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Red Bull spending accelerates

NEWS STORY
18/03/2010

The details of what it took for Red Bull to pull off its dramatic title challenge last year are at last coming to light courtesy of a report by Pitpass' business editor Chris Sylt.

Writing in the London Evening Standard, Sylt reveals that, according to its latest accounts, revenue at the Milton Keynes-based Red Bull Racing team accelerated by 26.1% to £123.5m in the year to 31 December 2008.

This was driven by several factors. Firstly, the team got a boost in its prize money which doubled to an estimated £24m under the new deal with F1's boss Bernie Ecclestone. It also received an £800,000 year on year increase in funding from Red Bull which poured in a total of £79m to the team.

In 2008 Red Bull slipped to eighth place in the standings from fifth the previous year, so the increased funding didn't boost its fortunes on track at the time it was invested. It wasn't meant to. F1 cars are mainly designed and built the year before they are introduced so Red Bull's spending in 2008 was focussed on last year when it had its best-ever finish.

Red Bull logos cover its F1 cars and investment in motor sport is one of the biggest marketing costs for the energy drinks company which had sales of £3bn last year. Despite being a huge investment it is surprisingly easy to justify. The total of £79m works out at a cost of around £4.2m per race. However, according to F1's industry monitor Formula Money, at the recent Bahrain Grand Prix the Red Bull logos on the Red Bull Racing cars alone generated the equivalent of £10.8m worth of advertising exposure giving a return on investment of over 250%.

Given this impressive promotional impact, the team's financial results are almost immaterial. In line with the increase in its revenues, costs rose to £123.5m with the research and development and design spending alone coming to £48.2m. Staff numbers on the F1 team and its design division (which also creates the Toro Rosso chassis) increased by 40 to 594 and their pay totalled £37.6m. It gave the team a pre-tax profit of £100,000 with its after-tax profit standing at £470,000 following a tax credit. If its recent form is anything to go by, this too is set to soar.

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