Freelance Journalist Marcus Stead

Archive for February 2011

The Quiet Death of Virgin Cola

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WHEN Sir Richard Branson launched Virgin Cola in 1994, his intensions were clear: he wanted the brand to be as well-known around the world as market leader Coca-Cola.

But after 16 years, Virgin Cola has died a quiet death in the UK and US with Asda, its last major distributor, confirming it has discontinued the product following its removal from the shelves in August 2009. The following month, its licensed producer, Silver Spring Mineral Water, went into administration, and no replacement has been found to continue production for the UK market.

Virgin Cola launched amid huge publicity and expectations to match. Branson teamed up with Cott Corporation, a Canadian private-label soda maker, in a 50/50 equity joint venture to produce cola under the Virgin banner. Following a modest start in Britain, in 1998 Branson took his cola brand to the US where he sought to create a major rival to Coca-Cola and Pepsi, who he called the ‘cola duopolists’.

Branson launched the product in the US by riding a vintage Sherman tank through New York’s Times Square, crushing rival brands’ bottles on the path below.

The tank aimed fire at a huge Coca-Cola advert, and Britain’s best-known entrepreneur placed his own 40-foot Virgin Cola billboard right above the Times Square Virgin Megastore.

Virgin Cola also enjoyed high-profile celebrity endorsements in its early days. When the 500ml bottles launched, they were marketed as “The Pammy”, as their curves were designed to resemble Pamela Anderson who was at the height of her popularity in the UK and USA at the time.

Characters from the sitcom ‘Friends’ were occasionally seen drinking the product, during the period when the programme was one of the most popular shows on US television and had become an international hit.

Immediately, there were raised eyebrows among those who understood the market. John Sicher, publisher of the US trade publication Beverage Digest, was instantly dismissive. He said: “It would be easier to make a snowman in July in Florida than to take on Coke and Pepsi.”

Even before the high-profile US launch, there were serious problems: Virgin Cola’s relationship with Cott Corporation broke down due to a dispute over strategy, and Branson bought Cott’s stake in the company shortly before the US launch. In Britain, the drink was manufactured under licence first to soft drink manufacturer Prince’s, before production switched to Silver Spring.

Despite some initial success, it quickly became clear that Virgin Cola was struggling to compete with its more established rivals.

As Branson himself acknowledged, the Virgin brand has usually succeeded in other areas by exploiting competitors’ weaknesses. He once said: “We often move into areas where the customer has traditionally received a poor deal, and where the competition is complacent.”

However, in the cola market, Coca-Cola and Pepsi have always shown themselves to be anything but complacent when faced with a new competitor. Rob Baskin, Coca-Cola’s spokesman in the USA said at the time of Virgin’s launch: “We take all competition seriously”.

Sensing the potential of Branson’s company, Coca-Cola responded to the launch of Virgin by immediately doubling its advertising and promotion budget.

Coca-Cola showed how seriously they took any new competition when Sainsbury’s launched their ‘Classic Cola’ product in the mid-1990s, which contained a curved stripe on the packaging resembling that of Coca-Cola’s. Following complaints from their more established rivals, Sainsbury’s quickly removed the stripe from the new brand.

A major reason Virgin Cola found it difficult to compete in the UK was problems with distribution. After the furore of the launch had died down, the label struggled to gain 3% of the UK market and has never made a profit.

By 1999, it had become clear that Virgin’s plans to become a major player in the cola market on both sides of the Atlantic were not going well. That year, Virgin Cola had sales of £28.6 million in the UK, compared with Coca-Cola’s £620.4 million. Branson had earlier predicted that Virgin would outsell Pepsi in his home country.

At the start of the new millennium, it was obvious that Virgin’s ambitions of competing with Coca-Cola and Pepsi were over, but they continued to innovate, and in June 2000 introduced a new product aimed at children called Mini-V, which was caffeine-free, contained no artificial sweeteners and had 30% less sugar.

Yet despite a £3 million advertising campaign, Mini-V flopped and had disappeared from the shelves within a matter of months.

In 2004, another attempt was made at stamping Virgin Cola’s presence on the US market, albeit in a much more low key way than their previous effort had been.

The company teamed up with US group The Firm to create Virgin Drinks North America, which manufactured and distributed the drink to 7-Eleven stores in Southern California, but once again the venture was short lived.

In Britain, Virgin Cola was gradually dropped by supermarkets and smaller chains, leaving its presence largely confined to Asda stores, who only stocked it in large, two litre bottles, costing between 20-30% less than their rivals.

It maintained a limited presence in independent newsagents, and continued to be sold on Virgin trains and airlines, but by 2005 advertising was virtually non-existent and Branson had given up on his dreams of rivalling cola’s ‘big two’ companies.

The product had failed to carve its place in the market and dominated by Coca-Cola and Pepsi, and had not succeeded in establishing itself as anything other than an own-brand cola, without the excitement and sense of adventure normally associated with the Virgin name.

Asda continued to stock Virgin Cola until August 2009, when it was dropped due to poor sales. Asda spokeswoman Lucy Robinson said: “Our aim is to provide a ‘one-stop shop’ where customers can find everything they need in a comfortable shopping environment.

“Space is at a premium in all our stores and sometimes we have to stop selling unpopular products to make room for new, or better selling ones. Therefore, Virgin Cola has been discontinued due to poor sales across Asda.”

The following month, its manufacturer, Silver Spring, entered administration, which caused production and distribution to cease in the UK. Marcia Bourne, spokeswoman for Silver Spring said: “Silver Spring Mineral Water Company did use to produce Virgin Cola under licence and supply such retailers as Asda.

“However, in September 2009, Silver Spring went into administration and as a result the contract with Virgin was no longer a going concern.

“A Private Equity company subsequently bought our business and we became Silver Spring Soft Drinks Ltd, but we took the strategic decision at that time not to take over the Virgin contract.”

The events of the autumn of 2009 appear to have caused the quiet death of the Virgin Cola brand in Britain and America, after a loud, if unconventional birth 16 years earlier. It continues to exist in the Philippines and Nigeria, where it is produced and sold under profitable licence, but that is now the extent of Virgin Cola’s ambitions. Virgin spokesman Nick Fox played down the chances of the company making another attempt at becoming a force in the cola market in Britain and America. He said: “At the moment we monitor the drinks market internationally for possible opportunities – but there are no current plans to revive the brand in the UK.”

Sir Richard Branson’s reputation as the ‘have a go’ businessman with a cheeky sense of challenge has survived the Virgin Cola saga in tact and this, along with Virgin Cosmetics and Virgin Brides, have been rare failures in a brand that extends to more than 360 different companies.

Yet it appears that deep pockets, a charismatic chairman and a proactive approach to business are not enough to break the market dominance of Coca-Cola and Pepsi.


Written by Marcus Stead

February 20, 2011 at 4:30 am

Posted in Business