BRL Hardy: Globalizing an Australian wine company

Group 8 Section D Sudhish KM Varun Kedia Ajith S Anil Kr Singh Ankit Kardam Chhavi Anand

Agenda
Case facts Questions addressed BRL & Hardys merger Wine Industry Value Chain Distinto Kellys Revenge Vs Banrock Station Recommendations Key learning's

Case Facts
Industry Background By 1996, BRL Hardy had become the second largest wine producer in Australia

Throughout the 1990s, Australian wines were becoming a hot trend throughout the international wine community

The UK was the largest worldwide importer of Australian wine exports

Company Background and History BRL Hardy was the result of a 1992 merger between 2 competing Australian wine producers: BRL and Thomas Hardy & Sons

BRL was known as very aggressive and commercial, while Hardy was known as polite and traditional.

The merger occurred because both companies were struggling financially, particularly with their failing international acquisitions and partnerships

The resulting organization had mostly BRL managers at the high levels, with more Hardy managers filling mid-management roles

Case Facts

The new companys management adopted a more decentralized approach Carson introduced the following measures: Reduction of headcount Standardized products Implemented new controls, systems and policies European operations moved from a net loss in 1990, to a breakeven in 1991 and a net profit in 1992

Davies, in his global brand owners strategy, believed that new companys management should adopt a more centralized approach

Case Facts

As BRL Hardys low-end Australian wines migrated up the European price ladder, there was an opportunity to introduce a new low-end Australian wine in Europe The UK based management developed Kellys Revenge, believed to be a fun brand that would appeal to first-time wine drinker The Australian HQ developed Banrock Station, promoted as an environmentally responsible product Banrock Station was introduced in Australia and New Zealand and became an instant success

Questions addressed
Should Distinto be launched? Is there any need to launch an entry level wine? If yes, which one should they prefer -Kellys Revenge OR Banrock Station

Other Issues addressed

Evaluating the success of merger between BRL and Hardy Evaluating the Industry Value Chain and analyzing the implication for BRLH

PRE MERGER SCENARIO

Ite m Kno wnfo r Hardy BRL

Fo rtifie d,bulk,value wine s Australia slarge st The o ilre fine ryo fthe wine make r Awardwiningqualitywine s wine industry

Culture /Value s Po lite andtraditio nal, Familyo wne rship

Marke tinge xpe rtise , Co re c o mpe te nc ie s brands,andwine making kno who w

Aggre ssive and c o mme rc ialCo o pe rative (1916:1 st co o pe rative wine ry,130Italiang rape Huge vo lume grape c rush gro we rs) Bulkpac kagingo pe ratio ns ac c e ssto fruit,funds,and disc ipline dmanage me nt

PRE MERGER SCENARIO (Contd..)

Ite m Hardy BRL Limite d inte rnatio nal Strugglingand e xpe rie nce in lo o kingfo rwaysto Scandinavia e xpandand upgrade its busine ss

Trac kre c o rdate xpo rt Expo rt Expe rie nc e 1989:ac quisitio no fWhic larand Go als Lo o kingfo rwine rie sinEuro pe to Go rdo n ritic almass+ c re dibilityto re ac hc

give ac c e ssto Euro pe . Lo o kingfo rmultiple so urc e so f supply

POST MERGER SCENARIO

POST MERGER SCENARIO (Contd..)

Reposition Stamps & Nottage Hills

Despite Carsons track record inside the company and his past performances he has to act and behaves like a new comer toward his new management Can be generalized to UK subsidiary Vs. the headquarters

POST MERGER SCENARIO (Contd..)

