BRL Hardy: Globalizing an Australian Wine Company - Management Assignment Help

Assignment Task

In January 1998, Christopher Carson smiled as he reviewed the Nielsen market survey results that showed Hardy was the top-selling Australian wine brand in Great Britain and held the overall number two position (to Gallo) among all wine brands sold in Britain’s off-trade (retailers, excluding hotels and restaurants). As managing director of BRL Hardy Europe, Carson felt proud of this achievement that reflected a 10-fold increase in volume since his first year with Hardy in 1991. But his mental celebration was short-lived. In front of him were two files, each involving major decisions that would not only shape the future success of the company in Europe but also have major implications for BRL Hardy’s overall international strategy:
• The first file contained details of the proposed launch of D’istinto, a new line of Italian wines developed in collaboration with a Sicilian winery. Carson and his U.K. team were deeply committed to this project, but several questions had been raised by Australian management. Not least was their concern about Mapocho, another joint-venture sourcing agreement Carson had initiated that was now struggling to correct a disappointing market launch and deteriorating relations with the Chilean sourcing partner.
• The second issue he had to decide concerned two competing proposals for a new entry-level Australian wine. His U.K.-based management had developed considerable commitment to Kelly’s Revenge, a brand they had created specifically in response to a U.K. market opportunity. But the parent company was promoting Banrock Station, a product it had launched successfully in Australia which it now wanted to roll out as a global brand at the same price point.

Watching over these developments was Steve Millar, managing director of the South Australia-based parent company that had experienced a period of extraordinary growth, due in large part to BRL Hardy’s successful overseas expansion (Exhibit 1). A great believer in decentralized responsibility, he wanted Carson to be deeply involved in the decisions. But he also wanted to ensure that the European unit’s actions fit with the company’s bold new strategy to become one of the world’s first truly global wine companies. Neither did he want to jeopardize BRL Hardy’s position in the critically important U.K. market that accounted for two-thirds of its export sales. For both Millar and Carson, these were crucial decisions.

This document is authorized for use only in Ankit Agarwal's Managing Orgs & People Sem 2, 2020 at University of Adelaide from Jul 2020 to Jan 2021.

Industry Background
Vines were first introduced into Australia in 1788 by Captain Arthur Phillip, leader of the group of convicts and settlers who comprised the first fleet of migrants to inhabit the new British colony. A wave of European settlers attracted by the gold rush of the mid-nineteenth century provided a boost to the young industry, both in upgrading the availability of vintner skills and in increasing primary demand for its output. Still, the industry grew slowly, and as late as 1969 annual per capita wine consumption in this beer-drinking country was only 8.2 liters—mostly ports and fortified wines—compared with over 100 liters per person per annum in France and Italy.
In the following 25 years, the Australian wine industry underwent a huge transformation. First, demand for fortified wines declined and vineyards were replanted with table wine varieties. Then, as consumers became more sophisticated, generic bulk wine sales—often sold in the two-liter “bag in a box” developed in Australia—were replaced by bottled varietals such as cabernet sauvignon, chardonnay, and shiraz, the classic grape type increasingly associated with Australia. By the mid-1990s, domestic consumption stood at 181/2 liters per capita, eighteenth in the world.

Over this two-century history, more than 1,000 wineries were established in Australia. By 1996, however, the 10 largest accounted for 84% of the grape crush and 4 controlled over 75% of domestic branded sales. Most of these were public corporations, the largest of which was Southcorp whose brands included Penfolds, Lindeman, and Seppelt. The number two company was BRL Hardy Ltd. (BRLH), selling under the Hardy, Houghton, Leasingham, and other labels. During the 1980s and 1990s changes in the global wine industry had a major impact on these emerging Australian companies. A rationalization and consolidation among wine wholesalers and
retailers was increasing the power of historically fragmented distribution channels. At the same time, however, large-scale wine suppliers from New World countries such as United States, South America, South Africa, and Australia were exploiting modern viticulture and more scientific wine-making practices to produce more consistent high-quality wine. These developments were occurring in an environment of rapidly growing demand from new consumers in nontraditional markets.

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