BRL Hardy: Globalizing an Australian Wine Company

International Business Theory Formatvorlage des Untertitelmasters durch Klicken bearbeiten Johannsen Heiko A. S.

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Agenda
1.

Introduction
1.

Case Study Australian wine Globalization Consequences of globalization Entry modes to the market History Post merger success
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2.

2.

International Management
1.

2.

3.

3.

BRL Hardy
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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

1. Introduction

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1.1 Case Study

BRL Hardy: Globalizing an Australian Wine Company Focuses on

Two product launch decisions of BRL Hardy, Europe

The managing director of BRL Hardy Europe

Responsible for the European operations Start with a globalizing strategy not only selling the parent company's wines
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1.2 Australian wine

The first vines in Australia were introduced by Captain Arthur Phillip in 1788

In 1969 the annual per capita wine consumption was 8.2 liters 100 liters per person and year in France and Italy

25 year transformation of the wine industry

From fortified wines to table wines followed by the shift from the two-liter bag in a box to varietal bottled wines

Consumption reached 18.5 liters per person in the 5/6/12 mid-1990s. 55

1.2 Australian wine

Number two in Australia was BRL Hardy Ltd.

Expected that Australian wine would become a trend

Exports of Australia had potential to increase until 2025 from

US$360 million (3,5% of the world market) to US$2 billion (16% of the world market)

In 1995 - 27% of the Australian wine production was accounted for exports

Only with a share of 2.5% of the world wine production by value

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2. International Management

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Batemann and Snell 2010: Management Chapter six

2.1 Globalization

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2.1 Globalization

Transportation and high technologized communications formed a global village globalization becomes more and more significant The globalization is mainly influenced by four major forces and regions.

European unification (European Union)

27 members, the currency is shared among 17 More than half a billion citizens

5/6/12 GDP at least as that of the United States 99

2.1 Globalization
China and the Pacific Rim
Growing influence as competitor of the U.S. and the global economy China: worlds largest population - major producer and consumer of many worlds goods

1.3 billion people Very rapid economic growth Tripled imports (last decade)
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5/6/12 Quadrupled exports (last decade)

2.1 Globalization
North and South America

North American Free Trade Agreement (NAFTA)

Simplyfication of trade agreements and import restrictions

Bloc of trading countries is with US$6.5 trillion output one of the worlds largest.

Rest of the world

India with the worlds second largest population and rapid growth in the information technology sector Middle East, parts of South America, Africa

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1111 Watched for their potential because of major

2.1 Globalization
What is Globalization?

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.

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2.2 Consequences of globalization

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2.2 Consequences of globalization

Driving force is the international commerce and lowering of trading barriers

The competition and the effort to get efficiency increases subsequently

Survival in the global market:

Players need to constantly study the opportunities Weigh up the chances of investing overseas Every former home market, under attack of foreign direct investments (FDI)

This progress is not only a disadvantage but rather an 5/6/12 1414

2.2 Consequences of globalization

Complexity is rising due to handling of different cultures & wide global coordination

Where costs and skills are most favorable, a product will be manufactured Soon it will be pointless if a product is from in Germany or Japan

Goods, technology are available to a wider public

Leads to an increasing living and efficiency standard and creates communication between cultures and people
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2.3 Entry modes to the market

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2.3 Entry modes to the market

Establishing a business in another market can be fulfilled through different strategies:
Exporting Advantages:

Mostly the first step a company takes Easiest way to serve an overseas market Due to scale economies, companies are able to avoid or reduce costs of manufacturing

Disadvantages: Exporting might be inappropriate due to lower-cost 5/6/12 solutions in other countries or locations 1717

2.3 Entry modes to the market

Licensing & Franchising Similar approaches to enter a market: Licensing

Licensing is a sold right to allow manufacturing in another country Payments on the units, paid by the license taking company

Disadvantages:

