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Coopers creek and the new zealand wine industry

  • Export markets were expected to be more price sensitive and, therefore, those resources which contributed to cost reduction may have been the more critical in these particular markets;
  • These issues are examined in Exploring Corporate Strategy, chapters 2, 3, 5, 7 and 9.

It is the first time charges have been brought under the Wine Act, but it is far from New Zealand's first wine scandal. Every five to 10 years, Michael Cooper reckons, it happens again.

That's how long it seems to be between scandals. When our wine industry is shaken by revelations that a certain bottle, for a variety of reasons, is not what it says it is on the label.

The trend stretches back to the early 1980s when Cooper, now a wine writer, had a story published in the Listener about makers of cask wine diluting their product with tap water by as much as 80 per cent to stretch supply.

In 1998 Coopers Creek winery allegedly altered the composition of several of its export wines, blending vintages with other grapes to levels that required a say-so on the label.

A Canterbury winery is facing more than 150 charges related to alleged mislabelling of its product. In 2006 an award-winning Wither Hills sauvignon blanc was found to be an early release of its vintage and only a tiny fraction of what was available in stores. Average it out and Cooper's timing theory stacks up.

He was front and centre on the Wither Hills scandal — a judge in the Cuisine magazine awards who smelled a rat when the bottle he bought from his local supermarket didn't compare to the competition entry.

Most trangressors, he said, tend to fall into that category: There are rules around how much you can do any of these things before you have to let the consumer know.

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For example, a wine from one region of New Zealand can by law contain up to 15 per cent from another without altering the label. Cooper said this is open to exploitation.

  • He also initiated local networking efforts and enjoyed visiting existing and potential customers personally;
  • Indeed, the 35 per cent cost saving resulting from the elimination of intermediaries means that Coopers Creek may be an effective cost competitor in the on-premise and supermarket segments;
  • The domestic market has become increasingly competitive, as would be expected given the industry developments noted in Section 1, but the collaboration with local wineries persists.

To get a good price it's great if it's labelled as Martinborough or Central Otago and not good if it's from Hawke's Bay. It must be very tempting for a producer based in the Wairarapa to pull [more grapes than allowed] from Hawke's Bay, where you can grow good pinot noir in the cooler inland sites, and label it as Martinborough.

The industry is now ferociously competitive.

  • The reputation of any winery rests on the quantity and quality of the grape supply;
  • Interestingly, the majority of the networks in which Coopers Creek was involved were horizontal or competitor-based 7;
  • The threat of the introduction of a low cost alternative is more serious for the development of new markets, where the New Zealand and Coopers Creek brands are unknown;
  • Interestingly, while supermarket sales have disappeared for Coopers Creek in the UK market, due to an increasing focus on price, Andrew is actively negotiating to supply a number of US supermarkets;
  • It could be argued that the previously successful partnerships with the grape growers meant that Coopers Creek occupied a position of trust and good reputation which could be brought to bear when securing supplies, even though these relationships had become more arms-length, transaction-based in nature.

We've got wineries that are financially failing. When the pressure goes on, people do things to survive that they shouldn't. Now, wineries must keep a Wine Standard Management Plan.

A short history of NZ wine scandals

This records every step of the winemaking process and is subject to an annual inspection by a Ministry of Primary Industries-approved auditor. New Zealand Winegrowers chief executive Philip Gregan said such a system would have caught out Coopers Creek-type offending.

Because there were no records they weren't able to do anything. The issue here is you're required to keep records.

That's what the wine standard management plan's all about. In the Coopers Creek case, the investigation was triggered by a claim it had misappropriated 10,000 litres of grape juice given to it by another winery for fermenting.

  1. However, this is only really evident for the Belgian market, with other European markets seemingly developing independently of the UK market. The dominant strategy of Coopers Creek, in common with the New Zealand wine industry as a whole, has been one of focused differentiation 5.
  2. This may be achieved by assigning different analyses to sub-groups within the class; for example, one group perform the PESTEL, another five forces, one focus on life cycle issues, one construct the resource audit and another develop the value chain analysis.
  3. The arrangement made sound operational sense even though the participants clearly maintained a focus on competition at the level of the individual winery label. Cooper isn't convinced the system is built to preserve that.

Former New Zealand Winegrowers chairman and National MP Stuart Smith said that wouldn't happen now as, under the management plan, grape tonnage can be compared to wine production. It should come out with 740,000 litres. You can squeeze more out of them but you can't get more than 1000 litres per tonne. Labelling scandals can be devastating for a brand, but Gregan and Smith agree New Zealand has a high standing overseas for the transparency of its wine industry.

Cooper isn't convinced the system is built to preserve that.

  1. There are rules around how much you can do any of these things before you have to let the consumer know. Having established a strong foothold in existing export markets, Coopers Creek should be able to maintain and, perhaps, increase its market share in the UK and the US 7.
  2. The investment in assets and the increasing focus on the Coopers Creek and Cat range brands might indicate that the company intends to go down this route; however, exit may be another plausible option for Andrew Hendry. Case analysis This section offers a number of suggestions for discussing the above questions and exploring related issues.
  3. This proved an effective strategy since, typically, the demand for grapes outstripped supply until 1996.

Because of the damage that these scandals can do.