Will Virgin’s balloon burst?

Has the wheel turned on Virgin? It would be richly ironic if, fresh from his spectacular triumph in the law courts, Richard Branson were forced to contemplate the first cracks in his commercial reputation.

Just recently the Virgin image has taken a bit of a battering. Or so it would seem, from the reams of printed matter expended on the supposedly lacklustre performance of certain Virgin products. Criticism has focused on the drinks portfolio. Virgin Vodka has been flagging for some time now. But it is the news that Virgin is buying out Cott’s 50 per cent stake in their joint soft drink venture which has really got the cynics’ tongues wagging. Could this by any chance be related to Virgin Cola’s deteriorating market share, about which the company has been so shy?

Worse still, for a brand that depends upon agile PR, Branson is having trouble rebutting the suggestion that Virgin is an uninspired train operator. Coming top of the timetable inefficiency league is not helpful. Neither is the well-publicised travails of London & Continental Railways (current owner of Eurostar) in which Branson’s company has a 17 per cent stake.

Ah, retort the apologists – such impressions are extremely misleading. Note that in none of these ventures has Branson been entirely master of his own destiny. Either they have been minority stakes to which Branson has lent the Virgin name, or – as in the case of the rail operations – there have been structural and managerial problems which predate his involvement. In any case, they are hardly representative of the Virgin group of companies as a whole. What of Virgin Atlantic, rapidly growing Virgin Express, of Virgin Megastores or the spectacular success enjoyed by Virgin Direct?

Nevertheless, Virgin has been forced to admit, implicity, that its brand is overextended and – more explicitly – that the group will now enter a period of ‘consolidation.

‘We don’t plan to extend the brand much further,’ says Branson’s right-hand man Will Whitehorn, because Virgin senior management ‘don’t see many more areas we really want to target…The cosmetics and clothing companies are going to be our last big moves in fmcg’.

Which is a significant admission, suggesting Virgin has taken a bit of a bruising from its recent experiences. But it should not be read out of context. An important element in Branson’s make-up has always been inspired opportunism, which sometimes succeeds brilliantly and can, equally, end in nondescript failure. Anyone remember Event, or indeed the Virgin computer experience? The truth is Virgin will continue to experiment in attractive growth markets, telecoms being a likely case in point. But this will be peripheral to Virgin’s avowed central focus: planes, trains, retailing and media.

The more important lesson to be drawn from the current round of Virgin-baiting is the vulnerability of its PR-led image – which will be of special concern to Branson as he contemplates his return, cap in hand, to the City. After all, what goes up in a balloon can come down in one.

News, page 7

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