Background

Analysis of Competitiveness Concentration on branded

bottle sales No dependence on distributors, importers and agents Threat from new entrants, especially from large global liquor giants 2/3rd Sales of BRLH from the UK market UK A large developed market

UK largest non-producing wine importer Access to vineyards - Ease of Sourcing A well-developed base for further expansion in UK Wide product portfolio Technical Expertise

Highly fragmented industry in Europe Brands with global recognition had miniscule share Retail-owned, labordominated Distribution: More push than pull

What are the Strategic and Organizational Logics for the Distinto decision?
March 1997: Initial contact with Casa Vinicola Calatrasi, a family-owned winery in Sicily Purpose: Exploring alternative European sources, particularly for red wine Partnership with a co-op of 135 members

Product was designed to give customers the information they needed

Easy-to-read labels with a pronounceable brand name Give the customers a wine they would enjoy a brand they would trust

 Portfolio of eight new Italian-sourced wines spread across the low and lowmiddle price points Baseline 3.49 (less well known indigenous Sicilian grapes) Mid 3.99. At 4.99 (blends of indigenous & premium varietals) Top at 5.99 (blends of super-varietals)

3.4 Distinto & Mapocho

3.4 Distinto & Mapocho

Mapocho:
In early 1997 Carson negotiated a 50/50 joint venture agreement with Jose Canopa y CIA Limitada Chileans Provide the fruit and the winemaking facility BRL Hardy Would send one of its winemakers to make several wines that it would sell in Europe under the Mapocho brand Using its marketing and distribution capabilities Despite several mishaps, difficulties, and delays during the negotiations by late 1997 the supply arrangements were in place
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3.4 Distinto & Mapocho

3.4 Distinto & Mapocho

Distinto line is primary low price oriented evidently by four brands in the segment from 3.49 to 3.99
Right now no product in the BRL Hardy price matrix Important gap of BRL Hardy would be closed and the product category enriched
27.99 24.99 27.99

5.99 6.99 4.49 Hardy Leasingham Chateau Reynella 5.99 4.49 Mapocho

5.99 3.49 D'istinto

Houghton

D'istinto line would overlap with the Hardy line and the Mapocho line
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3.4 Distinto & Mapocho

Mapocho:
Mapocho project was not going well For months, Canepa (JV) had raising doubts and concerns about the JV Claimed their costs went up, and wanted to renegotiate the supply price

Early sales were disappointing and forecasts were that the first vintage would sell only 15,000 cases against the 80,000 originally planned Company stood to lose up to 400,000

3.4 Distinto & Mapocho

Mapocho:
100.00

Characterized by very unstable sales 10.00 Unreliable managers Disappointing forecasts 1.00 Possible loss of 400.000
10000.00

Chile

1991

1992

1993

1994

1995

1996

1997

Hardy line
Constantly growing Representing core offerings in U.K.

1000.00 100.00 10.00 1.00 1991 1992 1993 1994 1995 1996 1997 Hardy

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3.4 Distinto & Mapocho

Problems for Distinto

Establish a new brand beside the already existing ones would be connected with high efforts to human resources and the organizational capacity

Positive for Distinto

Not expected to have the same disadvantages like the Mapocho line Real cooperation with the 135 farmers in Sicily BRL will send technical experts to enhance the value of the farmers harvest through new productive vineyard techniques and new winemaking methods Surveillance would guarantee to receive high quality fruits Partnership and the sourcing from different regions - high quality anticipated

Negative for Mapocho

Ongoing problems with the Chilean managers about supply prices and the disappointing fruits and forecasts are a high risk to steam
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3.4 Distinto & Mapocho

Mapocho line
Would bring more money in the best case Labor costs of the Mapocho line are lower than the Italian line

Distinto
Clear diversification and branding Quality and security as well as the savings in the transportation and currency fluctuation, the Distinto line is the better decision for the future of BRL Hardy BRL would be able to deliver a wider range of products to the retailers with higher security of demand Higher attractiveness to the retailers
Possibility to serve even more customer demands from one hand

Millar should approve Carsons proposal to launch Distinto but with the declaration to erase the Chilean source
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