Tedium - Crashing The Soda Wars 🥤

Today in Tedium: Everything has a story, and today’s Tedium tells the story behind a two-decade-old press kit, covered in plastic, that I acquired a few years back. On the front, the kit made a claim that it would be important to keep around. “KEEP THIS MEDIA KIT,” the front of the thing stated. “Someday it will be worth a lot of money. Someday it will be known as ‘the first Virgin Cola media kit.’” I’m not sure what they meant by someday, but I purchased this press kit for $9.95 at a used comic book store, and and I’m gonna tell you all about it. Today’s Tedium is about the story of Virgin Cola, the dark horse of the soda wars. — Ernie @ Tedium

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The Virgin Cola press kit in question. (photo by me)

How Richard Branson tried to make private-label soda into something exciting

In a lot of ways, the Virgin Cola story doesn’t really start with Virgin, but with the Canadian beverage manufacturer Cott, now know as the Primo Water Corporation.

You don’t know the company, most likely, but you know its beverages. Most famously, Cott was the company that came up with the Sam’s Choice private-label brand for Walmart, which the retailer first used with sodas but later expanded far beyond them. And outside of the U.S., it’s currently known as the manufacturer of RC Cola, the greatest also-ran of the soda world.

As a firm focused on private-label products (at least until its merger with Primo last year), Cott was a company that lived vicariously through other brands. And Virgin Group had a pretty good one that it was pushing really heavily at the time.

From its record-label and record store roots, Virgin was quickly becoming an empire, one that had gained a global reputation thanks to the founding of Virgin Atlantic Airlines in 1984, and by the ’90s, that napkin logo was slowly getting used on things as diverse as intercity trains, video games, and radio stations. Soon, that brand would be used for mobile phones, health care providers, and … uh, spaceships.

In fact, when the announcement that Virgin Cola was coming, a spokesman for Branson delightfully suggested that Virgin-branded marijuana was on the table. In 1994.

“If it were ever legalized and it were proved to the satisfaction of the BMA (British Medical Association) that it was harmless, he’d obviously consider it,” the spokesman told Reuters at the time.

But soda was different. People don’t buy Sam’s Club cola because they prefer it. They buy it because it’s the cheapest option. Like light beer, the driving factor behind purchase, in most cases, is marketing—lots of it. Despite the fact that cola isn’t all that hard to make and (despite what Coca-Cola has you believe) generally tastes very similar, you don’t see a lot of direct competitors with Coke or Pepsi for for a reason.

Branson, whose video game arm had made a game based on a soda brand in 1993, saw the opportunity of going up against some of the largest brands in the world less as a threat and more of a challenge.

In the 2011 edition of his book Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way, he explained that realized that launching a line of sodas would actually be less risky than it sounded, even if it sounded like something that would prove a really terrible idea from the outside.

“As usual, when people warn me against doing something once my mind is made up, I grow increasingly determined to try it,” he wrote. “In this case we all recognized that it would be an inch-by-inch fight along the shelves of the supermarkets but, once we established that there was minimal financial risk if we failed, we decided to proceed.”

That gave him just the reason he needed to go forward with the idea of a soda brand. Working with Cott, a brand known both for stunt beverages and for efficiently selling the cut-rate brands, Branson could actually get his products into stores at a cheaper price than Coke at the time.

And while Virgin didn’t necessarily have the years of brand loyalty or marketing reach of its established competitors, it had something that the soda giants didn’t: Edge.

At the time that Virgin entered the market, Coke was smarting from a recent attempt to release OK Soda, a brand that tried for a subversive postmodern branding approach rather than one that tried to grab its audience in a way that regular campaigns do. It failed, and pretty spectacularly. The world wasn’t ready for non-advertising-advertising from Coca-Cola.

Virgin was very much known for a degree of subversion, but it was also a brand that wasn’t afraid to actually try to sell you something. So if it could pull off the marketing stunts it was known for, there was a lot of potential upside.

And, of course, limited downside.

Virgin Cola, as shown on a Virgin Atlantic flight. (Satomi Abe/Flickr)

So why aren’t we drinking Virgin Cola?

As proven by his stunts, Richard Branson knew how to drive a tank. Unfortunately for Virgin Cola, Coke knew how to control an army.

According to Branson’s book Losing My Virginity, Coke apparently took the threat of Virgin Cola quite seriously, taking aggressive steps to quash what it saw as a potential long-term threat to its business:

Initially Coca-Cola head office didn’t take Virgin Cola seriously as a threat so we had no opposition from them. What I didn’t know was that based in Atlanta, in Coke’s head office, was an English lady working in a senior position for Coca-Cola. She warned the management there that Virgin had the power and the brand to rock Coke on a worldwide basis and she persuaded her directors to let her set up a SWAT team in England to try and stamp us out. Within days she and her team had moved to England. Retailers were offered unbeatable terms from Coke to take their cola over ours. Smaller retailers were threatened with removal of Coca-Cola fridges. The campaign from Coca-Cola was even more potent than the dirty tricks campaign from British Airways to stamp out Virgin Atlantic but Virgin Cola survived. Ironically this very same lady now holds a senior position at Virgin’s main clearing bank.

A less optimistic view of the firm’s business prospects comes from the U.K. marketing magazine Campaign, which notes that the Virgin Cola brand’s reach wasn’t what it could be in the UK, though it was careful never to imply sabotage, rather simply suggesting that Virgin’s brand was a “little more than an irritant” with a distribution reach of around 30 percent.

There were things to be proud of, though.

“Each cola maker is able to produce favorable, if widely varying market research sales figures, but Virgin’s latest suggest its rivals should be nervous,” the magazine’s Sharon Marshall wrote in 1997. “Although its national share is only around [3 percent to 5 percent], Virgin claims that where its cola is sold in direct competition with Pepsi, it outsells the boys in blue.”

And at the time, setback for the brand was not unheard of. One of Virgin’s earliest wins was when the British discount retailer Iceland took on Virgin Cola shipments at a cut-rate price. By May of 1997, though, the shipments were seen generally as eyesores and Iceland decided it no longer would distribute the beverage.

The uphill battle also became a story for Virgin Cola in the U.S. market, which Coke and Pepsi had even tighter control over. A 1998 Washington Times article noted that Virgin Cola had successfully convinced Target to carry the line, along with at least one major gas-station retailer, but it was by no means the scale it would need to get anywhere near its level of success in other parts of the world.

“Whether or not they even make a tiny, infinitesimal dent in the market is still too early to tell,” Beverage Digest editor John Sicher told the newspaper. “They’ve got a good product and they’ve made a splash with their marketing. But you have to remember they’re competing in the home market and against the flagship brands of two of the best marketing companies in the world. Their challenge is Herculean.”

Despite the challenges, Virgin put on a strong face, as highlighted by the press release I currently have sitting on my coffee table, pledging it will someday be worth a lot of money.

“I am so excited by the thought of Virgin Cola taking on Coke and Pepsi in their home territory,” Branson told CNN Money in 1998. “I have always believed that you can never truly be an international cola until you have launched in the home of the colas—America.”

Certainly, a man whose company owns an airline, a chain of record stores, and a line of cinemas is able to do quite a bit of vertical integration all by himself. But the problem is that the soda industry is everywhere.

Perhaps it was inevitable Virgin would get crushed.