Red Bull ups the tempo in China

Red Bull ups the tempo in China

by Bruce Zhang, Krones AG, Beijing

In collaboration with technological leader Krones, Red Bull is currently upsizing its canning capacities at its two Chinese production facilities.

Red Bull came to China back in 1995, driven by anticipatory confidence in the nation’s future prosperity, and set up China Red Bull Vitamindrink Co. in Shenzen, under the management of the well-known Thai entrepreneur Dr. Yan Bin. Within just two short years, Red Bull succeeded in impressing itself on the Chinese consumers’ brand memory. Red Bull positioned itself as what it is — the mother of all energy drinks. The company put in place a nationwide distribution network, complementing this with a full-scale marketing campaign, and swiftly became the market leader. In 1997, Red Bull relocated its headquarters to the capital Beijing, invested around ten million euros, and was thus at this juncture one of the biggest joint ventures between Chinese and foreign investors in the beverage industry. Red Bull started off by establishing over 20 branches and more than 50 sales offices, and in 2001 was ranked by the China National Food Industry Association among the Top Ten foreign food and beverage companies.

In a global context, Red Bull’s growth continues to flourish. In 2008, the market leader increased its turnover by almost eight per cent. By 2010, Red Bull aims to upsize its sales to nearly six billion cans. Its share of the global market is currently estimated as 70 per cent. In China, Red Bull actually exceeds this figure, with a share of over 80 per cent of the nation’s energy drink market. To put the whole thing in perspective: the market for energy drinks in China is of course marginal; measured against the total beverage market it accounts for a mere fraction. But the sheer size of the Chinese market has to be taken into due account: 230 million litres of Red Bull were sold in 2008 alone, about four-fifths of the market, for a turnover of approximately 430 million euros. And the firm is determined to maintain the momentum. Red Bull has accordingly channelled massive investment into its filling capacities over the past three years. After at first importing its wares directly from Thailand, in 1996 Red Bull began with contract canning on an Italian line in China’s southernmost province of Hainan. Back then, turnover was running at about 150 million RMB (about 15 million euros). One year later, Red Bull built the production base in Beijing and equipped it with two Italian lines each rated at 36,000 cans an hour.

In 2005, Red Bull had reached the magic cumulative figure of one billion cans sold, and the era of collaboration with Krones began. At its newly built Xian Ning facility in Hubei Province, Red Bull installed two Krones canning lines each rated at 36,000 cans an hour, which started operation in May 2006. Precisely two years later, in May 2008, a much faster line, rated at 72,000 cans an hour, started operation in the Beijing-Huairou plant. And this was followed in the summer of 2009 by the next two Krones lines, this time at the Xian Ning facility again. Thus Red Bull is now operating a total of five Krones lines in China, producing 70 per cent of its entire output, 3,600 cans per minute out of 5,100 cans per minute in all plants put together.

The Krones lines are all similar in terms of layout. In the 72,000-cph line at the facility in Beijing-Huairou, a Pressant Uni can depalletiser unloads the cans onto a high-level discharge. They are then hot-filled by a Volumetic VOC-G with the flash-pasteurised product at a temperature of 85 degrees Celsius, with a Ferrum seamer applying the lids. The filler is enclosed, and in addition entirely walled in, accessible for the operator only via an airlock with a disinfection bath. This is followed by fill-level inspection using X-rays by a Checkmat FX. The filled cans are passed through a recooler, which was locally sourced by Krones, and then packed by a Variopac Pro to form two times six-bottle shrink-packs, which are inserted two at a time into 24-bottle cartons by a downstream Wrapapac. The cartons are weighed to verify that the package weight is correct, inkjet-datecoded, and then transported on two lanes to a MultiDivider, which creates the layer pattern for the Pressant Uni palletiser, which also operates with a high-level infeed.

Like everywhere else in the world, in China as well Red Bull is sold only in cans, though here still in three-part cans. There are two products on offer: the beverage marketed as Red Bull Vitamin Functional Drink is sold in a golden 250-ml short can, and accounts for the lion’s share of the production output, at over 95 per cent. This product, with its high Vitamin B content, has been recognised as a health food, and is permitted to display the relevant, much-coveted logo. In the 250-ml slim can familiar in Europe (in China likewise a three-part design) featuring the silver-blue look, by contrast, the firm sells Red Bull extra with a taurine content eight times higher. “Since 2004, our market has exploded, with annual growth rates of more than 40 per cent”, explains Cheung Lap Kong, Vice General Manager and General Engineer Red Bull Co.

“In order to meet this demand, we relied on outstanding support from Krones, creating a win-win situation for both the partners involved.” So both companies see their collaboration as a long-term alliance. The firm is particularly appreciative of the good spare parts delivery service and the responsive support it gets from the Krones LCS subsidiary in Taicang. “It’s extremely important to us that Krones has a service station here in China, because it means we have less line downtime. If any sudden problems do crop up, Krones’ service people are swift to come by”, explains Cheung Lap Kong. “We have the new lines thoroughly overhauled once a year under a service agreement, which covers spare parts, care and maintenance.”

Following the vigorous expansion of recent years, Red Bull is principally to be found along China’s south-east coast, where quite generally the Chinese economic miracle took place. Red Bull is keen, of course, to extend this distribution area, even though Red Bull is already an incredibly popular drink in China. The 2008 Olympic Games in Beijing were a good platform for progressing sponsorship of climbing competitions, football, golf or the martial art of wushu, and to generate more publicity for the energising vitamin drink, which on the markets, at about 50 cents a can, is about twice as expensive as a normal carbonated soft drink.

But due precisely to the comparatively high price, the worldwide financial crisis is not sparing Red Bull entirely either. “The change is not all that clearly definable, but it’s equally clear that something has changed”, says Cheung Lap Kong. “The disposable income has decreased, and we’ve seen people being laid off at the export-driven companies in the industrial zones around Guangdong and Foshan. This is showing up in the consumption figures for Red Bull as well. And Red Bull is increasingly having trouble with imitations, the progressively fiercer competition is also putting pressure on prices, and possible legislative changes may restrict distribution.”

“There’s nothing we can do about the global economy”, comments Cheung Lap Kong. “The most important thing for us is that we do our best here at Red Bull. China is still a developing country, but this also means that we’re going to have a lot of opportunities to expand. The prospects for Red Bull continue to be very good.”

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