MadaArslan,200301986

Red Bull Dominating The Energy Drink Industry

08-Nov-12 BUS 349: Advanced Seminar in Strategic Management Mada Arslan

Mada Arslan

Red Bull Gives you wings

Dietrich Mateschitz built Red Bull reflecting his own personality. Within its 20 years of existence Red Bull has created and dominated and still dominates the whole new industry of energy drinks. Selling to the consumer the feeling of limitlessness in sleek silver and blue cans, Red Bull is still growing by penetrating new markets including the 3 emerging and fastest growing ones: Brazil, India, and China. Red Bull is salvaging its marketing strength and has extended it into a multimedia subsidiary. However, the recent space jump stunt and the massive marketing campaign suggest that Red Bull has matured in some markets thus the expenditures to reinforce its brand image. Still, Red Bull has great potential; being privately held and holding on to the leading spot in the energy drinks industry in addition to diversification into fashion, construction, and mobile technology makes Red Bull an attractive investment. Red Bull can penetrate other industries through acquisitions: for instance it can-keeping in line with its imageacquire a sports apparel company and create a network channel featuring extreme sports that Red Bull sponsors and has exclusive rights to. Red Bull can raise capital for its investments by going public; since the owners are taking all the risks and enjoying all the rewards, it is challenging to secure creditors especially that Red Bull is a family owned business under the leadership of one man controlling it. Therefore if Red Bull is setting its target on becoming Austrias Coca Cola a public offering can raise the required capital, spreading the risk, and insuring institutionalization for Red Bulls long-term existence. Strategic intent and Implementation protocols Entrepreneurs build companies reflecting their own personality. It is no surprise that Red Bulls positioning is a reflection of Dietrich Mateschitzs ambitions, hobbies, and recluse. Even Red Bulls core competency is built on Mateschitzs craft: marketing. In 1984, Austrian born Mateschitz partnered with Chaleo Yoovidhya, a Thai business man, to sell a carbonated version of Krating Daeng (Thai for "water buffalo") in the west (McDonald, 2011). The genius of this partnership lied in the recognition of the existence of a market for functional drinks and the formula of the beverage. Red Bull was going to sell you the illusion of being limitless by

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vitalizing your body and mind (company website). Relying on "viral marketing" Red Bull appealed to Generation Y (Bized, 2005) through series of hip events including students driving around in "Minis and Beetles with a Red Bull can strapped on top", throwing "Red Bull parties around weird and wonderful themes" (The Economist, 2002), sponsoring extreme sports like BASE jumping and cliff diving, and even financing daring stunts- Felix Baumgartners space jump where he broke the sound barrier is rumored to have cost Red Bull 100 million (Rowley, 2012). Thus, Red Bull positions "itself as a young, thrill seeking organization, that creates extremely dangerous events" (Clancy, 2012) and differentiates itself from its competitors through its strategy centered on its marketing genius: introducing the brand in "trendy onpremise locations and reinforcing the brand through push media only when the market has matured" (Johnson et al., 2005). As a result, Red Bull had not only created the energy drinks market carving out 57.6% of the functional drinks industry (Datamonitor, 2011) but dominated the industry with 70% market share in 2004 and still dominates the industry in 2012 with 40% market share (Hoover, 2012). The decrease in market share is due to the intensifying competition in this category and the maturity of the developed markets: it is expected that the functional drinks industry that encompasses the energy drinks, sports drinks, and nutraceutical drinks markets, to experience decelerating growth at a CAGR of 5.2% for the years 2010-2015 (Datamonitor, 2011). Red Bulls sleek appear- slim silver & blue can reminding the consumer of the speed of a bulletcoupled with its brand image enabled Red Bull to charge a premium price setting Red Bull in a completely different category than soft drinks: "If we'd only had a 15 percent price premium, we'd merely be a premium brand among soft drinks, and not a different category altogether" says Mateschitz (McDonald, 2011). The premium Red Bull charges is estimated at 25% since Red Bull "deliberately set prices at least 10 percent above competing energy drinks" (Johnson, Mitchell, Farris, Shames, 2005). This premium enabled Red Bull to enjoy sales in the billions of dollars throughout the noughties (years 2000s) reaching $5.25 billion in 2011 (Appendix 1) and a sales cumulative average growth rate of 17.04% over the last eleven years with estimated net income in 2011 averaging $0.81 billion (Appendix 1) sustaining its marketing expenditure at 3040% of sales (Euromonitor, 2012); in comparison Coca Cola spent 9% of its $20 billion sales on marketing in 2004 (Dolan, 2005). In 2011, Red Bull is reported to have shifted focus to Brazil,

