Red Bull Porter’s Five Forces Analysis

Red Bull Porter’s Five Forces identifies and analyses five separate forces that determine the overall pattern of competition in the energy drinks sector. These forces are represented in Figure 1 below:

Figure 1 Red Bull Porter’s Five Forces

Threat of substitute products or services is immense. Coffee is an obvious and cheaper substitute for energy drinks. Carbonated soft drinks, tea, water and juices represent additional substitute products. It is important to stress that buyer’s propensity to choose certain substitute products such as tea, water and juices may increase in the foreseeable future due to due to their increasing health-considerations fuelled by the media. There are no switching costs for customers to consume substitute products instead of energy drinks and this fact further increases the threat of substitute products. Indirect substitutions for energy drinks include getting enough sleep and leading a balanced life and this comes free of charge for the majority of customers.

Rivalry among existing firms in energy drink industry is very intense. There are many energy drink brands and the rate of the growth of the industry is impressive. It has to be noted that diversity of competitors is not significant and brand equity plays a major role on the level of popularity of a specific energy drinks manufacturer.  Major market players in energy drinks sector include Red Bull, Monster, NOS, Rockstar, 5-hour energy, AMP, Redline, Lucozade and others.  As it is illustrated in Figure 2 below, although Red Bull is a clear market leader in energy drink segment in the US, its share in the global soft drinks and energy drinks sector is only 6.7 per cent (see Figure 3 below).

Figure 2 Market share of soft drinks and energy drinks worldwide as of 2015[1]

Figure 3 Energy drink market share in the US[2]

Threat of new entrants into energy drinks industry is moderate. It is overly difficult for new market players entering energy drinks industry to succeed unless they product concept is based on an innovative idea. This is because the competition is already intense and an access to distribution channels is a significant barrier. Moreover, there is a need for massive capital investment to start energy drinks manufacturing operations and new entrants should expect retaliation from existing businesses. The presence of legal and regulatory barriers are additional factors reducing the threat of new market entrants…

Red Bull GmbH Report contains a full version of Red Bull Porter’s Five Forces Analysis. The report also illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain Analysis and McKinsey 7S Model on Red Bull. Moreover, the report contains analysis of Red Bull’s marketing strategy, discusses leadership and organizational structure and addresses the issues of corporate social responsibility.

[1] Statista (2016) Available at: http://www.statista.com/statistics/387428/market-share-of-leading-sports-energy-drinks-companies-worldwide/

[2] Caffeine Informer (2015) Available at: http://www.caffeineinformer.com/the-15-top-energy-drink-brands