BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
BRL Hardy: The Post Merger Success
Perhaps the main drive for BRL Hardys post-merger success was the fact that the two
merged companies were so distinct from each other. BRL was a company that sold fortified
wines and took a bulk and volume approach, and thus had as one of its main assets its grape
resources. Hardys on the other hand was a recognized, traditional award-winning brand wine
that had marketing expertise and brand recognition. This essentially meant that Hardy had the
know-how and innovation while BRL had the funds and resources to implement the ideas.
Another reason for the success was the appointment of Steve Millar as CEO of the newly
merged companies. Millars management placed an emphasis on turning BRL Hardy into a
global powerhouse brand by emphasizing the need to decentralize risks and responsibilities
while still maintaining the accountability of central management. Steve Millar also took a
rational approach by focusing on the Pareto Principle, the law of the vital few (the 80-20
principle), in business. That is, he recognized that 80% of achievements roughly come from 20%
of the amount of time and effort spent. He thus decided to focus his operations on getting 80%
success with around 20 projects as opposed to 100% success with just one or two.
The overall company strategy was also a big reason for the success that occurred postmerger. The companys central leadership decided to emphasize the majority of their sales in the
domestic (Australian) market which resulted in stately domestic bottle share and increasing
company profitability. There was also an emphasis on cutting costs and finding ways to improve
efficiency such as reducing the number of brands offered as well as employees by repositioning
with only a few strong brands.
Chris Carson, the experienced Hardy manager, was also vital to the success of BRLH
because he was able to recover failing UK and European enterprises by reducing the product
portfolio by around 70% and halved the employee count. As a result of the goal to become a
global company, the companys strategy of strengthening international distribution, investing in
the improvement and acquisition of new properties and facilities related to wine-producing, as
well as the positioning and labeling of global brands also stimulated the success of the company.
The company was able to take a minimum risk global approach by sourcing their wines from

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
multiple regions. The approach to decentralize while maintaining central accountability was
also solid in that it planned to place the responsibility of labeling, pricing and branding in
Australia while entrusting to foreign branch managers the responsibility of distribution,
promotion and sales.
Decentralization vs. Centralization: Power Struggles between Davies and Carson
The main source of tension that existed between Stephen Davies and Christopher Carson
was the simple conflict of centralized management vs. foreign branch autonomy. This seemed to
be an issue that arose in a post-merger context due to the fact that Carson was initially part of the
Hardy Co. before the merger with BRL and was previously used to operating under a
decentralized structure whereas after the acquisition, his previous experience and
accomplishments would be ignored as a result of new management and hed lose autonomy over
his operations in the UK by being forced to answer to Stephen Davies. Another area of conflict
stemmed from the fact that pre-merger, Hardy and BRL took very different approaches to selling
wines. BRL was more of a bulk oriented seller that emphasized brand-name importance, and
controlling its position from home, whereas Hardy took a more local approach and emphasized
the importance of retailer relations when deciding how to label and position the brand. This was
a major source of conflict because the long-term goals of BRL involved becoming a large
global player in the wine industry which obviously involved having a tighter and more
centralized grip of overseas operations.
Steven Millars reaction and handling of the conflict between Stephen Davies and Chris
Carson is open to a little bit of managerial interpretation. On the one hand, executives want
their managers to be competitive with each other and clash in order to stimulate new ideas and
creativity. On the other hand, his actions could be considered messy for encouraging such
ineffective behavior like dual-line reporting (when managers have responsibilities to one
executive but report to another one). This is grave considering the fact that Carson, while
autonomous was also technically still below Davies on the hierarchy, and had to consult
marketing and brand strategies with him while also having to submit profit reports directly to
CEO Steve Millar. It is difficult to make an absolute judgment on the actions taken by CEO
Millar, but for the most part, it seems that they had positive, albeit not flawless, results. Millars

