POOLEY WINES:
STRATEGIC MANAGEMENT REPORT
ABSTRACT:
A report analysing the business environment of Pooley Wines to formulate strategic recommendations for the future.
Word Count: 3, 249
Table of Contents:
2.1. General Environment Analysis 3
2.2.1.4. Substitute Products 6
2.2.1.5. Rivalry Among Competitors 7
2.2.2. Attractiveness of Industry 7
2.3. Competitive Environment 7
2.4. Opportunities and Threats 8
3.3. Core Competency Analysis 11
3.5. Strengths and Weaknesses 13
4.1.1. Marketing/Brand Image 13
4.1.2. Vertical Integration 14
4.2. Recommended Strategies 14
4.2.3. Establishment of Separate Business Entity 16
4.2.3.2.1. Purpose and Position 16
4.2.3.2.2. Business Structure 17
Appendix D: Core Competencies 26
1. Introduction
Pooley Wines (PW) is a premium, award-winning, and boutique family-owned winery located in Tasmania’s Coal River Valley region (Pooley Wines 2022). The area’s unique environment, combined with the tangible and intangible resources of the Pooley family, contribute to their esteemed position within the Tasmanian wine-making industry. This report analyses the current market position of PW by examining the external and industry environment. An internal analysis is used to identify PW’s core competencies, ultimately informing the recommendation of three future strategies.
2. External Analysis
2.1. General Environment Analysis
The general environmental factors affecting PW include economic, physical, sociocultural, technological, and demographic.
2.1.1. Economic
A business’ economic environment concerns the broad economic conditions in which they operate (Chua & Tsiaplias 2011). While the national economy is in recession, the local wine industry is in boom due to domestic wine tourism and direct e-commerce sales (Wittwer & Anderson 2021). Furthermore, local wine industries are benefiting from increased online sales prompted by Government stimulus and the forced closure of hospitality (Pooley 2022).
2.1.2. Physical
A business’ physical environment refers to the dynamic set of natural environmental conditions that impact the functioning of a firm (Hogevold & Svensson 2011). PW is heavily influenced by the physical environment, with land suitability integral to viticulture (Pooley 2022). The Coal River region provides a favourable micro-climate, allowing PW to grow quality wine grapes (Pooley Wines 2022).
2.1.3. Sociocultural
Sociocultural factors influencing business include societal values, attitudes, and perceptions that guide human behaviour (Montoya et al. 2022). As ‘Tasmania’s first and only fully accredited environmentally certified sustainable vineyard’ (Pooley Wines 2016), PW benefits from the increasing emphasis consumers place on sustainable food and beverage production (Vermeir & Verbeke 2006). Further, Tasmanian consumers display strong traits of ethnocentrism, favouring locally produced goods such as PW over foreign products (Bird 2020).
2.1.4. Technological
Technology is an important factor in a business’ strategy, with automation, mechanisation, and digitalisation becoming increasingly prevalent (Rachinger et al. 2019). When used correctly, technology can provide firms with a competitive advantage (Rachinger et al. 2019). PW utilises advanced weather stations to monitor climatic conditions, ensuring optimal growing conditions for their grapes (Pooley 2022).
2.1.5. Demographic
Demographics are concerned with a population’s characteristics, including geographic distribution, age structure, and income (Hanson et al. 2017). Bruwer and Li (2007) observed a positive correlation between wine consumption and age, with individuals over forty consuming a higher amount. Further, wine consumption is greater in households of lower income (Bruwer & Li 2007). Demographically, Tasmania is characterised by an ageing population and low average household income (Australian Bureau of Statistics 2016). Evidently, Tasmanian demographics are advantageous for wine producers.
2.2. Industry Analysis
2.2.1. Porter’s Five Forces
Porters Five Forces can be applied to analyse the factors influencing PW as a business operating within the Tasmanian wine industry.