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India, and China accessing markets of around 2.75 billion people (CIA factbook). Note that Red Bulls focus on emerging markets for expansion is the natural incremental step for Red Bull to access larger markets and increasing sales exponentially; yet this move coupled with the tremendous mass marketing media suggest that its markets in Europe and America have matured. Red Bull was founded in 1984 as a family business where the principal owners Dietrich Mateschitz and Chaleo Yoovidhya each own 49% of the company with Yoovidhyas son receiving the remaining 2%. However, Yoovidhya remained a silent partner which provided Mateschitz with the flexibility to mold the company as he sees fit. Mateschitz was able to benefit from the general socio-political environment of Austria during the 80s and 90s to start and grow Red Bull. Austria never fell under the Iron Curtain and in 1955 it declared neutrality enabling it to enjoy economic freedom and becoming the link between the West and the East. In 1995, Austria became a member of the European Union. Red Bull was able to access a bigger market at favorable tariff terms. In the noughties, Red Bull took advantage of the accelerated globalization increasing its market presence from 70 counties in 2002 (Todd, 2003) to 164 by 2011 (Company website) and increasing its employee base from 2,605 in 2004 (McDonald, 2011) to 8,294 in 2011 (Company website). One cannot but notice the ubiquity of Mateschitzs personality throughout Red Bull. A look into his hobbies and recluse explain Red Bulls growth track. It took Mateschitz 10 years to graduate with a commerce degree from the Vienna University of Economics and Business while he worked as a ski instructor to pay the bills thus Red Bull underwrites 500 athletes today in 97 sports; Red Bull owns 4 soccer teams in New York U.S.A., Salzbury Austria, Brazil, and Leipzig Germany (McDonald, 2011). Mateschitz enjoys flying and holds a pilots license and owns a collection of historic aircrafts thus Red Bulls Flying Bulls "a performing fleet of vintage aircraft" (McDonald, 2011). With his enthusiasm for sports cars and racing, Red Bull owns a Nascar team and two Formula 1 teams. In addition, Mateschitz is known for his obsession with secrecy and controlling information which explains why Red Bull does not publish its figures and is still privately owned. Mateschitz made his intentions clear that he does not want to take the company public (McDonald, 2011). Red Bull is an expert in generating media content around its events, has produced several TV programs, and has successfully spun off its subsidiary Red Bull Media House in 2007. Red Bulletin, a 98 page magazine distributed in the U.S.A. features athletes, musicians, extreme

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sports coverage, and graffiti art (McDonald, 2011). Red Bull is extending its line and only Mateschitz can successfully spin a media & sports conglomerate from a drink. This evolution, invites several questions: Has Mateschitz been pursuing this strategy from Red Bulls inception? Or had he crafted his strategy incrementally? What is next? SWOT Analysis Red Bulls brand equity is its biggest strength. Having created a blue ocean through its innovative experiential or viral marketing enabled it to bring "people to the product" not the other way around (The Economist, 2002) which makes marketing Red Bulls comparative advantage. Marketing expenses per year range between 30-35% of sales to sustain its brand image and increase sales. Red Bulls Formula one team costs $200 million per year, the space jump stunt cost a rumored 100 million yet Red Bull does not cut back expenses that reinforce its image. In addition the $5.25 billion in sales and the estimated average $0.81 billion in net income in 2011 (Appendix 1) suggest that Red Bull can afford the price tag. Red Bull is a worldwide brand. It is present all over the globe (except in some countries that have banned Red Bull for health related concerns like France; this represents a threat to Red Bull). Red Bull enjoys flexibility in its management since it is not encumbered by having to report to shareholders were it publicly held. The Red Bull Media house is its most promising subsidiary with expertise in content management and the objective of diffusing the "World of Red Bull" through television, magazines (Red Bulletin), even through Red Bulls record label (McDonald, 2011). Red Bulls biggest weakness is non-other than its products. The product portfolio is limited to Red Bull Energy Drink, Red Bull Sugarfree, Red Bull Energy Shot, and Red Bull Cola (Company website). All variants of the same product with no real added value. In addition, the drinks success is not its taste (describe in instances as cough syrup). Another weakness is the aging of Red Bulls key demographics. Red Bull appeals to the young thrill seekers. When it launched its products it targeted Generation Y (born in the later 70s & early 80s). The biggest markets for energy drinks are North America, Australia, and Europe (Exhibit 1) yet these markets have ageing populations: the current average age of the more developed regions is 37.4 years while the less developed ones have an average age of 24.3 years and the least developed regions have an average age of 18.2 years; by 2050 these averages will be 46.4, 35, and 26.5

