Red Bull: The Real Story Behind the Can

You’ve probably had that feeling when you’re
tired, but you’ve got to stay awake, so you pop open an energy drink and boom, you’re
hit by that familiar rush of energy. It’s this feeling that has given rise to
an industry worth approximately 64.7 billion dollars as of 2015, and so this week’s Behind
the Business video is dedicated to the beverage that made all of that possible, Red Bull. Surprisingly, Red Bull actually comes from
Thailand. Now, Thailand is a country that’s not particularly
known for its political stability. In fact, since 1912 Thailand has experienced
a total of 21 coup attempts, about half of which ended up being successful, for an average
of one coup every 5 years. The latest edition, by the way, was in 2014,
but since their king died less than a month ago, we’ll probably be seeing another coup
attempt pretty soon. Although today Thailand is a medium-income
country with the 20th largest economy in the world, for most of the 20th century it was
extremely destitute. Over 70% of the population lived in rural
areas, and the average person got by on $2 a day. The region of Thailand that interests us is
the Phichit province, located in the center of the country. It is there that in 1923 a man named Chaleo
Yoovidhya was born to a family of duck herders. As you can imagine, herding ducks isn’t
a very profitable business, and Chaleo grew up in poverty with minimal education. He was the third of five children, and as
soon as he was old enough, his parents sent him 330 kilometers south to work in his older
brother’s chemistry shop in Bangkok. Chaleo worked there as an antibiotics salesman,
and over the years he learned a lot about chemistry and marketing. In 1962 he had saved enough money to start
his own company, TC Pharmaceuticals. Chaleo ran his business well, but in the early
1970s he made a very curious observation. He noticed that the majority of energy drinks
in Thailand at the time were foreign imports: in fact, the most popular one, called Lipovitan-D,
came from Japan. These drinks were marketed mainly to the wealthier
residents of Bangkok, which at the time was Thailand’s largest international port and
so most foreign imports went through it. Chaleo realized, however, that the wealthy
people of Bangkok weren’t the ones who would need energy drinks the most. Having come from crippling poverty himself,
he knew all too well what it meant to be a low-paid worker pulling tiresome night shifts. Chaleo set about creating an energy drink
of his own, and his first step was to analyze the composition of competing drinks. The primary ingredient in most energy drinks,
including the ones sold in Thailand during the 1970s, is a compound called taurine. Now, taurine is a chemical of huge significance
for the human body: it’s necessary for the function of your cardiovascular system, skeletal
muscles and central nervous system. Contrary to the claims that you might find
on social media, taurine isn’t made of bull semen. The reason it’s called taurine is because
it was first isolated from ox bile. Not only is taurine essential for the function
of the human body, it’s a compound that we naturally synthesize and to be honest,
we should be glad about that. Unlike us, some mammals can’t produce taurine
on their own and have to get it from external sources. I’m looking at you, cats. But even though we can produce small amounts
of taurine on our own, dumping extra taurine into your bloodstream can give you a significant
performance boost, especially if you’re sleep deprived. It is precisely for this reason that Chaleo
chose taurine as the primary compound of his energy drink. He also added caffeine to serve as a stimulant,
a bunch of B vitamins to support cell metabolism, and two forms of sugar to provide a source
of energy. With the chemistry figured out, Chaleo’s
next step was to design his brand. He wanted to convey the strength and potency
of his drink, and so for his logo he chose to depict the gaur, a wild bovine species
native to Southeast Asia. Gaurs are actually the largest living bovines,
with adult bulls reaching up to 7 feet in height and weighing over 3,000 lb. Chaleo painted two red gaurs charging against
each other in front of a golden disc, and he called his drink Krating Daeng, which unsurprisingly
means Red Gaur in Thai. Having worked as a salesman for most of his
life, Chaleo knew very well how to market his beverage. Instead of advertising in urban areas like
Bangkok, Chaleo focused his efforts on the provincial regions of Thailand. One of his best ideas was to sponsor local
Muay Thai events. Muay Thai is Thailand’s most popular martial
art, whose origins date back to the 16th century. It was and still is an integral part of Thai
culture, and it was actually the foundation upon which the Japanese developed kickboxing
in the 1960s. Muay Thai became prominent internationally
in the 1970s, and Chaleo managed to harness this rising wave of popularity for Krating
Daeng. Thanks to a series of key event sponsorships
through Thailand, in 1976 Krating Daeng was off to a phenomenal start. By the end of the year it had become the second
most popular energy drink in Thailand, behind only Lipovitan-D, which it managed to overtake
just one year later. Chaleo was lucky because from the 1970s up
until the 1990s Thailand experienced a period of unprecedented economic growth. It’s GDP quadrupled, per capita income tripled,
and Thailand was on its way to becoming an economic powerhouse rivaling the likes of
Taiwan and South Korea. Krating Daeng became Thailand’s unofficial
beverage during the boom years. Unlike the foreign energy drinks, Krating
Daeng captured the national spirit and became a symbol for the perseverance of the working
man. At this point you might be wondering, “Well
hold on a minute, wasn’t Red Bull actually from Austria!” Technically, you’re right. I mean, if you open Red Bull’s website,
that’s pretty much what they say. You shouldn’t really look at a company’s
