In the beginning, there was cola. Well, there were other beverages, but
the bottom line was this: if it came in a bottle, and you were going to drink
it without having the ambulance come for you, you drank beer, wine, or soda.
The same applied for cans, minus the vino.
Juices were
fresh-squeezed or highly concentrated. Fruit flavors came from powders; tea – hot or iced – was brewed at home
or concentrated, sweetened, and canned; coffee was instant, it was decaf, it
was regular, but it was always made that day and poured into a cup. It was
never ready to drink. There was no ‘mocha.’ (There was, however, Yoo-Hoo.)
It’s not that it was
a boring world, but it was one whose liquids suffered from a certain kind of
placid repetitiveness. Aside from a few quirky regional drink brands, the only
excitement in the beverage industry seemed to happen when the Kool-Aid Man
busted through the wall. And while he always showed up with a flourish, you couldn’t take his stuff with you
unless you had a canteen.
The world needed new
flavors, new brands,
and because the pace of the world was getting faster, these things needed to be
ready to drink.
Meanwhile,
revolutions were happening in travel, in cultural awareness, at the table, and
in business. Creative marketing combined with efficiencies that allowed for shorter product runs, hot-filling of packages, better flavors. The potential
for variety was matched only by the desire for the new, the fresh, the trendy.
And that’s when things
changed. By the time the infamous Cola Wars of the 1980s were winding down, the
seeds for a new beverage aisle had sprouted. New words were already entering
the lexicon: Hydration. All-Natural. Low-Cal. Fresh. Electrolyte.
Bottled water had
become a status item in restaurants, Gatorade a fixture on NFL sidelines.
The market was
opening up. A third way was emerging, one whose broad outlines were summed up
by the phrase “New Age.” Things that hadn’t been bottled or canned were coming
into wide release: Fresh-brewed teas. Real juices. Sports drinks. Clear sodas.
Jolt Cola.
New Age fit for a while. But there’s a problem with
throwing a temporal moniker like “New” on something – it doesn’t last. Once the
potential for change is realized, the pressure to follow through on that
potential ensues. And when change occurs, it goes one of two ways: it results
in decline, through devolution, or advances, through innovation.
In the beverage
business, innovation is everything. A rote-sounding platitude, to be sure, but
considering the importance of small changes like new flavors, new packages, new advertising methods and
slogans
– the so-called
incremental innovations required of all packaged goods companies – and seeing
how the marketability of those change is instantly dwarfed by the emergence of
new classes of beverages, it’s one that resonates.
That doesn’t mean
it’s easy. IBQ has spent hours talking with each of the individuals listed here
about how they create and maintain an environment that fosters innovation, and
how they recognize, utilize, and apply it. Some ideas are obvious: new flavors, new sizes, new formulations. Some swear
by testing and focus groups, some rely on their gut and experience.
What separates
inspiration from innovation? Perhaps it’s that process of applying inspiration
to something concrete (or, yes, liquid). Regardless, what seems to define major innovation in the beverage industry is
the contrast between the ability of a single sensational idea to gain quick
entry into the business, and the hard work and long hours required to turn that
idea into an overnight sensation.
In that same vein,
there’s a separation between in-novation and invention. Those with an earthbound
view would
probably say that it’s the difference between figuring
out how to ferment grapes and the first bottling of Coca-Cola. Those who don’t fear
bruising the spiritually-minded might find the turning of water into wine to be quite an
innovative trick.
Now, innovation is
most important when it comes to getting a thirsty consumer to overcome their
reliance on the tried and true and turn to a new product. It’s finding the new space between water and wine, and
wedging it into a crowded cooler so that it doesn’t just take a slot or a
shelf, but creates a whole new door of beverages in a heretofore unrecognized
product class like bottled waters or energy drinks.
The men represented
here have done that, and in so doing, they’ve shaped the modern beverage
cooler. They have expanded it past a pair of warring cola factions into a broad
spectrum of beverage choices. Drink categories have gone from Soda, Beer and
New Age to incorporate the innovations of these pioneers. Here are their
stories.
Dietrich
Mateschitz
It’s the dream of not just every beverage entrepreneur, but every
entrepreneur, period, to conquer massive amounts of sales territory through the
clever execution of a simple idea.