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
objective from the beginning was to create a decentralized approach to expanding the newly
merged company but to still maintain management accountable. This was slowly achieved by
allowing them to negotiate and settle their conflict, and in the process promoted growth of up to
70%. However, Millar did not specify exactly how he wanted to organize the structure for a
decentralized approach that still maintained central-management accountability, his hope for
negotiation between Davies and Carson could be viewed as passivism and thus and indicator
of weak executive management, and, despite the growth that arose from these conflicts, they
would later manifest themselves more intensely when Carsons appointed marketing manager
and his UK branch would come to back their wine brand Kellys Revenge while senior
management (including Mr. Davies) was backing Banrock Station.
DIstinto: A European Brand with Aussie Backing
As CEO, Millar had to make a lot of decisions that involved competition and brand
overlapping between branches within his own company. Involved in these was usually the very
savvy Chris Carson, particularly in his creation of the Italian brand DIstinto versus the Chilean
Mapocho brand. The decision by Millar for choosing between these two overlapping brands
seems quite rational, stick with Carsons proposal to launch DIstinto and scrap the
Chilean project altogether. While acquiring Chilean wineries and facilities fit in with BRLHs
objective of spreading the risk and trying to build up a global brand, the flaws mismanagement
of the Chilean enterprise doomed Mapocho to failure. Management was unreliable, sales were
unstable, forecasts were grim, and it put the company at risk of facing a loss of around 400,000.
DIstinto, on the other hand had much success. The Italian brand had the advantage of
real cooperation with around 135 experienced wine growers in Sicily as well as help from
corporate that would send technical experts to enhance the value of farmers harvest via
new productive vineyard techniques and winemaking methods. There was really only one
threat to the launching of the DIstinto line, and that is the fact that it would stretch an already
thinned out human resources department that had been forced to deal with about 5 years of
expansion. From a managerial perspective, DIstinto did have the advantage of being a personal
project of Chris Carson, who wanted to position the brand by giving it a very attractive
Mediterranean image of warm, passionate, and relaxed while pairing it with food. This made it

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
an attractive brand, particularly to British consumers, and versatile as a result of its marketing
with a complementary good: food. It also allowed the consumer to participate in the image of the
product by allowing them to submit recipes involving the use of the DIstinto wine.
DIstinto would also have a higher chance of succeeding due to its higher attractiveness
to retailers, which Carson pointed out as being essential to succeeding in local markets. Thus, it
seems that, despite the risk of overworking a diluted Human Resources department and the fact
the shortcomings of other foreign brand ventures, Millar should decide to back Carsons
proposal for DIstinto but also cut out the Chilean sources and brand Mapocho in order to
cut costs on an unstable, doomed project and focus more on a brand that has serious
hierarchical cooperation and appeal to consumers in its respective market.
Global Prospects vs. Regional Goals: Banrock Station vs. Kellys Revenge
The choice between Kellys Revenge and Banrock Station is a difficult choice for the
BRLH Wine Company. It is one that, again, stems from its desire to be a global company but at
the same time one that is decentralized to better adapt to local and particular national markets
while also maintaining central management accountable. Kellys Revenge was, like DIstinto, a
pet project from Carsons UK Operations. However, it did not seem as though he was as
involved with this project as with DIstinto, but rather the marketing manager he appointed, Paul
Browne. Banrock Station, on the other hand, was the brand that had been launched in Australia,
New Zealand and the US with much success, one of the main sources of its appeal was the
fact that it emphasized its use of earth-friendly production methods. Judging from the
already proven success of Banrock Station in global markets, as well as the companys desire to
stimulate growth first on the Australian home turf, it seems that the most rational course of
action would be to support the launch of Banrock Station and gradually fade out the
production of Kellys Revenge.
The main issue with Kellys Revenge is the fact that its development was far too
decentralized from home management and ran the potential for relabeling or rebranding the
BRLHs image in the UK and Europe without BRLHs consultation or approval. The brand was
designed to be a blatantly Australian brand with international appeal. This was a good concept

