€3.2 million in profits for Red Bull Racing in 2010

Christian Horner explained to the Guardian that his team was able to record a profit for the fiscal year ending December 31st by increasing revenues and lowering costs: “The biggest increase for us, from a revenue perspective, is a 20% rise in performance bonuses from Formula One Management and sponsorship.”

These two aspects of the results are linked to each other. The FOM money is tied to victories, podiums, and points scored in each race of the championship. As the team managed to win both world championship titles, it means they were able to achieve a number of victories and thus score many points.

Similarly, when a team wins races, it receives more media exposure than its rivals, attracting numerous sponsors who are asked to contribute more financially than the less successful teams can afford. In 2010, the team led by Christian Horner managed to sign contracts with Pepe Jeans, LG, and FXDD, which naturally resulted in increased revenue.

At the same time, the team had to deal with the RRA (the cost control agreement signed in 2010 by all teams) and was therefore obliged to reduce its expenses. This mechanically led to an increase in the net profit at the end of the year: “Cost control combined with an increase in external revenues meant that Red Bull Racing experienced more success at a lower cost for the group. The cost of Formula One for Red Bull is below 50% of our expenses and continues to decrease.”

Indeed, the team from Milton Keynes is 100% owned by the energy drink of the same name. However, it is contributing less and less money to its F1 team leader: in 2009, it covered 111 million euros out of a total team expenditure of 152 million euros, a ratio of 73%. According to Christian Horner’s statements, this ratio is now reportedly below 50%, even though the return on investment from an advertising perspective has never been higher since the team’s media exposure (the amount the brand would have had to pay to be as present in the media) increased from 158 million euros in 2009 to 253 million euros last year.

It is therefore interesting to note that the media fallout in 2009 was already higher than the expenses incurred by the energy drink, which shows that its communication strategy focused on extreme sports is profitable. This directly contributes to the fact that the brand is approaching four billion dollars in revenue, with growth reaching 15% last year. The economic performance in 2011 is expected to follow the same trend.

With the participation of RacingBusiness.fr