In the case of Red
Bull, the idea was quick energy and alertness, served cold, at all the places
one would need it – on the slopes, in a car, at the tavern and in the trenches
– literally. (Red Bull is one of the most requested items by U.S. troops
serving in Iraq).
And Dietrich
Mateschitz was the one who executed it.
Mateschitz is the
co-owner of Red Bull, the beverage marketing company that launched energy
drinks as a global phenomenon. Moving from a home base in Mateschitz’s native
Austria into Germany, and then across Europe into the U.S., the product’s
success came from its ability to provide “energy” – a commodity in high demand
in an increasingly fast-paced, interconnected world – via caffeine, sugar, and
caffeine-related products, as well as a multi-pronged marketing approach that
included nightclubs and bars along with edgy, individual-achievement oriented
“extreme sports.”
The original formula
for Red Bull came from Mateschitz’s initial encounter with a restorative
“elixir” on trips to Thailand as a salesman, but after acquiring the rights to
market the product globally from its Thai owner, Chaleo Yoovidhya, (now a
billionaire as many times over as Mateschitz himself), the product was reborn
as a lightly carbonated, crisply packaged product that carried a slight air of
mystery about it.
It combined the
brain-and-body fueling abilities of coffee with the youthful characteristics of
soda; it hit at the right time, when rave parties and dance clubs encouraged
young Europeans and coastal Americans to stay up all night. A single, 8.3 oz. slim can provided
energy for a billion-dollar sales empire.
It also exemplified the power of innovation in the beverage
business. By creating a drink that focused on a single effect – increased
energy – and on a single marketing target – the individual – Mateschitz turned
Red Bull into a dangerously profitable
member of the beverage pack.
Dietrich Mateschitz
rarely speaks with the press. Keeping Red Bull private means that he has little
need for public dialogue. Despite the original odd myths about the effects of
his product, myths that the company did little to discourage as they seemed to
bolster sales, today, there is little concerning Red Bull’s success that is
shrouded in mystery. Mateschitz himself, however, engenders scrutiny: his sport
jet, race car, and private island-based lifestyle, fueled by Red Bull profits, gives him the aura of a professional
playboy, one bolstered by stunts like the purchase of auto racing teams or the
New York Metrostars soccer club and renaming them
– what else? – Red
Bull. It’s all in building the brand, however. Like Hugh Hefner and Playboy
before him, Mateschitz seems to be the model for Red Bull’s core message: with
enough energy, you can do anything.
For this interview
with Mateschitz, we attempted to focus less on brand Red Bull and more on what
sorts of innovative ideas its founder had put into play to make it into a
success. We quickly determined that he believes the brand itself is the
innovation.
IBQ: What does innovation mean to you?
Dietrich Mateschitz:
For me innovation means that “things” did not exist before or at least the
approach towards their execution is significantly different and hasn’t been
done before in that very unique way.
Is there a special
kind of way that innovation must be employed within the beverage industry? In
other words, is there anything unique about the industry and its relationship
to innovation?
I don’t think
so. There is a way to be quite innovative
in general, not just in the beverage industry. What is true for soft drinks is
also true for most other markets.
What kind of
environment fosters innovation?
Our passion is
quality and individualism. As a principle we take everything into question and
think about ways to execute things differently, i.e. in more creative,
efficient, intelligent, funny, and rational ways that have never been done
before. If you don’t try to do it better or be more creative, you won’t find
the alternative strategies.
What kind of training
creates an innovative mind?
I am not too sure if
this is something that comes through “training.” One has to have the corresponding personality
and attitude towards work and life, fun and performance. I like to say that one
needs to have “a clear mind and bright eyes.”
Do you consider
yourself an innovator? Why or why not?
Yes, I think so. If
you look at Red Bull’s history, you’ll see an ongoing innovative process woven
through our marketing mix.
What parts of Red
Bull’s makeup as a beverage company do you feel are particularly innovative?
What makes them that way?
It starts with the
product itself, its positioning, formula and benefits. Red Bull created a new,
highly attractive and – for 20 years now - expansive market. Its theme advertising campaign could hardly
be more individual. Also, twenty years ago no one had the idea to sample a
product out of an Austin Cooper with a fridge in the back instead of two seats
and two great looking students driving to the right events and locations.
