Coopers Creek and the New Zealand wine industry
Heather Wilson and Maureen Benson-Rea
This case describes the growth of a medium-sized New Zealand winery – Coopers Creek. It is concerned with the changing collaborative arrangements employed by Coopers Creek to service domestic and international markets since its inception. These changes are set against the background of a small, rapidly internationalising industry within a global market environment. Readers are encouraged to analyse Coopers Creek’s value chain configuration over time in the context of the changing value system/network in order to consider future strategic options.
Background to Coopers Creek
Between 1990 and 2004, Coopers Creek and the New Zealand wine industry experienced significant environment, industry and organisation change resulting in shifting network arrangements to meet domestic and international demand. Supermarkets were emerging as a major buying force for the industry, although consumer demand appeared to be fragmenting around new grape varietals and wine styles. New Zealand wineries continued to achieve strong growth in international markets but operated under the constraints associated with variable grape volume and exchange rate fluctuations. In addition, while Coopers Creek maintained its independent status, most of the larger and many of the medium-sized New Zealand wineries were being sold to global liquor companies. As Andrew Hendry, the owner and managing director of Coopers Creek commented: ‘There are only a few New Zealand owned wineries left in West Auckland. . . . And there are companies overseas moving around wanting to buy medium-sized wineries, and quite a few have sold, so one day I guess something interesting will turn up.’ It was against this background that Andrew Hendry was seeking to position Coopers Creek for the future. The Coopers Creek winery was established in 1982 on four hectares of land in West Auckland using a 40 per cent bank loan, 20 per cent equity capital from Andrew and 40 per cent equity from a combination of the original winemaker, grape suppliers and former colleagues of Andrew’s from Coopers and Lybrand. All but one of the grape-supplier shareholders have since sold their interests, despite experiencing capital gain, deciding that they could no longer operate on both sides of the fence; as suppliers they wanted to negotiate the highest price, but as shareholders they wanted to bargain for the lowest price. Meanwhile, the remaining grape-grower shareholder, with a focus on producing Chardonnay, was still supplying Coopers Creek. Apart from the original winemaker selling his shareholding to Andrew when he returned to the US, most of the other shareholders had retained or increased their shareholdings. In 2004, Andrew’s family trust owned 72 per cent of Coopers Creek. Coopers Creek acquired an additional vineyard in the Hawkes Bay, North Island, in the 1980s and, in the 1990s, the phenomenal export-led growth (see Table 1) led to the purchase of additional land for its own plantings in West Auckland and the Hawkes Bay, as well as buying grapes from independent growers in Marlborough, South Island, and Gisborne, North Island. This meant that, by 2000, the company had managed to spread the risk of adverse weather conditions in any of the four major New Zealand growing regions. Andrew further diversified the Hawkes Bay land interests by leasing another vineyard and developing a joint venture with the owner-grower of another. While interested in purchasing land in Marlborough, Andrew was content to continue leasing land and purchasing under contract for 2004 until prices stabilised: ‘Currently the Marlborough prices are a This case was prepared by Heather Wilson and Maureen Benson-Rea of the University of Auckland Business School, Auckland, New Zealand. It is intended for class discussion rather than as an illustration of either good or bad management practice. © Heather Wilson and Maureen...