Virgin in fmcg U-turn

Virgin is curbing its expansion into packaged goods to redirect investment towards its “core” activities, including its troubled rail business.

The move comes close to an admission that the group has bitten off more than it can chew. Virgin corporate affairs director Will Whitehorn says: “We don’t plan to extend the brand much further.”

Observers see the Virgin strategy shift as an admission that some brand extensions, such as its forays into cola and vodka, have not been as successful as it hoped, and that others – such as its massive commitment to railways, are eating up both capital and senior management time.

Last week, Virgin announced a 500m order for tilting trains on its West Coast mainline service. It is also a member of the London & Continental Railways consortium which has until next week to come up with an alternative proposal to finance the Channel Tunnel rail link. Virgin is understood to be working on a plan to make LCR’s Eurostar service viable whoever takes over the rail link.

“We are not going to see a Virgin motorbike or Virgin motor car,” says Whitehorn. “And I don’t think you will see many more consumer goods products in the next few years. The cosmetics and clothing companies are going to be our last big moves in fmcg.”

Its clothes brand is scheduled to be launched in the autumn, having been previously delayed. But the group has flouted conventional marketing wisdom over the past 15 years by extending its brand over a host of businesses from airlines to cola, to Peps and trains.

Virgin has identified a number of “core businesses” where it wants to see growth: Virgin Atlantic; Virgin Express (Virgin’s low-cost European airline); its cinema business through expansion in the US; its Virgin Megastores, especially in South America; and its rail business.

“We are going to consolidate around these core areas,” says Whitehorn, “because we have a lot to do with them.” But in an apparent contradictory move, Whitehorn also says Virgin will “look at telecoms” in relation to entertainment, retailing and media opportunities.

Defending its rail business, Whitehorn reveals it was a Government imposed condition, and not a choice, to plaster the Virgin name across it from day one.

“We realised when we did it that it was going to cause problems,” he says. But he claims that the railway will be “by far the biggest business in the Virgin empire apart from, possibly, Virgin Atlantic Airways”.

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