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THE BIG FOUR AUSTRALIAN WINE COMPANIESFrom exporter to global producers
Case study
BY Mohammed Sobahan Nicole Falterbaum Sonja Bertling
DATE 03.12.2015MODULE Strategies for International Market EntryCOURSE MSc. International Marketing
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AGENDA1) THE FOUR AUSTRALIAN WINE COMPANIES2) SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY 3) THE “BIG FOUR’S” EXPANSION STRATEGIES ABROAD 4) REASONS TO ENTER FOREIGN MARKETS5) FOREIGN MARKET ENTRY STRATEGIES USED BY THE AUSTRALIAN COMPANIES6) INFLUENCING FACTORS “BIG FOUR”7) CHALLENGES THEY FACE8) FACTORS OF SUCCESS IN THE UK9) REPLICATING SUCCESS IN OTHER COUNTRIES10) STATISTICS 11) REFERENCES
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THE FOUR AUSTRALIAN WINE COMPANIES
BERINGER BLASS SOUTHCORP
BRL HARDYORLANDO WYNDHAM
AUSTRALIAN WINE
COMPANIES
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BERINGER BLASS• acquired by Foster‘s Brewing Group• three-channel-strategy: maintaining its traditional
channels, acquisition of specialist wine packaging operations and acquisition of wine clubs
• benefits from Mildara Blass extensive international distribution network
• Beringer acquisition is expected to assist the distribution of Mildara Blass brands in the US market
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SOUTHCORP• Corporation of Lindemans and Penfolds brands• signed a number of JV in the 1990s• focusing on exporting to Languedoc in France• aim: becoming the world‘s leading global branded wine
company• 50/50 JV with Californian producer Robert Mondavi• 2001: acquisition of Rosemount high-valued brands; well-
recognized in international markets
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BRL HARDY• Merger of Berri Renmano and Thomas Hardy
• well-established distribution channels in New Zealand, the UK and US
• Still developing its channels in Continental Europe
• 50/50 JV with Casa Vinicola Calatrasi (Italy)
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ORLANDO WYNDHAM• Pernod Ricard acquired the two Australian companies
Orlando and Wyndham
• focus on a single brand: Jacob‘s Creek (leading wine brand sold in UK)
• new vineyards in Argentina, Chile, South Africa and China “New World”-portfolio
• has intensified its distribution in Asia
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TIMELINE1989/90Pernod Ricard
acquired Orlando
and Wyndham
1990Thomas Hardy
purchases in the
Languedoc-Rousisillion region of France,
Domaine de la Baume
1991Merger between Wolf Blass and
Mildara
1992BRL
Hardy is a result of
the merger of
Berri Renmano
and Thomas Hardy
1993Jacob’s Creek
(Orlando Wyndham) becomes
the leading wine brand sold in the
UK
1995Mildara
Blass was acquired Foster’s Brewing Group
2000Foster
acquired
Beringer Wine
Estates
2001Southcorp acquires Australian producer
Rosemount
200150/50 JV with US
company Constellatio
n Brands
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Q1
Carry out a SWOT analysis of the Australian wine industry and indicate whether the „Big Four“ have adopted the same or
different strategies to expand abroad.
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SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY
SWOT analysis is the analysis and evaluation of a company’s internal environment
strengths and weaknesses, and the external
environment opportunities and threats (Kotler and Keller 2012).
Weak-nesses
ThreatsOppor-tunities
Strengths
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• C• Technological innovation• Production focus• Financial resources
SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY - STRENGTHS
Strengths “The internal environment of
a cooperation consists of
variables (strengths and weaknesses) that are within
the organization itself” (Wheelen and Hunger, 2010,
pp. 64-65).
• Core strengths• Consistent product quality• Fair prizing• Product portfolio
• Australian Wine Export Council Exporting• UK market dominance• Low psychic distance between UK and Australia
successful in countries with low psychic distance• Low competition in the UK strong market position• Positive image and high reputation in the UK
strong market position• Diversification of production location • E.g. Joint Ventures in Chile and the US
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SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY - WEAKNESSES• Export orientation:• High dependence on export markets (especially UK)• Struggle to diversify • Ability to operate successfully in export markets
with high psychic distance• Focus on production rather than marketing• Low awareness of Australian wine in Germany
• Southcorp, BRL Hardy and Foster potential takeover targets
Weak-nesses
“The internal environment of a cooperation consists of variables (strengths and weaknesses) that are within the organization itself” (Wheelen and Hunger, 2010, pp. 64-65).
