Manufacturers

Red Bull targets China for expansion (UPDATED)

17-Dec-2013 - By Maggie Hennessy
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Red Bull is planning to roll out its best-selling energy drink in China after gaining the necessary permissions, and is building an office in Shanghai, a spokesperson told FoodNavigator-USA. The news was initially reported in Austrian newspaper Kronen Zeitung. 

"Now that we have been given official approval, we are in the process of building up a small office in Shanghai and that we are evaluating the first steps of a launch on test markets," Patrice Radden, director of corporate communications, said in an email.

"However, the focus is limited to a very selective distribution of Red Bull, restricted to urban areas and a target group that knows the Red Bull brand from abroad. As a result of this approach, the revenue figures are naturally only negligible; our intention for the near future is primarily to get a feeling for the market and the consumers. But we are of course delighted that our Red Bull users will in future be able to buy our product in China as well," she added.

Cans of Red Bull on display at Tianjin Airport in China. Photo by Jeff Crowther, executive director of U.S.-China Herbal Products Association

The expansion refers to Red Bull's international product (marketed and distributed with its characteristic formula and blue and sliver can), which will only be available as of now, as opposed to the local version of Red Bull (Hong Nui), which Radden noted is "already a successful product that has been in the market for years."

Privately held, Salzburg, Austria-based Red Bull sold 5.2 billion cans of its energy drink last year and reported 4.9 billion euros ($6.7 billion) in sales.

Market research firm Packaged Facts, which focuses its food and beverage research largely on domestic food and beverage markets, is bullish on Red Bull’s expansion, as research analyst Daniel Granderson told FoodNavigator-USA.

“Widely regarded as an emerging superpower, China is a fertile ground for new and innovative food and beverage products,” Granderson said. “Red Bull is a juggernaut in the energy drink segment, and the opportunity to build a loyal consumer following in China makes sense from a business standpoint.

Indeed, according to estimates from McKinsey & Co., by 2022, more than 75% of China’s urban consumers will earn 60,000 to 229,000 renminbi ($9,000 to $34,000) a year—a range that falls between the average income of Brazil and Italy, in purchasing-power parity terms. Just 4% of urban Chinese households were within that range in 2000—but 68% were in 2012. 

Moreover, the upper middle class segment—made up of consumers with household incomes in the 106,000 to 229,000 renminbi ($17,000-$34,000) range—will account for 54% of urban households and 56% of urban private consumption by 2022, according to McKinsey & Co. By comparison, this segment accounted for just 14% of urban households in 2012.

“There are obvious risks when operating in any new market, including competing with brands already established in that market and navigating often murky regulatory waters,” Granderson noted. “However, when one considers the sheer number of potential consumers in China and the rising number of supremely wealthy individuals that live there, the possible rewards outweigh the risks.”

Related topics: Manufacturers, Markets, Red Bull