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Red Bull's Billionaire Maniac

 
Dietrich Mateschitz is making a bold move into TV, movies, and
magazines. What's the visionary behind a $5 billion-a-year
soft-drink empire doing in the media business? Just what he's
always done: having a blast

     May 19 (Bloomberg BusinessWeek) -- Little known outside of
his native Austria, Dietrich Mateschitz is one of the most
successful entrepreneurs of our age, a man who single-handedly
changed the landscape of the beverage industry by creating not
just a new brand but a whole new category: the energy drink. As
the visionary who brought the world Red Bull, affectionately
known as "speed in a can" or even "liquid cocaine," Mateschitz,
67, has been a patron saint for more than two decades to
late-night partiers, exam-week undergrads, long-haul truckers,
and, above all, extreme-sports athletes everywhere.
     In return for his sickly sweet innovation, the world has
made him very, very rich. Last year the privately held company,
also named Red Bull, says it sold 4.2 billion cans of its drink,
including more than a billion in the U.S. alone. That represents
a 7.9 percent increase over the year before, and revenues jumped
15.8 percent to $5.175 billion. Mateschitz runs an efficient
enterprise that has yet to trip on its rapid growth: At the end
of 2004, he had just 2,605 employees; in 2010, Red Bull employed
7,758 people—which works out to more than $667,000 in revenue per
person.
     Now he's set his sights on media. On May 15, subscribers to
the Los Angeles Times, Chicago Tribune, Miami Herald, Houston
Chronicle, and New York Daily News found a magazine called Red
Bulletin inserted in their Sunday papers. The 98-page glossy
features a cover story on San Francisco Giants ace Tim Lincecum,
as well as pieces on Bob Dylan, graffiti art, and Russian BASE
jumper Valery Rozov. Billed as "an almost independent monthly,"
the magazine is a product of Red Bull Media House, a subsidiary
media company launched in Austria in 2007 that expanded with a
Los Angeles outpost this January.
     Red Bull knows what it's getting into. Over the years, it
has produced TV programs (No Limits on ESPN), films (That's It,
That's All), magazines, a website, and a steady diet of Web
videos featuring snowboarders, rally cars, surfers, cliff divers,
and concerts. Even so, its current ambitions reflect a serious
ramping up, as well as the realization of a business plan that
eschews conventional advertising in favor of marketing through
its own events, shows, and publications. The company shipped more
than 1.2 million copies of the first Red Bulletin in the U.S.
(equal to Sports Illustrated's paid circulation). This fall its
first feature-length documentary, a look at snowboarding called
The Art of Flight, will be released in U.S. theaters. Earlier
this year, the company announced a partnership with Bunim/Murray
Productions, best known for creating the Real World reality-show
franchise on MTV. The two are working on reality TV concepts for
Red Bull athletes.
     Mateschitz calls the multimedia assault "our most important
line extension so far. As a major content provider, it is our
goal to communicate and distribute the 'World of Red Bull' in all
major media segments, from TV to print to new media to our music
record label." He hopes Red Bull Media House will turn a profit,
but, as with his sports teams, he's willing to wait. "In literal
financial terms, our sports teams are not yet profitable, but in
value terms, they are," he says. "The total editorial media value
plus the media assets created around the teams are superior to
pure advertising expenditures."

Red Bull has employees in 161 countries, but most of the major
decisions still get made either at Red Bull's headquarters in
Fuschl, an Austrian village of 1,500, or at Hangar-7,
Mateschitz's private airplane complex a few minutes outside
Salzburg.
     Though he rarely gives interviews, Mateschitz's Hangar-7
provides ample evidence that he is not shy about his success.
Each of his buildings features architectural flourishes that seem
better suited to a design mecca like Berlin than to a bucolic
Austrian suburb. "The architect almost killed me when I told him
I wanted to add that," says Mateschitz, standing on a balcony and
pointing straight up at the Threesixty Bar—a circular all-glass
room that appears to be suspended in mid-air. It's extravagant,
unnecessary perhaps, and that's precisely the point. "It wouldn't
be Red Bull if it didn't start harmless and end up as a
catastrophe," Mateschitz says. "And architects are really only
paid discussion partners anyway."