The loss of technology expertise to the overseas party

Franchising
Mostly used by service companies like fast food chains or companies where standardization can be implemented worldwide 5/6/12 Way to maintain standards globally 1818

2.3 Entry modes to the market

Joint ventures

Advantages

Existing knowledge of the host countrys conditions Language, culture, competitive conditions, specific risks of market Risk sharing with local partner

Disadvantages

Risk to lose control over technology or knowledge due to the involvement of another company Different opinions about business decisions can raise and
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2.3 Entry modes to the market

Wholly owned subsidiary

Parent company in the target country Most costly but also highest secure method Possibility to have tight control over all operations in the other country

Disadvantages

Language and culture barriers

Hire local workers and managers to prevent extensive usage of expensive expatriate staff Assessments (spot qualified employees) 2020

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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

3. BRL Hardy

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Agenda
1.

Introduction
1.

Case Study Globalization Australian wine Globalization Consequences of globalization Entry modes to the market History
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2.

3.

2.

International Management
1.

2.

3.

3.

BRL Hardy
1.

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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

3.1 History

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3.1 History - Hardy

Hardy can be traced back to 1853

Founded by Thomas Hardy who produced his first vintage in 1857

Exported it to England & won in 1882 first international gold medal at Bordeaux Long tradition of exporting

Known for quality wines

Dead of Hardy in 1912

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3.1 History - BRL

Renmano Wine Cooperative, was formed in 1916

1982 this wine cooperative merged with Berri Cooperative

To form Berri Renmano Limited (BRL)

1990s

BRL was with almost 500 growers and amount of 50.000 tons of grapes called the oil refinery of the wine industry

First success of BRL to sell abroad was in the late 1980

Known as an aggressive and commercial barker 5/6/12 2525

3.1 History - Merger

Berri Renmano Limited (BRL) & Hardy BRL Hardy Ltd.
1990s
Hardys decided, due to the ever-present risk of poor vintage in one region, to buy wineries in France and Italy

Recession-driven market in Australia & other problems with European acquisitions losses at Hardy

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3.1 History - Merger

Berri Renmano Limited (BRL) & Hardy BRL Hardy Ltd. BRL had similar problems and looked for new opportunities

BRL became financial partner of Hardy

Merger in 1992

Put together fruits, funds, expertise, brands & winemaking know-how

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3.1 History - Merger

(00 0) Post merger success
12 10 8 Axis Title 6 4 2 0

Sales revenue Operating profit (before interest, tax) Net after tax profit Total assets Total liabilities Shareholders equity

1992 151,50 16,70 8,80 216,80 117,40 99,40

1993 238,30 26,60 13,30 234,60 127,40 107,20

1994 256,40 30,20 15,80 280,70 146,60 134,10

1995 287,00 34,00 17,40 329,00 160,40 168,60

1996 309,00 39,30 21,20 380,60 194,40 186,20

1997 375,60 49,20 28,40 455,50 205,80 249,70

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3.2 Post merger success

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3.2 Post merger success

BRL Hardys success is influenced by the two different grown complementing companies
Hardy stood for an award winning traditional quality company with marketing expertise and brand recognition BRL known for its fortified, bulk and value wines and its grape resources.

BRL was the driving force providing the money to Hardy

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3.2 Post merger success

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3.2 Post merger success

CEO Steve Miller

Concentrated on the companys culture and the management style More decentralized management approach

Target to create a have a go mentality

Delegation of small risk decisions Target stated connected to the Pareto principle:

Minority of causes or efforts normally leads to the majority of outcomes 80% of achievements from 20% of the allover time spent

Not get two things done with 100% success instead of 5/6/12 20 things done and 80% success 3232 (Koch,

3.2 Post merger success

Company Strategy Management concentrated on protecting the Australian home market

Vast bulk of the profit Branded bottle sales for further growth

Two sales forces were put together by the allocation of a proven successful strategic marketer: Stephen Davies
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3.2 Post merger success

