brl hardy_group 8_section d
TRANSCRIPT
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