Entrepreneurs

What Richard Branson learned when Coke put Virgin Cola out of business

Richard Branson was already involved in publishing, music and the airline industry when he decided he could get into the beverage industry, too.

In 1994, an aspiring soda maker had Branson try a blind taste test between his own concoction, Coke and Pepsi. Branson liked the homemade recipe best.

Next, Branson administered the same taste test at his kid's school.

"Overwhelmingly the kids loved the one that wasn't Coke and wasn't Pepsi," says Branson in an interview with Guy Raz on the podcast, "How I Built This."

"So we decided to launch Virgin Cola," says Branson, with the nonchalance typical of an entrepreneur who has so many businesses in his Virgin empire that he says he can't remember the exact number (he estimates the total to be around 250).

Virgin Cola was a hit in the U.K. right away.

"We had some big smiles on some days thinking, 'Coke is the best know brand in the world, and if we could topple Coke, we thought it would be a lot of fun,'" says Branson.

Branson and his team launched Virgin Cola in the U.S. in 1994 with great fanfare. They drove a Sherman tank through Times Square, crushing a wall of Coca-Cola cans.

Then Virgin Cola started disappearing off of shelves, says Branson. Not because customers were buying it, but because its competition was willing to go to any length to undermine it.

Coke "went to retailers. They gave them offers they couldn't refuse. And literally Tescos that had shelves and shelves of Virgin Cola, suddenly they just had no Virgin Cola on the shelves. And it was a very systematic kneecapping job," says Branson.

Virgin Chairman Richard Branson, at left on top of tank, flashes a V-for-victory sign as his vehicle crashes through a wall of Virgin Cola cans in New York's Times Square, Tuesday May 12, 1998.
Richard Drew | AP
Virgin Chairman Richard Branson, at left on top of tank, flashes a V-for-victory sign as his vehicle crashes through a wall of Virgin Cola cans in New York's Times Square, Tuesday May 12, 1998.

Retailers began pulling their orders of Virgin Cola.

Branson believed that Coke was sabotaging his rollout. His theory was confirmed when his new bank manager at Lloyd's bank took him out to dinner. Prior to working for Lloyd's, the bank manager had worked for Coke.

"She proudly told me how she'd managed to drive us out of business. And anyway I sort of forgave her," says Branson.

When he saw that the soda was the most popular option in Bangladesh but nowhere else, Branson declared Virgin Cola over.

"I learned only to go into businesses where we were palpably better than all the competition." -Richard Branson, founder and chairman of Virgin Group

Branson says he learned a valuable lesson from the failure.

"The problem was that, you know, we didn't have something completely unique," he says. "We had a great brand. But Coke had a great brand. The taste of the Cola was maybe marginally better. But it was neither here nor there.

"So since then what I learned from that was only to go into businesses where we were palpably better than all the competition."

Selling Virgin Records was painful for Branson. Closing Virgin Cola was less so.

"I'm somebody that, you know, I'll fight tooth and nail to make something succeed, but the moment I realize it's not going to succeed, the next day I would have forgotten about it," he says. "I will move on to the next venture."