Branson takes on Coca-Cola in US
Sunday 07 December 1997
Typical for a man who crossed the Pacific in a hot-air balloon and still longs to pilot one around the world, Mr Branson has inflated ambitions for the US launch of Virgin Cola, which was started in Britain just three years ago.
"We'll be launching it in different cities simultaneously and travelling around America to make absolutely certain it gets the best start it can, with the hope of driving Coke out of the States," he said.
It is a tall order. Mr Branson said Virgin Cola will start with just a $25m (pounds 15m) marketing budget to challenge Coke, which earned $1bn in the third quarter alone. The nationwide launch will come in either March or April, following Philadelphia-area test marketing that began last year.
Leaving aside the sheer size of Coke and PepsiCo, which together control almost three-quarters of the $53bn US soft- drink market, analysts question whether the Virgin brand can play as well in America as it has elsewhere.
Its appeal in Britain stems largely from Mr Branson's enormous personal popularity - he was the hands-down winner in a survey asking Londoners to name their choice for mayor - and his reputation as a free spirit in a nation known for its conformity.
In the US, where the remarkable thing has been the ubiquity of unconventional billionaires from Ted Turner to Howard Hughes, Mr Branson's appeal may not be readily apparent.
"Virgin and Branson stand for an awful lot in the UK; he has a hold on the British psyche," said Chris Wood, the chairman of CLK, a London-based brand development firm. "I don't think the Virgin brand is terribly well- known or has massive pull in the States."
Industry analysts, too, warn that success in the US soft drinks market depends even more on the strength of the bottling network rather than the strength of the brand. Even Cadbury's Dr Pepper/Seven-Up unit, lacking a strong system, has been squeezed by Coke and Pepsi.
"Richard has always set his goals high, and I applaud him for that, but the US market is very different," said Skip Carpenter of Donaldson, Lufkin & Jenrette. "It's going to be extremely challenging and highly unlikely for a new entrant like Virgin to achieve those kinds of goals."
He estimated that Coke's advertising budget behind a single soft drink - the Surge brand introduced this year to challenge Pepsi's Mountain Dew - was $100m.
So far, Virgin Cola has not made more than a dent in Coke and Pepsi in Britain, where it is sold through a joint venture with Canada's Cott, a maker of own-label soft drinks for grocery stores.
It is rarely available in UK restaurants or cinemas - aside from Virgin's own cinema chain - and had only a 4.5 per cent share of the take-home cola market in October, according to AC Nielsen research.
While the figure rose from 3.3 per cent in October last year, rivals contend that the gains came largely against own-label brands. Coke still has about 50 per cent of the cola market, while Pepsi has about 20 per cent.
Mr Branson said he was not concerned and that he expected it to take years - even decades - to unseat Coke.
Copyright: IOS & Bloomberg
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