawn dance parties, and Kozmo.com checkout lines. Three years and one stunning economic downturn later, office fridges are bare of complimentary beverages, and 22-year-old consumers can hardly afford résumé paper much less a caffeinated kick in the pants — especially one that costs $1.99 for just 8.3 ounces.

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So how is Red Bull marketing its brand to meet the changing needs and budgets of its customers? How will the privately owned Austrian company expand its product line beyond the silver-bullet beverage that “gives you wings”?

The short answer: It’s not. And, quite frankly, it doesn’t need to. Not yet, anyway.

Red’s Dawn: The Birth of a Bold Brand

Red Bull founder Dietrich Mateschitz introduced his taurine-fueled beverage to Europe in 1987. (Coincidentally, it was the same year Howard Schultz acquired a small, Seattle-based coffee outfit called Starbucks Corp.) Ten years later, Red Bull charged into the United States, launching a new category of nonsoda energy drinks aimed at burned-out high-school and college students.

Remarkably, America’s hottest new brand bucked the trend of aggressive, excessive marketing that swept through upstart companies in the late 1990s. While Pets.com and eToys were lavishing millions on prime-time advertising, Red Bull was quietly converting America’s youth into devoted, enthusiastic customers.

Since its inception, Red Bull has shunned print advertising in its marketing strategy. It has not created one Web-marketing campaign. And it hasn’t tweaked or expanded its product line one iota. Red Bull has, however, expanded into 50 countries, experienced annual double-digit growth, and captured the loyalty of a notoriously fickle consumer group: teenagers. Today, a dozen imitators like Whoop Ass and Red Devil vie for the number-two high-voltage beverage spot, and Mateschitz is the richest man in Austria.

So what gives? How did Red Bull come to dominate the energy-drink market through stealth and thrift? How did it become the coolest brand since Slim Shady without a branding blowout?

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“In terms of attracting new customers and enhancing consumer loyalty, Red Bull has a more effective branding campaign than Coke or Pepsi,” says Nancy F. Koehn, professor of business administration at Harvard Business School and author of Brand New: How Entrepreneurs Earned Consumers’ Trust from Wedgwood to Dell (Harvard Business School Press, 2001). “Red Bull is building a beverage brand without relying on the essential equipment of a mass-marketing campaign. Perhaps the indispensable tools of marketing aren’t so indispensable after all.”

Here are some tools that Red Bull doesn’t use: billboards, banner ads, taxicab holograms, blimps, Super Bowl spots. Even its TV spots — all of which feature the whimsical sketches of a mysterious Austrian artist — serve more to amuse than to educate or entice consumers.

Bull Shift: Marketing Makes a “You Turn”

Like its product, Red Bull’s branding campaign is sleek and small. Its grassroots efforts fly well beneath the radar, and they provide a startling return on investment. In fact, its most lucrative strategies cost next to nothing.

“Grassroots marketing is enjoying a resurgence with Starbucks, Red Bull, Krispy Kreme, and Trader Joe’s — young, successful brands built by word of mouth,” Koehn says. “Person-to-person marketing is going to be a big part of the next chapter, the next frontier of branding competition.”

The sudden shift from TV blitzes and blimps to low-key, low-cost marketing schemes, says Koehn, follows the convergence of three trends. First, advanced communications technology is creating a generation of consumers skeptical of every TV ad, email message, and celebrity endorsement. If a marketing message doesn’t offer a distinct, unique benefit to the individual consumer, he or she will tune it out, Koehn says. “As information overload becomes a time-management issue for consumers, mass marketing is necessarily going to be less effective.”

Second, people are casting votes with their credit cards. “People are using products to provide things that they think traditional institutions no longer can, like social progress, a sense of community, and a sense of public good,” she says. “Companies that want to claim consumers’ votes will have to implement branding strategies that represent something.”

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Finally, Koehn says that consumers are looking for authenticity, self-identity, and community in the brands they endorse. And for Red Bull’s target audience, being authentic means being a bit irreverent, a bit antiestablishment, and every bit different from your parents, says Marc Gobé, president and CEO of the desgrippes gobé group, a New York-based branding firm with a client list that includes Godiva, Versace, and Starbucks.

“The beauty of Red Bull is that it’s the antibrand brand,” says Gobé, author of Emotional Branding: The New Paradigm for Connecting Brands to People (Allworth Press, 2001). “Red Bull doesn’t have any of the commercial trappings of a traditional, off-the-shelf product. It’s underground, even when it’s above ground, and that appeals to the young people who drink it.”

