Virgin Cola faces Iceland setback

Virgin’s recent bullish distribution claims for its Cola brand look less rosy in the light of Iceland’s plans to delist it. Even a 5m television advertising campaign may not be enough to bolster sales.

Next month Iceland is planning to delist the Virgin Cola range from its 780 stores. The move comes literally weeks after the soft drinks company announced that it was doubling its distribution in response to “consumer demand” (MW May 8). Despite new retailers agreeing to stock the range, Iceland’s decision represents a serious, even if short-term, dent in Virgin’s expansion plans.

Nick Kirkbride, managing director of the Virgin Cola Company, told Marketing Week earlier this month that “consumers tell us that they love the brand – their only issue has been getting enough of it”.

Trade rumours have it that Virgin will be replaced by even more of the very brand it is publicly striving to knock off its pedestal in the 7.1bn UK soft drinks market – Pepsi. But both Pepsi and Iceland refuse to comment on whether this is the case.

Iceland says: “It is company policy not to discuss trading relations,” although a buyer at the company confirms that the Virgin range is to be axed. Virgin also refuses to comment on its relationship with the food chain.

The Virgin range – which comprises Cola, Diet Cola, Lips Orange and Lips Lemon & Lime – can be found in Tesco (which originally had exclusive rights to it), Asda, Co-op, Somerfield, Morrisons and Woolworths. Iceland was the second multiple retailer to strike a deal to stock Virgin and has been selling the Virgin range since November 1994. It is not known whether the Lips Orange and Lips Lemon & Lime lines will follow Virgin Cola if it is delisted at Iceland.

In November 1994 Iceland chairman Malcolm Walker announced: “We’re a big player in the soft drinks market so Iceland is an obvious launch pad for Virgin Cola. Richard [Branson] and ourselves are keen to be in partnership.”

Three years later, the renewed distribution drive is being hyped as the answer to Virgin’s prayers. Statements from Branson’s spin doctors declare that the ambitious move will “put Pepsi under pressure for the number two spot”.

Virgin clearly has a lot of hard work ahead. Britvic, which distributes Pepsi, is on record as claiming that Pepsi out-sells Virgin seven to one and its rate of sales in the multiples where it is stocked is double. Furthermore, Pepsi is enjoying its highest volume share of the UK cola market since September 1994 – at 20 per cent, this is five times that of Virgin’s 3.7 per cent ( Nielsen figures).

For several years Virgin has been seen as Tesco’s alternative to an own-label brand, since the UK’s leading supermarket chain did not have a premium American-style cola. What it did have was a bargain cola sold only in family and party-size bottles.

Woolworths has now axed its own-brand American Cola in favour of Virgin (MW April 24).

Virgin is also negotiating with other retailers. But a spokeswoman says such negotiations are “under wraps” to “minimise the competitive response that will undoubtedly come from Coke and Pepsi”. Virgin claims that “further distribution gains are anticipated” very soon.

Safeway, which stocks its own Select brand, tested Virgin’s performance in 20 of its own stores last year, a trial which has since ceased. Paul Clarkson, category buying controller at Safeway, confirms the chain has been approached by Virgin about rolling out the range in all 410 of its nationwide stores and that he is in the process of considering a deal. He will not comment on how well Virgin performed in the trial.

Sainsbury’s, which sells its own Classic Cola range, declines to comment on whether it has also been approached by Virgin because it is a “commercially sensitive” issue.

But Nisa-Today, the buying group for Budgens, Londis and a number of regional retailers, which also has its own Premier brand of soft drinks, has ruled out stocking Virgin in the foreseeable future.

This week Londis launches its own premium American cola which it claims “tastes as good as the national brands”. The “All American Taste Cola” is Londis’ response to what marketing director Denise Buller believes is an “underdeveloped” market. “The premium own-brand cola market remains underdeveloped at nine per cent of the category in convenience stores compared with 20 per cent in the total market,” she says.

A trade buyer told Marketing Week that he was doubtful about the level of Virgin’s success in a market which will always be dominated by two household names. He says: “Virgin has got a very big problem in trying to create a brand. There’s not room in the business and, ultimately, there are only two brands. Other stores are already happy stocking their own brands.”

This month Virgin announced the details of a 5m television advertising campaign to counteract Coca-Cola and Pepsi’s glamorous, celebrity-filled ads.

A Virgin statement claims: “Forget your ‘trying to be trendy’ American corporate bullshit. You’ll see no supermodels, no ‘wannabe’ popstars, no hidden messages.” A little rich, perhaps, coming from a brand which has dedicated an entire bottle design to the very epitome of US glamour and stardom, Pamela Anderson.

The four new ads, through Rainey Kelly Campbell Roalfe, break in the first week of June and will run throughout the summer on ITV, Channels 4 and 5 and satellite. All four are spoofs of over-the-top “dodgy foreign ads”, as the company describes them.

The proposed Virgin distribution deals comprise the first concentrated burst of activity involving its soft drinks division since it was launched in 1994 – an indication that Virgin is deadly serious about holding its corner in the cola battle.

Kirkbride recently stated: “We are confident that… this summer will leave our competitors feeling ‘blue’ and ‘seeing red’… the gloves are off after two years – the cola wars have been good not only for consumers but for Virgin Cola. This summer sees [us] take the fight to a new level.”

Virgin, a company renowned for its flamboyant publicity (the semi-naked nurses who launched Virgin Energy, the curvaceous “Pammy” Anderson bottle), shouts from the rooftops that it is about to wake up the “sleepy battle between the two established cola barons”. But share of voice does not necessarily equal share of market. And that share of market will decrease – at least in the short term – with the loss of 780 popular shopping outlets throughout Britain, no matter how loud Virgin shouts.

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