2.2.1.1. Supplier Power
PW’s reliance on suppliers is mitigated by their vertical integration of the wine production process. The main raw material required for wine production are the grapes themselves (Šperková & Hejmalová 2011). PW reduces the bargaining power of suppliers by growing 85% of the fruit required for their wine production (Pooley 2022). To maintain their sustainability accreditation, PW are limited to sourcing from sustainably certified vineyards. Other major inputs for wine production include materials used for packaging that are readily available on the open market, thereby reducing supplier power in this domain (Šperková & Hejmalová 2011).
2.2.1.2. Buyer Power
PW experiences high levels of brand loyalty, as evidenced by the 1,200 members of their wine club, each committing to purchase 36 bottles annually (Pooley 2022). Members are not obligated to renew their memberships, resulting in a high level of buyer power due to the abundance of substitute products available. This risk is offset given that Australian wine consumers deem the brand of wine as the most important factor in their purchase decision (Bianchi, Brennan & Proud 2014).
2.2.1.3. Potential Entrants
The risk of new entrants is low due to the high start-up cost and importance of vineyard location (Pooley 2022). PW’s differentiation strategy ensures they maintain a loyal consumer base and mitigate the threat of other producers. The vineyard’s location and unique soil profile provide its products with distinctive characteristics that cannot be easily replicated by competitors (Pooley Wines 2022), further reducing the risk of new entrants.
2.2.1.4. Substitute Products
PW’s products can be substituted for different alcoholic beverages and similarly positioned wines available in the market. However, the continual growth of the wine industry is conducive to sustained wine consumption (Wittwer & Anderson 2021). Additionally, differentiation and ethnocentric attitudes result in high brand loyalty, maintaining PW’s customer base among wine consumers.
2.2.1.5. Rivalry Among Competitors
There is a degree of comradeship among Tasmania’s 230 individual vineyards (Wine Australia 2021). It is common practice for PW to direct consumers to other cellar doors to promote the Tasmanian vineyard community (Pooley 2022). Despite this, a PW employee (anonymous) raised concerns over established wineries relocating from interstate to small regions, like the Coal River, which could increase competition and disrupt community relations.
2.2.2. Attractiveness of Industry
The increasing difficulty of obtaining suitable land combined with the financial and time commitments involved in establishing a vineyard reduce the attractiveness of entering the Tasmanian viticulture industry. Further, given the abundance of well-established wineries with loyal customer bases, it is becoming increasingly difficult to penetrate the Tasmanian wine market (Pooley 2022).
2.3. Competitive Environment
The domestic wine market can be divided into the Tasmanian and national markets. Tasmania produces 1% of Australia’s wine, accounting for a 4.2% share of total national sales (Wine Tasmania 2022). Given that Tasmanian-produced wine commands a higher price, consumers are more likely to be loyal to their preferred winery (Drennan et al. 2015), mitigating the level of competition among the 230 Tasmanian vineyards.
Tasmania does not currently produce any bottles of wine that retail under $15, however, 93% of wine produced on mainland Australia is sold below this price (Wine Tasmania 2022). Tasmania’s lack of competitive offerings in this category allow low-priced interstate wines to dominate the market segment valuing price over quality.
Imported wine accounts for less than 20% of domestic sales, illustrating a relatively minor threat to the local market (Wine Australia 2021). With growing consumer preference towards higher-priced international wines, it is evident that imported products compete with premium wines, such as PW (Wine Australia 2021). This competition is mitigated by the ethnocentric behaviour exhibited by Tasmanian wine consumers (Bird 2020).
2.4. Opportunities and Threats
Tasmanian wineries continue to face increasing levels of competition from distillers and producers of alternative alcohol products. This threat can be attributed to changing consumer preferences coinciding with the growing presence of over sixty local distillers (Australian Distillers Association 2022).
Through investigating the general, industry, and competitive environment, a table summarising PW’s opportunities and threats has been developed (See Appendix A).
3. Internal Analysis
3.1. Resources
A list of PW’s tangible and intangible resources can be found in Appendix B. While all resources are important to the operations of PW’s, there are some significant tangible and intangible resources that are integral to their operations.
