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Virgin Brand Embraces Diversity : Products: British entrepreneur Richard Branson adds vodka, cola and computer lines to a firm identified with an airline and music stores.

November 01, 1994|From Reuters

LONDON — Virgin, new to the business game 25 years ago but now experienced in the art of sales seduction, is stretching its brand in new directions.

Best known in America for its cheap flights to London on Virgin Air and its big-city music department stores, the British company thinks it can easily branch out into new areas.

"We've never had a core (business) thing," founder Richard Branson told Reuters at the launch this month of Virgin Vodka, which, with Virgin cola and Virgin computers, are his latest bright ideas.

"We love new challenges. . . . We love investing in new challenges where we think the rivals have Achilles heels."

Branson's eclectic business tastes are not new to Orange County. In addition to his company's Virgin Megastore, which is the biggest attraction at Triangle Square in Costa Mesa, his Virgin Group is the former owner of Orange County's largest video game publisher--Virgin Interactive Entertainment.

Branson's foray into interactive video game publishing began in 1987 when the Virgin Group's video game unit purchased an Orange County video game company run by Martin Alper. Though Branson's name is often associated with Hollywood through his years with Virgin Music, the leap into high technology was a change for the man who built his fortune on airlines, retail and music.

Last summer, Branson sold his stake in the company to minority owner Blockbuster Entertainment Corp., which bought controlling interest in the company for about $165 million. The game company is now operated as part of Spelling Entertainment Group Inc., of which Blockbuster owns more than 70%.

Advertising experts say very few brands are elastic enough to bind together a clutch of diverse products without snapping. But then, that's not what Branson is about.

"It's not so much a product he stands for," said John Murphy, chairman of Interbrand, an international brands consulting firm.

"He stands for values--youth, iconoclasm, cheeky perky informality. Cola is a very good example of something that applies to."

Branson, 44, broke the mold of British businessmen with his casual clothes, friendly approach and infectious enthusiasm.

His talent for self-promotion and desire to take on the established big-shots have won him an impressive track record in the music and retail businesses and in transatlantic airlines.

But is that enough? David Baker, head of planning at ad agency J. Walter Thomspon Europe, said that, although brand owners have often been slow to leverage their brands, simply slapping a well-known logo onto a new line is no guarantee of success.

"For a brand like Virgin to succeed, it's got to have an edge above the Virgin name," he cautioned. "It's certainly not enough to make a cola that's just a 'me-too' product."

Branson prefers to think positive.

Over-extending "is something we're very careful about, but as long as we do products people can identify strongly with, that are quality and fun, one will enhance the other," he said.

He said there had been ventures he had backed without using what would have been an incongruous brand name, like Mates, the cut-price condoms he launched as part of an anti-AIDS drive.

But he was well aware of the strength of the group's personality and the potential mileage to be gained from the label.

"Virgin is a name we treasure," he said. "If any name in the world had a chance to run with cola, it's Virgin."

Indeed, the empire grown from a mail-order record firm that Branson started as a teen-ager, fancies itself a British version of a Japanese "keiretsu"--a corporate structure where disparate satellite companies share a core brand name and image.

Branson said Virgin was showered with new business ideas but only picked those it believed were high quality and unlikely to harm the name. Financial services is one possibility currently under consideration and a spokesman said the group would even market marijuana if it were legalized and deemed medically safe.

Marketing and drinks analysts have grave reservations about how well Branson will meet his extravagant projections when he pits his Virgin cola against U.S. giants Coca-Cola and PepsiCo.

But the drink, made by Canadian specialist Cott Corp., has been given the thumbs up in taste tests and looks set to sell well in a deal with Tesco, a big British supermarket chain. Virgin also has high hopes for its vodka, made by Scotch whiskey specialists William Grant & Sons. It will be priced competitively at 10.99 pounds ($17.50 U.S.) when it goes on sale next month and will be the only vodka sold on Virgin planes.

The group is also putting its badge on a range of computers made by Japanese-owned ICL, under a deal announced in September.

There have been flops, like a government-sponsored litter collection plan in the 1980s. Branson made a quiet exit.

But a recent survey found the Virgin name very resilient, with 93% of respondents identifying it as a music business, even though the group sold the Virgin record label to Thorn EMI in 1992.

"I think it's a great brand, but there is a danger" in expanding, said Murphy, adding that Branson's "got to be very careful."

Charismatic, with long hair and a beard, Branson has livened up business with the verve that helped him smash world records for crossing the Atlantic by powerboat and hot air balloon.

A multimillionaire, he gives the impression of doing business for fun. The 10-year-old Virgin Atlantic Airways is popular but profits have been patchy, and Branson said recently that, even if it failed, in the end he would have enjoyed himself.

But his track record augurs well, analysts say.

Extending your brand is "a bit hit-and-miss," said Richard Sanderson at the Panmure Gordon brokerage. "But then I didn't think he was going to succeed with the airline."

Times correspondent Hope Hamashige in Costa Mesa contributed to this report.

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