Red Bull's Indian partnership goes sour
One of the great success stories of beverage industry, Red Bull will be of its own after a successful but lately bitter partnership with its Indian partner RNG. With this, the Austrian company will go solo and set up its independent operations in India.
Red Bull, the largest energy drink in the INR 2 billion energy drink market India, is currently distributed by RNG group through its distribution network of over 150 thousand points of sale throughout the country. It competes in the energy drinks category with Coca Cola’s Burn and Goldwin Healthcare’s Cloud 9 brands in India.
Launched in Austria in 1987, Red Bull has completed 25 years of its operations. The company has sold more than 30 billion cans in these years. Red Bull started its international journey from Singapore in 1989, followed by Hungary (1992), Germany ( 1994), UK (1995) and the USA in 1997. Currently the drink is available in 160 countries across the globe. In 2011, the company recorded sales of more than 4.6 million cans, globally.
The Indian split was in the offing for sometime as there was a feeling in both the camps that the partnership is not yielding the desired results (read aspirations mismatching) for each partner. Both the companies are engaged in the negotiations and parting of ways has not spelled out in terms and conditions. In all probabilities, RNG Group would insist on a termination fee and for civil and criminal legal charges against Red Bull for breach of agreement. RNG has asked its dealers and other trade partners not to share any proprietary information with Red Bull or deal with them. RNG’s CEO alleges that under the disguise of merchandisers, Red Bull’s sales team has been surveying the market, collating confidential data and trade know-how for some time.
According to a news story published in an Indian financial daily, Economic Times, Red Bull’s official spokesperson has confirmed that both the companies are parting ways from October 15th. The statement reads "This decision was made in order to step-change the presence and distribution of Red Bull in India and reflects our belief in the phenomenal potential in India." According to the same news, Rahul Narang, founder and chairman RNG Group stated "Both partners need to go their own way. We have two JVs with Danone and Suntory and we have aggressive roll-out plans of our brands as well. We have plans to go wider than what Red Bull needs to do."
"We have not yet signed on a mutually-agreeable exit contract. We are looking at a fair option. We have invested considerably on Red Bull. If we fail to reach a consensus, all options are open," he further added.
Earlier, courting a controversy over excess caffeine content, Maharashtra Food and Drug Administration (FDA) had seized 1.63 million cans of Red Bull from two premises in Thane in Maharashtra state in June. A similar raid at another distributor in Mumbai led to the seizure of 2008 cans. According to government the raid was conducted because of the higher levels of caffeine (between 250- 300 ppm). Before this confiscation in Maharashtra, a seizure of Red Bull cans was made in state of Tamil Nadu in 2011 on the similar basis.
The bone of contention is Indian Food Safety and Standard Act 2006. According to this act all drinks containing caffeine should follow the rules applicable to carbonated beverages, there is no separate standards for caffeine content in energy drinks. In June 2010, the Food Safety and Standards Authority of India prepared draft standards for energy drinks and invited public suggestions. But its efforts did not yield any results. As of now, energy drinks are labelled as proprietary food that has no prescribed standards. Unlike carbonated drinks in which caffeine is capped at 145 ppm, a can of energy drink has 320 ppm caffeine or more.
Currently, Food Safety and Standards Authority of India is working on norms for energy drinks. Hopefully, it will create a new category for energy drinks to allow a higher caffeine content.
