VIRGIN FLIES IN FACE OF CONVENTIONS: CEO BRANSON SELLS ATTITUDE WHILE GROWING PRODUCT LINES

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[London] When Richard Branson started his own record label at the age of 19, he rejected the catchy name Slip Disc Records because he realized it wouldn't work well with other, future businesses he envisioned. Instead, he picked Virgin.

"There was a strange, protozoan consciousness even then," said Will Whitehorn, 36, Virgin's longtime and energetic corporate affairs director.

Twenty-seven years later, the farsighted Mr. Branson, still favoring the casual uniform of sweaters and jeans, is trying to establish his Virgin Group as a global brand in everything from airlines and soft drinks to, starting later this year, jeans and cosmetics. The British entrepreneur remains best-known for his fleet of red and white Virgin Atlantic Airlines planes and huge Virgin Megastores, but his $2.8 billion travel and entertainment group is fast spreading its wings.

With his penchant for hot-air ballooning and eye for public relations, Mr. Branson, 46, is the flamboyant focus of the Virgin Group. But the real clues to future growth lie in the cadre of marketing executives he is assembling quietly to take the Virgin brand into new, international categories.

Consider Paul Steele, 42, who in November became managing director worldwide of cola and vodka subsidiary Virgin Trading. A 15-year veteran of the cola wars thanks to an international marketing career at PepsiCo Inc., Mr. Steele has the mission to fulfill Mr. Branson's dream of Virgin Cola surpassing Pepsi during his lifetime-and overtaking Coca-Cola during the lifetime of his 12-year-old son, Sam. These are tall orders: Two years after its introduction, Virgin Cola has a miniscule market share in the U.K. and is sold abroad only in Japan, France and the U.S. test market of Philadelphia.

Another key figure is Brad Rosser, a 38-year-old Australian and ex-McKinsey & Co. consultant, who has the intriguing job of choosing-and rejecting-the next products to bear the Virgin name. As director of corporate management, Mr. Rosser and his three-person corporate development team evaluate about 15 proposals a day from outside the company and several from Virgin staff.

One idea, known for now as Virgin Jeans, led to a concept for a Gap-like chain selling denim clothing that likely will open this year in the U.K., with Japan the possible second market. To run the new venture, Virgin has recruited Simon Glasgow, 41, who launched Timberland across Europe, and Mark Blenkinsop, 31, the former European marketing director for trendy Pepe Jeans.

To assess new product areas, Mr. Rosser said he and his team look at synergy with other Virgin products, pricing, marketing opportunities, risk weighed against return on investment, future management and whether the idea uses the Virgin brand-or abuses it.

"We look at the industry market structure" that correlates with each proposal, he said. "While we don't care where we enter at, our ambition is to get within the top three in the industry." The team is looking for products with global potential, he added.

For example, when Liz and Mark Warom, the husband-and-wife team behind the Body Shop's hugely successful Colourings cosmetics brand, approached Mr. Rosser, he already was interested in starting a beauty and skincare line. The result of this meeting of the minds: The Waroms this year will open and run a fragrance, skincare and cosmetics business, aimed at both men and women, that has the working name of Virgin Cosmetics. The products are to be sold in their own stores rather than through other retailers.

While at McKinsey, Mr. Rosser consulted on Unilever fragrance and skincare products and noted that the sheer size of Unilever and other consumer goods companies limited their abilities to respond quickly to consumers' tastes.

"The Procter & Gambles and Unilevers were buying up all the factories," he said. "They were factory-led, not marketing-led, because they've got millions of dollars invested in these factories."

In contrast, a young Virgin Atlantic air hostess was the sole inspiration for Virgin Bride. Ailsa Petchey, unhappy with the selection of wedding gowns she and her engaged friends were finding, submitted a business proposal to Messrs. Rossner and Branson. Two days after meeting Mr. Branson in person, she was transferred from the travel group to the chairman's office. The first Virgin Bride store, managed by the now-married Ms. Petchey, opened in London last month.

In other ventures, Virgin Net, an Internet access provider, started up in November in the U.K. and Virgin Direct, which sells equity plans like pensions, insurance and annuities, a year earlier.

Not every idea is a winner, of course. Mr. Rosser still recalls "Woofit" and "Meowit"- "a really bad idea for dog and cat drinks." No surprise: He turned those down.

If Virgin has a secret formula for success, it probably is Mr. Branson's belief that brands aren't built around products, but rather around reputation, quality, price competitiveness and innovation.

"When I started here 11 years ago," recalled corporate affairs director Mr. Whitehorn, "one of the first things Richard said to me was that he wanted to expand into all different areas, and the airline would be the linchpin."

Cross-promotion is indeed rife. Cola drinkers flying Virgin Atlantic are served Virgin Cola. Shoppers at Virgin Bride can use a handy computer to learn about Virgin flights to honeymoon and wedding destinations.

Mr. Branson's own well-publicized sense of adventure and daring fuels the Virgin mystique that links businesses as diverse as the flagship airline and Virgin's new multiplex cinemas. Other airlines offer lucrative business travelers limousine service to the airport; only Virgin offers them the option of a motorcycle ride.

When Mr. Branson learned to parachute, he had to run down a hill as practice and pull one of three cords to engage the parachute. Each time, he yanked the wrong cord. "I'm ready," he announced after his third incorrect pull. From the plane, he jumped without hesitation, pulled the wrong cord again and lost his parachute. The instructor saved Mr. Branson in midair.

"No fear," observed M.T. Rainey, managing director of Rainey Kelly Campbell Roalfe, the London agency handling Virgin's airline and soft drink advertising worldwide. "Virgin encourages people to take risks."

Ms. Rainey's agency is pretty brave itself. Virgin worked with previous agencies on a project basis, rather than as an ongoing account. The manager of a former Virgin agency has privately called Virgin "the client from hell" for impulsively demanding quick campaigns at the last minute, and on a very low budget.

Virgin still doesn't spend much on advertising, although Virgin Atlantic's budget almost doubled to $10 million in 1996 from $5.6 million in 1995. That included full-page ads in U.S. newspapers protesting an alliance between American Airlines and British Airways, Virgin's main rival on its major routes between London and the U.S., Hong Kong and, since October, South Africa.

No ads have been seen yet from Virgin Express, a budget carrier that is riding on the wings of a booming demand for no-frills flying within Europe. Mr. Branson formed the airline by acquiring Brussels-based Eurobelgian Airlines in April for around $60 million.

This month Virgin Atlantic breaks its first brand advertising. Previous campaigns have promoted specific products, usually Upper Class, a business-class service similar to other airlines' first-class. True to Virgin style, the TV commercial aims to be unconventional, irreverent and fun. In the 60-second spot, which will run in the U.K. and possibly the U.S. and on pan-European TV, a statue falls on a man, causing a comic near-death experience. A humorous Grim Reaper figure then appears, carrying a videocassette tape. After sending out for pizza and beer, the two sit down to watch a video of the almost-dead man's life, showing milestone moments like when he lost his virginity and canoed off the edge of a waterfall. A Virgin plane appears in a few of the scenes, but "it's not about the airlines," said Ms. Rainey. "It's a celebration of the travel experience."

When the Grim Reaper dozes, the man flees and escapes death. The commercial ends with a voice advising: "When your life flashes before your eyes, make sure

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