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
that kept in line with BRLHs goal of becoming a global wine company, but the problem is that
the image ran the risk of seeming too Australian, thus alienating and failing to attract
consumers in the UK, particularly among the young crowd. Banrock Station already had success
in three markets, one of them being the aforementioned domestic Australian market that
BRLH wanted to emphasize in order to promote company growth. A driving force behind its
success in Australia, New Zealand, and the US, was its image as an eco-friendly brand through
use of earth-tones in its labels as well as informing the customer on the label of the earth-friendly
production methods used to make it. A theme like environmental friendliness is certainly
one that has more of a global appeal than the perceived Australian exclusivity of the Kellys
Revenge brand. However, the management team responsible for the development of Kellys
Revenge expressed doubts about the launch of Banrock Station, citing the fact that in the UK and
European markets, BRLH wines were still in their growing stages, meaning that the green
image it was trying to ride to glory would have very limited appeal to UK consumers, on top of
the fact that its dull, colorless label would also not be too appealing to retailers.
With someone given the kind of autonomy that Chris Carson has, it would seem like a
wise idea to stick by the ideas and projects of the managers he has appointed. However,
autonomy aside, someone like Carson needs to realize that company goals and interests need
to be taken into account before the creation or even discussion of a new brand. His ultimate
decision should be to side with the implementation of Banrock Station while finding a way to not
alienate his own managers and leaders involved in the creation of Kellys Revenge. One way to
ease the fall, as well as keep the brand from competing with the DIstinto line would be to
position the brand slightly higher than expected, at the 3.99-4.49 price range as opposed
to 3.49-3.99.
Steve Millar acknowledged that he is partially responsible for some of the tension that
occurred between Banrock Station and Kellys Revenge because he encouraged decentralization
and Carson to delegate more responsibilities how he saw fit, and in doing so further
compromised central managements control over its own brand to its foreign subsidiaries. Steven
Millar should acknowledge that the Banrock Station brand has already garnered domestic and
international success in certain markets, and that the market testing and appeal of Kellys

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
Revenge was poor among senior managers and consumers. He should communicate with Carson
and remind him that the ultimate goal of the company is to become a globally recognized brand
and that with consumer appeal and sales results backing his claims, Banrock Station has more of
that potential over Kellys Revenge. In order to shake off the passive reputation that Millar
has had with regards to dealing with disputes inside his own company, he should give
Carson the ultimatum to remove Kellys Revenge and focus on Banrock Station as the go-to
brand while giving him more power over marketing, sales, and promotion tactics in his
region. This would help to restore Millar and central managements grip on its overseas
subsidiaries while not compromising its desire to be decentralized or the autonomy of its
overseas managers like Christopher Carson.
The Raw Facts: Interpretation of Charts and Data
Since decentralization was a main source of conflict throughout BRLHs organizational
history, but also a goal that it wanted to successfully achieve in order to better respond to the
demand of regional markets, we must first start off with analyzing the numbers for its subsidiary
BRL Hardy Europe Ltd., particularly under the leadership of Mr. Christopher Carson, and then
compare them to the actual historical figures of overall company performance. For the majority
of this analysis, we will focus on marginal data and rates of change derived from the tables
provided in the case study in order to go beyond analysis of just absolute figures by deciding
how much certain expenses or gains increased or decreased by and why.
BRL Hardy Europe
For the most part, it seems that the financial performance of BRLHE Ltd was quite solid.
If we peek at Appendix 4 and look at the graph comparing the Gross Profit (after distribution
expenses) and Administrative Costs, we notice that the former experiences a steady increase in
its slope, and that during the 1995-1996 time period, the gap between these two factors was at its
greatest, and a forecast for further separation between these two lines, indicating a prediction for
increased efficiency geared at increasing revenue while decreasing costs. Net Sales Turnover
(In ) also showed much promise, with the time period between 1996 and 1997 showing a sharp
increase in the steepness of the slope and a forecast of further sales expansion.

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
However, there is some cause of concern. Despite the stellar performance of BRL Hardy
Europe, there seems to be an efficiency issue. Let us first focus on employee figures. During the
beginning of Carsons reign as Managing Director of BRLH Europe, we notice a reduction in the
number of employees, consistent with his plan to cut costs and increase efficiency, however, if
we consult Appendix 2, the number of people employed by BRLH Europe began to increase after
1993. This is not necessarily a bad thing, however what is daunting is the fact that sales per
employee, measured in , began to decrease. Now, immediately we can place the blame on the
simple fact that this branch was attempting increase employment so soon after its merger and
recover process, that not enough sales were being produced among the new arrivals, thus
bringing down the once high average. Even more alarming is the fact that the graph in Appendix
4 measuring the Sales per Employee predict negative rates of change, meaning that the
forecasts expects sales per employee to go down! Another cause for concern is the Return on
Investment, measured here in percentages. The main cause for concern is the fact that theres too
much fluctuation. At the beginning this could be explained, again, by the transitional period that
occurred during the post-merger period. From 1994-1995, ROI saw its lowest rate of change as
we can see on the ROI graph in Appendix 4, while predicting further decreases in the future.
This would make it very unattractive for potential investors and, if the trend continues along with
an unfriendly economic environment, would risk having current investors remove BRLH
Europes stock from their portfolios, which would in the long run affect the companys abilities
to fund future projects and operations.
While BRLH Europes key figures (positive Gross Profit and Net Sales Turnover, flatlining to negative Administrative Costs) continue to look very healthy as we can see from the
graphs in Appendix 4, the little things that can in the long-run pile up, such as decreased
employee efficiency as well as ROI and Stock value at year end. The downward and negative
trends that we see in employee efficiency and inversely the positive increase in number of
employees coincide with the time period in which Carson and his marketing manager Paul
Browne were working on the development of their Kellys Revenge brand, indicating poor
prospects for the brand.
BRL Hardy Limited

