Branson risks brand with Virgin ventures

In the past three years Virgin has become synonymous with publicity-rich product launches. Some have questioned whether Richard Branson is stretching the brand too far, but have failed to return to the subject and assess the success, or otherwise, of its ventures. These range from Virgin Cola to Virgin Direct to Virgin Vodka and the short-lived Virgin branded computer with ICL.

Its success in taking on the “big boys” in different markets – the objective defined by Branson from day one – has been at best patchy. Significantly, all its ventures to date have been with partners who knew their markets.

That makes its latest plans to take on Levi’s in the jeans market and the major players in the cosmetics industry its most ambitious, and possibly most risky, yet. It is having to invest in infrastructure. The appointment of Lesley Angus as marketing director of Virgin Jeans (MW January 17) suggests an imminent launch, but according to internal sources there will be nothing on sale for at least 12 months.

The first offerings from its cosmetics range will only start to appear in the shops, part-owned by Virgin, before Christmas. When Marketing Week first revealed Virgin’s interest in cosmetics and toiletries (MW August 9 1996) few realised it was planning to open its own high street stores, which represents the company’s largest and most public commitment to any partnership yet.

Branson claims that he will open up to 100 high street beauty stores within five years at a rate of two per month from this autumn.

The Victory Corporation (the holding company for the Virgin Cosmetics and Virgin Jeans divisions, which is jointly owned by Virgin and two brothers Tim and Rory McCarthy) raised 45m on the Alternative Investment Market (AIM) last October to pay for the ambitious plans. The background of the McCarthy brothers is in banking, but they also have interests in telecoms in the US, restaurants and property. “We really want to own the environment where our products are sold,” says a spokeswoman for Victory’s cosmetics arm. “There is so much clutter in the industry and all the advertising and products seem to merge into one. We will do everything to break that mould.”

Virgin, which will target women aged between 20 and 40, claims it can match the quality of top-of-the-range brands such as Chanel and Clinique, but at lower prices. The ranges will avoid using the colour red but, apart from that, few decisions have been taken. Though it will be a surprise if Rainey Kelly Campbell Roalfe, the ad agency which already handles work on Virgin Atlantic and its cola and financial services business, does not pick up the account.

Plans for the clothing range are even less clear. A launch date of February 1998 has been set internally but Virgin refuses to give any detail on the range of clothes, suppliers or how they will be retailed.

But the arrival of Angus from Disney Stores to head a Virgin Jeans team which includes Mark Blenkinsop (ex-Pepe Jeans) and Simon Glasgow (ex-Timberland) is expected to accelerate the process.

Clive Vaughan, an analyst at Verdict Research, is sceptical of Virgin’s plan to set up stores for a brand which has not yet been tested. “I think Branson is overstretching his brands. I can’t see what added value he can give jeans and beauty products that Levi’s and the beauty houses have not already got.

“Levi’s already has an established and very successful product and The Body Shop has built its spread of stores gradually over 20 years. Next he’ll be taking on Microsoft.”

Vaughan is not alone in his scepticism. And the past record of standalone beauty stores does not bode well for Branson. Although the success of Anita Roddick’s The Body Shop is well recorded, its most recent trading figures were two per cent down year on year.

A series of attempts to copy The Body Shop’s success have failed. The retailer Next sold the chain of five Bath & Body Works stores, which opened in 1994, back to US retailer The Limited last year, and we are still waiting for Australian natural cosmetics company Red Earth’s flagship London Store, which was announced last year. The Canadian MAC cosmetics and skincare range remains a niche concept with just two stores in London.

Combined with that poor track record, beauty experts also have a problem linking Virgin with both the glamour needed to sell make-up and the trust needed to sell skin-care products.

Lorna McKnight, beauty industry consultant and cosmetics buyer for QVC Television, says: “Make-up is aspirational and so price is not necessarily a factor. The price difference of 3 or 4 between lipsticks is not going to break the bank. The reason Boots No 17 and Rimmel are cheap is because they appeal to a younger market. The 20-to-40 age range set out by Virgin seems too broad.”

However, Michael Fine of retail analyst Management Horizons, warns Virgin’s branding power should not be underestimated. He says: “I’m sure there is a huge core target market which can be led. All Virgin’s projects are unique and daring. There is some sense and logic there somewhere.”

It remains to be seen if this “sense and logic” will work to Virgin’s advantage.