Virgin brings cola to U.S. markets

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Flat sales in the cola market aren't stopping Richard Branson, the publicity savvy and charismatic creator of the Virgin brand franchise, from bringing his Virgin Cola to the U.S.

Mr. Branson is set to launch the soft drink in the U.S. May 12 with a 6-hour party in New York, scheduled to end at 2 a.m. but expected to go on much later, since "celebrity types will be arriving late," said a spokesman for Mr. Branson.


The invitation for the event came in a miniature military tank fashioned out of wire, with the word "Virgin" twisted in its side.

Ad plans for Virgin Cola are unclear, and Virgin Cola USA declined to comment on rollout plans before the event. Industry watchers believe Virgin Cola will be introduced on a regional basis.

Ground Zero, Santa Monica, Calif., is the U.S. agency for the soft drink. In the U.K., Virgin Trading Co. spent about $6 million in advertising last year on Virgin Cola and two other beverage brands, according to industry statistics.


Virgin Cola was introduced in London in 1994 and has been expanded to several European markets. Although it usually experiences initial sales pops, the brand has been lackluster overall compared with segment leaders Coca-Cola and Pepsi-Cola, according to beverage industry observers.

U.K. advertising is handled by Rainey Kelly Campbell Roalfe, a small London shop with a strong reputation for creative.


It will be tough for Virgin Cola to grab share from the giants in the U.S. Coca-Cola Co. spent $113 million on media for Coca-Cola Classic last year, while Pepsi-Cola Co. spent $106 million on Pepsi. Coca-Cola Classic has 19.9% of the $54 billion U.S. carbonated soft-drink market, according to Beverage Marketing Corp., a consultancy, while Pepsi had 14.9%.

"It has a very strong name recognition, certainly, but I think it needs something more than that to distinguish it in a very crowded and competitive cola market," said Gary Hemphill, VP-information services for Beverage Marketing Corp.. "It needs some point of difference from its cola competitors, and I think it's an uphill climb."

According to Beverage Digest, cola products' share of the U.S. soft-drink business hit a new low last year, posting its steepest decline since 1992. Cola share fell by 1.1 points to 57% of the beverage market.


Distribution is a key to success in the U.S. beverage business, and Mr. Branson likely will have to depend on a shrinking network of independent bottlers--those not contracted to Coca-Cola or Pepsi--to distribute Virgin Cola.

The product is likely to appear in its signature curvy "Pammy" bottle, named after Pamela Anderson Lee, a former star of the syndicated TV show "Baywatch."

Contributing: Laurel Wentz.

Copyright May 1998, Crain Communications Inc.

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