Red Bull's Billionaire ManiacDuff McDonald
(Corrects Sports Illustrated's paid circulation in fourth paragraph.)
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. (about one-third of 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."