This research is to determine the price elasticity of Red-Bull energy drink in Los Angeles. The demand elasticity of demand of a product determines the responsiveness of demand of the product with change in its price. Therefore, this research concentrates on predicting the elasticity extent of demand of red-bull energy drink. In determining the responsiveness of red-bull energy drink, the research aims at the retail market of Los Angeles. It is based on comparison of the prices of Red-Bull energy drink with the prices of other energy drinks on the market. Matters that could affect the prices of the drinks are also taken into consideration in this study.
Red-Bull Energy Drink is one of the most popular energy drinks in the US market. It comes in three editions: Red-Bull edition, silver edition, and blue edition. The three are distinct in terms of flavor and color of the containers they are packed. For example, red-bull edition is packed in a red container and has cranberry flavor. The blue edition, as its name suggests, is packed in a blue container and has a blue-berry flavor. Finally, the silver edition has a silver packaging and has lime flavor. All the three editions of Red-Bull Energy Drinks have the same price (Hammitt et al. 200).
In 2011, statistics showed that Red-Bull Energy Drink had the highest share of energy market. Red-Bull Energy Drink got 43% of the total market. It was followed by Hansen’s Natural at 16%, Pepco at 13%. Rock-star Original and Coca-Cola followed at 12% and 10% of the market shares (Powell et al. 15).
In this research, the price of Red-Bull Energy drink will be compared with that of other four energy drinks. The research has utilized price data taken from three stores that are found within the same location in Los Angeles. In cases where it was difficult to get the same sizes of alternative energy drinks, prices of the products were determined through comparison per unit. However, the research seeks to compare the prices of 8 oz tin container of the drinks.
This research is divided into three sections. Section 1 is mainly relative price comparison of various brands of energy drinks. Section 2 is the relative analysis of quality of different drinks. Section 3 is the analysis of factors that might have influenced the prices. These sections are followed by a conclusion which represents summary of relative qualitative price elasticity of demand for Red-Bull Energy Drink. It also includes a recommendation of a pricing policy for Red-Bull Energy Drink.
|Monster Energy||Verve||Red-Bull||Rock-star Original||Coca-Cola|
|1.30 Dollars||0.60 Dollars||1.50 Dollars||3.00dollars||0.75 Dollars|
|1.50 Dollars||0.75 Dollars||2.00 Dollars||3.50 Dollars||0.75 Dollars|
|1.30 Dollars||0.60 Dollars||1.75 Dollars||2.99 Dollars||0.75 Dollars|
|1.30 Dollars||0.60 Dollars||2.00 Dollars||3.00 Dollars||0.75 Dollars|
Quality Characteristics of Red-Bull Energy Drink
As stated in the previous section, Red-Bull energy drink comes in various flavors. These flavors also dictate the peculiarities of the containers used to pack the drink. However, these factors do not affect the prices of Red-Bull Energy Drinks. Nonetheless, the packaging of Red-Bull energy drink may determine its price in comparison with other brands. Other qualitative characteristics that could have played a part in the pricing are ingredients, packaging, effect on health of users and the extent of market approval (Ni Mhurchu et al. 34).
Just like any other energy drink, Red-Bull contains caffeine as one of its ingredients. This offers stimulating effects to those who drink Red-Bull or any other energy drink. Another ingredient is B-group vitamins. Furthermore, an 8 oz tin of Red-Bull has taurine which is an amino acid. Taurine occurs naturally in human being. The drink is also made up of sucrose and glucose as its ingredients. This gives Red-Bull its sweet taste and ability to energize the body of a person who drinks it. The drink also comprises water as one of its key ingredients (Powell et al. 15).
The quality of water used to make Red-Bull energy drink is of a high quality as it comes directly from Alpine springs. Nonetheless, it will be unjust to wind up this section without mentioning Red-Bull sugar-free. Red-Bull sugar-free is just like any other Red-Bull Energy drink. However, sugar is not included in the list of its ingredient. Instead of sucrose and glucose, Red-Bull sugar-free has acesulfame K as its sweetener. In addition, Red-Bull energy drink is non-carbonated (Hammitt et al. 200).
Although in 1997 advertising restrictions were imposed on Red-Bull energy drink by Advertising Standards Authority of UK, it continues to get the high levels of sales and performance. To date, Red-Bull is sold in more than 165 countries. Various ingredients of Red-Bull underwent assessment of their effects on the health of human beings. Taurine, caffeine, and gluconolactone were the supplements that the assessment was centered around. At the end, , by means of research conducted by Health Canada, it was found out that caffeine had milled effects on users (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
In the research, it was concluded that adults had minimal exposure to any health risks if they limited themselves to 400 mg per day. On the other hand, taurine and glucuronilactone raise minimal health concerns to people who take Red-Bull energy drink. This is after the two had been confirmed constituents in various foods that people take daily. For example, the two are present in foods like fish, grains, scallops and poultry. Furthermore, the amount of sugar and caffeine in Red-Bull equals the amount found in fruit juice and coffee (Powell et al. 15).
