Analysis of Red Bull Distribution Channel

1697 WordsFeb 17, 20127 Pages
Comparative analysis of the distribution channels between Red Bull energy drink and major carbonated beverages Issues, recommendations and their implications SDM Section A Anshul Sehgal – 10P010 Kayarat Ajit Krishnan – 10P023 Esha Sharma – 10P075 Jayant Bahel – 10P081 Mohit Ahuja – 10P090 Issue: Price volatility in Red Bull products being sold to retailers and wholesellers Till 2009 Red Bull refrained from selling to wholesellers and used to sell the product to retailers at a single price. They relied heavily on store executions to get the necessary retail push. Since 2009, Red Bull has begun selling to wholesellers and began the practice of price cutting. The reasons for these changes in strategy was that the competition in the energy…show more content…
The external agency charges for performing the audit would increase accordingly. Also, such an exercise would involve the costs of incentives which would have to be handed out for satisfactory executions. Audits by Red Bull India could also become a source of tensions and conflicts between the two companies. Issue: Above the Line promotions Currently, above the line promotions are a responsibility of Red Bull India. The landing price of Red Bull for NHSPL is 1/3 of MRP plus another X % of MRP. The activities of Red Bull India are currently financed by this X % MRP component. Red Bull India is supposed to account for its operational expenses and its ATL promotions from this component. The issue is that Red Bull India has constant found the amount left over for ATL promotions to be insufficient. *The exact figure that X equals to could not be ascertained due to the confidential nature of the contract between the two companies. Industry standards suggest that X should be in the range of 10-12%. Recommendation: Raise the landing price for NHSPL The variable component of the landing price can be raised 2-3 percentage points from the current levels, thus margins for operations in India would be higher and investment in ATL activities could be increased. The distribution contract was last revised in 2009 and price changes might be possible only during next contract re-negotiation. Implications: Any price increase would be highly contested by NHSPL

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