brl hardy_group 8_section d

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 & Hardy’s merger Wine Industry Value Chain D’istinto Kelly’s 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 1990’s, 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 company’s 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 company’s management should adopt a more centralized approach

CASE FACTS As BRL Hardy’s 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 Kelly’s 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 D’istinto be launched? Is there any need to launch an entry level wine? If yes, which one

should they prefer -Kelly’s 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

Item Hardy BRL

Known for

Australia’s largest winemaker

Award-wining quality wines

Fortified, bulk, value wines

“The oil refinery of the wine industry”

Culture/Values Polite and traditional ,

Family ownership

Aggressive and commercial Cooperative (1916: 1st cooperative winery, 130 Italian grape growers)

Core competencies

“Marketing expertise, brands, and winemaking know-how”

Huge-volume grape crush

Bulk packaging operations

“access to fruit, funds, and disciplined management”

PRE MERGER SCENARIO (CONTD..)

Item Hardy BRL

Export Experience

Track record at export 1989: acquisition of Whiclar and

Gordon

Limited international experience in Scandinavia

Goals 

Looking for wineries in Europe to reach critical mass + credibility to give access to Europe.

Looking for multiple sources of supply

Struggling and looking for ways to expand and upgrade its business

POST MERGER SCENARIO

1992 1993 1994 1995 1996 19970%

10%

20%

30%

40%

50%

60%

70%

80%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Profitability, ROE & Debt/Equity Ratio

Debt/Equity Net Profit Margin ROE

Perc

en

tag

e

Perc

en

tag

e

POST MERGER SCENARIO (CONTD..)

Reposition Stamps & Nottage Hills Despite Carson’s 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 Assumption2. The Headquarters Hierarchy SyndromeResult:Company operates in a diverse and changeable environment with an undifferentiated structure and an inflexible management process

ROLES OF NATIONAL SUBSIDIARIES

Strategic Leader Contributor

Black Hole Implementer

Strategic importance of local environment

Com

peti

tion

of

local

org

an

izati

on

HIGH LOW

LOW

HIGHBRL Hardy

VALUE CHAIN: WINE INDUSTRY

Grape Grower

Cooperative

Wine Maker(Vintner)

Private Winery

Wholesaler

Merchant Trader

Auction

Food Service

Supermarket

Specialty Shop

Consumers

Grape Growers RetailingDistribution

Wine Production Consumption

Grape Grower

Grape Grower

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 BRLH’s bargaining power in this case was moderate to low

Vincola Calatrasi (D’istinto) Sicilian winery (red wine) with links to major grape grower’s

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 BRLH’s 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 global marketing and distribution capabilities

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

BRAND VS PRICING

D'istinto

Stamps

Leasingham Chateau Reynella

Nottage Hill

Bra

nd

Price

Kellys Revenge

Banrock Nation

D’ISTINTOPROS CONS

Represents the good image of Italian wine, connected to Mediterranean lifestyle and good quality

Risk of allocating the same human resources as in Mapocho which faced issues

Market positioning as low to mid wine from 3.49 to 5.99 in European market

Does not target the same consumer as Stamp and Nottage Hill, as market is growing

Focus on creating community loyal to such Italian wine

Helps in leveraging great distribution and strong marketing

WHY LAUNCH D’ISTINTO

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)

KELLY’S REVENGE VS BANROCK STATION Parameter

Kelly’s Revenge Banrock Station

Pricing Priced at 3.49 in 3.49 pound in U.K. Does not cannibalize the

sales of the STAMP branded wines

Positioning Positioned as a fun brand

Appealing only among young consumers , first-time wine drinkers Highly flashy label to attract consumers

Positioned as environmentally responsible product, down-to-earth wineHas global appeal among wine loversCreates value-for-money , part of its profits allocated to conservation groupsMotto: Good earth , fine wine

Kelly’s Revenge Banrock Station

Sourcing From U.K. itself Domestic sourcing from South Australia’s Riverland district regionConsistent with global strategy

Brand Recall

Low, as named after a character in the history of Australian wine industry about 130 years ago.Hard for consumers to connect with, not a quality wineNot suitable as a global brand

High due to its immediate success in Australia and New ZealandPotential as a global brand Already launched, so low cost incurred further

KELLY’S REVENGE VS BANROCK STATION

RECOMMENDATIONS

Launch D’istinto & 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 consumer’s confidence in and credibility of the brand’s environmental claims

Adopt niche marketing strategy to position the brand as a ‘green’ wine Consistently communicating the brand’s

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