Nonetheless, the caffeine content of Red-Bull energy drink varies from one country to another. This is because some countries have restriction on the amount of caffeine in energy drinks while others do not. Therefore, just like users of any other beverage, people who drink Red-Bull are at risk of caffeine intoxication. It is also anticipated that Red-Bull has cardiovascular effects. However, the drink has been proven useful for drivers. This is because the level of caffeine keeps them awake as they drive (Ni Mhurchu et al. 34).
Various factors are used to determine the price elasticity of demand of an energy drinks. These include the availability of substitute drinks and the relative price of the drink. The level of perceived necessity for the drink is also a key determinant of the price elasticity of demand for a product. Other factors enlist brand loyalty and the target market for the product (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Quality Characteristic Comparison
One of the key differences between Monster-Energy drink and its substitutes is that the large capacity of drink is packed in large can with comparable pricing. The drink also comes in different flavors, giving consumers a wide range of choice within the same brand. A buyer may decide whether to buy regular Lo-Carb Monster, Energy Shooter, Java Monster, X-PRESSO, Regular or shooter (Patterson, Struck, and Murray 20).
One of the key ingredients in Monster Energy drink is caffeine. According to the research, Monster Energy drink has approximately 10 mg per oz. This means that the caffeine content in 8 oz Monster Energy drink is close to 80 mg. Nonetheless, various advertisements have warned the public about the risk of taking more than 48 oz on Monster Energy drinks per day. Furthermore, the drink is considered harmful to pregnant women. The drink can also pose health risks on people who are sensitive to caffeine. This drink has low brand loyalty as compared to Red-Bull due to its high caffeine content (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Research has proven that consumption of Monster Energy Drink can cause adverse health consequences. For example, in 2011, a fourteen-year-old passed on due to caffeine intoxication after having taken two 710ml cans of the drink at a go. This amount of Monster Energy drink was estimated to have about 475 mg of caffeine. However, it was latter discovered that the boy had a heart condition prior to the incident. Furthermore, this is not the only complaint about Monster drink and its health effects (Patterson et al. 20).
Over five deaths related to consumption of Monster drink were reported to Food and Drug Administration in 2004 and 2013. Nonetheless, no death has been directly linked to Monster Energy Drink. For this reasons, the drink suffers from low consumer loyalty compared to Red-Bull. Whereas the caffeine content in Red-Bull equals to that in a cup of coffee, the level of caffeine in Monster Energy is high and harmful (Patterson et al. 20).
Verve Energy Drink
It goes without saying that Verve Energy drink has caffeine as its ingredient. The drink has 12 full-spectrum vitamins including vitamins that are antioxidant. Verve Energy drink has approximately 80 mg of caffeine. It also contains carbonate flavor. Other ingredients in Verve Energy drink are aloe vera, organic green tea, taurine, Guarana seeds extracts and D-ribose. These are not all. In addition to this, the drink has inositol which is a blend of A B vitamin and choline chloride. Nonetheless, it has been proven by scientists that most of the minerals offered in Verve Energy drink are unnecessary. According to them, the long list of ingredients in Verve Energy drink does not transform to its health advantage. Nonetheless, Verve Energy drink is a product of Vemma (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Vemma is a multilevel marketing business whose products are surrounded by a lot of hype. Although Verve Energy drink has been praised for its ability to boost the level of human energy, it is one of the energy drinks that are characterized by the high level of caffeine contamination. According to research, 8 oz of Verve Energy drink has approximately 120 mg of caffeine. This amount supersedes the level of caffeine in Monster Energy or even in Red-Bull Energy drink (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Quality Characteristic of Rock-Star Original Energy Drink
Rock-Star cans have distinctly bright colors. Rock-Stars flavors are referred to by color of the can more than the name. For example, ‘Recovery Lemonade’ has a yellow can. ‘Perfect Berry’ comes in pink Rock-Star can. Rock-Star is scientifically formulated to energize people who do a lot of activities. Rock-Star switched distributors from Coca-Cola to PepsiCo in 2009. It comes in a variety of flavors: Coffee flavored, Non-Carbonated and Rock-star Vodka flavor (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Rock-Star energy drink has two levels of caffeine as a major ingredient and sugar. It has 10 mg to 15 mg of caffeine per ounce. Original Rock-Star energy drink contains 160 mg of caffeine per 16 ounce can. The Rock-Star punched energy drink contains 360mgs of caffeine per 24 ounce can. Besides caffeine and sugar, it also contains a variety of herbs amid which there are Ginkgo Biloba, Panax ginseng, milk, guarana seed and thistle extract. The level of guarana used to be high, but it was reduced significantly. It resulted from the criticism expressed by critics due to its adverse health effects. The drink also includes 100mg of taurine (Canadian Broadcasting Corporation, Films for the Humanities & Sciences (Firm), Films Media Group 10).