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years respectively (Exhibit 2). According to Mateschitz Red Bull needs to hook a generation of 16-year olds every year to sustain and grow its customer base (The Economist, 2002). Therefore Red Bull needs to and already is penetrating these markets with primary focus on Brazil, India, and China. In addition, Red Bull has so far survived on its marketing to sell a not so tasty drink. How long could Red Bull continue to do that? Family business and companies that are built without a well-defined succession plan or a degree of institutionalization may be faced with chaos and may crumble if the founder leaves the company voluntarily or involuntarily. Red Bull has been so far a one-man show with Mateschitz pulling the strings. His only son Marc, is poised to join the company once he finishes his studies (McDonald, 2011). Red Bull still has the opportunity to grow in virgin markets. It already started targeting Brazil, India, and China. The next big market is going to be Africa. In addition, Red Bull that has only one production facility in Austria where it cans and ships its drinks worldwide (this arrangement increases transportation costs) began building a $111 million production facility in Brazil gearing up for the 2014 FIFA world cup that will take place in Brazil and this facility will service the Americas at a reduced transportation cost (Euromonitor, 2012). Another way to grow is diversification and acquisition as stated by Mateschitz (The Economist, 2002). Red Bull could buy out its smaller to mid-sized competitors or by branching out in a completely different direction. So far, Red Bull has leveraged its core competency of marketing to create a blue ocean in the functional drinks industry and spin off a multimedia subsidiary. Red bull could continue with spin offs by acquiring sporting apparels or sound system equipments for example. Looking at Richard Branson (founder and chairman of Virgin Group), it is not farfetched for Red Bull to have its own airline fleet. Red Bull could also go public; although being privately owned Red Bull could grow much faster if it went public due to its promising potential; currently the owners enjoy all the benefits of the company yet they are bearing all the risk (since company financial records are not publicly available it is hard to know the exact degree of leverage of Red Bull and/or who its creditors are). Red Bulls biggest threat is a new entrant with an original outlook on the market or substitute products from pharmaceutical companies such as pills for example. Other threats are health concerns that have been raised especially with the latest scandal of a 14 year American girl dying

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of "caffeine toxicity after drinking just two cans of Monster energy drink" (Haiken, 2012)- one of the 3 leading brands in energy drinks (ZenithInternational, 2012)- prompting the FDA to investigate. Results from such lawsuits can hurt the industry but as long as there are smokers there will be energy drink consumers unless countries like France actually ban the product. Strategic Competitive Advantage (SCA) and Major Problems for Red Bull Red Bulls strategic competitive advantage was its marketing genius; but with its markets maturing that core competency became just a great strength and a weakness at the same time. The product is nothing but the end result of a unique experience. The consumer is valuing the illusion of limitlessness even invincibility. A Red Bull is smartly packaged in a sleek palm fitting silver and blue can that promises to revitalize body and mind by increasing performance, concentration, and reaction speed, improving vigilance, stimulating metabolism, and improving overall well-being (Company website). Since Red Bull relies on marketing to sell a not so tasty product with its product portfolio being limited to variants of the energy drink. Marketing is no longer considered a strategic advantage because a strategic advantage is supposed to sustain the product for a long period of time; in the end the sales are the bottom line; if the marketing is great yet the sales are declining, the company will not survive. On the other hand, Red Bulls marketing genius is efficiently utilized in diversifying the business and creating the Red Bull Media House that has the potential to influence the multimedia landscape. It is still unclear if this strength that was leveraged in the functional drinks industry carving out 57.6% of it to the energy drinks market would do the same in the multimedia domain. True the multimedia division is in line with the Red Bull image covering athletes and extreme sports, it is also venturing into music with a record label. The biggest challenge for Red Bull is salvaging its strength into a competitive advantage to grow and diversify. The product is not what Red Bull is selling; according to Mateschitz Red Bull is selling efficiency rather than good taste (McDonals, 2011), but how many innovative beverages can Red Bull come up with especially that the market has matured and big players such as Coca Cola and PepsiCo are in the game? How many spin-offs such as the multimedia division can Red Bull create? Red Bulls competitors are players in the energy drink as direct competitors: Monster, Burn, Full Throttle from Coca Cola; substitute products like soft drinks, sports drinks such as Gatorade

