From a Wine Exporter to a Global Wine Brand Company

BRL Hardy, the Australian wine company, increased its 1991 international sales of US$31 million to US$178 million in 1998 when it realized the opportunity to build up a global wine brand, something previously unimagined in the highly-fragmented global wine industry. The Old World (European) wine industries of France, Spain, Italy, Germany, and others are so fragmented in producers, cultivars, and brands that it confuses consumers and retailers alike. A large supermarket store in Europe sells hundreds of different types and brands of wine made by a huge variety of producers, from the Old World and New World wine producers. The New World wine producers come from countries such as the USA, Australia, New Zealand, Chile, and South Africa.

In most Old World wine countries, wines are labeled according to region, subregion, and even village. In addition to that, a vineyard in France can be further categorized according to its historical quality classifications such as the Premier Grand Cru, the (ordinary) Grand Cru, and so on. The world famous wine region Bordeaux alone has over 12,000 producers. Italy has over a million separated winegrowing units in private ownership. In Australia on the other hand, only four companies dominate 80% of the local wine industry, making for a more consolidated industry. It is this power of larger scale that allows New World wine producers to build up brand strength and distribution capability. The major wine importing countries are the United Kingdom and Western European countries such as Germany, Holland, and Sweden, where the range of wine brands have proliferated five-fold in the past ten years.

In the early 1980s, BRL Hardy found itself “trapped” in the shrinking market of the lower quality and price segment of the major wine importing markets, especially the UK. The business model was an “export company” model built on significant quantities of low-margin wine products, with the large supermarket chains in the UK having the power to dictate wine styles, quantities, timing, and prices. In world terms, BRL Hardy was a relatively small and entrepreneurial entity. Steve Millar, the managing director at that time, decided that the only way out would be to “change the rules of the game” and to come up with a new business model. He sensed that wine consumers were frustrated with the proliferation of wine brands and their lack of knowledge of relative wine qualities and service. He further sensed that there was no real global wine brand, while these were commonplace in soft drinks, beer and some high-alcohol spirits. He surmised that a global wine brand would make things easier for suppliers and customers, and could “free” them from the stifling power of large retailers.

A key issue was the eventual realization (or sensing) by BRL Hardy that the major knowledgeable wine customer need, or customer wine value proposition, was made up of three elements: well known global image; consistency of quality and availability; and “value-for-money”, including affordability and competitive pricing. Once it was clear that something had to be dramatically changed, it was important to have the necessary prerequisites to engage in disruptive change. In 1991, for example, Christopher Carson, an experienced international wine marketer, was appointed managing director of the company’s UK operations. Over the next 18 months, he pruned three-quarters of the items in the fragmented product line, replaced half of his management team, and began building a culture around globalism, creativity and innovation, and global value chain configuration and management. It was realized that dynamic new organizational capabilities were needed, and Hardy embarked on a targeted strategic alliance building with companies in Italy, Spain, and the USA. These alliances added essential expertise, infrastructure, and finance (technological and other resources infrastructure). Several mistakes were made in the process, but nothing survival-critical, and these eventually contributed to the learning experience and overall value-added of the new business model.

The company started to focus on integrated wine production, supplementing their Australian product line by sourcing and supplying wine from around the world. By breaking the tradition of selling only its own wine, Hardy was able to build the scale necessary for creating strong global brands and negotiating on equal basis with large retailers. The advantages of global sense-making to Hardy have been clear and powerful: The company’s range of wines – from Australia as well as France, Italy, and Chile – responds to the supermarket companies’ need to deal with only a few broad line suppliers. Simultaneously, the scale of operations has supported the brand development that is vital to transforming products from the commodity range.

A radical corporate strategy, as in the case of BRL Hardy, is to introduce new business models that challenge an industry’s established rules of competition, or ways of doing business. Results and profitability have been outstanding. In Europe, the volume of Hardy’s brands has increased 12-fold in seven years, making it the leading Australian wine brand in the huge UK market, and number two overall to Gallo in the United Kingdom. Hardy has evolved from a mere Australian wine exporter to a truly global wine company, utilizing global scope and scale economies and drawing on knowledge and skills from many parts of the world.