Soft drinks no longer virgin territory for CEO Steele
By Sarah Diston | 19 March 2001
Paul Steele is Chief Executive Worldwide of The Virgin Drinks Company. Paul's beverage industry career spans 20 years apart from an 18 month spell at Hilton International where he was a Member of the Board responsible for Sales, Marketing & I.T. Prior to joining Hilton, Paul spent 15 years with PepsiCo in a variety of roles including Group Vice President Northern Europe, Vice President Sales & Marketing for PepsiCo Europe as well as a number of overseas assignments in Eastern Europe, Germany, Egypt and Turkey.
Paul graduated in Business Administration & French. He lives in Cobham, Surrey with wife, Maureen, and children Matthew and Ricarda. When not travelling, his main interest is music and he enjoys performing in Musicals at local Surrey theatres.
Five years ago Virgin chairman Sir Richard Branson unwittingly announced that he would shave off his beard if Virgin Cola had not overtaken sales of Pepsi in the UK by 2000.
Five years on, Branson still has his beard even though his dream has not been realised. But when talking to Paul Steele, CEO of Virgin Drinks it soon becomes apparent that whatever the market share, Virgin Cola is still the success the company had hoped it would be at this point.
"We have learned an awful lot in the last six years. If you think of where we came from when the product was positioned more so as a premium private label product, in one UK supermarket, to today where it is earning its spurs as a full branded product, then yes, Virgin Cola has been the success we had hoped."
As he talks it is clear that Virgin Cola and the Virgin name is something Steele is proud to be associated with and five years after joining the company the attraction to the brand is as strong as ever.
Describing cola as "a market, which is great fun to be in", it is evident Steele believes the Virgin brand name has been a tremendous help in developing the soft drinks business. But as everyone in the industry knows, brands can just as easily go from being known as a number one success to being remembered as an all-time failure.
So how does he envisage Virgin Drinks fitting into the new look soft drinks industry, especially as the cola market remains so flat?
"We have a very strong brand name which we know consumers find extremely attractive and acceptable. We have also developed a very wide range of products to satisfy a broad range of consumer needs. And with a lot of those products we try to bring something new and refreshing to the market."
"In the UK we are known for Virgin Cola, but outside of the UK we offer (in most countries) a very broad range of products in most major segments of the soft drinks industry, everything from teas, waters to juice-based products to a full range of carbonates."
Describing the Virgin Colours range as its international platform, the company believes it is a concept that can be tailored very closely to the local market. Steele explains the range of products that fall under the Virgin Colours brand name makes it much more a kaleidoscope strategy, which he claims has worked extremely well.
"We do not believe in the one size fits all approach. And if you listen to what is coming out of Atlanta, they are beginning to realise the same."
With its biggest markets being the UK, France and Italy, Steele is also keen to point out that just six years after its launch in the UK Virgin Drinks is now distributed in 15 countries with plans to launch later this year into Greece.
Now Available in 15 countries worldwide:
Algeria, Bangladesh, Belgium, Canada, France, Guadeloupe, Italy, Japan, South Africa, Switzerland, Sweden, Taiwan, UK, USA
"We have Greece in May but that is all I can tell you right now. Last year we launched in Taiwan and that was the first market we have gone into with no cola in the line up at all. And that has gone very well with a range of four products. We have partnered with a big player over there, called Sinn-Si. They have access to all of the small convenience stores, which is where most of the business goes in Taiwan. It is not a supermarket type marketplace so that has gone very well for us."
"I think people are realising they have got to be present in a lot of new segments"
"We also have a number of exciting things that we are doing internationally and a number of initiatives going on in different market places. In some places, we segment the market into different distribution sectors, on-premise and grocery. That is the great thing about being international - you can develop one product in one market and see if they are applicable in others."
But with the 'new look' soft drinks industry seeing more and more innovation with new products and new sectors cropping up all of the time, does Steele see there being further consolidation within the industry?
"Consumption habits are changing and people are looking for more specifically engineered products for specific needs at any one point in time.
And I think people are realising they have got to be present in a lot of new segments."
"I think we will see more consolidation. In the UK, Britvic is openly up for sale and Lucozade has also been banded around by Smithkline Beecham who apparently do not think it fits into their portfolio anymore."
"But if anything some of the consolidation has actually helped us. There are powerful bottling companies in various countries that suddenly have less of a range available to them than they had before. And they look to someone with a global brand name who can help them to expand their portfolio. And I guess that is where we come in."
His loyalties obviously lie with Virgin and as our conversation steers towards the acquisitions, Steele is not hesitant with his reply: "Acquisitions are not really our game."
"But there is a lot of growth going on in a lot of other sectors and I think that is what has driven a lot of the acquisitions which have been going on recently. I think it will be interesting to see how that pans out over time."
"We are looking to continue our international expansion quite strongly. We are going to build on what we have got in the markets that we have already established. We are never short of ideas or short of new concepts and we are looking at the markets to identify where the trends are. Expanding internationally is proving to be very successful for us."
"There are no shortage of opportunities out there, with real opportunity in the US and particularly in Europe and Asia with stimulants which is interesting for us. And then there are the juice-based drinks, waters and single-serve opportunities."
With Coca-Cola and Pepsi dominating the soft drinks industry it cannot make things easy for some of the smaller and medium-sized players who are trying to get their share of the industry. We only have to look at the UK stimulants market over the past 12 to 18 months to see there were a lot of people who were quick to jump on the bandwagon and just as quick to vanish.
So how achievable is it for new companies not only to get their product into the market but to stay there?
"There will always be people who come and go and I think new players is what the market needs as it cannot all be in the hands of the big players. To some extent it is a little bit of a myth that has been built up by the big guys (no guesses who) that only they can make good quality cola - I think we are slowly but surely proving that to be wrong."
"It is a question on how successful they are on building a brand. We have a brand but others will struggle because they are going to have to invest very heavily to establish a brand name."
"But it is possible. Look at SoBe in the US and what a tremendous success that has been. It started off literally on a couple of trucks and within a time frame of less than 10 years it has just been sold to Pepsi for $300m. So there are success stories."
Remembering his comment on learning a lot over the last six years, I asked the question: Have there been any mistakes?
"You always make mistakes in business. The key is to recognise when it is a mistake and move on and I think that is the sort of tenet of the way that I would run the business. I would expect people to make mistakes, as long as they are managed risk mistakes and as long as we learn from them. It is a question of what works and what does not work."
Steele is predictably positive: "It is difficult to say what has not worked. I think what we have learned (Virgin Drinks) is speed of innovation is the absolute key to today's marketplace. You cannot just rely on the old campaigners of the business."
"I think it is very, very strong. We have got some good markets out there and some excellent business partners. And there is no shortage of new partners knocking on the door looking for new business. We've developed a strong brand presence in a number of markets with an exciting range of products. And as we go forward I feel very confident."
"We've developed a strong brand presence in a number of markets with an exciting range of products"
Apart from an 18 month spell at Hilton International, Steele's beverage career spans 20 years, 15 of those with Pepsi. So I was intrigued to know what attracted him back into the business.
"It was a combination of a great product but more importantly a superb brand name to work with. And you do not get opportunities like that every day."
One more question Paul, is the attraction to Virgin still there?
"It has been an absolute ball for five years."
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