148: The Drink Nobody Wanted, Priced Higher Than Everything Else (Red Bull, Part 1)

How a Thai energy tonic became the most counterintuitive product launch in marketing history.

Hey everyone, Chase here from CreativeOS. This is an iconic brand with an iconic founder.

In 1982, a 38-year-old Austrian marketing executive named Dietrich Mateschitz was in Bangkok on a business trip. (Listen to the founders podcast about him here - it’s excellent).

He was exhausted. Jet-lagged beyond functioning.

His colleague handed him a small bottle of something called Krating Daeng — Thai for "red bull." It was a sweet, slightly medicinal energy tonic popular with truck drivers and factory workers across Southeast Asia.

Mateschitz drank it. His jet lag disappeared.

He spent the rest of that trip figuring out how to buy the rights to sell it in Europe.

It took him three years and nearly everything he had.

And when he finally launched, he did something that made every marketing professional who heard about it say he was going to fail.

He priced it higher than Coca-Cola. Higher than beer. Higher than almost any beverage on the market.

And then he gave it away for free.

In this issue, you'll learn:

• How Mateschitz found a product nobody believed in and turned it into a category

• The pricing paradox that became Red Bull's first competitive advantage

• Why giving the product away for free was the smartest launch strategy in beverage history

The formula nobody wanted.

Mateschitz didn't invent the product. Krating Daeng had been sold in Thailand since 1976, developed by a businessman named Chaleo Yoovidhya.

But Krating Daeng was sweet and thick — formulated for the Thai palate. Mateschitz knew it needed to be modified for Western tastes. He commissioned reformulation work and spent years getting the carbonation, sweetness, and flavor profile right.

He also needed a business partner. He went back to Yoovidhya and proposed a joint venture: each would put in $500,000 and own 49% of the new company. The remaining 2% would go to Yoovidhya's son.

Mateschitz took out a personal loan to fund his half. He had effectively bet his entire net worth on a carbonated energy drink that no regulatory agency in Europe had yet approved.

Market research did not help his confidence.

Focus groups across Austria and Germany came back negative. Participants found the taste medicinal. The branding was strange. The concept — buying a caffeinated beverage for energy rather than drinking coffee — didn't make sense to them.

One research report concluded: "No market exists for this product."

Mateschitz kept going.

The pricing decision.

Red Bull finally received Austrian regulatory approval and launched in 1987.

Mateschitz priced a 250ml can at 5 Austrian schillings — roughly equivalent to $0.35 at the time, but significantly higher than a comparable volume of Coke, beer, or any other beverage in the same cooler.

Every distributor he spoke to told him this was wrong.

He didn't change the price.

His reasoning was precise: a premium price signals a premium product. If Red Bull was priced like a soft drink, it would be evaluated like a soft drink. It would sit on the shelf next to Coke and lose.

But if it was priced higher — if there was a visible gap between Red Bull and everything around it — that price itself became a communication. It told the customer that this was different. That you were getting something Coke couldn't give you.

The price wasn't a function of cost-plus margin. It was a brand signal.

And it meant Red Bull could never be positioned as an everyday beverage. Which is exactly the positioning Mateschitz wanted.

The sampling strategy that looked like waste.

Red Bull launched with essentially no traditional advertising budget.

Instead, Mateschitz hired students — the young, social, aspirational demographic he was targeting — and gave them Red Bull cases to drive around in branded Mini Coopers. Their job: go where young people were and give the drink away.

Ski resorts. University libraries during finals week. Outside clubs at 2am. Anywhere someone might need energy and might be surrounded by other people who would see them drinking something unusual.

The economics looked terrible. You're giving away product that costs money to manufacture, ship, and store, and you're not collecting a cent.

But Mateschitz understood something about how categories get created.

You can't advertise your way into a category that doesn't exist yet. You have to let people discover it. Word of mouth from a genuine experience is more credible than any media buy. And a student driving a Mini Cooper full of free Red Bulls is a far more interesting story than a TV spot.

The sampling program didn't just give away drinks. It created a network of people who'd had a real experience with the product and would talk about it because it was unusual enough to be worth talking about.

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What this tells us about Creative Discipline

By 1992, Red Bull had expanded into Germany, Hungary, and Slovenia. The sampling program had seeded the market. Word of mouth was building.

The two-bulls logo — designed to convey competition and energy — was on every can. The tagline "Red Bull gives you wings" had been introduced and immediately became the entire brand platform.

Mateschitz had built a beverage company with no advertising, a price that made distributors nervous, and a product that focus groups said nobody wanted.

He'd done it by making three counterintuitive decisions in a row:

1. Trust the product over the research

2. Use price as a quality signal instead of a volume driver

3. Give the product away to create experiences instead of buying awareness

Each decision required ignoring conventional wisdom. Each decision turned out to be right.

The category Mateschitz entered in 1987 didn't exist. He had to create it before he could lead it.

Next week: how Red Bull stopped being a beverage company and became a media empire — and what Felix Baumgartner jumping from space has to do with selling a can of caffeine.

Keep Creating,

Chase

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