1. Executive Summary Like many other industries, the New Zealand Wine Industry (NZWI) is a dynamic one.

It is a fact, however, that consumption of alcohol as a whole has fallen. Therefore, we can conclude that the changes facing the industry may not necessarily be beneficial for it. Competing for market share in such a mature environment is without doubt an extremely delicate and difficult affair. However, one such company that is attempting to do so is Coopers Creek (henceforth referred to as Coopers). Our report aims to provide a clear and concise snapshot of the global as well as NZWI at this juncture, as well as analyse how the industry might change over time. In addition, an integral part of the report will focus on how Coopers might deal with these changes, and the way in which they can incorporate these changes into the company's corporate roadmap. The report takes into account a few of the macro (external) and micro (internal) factors that had, and will continue to have, significant impact on the industry and the company in general, and suggest alternatives or solutions that our group feels may be feasible. Certain models have been used in support of our analysis, and the group critically evaluates the use and effectiveness of these models in determining Coopers success factors as well as core competences. From this analysis we then try to identify certain weaknesses in the Coopers value proposition, as well as take note of the areas that Coopers may be able to exploit. On a whole the management at Coopers has steered the company in the correct direction. However, more emphasis might be needed in terms of differentiating itself from the other New Zealand (NZ) brands. It would have to build on its brand equity, and continue leverage its founder Andrew Hendry's contact network. Succession planning would also have to be included in future strategic plans so that the company will continue to prosper should Andrew decide to depart or retire. 2. Introduction 2.1. Wine Industry and its market studies The Wine Industry (WI) is filled with many players and there is a huge supply of wine from all over the world, with approximately 70 main wine producing countries. To a certain extent, this industry is at its early maturity stage and wine-producing firms are vying hard for market share. There is a danger of industry capacity exceeding demand basing on the alcohol consumption based on per capita consumption. Since the early 1960's there has not been much growth in wine consumption. The growth was mainly in beer consumption . On the whole, Europe is the highest alcohol consumption region coupled with being the largest wine-producing region as seen in the graph below. However, from studies done by World Health Organization has found that there has not been not much increase in consumption level in this region. The two main regions with continuous increase in consumption are South-East Asia and Western Pacific regions. Exhibit 1: Volume of Wine Production

With the foreseeable problem in mind, industry players in this market are strategically planning to carry out several activities to find out (1) The wine styles preferences of consumers (2) Characterize the quality attributes grapes & wine and develop appropriate research industry and tools to quantify them (3) Develop systems for the production of wines free from agrichemical residue (4) Develop systems for the consistent production of grapes of specified qualities with synchronized maturity attributes and wine of specified quality. The main objective for carrying all these activities is gaining competitive advantage. 3. External Environmental Scanning 3.1. Industry Life Cycle The Global Wine Industry is entering into the early maturity phase of its life cycle as evidenced by the consolidation and takeovers happening in the industry and the increasing level of competitiveness. From a demand perspective, the worldwide wine consumption has stagnated. According to the Wine Institute, there is only a 2.04% growth in wine consumption from 1997 to 2001. In fact, worldwide consumption dropped from 227,875 hectoliters to 226,646 between 1999 and 2000. Generally there is a drop in consumption from the traditional wine drinking countries like France and East European countries, whilst demand has growth significantly from China. The production of wine has shifted from the traditional vineyards in France to the rest of the world. There are New-World Wines from Australia, New Zealand and South Africa. These wines are generally thought to be of moderate to high quality and are essentially challenging the traditional wine producers on the quality front. Furthermore, there are wines coming out from China and India. Because of the lower wages in these countries, wines can now be produced at a fraction of the costs of the French vineyards. Price has now become a big challenge that the traditional wineries have to face. Some author's even suggest that the Old-World producing countries like France has followed growth & decline and now has entered a second life phase. While the New-world countries are in an emerging or growth phase. Exhibit 2: Life Cycle of Wine industry and Wine growing Countries There are also increased pressures of consolidation in the industry. There are many mergers and acquisition activities happening as bigger players combine to leverage scale in production and distribution. On the product side, there is now a wide variety of wine ranging in quality from fine wines to the very basic as seen in the exhibit below. There are even wines, which are sold as table wines, or wines intended for cooking. Exhibit 3: Various Wine Segments As the industry moves towards maturity phase of its life cycle, the pace of consolidation will increase.

