New Wings Flow

seeing red

Red Bull is reportedly willing to spend $7B on the NBA’s Vegas expansion team…

The report comes from Bloomberg, just a few months after Red Bull bought a significant strategic stake in Leeds United, a notable British soccer club.

Everyone’s favorite energy drink has quietly become the most active corporate investor in the sports sector, with a portfolio worth well over $5B.

Let’s dive into their collection of sports assets + what to watch for in the near future

sunseeker

In 2023 Red Bull sold 12.1 billion cans.

Enough to leave everyone on earth caffeinated.

The story of Red Bull dates back to the mid 1980s, when an Austrian entrepreneur named Dietrich Mateschitz came across the drink in Thailand.

Krating Daeng was the earliest version of Red Bull, founded by Thai pharmacist, Chaleo Yoovidhya

• In Thai, Krating = red, Daeng = gaur, a breed of cattle

Mateschitz thought that adding carbonation would make it taste more appealing to the Western world. Yoovidhya took his advice, and the two incorporated Red Bull GmbH in 1984

Red Bull’s cash cow is pretty simple - a premium energy drink with good margins

But its means of distribution is interesting.

The best way to explain it is to bring Pepsi into the picture:

• PepsiCo: $91B in revenue. $3B in marketing (~3% of sales)

• Red Bull: $11B in revenue. $3B in marketing (~27% of sales)

Why is Red Bull able to spend the same amount of money on marketing as a company 8X its size?

The answer is because Red Bull is in the business of buying distribution (sports teams, media platforms, events) which lowers customer acquisition costs

Pepsi’s advertising budget is spent on commercials and sponsoring events, both expenses on an income statement

Red Bull is buying teams and platforms which lead to great brand exposure and asset appreciation over time.

Soccer

• RB Leipzig, Bundesliga ($600M+)

• NY Red Bulls, MLS ($560M)

• FC Red Bull Salzburg, Austrian Bundesliga ($500M+)

• Red Bull Bragantino, Serie A ($242M)

• Leeds United, English League Championship (minority stake)

Racing 

• Oracle Red Bull Racing, F1 ($2.4B)

• Visa CashApp RB, F1 ($1.1B)

Ice Hockey

• EHC Red Bull Munchen, Deutsche Eishockey Liga (N/A)

Another interesting aspect of this strategy is that Red Bull is able to charge other sponsors for distribution

Take their second F1 team for example.

The team was previously named AlphaTauri before selling the name rights to Visa and Cash App for a reported $20M per year, according to SBJ

wings melt

Back to the NBA expansion team

Red Bull is not the only capable buyer in Vegas… It has been well established that Lebron is teaming up with RedBird Capital to make a bid

James and RedBird have history together

• RedBird invested in James’ media company, SpringHill, in 2021 at a $725M valuation

• Cardinale, RedBird’s founder, credits Lebron and Maverick Carter with changing the firm’s investment thesis

RedBird was founded in 2014 and has $8.6B under management across sports, media, and culture.

Not too long ago, Cardinale expressed his frustration about the rising prices of an expansion team.

It will be quite interesting to watch negotiations play out, now that the NBA media rights spectacle is winding down.

Let me know who you think has the upper hand

Headlines

• Spotify posts record gross margin, cash flow, and profit for Q2. Axios article here

• Monarch Tractor raises $133M Series C in largest agri-robotics raise ever. TC article here

• Krispy Kreme sells majority stake in Insomnia Cookies, deal valued at $127M. Yahoo Finance article here

• Posh raises $22M to become TikTok for small events. TC article here