BRL Hardy Case Analysis Recommendations

The wine industry is a considered to be highly competitive industry that has yet to see emerge a true global company with an international brand. The position of BRL hardy within this industry is presently, similar to many other companies, that of a small global-volume supplier and distributor that has a large footprint . The goal of becoming an international wine company is ambitious but achievable; however several changes are recommended in order to make this possible.

Introduction

Christopher Carson in year 1998 reviewed the Nielsen market survey and it showed that Hardy was the top Australian wine brand sold in Great Britain and it holds the number two position in the market among all wine brands selling in the market . It sells in the market by the off trade mode in market .

Mr. Carson managing director of BRL Hardy felt proud .

The celebration is not left for long period . In front of Carson there has two files involving major decisions but it have major implications for Hardy overall international strategy:

1. It contains details of the proposed launch , Italian wines developed in collaboration . The team was deeply committed to his work.

2. In this he had to decide two competing proposals .

After seeing these developments Steve Millar managing director of the South Australia based parent company has faced a phase of growth and this lead to BRL Hardy expansion .

Industry Background

It was first introduced into Australia by Captain Arthur Phillip in 1788 ,leader of the group of convicts and settlers comprised the first fleet of migrants to inhabit the new British colony. The mid nineteenth century provided a boost to youth industry.

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In the 25 years , the Australian wine industry has gone through a huge transformation . First demand for fortified wines declined and wines were replanted with table wine varieties .By the mid 1990’s eighteen half liters per capita is the domestic consumption .

Past two centuries more than 1000 wineries were established in Australia and till 1996 , the 10 largest accounted for 84% of the grape crush and 4 controlled over 75% of domestic branded sales. The Hardy is the number two company selling under the Hardy, Houghton, Leasingham and other labels.

During the period of 1980s and 1990s Australian wine began to seek for large markets in abroad and by the period of 1995 exports accounted more than 27% of production but Australian industry accounts less than 2% of the world wine production by volume and 2.5% by value but this industry is rising rapidly and by 2025 the export potential will grow up to $65 billion- 16% share of the projected trade value .

They saw four export market -The United kingdom, The United States, Germany and Japan but UK market would decrease in 1996 and account for over 40% of over next 25 years these four markets were expected to accounting for 60% of export sales .

Company Background and History

The roots of BRLH’s could be traced in 1853 when Thomas Hardy was 23 years old and acquired the land in South Australia & planted it with wines. First vintage was produced in 1857 and won fir gold medal at Bordeaux in 1882.In 1912 Hardy died but his company was largest winemaker company.

In the River land region northeast of Adelaide,130Italian grape growers formed Australia first cooperative winery in 1916 soon after death of Hardy and they named it as Renamo Wine Cooperative. In year 1982 they merged with The Berri Cooperative to form Berri Renamo Limited (BRL).

By the 1990, almost 500 member growers were delivering over 500000 tons of grapes to BRL and giving the second largest crush in Australia.

International Roots

BRL face the period of success when it began selling abroad and in late 1980s it efforts being seem good when BRL is compared with Hardy history.

After doing research for long period in year 1989 they acquired Whiclar & Gordon, wine importer and distributor in UK. This move led the management to talk about buying of European Wineries so that they can provide newly acquired distributors with the critical mass and credibility to give Hardy’s wines greater access to Europe. In year 1990 two of Hardy directors visited France & Italy wine growing regions and in Southern France they acquired Domaine de la Baume, after six months they took over Brolio de Ricasoli in Italy. In year 1992 after getting motivated by looming Hardy management felt that it is an ideal time to invest. Immediately after three European acquisitions they face the problem . BRL market go slowdown at home ,these problems led to heavy losses to Hardy. After seeing this BRL management decided to propose a merger & in year 1992 they merged soon after three months become a public listed company.

New Management and New Strategies

After the merger it is assumed that top jobs like company deputy chairman, CEO, Operations & Technical director, International trading director are all from BRL where as from Hardy only managing director, Australian sales and marketing manager survived as the members of the new executive team.

Steve Millar the CEO of merged company has explained his following priorities:

To deal with financial situation

After dealing with financial situation next priority is to integrate the two organization.

The Domestic Turnaround

The starting focus of the management should be on domestic market and then implementing new strategies.