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3.2 Post merger success

Product portfolio was repositioned

Resulted in stately domestic bottle market share and increasing profitability Eradication of teething problems within the operations

Root of the financial problems

Focus on strengths and repositioning in the market with rationalized line and reposition with only few key brands Turnaround in Europe successful established by: Christopher Carson

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3535 Product portfolio was reduced by 73.6% & the employee

3.2 Post merger success

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3.2 Post merger success

Success was driven by the approach to become a global wine company

World-class production facilities Global brands International distribution

BRL Hardy was on the run to enter the market as global brand owner

Plan to centralize labeling, pricing and branding in Australia Sales, distribution and the promotion strategy in the hands of countries
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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

3.3 Centralization vs. decentralization

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3.3 Centralization vs. decentralization

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3.3 Centralization vs. decentralization

Tension between Stephan Davies and Christopher Carson can be tracked by the difficulty to merge a traditional European-built company with a bulk-wine oriented business

Centralized approach

Davies with his BRL export division background was supporting the idea that all labeling, pricing and branding decisions should be in the hands of the Australian home management

Decentralized approach

Carson with his Hardy marketing background had the opinion that labeling and positioning decisions should be made with key influences of the local market

Carson had to go through Davies to modulate marketing and brand strategies,

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3.3 Centralization vs. decentralization

Steve Millar

Hoped that the two managers would run a constructive and healthy negotiation Instead they clashed together - resulting in a volume quadruplication BRLH UK

Stephen Davies

Concerned about the local control of branding, labeling and pricing decisions Long-term strategy to become a global player centralize key decisions

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3.3 Centralization vs. decentralization

Handling of the tension

Steve Millar

Handled their differences not directly through instructions Supported the tension with the arrangement of the managing structure The tension was promoting the growth up to 70%

Millar has done the right decision to build up

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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

3.4 Distinto & Mapocho

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3.4 Distinto & Mapocho

Christopher Carson to Steve Millar Company had a difficult joint venture with a Chilean wine source

During this time proposal to launch an Italian line of wines

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3.4 Distinto & Mapocho

Distinto:
Exploring alternative European sources, particularly for red wine March 1997 initial contact with Casa Vinicola Calatrasi, a family-owned winery in Sicily Meeting with the farmers to explain how branding could give them security of demand and eventually better prices for their fruit Audience of 135 receptive members (Partnership)

Consultant began generating over 2,000 possible brand names Designer to develop labels and packaging 5/6/12 4545

3.4 Distinto & Mapocho

Distinto:
Portfolio of eight new Italian-sourced wines spread across the low and low-middle price points

Baseline 3.49 (less well known indigenous Sicilian grapes) Mid 3.99. At 4.99 (blends of indigenous & premium varietals) Top at 5.99 (blends of super-varietals)

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3.4 Distinto & Mapocho

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3.4 Distinto & Mapocho

Mapocho:
In early 1997 Carson negotiated a 50/50 joint venture agreement with Jose Canopa y CIA Limitada Chileans

Provide the fruit and the winemaking facility

BRL Hardy

Would send one of its winemakers to make several wines that it would sell in Europe under the Mapocho brand Using its marketing and distribution capabilities
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3.4 Distinto & Mapocho

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3.4 Distinto & Mapocho

Distinto line is primary low price oriented evidently by four brands in the segment from 3.49 to 3.99
Right now no product in the BRL Hardy price matrix

Important gap of BRL Hardy would be closed and the product category enriched

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3.4 Distinto & Mapocho

Mapocho:
Mapocho project was not going well For months, Canepa (JV) had raising doubts and concerns about the JV Claimed their costs went up, and wanted to renegotiate the supply price

Early sales were disappointing and forecasts were that the first vintage would sell only 15,000 cases against the 80,000 originally planned
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3.4 Distinto & Mapocho

Mapocho:
Characterized by very unstable sales Unreliable managers Disappointing forecasts Possible loss of 400.000
1.00E+110 1.00E+099 1.00E+088 1.00E+077 1.00E+066 1.00E+055 1.00E+044 1.00E+033 1.00E+022 100000000000 1

10

Hardy line

Constantly growing
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Representing core offerings in U.K.