3.1.1. Tangible Resources
3.1.1.1. Location
Operating in the Coal River Valley, PW’s products possess unique characteristics which serve as a point of differentiation (Pooley 2022). The Coal River Valley is unique, featuring historic river soil deposits and a microclimate influenced by the Southern Ocean and local topographic features (Pooley Wines 2022). The Coal River Valley area is geographically limited with finite land reducing expansion prospects.
3.1.1.2. Infrastructure
PW has been operating for three generations, resulting in large amounts of infrastructure development that is utilised by their business (Pooley Wines 2022). Infrastructure development is expensive, with vineyard construction costing up to $80,000 per hectare (Pooley 2022). Furthermore, PW own a processing plant in Cambridge and an 1830’s homestead on Butchers Hill that operates as the cellar door and primary point of sale.
3.1.2. Intangible Resources
3.1.2.1. Staff Knowledge
PW’s winemaker, Anna Pooley, has acquired extensive viticulture knowledge throughout her illustrious career, working for some of Australia and Italy’s most renowned wineries (Pooley Wines 2022). Furthermore, Anna completed the exclusive Len Evans Tutorial in 2012, placing her in the top echelon of winemakers nationwide (Pooley Wines 2022). PW invests heavily in staff training, ensuring customers are provided with extensive knowledge on their range of wines (Pooley 2022).
3.1.2.2. Brand Image
First established in 1985, PW has evolved into a brand synonymous with high quality, ‘boutiqueness’ (Pooley 2022), and exclusive Tasmanian wine (Pooley Wines 2022). Research suggests brand image creates a strong perceived value between products with minimal differences in their functional benefits (Tavitiyaman, Qu & Zhang 2011). Therefore, PW can use its strong brand image to communicate its luxury products, increasing the perceived value of its wines.
3.1.2.3. Customer Loyalty
PW benefits from strong customer loyalty, as demonstrated by the growing number of memberships in their wine club (Pooley 2022), serving as a significant competitive advantage (Jiang & Zhang 2016). PW preserves customer loyalty by offering members numerous benefits including discounts, exclusive releases, and access to private events (Pooley Wines 2022).
3.2. Capabilities
A firm’s capabilities are created through the utilisation of their tangible and intangible resources (Hanson et al. 2017). Capabilities allow a firm to provide goods and services that create value. A list of PW’s capabilities can be found in Appendix C. Many of PW’s capabilities can be categorised into three interrelated areas of the business. This includes Matt Pooley’s knowledge and implementation of sustainable viticulture practices; the speciality winemaking processes resulting from tri-generational refinement and industry-leading specialists; and their strong brand image and customer loyalty.
3.3. Core Competency Analysis
Core competencies are rare, valuable, costly to imitate, and non-substitutional capabilities of a business that provide a competitive advantage (Hanson et al. 2017). Appendix D examines PW’s predominant capabilities and assesses their eligibility as core competencies. This report analyses the three identified core competencies.
PW is the first and only winery in Tasmania to earn the title of an accredited ‘environmentally certified sustainable vineyard’ (Pooley Wines 2022) which lends itself to being a core competency (Pooley 2022). The process of attaining this accreditation is costly, both in time and investment, requiring impact assessments in six key focus areas (Sustainable Winegrowing Australia 2022). Appealing to Tasmania’s prominent environmental attitudes, the industry-leading certification increases perceived values and cannot by substituted for lesser accreditations. As the first winery with this accreditation, PW’s certification serves as a core competency.
Anna Pooley’s knowledge of international winemaking practices and world-class training contribute to her rare and unparalleled abilities. Furthermore, PW’s processing operations have been developed and refined for three generations (Pooley Wines 2022). Both elements are highly valuable and costly to imitate. The precise development of PW’s processing operations is not substitutional without significant investment in highly skilled human resources. Through generational experience and industry-leading viticulturalists, PW’s winemaking process is a core competency.
