Red Bull’s Marketing Campaign Not a Huge Success

Case Type: operations strategy, marketing.
Consulting Firm: LEK Consulting first round job interview.
Industry Coverage: food & beverages.

Case Interview Question #00552: Our client Red Bull GmbH is a large global beverage company that sells the popular Red Bull energy drink. In terms of market share, Red Bull is the No. 1 energy drink in the world, with about 4.5 billion cans sold each year. In 2011, a total of 4.63 billion cans of Red Bull were sold in over 161 countries. Headquartered in Fuschl am See, Austria, the client company Red Bull GmbH has more than 8,300 employees generating 4.25 billion euros in revenue worldwide.

Last month, the client Red Bull’s marketing department ran a distinct trade promotion in three separate stores in the United State. They’ve hired your consulting team to tell them whether or not the promotions were successful. How would you go about helping them figure this out? Were the promotions a “success”?

Additional Information: (to be given to candidate if asked)

1. Promotion

During the promotion month,

• Store 1 was instructed to give a 10% discount on all Red Bull purchase;
• Store 2 was given a “buy 4 get 1 free” deal;
• Store 3 was given $10,000 to promote the Red Bull product however they wanted.

2. Sales Volume

In a non-promotion month, each store typically buys 10,000 cans of Red Bull.

During the promotion month,

• Store 1 purchased 12, 000 cans;
• Store 2 purchased 15,000 cans;
• Store 3 purchased 14,000 cans.

3. Revenue and Cost

• Each can of Red Bull is sold for $5.
• The cost to produce a can of Red Bull is $2.50. This figure includes all relevant costs (i.e. raw materials, manufacturing, distribution, etc.).

Possible Answer:

The candidate must think through what constitutes a “successful” promotion, and then synthesize data to provide a recommendation to the client. For this case, a “successful” promotion is one that generates more profit than would be attained without running any promotion at all. However, the interviewer should ask the candidate to define how success might be measured, and should encourage the candidate to brainstorm several other barometers of success, besides profits.

This marketing case scenario is not complex, but it requires a proper initial structure. The candidate should not be bogged down by the numbers and fail to see the bigger picture.

1: Calculate Store Profits

• Store 1: (90% discounted * 12,000 cans * $5.0 revenue per can) — (12,000 cans * $2.5 per can) = $24, 000 profit
• Store 2: (80% discounted * 15,000 cans * $5.0 revenue per can) — (15,000 cans * $2.5 per can) = $22, 500 profit
• Store 3: (14,000 cans * $5.0 revenue per can) — ($10,000 promotion cost) — (14,000 cans * $2. 5 per can) = $25,000 profit
• Normal, or baseline profits: (10,000 cans * $5.0 revenue per can) — (10,000 cans * $2.5 cost per can) = $25,000 profit

2: Business Insight

From the above calculations, all three stores are profitable. However, no store’s profits exceed that of a non-promotion, normal month.

3: Additional Discussion

The interviewer can add to this case by asking the candidate to discuss other factors that could possibly be considered. Some of the factors include:

• External factors: economy, market, competitors
• Sales trends: perhaps baseline is shrinking
• Long term effects of the promotion: market share, brand loyalty , affecting customer buying habits
• Controllable factors: may be it would work better in different geographic locations, with different customer segments, or at a different time of the year, e.g. summer v.s. winter.