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• UK market market expansion• • Increase of wine consumption
• Acquisition of distribution channels and production facilities • Acquisition of know-how and expertise
• Market development:• US as the most profitable market
• New world brand portfolio and option to produce in “New World” countries
• Southcorp, BRL Hardy and Foster potential takeover targets• Rise of stock price • Synergies
• • Low domestic competition•
• Low psychic distance
• Greater excess to know-how and resources
SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY - OPPORTUNITIES
Oppor-tunities
“A marketing opportunity is an area of buyer need and
interest that a company has a high probability of profitably
satisfying” (Kotler and
Keller, 2012, p. 70).
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SWOT ANALYSIS OF THE AUSTRALIAN WINE INDUSTRY - THREATS• Southcorp, BRL Hardy and Foster potential takeover targets• High dependence on the UK market• Challenging export markets: • Low awareness of Australian wine in Germany• Low wine consumption in Japan• Complex distribution channels in the US
• Increased competition • Competition from other European wine companies • France as a major competitor
• New market entrants low-cost new world producers• Cultural specific factors influence wine consumption in different markets• Global wine glut
Threats
“An environmental threat is a challenge posed by an unfavourable trend or development that, in the absence of defensive marketing action, would lead to lower sales or profit” (Kotler and Keller, 2012, p.71).
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• Three-channel strategy• Traditional
channels• Acquisition
Specialist wine packaging operations
• Acquisition Wine clubs
• Joint Venture (JV) production
• Acquisition Wine company
Beringer Blass
• New World investments production and distribution
• Focus: developed European and Asian countries
• Single brand and “New World brand”
Orlando Wyndham
• Stakes in distribution companies
• 50/50 JV production, product launch and distribution
• Global and local brand strategy
BRL Hardy
• Sourcing strategy
• JV and Partnerships product launch
• Purchase of land vineyards
• Acquisition production
• Global and local brand strategy
Southcorp
• Three-channel strategy• Traditional
channels• Acquisition
Specialist wine packaging operations
• Acquisition Wine clubs
• Joint Venture (JV) production
• Acquisition Wine company
Beringer Blass
• New World investments production and distribution
• Focus: developed European and Asian countries
• Single brand and “New World brand”
Orlando Wyndham
• Stakes in distribution companies
• 50/50 JV production, product launch and distribution
• Global and local brand strategy
BRL Hardy
• Sourcing strategy
• JV and Partnerships product launch
• Purchase of land vineyards
• Acquisition production
• Global and local brand strategy
Southcorp
• Three-channel strategy• Traditional
channels• Acquisition
Specialist wine packaging operations
• Acquisition Wine clubs
• Joint Venture (JV) production
• Acquisition Wine company
Beringer Blass
• New World investments production and distribution
• Focus: developed European and Asian countries
• Single brand and “New World brand”
Orlando Wyndham
• Stakes in distribution companies
• 50/50 JV production, product launch and distribution
• Global and local brand strategy
BRL Hardy
• Sourcing strategy
• JV and Partnerships product launch
• Purchase of land vineyards
• Acquisition production
• Global and local brand strategy
Southcorp
THE “BIG FOUR’S” EXPANSION STRATEGIES ABROAD - CHARACTERISTICS
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THE “BIG FOUR’S” EXPANSION STRATEGIES ABROAD - SIMILARITIES① 1980s: export growth② 1990s: market development③ 2000s: global operators• Same aim: “from exporters to global producers”• Lower dependence on the UK market• Extent production period during the yearDecrease of operational risks
• Approach of foreign markets: more simultaneous• Foreign Market Expansion Strategy: Investment
Entry• Change from export to alliances and FDI
Increase of control and profits• Mainly vertical alliances or acquisitions
Export
Joint venturesand strategic alliances
FDI
Adapted from Bradley, Frank (2005), International Marketing Strategy 5th. ed. Harlow Prentice Hall pp. 291, 264
risks
,, am
ount
of
requ
ired
reso
urce
s
high
low
Franchising and licensing
highlow control
THE “BIG FOUR’S” EXPANSION STRATEGIES ABROAD - CONCLUSION
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• Purpose of Joint Ventures and acquisitionsDifferences
• However they all develop from export to JV and/or FDI• Investment entry• More simultaneous approach to enter markets
Similarities
• Overall they used similar expansion strategies abroadConclusion
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Q2
Identify and discuss the influencing factors behind the decision of the „Big Four“ to switch from the use of exporting to other foreign market entry strategies and discuss the challenges resulting from a switch.