     Beyond the Flying Bulls—a performing fleet of vintage
aircraft—the most fascinating parts of Hangar-7 are the
restaurants, including the Threesixty Bar, the Mayday Bar, and
Restaurant Ikarus. Directly below us sit a half dozen aircraft,
all tattooed with Red Bull's logo, including a Chance Vought
F4U-4 Corsair fighter from 1945, a Pitts S2B aerobatic biplane,
two Alpha jets once used by European militaries for training, and
a couple of helicopters.
     Mateschitz owns four soccer teams: New York's Red Bulls (and
their stadium), Red Bull Salzburg, Red Bull Brasil, and RB
Leipzig. He also has a Nascar team and two Formula 1 racing
teams. One Formula 1 team has on occasion been sufficient to
cripple a billionaire's finances, but like everything at Red
Bull, he finances the annual $200 million cost of his F1 teams
out of the company's healthy operating income.
     Mateschitz is Austria's richest man, and Red Bull is the
biggest thing to come out of the place since, well, Arnold
Schwarzenegger. California's former governor has an idea why
Mateschitz is so successful: "He's a daring businessman, but he's
also quite visionary for an Austrian, because he thinks in terms
of the whole world. It's one thing to think that way in America,
but it's much more rare when you come from a small country like
Austria."
     Mateschitz's private office is called Lucky 7-Private
Heaven. It's so private that we're forced to wait as he struggles
to get the digital fingerprint reader to grant him access. It's
the one time all day that he shows even an inkling of
uncertainty. "I'm not really this James Bond," he says as he
places his finger on the reader for the third time. "It was for
my son when he was younger. But he was a little surprised when I
told him that it only worked with my fingerprint and not his as
well."
     Once inside, Mateschitz takes his place behind a modern
wooden desk that holds not a computer but rather a model plane, a
bronze sculpture of two bulls flying on an eagle's wings, and a
few coffee-table books—on the Belgian artist Panamarenko and the
German aeronautical engineer Claude Dornier—and launches into a
spiel he's been delivering for the past 25 years. In near-perfect
English, he explains that Red Bull is not just a drink. Instead,
it is a "philosophy"—one seemingly derived from his own outlook
on life—and a "functional product," used to improve strength and
performance and to revitalize the body and mind. An amiable man,
Mateschitz is also quite serious, prone to beginning sentences
with the phrase "It is a must." As in: "It is a must to believe
in one's product. If this were just a marketing gimmick, it would
never work."
     He says it with such certainty that it's easy to forget that
Red Bull is just a carbonated drink in an artfully designed
eight-ounce can, the main ingredients of which are caffeine, an
amino acid called taurine, and a carbohydrate called
glucuronolactone.

Mateschitz was born on May 20, 1944— under the sign of Taurus,
naturally—in the village of St. Marein, in Austria's southern
region of Styria. His family was predominantly conservative, full
of officers, priests, and teachers—the profession of both his
parents.
     From an early age, Mateschitz showed an aptitude for selling
an idea, like the time he persuaded his mother to let him attend
university in Vienna rather than in nearby Graz. "I chose the
university for the city, not for the university," he says. "But I
could only find one course which wasn't available in Graz, which
was ship construction. So I convinced her that I had only one
desire in life, and that was to become a ship engineer."
     It took him 10 years to get a degree in commerce from the
Vienna University of Economics and Business, and he spent part of
that time working as a ski instructor to pay the bills. After
graduating, at 28, he spent 10 years as the international
marketing director of a German consumer products company called
Blendax. He was little more than a glorified toothpaste salesman,
and by 38 he'd hit a wall. "All I could see was the same gray
airplanes, the same gray suits, the same gray faces. All the
hotel bars looked the same, and so did the women in them. I asked
myself whether I wanted to spend the next decade as I'd spent the
previous one."