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
From looking at the historical company data provided in the packet, post-merger, the
performance is outstanding. Debt/Equity Ratio, if we look in Appendix 1 keeps going down
consistently, and if we look at the first graph in Appendix 5, the rate of change for Total Assets
and Sales Revenue keeps going up consistently along with Shareholder Equity while the rate of
change for Total Liabilities goes down. In fact, during the 1997-1996 time periods, the gap
between the rate of change for Total Assets and Total Liabilities is at its highest. This is
indicative of strong financial performance and a solid investment opportunity for potential
investors. Taking into account the expansion attempts by BRLH and its goal to be a global brand
while also looking at the numbers, it seems as though theyve managed to keep debt and
liabilities suppressed while increasing asset value and sales revenue.
While BRLHs performance overall is very competitive and solid, there are points of
concern that arise. If we rely strictly on the information provided in the first table in Appendix 1,
all we would see is solid growth and no cause for concern. However, once we look at the
marginal data located in the second table in Appendix 1 we notice some discrepancies. For
instance an increase in the rate of change for Total Liabilities as well as fluctuating rates of
change in sales revenue during the time period between 1993 and 1996. The Debt/Equity Ratio,
while in absolute value terms is on the downward turn, when we look at its rate of change during
this time period, there is also fluctuation, reaching its high point during the time period between
1996 and 1997. In fact, from looking at the second graph in Appendix 5, we see that profit
reached their lowest points during 1994-1995 and during the time period of 1995-1996, in the
first graph of the same appendix, the gap between rates of change of Total Assets and Total
Liabilities is smallest, indicative of a very grim trend for a companys performance. All of these
downturns and negative findings are time-consistent with the development of the Kellys
Revenge by BRLHs European subsidiary and, obviously, the competition that occurred between
the aforementioned brand and the senior management backed Banrock Station.
The data for BRLH Ltds historical performance indicates an overall positive, solid
performance consistent with its desire to become a globally recognized brand. Efficiency
maximization appears to be tackled well with consistently decreasing liabilities and increasing
shareholder equity and total assets. The causes for concerns are the minor fluctuations previously

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
discussed. If in fact we assume that these fluctuations are directly correlated to the development
of Kellys Revenge as well as that brands competition with the company favorite Banrock
Station, it certainly shows us the power and importance of the European market not just to the
operations of BRL Hardy Ltd, but to the wine industry in general. Also, this minor instability
shows us the consequences of attempting to decentralize operations while losing central
managements overlook: CEO Millar encouraged Carson to delegate responsibility in the
European branch to more managers without requiring that these prospective managers, or the
projects they have in mind, be first approved or consulted by central management.

APPENDIX 1
BRL Hardy Limited: Summary Group
Financial Results 1992-1997
(Aus$millions)

SALES REVENUE
PRE-TAX&INTEREST OPERATING
PROFIT
NET AFTER TAX PROFIT
EARNINGS PER SHARE
TOTAL ASSETS
TOTAL LIABILITIES
SHAREHOLDERS EQUITY
DEBT/EQUITY RATIO

Marginal BRL Hardy Limited: Summary

Group Financial Results 1992-1997
(Aus$millions)

Sales Revenue
PT&I Profit
Net Profit
Earnings Per Share
Total Assets
Total Liabilities
Shareholders Equity
Debt/Equity Ratio (%age)

