Case Summary of BRL Hardy: Globalizing an Australian Wine Company

Intro o In January 1998, Christopher Carson, the head of BRL Hardy Europe, faced 2 difficult decisions: Should he launch Distinto, a new line of Italian wines his group had developed, despite concerns from Australian HQ? In response to a UK market opportunity, which entry-level wine should be introduced in Europe: Kellys Revenge, a wine developed by his European team, or Banrock Station, a wine developed by Australian HQ? o Steve Millar, Carsons boss at HQ in Australia, believed strongly in decentralized decision-making and allowing Carson to make his own decisions, but he wanted to make sure that decisions made in Europe where consistent with BRL Hardys strategy to develop global brands. Industry Background o Despite meager beginnings, by 1996, BRL Hardy had become the second largest wine producer in Australia. o Throughout the 1990s, the Australian wine industry experience rapid growth and international expansion. Australian wines were becoming a hot trend throughout the international wine community. o The UK was the largest worldwide importer of Australian wine exports

 Company Background and History o BRL Hardy was the result of a 1992 merger between 2 competing Australian wine producers: BRL and Thomas Hardy & Sons. At the time of the merger, the companies had very different cultures: BRL was known as very aggressive and commercial, while Hardy was known as polite and traditional. o The merger occurred because both companies were struggling financially, particularly with their failing international acquisitions and partnerships. Both companies believed that they would better be able to address these problems as a larger firm. Their critics doubted them, saying: when you put 2 dogs together, all you get is louder barking. o The resulting organization had mostly BRL managers at the high levels, with more Hardy managers filling midmanagement roles.

 New Management, New Strategies o Despite doubts from their critics, the new company began to flourish as a result of some important decisions made by Millar: Change the management style to a more decentralized approach that gave lower levels of the organization the power to make more decisions, but hold them accountable. He particularly wanted to enable the former Hardy managers, who he felt were particularly reluctant to make decisions at lower levels of the organization; a result of the centralized management style that had existed at Hardy. Many of the Hardy managers noted having to earn their stripes before getting full trust from the BRL managers. o Relaunching International Millar appointed Stephen Davies as the new group marketing and export manager for BRL Hardy. Davies immediately noted that the international position of BRL Hardy was relatively weak, with a very disperse portfolio of marginally successful wines throughout the world. Davies first focused on cleaning up the operating and immediate financial issues of the international operations. Once complete, he would begin to focus on a more consistent global branding strategy for BRL Hardy.

BRL Hardy in Europe o At the same time Davies was initiating his turnaround, the recently appointed Christopher Carson was implementing a turnaround of his own at BRL Hardy UK. o Carson had reduced headcount, standardized products, and implemented new controls, systems and policies that moved European operations from a net loss in 1990, to a breakeven in 1991 and a net profit in 1992. o Carson and Davies, naturally, began butting heads and struggling with the control that they were each attempting to impose over the other (Davies wanted strong control initiated from Australian HQ, while Carson wanted more local control for his European offices). o The biggest disputes had to do with wine branding and labeling: Carson believed that the entry-level brands in the UK had completely eroded, and he wanted to relabel, reposition and relaunch them. Davies was opposed to this. In the end, Davies yielded, and the relaunch was a smashing success, which strengthened Carsons belief that the local offices know best. o Evolving Strategy Meanwhile, back at HQ, Millar was pushing a new vision of BRL Hardy as the first truly global wine company with worldwide product access backed by global marketing and distribution capabilities. Naturally, Davies believed that in order to accomplish this vision, HQ would need to become the global brand owners. He believed that if too much control was given to local offices, then BRL Hardy will lose control of their brands and never be able to achieve the goals of their new global strategy. Naturally, Carson disagreed and the war between Davies and Carson waged on. Millar didnt intervene, stating that with 70% growth, we could support the tension.

 The 1997 Watershed Decisions o Based on excellent performance, Carson was appointed to the Chief Executive of BRL Hardy Europe in 1995. o The Outsourcing Ventures Carson realized that grape harvests were vulnerable to regional weather patterns and diseases, thus, sourcing from several regions was a good way to mitigate this risk. He partnered with Caliterra, a Chilean grape grower as a first step. However, in 1996, Caliterra, dropped BRL Hardy and partnered with US winemaker Robert Mondavi. This left a bitter taste with Carson and he vowed to have more control over future partnerships to avoid these types of situations. In response, Carson partnered with another Chilean grape grower, Jose Canopa y CIA Limitada. After a lot of initial difficulty, the partnership was finally in place by late 1997. He also initiated a partnership with Casa Vinicola Calatrasi, an Italian winery. He became so interested in this partnership that in 1997, Carson made plans to create a completely new brand Distinto, which translated as instinctively and was meant to convey an image of the Mediterranean lifestyle. When he relayed these plans to Australian HQ, he stressed how this brand would help offset any Australian grape shortages and would appeal to a very broad consumer base in Europe. HQ management, however, was not impressed. They liked the overall branding idea, but they questioned how well the Italian winery partnership would work out in light of the previous partnership failures. They were also concerned with Distinto cannibalizing some of the existing BRL Hardy wine brands. Millar raised a final concern about Carson losing his focus on his core European brands and whether Carsons organization was capable of launching a major new brand since they were already stretched very thin.

o The Australian Opportunity As BRL Hardys low-end Australian wines migrated up the European price ladder, Carson believed that an opportunity existed to introduce a new low-end Australian wine in Europe. Since Carson was so consumed with the issues described above, he brought in Paul Browne to run with this initiative. This decision pleased Millar, who wanted Carson to delegate more of his decision making to his lower-level managers. Browne came up with the new brand Kellys Revenge, which he believed to be a fun brand that would appeal to first-time wine drinkers. The brand name came from a 19th century Australian outlaw and a colorful, exciting bottle and label was developed. Meanwhile, back at Australian HQ, they were also developing a new low-end wine brand known as Banrock Station. This brand was positioned as an environmentally responsible product. It was a down to earth, unpretentious wine, with an earthy-colored label. Banrock Station was introduced in Australia and New Zealand and became an instant success. This success convinced Davies and Millar that Banrock Station could be a global brand and they urged their US and European offices to introduce it. The US did so. The European office, lead by Carson and Browne, was reluctant to do so, as they believed it would infringe upon the potential of the Kellys Revenge brand. Thus, BRL Hardy was at a Crossroads: The European market couldnt support both brands; they had to pick one or the other. Davies was upset that he was losing control of the BRL Hardy brands at the hands of Carson and Browne. Carson and Browne continued to feel that they knew their market best and that Kellys Revenge had the best chance of success in Europe. Millar, meanwhile, was struggling with his long-held belief of decentralized management. He wanted to give Carson the freedom to make general decisions at the local level, but he also favored the introduction of Banrock Station as opposed to Kellys Revenge. He wondered what action he would have to take if Carson refused to introduce Banrock Station and instead proceeded with Kellys Revenge.