PW’s facility produces 450 tonnes of wine annually. They reserve 130 tonnes for themselves, with the remaining 320 tonnes produced for other vineyards (Pooley 2022). PW’s large facility, in combination with their unique processes, allow them to create value through the provision of a contract winemaking service to other local vineyards. The opportunity for vineyards to have their grapes processed through the industry-leading facility is both rare and valuable. A process of such quality is not substitutable and is costly in time and resources to reproduce. Therefore, PW’s winemaking processes are a core competency that they can contract to other vineyards.
3.4. Value Chain Analysis
3.4.1. Primary Activities
PW undertake primary activities of growing grapes, producing wine, and distributing their product. PW take advantage of its core competency of being a sustainable certified vineyard by growing 85% of the fruit required for their wine production. The firm’s core competency of tailored winemaking processes facilitates their second primary activity of wine production. PW produces over 130 tonnes of their own wine each year, however, their infrastructure supports the production of 450 tonnes (Pooley 2022). Further value is created by offering contract winemaking services to other vineyards, thereby achieving high levels of production capacity, and reducing the opportunity costs of their vertically integrated processes. Distribution occurs in various forms, with 65% of PW product sold through their cellar door, wine club, and online store. The remaining 35% is sold through wholesale distribution channels (Pooley 2022).
3.4.2. Support Activities
PW uses various support activities to aid the operation of their business. Regarding human resource management, PW employs sixteen full-time staff members to support their primary activities (Pooley 2022). PW also offers hospitality services, offering food options to support the sale of wine at the cellar door (Pooley Wines 2022). Marketing activities support the distribution of PW products by communicating product information, acquiring and maintaining wine club members, and developing their brand image.
3.5. Strengths and Weaknesses
Examining PW internal environment, the business’ strengths and weaknesses have been summarised in Appendix A.
4. Strategy Formulation
4.1. Current Strategies
This report examines two core strategies that PW are currently implementing. These core strategies capitalise on PW’s core competencies and inform the report’s future recommendations.
4.1.1. Marketing/Brand Image
PW strategically utilise its core competencies to maintain a brand that values ‘boutiqueness’, quality, and sustainability whilst paying homage to its strong family and Tasmanian heritage (Pooley 2022). The relatively small scale of PW’s operation facilitates strong relationships with their 1,200 wine club members. This assists in sales security and forecasting given each member commits to purchase 36 bottles each year (Pooley 2022). Further, PW’s cellar door operates every day of the week, fully capitalising on the 350,000 annual tourist visitations to the Richmond area (Pooley 2022). The strength of PW’s brand loyalty is further influenced by its numerous esteemed awards (Pooley 2022).
4.1.2. Vertical Integration
PW’s vertically integrated process encompasses the entire winemaking operation from growing to point of sale. PW’s winemaking facility and specialised processes are integral to its operations. Resulting from three generations of development and Anna Pooley’s expertise, PW’s vinification processes are fundamental to the unique and award-winning wines they produce. Capitalising on this core competency, PW offer contract winemaking services to other local viticulturists, utilising the complete capacity of their specialised winemaking facility.
4.2. Recommended Strategies
This report recommends three strategies that PW can implement to further their profitability while maintaining their strong brand image and market position.
4.2.1. Vineyard Expansion
PW currently grows 85% of their wine grapes, with the remaining 15% being purchased from local vineyards (Pooley 2022). PW have limited potential suppliers as they are required to adhere to the environmentally certified sustainable vineyard standards. While PW has significantly mitigated supplier’s power, they remain susceptible to price increases, especially in years of poor harvest. PW currently owns land suitable for vineyard expansion and are in the process of obtaining sufficient water rights to support this (Pooley 2022).
It is recommended that PW invest in expanding their vineyard to the extent that their wine grapes are 100% internally sourced. This would eliminate grape supplier power and allow PW to promote 100% internally grown Tasmanian produce, further strengthening their brand image. In undertaking this recommended strategy, PW must be aware that the new expansion will not yield fruit for three years and not make a return on investment for five (Pooley 2022). However, this strategy will future-proof PW’s operations.