1992
151.5

1993
238.3

1994
256.4

1995
287

1996
309

1997
375.6

16.7
8.8
0.132
216.8
117.4
99.4
70%

26.6
13.3
0.141
234.6
127.4
107.2
57%

30.2
15.8
0.157
280.7
146.6
134.1
57%

34
17.4
0.157
329
160.4
168.6
53%

39.3
21.2
0.181
380.6
194.4
186.2
58%

49.2
28.4
0.233
455.5
205.8
249.7
41%

92-93 93-94 94-95 95-96 96-97

86.8
18.1
30.6
22
66.6
9.9
3.6
3.8
5.3
9.9
4.5
2.5
1.6
3.8
7.2
0.009
0.016
0
0.024
0.052
17.8
46.1
48.3
51.6
74.9
10
19.2
13.8
34
11.4
7.8
26.9
34.5
17.6
63.5
-0.13
0
-0.04
0.05
-0.17

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY

APPENDIX 2
BRL Hardy Europe Ltd.
Key Historical Data (in
000)

Net Sales
Turnover
Gross Profit ADE
GP % Sales
Administrative
Costs
Admin %Sales
Profit After Tax
PAT %Sales
Avg. # Of
Employees
sales per
employee
Stock @year end
Stock Turnover
ROI

1990

1991

1992

1993

1994

1995

10788
1173
10.90
%

12112
1429
11.80
%

12434
1438
11.60
%

15521
1595
10.30
%

18810
1924
10.20
%

27661
2592

1104
10.20
%
-26
0.20%

1261
10.40
%
6

1164

1172

1308

1896

9.40%
157

7.60%
266

7%
395

6.90%
426

0.00%

1.30%

1.70%

2.10%

1.50%

31

27

19

20

22

24

348
1226
7.8
2.10%

449
1043
10.2

654
605
18.2
11.20
%

776
897
15.5
17.90
%

855
1392
12.1
24.50
%

1153
1265
19.8
23.50
%

0.50%

1996

1997

1998

1999

2000

2001

32271

40100

53848

66012

78814

91606

9.40%

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
3202

5453
10.10
%

6488

7630

8787

9.90%

4212
10.50
%

9.80%

9.70%

9.67%

2118

2717

3649

4473

5340

6207

6.80%

6.80%

6.80%

6.80%

6.80%

6.80%

723

948

1087

1286

1460

1644

2.20%

2.40%

2.00%

1.90%

1.90%

1.80%

28

34

48

62

76

91

1153

1179

1122

1065

1037

1007

1504

1500

2100

2600

3300

3900

19.3
35.70
%

23.9
39.70
%

23

22.9
37.80
%

21.6
36.10
%

21.2
37.20
%

38%

APPENDIX 3
Marginal BRL Hardy
Europe Ltd.: Key
Historical Data (in
000)

Net Sales
Turnover
Gross Profit
ADE
GP %Sales
Admin Costs
Admin %Sales
Profit After Tax

90-91

91-92

92-93

93-94

94-95

95-96

1324

322

3087

3289

8851

4610

256
0.009
157
0.002
32

9
-0.002
-97
-0.01
151

157
-0.013
8
-0.018
109

329
-0.001
136
-0.006
129

668
-0.008
588
-0.001
31

610
0.005
222
-0.001
297

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY
PAT %Sales
Avg. # of
Employees
Sales Per
Employee
Stock @Year
End
Stock Turnover
ROI

0.002

0.013

0.004

0.004

-0.006

0.007

-4

-8

101

205

122

79

298

-183
2.4
0.026

-438
8
0.107

292
-2.7
0.067

495
-3.4
0.066

-127
7.7
-0.01

239
-0.5
0.122

96-97

97-98

98-99

99-00

00-01

7829

13748

12164

12802

12792

1010

1241

1035

1142

0.006

-0.004

-0.003

-0.001

1157
0.000
3

599

932

824

867

867

225

139

199

174

184

0.002

-0.004

-0.001

-0.001

14

14

14

15

26

-57

-57

-28

-30

-4

600

500

700

600

4.6

-0.9

-0.1

-1.3

-0.4

0.04

-0.017

-0.002

-0.017

0.011

APPENDIX 4

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY

APPENDIX 5

BRL HARDY: GLOBALIZING AN AUSTRALIAN WINE

COMPANY