Red Bull still charging ahead
Red Bull still charging ahead
Chief executive Saravoot Yoovidhya talks about regional growth and the importance of know-how
Published: 28/12/2015 at 06:13 AM
Newspaper section: Business
Red Bull, one of the world’s best-known beverages, all but defines the energy drink market. It is also one of Thailand’s greatest business success stories, having grown from humble beginnings as a refreshment for rural Thai labourers in the mid-1970s to being sold today in 165 countries.
Saravoot Yoovidhya shakes his head. “I feel sad when I read someone saying Red Bull is no longer Thai. It’s still a Thai brand and still family-owned,” he says in an interview with the Bangkok Post.
“It’s a source of pride for us actually that we produce the flavour used for Red Bull here in Bangkok and export it everywhere in the world.”
Mr. Saravoot is chief executive of T.C. Pharmaceutical Industries, the company founded by his father Chaleo in 1956. True to its name, it began as a drug company. Older Thais may remember the popular TC Medicine antibiotic brand.
In 1975, Mr. Chaleo developed Krating Daeng, an energy drink with a distinct flavour quite unlike the more medicinal-tasting products on the market at the time.
“At first it was not very popular actually,” says Mr. Saravoot. “It was quite different from others in the market, and [Mr. Chaleo] focused first on upcountry markets rather than in the cities where other competitors concentrated.”
Before Krating Daeng, the market was led by energy drinks from Japan and South Korea.
“They did not call them energy drinks then,” Mr. Saravoot recalls. “Actually, some of it was medicine. But my father wanted to try something different, not a copy of what was available then but something unique.”
The Krating Daeng logo underlies its branding, with the two bulls chosen to represent a powerful animal, red signifying perseverance and the backdrop of the sun symbolising energy.
International sales began in 1982 in Singapore, followed the year after in Hong Kong.
Mr. Saravoot says expansion was considered critical because of the regulatory constraints placed on the drink in Thailand, rules that continue to this day.
For instance, energy drinks are required to post warnings on consumption, presumably due to the caffeine content despite the fact that the 50 milligrammes per bottle of Krating Daeng is significantly less than the caffeine present in popular canned coffee drinks.
“It’s strange that in Thailand, energy drinks are so stigmatised in terms of regulations,” says Mr. Saravoot. “It’s much different than the image of energy drinks abroad. I find it quite confusing, and my father had me and my siblings drink Krating Daeng since we were children.
“In Thailand, energy drinks have the reputation as a drink for low-income workers. But elsewhere, energy drinks are aimed at a higher market, with a broader mix of consumers including white-collar and blue-collar workers.”
Mr Saravoot laughs. “Even at T.C. Pharmaceutical, if someone comes to apply for a job, 95% probably don’t drink it. But many, once they start at the company and understand the product, begin drinking it afterwards.”
The breakthrough moment for the company came in 1987, when Mr. Chaleo formed a partnership with Austrian Dietrich Mateschitz to create Red Bull GmBH.
Mr. Saravoot says the deal was sealed with a “gentleman’s agreement”, as Mr. Mateschitz knew Mr. Chaleo from prior business dealings and enjoyed drinking Krating Daeng during his visits to Thailand.
Mr. Mateschitz made some key changes to the product and its marketing image, adding carbonation and switching from glass bottles to silver-and-blue aluminium cans. Red Bull was positioned as a premium, trendy drink, starting at ski resorts in Austria and later expanding across Europe and elsewhere in the West.
Today, Red Bull GmBH is 51% controlled by the Yoovidhya family and for technical reasons owns the trademark for the drink in the Europe and the US. T.C. Pharmaceutical continues to market Krating Daeng in Thailand, China and elsewhere.
Mr. Saravoot says pricing was the key difference between the two products, with Red Bull positioned as a premium drink and Krating Daeng as a lower-cost item. In many countries both are readily available, essentially dominating both ends of the energy drink segment.
“There are some slight differences in the formula for each market, depending mostly on regulations,” he says. “But the flavour profile and core ingredients are the same.”
T.C. Pharmaceutical wants to increase its activity across the region, seeing new opportunities with this week’s launch of the Asean Economic Community. While the company is best known for Krating Daeng and Red Bull, it also makes Sponsor electrolyte beverage, Puriku tea drinks and Sunsnack sunflower seeds.
Mr. Saravoot says the company wants a greater share of the Asian snacks and drinks market, with a broader product portfolio and larger distribution infrastructure.
“But the business cycle today is much faster than during my father’s time, and the consumer market is also more complex,” he says, adding that the company is developing human resources, information systems and marketing strategies to support regional growth.
“Take marketing. Almost everything we do here in terms of marketing cannot be used abroad due to different regulations and consumer behaviour. So we need to have a better understanding of each market’s particular needs. We need to work based on information, not gut feelings.”
The company continues under the values set down by Mr. Chaleo and the lessons imparted to his 11 children including the importance of branding and differentiation.
Hard work and persistence as well. “One of his lessons is that when you do anything, don’t think it’s easy. Everything requires know-how and experience for success,” says Mr. Saravoot. “And he would always ask, ‘Why can’t you do it?’ That was the attitude passed down from my father.”
The son remembers when Mr. Chaleo saw durian on the farm was substantially cheaper than in Bangkok and thought to go into business selling the fruit himself.
“But he did not know which fruits to cut, and when he came back to Bangkok it was all rotten,” says Mr. Saravoot. “The lesson is yes, everything needs know-how, everything has its own secrets.”
About the author
- Writer: Chiratas Nivatpumin and
- Busrin Treerapongpichit