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from PepsiCo, coffee suck as Starbucks, and pharmaceutical companies. Red Bulls multimedia division has an even wider array of competitors from television to magazines to record labels. Monster Beverage Corporation (MNST) is traded on NASDAQ, has a beta of 0.15 implying that it is not much affected by swings in the market, a price to earnings ratio of 25.11 and EPS of $1.79 are higher than the industry average of 22.47 and $0.44 respectively (Yahoo Finance); compared to Coca Cola, Monsters share price since it was launched in 2002 by Hansen Natural has been higher. However, Monster follows the same model of Red Bull in sponsoring extreme sports and party events; it differs in the size of the beverage offered. According to BevNet Red Bull in 2008 captures 40% of the U.S. market share while Monster has been growing to capture 23% (compared to just 14.4% in 2006). The Coca-Cola Company (KO) is traded on the NYSE, has a beta of 0.45 implying that it will be affected half as much by swings in the market, a price to earnings ratio of 19.19 is less that the industry average of 22.47 but its EPS of $1.91 is higher than the industry average of $0.52 (Yahoo Finance); in response to Red Bull, Coca Cola launched Full Throttle energy drink but has only been able to capture 4% of the 2008 U.S. market (Bevnet, 2012). However Coca Cola is still the biggest threat within these players since it has massive capital and operations and ranks 3rd on most powerful brands in the world according to Forbes with an estimated brand value of $50.2 billion (Forbes, 2012). Starbucks is another competitor selling caffeine in a unique experience. It is traded on the NASDAQGS with a beta of 0.89 which means it almost moves in the same symmetry as the market. Its price to earnings ratio of 28.94 is slightly above industry average of 28.89 (Yahoo Finance) suggesting that Starbucks has matured as well and is looking for new ways to grow. Successful pharmaceutical are some of the biggest tax payers (The Economist, 2002) with ample resources for R&D. Pharmaceutical companies may come up with ground breaking vitamins that could become serious substitutes to the energy drinks. We obtained sales of Red Bull from various resources and have benchmarked basic numbers to Red Bulls direct competitors: Coca Cola and Monster. Based on average net income calculated for Red Bull (Appendix A), we obtained a net profit of 16% compared to an average net profit of 20.74% and 11.8% for Coca Cola and Monster respectively. In addition, Coca Colas sales have been fluctuation throughout the years 2000-2011 with a CAGR of 9.38% compared to Monsters sales CAGR of 33.37% and Red Bulls sales CAGR of 17.4%. Both Red Bull and Monster have

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a higher and more stable growth rate due to the fact that both companies are operating in the new energy drinks industry and in which they both have a higher market share than Coca Colas Full Throttle. In addition, Coca Colas beta of 0.42 is higher than Monsters 0.15 which means that Coca Cola is more sensitive to changes in the market. These conditions in addition to penetrating new markets have allowed Red Bull to fare better during the global crisis where it has performed better than expected. The second source of data was limited and was obtained from Privco (Appendix 2). As deduced in Appendix 2, Privcos numbers are not 100% reliable but they may be indicative of the companys operations. Red Bulls profit margin is very low at 6.6%. Gross profit margin of 42% in 2009 is lower than Coca Colas 64% and Monsters 54%; this is in line with the fact that Red Bull has only one production facility is Austria which increases its transportation costs and explaining the lower gross profit. Coca Colas cash and cash equivalent at $8.52 billion in 2009 is significantly higher than both companies which makes Coca Cola the biggest threat to both companies. Red Bulls current ratio at 2.75 is higher than Coca Colas 1.17 and less than Monsters 4.97; both Red Bull and Coca Cola should make better use of their assets since ensuring the companys current liabilities will be met when the ratio is between 1 & 2, theres no need for a higher ratio and this increase in the current ratio for Red Bull & Monster is not due to holding more inventories since quick ratio does not decrease significantly (RBs 2.59, Monsters 4.18). Red Bull manages its inventory better than both companies as shown by the quick ratio, in addition its inventory is a mere 5.82% of current assets while Coca Colas is 12.28% and Monsters is 15.91%. This efficient inventory management is due to Red Bull only having one production facility which allows it to better control its inventory levels. Coca Cola is highly leveraged at a debt-to-equity ratio of 133% in 2010 against Red Bulls 52% and Monsters 38%. Red Bull has the highest return on assets and return on equity which is in line with its balanced leverage level (52%) and its high sales. Dissecting ROE with Duponts equation (ROE = Net profit * Asset turnover * Equity multiplier) we can conclude that the high ROE is driven by the high sales.

