Red Bull's $675 Million Formula 1 Spending Spree Helps Brand Top Ferrari

Red Bull GmbH leads Formula One brands including Ferrari SpA in television exposure after spending more than $675 million in five years, research shows.

The energy drink maker, its logo emblazoned on four racing cars, got 4 hours, 27 minutes of TV airtime at the first 15 races this season compared with about 52 minutes for Ferrari, research by Guildford, England-based Margaux Matrix Ltd. found. Only series sponsor LG Electronics Inc., with almost 11 hours, had more coverage.

Red Bull spent an average $135 million a year on its main Milton Keynes, England-based team since 2005, according to company filings in the U.K. by Red Bull Technology Ltd., allowing it to rely less on sponsorship from other companies to cover costs, said Mick de Haas, a motor sports sponsorship consultant who has advised ING Groep NV.

“Red Bull is a brand that’s still emerging and it’s looking for as much publicity as possible,” De Haas said. “It’s all over the place.”

Fuschl am See, Austria-based Red Bull also runs a second team, Toro Rosso, and last year had a deal with Kimi Raikkonen under which the former champion drank from a branded Red Bull bottle when racing for Ferrari. Red Bull said in an e-mail it spends “30 to 40 percent” of company sales on marketing, including F-1 expenditure. It had net income of 123.1 million euros on sales of 1.85 billion euros last year, according to a filing with the Austrian company register.

Market Share

Closely held Red Bull was the 7th biggest maker of soft drinks last year, with 0.7 percent of the American market, according to industry journal Beverage Digest. While volume in the U.S. total soft drink industry declined 2.1 percent, Red Bull’s rose 1.2 percent. Red Bull sold about 4 billion cans of its energy drink last year, and plans to increase volume by more than 10 percent this year, Chief Executive Officer Dietrich Mateschitz told the Sonntag newspaper.

It purchased Ford Motor Co.’s unprofitable Jaguar Racing team in 2004 to enter Formula One. Its sports portfolio includes soccer’s New York Red Bulls, while it sponsors Olympic downhill champion skier Lindsey Vonn among other athletes.

In the racing series, Red Bull’s Mark Webber trails championship leader Fernando Alonso of Ferrari by 11 points ahead of the Nov. 7 Brazilian Grand Prix, the second-to-last race. McLaren’s Lewis Hamilton is 10 points further back, four ahead of another Red Bull driver, Sebastian Vettel.

Ferrari, in Formula One since 1950, doesn’t spend any additional money on marketing, team spokesman Luca Colajanni said by telephone. He declined to discuss team costs. The carmaker said in May it planned to maintain production at 6,000 road models this year.

Limited Market

“Ferrari’s audience is limited” to the high-end car market, De Haas said. It’s in Formula One to associate itself with elite technology, he added.

To be sure, Red Bull ceded space on its racing cars this year as part of “healthy seven-figure deals” with LG and FXDD Malta Ltd., said Zak Brown, chief executive of Just Marketing International, which brokered the deals.

It may come under pressure to sell the Toro Rosso team to reduce costs further, according to Mark Jenkins, a business strategy professor at the U.K.’s Cranfield University who has written about Formula One.

“They’re sinking a lot of money into Formula One,” Jenkins said. “It doesn’t make any sense with the current regulations for Red Bull to own two teams.”

Red Bull said it has no “concrete” plans to sell the squad, whose top-ranked driver Sebastien Buemi is 16th in the championship.

To contact the reporter on this story: Alex Duff in Madrid at aduff4@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser at at celser@bloomberg.net

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