Relaunching International

Millar appointed Stephen Davies, Davies had responsibility for setting up company export division and been credited for successful expansion in abroad .He basically found dispersed portfolio of marginal to weak market positions. The first priority is to be to clean up the operating problems.

BRL Hardy in Europe

In the developed market of UK the turnaround had been already started under the leadership of Christopher Carson managing director of Hardy’s UK company.

Within a week of joining the company he felt that the financial situation was disastrous and to rectify or be clear about situation he flew to Australia to Hardy management to tell about the situation of bankruptcy in future if drastic action was not taken to come over he proposed series of cost cutting plans.

Developing the headquarter relationship

Carson highlighted the key problems : To build quickly on the 178,000 of branded product that had represented less than quarter of his total volume. The company has to restore the financial health of its French winemaker and he wanted to protect unstable imported Chilean product.

The 1997 Watershed Decisions

Carson was appointed as chief executive of BRL Hardy Europe in 1995. Outsourcing Venture

Initial five years following the merger : Carson paid more attention on the building sales for the brand Hardy wines but remain aware about the importance of the other non Australian product line which he inherited through acquisition.

Environment Analysis

Environment: The term environment means the things which we found near our surroundings.

Types of environment

Micro Environment: Micro environment means the study of small parts or studying the environment in small area.

In BRL Hardy case the domestic turnaround is look like in following matter:

The strategy that emerged was simple: The company should focus on protecting its share but concentrate on branded bottle sales for growth.

The initial focus is get first the efficiency of merger, concentrate on domestic market and then implementing the new strategy. As well as developing the clear strategy in Millar mind there was need to change the company culture and management style. Though the middle management had great potential but still the Hardy team had been held by being resource constrained and removed from major decisions. The main objective is to create more decentralized approach but to hold management accountable.

Woods earned his stripes by integrating the two sales forces. The results were impressive with both domestic bottle market share and profitability increasing significantly .

Macro Environment : Macro environment mean the study of wider parts or studying the environment as the whole instead of doing study in smaller part.

In BRL Hardy case the study of macro environment is done at the time of relaunching the product internationally. Millar had appointed Stephen Davies who regarded as strategic marketer as group marketing and export manager for BRLH. Davies is responsible for establishing the company export where as the other management people focused on the major restructuring of the domestic operations.

Davies start evaluating the company’s international operations, He found that portfolio of marginal-to-weak market positions, a U.K business selling a small volume of Hardy wines.

The first priority had to be clean up the operating problems only then they would focus on developing the strengths starting with their position in the U.K market. From the existing broad portfolio of exported products, initiated program to rationalize the line and reposition a few key brands.

At the mass market points, for example he focused the line on Nottage Hill& Stamps as the Hardy fighting brands while at the top end he targeted the Eileen Hardy brand.

Product Life Cycle and Strategies

The term Product Life Cycle means how the product goes from its initial stage – growth stage – maturity stage – decline stage.

Product life cycle is basically showing the different strategies of product how it moves in the market to acquire the some position in the marketing environment.

Stages of product life cycle are:

Introduction

Growth

Maturity

Decline

Strategy

The term strategy means how the particular things can be move in environment by setting the proper plan so as to achieve the target in better manner and after evaluating or scanning the surroundings.

To distinguish the product life cycle three special categories has to be discussed:

Styles: is a basic and distinctive mode of expression.

Fashion: is currently accepted or popular style in a given field.

Fads: are fashions that come quickly into public view.

Marketing Strategies at different stages of product life cycle

Marketing Strategies: Growth Stage

It is marked by rapid climb of the sales. Early adopters like the product and rest start buying it after seeing.

New competitors enters introduce new product features and expand contribution.

Prices remain the same, fall slightly depending on how fast demand increases.

Marketing Strategies: Maturity Stage

The rate of sales growth will slow and product enter into relative maturity stage. This stage normally lasts for longer period then the previous stages and poses big challenges to marketing management.

Marketing Strategies: Decline Stage

Sales decline for number of reasons like technological advances, shift in consumer tastes and increase in domestic and foreign competition. All can lead to overcapacity, increased price cutting and profit erosion.

