Tuesday, October 23, 2012

FDA to Monster Energy: "This stuff is killer, dude!"

Red Bull set a new standard with Felix Baumgartner's 'space jump', which was watched by 27+ million viewers on YouTube alone.

People who work in the ad/marketing/sponsorship business are used to Red Bull's eye-popping stunts (and skillful exploitation of social media.) But the company's latest and greatest venture has caused a lot of discussion about the future of 'content marketing.' 

First, they said 'Advertising is dead.' Now, even conventional notions of sponsorship may be deemphasized by companies like Red Bull, in favor of stunts like the space jump, in which the sponsor doesn't share the impression with any other brands. Let's face it, the quality of the sponsorship impression made by that jump was vastly superior to any impression made by a logo on a motorcycle, swirling amongst dozens of other logos, often of competing brands.

 I read an interesting interview with Red Bull's CEO, in which he was asked, essentially, Is Red Bull a drink company that produces content, or a content company that sells drinks? His answer was, It's both.

On the face of it, I thought that was ridiculous. Even if, by some estimates, it spends an astounding 40% of its revenues on sponsorships and related activities, I was sure it was still a drink company. That huge marketing budget proved (I thought) only that the cost of production on that shit has to be very, very low.

But the more I mulled it over, the more I began to question my first take on it. Suppose you ran a more run of the mill business... Say, you're Joe the Plumber, with a commercial plumbing business. You might have an Accounts Receivable department (if you were a really successful plumber.) All of the revenue would come through that department, but that wouldn't mean that, when people asked what you did for a living, you'd say, I'm a bill collector. You'd say, I'm a plumber.

Maybe Red Bull really is refashioning itself as a content company, and it's just that the revenue flows in through the division of the company that sells drinks.

Right now, if the energy drink business catches a cold, motorcycle racers start to sneeze. That's because energy drink companies are among the few non-endemic sponsors pumping cash into the sport. And while the motorcycle racing world may have to fear a long-term shift of that sponsorship towards content projects like the space jump, there are short-term risks to the energy drink segment, too.

I noticed a story in today's New York Times, which reports that the Food and Drug Administration has recorded five deaths associated with the consumption of Monster Energy drinks. This news comes out thanks to a Freedom of Information Act request to get the FDA records, filed by the parent of child that died, who* is suing Monster. The company's stock dropped 14% when that was announced yesterday.

Monster's spokespeople have coyly stated that the company is, “...unaware of any fatality anywhere that has been caused by its drinks.” That's perhaps technically true, although they were aware of the reports of fatalities that got back to the FDA.

The FDA, for its part, notes that while correlation doesn't equal causality, it's also likely that they did not hear of all incidents of death following the consumption of Monster Energy. 

According to the Times, the duty to investigate causality would, it seems, actually fall to Monster. I'm sure they're diligently researching it.

In the meantime, the lawsuit may increase pressure from some** legislators, who have been calling for regulation of the energy drink sector, which aggressively markets drinks loaded with caffeine (and related stimulants) to kids, while blithely including a fine-print disclaimer that the drinks are not intended for children. Of course, we all know that energy drink companies would never encourage kids to do anything dangerous. 

Given the size of the energy drink segment, and its profit margins, I'm sure they'll mount a hell of a lobbying effort regardless of the impact of this lawsuit. Or, Romney may win the election and shut down the FDA. After all, the federal government, in his view, is not as good as the private sector at anything. I'm sure Monster, Red Bull, et al realize that its not in their best interest to profit from products that may be unhealthy, and that they can be trusted to regulate themselves. I mean, the tobacco industry was always very responsible that way...

*I mean, the parent is suing Monster; it's not the child suing from beyond the grave.
**Democratic Party, business-hating, job-killing socialists.

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