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RICHARD BRANSON AND THE VIRGIN GROUP OF COMPANIES IN 2004
itable: however, these profits depended upon government operating subsidies of £56.5 million annually. In addition, the capital investment requirements of operating passenger rail services were substantial, though the sale of 49 percent of Virgin Rail to Stagecoach for £158 million had reduced Virgin’s exposure. During 2001–04, Virgin Rail invested heavily in new trains and carriages with a view to upgrading both speed and the quality of customer service. Despite these investments, Virgin Rail suffered from the general woes of the UK’s privatized rail network. Virgin Rail’s record of poor punctuality (less than half of its trains arrived on time) was primarily a result of the poor state of Britain’s rail infrastructure; however, these experiences did little to enhance the Virgin brand.
Virgin Entertainment Group Virgin Entertainment Group comprises Virgin’s retailing businesses together with Virgin’s remaining cinema chains. The retailing companies include Virgin Megastores, with 122 locations around the world, and the UK Our Price chain. The Megastores sold music, music accessories, electronic equipment, clothing, and concert tickets. The Virgin Megastores did not form a single integrated business but were operated as separate businesses with different business partners in different countries. Thus, in Japan, Virgin Megastores were a joint venture with Marui, a Japanese department store, while in France Virgin no longer had an equity stake in the Megastore chain. The other major retail business was the Virgin/Our Price music retailing chain, 75 percent of which had been sold to the book and newspaper retailer W. H. Smith in 1991 but was reacquired by Branson for £145 million in 1998.10 Despite the success of the Virgin stores as leading retailers of recorded music, the format failed to develop into a “category killer” in the same way as Home Depot in home improvement supplies, IKEA in home furnishings, or The Gap in casual clothing. Retailing revenues have totaled around half a billion pounds annually. However, profitability has been miserable. In April 2000, The Economist reported that Virgin Entertainment owed its banks £172 million and had run out of capital. The impact of Internet file sharing and illegal recording of CDs has been a major problem only partly ameliorated by Virgin’s use of its retail network to sell mobile phones. Despite extensive refurbishment of the UK Megastores, the chain was still struggling in 2004.
Virgin Trading Group Limited Virgin Trading Group, a wholly owned Virgin subsidiary, comprised Branson’s beverage start-ups – the ventures had been widely viewed as pure follies by most outside marketing experts. Virgin Spirits, a joint venture with Scottish whisky distiller William Grant, was established to market and distribute Virgin Vodka. The brand failed to gain significant market presence outside of Virgin’s own planes and hotels and the venture was wound up in March 1998. The Virgin Cola Company was a joint venture with the Canadian soft drink company Cott & Company, the world’s largest supplier of retailer own-brand soda drinks. Virgin Cola was introduced in the UK in 1994 and achieved 318