Finally, according to
its slogan of “…gives you wings,” we created the Red Bull Flugtag, the Taurus
Stunt Awards, the Red Bull Air Race World Series, the Red Bull X-Fighters, the
Flying Bulls at Hangar-7, and the Taurus Rubens Air Show (where helicopters and
airplanes took over the role of actors for the first time ever), among others.
It’s been said that
market pioneers are continuously trying to develop new products and marketing
programs to secure a bridgehead in future markets, defend market share, or enhance
their image as an innovative company. How is Red Bull doing this, and as its
chief executive, how are you doing it, as well?
By continuing to
create those kinds of innovative approaches and activities.
How much of Red
Bull’s success do you attribute to marketing innovation, and how much to
product innovation?
The right product,
its quality and innovation, is a precondition for everything. Red Bull creates
the highest product expectations and benefits. If the product does not fulfil
its expectations, you will not have the corresponding re-purchase rate, which
decides everything, including the long term success. No marketing budget in the world brings back
a disappointed consumer.
On the other hand, it
is a matter of fact that much of the success - with respect to time and volume
- depends on your marketing activities. The better you do your homework, the
more your brand will change to a premium brand from a “cult” brand.
Over the long term,
which do you see as being more critical to the company’s future success –
broadening the product base you offer, or continuing to come up with new ways
to market your chief product?
We don’t believe too
much in line extensions, taste segmentations, etc. Red Bull is an “efficiency product,” tailor
made for its target group.
You’ve been described
as having “Westernized” Red Bull before selling it – what were the specific
attributes of Western culture that caused you to make changes to the product,
and how hard were those changes to make?
The only things we
took back to Europe were the active ingredients from the original Japanese/Thai
formula. Everything else, including package design, advertising and promotion,
positioning, distribution, and price
strategy, was developed individually for the European markets.
What’s the worst
mistake you’ve made with the company thus far, have you been able to overcome
it, and how?
When we launched in
Germany in 1994, we dramatically underestimated the demand our product would
have. We were selling an average of a million cans a day and ran out of stock
after a few months. We were not able to
buy additional cans anywhere in the world to keep up production. As a consequence, we lost our listing and had
to re-launch Red Bull six months later.
Red Bull is primarily
known as a one-product company due to the success of its eponymous energy
drink. Are you satisfied with that perception of the company?
Yes, for the time
being. We have yet to finish our global rollout and Red Bull is still
expansive, so it would be wrong to launch other products now. In the medium and long term however, the
company needs and will get additional main pillars.
How can a company as
reliant on one product as Red Bull currently is maintain a nimble approach to
innovation?
As far as Red Bull is
concerned, it comes mainly from its marketing activities.
Beside our recent
acquisition of the New York Red Bulls, we will compete in the NASCAR series
with our own Team Red Bull, participate in the Champ Car Series with one of our
talented young drivers, and will increase the number of Red Bull Air Races in
the United States, etc.
Red Bull has dabbled
in other products like Carpe Diem. Do you see it getting a major U.S. push?
What will influence that decision? Will you only roll out new products if you
see the opportunity to create a new category, rather than a presence in an
existing one?
Carpe Diem’s range
consists of Kombucha, Kefir (two fermented products) and Ginkgo as well as
Carpe Diem Botanic Water. All products are so called “functional
products.” In the field of beverages,
this means that they are thirst quenchers, great tasting and the consumption is
beneficial because they also fulfil a dietetic purpose. After doing well in Europe, we have decided
to launch Carpe Diem Botanic Water in the U.S. this year.
As the original
generation of Red Bull consumers ages, how much of a problem is it going to be
to fight off competitive brands?
For the kids and
teens today, Red Bull is as young, innovative and attractive as it was 20 years
ago for the “first generation.”
By selling three
billion cans worldwide in 2006, Red Bull is “THE” Energy Drink. All others are
me-too products and sell their brands at lower prices, sometimes two-to-three
times cheaper.
Of course, such a
price advantage guarantees a certain volume share in each market – and in the
Energy Drink category.
(more to come)