Gerry’s Insights Dietrich Mateschitz’s Lasting Legacy

Dietrich Mateschitz was a jet-lagged, middle-aged marketer for a European toothpaste brand when he encountered an odd energizing beverage in Thailand called Krating Daeng. Inspiration struck, and he cut a deal with the brand’s founder Chaleo Yoovidhya to devise a version adapted to western tastes. That effort took three years, but the brand debuted in his native Austria in 1987 under the name Red Bull. The rest is history – to the tune of 9.8 billion cans sold in 172 countries last year. Sadly, the central role of “Didi” in this remarkable story came to an end in October, when he passed away after a long, private battle with a severe illness that the company hasn’t identified. The man’s ebullience made it all the more shocking to realize he really might be mortal, as was clear on the faces of some attendees at that energy drink mecca, the NACS c-store show in Las Vegas, as rumors of his pending demise rippled across the floor few weeks earlier. He was 78.

Mateschitz’s passing could herald significant implications for a category that, nearly three decades here in the U.S., remains a marvel of growth and profitability. I’ll get to that in a moment. But first I’d like to express my appreciation of how influential this entrepreneur was, not just in energy drinks but across the range of image-oriented CPG categories. For starters, Mateschitz’s commitment to creating ownable spectacles rather than piggybacking on existing equities represented a key marketing innovation. After all, even Pepsi’s splashy half-time shows at the Super Bowl leveraged somebody else’s existing equity. Whether it was a flamboyant air show with the Golden Gate Bridge as a backdrop or parachuting the daredevil Felix Baumgartner from the edge of outer space, Red Bull created lasting impressions that translated into deep brand equity – and sales. When you see newer brands like Black Rifle Coffee, Bang Energy or Liquid Death Water that are media machines as much as beverage marketers, that’s the influence of Red Bull’s founder. He also innovated in his ground game, with legions of appealing field marketing staffers who relentlessly worked the brand in the nation’s streets, clubs and college campuses. No surprise, then, that many of the executives associated with the brand’s breakout years have moved on to influential posts elsewhere, in much the way that P&G and Gallo once served as finishing schools for marketing talent. So fresh was this company’s approach that in the early days, even jaded distributors in blue chip distribution networks like Anheuser-Busch’s were stunned at the commitment and disciplined strategy of the Austrian interloper. “Red Bull was way ahead of the curve in its marketing compared to any of our brewer suppliers,” a former Bud wholesaler named Terence Fox told my newsletter Beverage Business Insights a few weeks ago. Its use of advanced metrics to monitor performance also exceeded what many other marketers did at the time. Not least, it maintained a staunch commitment to premium pricing, in the process elevating the entire category. Because Red Bull’s key rivals also have continued to be independently owned and operated, energy has been a rare category not to spiral into downward cycle of promotional pricing as with soda, bottled water and sports drinks, where a rotating cast of caretaker executives under pressure to meet volume goals make short-term tradeoffs that tarnish the promise of the category.

Is that dynamic suddenly in jeopardy? It could be if Red Bull is now in play and likely to fall into the hands of a strategic player. Even as the rumors were circulating that Mateschitz was severely ill, the company did a distribution deal in Mexico with Keurig Dr Pepper, which sent a shudder through the trade. After all, a similar alliance next door, in the U.S., would be uncommonly seamless to implement, since Red Bull self-distributes in most major markets and wields a notoriously stingy contract that doesn’t offer meaningful buyouts to its independent houses. KDP acknowledged Mexico was a one-off deal but expressed the hope its success would breed further expansion down the line.

On the other hand, Mateschitz apparently felt deeply that Red Bull needs to stay independent. Whether that commitment remains is unclear: his Thai partners, Yoovidhya’s heirs, own 51% of the company, and it’s not clear where they stand on the matter, or if there’s some internal agreement that the company shouldn’t be sold. Even if Red Bull were in play, it would be an uncommonly expensive proposition for an outright acquisition, and a minority investment by a strategic wouldn’t necessarily kill the golden goose. After all, Monster has remained vibrant even as a strategic ally of Coca-Cola.

In the short term, the company hasn’t been making any pronouncements about its continued independence, but it did move to implement a succession plan urged by Mateschitz that will replace the charismatic founder with a troika of executives. Notably, Mateschitz’s son Mark, inheritor of his 49% stake, is recusing himself from any further operating roles, at least for now. Given Red Bull’s generally opaque inner workings, it is hard to handicap how stable this reorganization will prove, but for now, we can likely breathe a sigh of relief. Personally, I feel that it’s healthier for innovation, and for the independent distribution system that incubates new concepts, if a certain number of consumer-compelling brands like Red Bull – and AriZona Iced Tea and Spindrift – remain independent and unaligned. So Didi may be gone, but here’s hoping that Red Bull finds a way to maintain his legacy of injecting creativity, glee and sheer fun back into marketing.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.