     A chance trip to Thailand in 1982 would prove to be the
turning point in Mateschitz's life. Curious to know what
attracted the locals to an uncarbonated "tonic" called Krating
Daeng (Thai for "water buffalo"), he tried some himself and found
that it instantly cured his jet lag. Not long after, while
sitting in the bar at the Mandarin Oriental in Hong Kong, he read
in a magazine that the top corporate taxpayer in Japan that year
was a maker of such tonics. Suddenly, the idea hit him: he would
sell the stuff in the West.
     In 1984, Mateschitz approached one of his Blendax contacts,
Chaleo Yoovidhya, a Thai businessman who was selling the tonic in
Southeast Asia, and suggested that the two introduce the drink to
the rest of the world, with one crucial change: It would be
carbonated. Yoovidhya liked the idea, and they agreed to invest
$500,000 apiece to establish a 49/49 partnership, with the
remaining 2 percent going to Yoovidhya's son. (Yoovidhya remains
a silent partner in the company.) Mateschitz then returned to
Austria to plan the all-important packaging and slogan. For help,
he turned to his university friend Johannes Kastner, who owned
his own ad agency in Frankfurt.
     "He said he had no money, so we agreed that he would do
freelance work for me to pay me for it," says Kastner. Over the
next year and a half, Kastner and his team put together about 50
different designs for Red Bull, with Mateschitz finally deciding
on the distinctive blue-and-silver can emblazoned with the logo
of two muscular bulls about to smash heads in front of a yellow
sun. A slogan was harder to come by. "Nothing satisfied him, and
I was finally so upset that I told him to find another agency,"
says Kastner. "He asked me to think about it for one more night.
And at 3 a.m. it came to me—'Gives You Wings.' I called him right
then and told him it was the last one I'd give him, but he said,
'That's it.'"
     It was just what Mateschitz needed—something to convey that
Red Bull had tangible effects. That, in turn, would allow his
product-positioning master stroke: He would sell Red Bull as an
ultra-premium drink in a category all its own. At about $2 a can,
it was far-and-away the most expensive carbonated drink on the
shelves. "If we'd only had a 15 percent price premium, we'd
merely be a premium brand among soft drinks, and not a different
category altogether," says Mateschitz. In 1987 he introduced the
drink in Austria. Next came Hungary, the U.K., and Germany, and
before long sales were spiking all over Europe.
     At this point most histories of Red Bull tend to depart from
Mateschitz and focus on Red Bull itself, which is exactly how he
wants it. A curious hybrid of a mogul, Mateschitz has a zest for
life that rivals Richard Branson's, but his obsession with
controlling information puts him closer to Steve Jobs. Like the
Apple (AAPL) chief, Mateschitz pulls the strings behind a
consumer cult. And cults rely on message control.
     While he's engaging in person, Mateschitz is notoriously
secretive. (His elusiveness has prompted his staff to nickname
him The Yeti.) He has a long-standing policy of refusing to
discuss his private life, and until recently he wouldn't even
consider answering questions about his only child, Marc, whose
mother is a schoolteacher Mateschitz dated for two years.
     He's close to some of Austria's most prominent people,
though Mateschitz says he doesn't place a premium on collecting
friends or socializing: "I don't believe in 50 friends. I believe
in a smaller number. Nor do I care about society events. It's the
most senseless use of time. When I do go out, from time to time,
it's just to convince myself again that I'm not missing a lot."
On those rare occasions, however, he invariably arrives with an
attractive woman on his arm. "It's just that I'm not old and wise
enough to be married yet," he says. "But is it necessary that you
write about this?"

The success of Red Bull defies logic in one important regard: It
doesn't taste very good. The amber-colored elixir's taste has
been likened to "liquid Sweet Tarts" or "cough medicine in a
can." (Although it does grow on you.) One early market research
report in the U.K. put it bluntly: "No other new product has ever
failed this convincingly." Mateschitz says he didn't care about
the taste issue then, and he doesn't care about it now. "It's not
just another flavored sugar water differentiated by color or
taste or flavor," he says. "It's an efficiency product. I'm
talking about improving endurance, concentration, reaction time,
speed, vigilance, and emotional status. Taste is of no importance
whatsoever."
