Virgin Active recently launched its100th South African club, at the Balfour Park Mall north of Johannesburg, and trumpeted a success story in its 12 years presence at the southern tip of the African continent.
The globalising health club operator, with 267 clubs and 1.3 million members across the UK, South Africa, Italy, Spain, Portugal and Australia, entered the local market in 1999 after the collapse of the then Health and Racquet Club brand. Virgin Active does not miss an opportunity to remind us that it was Nelson Mandela who called founder Richard Branson and asked him to save thousands of jobs threatened by the liquidation of Health and Racquet Club.
Branson has thus far invested about R2.9bn through Virgin Active SA and in the establishment of new clubs, refurbishing and re-branding of existing ones.
Virgin Active MD, Ross Faragher-Thomas, says the health club has become the significant ‘third space’ – after work and home – in the lives of city dwellers. “It is no longer the exclusive domain of sportsmen, students and body builders. The club now attracts a wider audience and has become a social space and experience – rather than just a place to exercise.” And it certainly appears to be a winning formula. On average 130 000 members access the health clubs across the country each day.
Faragher-Thomas sees the strong growth as a result of opportunities offered by South Africa’s diversity. “We understand that South Africa is unique and have made it our business to understand our members, what works for them and then cater to them. The existing population is transitioning through LSM levels and we have ensured that our clubs are positioned to attract each market segment. Inevitably there is a standard recipe when it comes to equipment and facilities but, like a good chef, we add a personal and unique touch. Our clubs are differentiated in this way: Classic, Flagship, Club and Fitness and soon we’ll be opening entry level clubs countrywide. This doesn’t mean low cost, but rather geared around unique consumer categories need and what they are prepared to pay. Underpinning all of this is the strong Virgin brand.”
Initially the task of repositioning the brand and bedding down the business took five years at which point the expansion began in earnest. “Reaching the 100 club mark is a fantastic milestone but that doesn’t mean we can relax. We are always looking for new club opportunities and, more importantly, regularly refurbishing existing clubs.”
In October last year, the Virgin Group and CVC Capital Partners announced the acquisition of a controlling stake in Virgin Active by CVC. Faragher-Thomas says the transaction brought in a new majority investor who is helping to accelerate the expansion of Virgin Active. He added that CVC also brings a broad international network, has an excellent track record of building businesses, as well as valuable experience in the international leisure sector.
Following the transaction CVC holds a 51% stake in Virgin Active. Virgin, which has played a central role in the success remains as a significant shareholder, with a 49% stake. “Richard Branson is as committed to SA as he has been for the last 12 years,” says Faragher-Thomas.
He says Virgin Active continues to make a significant contribution to the economy and the lifestyle of South Africans, employing 4500 full time staff as well as 2000 part time instructors and casuals.
The plan is to open six to ten clubs annually and the company is well into the development of the entry level clubs – a new and exciting market for Virgin and an opportunity for all South Africans. “We believe in the future of Virgin Active South Africa and while there is still a strong demand we will supply as best as possible what the consumer wants and needs,” says Faragher-Thomas.
Depending on location, the building, architecture, infrastructure, facilities and the club category, it costs between R40 and R120 million to open each of the six to 10 clubs every year. In addition, Virgin Active also sets aside at least 10% of its turnover for refurbishment.
As a result of capturing all the potential markets Virgin Active has become a household name. In a series of surveys done every 18 months, the brand consistently has 96% unaided recognition, prompted only by the question “Do you know any health clubs in SA?” The most recent survey shows that familiarity with the brand runs at an equally high 96% and more importantly 98% of respondents would consider joining.