With product development and small-firm mindset, Red Bull succeeds the Steve Jobs way

Economy August 28, 2012 00:00

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Red Bull Beverage marketing manager Suwandee Chaiwarut explained how vigorous and tireless product development and a small-company mindset have contributed to the success of Thailand's leading food and beverage company at making inroads into the lucrative



 

As a latecomer to the ready-to-drink tea market, Red Bull knew it had to be different. And in an era of high competition, the difference had to be large enough to be noticed and valued by consumers, Suwandee said. So while everyone was competing with green-tea products, Red Bull chose eight years ago to go ahead with “white tea”, which some research has found to have three times the antioxidant content of green tea.
There was no easy path, nonetheless. She said Red Bull struggled with its Puriku white-tea product during its first year. Some consumers, for example, complained that they hardly noticed any difference between the tastes of white and green tea. 
“We could hardly sell any during the first year. My tears almost came when I saw the stocks piled up to the rooftops of our agents’ warehouses,” Suwandee told the seminar “New Products: How to Create, Develop and Grow Them” held recently by an educational unit of CP All, the operator of 7-Eleven convenience stores in Thailand.
Red Bull reacted by adding Vitamin C and reducing sugar content. The company also gained some ground by shrinking its packaging size to a 350-millilitre bottle, and thus being able to slash the retail price to Bt10. It kept selling the standard 500ml size at 7-Eleven stores, which levied a high distribution fee, though.
“Later, after learning that we were selling it well, 7-Eleven told us it also wanted to sell [the smaller variety of Puriku] and agreed on a [distribution] margin that was satisfactory,” she said.
Suwandee said she got the idea of developing another new product – the Puriku chrysanthemum white tea drink, which later became a big seller – by accident. 
“I dropped by to visit the editor of Marketeer magazine, who asked why we didn’t sell chrysanthemum drinks.” Eight years ago chrysanthemum drinks were only sold in glasses or in simple clear-plastic bottles at mum-and-dad shops. 
But the Mixed Berry formula has helped Puriku succeed the most, she said. One reason is that while competitors only used fruit favours, Puriku was the first to blend its tea with real fruit juices. “Since then we have never been able to keep up our production with the orders.” 
Puriku could not escape going on to the most popular segment: tea with lemon and honey. Nonetheless, it has differentiated it by using “real lemon from Sicily”.  The firm has kept on offering other new products, including rose-hip and goji-berry versions.
 Suwandee said she used her “Hahahahah” formula to create new products. Under this method, all beverage products are put into a “spectrum”, with soft drinks on the left-most wing of the spectrum, following by fruit juices, tea in the middle, and pure water on the right. 
Puriku White Tea Mixed Berry drink, for instance, was created through mixing tea with fruit juices to offer a certain group of consumers choice that matched their preferences. Many consumers feel that fruit juices are too sweet and don’t quench thirst as well as soft drinks do. Blending them with tea helps reduce the sweetness of juices while retaining their full body and scent. 
Suwandee said that although Red Bull was a big company, it did not have big marketing budget like some of its competitors, and thus differentiation has played a key role in its product strategies. Applying the “SME mindset”, on the other hand, has helped the firm succeed with the launch of its Sunsnack sunflower seeds.
“One product for which we did not use any [consumer] research was Sunsnack. We were simply doing as Steve Jobs did: We tested and chose the tastes we like and then ordered our research and development to proceed,” she said.
Apple Computer’s late founder Steve Jobs was famous for his notion that consumers don’t know what they want until companies show them. 
Actually, Sunsnack originated from a product developed by a small local company that had been selling the product only at trade fairs. Seeing its potential, Red Bull’s late founder Chaleo Yoovidhya acquired the product from the previous owner, redesigned the packaging and distributed it to the mass market. 
Relying solely on Chaleo’s gut feeling, Red Bull started the product’s redevelopment by setting a goal to sell it at Bt5 per packet and then redesigned the package to allow consumers to tear it open easily and pour the seeds directly into their mouths.
“Market research shouldn’t be conducted for the purpose of asking consumers what they want, rather than to detect changes [in the market]. The ability to read the changes will determine the success of a new product launch, in particular the ones that consumers don’t know that they want,” Suwandee said.
 
pichaya@nationgroup.com