     But if Red Bull doesn't please the palate, what exactly does
it do for you? The short answer is that no one outside of Red
Bull is entirely sure. There's the caffeine content: 80
milligrams per can, twice that of a can of Coca-Cola (KO) and
about the same as a cup of coffee. Those drinking original Red
Bull and not the sugar-free version also receive a healthy dose
of carbohydrates. But the rush Red Bull delivers is different
from what you'd feel after drinking a coffee or two cans of Coke.
     Enter the "crucial" ingredient: taurine, an amino acid found
in meat, eggs, and human breast milk. While some studies have
shown small doses of taurine to be beneficial against problems
ranging from epilepsy to cardiac arrhythmias, there's scant
evidence of its impact on the body, positive or negative. A
"nonessential" amino acid, it's manufactured from other amino
acids in the liver, and scientists say it's therefore unnecessary
to a healthy diet. But Mateschitz scoffs at this. "We have meters
and meters of scientific evidence and support" showing its
benefits, he says.
     The company has shared the results of these studies with
health authorities each time it has sought to enter a new
country, and most governments have approved the drink for sale.
It was banned, for a time, in both Denmark and France, where
authorities were focused not on Red Bull's benefits but on the
potential danger posed by its unusually high levels of taurine,
caffeine, and certain B vitamins. In 1991 two young Swedes died
on a night when they'd drunk Red Bull with vodka, and in 1999 an
Irish teen who had consumed three Red Bulls died while playing
basketball. Although investigators found no connection between
the deaths and Red Bull, the cases raised alarms, as did a French
study in which rats that had been fed taurine were found to
exhibit bizarre behavior, including self-mutilation. Still, the
data on taurine remains inconclusive.
     Mateschitz proved his marketing genius, especially in an era
of "crisis management," with his early decision to foster rumors
about Red Bull's content instead of trying to quash them. In the
early 1990s, when the drink emerged as a hit in the infamous
all-night party circuit on the Spanish island of Ibiza, tales
began to circulate that taurine was derived from bull testicles
or even bull semen. The company let the gossip travel unchecked,
and even set up a page devoted to the rumors on its website. "In
the beginning, the high-school teachers who were against the
product were at least as important as the students who were for
it," says Mateschitz. "Newspapers asked, 'Is it a drug? Is it
harmless? Is it dangerous?' That ambivalence is so important. The
most dangerous thing for a branded product is low interest."
     Was it all by design? Did he really anticipate that a
combination of rumor and public outcry would play such a big part
in driving early sales? Mateschitz is emphatic: "Yes. We expected
it. It was a part of the strategy from the beginning. We would
make the brand interesting enough that people wanted to get their
hands on it."

Controversy aside, the central pillar of Red Bull's marketing
campaign has always been its claim that it can improve athletic
performance. To prove it, the company took a page out of
Gatorade's (PEP) book and targeted athletes, except that, in a
timely twist, Mateschitz zeroed in on the extreme-sports crowd.
The first athlete he signed up to be an "ambassador" was fellow
Austrian Gerhard Berger, winner of 10 Formula 1 races. In short
order, Red Bull was sponsoring events and athletes in a variety
of perilous endeavors.
     Today, Red Bull underwrites more than 500 athletes in 97
sports—100 of them in the U.S. But in a departure from the
traditional sponsorship arrangement, Red Bull doesn't offer its
athletes contracts, just a verbal agreement to "support" them in
achieving their dreams. Some of those athletes don't need any
"support" per se—Red Bull counts soccer star Thierry Henry and
snowboarder Shaun White as part of its "family"—but some, like
Canadian ice-climber Will Gadd surely welcome the extra bucks.
     The sports Red Bull tends to focus on are definitely not for
the faint of heart. In the last 20 years, three Red Bull
athletes—whom Mateschitz calls "family members"—have died in
separate incidents: Shane McConkey and Ueli Gegenshatz (BASE
jumpers) and Eli Thompson (Red Bull Air Force). "There are almost
no sports within which mortal accidents are not a reality,"
Mateschitz says. "The sports they helped pioneer carry inherent
risks which each would take with or without our support. And
while we were hit hard by it and deeply concerned, they chose
their journey long before we met."