Global Mentality led to an organization form termed as Symmetrical Hierarchy Assumptions: 1.The UN Model Assumption 2.The Headquarters Hierarchy Syndrome Result: Company operates in a diverse and changeable environment with an undifferentiated structure and an inflexible management process

Roles of National Subsidiaries

Strate g icimportance oflocale nvironme nt HIGH LOW

Strategic Leader
HIGH

Contributor

BRLHardy

Compe titionoflocal org anization

Black Hole

Implementer

LOW

Value Chain:Wine Industry Wine Grape Pro duc tio n Gro we rs

Distributio n

Re tailing

Co nsumptio n

Grape Gro we r

Co o pe rative

Who le sale r

Fo o dSe rvice

Grape Gro we r

Wine Make r (Vintne r)

Me rc hant T rade r

Supe rmarke t

Co nsume r s

Grape Gro we r

Private Wine ry

Auc tio n

Spe c ialty Sho p

BRL Hardy: Business Partners

Jose Canopa y CIA Limitada

50/50 joint venture where the Chilean company was to provide fruits and winemaking facility BRLH to send its winemakers and make several wines, to be distributed under brand Mapocha High volume commitment to Canepa indicates that BRLHs bargaining power in this case was moderate to low

Vincola Calatrasi (Distinto)

Sicilian winery (red wine) with links to major grape growers cooperative BRLH negotiated hard to explain farmers how branding could give them security of demand and better prices Less known indigenous Scilian grapes for lower price bands Rationalization & consolidation among small wholesalers & retailers Indicates BRLHs bargaining power to be moderate

Launching of an entry level wine

Stamps and Nottage Hill brands gradually migrated to upward rice points, minimum being 4.49 Price points below 4.49 represented 80% of the market Opportunity to leverage distribution capabilities global marketing and

Hence, launching an entry level wine would have garnered fuel to

Brand Vs Pricing
Leasingham Chateau Reynella

Nottage Hill

Brand

Stamps D'istinto

Kellys Revenge Banrock Nation

Price

Distinto
PROS CONS Represents the good image of Risk of allocating the same Market positioning as low to midhuman resources as in Mapocho Italian wine, connected to Mediterranean lifestyle in good which faced issues wine from 3.49 to 5.99 and quality market European Does not target the same Focus on creating community consumer as Stamp and Nottage Hill, as market is growing loyal to such Italian wine Helps in leveraging great distribution and strong marketing

Why Launch Distinto

Organizational Factors
True Partnership, unlike Mapocho from Chile

Financial Factors
Cheap Launch ( 500,000) Good forecast of selling (made by Carson)

Other Factors
Consistency with global Strategy (USP: Mediterranean Lifestyle- Passionate, warm, romantic and relaxed) Brand for average consumer (3.49 to 6.99)

Kellys Revenge Vs Banrock Station

Parameter Kellys Revenge Priced at 3.49 in Pricing Positioning Positioned as a fun brand

Banrock Station

3.49 pound in U.K. Does not cannibalize the sales of the Positioned as environmentally STAMP branded wines responsible product, down-to-earth wine Appealing only among Has global appeal among wine lovers young consumers , first-time Creates value-for-money , part of its wine drinkers profits allocated to conservation groups Highly flashy label to attract Motto: Good earth , fine wine consumers

Kellys Revenge Vs Banrock Station

Kellys Revenge Sourcing Brand Recall

Banrock Station

Domestic sourcing from South Australias Riverland district Low, as named after a character High due to its immediate success region in the history of Australian wine in Australia and New Zealand Consistent with global strategy Potential as a global brand industry about 130 years ago. Hard for consumers to connect Already launched, so low cost with, not a quality wine incurred further Not suitable as a global brand

From U.K. itself

Recommendations
Launch

Distinto & Banrock Station Position Banrock Station as a green wine that supports conservation activities in UK market Establishing strategic alliances with local conservation groups Certain percentage of profit from sales of each bottle of wine would go to the alliance partner to fund environmental projects

Recommendations (Contd..)
This would increase consumers confidence in and credibility of the brands environmental claims Adopt niche marketing strategy to position the brand as a green wine

Consistently communicating the brands environmental initiatives Attractive & distinct product packaging and labelling

Recommendations (Contd..)
Allow corporate headquarters to introduce new global brands as well as give regional operations control of specific market demands Provide regional autonomy for product and brand development that does not compete with global brands Corporate headquarters needs to maintain control of the number of brands competing at a given time

Key Learnings

Decision for a new product launch should not be only dependent on performance of older products Strategies of the subsidiaries should be aligned with the parent company Need for global integration as well as local responsiveness Organization design is also a key factor in organizing global operations Need of cooperative effort and co-option of dispersed capabilities of national units instead of centralized direction and control by the parent company

Thank You