4.2.2. PW’s Masterclass
PW is a successful, high-quality Tasmanian winery, that, with tri-generational experience and industry-leading specialists, was awarded Halliday’s Australian winery of the year (Pooley 2022). PW’s success can be attributed to the knowledge and leadership of Anna and Matt Pooley, who have both undertaken internationally renowned training (Pooley Wines 2022).
This report recommends that PW offer a limited access Masterclass designed for winery owners throughout Australia. The three-day class will be offered bi-annually with a maximum of five participants. Divided between Matt at the vineyard and cellar door, and Anna at the processing facility, the Masterclass will offer attendees firsthand experience in the complete operations of a successful boutique winery. Furthermore, the class will educate attendees about the industry-leading environmental practices that have contributed to PW’s brand image and sustainability certification.
The $7,500 Masterclass will be fully catered and provide accommodation at Prospect House. Upon completion of the training, participants will be presented with a certification recognising their development within the industry.
4.2.3. Establishment of a Separate Business Entity
4.2.3.1. PW Position
PW’s customer loyalty is attributed to their high-quality wine and reputable brand image. Their success has resulted in excessive demand causing PW to prioritise increasingly limited stock for wine club members. As brand image is integral to PW’s future success, Matt does not wish to increase production and supply of wine as it would dilute the brand (Pooley 2022). Additionally, Matt does not want to increase the product’s price beyond its current position within the top 15% of Tasmanian wines, with fears it would out-price the target market.
It is recommended that PW maintain its existing level of production, increasing the growth of its wine club as this is the ultimate strategy for a ‘boutique’ winery (Pooley 2022). To further increase the Pooley family’s market share, this report recommends the establishment of a separate winemaking entity that shares the core competency offered by PW’s specialised winemaking facility.
4.2.3.2. Loopey Wines
This report recommends the establishment of Loopey Wines (LW). LW functions under the ownership of the Pooley family, but operates with a different brand name, trademark, and ABN. The ownership of LW will not be publicly promoted, thus protecting the PW brand and customer loyalty whilst increasing the Pooley family’s market share.
4.2.3.2.1. Purpose and Position
Tasmania does not produce any bottles of wine that retail for under $15 (Wine Tasmania 2022). Wine Tasmania’s 2021 report highlighted the need for Tasmanian wines across all ‘styles and price points’ to ‘drive value and market-led growth’ (Wine Tasmania 2022). LW will be the first Tasmanian-produced wine under $15, capitalising on this untapped market segment. LW will compete with a cost leader strategy against mainland and international budget labels. LW will benefit from an ethnocentric point of differentiation, capitalising on Tasmanian consumer behaviour, thus increasing perceived value and providing a competitive advantage.
4.2.3.2.2. Business Structure
This report recommends LW operate through a vertical complementary strategic alliance with a vineyard from the Australian mainland. The mainland’s climatic environment causes grape ripening to occur at a different time of year to Tasmanian vineyards (Webb, Whetton & Barlow 2011). The strategic alliance would involve the mainland vineyard growing, harvesting, and pressing the wine grapes before transporting the liquid product to Tasmania. LW will have primary access to PW’s processing facilities due to their joint ownership and ‘off-season’ production. This will ensure PW maintain their contract winemaking services for Tasmania’s harvest season and continue the facility’s operation throughout the offseason. After processing, LW will be responsible for the distribution of the product for sale throughout Tasmania.
This arrangement capitalises on PW’s specialised winemaking processes, adopting their core competency into LW’s business. The report aims for LW, in utilising PW’s specialised processes, to produce a quality product at a budget price. This is seen to be achievable with the correct processes, evidenced by ALDI’s $6.99 bottle being awarded the best dry red wine at the Sydney International Wine Competition (Sydney International Wine Competition 2018).