     Felix Baumgartner, the world's best-known BASE jumper, is in
Mateschitz's inner circle, and his association with the company
dates back to 1996. (BASE is an acronym for the fixed objects
from which such athletes usually jump: Building, Antenna, Span—or
bridge—and Earth.) Red Bull sponsors most of Baumgartner's
stunts, such as a 120-foot leap from the arm of the Christ the
Redeemer statue in Rio de Janeiro in 1999 that set the record for
the lowest parachute jump in history. Baumgartner later admitted
to Jay Leno that the idea sounded stupid. Leno replied, "It
doesn't sound stupid. It is stupid."
     Like everything else at Red Bull, the negotiations that lead
to sponsorship deals are unorthodox as well. Windsurfer Robby
Naish recalls his first meeting with Mateschitz almost 20 years
ago. "We talked in the courtyard of his office in Fuschl, and
pretty soon realized that we're both really into cars. That was
the end of our business meeting, because he wanted to show me his
Ferrari GTO. We went driving off into the mountains, and after 15
minutes he pulled over, got out, and told me to drive back. I
didn't want to—it's a million-dollar car—but he said I was either
going to drive the Ferrari or walk back. I was so scared, I drove
like my grandmother."
     The lines between Red Bull, Red Bull athletes, and Red Bull
events are blurry on purpose. To Mateschitz, it's just one big
image campaign with many manifestations. Americans might see 2005
Heisman Trophy winner Reggie Bush on television wearing a Red
Bull hat. Or they might stumble on a YouTube video of Shaun White
secretly training on the private half pipe built by Red Bull. Or
they might actually attend one of dozens of global Red Bull
events, like the May 21 Red Bull Soapbox Race in Los Angeles or a
motocross spectacular in Brazil the week after. This is fun
stuff, and it's a lot more interesting than writing a check to
buy 30 seconds during the Super Bowl.

Despite the fact that he's approaching 70, Mateschitz maintains
quite a clip. He still moves like an athlete, rides horses,
pilots planes, and last year competed in an off-road motorcycle
race. He has, however, installed a board of directors at Red Bull
to work on broader strategic issues. Red Bull now has hundreds of
competitors (the latest entrant: Tiger Blood energy potion, an
homage to Charlie Sheen). For a time, there were rumors that
Coca-Cola had offered to buy the company, but those have died
down. Mateschitz has long insisted that he has no plans to sell
or take Red Bull public. "It's not a question of money," he says.
"It's a question of fun. Not only that, can you imagine me in a
shareholders' meeting?"
     The bigger question is whether the juggernaut he has built
will survive him, factoring in that Red Bull is the vehicle for
his passions and ideals. Mateschitz thinks so. And he even has a
successor in mind. "My 19-year-old son will join the company
after finishing his studies, if he wants to and if the time is
right," he says.
     Meanwhile, Mateschitz has certainly created some enviable
havens for himself. Like Richard Branson, he has his own private
island, the 3,000-acre Laucala, in Fiji. The flamboyant Malcolm
Forbes bought the island for $1 million in 1972. Mateschitz heard
about it from his friend George Harrison, the ex-Beatle, who had
planned to buy the island himself before his death. In 2003,
Mateschitz purchased it for a reported $10 million.
     Laucala was first sighted in 1789 by Captain William Bligh
of the HMS Bounty after he'd been relieved of his duties and set
adrift by his mutinous crew. Mateschitz plans to use it mainly as
a getaway for his small circle of friends, but he has also built
an exclusive resort on the island. When I ask him what motivated
him to buy a vacation home so far from Salzburg, he resorts to
quoting Forbes himself: "He gave a nice answer, which was,
'Doesn't everybody want their own South Pacific island?' Well, in
my case, he was right. I did." He also says that he has always
been attracted to the idea of having his own independent
state—the country of Red Bull, as it were—which would have the
shortest set of laws in the world. "The rules would be simple.
Nobody tells you what you have to do—only what you don't have to
do."

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