website for an unbiased account of its history, though. Here is what actually happened:
While Krating Daeng was conquering Thailand’s energy drink market, an Austrian man named
Dietrich Mateschitz was struggling to work as a salesman. He didn’t come from a particularly wealthy
family: his parents were primary school teachers,
which is rather ironic considering it took him 10 years to graduate from university with
a marketing degree. He worked for half a dozen companies, including
Unilever, before finally landing at Blendax, a German-based company notable for its toothpaste. In 1982 Dietrich travelled to Thailand for,
*ahem*, business, of course, and after his flight he felt very sleepy so he decided to
buy an energy drink. The drink he bought was Krating Daeng, and
to his surprise it not only woke him up, but it also cured him of his jet lag. Dietrich got hooked immediately, drinking
as many as 8 cans a day, and he liked the drink so much he decided to try to import
it back to Austria. In 1984 he approached Chaleo with an offer:
both of them would invest half a million dollars each into the establishment of an Austrian
company that would distribute Krating Daeng internationally. Dietrich would be in charge of the new company’s
operations, while Chaleo would continue to run TC Pharmaceuticals and Krating Daeng back
in Thailand. Dietrich’s first task would be to westernize
Krating Daeng and make it appealing to its European clientele. He left the basic formula pretty much the
same, and the only big change he made was carbonating it. Dietrich liked the brand’s overall design,
but instead of going for its name’s literal translation, he went for the more generic
Red Bull. In many ways Dietrich was faced with the same
marketing challenge that Chaleo had overcome a decade earlier. Krating Daeng was successful because it represented
the spirit of its buyers, the working class of Thailand. Unlike Thailand, however, the vast majority
of Europe had a pretty decent lifestyle, so Deitrich had to take a different approach. He knew that Red Bull would work best as a
party drink, but had to figure out how to market it to a young generation of people
who were firmly against traditional forms of advertising. This is where Dietrich struck gold. He paid students to have their Volkswagen
Beetles or Mini Coopers redone with large Red Bull cans on top, and he also hired students
to serve as “brand managers”. These “brand managers” were essentially
paid to throw huge parties, where they would distribute free Red Bull cans to promote the
brand. From these parties have emerged dozens of
cocktail recipes using Red Bull, like the Vod-Bomb, the Jumping Jack Flash, and Liquid
Cocaine. As you can imagine this marketing strategy
was brilliant, and during the first year of its launch in 1987, Red Bull sold over a million
cans in Austria. From then on it spread like wildfire, hitting
the shelves of Hungary and Slovakia in 1992 and Germany and the UK in 1994. By the time Red Bull entered the US in 1997,
it was selling 1 million cans every day. During this dramatic expansion Dietrich developed
another ingenious marketing tactic. As an avid sports enthusiast and a proud owner
of a pilot’s license, Dietrich was well aware of the rise of extreme sports during
the 1980s. That’s one of the reasons why he gave the
drink its emblematic slogan: “Red Bull gives you wings”. Dietrich’s first serious venture into the
world of sport came in 1991 when he organized the first Red Bull Flugtag in Vienna. The event brings together competitors from
across the globe who try to fly their homemade human-powered flying machines, usually with
minimal success, but great entertainment value. The success of Flugtag convinced Dietrich
to start hosting other sports events, and to that end he’s been spending an ever increasing
amount on this alternative marketing strategy. In 2011, for example, Red Bull’s marketing
budget amounted to 2.1 billion dollars, a stunning 84% of their gross profit. The list of events organized by Red Bull is
truly impressive, and it features sports ranging from freestyle motocross to downhill ice skating. Red Bull has also acquired five soccer teams,
including the New York Red Bulls, and three stadiums to go along with them. Over the years Red Bull has bought or sponsored
teams across many different sports, but their most notable acquisitions by far are their
two Formula One teams. That’s right, they’re bankrolling not
one, but two teams participating in one of the most expensive sports in history. In 2011 Red Bull spent a third of their entire
marketing budget on their Formula One teams, which has more than paid off considering their
impressive track record. Scuderia Toro Rosso is the junior Red Bull
team, which they bought from Minardi in 2005. The best drivers from Toro Rosso usually advance
to the senior team, Red Bull Racing, which Dietrich acquired in 2004 from the Ford Motor
company. Red Bull Racing has won a total of 8 titles,
all thanks to their star driver Sebastian Vettel. Today Red Bull is bigger than ever, with a
43% global market share despite the rise of copycat brands like Monster and Rockstar. Interestingly enough in 2013 they got hit
by a class-action lawsuit that claimed their “Red Bull gives you wings” slogan was
tantamount to false advertising. Of course, it’s doubtful that anyone ever
bought a Red Bull can with the hope of eventually growing wings, but hey, it’s the US so why
not start a lawsuit, right? Eventually Red Bull settled for 13 million
dollars, about half of which ended up in the hands of the victims whose dreams of growing
wings had been shattered. On a final note I’d like to share with you
footage from the Red Bull Stratos project, which in 2012 helped Felix Baumgartner skydive
a record-breaking 24 miles from the stratosphere. I recommend watching it to the end, since
I’ve got a few special surprises for you guys after, but for now, enjoy:
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