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REASONS TO ENTER FOREIGN MARKETS
• Reducing their dependence on the UK market• Diversify their export market• Access to new geographic markets• Increase the sales & profit
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FOREIGN MARKET ENTRY STRATEGIES USED BY THE AUSTRALIAN COMPANIES
Joint Ventures
Acquisitions
Partnerships
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INFLUENCING FACTORS “BIG FOUR”
• To access distribution networks in international market. E.g. US
• Create new brand portfolio e.g. “New World”-Brand• Lunch global brand of Italian Wine • To become high value brand• Joint Ventures: sharing of risks and costs with a partner
ExportingJoint VentureAcquistion
Partnerships
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INFLUENCING FACTORS “BIG FOUR”
• Access to greater resources, including specialised staff, technology and finance , • reduce production cost • market entry barrier : It overcomes market entry barrier
by acquiring an existing organization• Partnerships with local companies can help to understand cultural differences in
business and consumer behaviour • Increase profit and control in foreign country• Increase market share in foreign country• Reduce potential competition • Access local infrastructure and need of raw materials
ExportingJoint VentureAcquistion
Partnerships
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CHALLENGES RESULTING FROM THE SWITCH• High dependence on the UK & US market, leaving the industry venerable
to develop in this 2 market. • The Australian 4 company have number of partnership in different country
-the liability of the partners for the debts of the business is unlimited• there is a risk of disagreements and friction among partners and
management• Integration problems in accusation :The activities of new and old
organizations may be difficult to integrate• Production oriented-Australian companies have been criticised for being
production rather than marketing orientated. • Capital investment , they are investing everywhere without happy return
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CHALLENGES RESULTING FROM THE SWITCH• rumoured to be takeover targets- While Southcorp, BLR Hardly and
foster have been making acquisitions. • Australia face stiff competition from the established European
market • Australia ,s Low cost New world brand cannibalised other Australian
whine in chilli , south Africa and Argentina. • Big 4 companies have number of joint venture around the world–
which may conflicting goal and objectives between partners. • Unpredicted increase of new whine plant may leas to global whine
glut • Managerial difficulties due to multicultural clashes
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Q3
Discuss whether the „Big Four“ Australian wine companies are able to replicate the same success experienced in the UK market in other export markets such as the U.S., France, Italy, New Zealand, Japan and China. If not, why not?
