Energy Drink Industry Analysis: Red Bull and Competitive Forces

This report provides an in-depth analysis of the energy drink industry, specifically focusing on Red Bull. It begins with an executive summary that outlines the scope of the analysis, which employs Porter's Five Forces framework to evaluate the competitive environment. The introduction highlights the industry's growth and the shift in consumer preferences towards healthier alternatives, positioning Red Bull as a leading brand. The report then delves into each of Porter's Five Forces, examining competitive rivalry with other energy drink brands, the threat of new entrants, the bargaining power of consumers and suppliers, and the threats posed by substitute products. The analysis considers Red Bull's strategies to maintain market share and address competitive pressures, including its involvement in sports and brand diversification. The conclusion summarizes the key findings, emphasizing Red Bull's market position and its ability to mitigate the bargaining power of buyers and suppliers. The report concludes with a list of references used in the analysis.

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ENERGY DRINK INDUSTRY ANALYSIS
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THE FIVE FORCE ANALYSES OF RED BULL ENERGY DRINK
Executive summary
The following a five-force porter’s analyses for red bull energy drink. The analysis looks into the
competition that is facing the energy drink in Australia concerning the other brands. It also gives
the bargaining power of the buyers. In addition, the strategies that the brand has used to reduce
the bargaining power of the buyers as well as the suppliers. Threat of new entrants into the
market is also a very important aspect of a business. In addition, substitutes of a commodity can
be a great threat to the commodity and has been put into consideration.
Introduction
Energy drinks are one of the emerging commodities in the world that are having a very
high rate of growth in their market. People in the world are shifting from the consumption of
carbonated drinks to taking more healthy drinks. This has enabled the energy drinks market of
energy drinks to be increased at a very high rate. The products have translated from being a niche
commodity to a fast growing in the drinks markets. These changes are evident because the
people are more focused on being fit and healthy. People are trying as much as they can to avoid
complications that are brought by carbonated drinks.
Red bull is an Australian product that is a product. It is the most selling energy drink worldwide
and has more than 5.8 billion cans sold in 2016. It is a modification of a Thailand drink called
Krating, which was designed to meet the taste of the western consumers (Henges, et al 2018).
The drink is designed in 19 different types based on different flavors. The company has also
been involved in sporting activities in a very extensive way. The brand has become continually

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popular and is extending to different markets n the world. It sponsors extreme sporting activities
such as crushed ice and others. The following is a five porter's analysis for of the brand.
Competitive rivalry
Very many companies in the world manufacture energy drinks. The different companies
include the monster, full throttle, and rockstar. All these companies are part of the competitive
rivals for red bull. However, the red bull has been able to secure a very great market share in the
drinks market than all the other competitors while combined. There is a continuous growth in the
energy drink industry and this is an opportunity for both red bull and the competitors. Red Bull
has been a leading example and the competitors are trying to follow the footsteps by making
their business diverse and getting involved in sporting activities (Morley, Howard, and Henges,
2018). Having a great share of the energy drinks market the company means that red bull is
having many competitors and therefore is facing a very high competition.
The threat of new entrants
For a business to enter into the energy drink industry there has to be many innovations
that will enable the business to pick and stand. It is very difficult for a new business to enter into
the energy drinks industry and this discourages new entrants into the industry. The barriers that
prevent new entrants in the industry are very high. Those businesses in the industry made many
investments so as be who they are now (Thow, et al 2018). Therefore, new entrants will have to
spend a lot of money and other resources to be able to catch up with the existing players. In
addition, developing and economies of scale is a great barrier because it will take a lot of time to
establish. The entrants are also faced with many challenges in the effort to develop a national
distribution or even global distribution. The toughest task comes when trying to acquire a market