3.2. PESTEL Analysis The following is a review of the major environmental factors, which will impact the industry to a large extent. A closer examination of the more important factors amongst them will allow for a tighter integration between the external environmental factors and the corporate strategy chosen for Coopers. Political factors Government regulation has always played a major role in the WI. There are increasing concerns that there will be new barriers and trade impediments to trade in the WI. One such example is the trade disagreement between US and European Union in the level of farm subsidies that the US alleged that the EU farmers receive. The same allegations may also be similarly levied on the European vineyards. In the Wine Institute report on International Trade Barriers to U.S. Wine 2006, European wine producers were noted to have received certain subsidies . Tariffs also have been the most important barrier to the international wine trade. Some governments impose unusually high tariffs on wine imports . Recent announcement in the media like India opening its market and slashing duties on imported wine and spirits bring good news to the industry, as this will allow them to enter this lucrative untapped market. Though due to WTO pressure the tariff has been reducing, which has lead to major wine producing countries imposing various non-tariff trade barriers. One such non-tariff trade barriers are research fundings made available by local governments to improve the overall harvest yields and quality of the country's grapes . Economical factors The rising number of middle class worldwide has led to an increasing appreciation of wine and demand for wine. In developing economies of China and India, this class of consumer is expected to increase significantly over the next decade. With the continued increase of economic growth rates for both countries, these consumers can now afford to consume wine is expected to grow significantly as well . The effect of currency fluctuations on the WI will continue to play an integral part in influencing the WI. The proportion of wine being exported outside the wine producing country has increased. Even in a traditionally large wine consuming market, the proportion of wine, which ends up in foreign land, has been increasing. The continuing trend of exporting to new markets such as India and China is going to increase as wine producers cope with the declining wine demand in traditional home markets As a result, the wine producers' exposure to fluctuations in currency exchange rates will increase further. Socio-cultural factors The increased spending power, sophistication of the middle class in many countries with increased tendency of copying the west has helped to increase the demand for wine consumption. This growing group of earners from various countries is often well traveled & highly educated consumers with needs and wants for the better things in life. The number of middle class across

Asia is expected to grow by 1 billion in the next 8 years . With the shift in demographics in the developing countries, there will be more wine drinkers in the future. Increasingly, there are also more scientific evidences that there are health benefits to be derived from moderate drinking of wine especially red wine. As a result, there is an increasing acceptance of the beverage as "health-product" leading to a healthy heart. Technological factors Innovation and technological factors continue to drive improvement in production yields and better storage of wine. The Australian WI today has transformed itself from a small cottage industry to one of the largest exporter of wines internationally, even to the extent of eclipsing some of the older Old-World countries. The great leap forward for Australia can be attributed to the Australian wine producers clustering to innovate and improve existing processes . The growth of e-commerce infrastructure and the increasing acceptance of buying things online have led to new opportunities for wine connoisseurs and wine producers alike. With this new technology, niche wine growers are able to reach out to the individual wine consumers without being drowned out by the marketing noise generated by the large wine producers. The ability to ship small quantities directly to individual wine drinkers without passing through layers of middlemen may mean that small niche growers may be able to find their position in a market dominated by large brand names . Environmental factors Within the Food and Beverage (F&B) industry, the WI is markedly different from the other products due to the fact that F&B products are limited by market, while the WI is limited by resource (land and grapes). Reason being wine is grown in moderate climates and on certain types of soil. Sudden climatic changes may adversely affect production yields or may even destroy crops all together. The significant changes expected in the environment from global warming, rising sea levels, rising carbon emissions and increasing acidity in the waters will all add to contribute to the adverse conditions for which growers will find themselves in. These conditions together with a scarcity of good arable land may act to constrain or even reduce the industry's supply. On the positive side, in one of the rare articles published in Newsweek on the positive effects of global warming, the author highlights that fast melting of Artic glaciers and increase in global temperatures may lead to opening of new vineyards in many parts of the world with weather conditions similar to the France's Champagne region. Legal factors External environmental legal factors have acted in line with other environmental factors changes. For example, the advent of the Internet e-commerce has resulted in changes in legislation for wine sales, which crosses state lines in the United States . In addition, the origin of the grapes used to make wines also became a contentious issue for many wine-producing countries. The origin of these grapes and the proportion of local grapes used became an issue for branding and labeling of wines; as governed by new local legislation controlling wine labeling . 4. Inter-Industry Environment Analysis

