By Melanie Ho
Washington Post Staff Writer
Wednesday, August 23, 2006
The drink claims to defy gravity. The company's sports business strategies try to defy convention. While sports marketing and the attachment of corporations to teams and events continues to grow at a significant pace, Red Bull has managed to stake its claim with a sense of rebellion.
Today, there are few gasps of disbelief when it comes to sports and corporate sponsorship. Fans have grown used to hearing the Sugar Bowl referred to as the Nokia Sugar Bowl. The halftime show must be preceded by a title presenter, and a 30-second ad during Super Bowl XL in February reportedly cost $2.5 million. David Gilliland's NASCAR stock car is covered by representations of larger-than-life M&Ms.
Seemingly on its own little island lies Red Bull. The company that produces the highly caffeinated energy drink of the same name has managed to push into the sports business world in a way that could be either just consistent with its corporate philosophy or a trend soon to be adopted by others.
Red Bull's approach lies in the ownership of teams and events rather than just the sponsorship of them; this gives the company not just exposure but also control. Founder Dietrich Mateschitz estimates spending $300 million, or about a third of his company's annual marketing expenditures, on sports sponsorships.
The most well known, and the costliest, are the two Formula One teams. In March, Mateschitz -- who is based in Austria -- bought the New York MetroStars of Major League Soccer and renamed them the New York Red Bulls.
In 2007, Mateschitz will expand that sports budget by starting a two-car NASCAR team not surprisingly named Team Red Bull. There also are the smaller events: Alpine skiing, BASE jumping, sailing, BMX freestyle dirt and skateboard vert.
David Carter, the executive director of the USC Sports Business Institute, said the energy drink industry has made strides in sports marketing, in part because the brands transcend their immediate demographic category. Red Bull has branded itself a lifestyle product and has aligned itself with the lifestyle associated with action or extreme sports and motorsports.
"Clearly, sports have become entertainment, and in many ways, Red Bull has become a lifestyle product linked to entertainment in its own right," Carter said. "Red Bull's brand is more robust than a lot of other brands in that category."Branching Out
To date, Red Bull has relied on few conventions to brand its product, eschewing them in favor of letting the product develop a cult-like status through the underground. Despite the company's preference for hosting an event where people create their own human flying devices rather than a traditional magazine ad, Red Bull is still very interested in conquering the American beverage market. Sports, and specifically auto racing, has been its primary avenue. In the United States, entry into NASCAR is the next obvious step.
While Red Bull does not disclose its financial data, a primary sponsor of a single stock car averages about $15 million to $20 million annually. What makes the NASCAR project of interest is Red Bull's approach. Unlike most companies that elect to sponsor a car, Red Bull has chosen to own its teams, an uncommon decision in modern day NASCAR.
"They're really, in their own way, turning the NASCAR model on its ear," said Mike Bartelli, senior vice president for motorsports at Millsport. "It's not just the fact that they'll own the team as a sponsor, but their marketing approach is certainly going to be different."
Red Bull will have the 83 Car (there are 8.3 ounces in a can of Red Bull) driven by Brian Vickers, currently with Hendrick Motorsports. The second car, which may be aligned with another sponsor, is still to be determined.
Though it is the company's first experience with stock cars, Red Bull's two Formula One teams can be looked to as a model of their unconventional approach. Red Bull Racing and Scuderia Toro Rosso purchase their engines from Ferrari, but without sponsorship obligations, they can opt to go elsewhere.
For the drivers, this arrangement simplifies their lives.
"When you're driving for a team like Mercedes, you represent DaimlerCrysler; you represent Mobil, Siemens, Hugo Boss. You've got a range of companies," said Formula One driver David Coulthard. "You then have to walk a much finer line of what is politically correct for each of these sponsors. When you have one owner and it's a drink company, then it allows you to be, for better or worse, yourself."
Vickers elected to sign with Red Bull for similar reasons.
"Any business has its budget, but under a normal structure, an owner has a very strict budget from a sponsor and that's it and they have to work under those restraints," Vickers said. "But when the sponsor owns a team, that dynamic is a little bit different."
And then emerged that bit of teenage rebellion that has made the drink so popular in the first place.
"They don't have to answer to anybody because the owner and sponsor are one in the same," Vickers said.Coming to America
Red Bull's presence in the United States is not as definitive as it is in Europe, and Bartelli suggests the company may appear bigger than it truly is.
"Could Pepsi or Coca-Cola have done it? Absolutely, and it would have been a nominal figure in their books," Bartelli said.
Brandon Steiner, of Steiner Sports Marketing, says Red Bull has succeeded because it has aligned itself with the racing industry, which is ahead of the curve in terms of its business partnerships, and it has created and executed new and unconventional ideas. That and Red Bull has chosen a sport whose characteristics parallel those attached to the concept of an energy drink.
"It's a good relationship with what the drink stands for and what the sport stands for," Steiner said. "It doesn't surprise me to see that kind of synergy. It makes total sense, and I see more and more companies doing that."
However, there also is a risk that Red Bull -- which Mateschitz says is embodied by individuality, risk-taking and joie de vivre -- could extend itself too far.
In 2004, Major League Baseball forged a partnership with Columbia Pictures and Marvel Studios to help promote the movie "Spider-Man 2." Webbed logos were scheduled to appear on the bases and the on-deck circles during a weekend set of interleague games. It was not well received.
"It was sacred ground up to that point," said Bill Glenn, the vice president of insights and analytics at the Marketing Arm. "The backlash that the public created gave cause to saying that maybe we don't want this kind of publicity. There is a threshold of how much marketing one sport can take. Where that threshold is, is anyone's guess."
It thus seems like Red Bull is willing to straddle that line as best it can. Naming the New York Red Bulls after their corporate owner was less risky because corporate ownership in an international sport such as soccer is common. However, Carter believes that the notion of buying a team and completely rebranding it will not immediately have multiple followers, in part because the traditional sports seem to resist it. However, over time, this could all change.
"You might be seeing a fundamental shift in preferences among the next generation of consumers," Carter said. "It's sort of playing out in front of us."