Health Effect of Rock-Star Energy Drink
Like most energy drinks, Rock-Star can cause jitteriness, anxiety and high blood pressure. If mixed with alcohol, it may also mask the level of alcohol intoxication. It was once named the worst energy drink by Men’s Health magazine for having 280 calories due to 67.5 grams of sugar. This automatically means that the drink is more harmful that Red-Bull. Once taken, it leads to a high increase in the level of calories in the body. Young people confused the alcoholic versions of Rock-Star with the regular one. This exposed them to future health problems. Although the drink has a high price as compared to that of Red-Bull, it is clear that Red-Bull beats it in various ways. The drink has a high caffeine content and it also influences the risk of increasing level of calories in men (Patterson et al. 20).
Quality Characteristics of Coca-Cola Drink
Coca Cola drink is a carbonated nonalcoholic drink manufactured by The Coca-Cola Company of Atlanta. It was originally created as a patent medicine. The company manufactures concentrate which is sold to licensed Coca-Cola bottlers across the world. The exact formula of Coca-Cola natural flavor is a trade secret. This makes it different from all other brands. Coca-Cola bottle has a contour bottle design. It also comes in the form of tin cans, glass and plastic bottles (Patterson et al. 20).
The various ingredients of Coca-Cola are caffeine, high-fructose corn syrup, carbonated water, caramel color, sucrose, phosphoric acid, and natural flavoring. A can of Coke (12fl ounces/355 ml) contains 50 mg of sodium, 39 gm of carbohydrates (from sugar, approximately 10 teaspoons), 0 grams of fat, 0 grams potassium, and 140 calories. Coca-Cola’s key ingredients are cocaine and caffeine. Cocaine is derived from coca leaf and the caffeine comes from from kola nut. This gave it the name Coca-Cola. It has occasionally produced other Coca-Cola drinks under the Coca-Cola brand. This includes diet Coke: for example, Coca-Cola Zero, the Coca-Cola Cherry, Coca-Cola Vanilla and other unique versions with lime or coffee flavor. The drink has caffeine and that is not all. It also contains cocaine. These two pose more health risk than Red-Bull that only has caffeine (Lindhjem et al. 1384).
Coca-Cola is a sweetened soft drink hence it is a major source of calories in the American diet. This soft drink, if consumed excessively, can be harmful mostly to young children. Research shows that regular nonalcoholic drink users have low levels of magnesium, calcium, ascorbic acid, Vitamin A, and riboflavin. It also has caffeine that may cause physical addiction. Researchers also found out that Coke has high toxic acidic level. In some countries, it is believed that there are pesticides and other harmful chemicals in bottled products, including Coke. Research shows Coca-Cola contains toxins such as lindane, DDT, malathion and chlorpyrifos pesticides. These can cause cancer related health problems. Coke formulation is sweetened entirely with HFCS (Patterson et al. 20).
Consumption of too much HFCS aggravates type-2 obesity. However, Coca-Cola company has responded its plant filter water to remove potential contaminant. Its products are tested for pesticides. Therefore, the drink is hazardous as compared to Red-Bull. It poses a risk of obesity, heart problems, and intoxication by pesticides (Patterson et al. 20).
There are many substitutes for Red-Bull energy drink. It also has a high price compared to many products in its category. The drink also enjoys a high consumer loyalty due to its high comparative quality. Nonetheless, the drink can be considered a necessity as it energizes people who live lives that are filled with activities. This proves that the price elasticity of demand of Red-Bull is highly elastic (Lindhjem et al. 1384).
However, the high levels of caffeine in the drink may cause health effect to the users. The product’s main market is young adults and adults who run active lives. This makes the drink’s price to be characterized by low elasticity. The brand loyalty of Red-Bull has been established through branding. These two make the price elasticity of demand of Red-Bull have low elasticity (Tellis 45).
The price elasticity of demand of Red-Bull is somewhat elastic. There are factors that suggest high price elasticity of demand for Red-Bull. This includes higher price than many products of its kind, is characterized by of the presence of substitutes and its low perceived necessity. However, other factors also suggest a less elastic price elasticity of demand (Ni Mhurchu et al. 34). This includes high brand loyalty. Moreover, the target market for the drink is made of young adults and attractive adults (Hammitt et al. 200). Nonetheless, the elasticity is low for minor changes in price and high for major changes in price. Since all companies aim at maximizing profits, it should be recommended that the price of Red-Bull be increased at a small margin. This is because a small increase of the price will not affect the demand of the drink (Tellis 45).