4.1. Porter's 5 forces analysis We have analyzed Coopers internal environmental factors using Porter's Five Forces analysis. Being in a specialized industry, it is not easy for another player to just come in wanting a portion of the pie. The WI requires specialized skill sets, special knowledge and extensive experience to stay competitive. It also needs very high investment especially for equipments used for processing of wine. This indirectly induces high entry cost which is work as a barrier of for new entrants. There is also the expected retaliation faced by new entrants from existing players. Coopers together with other existing players may collaborate to deter competitors from coming in. For example, Coopers may start dropping its price and the other existing players may follow suit leading to a price war. On the whole, the force of threat of entry is low here. Power of buyers Power of buyers is considered high for this business, as the product does not tie down customers. They are free to go for any wine without having to pay for any switching costs. Customers in the case of the supermarkets chains command certain buyer power, as they constitute a large proportion of customers in this industry. Power of suppliers Power of suppliers force is neither high nor low in this case. The main drawback faced is the limited supply of the unique strain of grapes required. Wine producers like Coopers have suppressed the power of suppliers, by integrating backward in the supply Chain by owning their own vineyards and growing their own grapes or through long-term contracts. As such, players in this industry need not worry about the costs of switching suppliers due to low concentration of suppliers. Threat of Substitutes This industry faces stiff competition from not only other wineries but also from other alcoholic drinks such as beer, spirit and pre-blended mixed drinks and carbonated drinks. Product-forproduct substitution is also possible should customers of Coopers decide to try out other brands/types of wine. For the health conscious, bottled water, energy drinks and natural fruit juices also provide competition. Possibility of generic substitution is also there where as customers may prefer to spend on purchasing cigarettes rather than drinking wine. Thus, there is a high force of threat of substitutes in this industry. Threat of entry Competitive rivalry among existing firms is evident in this industry. Larger companies are acquiring smaller wine producers to monopolize the market resulting in dynamic competition amongst these companies. As the WI is at its mature stage, companies start to take market share from competitors to survive. As there are too many wine producers, adding on to the high power of buyers, companies may decide to go for price wars due to high fixed costs to gain market share. This industry has high entry and exit barriers due to the extensive capital investment and knowledge & skill set needed. In addition one must have sustainable resource, as it takes several years for wine to mature. This means that industry players do not have many choices. Again this

induces competition amongst them and price wars and low margins situations are likely to happen. Based on the information above, the groups came to the conclusion that the industry is "Medium Attractive".
.0 Introduction Coopers Creek, established in 1982, became one of New Zealands more successful medium-sized wineries by following a strategy of resource leveraging via networks of co-operative relationships with other New Zealand winemakers in the domestic and export markets. This strategy allowed Andrew Hendry, the managing director, to consciously manage the growth of the company to retain the benefits of small size. However, with increasing globalisation of the wine industry, the changing nature of export markets, the early maturity of the New Zealand industry and the constrained supply facing New Zealand wine makers, Andrew Hendry was faced with the decision of how to position a smaller company for the future. He had to decide whether the network-based strategies that served the company so well continued to be appropriate under conditions of industry concentration, increasing competition and emerging globalisation. (Robbins S, 2006) 1.1 The NZ wine industry When Andrew Hendry established Coopers Creek, the New Zealand environment was highly regulated. By 1984, the New Zealand government had initiated a programme of deregulation, which included devaluation of the New Zealand currency, exchange rateflotation and general anti-inflationary measures. (Porter M, 2001) The opening of New Zealands domestic market meant that businesses had to improve their efficiency substantially over a short period. The agricultural sector sought out new markets, to replace the loss of their traditional dependence on the UK market with its increasing commitment to its European trading partners, and new products, reflecting a growing awareness that much of New Zealands exports were of a commodity nature. This period saw growing exports to Australia, the United States, Japan and the rest of Asia and exports of predominantly sheep meat and dairy produce being accompanied by more fresh fruit, venison and wine. A further response to fiercer competition at home and in...