Dietrich Mateschitz: Red Bull's F1 returns show no sign of decelerating
The Business Interview: The boss of Red Bull says his motor-racing team have no plans to exit the sport while they remain in pole position
Thursday 29 September 2011
Formula One's championship fight is all but over with five races to go before the end of the season. German driver Sebastian Vettel needs just one point to clinch the 2011 title for his Red Bull Racing team and he is expected to do this at next week's Japanese Grand Prix. Last year, he became the youngest champion in the sport's history when he won for Red Bull and he has dominated the field so far this year.
However, although it has achieved all its aims in F1, Red Bull's billionaire boss, Dietrich Mateschitz, says that the drinks company has no plans to reverse out of the sport, despite recent reports its sister F1 team, Toro Rosso, would be sold this month to Abu Dhabi's International Petroleum Investment Company.
"No," Mr Mateschitz says, "[Toro Rosso is not for sale] although partnerships would not be ruled out, as long as the partner is the right one."
He adds that at the moment, he would also not consider selling a stake in Red Bull Racing but "a forecast is difficult and a decision always depends on the wider picture, the politics, influence of F1 shareholders and many other factors".
Competition flows through the veins of Red Bull. When the company was founded in 1987, it was up against two of the world's best-known brands: Coca-Cola and Pepsi. Through its unique marketing strategy, which associates Red Bull with adrenalin-fuelled extreme sports, it went on to become the world leader in the energy-drinks sector.
F1 is its most high-profile investment but it is much more than just a toy for the company's racing-loving boss. The tall, tanned 67-year-old Austrian is usually seen in his trademark dark leather jacket entertaining guests in Red Bull's palatial two-storey motorhome in the F1 paddock. However, he is most at home in Hangar-7, a domed steel-and-glass shrine to all things Red Bull just outside Salzburg.
Built to house Mr Mateschitz's collection of historic aircraft, Hangar-7 includes a DC-6B that once belonged to the former president of Yugoslavia Marshal Tito. It also houses a gourmet restaurant and a spectacular bar that appears to float inside the top of the structure. Everything is clinically clean and designed with precision.
Mr Mateschitz speaks with near-perfect English and has pearly-white teeth. There is good reason for this.
As a student in Vienna, he studied world trade and commerce before being hired as international marketing director of Blendax, a German toothpaste manufacturer now owned by Procter & Gamble. He was essentially a toothpaste salesman and he travelled the world.
It was on one of his business trips that Mr Mateschitz came across an energy drink called Krating Daeng, Thai for "Red Bull". Mr Mateschitz became its biggest fan after finding it reduced the effect of jet lag. He convinced Chaleo Yoovidhya, its manufacturer, to go into partnership with him. Red Bull GmbH was born.
Mr Mateschitz owns a 49 per cent stake in Red Bull, with the majority in the hands of Mr Yoovidhya and his son. In its first year, a million cans were sold; last year, four billion. It gave Red Bull record revenue of €3.8bn (£3.3bn) in 2010, up 15.8 per cent on the previous year. It is so big indeed that its investment in F1, one of the world's most expensive sports, is a drop in the ocean.
"The total marketing investment for Red Bull is 10 times as much as in F1," Mr Mateschitz says. To give an indication of its total budget, according to company accounts it has invested £422m in Red Bull Racing since buying the then-struggling team from Ford at the end of 2004.
When Red Bull bought Jaguar for $1 in November 2004, there were concerns that the company was not getting involved with F1 to win races but simply to promote its products. It soon proved that it would put its money where its mouth is.
In 2005, its first full year as an owner, Red Bull poured £58.3m into the team but, according to its latest accounts, in 2009 the investment nearly doubled to £106.8m as the drinks company fuelled its championship campaign. To maximise lead time, development work on F1 cars is done the year before they are introduced and in 2009 Red Bull's spending on research and development increased 18.8 per cent to £57.2m.
Mr Mateschitz says that Red Bull has "no medium- or long-term business plans" in F1 except staying at the top for as long as possible. He puts the team's success down to its staff. "We recruited the best and most professional people for all key positions." Red Bull Racing has 592 staff but four of them have played a bigger part than the others in the team's success.
Team principal Christian Horner was one of the first key recruits and, as F1's youngest team principal, he suited Red Bull's youthful attitude. He was followed by Adrian Newey, the most successful designer in F1, who has a salary of about £6.5m. Vettel is believed to be paid £10.4m with his partner, Mark Webber, getting around £3.9m.
Mr Mateschitz says it is hard to offset the team's costs by increasing sponsorship due to the prominence of Red Bull's logos. Red Bull Racing has 13 on-car sponsors, including oil company Total and car brand Infiniti, but they provide only around 24.5 per cent of its £160.8m revenue. The team lacks a title sponsor and Mr Mateschitz says it is "difficult to find one due to the strength of the Red Bull brand". Its prominence is where the real value lies.
"The return on investment is the marketing value, which depends on the race performance and results," Mr Mateschitz says. Red Bull has the most visible logos on the livery of both of its teams, and the on-track success of Red Bull Racing has made it the most exposed brand in F1 for the past two years. Red Bull's Advertising Value Equivalency – the price it would have to pay to buy a similar amount of on-screen exposure – came to an estimated £144m in 2009 and £232m in 2010, when it received almost a quarter of the total received by all the teams. It has already got exposure worth an estimated £115m in 2011, so over the past three years alone this has more than offset the cost of Red Bull's investment in F1.
But Red Bull has not been so successful across the Pond. Its Nascar stock-car racing team has struggled since joining the series in 2007 and in June it was reported that Red Bull will pull out at the end of this year. Mr Mateschitz says "this decision is not yet final but we had numerous reasons to re-analyse our involvement".
He also dashes rumours that Red Bull will sponsor the United States Grand Prix when it returns to F1's calendar next year. "As a matter of principle we are not in F1 as sponsors but are represented with our two teams."
Mr Mateschitz acknowledges Red Bull's achievement in F1 and says his advice to prospective team owners is to "think twice, then maybe look for something easier". Given how hard it would be to repeat Red Bull's success, this makes a lot of sense.
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