Talks are at an early stage, but it is understood that the vodka would be triple distilled with the Virgin name used to emphasise the purity of the drink.
Marketing of the product could begin on a trial basis in the London area within the next few months. Virgin is also thought to be seeking a joint venture partner to market its spring mineral water along similar lines.
The moves are part of a strategy by Virgin to take advantage of its brand name in a wide range of consumer areas. The company is thought to be negotiating with ICL, the computer group owned by Fujitsu of Japan, which could lead to a range of ICL personal computers being marketed with the Virgin badge.
The computer project, if it comes to fruition, is likely to be one of the most impotant elements of Virgin's drive to cash in on its name.
It is thought that the group would want its involvement in any joint venture to amount to more than just putting the Virgin badge on an ICL machine.
ICL has already been manufacturing personal computers for Virgin, although it has not confirmed this.
It is understood that talks between the two groups will expand this relationship.
A spokesman for Virgin said the company wanted to extend its brand into a wide range of fast- moving consumer goods, reaching millions more customers than it does today.
'Virgin has developed as a service and retail brand in diverse areas,' he said.
'We have a unique opportunity and the time has come to take advantage of that.' The group recently announced that it was joining the London and Continental Railways consortium which is bidding to build and operate the pounds 2.7bn high-speed rail link between London and the Channel Tunnel.
Separately, Virgin is awaiting the go-ahead for its planned alliance with Delta Air Lines of the US, which has been blocked by the US Department of Transportation.
Under the deal Delta would buy at least pounds 100m worth of seats on Virgin flights to London.
The companies would also set up a 'frequent flyer' partnership, giving Virgin passengers access to hundreds more destinations.
The agreement is important for Delta as it would give the airline access to Heathrow Airport, where the main transatlantic operators with Virgin are British Airways, United Airlines and American Airlines.
Virgin believes that the partnership is being held back by the slow progress on 'open skies' negotiations between the governments of the US and Britain. The alliance has been approved by the US Justice Department and the British government.
Talks between the two countries are expected to begin again in the autumn and could make or break the Virgin-Delta plans.Reuse content