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Strategic Recommendations Red Bull is already addressing some of its key weaknesses and threats. In realizing that its demographics are ageing and western markets have matured, Red Bull is focusing on the emerging markets Brazil, India, and China; and has already started building a second production in Brazil that will be used to supply the Americas which will decrease transportation costs and increase Red Bulls 42% gross profit margin (Appendix 2). Tapping China and India, Red Bull should consider building a third plant in the either of these countries or any far-east or south-east country that will serve that geographical area. Red Bull has recognized the need to diversify given its limited product portfolio. Coming up with new drinks extending the product line is hard especially that the creator of Red Bulls formula Chaleo Yoovidhya is dead. In addition, addressing the health issues raised over Red Bull will be difficult as well since a slight change in the formula affecting taste may shift consumers preferences and decrease demand. Therefore, Red Bull has chosen to diversify its business by going into multimedia with Red Bull Media House, fashion with its online store1, construction with Bull Bau and mobile in South Africa with Red Bull Mobile (Euromonitor, 2012). Furthermore, Red Bull can penetrate other industries through acquisitions: for instance it cankeeping in line with its image- acquire a sports apparel company. In addition, Red Bull can create a network channel featuring extreme sports that Red Bull sponsors and has exclusive rights to. Red Bulls Media House subsidiary already produces series for TV programs and has launched its Red Bulletin magazine in the U.S.A. and has a record label. Therefore Red Bull is competing with sports networks such as ESPN. There is an opportunity in having its own cable channel given its craft of content generation. Red Bull is staying true to its value proposition of limitlessness: theres nothing it cannot accomplish and it sure has the resources to implement its ideas with Sales of $5.84 billion and estimated average net income of $0.81 billion in 2011 (Appendix 1) and its growing employee base of 8,294 in 2011. Red Bulls sales and net income have been growing steadily thoughout the noughties in comparison to Coca Colas sales and net income which have fluctuated as a result of Coca Colas beta of 0.42 making it sensitive to market swings. Coca Colas net income growth

www.redbullshop.com

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fluctuated heavily from 17.75% in 2007 to -2.89% in 2008 to 31% in 2009 to 69% in 2010 to a negative growth of 28% in 2011 showing the difficulties of Coca Cola to navigate through the financial crisis (Appendix 1). However, Red Bull has navigated well the crisis mainly due to the penetration of new markets of Brazil, India, and China; Turkey witnessed in 2010 a surge of 86% in sales (Maierbrugger, 2011). As Red Bull is growing into a conglomerate of different businesses, it is important to have a succession plan and to be institutionalized. Taking the company public will enforce institutionalization as well as secure funds for the company to grow without having to satisfy debt covenant were it to finance its growth with debt. So far Red Bull has been financing its investments from its cash flows (Euromonitor, 2012) which only add to Red Bull attractiveness as a company to invest in. Embedded in Red Bulls strategy should be flexibility to change and realization when its strategic advantage is no longer enough. A great example is IBM, the company has changed throughout its 100 years of existence (founded in 1911) to produce completely different products and service completely different customers. Siemens in the last 10 years has change 55% of its product lines to cope with the different trends and requirement of the market. Google is not just your search engine anymore; it is developing the driverless car which adds to its competitors the automotive companies. However, given Red Bulls diversification into other businesses, it seems that Red Bull is changing its strategy previously based on marketing as a strategic competitive advantage and delving into new businesses to diversify its risk. Summary of Learnings Red Bull is a case in point of the ability to sell an idea, a feeling, regardless of how good the product is (taste). The people are brought to the product which is nothing but the end result of the companys strategic intent. It is always important to envision growth as strategy is crafted and by growth we do not mean just organic growth but strategic growth. Red Bull cannot survive in the long run on one product yet it is proving it is not just a FAD. It has been around for almost 20 years and it is showing no signs of slowing down. It is capitalizing on its brand image to extend its lines into multimedia. Red Bulls unique positioning and biggest strength enable it to spin a