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FACTORS OF SUCCESS IN THE UK- consumers favoured the Australian wine- no domestic competition
“consumers shift away from beer”- low psychic distance (Australia vs. UK)
individualistic countries; share the same values, Australia used to be a British colony
- Australian wines are high-valued full flavour and generic images of Australia are positive
- Success was underpinned by help from the Australian Wine Export Council- Steady growing consumption over the last ten years
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ARE THEY ABLE TO REPLICATE THE SUCCESS IN OTHER COUNTRIES LIKE
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REPLICATE THE SUCCESS IN UNITED STATES
• booming economy • increasing spend and
consumption habit of its wine drinking population (rise of 13.12%)
• AUSFTA free trade agreement• Low psychic distance• More than 2/3 of production
goes to U.S. and UK
• Growing number of wineries/• 4th biggest wine production in
the world• Complex distribution channels
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REPLICATE THE SUCCESS IN CHINA
• premium wine is high valued• is expected to make a return to the
top 5 consumption countries more middle class Chinese buy everyday wine for consumption at home
• Chinese-Australian Free Trade Agreement
• short transport route• Wine has a cultural function
“keeping face”•Wobbling economy, government
crackdown on goods •2nd largest vineyard acreage in the
world (11% of the world)• fast rising vineyard acreage (+33,9%!)• production of own wine “Sake”•psychic distance: high
• Competitors: France (42.28%), Australia (12.4%)
• Fast growing export market
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REPLICATE THE SUCCESS IN JAPAN
• Economic Partnership Agreement (JAEPA)
• Wine from Australia is high valued
• Short transport route
• Expensive• Production of own “yellow
wine”• Overall consumption remains
modest
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REPLICATE THE SUCCESS IN NEW ZEALAND
• ANZFTA free trade agreement;• Rising wine consumption• Short transport route• Low psychic distance• Rich country
Purchasing power
• Low level of consumption• Small amount of population• Similar climate
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REPLICATE THE SUCCESS IN ITALY
• Wine is highly valued• 3rd highest wine consumption
per capita• Wine is part of the culture “la
dolce vita”
• Declining wine consumption -11.50%
• 4th biggest vineyard acreage• Established market• High psychic distance• Long transport route• Traditional supplier
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REPLICATE THE SUCCESS IN FRANCE
• Growing market (+11.38% consumption)
• Highest consumption per capita,• Wine is an important part of
their culture, high values
• Many competitors, difficult to penetrate; 84% of the most famous wine brands are French• Long transport route• 3rd biggest vineyard acreage • high import restrictions (without partnerships with french companies)
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STATISTICS - WINE CONSUMPTION BY COUNTRY
Population Wine consumption 000 Liters
Consumption per capita
US 313.847.465 3.217.500 10.25France 65.630.692 2.790.000 42.51Italy 61.261.254 2.040.000 33.30New Zealand 4.327.944 93.000 21.49Japan 127.368.088 348.000 2.73China 1.343.239.23 1.580.000 1.18
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STATISTICS - CHANGE IN WINE CONSUMPTIONRanking Country % change in
consumption 2011-2014
% of world consumption
1 US +1.71% 13.12%2 France - 4.85% 11.38%3 Italy - 11,50% 8.32%5 China + 3,93% 6.45%16 Japan + 21.25% 1.42%35 New Zealand + 3.45% 0.38%
Source: TDA
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STATISTICS - VINEYARD ACREAGE BY COUNTRYRanking Country Acreage % of world
totalDifference 2014/2011
2 China 1.974 11% +33.9%3 France 1.876 10.4% -0.6%4 Italy 1.705 9.5% -3.8%6 US 1.035 5.8% +6.0%32 New Zealand 88 0.5% +6.3%40 Japan 43 0.2% -1,7%
Source: TDA
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STATISTICS - WINE PRODUCTION BY COUNTRYRanking Country Wine
production% of world production
Difference 2014/2011
1 France 4.670.100 16.54% +5.4%2 Italy 4.473.900 15.85% -4.3%4 US 3.021.400 10.70% +12.2%8 China 1.117.800 3.96% -3.4%15 New Zealand 320.400 1.13% +13.9%28 Japan 82.000 0.29% -1.2%
Source: TDA
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REPLICATING SUCCESS IN OTHERCOUNTRIES
Trade Agreement Short transport routesWine is high valued
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WHY NOT NZ, ITALY AND FRANCE? European markets are established High Australian Dollar makes them less price competitive
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CONCLUSION Q3
Successful Unsuccessful
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REFERENCES• Kotler, P. and Keller, K. L. (2012) Marketing Management. 14th
Edition. Harlow: Person Education Limited.• https://d28wbuch0jlv7v.cloudfront.net/images/infografik/
normal/chartoftheday_3445_the_worlds_biggest_wine_producers_n.jpg
• Statista• Trade Data And Analysis (TDA)• Wheelen, T. L. and Hunger, J. D. (2010) Strategic Management
and Business Policy: Achieving Sustainability. 12th Edition. New Jersey: Prentice Hall.
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THANK YOU FOR YOUR ATTENTION. ?
ANY QUESTIONS