Red Bull Is Determined to Defend Its Territory
Brett Miller tried, but he couldn’t outrun the bull.
His Moondoggies restaurant and bar in San Diego was once among the region’s biggest sellers of Red Bull, a highly caffeinated soft drink that does double duty as a cocktail mixer. Yet when Miller switched brands, the beverage maker stuck him with a lawsuit.
Having single-handedly created the so-called energy drink category when it charged into the United States from Austria seven years ago, Red Bull controls 62.7% of the $650-million market in the U.S., according to research firm Beverage Marketing Corp.
That’s down from a commanding 68% share in 2000, as a herd of challengers has entered the ring.
Loaded with 80 milligrams of caffeine, natural additives and sugar, the drink first struck a chord among the sleep-deprived dot-com crowd and college students. But it quickly migrated to the nightclub and rave party scene, where Red Bull’s status was enhanced by the scientifically unproven notion that its main ingredient, the amino acid taurine, helps lessen the effects of a hangover.
Its popularity spawned numerous imitators. Today, there are at least a dozen brands of “energy” beverages. Sales of Rockstar, the second-bestselling energy drink, tripled last year to $48 million. What’s more, beverage giants Coca-Cola Co. and PepsiCo Inc. each have their own nascent labels that are slowing taking hold in the market.
Still, with its slim blue-and-silver can, Red Bull is the most widely identified energy drink on the market.
To guard its turf, Santa Monica-based Red Bull North America Inc. is vigorously defending its trade name by pursuing bar owners such as Miller.
In its lawsuit against Moondoggies, the company alleged that Miller and his staff failed to tell customers who requested Red Bull that they were being served another brand instead.
It was the fourth such suit Red Bull says it has settled in the last six months.
Gary Smith, executive vice president of Red Bull North America, says the company hopes the litigation will make restaurants and bars “think twice” about referring to other energy drinks as Red Bull.
Though he acknowledges that the problem “doesn’t seem to be widespread,” the drink maker is looking for other possible offenders. “Our loyal consumer base is being deceived and it’s wrong,” Smith said.
Few are surprised that Red Bull is being so aggressive. As the dominant brand in its drink category, Red Bull is expected “to do everything in its power to protect its franchise,” said Gary Hemphill, senior vice president of New York-based Beverage Marketing.
Indeed, what Red Bull is doing is considered standard operating procedure in the highly competitive beverage industry, where flavors and ingredients among rivals often vary only slightly.
If the market leader fails to take action, it runs the risk of “becoming generic,” said Peter Sealey, adjunct professor of marketing at UC Berkeley. That would, over time, lead to “a catastrophic loss to the trademark,” he said.
A former head of global marketing at Coca-Cola, Sealey said the Atlanta-based beverage company employed a cadre of people whose sole job was to order Coke at restaurants where it wasn’t sold. “If a server didn’t say, ‘We don’t have Coke. Will you take a Pepsi?’ ” a stern letter was written, he said. Legal action, Sealey added, was always an option.
For his part, Miller felt he had safely guarded against just that when he decided to sell a different brand of energy drink.
Moondoggies’ customers, most of whom are in their 20s, had joined the energy-drink craze early on, and by 2000 Miller and his staff were mixing up 1,400 Red Bull-and-vodka concoctions a night at $5 apiece.
Yet storing the beverage became a problem, Miller said. Red Bull is only available in 8.3-ounce cans -- enough for two mixed drinks -- and every night dozens of half-empty containers would pile up behind the bar only to be tossed in the trash after closing.
So when upstart Roaring Lion -- a similar-tasting drink produced by RLED, a Burbank-based venture where four of the top five executives are former Red Bull employees -- approached Miller in 2002, he was quick to sign a deal. Not only could Roaring Lion be dispensed with a bar gun like other mixers, but a 5-ounce serving ran about 53 cents, while Red Bull was costing Miller around 70 cents a serving.
But when he stopped serving Red Bull, Miller might as well have been waving a red cape. The company rushed forward and sued, contending that Moondoggies was illegally trading on the brand name.
“They told us, ‘You’re passing off somebody else’s product’ ” as Red Bull, Miller recalled.
He denies the claim. He maintains he posted signs throughout his bar explaining that Roaring Lion was the only energy drink sold, and employees were trained to correct patrons if they ordered Red Bull by name.
Nonetheless, he ended up settling in January for $50,000. His bar, which Miller says takes in $4 million in sales annually, had little to gain in taking on a company whose 2003 revenue hit $325 million, according to Dun & Bradstreet Inc. (Privately held Red Bull declined to discuss revenue or profit figures.)
Three other bars -- Centro-fly in New York, Drai’s in Las Vegas and Philadelphia’s M Restaurant and Lounge -- faced similar suits last fall and agreed to settle for undisclosed amounts. Only Moondoggies’ settlement had no confidentiality clause. The other bar owners declined to comment, citing terms of their settlements.
Miller noted that he was recently thinking about making another beverage switch -- from Coke to Pepsi.
But given his run-in with Red Bull, he decided better of it, lest his customers ask for the wrong drink and his staff fail to set them straight about what they were being served.
“I can’t correct everyone in the world when they order a Jack and Coke,” he said.