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multimedia company off a beverage. Again, this is due to the fact that the product was built around the marketing strengths of the founder Dietrich Mateschitz, not the conventional way of marketing to sell the product. Companies need to leverage their core competencies to bring the customers to them. Apple is another example of bringing people to its product by offering a perceived superior design of computer hardware and software. In addition, in the dynamics of todays global market companies should use their core competencies to spinning off products or subsidiaries. However, once companies matured they need to be flexible and realize that what got them to where they are may ultimately contribute to their demise.

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Exhibit 1: Energy Drinks Total Volume Consumption 2010

Source: Energy Drinks Entering a New Phase of Growth (2012). Retrieved from: http://www.portal.euromonitor.com.ezproxy.aub.edu.lb/Portal/Pages/Statistics/Statistics.aspx Exhibit 2: Changing Balance Between Age Groups

Source: United Nations Department of Economic and Social Affairs: Population Division. World Population Ageing: 1950-2050. Retrieved from http://www.un.org/esa/population/publications/worldageing19502050/pdf/81chapteriii.pdf

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Appendix 1

Sales
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 RedBull Salesin $millions CocaCola Salesin $millions Monster Salesin $millions

$billions

NetIncome
14,000 12,000 10,000 $billions 8,000 6,000 4,000 2,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 CocaCola NIin $millions Monster NIin $millions RedBull averageestimatedNI

Mada Arslan, 200301986 Appendix 1- continued

Red Bull GmbH RB Estimated NI RB Estimated based on NI based on Price 11% Profit Premium B margin C $ millions $ millions 186 245 300 323 460 553 724 844 856 806 934 1,050 17.04% 102 135 165 178 253 304 398 464 471 443 514 577 17.04% Coca Cola (KO) Red Bull average estimated NI D, z $ millions 144 190 233 250 356 429 561 654 663 625 724 814 17.04% Coca Cola Sales E $ millions 17,354 17,545 19,564 21,044 21,742 23,104 24,088 28,857 31,944 30,990 35,119 46,542 9.38% Monster (MNST)

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Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 CAGR

Red Bull Sales A $ millions 929 1,225 1,502 1,614 2,300 2,765 3,618 4,219 4,280 4,032 4,670 5,249 17.04%

Coca Cola NI E $ millions 2,177 3,969 3,050 4,347 4,847 4,872 5,080 5,981 5,807 6,824 11,809 8,572 13.27%

Profit margin 13% 23% 16% 21% 22% 21% 21% 21% 18% 22% 34% 18% x

Monster Sales F $ millions 72 81 92 110 180 349 606 904 1,034 1,143 1,304 1,703 33.37%

Monster NI F $ millions 4 3 3 6 20 63 98 149 108 209 212 286 47.72%

Profit margin 5% 4% 3% 5% 11% 18% 16% 17% 10% 18% 16% 17% y

x Average Profit Margin of Coca Cola = 20.74% y Average Profit Margin of Monster = 11.8%

Mada Arslan, 200301986 Appendix 1 - continued z Average Profit Margin of Red Bull = 16% A: Sales for the years 2000-2010 were obtained from Gale Business Insights (http://bi.galegroup.com/essentials/search#q=red%20bull%20owner); Sales for the year 2008 was obtained from TopNews.in (http://www.topnews.in/red-bulls-growth-rate-halved-2008-2120124) ; Sales for the year 2011 was computed based on sales 2010*(1+12.4%) obtained from the company website. B: Net income was first estimated based on a price premium of 25%. Which is the cost + 15% that soft drinks charge (McDonald, 2011) and the 10% premium that Red Bull charges (Johnson et al., 2005). C: Net income was next estimated based on a profit margin of 11% obtained from Hoover. D: Average net income was next calculated as average of B & C. E: Figures for the Coca Cola company were obtained from the 10-K filed reports (http://www.sec.gov/edgar.shtml).
F: Figures for the Monster Beverage Corp company were obtained from the 10-K filed reports (http://www.sec.gov/edgar.shtml).