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3.4 Distinto & Mapocho

Problems for Distinto

Establish a new brand beside the already existing ones would be connected with high efforts to human resources and the organizational capacity

Positive for Distinto

Not expected to have the same disadvantages like the Mapocho line Real cooperation with the 135 farmers in Sicily BRL will send technical experts to enhance the value of the farmers harvest through new productive vineyard techniques and new winemaking methods Surveillance would guarantee to receive high quality fruits

Partnership and the sourcing from different regions - high quality anticipated 5/6/12 5353

3.4 Distinto & Mapocho

Mapocho line

Would bring more money in the best case Labor costs of the Mapocho line are lower than the Italian line

Distinto

Clear diversification and branding Quality and security as well as the savings in the transportation and currency fluctuation, the Distinto line is the better decision for the future of BRL Hardy BRL would be able to deliver a wider range of products to the retailers with higher security of demand Higher attractiveness to the retailers

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Possibility to serve even more customer demands from one hand

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Bartlett - BRL Hardy: Globalizing an Australian Wine Company

3.5 Kellys revenge & Banrock Station

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3.5 Kellys Revenge and Banrock Station

Development of a new Australian brand

Compete directly with a parent company's global brand rollout

Views from Christopher Carson and Steve Millar

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3.5 Kellys Revenge and Banrock Station

Kellys Revenge
A fun brand strongly based on younger customers and targeting on the price line between 3.49 and 3.99

Brands background is based on a character from Australia

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3.5 Kellys Revenge and Banrock Station

Banrock Station
Launched in 1996 in Australia, New Zealand and the United States with great success

Price line would be the same as the Kellys Revenge

The image of Banrock Station is mainly based on the natural resources and the protection of the environment

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3.5 Kellys Revenge and Banrock Station

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Banrock Station Kellys Revenge

3.5 Kellys Revenge and Banrock Station

Kellys Revenge
Problem of Kellys brand is clearly stated with its image and the customer demand

Strong Australian connected image of Kellys Revenge Questionable if it will have high influence on young customer target group in the U.K Bad customer reactions and the misleading branding

Banrock Station
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3.5 Kellys Revenge and Banrock Station

Viewpoint of Christopher Carson:

Both brands are targeting for the same price line as the Distinto line Bad customer reactions and misleading branding Should decide for Banrock Station because of the proven success in the other markets

Suggestion: Banrock Station gets introduced to the U.K. market on 5/6/12 6161

3.5 Kellys Revenge and Banrock Station

Viewpoint of Christopher Carson:

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3.5 Kellys Revenge and Banrock Station

80% of the market 5/6/12

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Banrock Station

6363 Protecti

3.5 Kellys Revenge and Banrock Station

The Stamp product within this price line was already withdrawn in America due to the opinion that it could devaluate the allover image of Hardy Investigations in this direction should therefore be made
Market survey would help to decide if the Hardy Stamp product still meets the customer demands

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3.5 Kellys Revenge and Banrock Station

Viewpoint of Steve Millar:

Testing of Kellys Revenge was not successful The long term plan to become

a global wine brand is only supported by Banrock Station

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3.5 Kellys Revenge and Banrock Station

Both, Steve Millar and Christopher Carson, should decide to test Banrock Station in the U.K. market Also a market survey would help to decide if the Hardy Stamp product still meets the customer demands or if Banrock Station should take the place of this brand 5/6/12 6666

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4. Conclusion

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4. Conclusion

The approach to become a global wine company is difficult due to the differentiation of mass products towards quality single branded products The best possibility to handle this special identified industry is a mix of a decentralized and centralized organization The wine industry is dependent from differentiated sources all over the world to guarantee best possible security
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4. Conclusion

Thank you very much for your attention

Questions?

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