Director Departs, War Horse Arrives, Red Bull China's Fate Uncertain

Twenty years later, China Red Bull's development has hit a bottleneck, and the trademark license may just be the 'last straw.' The difference lies in the outcome: survival or being 'crushed.'

Change

"It's unclear; everything is up in the air," a market salesperson from Red Bull Vitamin Beverage Co., Ltd. (hereinafter referred to as China Red Bull), a subsidiary of Reignwood Group, recently told New Finance Observer regarding whether the company has obtained the trademark license.

Last year, "the company conveyed to us that the license renewal had been settled, but now it seems it was just to reassure employees."

In fact, as early as August last year, news leaked that China Red Bull's trademark license would expire in 2016, but China Red Bull officially never responded directly.

According to interviews, China Red Bull (gold can), which has been sold in China for twenty years, began expanding into the Chinese market in December 1995 after Reignwood Group obtained the license from Thailand's TCP Group (Thai Red Bull). There is also another Red Bull beverage (silver-blue can) produced by Red Bull GmbH (Austrian Red Bull), founded in 1987, which entered the Chinese market in 2014.

The similarity is that both China Red Bull and Austrian Red Bull are licensees of the trademark. The difference is that China Red Bull may now lose this license.

"All signs point to the fact that the trademark license may not have been secured," the aforementioned salesperson said.

December, approaching the Spring Festival, is particularly important for the food and beverage industry, as it is a peak season that runs through the end of the year. However, China Red Bull has decided not to invest any more in its products.

During CNY (Chinese New Year), the purchase of original Red Bull across all channels only needs to ensure normal shelf sales; the displays will focus on new products (such as Capri-Sun, Vita Coco, VOSS, and other new products under Reignwood Group). After receiving notice in mid-January 2017, regions can proceed with normal product sales—"This is the latest meeting content, meaning Red Bull's 'status' has been deferred by the company, which is quite different from previous years," the salesperson said.

At the same time, there are reports that "China Red Bull's promotional policies are now favoring Capri-Sun, and it will also hold its first distributor conference"...

The status of China Red Bull's staff has also "declined" accordingly.

"Received company notice of a 30%-40% staff reduction, with salespeople allocated according to distributor tasks," "All company sales representatives have been transferred to third-party companies, and the company has begun downsizing," "Supervisors, whether junior or senior, will only receive basic salary from the company, with performance bonuses paid by distributors"...

News from the front lines is somewhat chaotic, but it is clear that China Red Bull is responding to the upcoming changes.

On one hand, the economic downturn may not ease in 2017; on the other hand, although China Red Bull's sales overall increased in 2016, profits were diluted by the aforementioned new products. Now, with the trademark license issue unresolved, change is inevitable.

However, this top-down change, while not causing panic, leaves the "Red Bull people" at year-end feeling somewhat at a loss due to the "uncertain" future.

Pending

Last week, China Red Bull's marketing director was "dismissed." Previously, he faced two choices: either move to the new product—War Horse—or take compensation and leave. Obviously, he chose the latter.

War Horse is another new product Reignwood Group plans to launch in 2017. From leaked photos, this beverage called War Horse comes in PET bottles of 400ml each, both classified as "energy vitamin beverages," one carbonated and one non-carbonated, distinguished by different bottle colors.

"It's probably a backup for Red Bull. Internally, it's understood that the carbonated one targets Monster (the second-largest functional drink in the US) and Austrian Red Bull, while the non-carbonated one targets Lehu and Dongpeng. It's still in the pricing stage, expected to launch between March and June next year," an insider told New Finance Observer.

"It looks like a knockoff. If China Red Bull wants to replace the gold can Red Bull with these two products, it will definitely fail. They have no product recognition and can't leverage consumer habits," an industry insider commented.

Of course, some have different "opinions" about these two products. In their view, it's just a strategy issue—"Currently, the market position of functional drinks = gold can Red Bull has been established. Before this, China Red Bull had never produced PET-packaged functional drinks. But now, with imitators like Dongpeng and Lehu gaining market share, it's natural for China Red Bull to launch PET packaging."

According to the insider, this is related to Reignwood Group's early strategy.

In 2014, Reignwood Group set a three-year plan for China Red Bull. Simply put, by the end of 2017, Red Bull aimed to achieve annual sales of 50 billion yuan, but that year's sales were 20 billion yuan. This meant a 150% growth in three years.

In 2015, Red Bull's annual sales were 23.07 billion yuan. Now, it seems this goal is impossible to achieve. "Gold can Red Bull has hit a growth bottleneck. Launching PET-packaged functional drinks now will inevitably capture some market share from Dongpeng and Lehu."

However, if China Red Bull fails to obtain the trademark license from Thai Red Bull, everything will be different. But according to the aforementioned industry insider, "Reignwood Group is unlikely to give up China Red Bull, as it is the only profitable product among all its beverage offerings."

An unconfirmed report suggests that the negotiations between Reignwood Group and Thai Red Bull face obstacles not only from Thai Red Bull. There are rumors that Thai Red Bull wants China Red Bull and Austrian Red Bull to merge, and Austrian Red Bull wants a 40% stake, causing the negotiations to stall.

There are also reports that on December 16, Reignwood Group Chairman Yan Bin held final talks in London, and official news should be announced at the year-end meeting on December 19.

Regarding the trademark license and future strategies of Austrian Red Bull and China Red Bull in the Chinese market, as of press time, both parties have unanimously remained "silent" on New Finance Observer's interview questions. Now, we can only wait for Monday.

Source: New Finance Observer

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