Running of the Bull: How the Brand Got Hot

Red Bull sets its grassroots ethic into motion with a simple, yet masterful marketing force: student brand managers. In Europe, collegiate buzz junkies have been successfully addicting friends and classmates for years thanks to a foolproof branding plan: Red Bull provides the student representatives with free cases of its energy drink and then encourages the kids to throw a party. (Needless to say, it didn’t take long for coeds to discover the benefits of Red Bull and vodka, now a staple at hip bars around the globe.)

Hardly a new marketing device, these brand evangelists spread the good word about Red Bull quickly and cheaply. Above all, Gobé says, the student advocates offer credibility to a product that is competing in an increasingly crowded beverage market — a market that became even more competitive in August when PepsiCo was given the FTC’s okay for its plan to purchase Quaker Oats and take control of the Gatorade brand.

“Generation Y no longer responds to commercial messages from big-business America,” Gobé says. “Cool college students have become Red Bull’s best ambassadors because they carry the most credibility with cynical consumers. It’s almost as if brands have to be elected to be part of the culture now.”

Red Bull’s second grassroots branding strategy involves “consumer educators” — folks who drive around in shiny silver off-roaders with giant, phallic cans of Red Bull strapped to the back. Their mission: to find people who need energy and give ’em a free can of Red Bull. Sounds too corny and pedestrian to actually work, right?!

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Wrong. This ploy, as old as Heinz and Tupperware, is introducing Red Bull to the masses — building an image for next to nothing. On the other hand, the free sporting events that Red Bull organizes do not aim to influence the public at all. Many of Red Bull’s extreme events — cliff diving in Hawaii and skateboarding in San Francisco — are for athletes only, designed “to support a community of athletes and to bring credibility to the sports they compete in,” says Emmy Cortes, director of communications for Red Bull.

Can It: Packaging Becomes Paramount

It’s all in the can. Gobé says that the sleek, silver can is Red Bull’s “anti-Pepsi statement.” He calls it slim, sexy, and powerful, and says that its diminutive size only bolsters Red Bull’s reputation as a concentrated experience.

“Packaging is critical,” Koehn agrees. “Red Bull really looks like a product from a global economy. It doesn’t look like a traditional American soft drink — it’s not in a 12-ounce can, it’s not sold in a bottle, and it doesn’t have script lettering like Pepsi or Coke. It looks European. That matters.”

The most remarkable thing about Red Bull’s 8.3-ounce can is not its size or sex appeal but the fact that it’s the company’s only offering. One size. One color. One sticky, sweet taste. That’s all, folks. At a time when Starbucks is hawking ice cream, bottled Frappuccino, and airplane coffee, it’s shocking to hear of a successful company not exploring brand extensions left and right. “We are one of few companies around the world that can stay focused on one product,” Cortes says in defense of Red Bull’s narrow strategy. “We do what we do best.”

A private company with a hands-off founder, Red Bull doesn’t feel financial pressure from investors and board members. It can take its time with the brand, and Koehn says that it should. “Red Bull is establishing itself as a very powerful mover in a relatively new and evolving category,” she says. “To do that, they are trying to get their knitting exactly right before they start weaving.”

But if Red Bull continues to amass consumers and increase its profits every year, Koehn predicts that the company will introduce related products “carefully, tightly linked to Red Bull’s core offering.” In the meantime, Red Bull is simply working to keep tabs on all the rumors circulating about its beverage. Some reports claim that Red Bull is unsafe for minors. Others link the drink to the deaths of various teenagers around the world. France has banned the sale of Red Bull altogether.

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Consumers don’t appear concerned. In clubs and dorm rooms everywhere, Red Bull remains a popular drink among popular kids. Gobé says that the rumors only contribute to the brand’s mystique. “Red Bull is not about safety,” he says. “The brand’s emotion is over the edge; it’s pushing the envelope. Danger is part of the deal. If you can survive Red Bull, you are cool.”

The question, however, is not whether consumers can survive Red Bull but whether the major soda manufacturers can. Regardless of whether the Austrian beverage disappears in five years or steals the market out from under Gatorade, Red Bull has tapped into an authentic branding strategy that will redefine product marketing in the next decade — again.

“The game of marketing sports drinks is going to be the game of connecting with people in certain kinds of contexts,” Koehn says. “Pepsi’s not going to be able to market Gatorade strictly with slick print campaigns and good television. Pepsi and Coca-Cola could learn a lot from Red Bull.”

Anni Layne Rodgers (arodgers@fastcompany.com) is the Fast Company senior Web editor. Learn more about Red Bull on the Web.