The Evolving Strategy :

In Reynella by the mid 1990s, Millar and Davies began to conceive of BRL Hardy not as a quality exporter but as an international wine company. It was an important strategic shift. Controlling those assets allows us to control our destiny in any major market in the world. For example Jean Louis Duneu , the head of the Paris office, a consulting firm, they recognized the potential of global branding.

In the highly fragmented European industry there were around 12000 producers. Only few names like Veuve Clicquot ,DYqeum had achieved global recognition but these held less market shares.

Though we believe in decentralization & want to listen and support overseas ideas we should be clear about the Reynella’s role.

Marketing Channel:

Marketing channel relates to all the activities which are undertaken to transfer the ownership and move goods from it’s point of production to it’s point of consumption.

In case of BRL Hardy case study it can be categorized into parts:

Communication Channel

It relates to the company’s advertisement objectives and the message that the company wish to give the consumers about the product. It includes factors like branding, marketing, sales promotion, packaging etc.

Creating and maintaining a brand is a difficult task especially in the wine industry. The competition is relatively high and takeover the market is even more difficult especially in Europe. There were more than 12000 producers in Bordeaux alone and apart for a few names like Blue Nun, Mount Cadet etc. there were not many brands known all over the globe. The world’s leading wine brand Gallo, accounted for 1% of the world’s wine market and the majority of the sales was in the home market. But still the management of BRL Hardy believed that due to the changing market conditions and changes in the consumer behavior the company will be able to achieve a global brand image. To achieve this goal Carson presented a portfolio of eight Italian Sourced wine ranging from 3.49 pounds to 5.99 pounds which will capture lifestyle of Mediterranean and relate strongly with food. For this over 2000 possible brand names were generated and out of that list final name choice was D’istinto meaning “instinctively”. The work not end here and to match up with the name and theme of this wine distinctive labels and other packaging designs were made including the idea of free booklet with every bottle so that the customer can write free recopies and this would create a database of the customers to whom future promotions could be mailed. Although due to the prevailing market conditions the success of D’istinto was not 100% sure but the idea of D’istinto and the marketing and branding strategy was much appreciated by everybody including the Australian headquarters. The company not stop here and went on to create brand images for their other line of wine, Banrock Station. It showcased this wine as down-to-earth wine the motto was “Good Earth, Fine Wine”.

Distribution Channel

Distribution Channel highlights the journey of the product from it’s point of origin to its point of consumption. A distribution channel can have numerous steps according to the nature of the product.

In case of BRL Hardy the distribution channel starts when the farmers sells its harvest to the company and the company sells it to the retailer which in turn is finally sold to the consumer.

Recommendations

BRL Hardy must return to the roots of its strategies which are developed some time ago by Millar and Davies: focuses on the BRL Hardy, or at least develop a single brand, that can command a premium price in the market. This will ensure to reduce the competitive threats. As part of this brand, the history (Australian, over 200 years old) should be used (Australian reduces number of competitors, differentiates from exporters from other countries; 200 years old is a barrier to entry), the environmental and sustainable angle should be pursued (based upon reality of e.g. Banrock Station; another barrier to entry currently). A new brand should be investigated that might add the dimension of fun to the brand image (in the manner of Virgin, for instance). The addition of fun to the brand will enable the younger, affluent segment of the market to be addressed; possibly this segment is not as widely addressed particularly within the markets and in emerging markets (Asia) .This can be done through market research .This determines what product should be taken to market. The question then remains as to how to effect the successful introduction of this wine into the market given BRLHardycurrentsituation.

In order to obtain some advantage from going global, a consistent brand image worldwide is a possible option. Although the industry wisdom says that local responsiveness is needed within the wine market because of the differing cultural and social norms within different countries, addressing the segment of the market will remove the need for local responsiveness; global convergence is adopted more quickly by the younger age segments so market to them. BRL management has already benefit that Hardy already subscribes to the notion of a global brand. However this is not the case with for instance the European division of BRL Hardy. A solution to this issue is to allow the European division to continue to operate somewhat independently, taking high volume low priced wines, without the BRL Hardy brand, to the European market that has capacity for such wines, and use the cash flow to fund the reinvention and introduction of the new BRL Hardy global brand. Time should be taken to perform this internal marketing before launching the new brand.