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share in the available market for the new entrant. Red bull is therefore not facing a threat from
the new entrants into the market.
Bargaining power of the consumer
Red bull has left suppliers with a very low bargaining power due to the strategies that
they use in the production. It has also reduced the cost involved in switching suppliers. A simple
production process that only requires a few raw materials has done this. The company requires
the raw materials in large amounts thus giving an opportunity for any company to supply the raw
materials (Sánchez, 2018). The company, therefore, is able to shift from one supplier to another
because of the many suppliers available. In fact, most suppliers are known because they have
been given an opportunity to be part of red bull suppliers. This shows that the suppliers are
having a very low bargaining power (Nienhuis, Van Hoof, and Van der Lely, 2018).
Bargaining power of buyers
Energy drink market is a small market that has been identified for brand loyalty.
However, there is a lot of competition in the market despite the fact that it has a small market.
Red Bull has held a certain bargaining power over their customers because it has a very high
market share in the market. Therefore, the company can increase the prices of their commodity
moderately without having to lose any buyer (Garrett, et al 2018). On the other hand, those who
are high earners and therefore are not sensitive to increase in prices mostly consume energy
drinks. The drink contains caffeine, which is addictive to the buyers and therefore reduces the
bargain powers. Therefore, the bargaining power of the buyer is at a medium level.
Threats of substitutes

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The things that can substitute for energy drinks are coffee and other homemade drinks
(Billich, et al 2018). In the case of fruit, smoothies are natural and are the only things that can
bring a treat to red bull. Many controversies are associated with the consumption of red bull.
Some say that the drink is not healthy and therefore there is a need to substitute it with a natural
drink. However, the red bull has been able to deal with these controversies by ensuring that the
raw materials that they use are of the best quality (Vester, et al 2018). Therefore, even after the
controversies the primary consumers of the energy drinks continues to consume the products.
This has lowered the threat of substitution very low.
Conclusion
Energy drinks are an emerging commodity and have substituted most of the carbonated
drinks. Red Bull has the greatest market share in the energy drink market. The brand has been
able to acquire a lot of competitive advantage due to their strategies of production and marketing.
The brand, therefore, is able to make the greatest sales as compared to its rivals combined. It has
also been able to reduce the bargaining power of both the buyers and the suppliers.

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References
Billich, N., Blake, M.R., Backholer, K., Cobcroft, M., Li, V. and Peeters, A., 2018. The effect of
sugar-sweetened beverage front-of-pack labels on drink selection, health knowledge and
awareness: An online randomized controlled trial. Appetite.
Garrett, D.C., Rae, N., Fletcher, J.R., Zarnke, S., Thorson, S., Hogan, D.B. and Fear, E.C., 2018.
Engineering Approaches to Assessing Hydration Status. IEEE reviews in biomedical
engineering, 11, pp.233-248.
Henges, A., Brown, C., Maloney, S., Daugherty, A., Guzman, A. and Statham, M., 2018. Acute
Effects of a Glucose Energy Drink on Information Processing and Subjective Ratings of
Stimulation.
Morley, C., Howard, M. and Henges, A., 2018. Acute Effects of a Glucose Energy Drink on the
Attentional Blink.
Nienhuis, K., Van Hoof, J.J. and Van der Lely, N., 2018. Direct Clinical Health Effects of the
Consumption of Alcohol Mixed With Energy Drink in Dutch Adolescents. Journal of child &
adolescent substance abuse, 27(2), pp.125-132.
Sánchez, C.Á., 2018. Mexicans' Consumption of Taxed Sugar-sweetened Beverages and the
Psychosocial Determinants of Consumption in the Context of the 2014 Sugar-sweetened
Beverage Tax-A Mixed Methods Study (Doctoral dissertation, Columbia University).
Thow, A.M., Downs, S.M., Mayes, C., Trevena, H., Waqanivalu, T. and Cawley, J., 2018. Fiscal
policy to improve diets and prevent noncommunicable diseases: from recommendations to
action. Bulletin of the World Health Organization, 96(3), p.201.

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Verster, J.C., Benson, S., Johnson, S.J., Alford, C., Godefroy, S.B. and Scholey, A., 2018.
Alcohol mixed with energy drink (AMED): A critical review and meta‐analysis. Human
Psychopharmacology: Clinical and Experimental, 33(2), p.e2650.