The financial arrangement of the strategic alliance is to be determined by LW and the contracted vineyard. The report recommends that the provision of inputs and transformation processes be uncharged, with an agreed division of profits between parties upon the sale of the product.
5. Reference List
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Bird, I 2020, ‘The Tasmanian Project report finds Tasmanians want local food’, The Advocate, 25 June, viewed 6 September 2022, <https://www.theadvocate.com.au/story/6805057/tassie-fish-meat-fruit-and-veg-preferred/>.
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Hanson, D, Hitt, MA, Ireland, RD & Hosksson, RE 2017, Strategic Management: Competitiveness and Globalisation, 6th edn, Cengage, Melbourne.
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6. Appendix
Vineyard location Water rights Brand loyalty Established infrastructure Intergenerational experience Environmentally sustainable vineyard certification Awards Customer relationships through wine club High product demand Tasmanian local wine producers’ comradery Processing facilities’ large capacity Richmond’s tourism appeal Vertical integration Distribution network Social media network and promotion |
Weaknesses High price Staffing availability Stock shortages 15% reliance on external vineyards Infrastructure design limitations for technological implementation High staffing costs Lack of technological investment |
Opportunities Increasing Tasmanian tourism industry Vineyard expansion Tasmanian ethnocentric attitudes (strength?) Developing technology Economic recession Future accreditation |
Threats Cheaper alternatives Larger companies entering local market Economic recession Climate change Competitive local producers Workforce shortage Rising wages |
Appendix A: SWOT Analysis
Appendix B: Resources
TANGIBLE |
Vineyard Machinery Land Prospect House Infrastructure Water rights Cellar Door |
INTANGIBLE |
Staff knowledge Website and online store Brand name/image Customer loyalty Relationships with other stakeholders |
Appendix C: Capabilities
PW has the ability to manage their two unique growing locations, producing grapes with unique characteristics and different climatic resistances. |
PW has three generations of family vineyard experience, culminating in a dependable and proven winemaking process. |
PW has one of Australia’s best, and internationally educated viticulturalists providing oversite in the wine making process. |
PW utilises their extensive processing facilities to provide contract winemaking services to other vineyards. |
PW vertically integrates the entire winemaking process from growing to point of sale. |
PW’s cellar door employs highly trained staff to facilitate in-depth wine tastings and high-quality hospitality. |
PW’s strategic partnerships with nationally located distribution centers ensure a reliable supply of wine to interstate customers. |
PW’s effective inventory management systems forecast future demand to prioritize members and retain vintages for sale in subsequent years. |
PW utilises social media marketing, including Instagram and Facebook to promote customer engagement and communicate product information. |
PW offers both a regular and premium range of wines, appealing to customers at various price points. |
PW’s operations and decisions are guided by the strong vision of its founder, John Pooley. |
PW’s strategic acquisition of neighboring luxury manor, Prospect House. |
PW’s strategic relationship with neighboring vineyards, allowing for grapes to be bought for production if required. |
PW’s organic certification adds to their brand image as a boutique and sustainable vineyard. |
PW’s expansive product awards produce a point of differentiation and competitive advantage. |
PW’s intimate customer relationships ensure product developments reflect consumer preferences. |
Appendix D: Core Competencies
Rare? |
Valuable? |
Costly to Imitate? |
Non-Substitutional? |
= |
Core Competency? |
|
Intergenerational Experience |
Yes |
Yes |
Yes |
No |
= |
No |
International Leading Viticulturalist |
Yes |
Yes |
Yes |
No |
= |
No |
Environmentally Certified Sustainable Vineyard |
Yes |
Yes |
Yes |
Yes |
= |
Yes |
PW’s tailored winemaking process |
Yes |
Yes |
Yes |
Yes |
= |
Yes |
Intimate customer relationships |
No |
Yes |
Yes |
No |
= |
No |
Contract winemaking service (with Anna) |
Yes |
Yes |
Yes |
Yes |
= |
Yes |