PRIVATE-LABEL VIRGIN COLA POISED FOR ITS U.S. DEBUT

RICHARD TURCSIK

Virgin Cola, the newest premium private-label cola line, is expected to hit the United States next year, but may find only limited distribution in urban markets, said beverage industry watchers contacted by SN.

The Virgin Cola line was introduced last month in Great Britain, where it is being carried by retail chains Tesco and Iceland.

It was created by Richard Branson, the high-flying executive and brains behind Virgin Atlantic Airways and Virgin Records, with help from Cott Beverage Corp., Toronto. Cott, the company that manufactures President's Choice cola, has been named the licensor for the Virgin Cola name and formula in North America, and plans to introduce it to the United States some time in 1995.

Industry observers said beverages bearing the Virgin name are most likely to be successful in chains in major cosmopolitan cities. In addition, small chains and independents without existing premium store brand colas are likely candidates to carry Virgin cola.

"Virgin is a stronger brand in the U.K. than it is in the U.S.," said Mark Husson, a securities analyst with J.P. Morgan Securities, New York, and former Tesco executive. "A number of the more cosmopolitan markets on the East and West Coasts will be very aware of Virgin Atlantic Airways and of Richard Branson, but the Midwest is going to be a different kettle of fish."

Husson said he saw little need for such a soft drink line at chains with established premium store brands. "I don't think there is any point in putting a Virgin Cola next to a Safeway Select, next to a Coke, next to a Pepsi. I think the Virgin Cola will have to stand as an alternative to Coke and Pepsi in stores where the retailer doesn't have a private brand that he is trying to promote," he said. "That suggests the Virgin brand will be found in smaller retailers and smaller chains of retailers in the U.S.."

Husson also noted that Branson expected gradually to expand the line to include other products, such as healthy snacks.

Other securities analysts said Virgin might face a tough go because private-label soft drink sales growth actually began to decline this summer.

"Introducing Virgin is going to be a hard row," said Barry Ziegler, an analyst with A.G. Edwards & Co., St. Louis. "There is clear evidence that private-label soft drinks are starting to decline in volume because of the aggressive stance that Coke and Pepsi have taken in the domestic market."

Marc Cohen, an analyst with Goldman, Sachs & Co., New York, said, "Perhaps there is room for some chains to replace poorly executed programs with better executed programs. But unless there is an expansion of the price spreads between the national brands and these private labels -- which is unlikely in the face of cost increases in aluminum next year -- I think that you're looking at a relatively uninteresting proposition for consumers."

David Nichol, president of Cott, said the company was still working out a plan for distribution, deciding whether or not it would be introduced on a market-exclusive basis. "At the present time, we're trying to decide what exactly is going to be our distribution strategy for Virgin Cola in North America," Nichol said.