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MadaArslan,200301986 Appendix 2

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Sales Net Income Profit margin Gross profit margin Gross profit Cash & Cash equivalents Current ratio Current assets Current liabilities Quick ratio Inventories Debt/Equity ratio Debt/Equity ratio_2 Total debt Total debt_2 L-T Debt/Equity ratio L-T Debt ROA Total assets ROE Total equity

Red Bull GmbH Coca Cola (KO) Monster (MNST) 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ $ $ $ $ $ $ $ $ billions billions billions billions billions billions billions billions billions 5.5 5.19 4.5 46.542 35.119 30.99 1.70 1.30 1.14 0.363 0.343 0.297 8.572 11.809 6.824 0.29 0.21 0.21 6.6% 6.6% 6.6% 18% 34% 22% 17% 16% 18% 42% 61% 64% 64% 53% 52% 54% 1.89 28.33 22.43 19.90 0.89 0.68 0.61 0.89 12.80 8.52 7.02 0.36 0.35 0.33 2.75 1.05 1.17 1.28 4.44 4.97 6.99 0.88 25.50 21.58 17.55 1.18 0.96 0.59 0.32 24.28 18.51 13.72 0.27 0.19 0.08 2.59 0.92 1.02 1.11 3.86 4.18 5.70 0.05 3.09 2.65 2.35 0.16 0.15 0.11 52% 151% 133% 92% 39% 38% 37% 37% x 0.34 48.05 41.60 23.33 0.38 0.32 0.22 y 0.48 2.33% 30% 32% 20% 9% 11% 16% 0.02 23.77 23.10 9.60 0.12 0.12 0.13 27% 11% 16% 14% 21% 18% 26% 1.27 79.97 72.92 48.67 1.36 1.15 0.80 37% 27% 38% 27% 29% 26% 36% 0.927 31.92 31.32 25.35 0.98 0.83 58%

We used the financial ratios to deduce the numbers for Red Bull. However we found a discrepancy. Using ROE & ROA we deduced total equity and total assets. But total debt calculated as a deduction of the obtained equity from liabilities is $0.48 billion (y) which is different than the obtained debt amount of $0.34 billion (x) obtained by multiplying the 52% debt-to-equity ratio obtained from Privco by the obtained equity amount of $0.927 billion. Thus, Privcos numbers are not 100% reliable but they may help benchmark the company in some areas.

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References Bized (2005). Red Bull Case Study Home Page. Biz/ed. Retrieved from http://www.bized.co.uk/compfact/redbull/redbullindex.htm "Brazil", CIA- World Factbook, 2012, https://www.cia.gov/library/publications/theworld-factbook/geos/br.html, accessed November 8, 2012 BevNet, (2012). The Top 15 Energy Drink Brands. BevNet. Retrieved from http://www.energyfiend.com/the-15-top-energy-drink-brands Brand Strategy (2007). CASE STUDY - RED BULL: Running with bulls. Brand Strategy, 20-20. Retrieved from http://search.proquest.com.ezproxy.aub.edu.lb/abicomplete/docview/224157203/13A431780362 1DBD078/1?accountid=8555 "China", CIA- World Factbook, 2012, https://www.cia.gov/library/publications/theworld-factbook/geos//ch.html, accessed November 8, 2012 Clancey, R. (2012). Red Bull 'worth 5bn' after Felix Baumgartner skydive. The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9609231/Red-Bullworth-5bn-after-Felix-Baumgartner-skydive.html Company website: www.redbull.com Datamonitor (2004). Red Bull GmbH: Company Profile. Business Source Complete. Retrieved from http://web.ebscohost.com.ezproxy.aub.edu.lb/bsi/pdfviewer/pdfviewer?sid=eb2bf68a-e469478d-9b42-5dfdf7aa62c2%40sessionmgr13&vid=7&hid=10 Datamonitor (2011). Industry Profile: Global Functional Drinks. Datamonitor Plc, Reference Code: 0199-2285.

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