Final 12 March 2001

Coopers Creek Case Study #2

Introduction

Coopers Creek, established in 1982, became one of New Zealand’s 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.

Background

Coopers Creek and network-based strategies

Coopers Creek was a typical entrepreneurial venture in that its development and growth had
been driven by the founding entrepreneur, Andrew Hendry. From 120 tonnes of grapes
crushed in 1988 and less than 1 per cent export volume to 670 tonnes crushed in 1999 and
greater than 49 per cent export volume, growth was achieved with minimal comparable
overheads and infrastructure. Table 1 contains the relative export figures for Coopers Creek
and the New Zealand wine industry. A critical factor in the success of Coopers Creek was
Andrew’s ability to build relationships, within the context of an innovative and flexible approach,
in order to leverage critical resources to pursue growth.

Table 1: Comparative Export Figures

NZ Wine
Industry 1992 1993 19941 19951 1996 1997 1998 1999 2000
Figures
Total exports
$million 34.7 48.3 41.5 40.8 60.3 75.8 97.6 125.3 168.6*
% increase 37.4 39.2 -14.1 -1.7 47.8 25.7 28.8 28.4 34.6
Exports as %
of sales (vol) 13.9 18.9 21.7 20.2 25.3 25.2 28.5 30.1 n/a
% increase 15.8 36.0 14.8 -6.9 25.2 -0.4 13.1 5.6 n/a

2
Coopers
Creek 1992 1993 19941 19951 1996 1997 1998 1999 2000
Figures
Total exports
$million .36 .76 1.1 1.0 1.2 1.8 2.0 2.3 2.1
% increase 65.0 111.1 44.7 -9.1 20.0 50.0 11.1 15.0 -8.7
Exports as %
of sales (vol) 22.4 42.9 48.9 42.4 49.2 63.3 57.9 61.5 49.1
% increase 97.3 91.5 14.0 -13.3 16.0 28.7 -8.5 6.2 -20.2

1 - less wine available for export due to low cropping years (real effect of which covers
18 months)
* Year end June 2000
Source: Statistics New Zealand and Coopers Creek

Andrew Hendry and his wife Cynthia purchased the land for the Coopers Creek vineyard in
1980 with seed capital from their home-made pâté business. Coopers Creek was formally
established two years later with 40 per cent loan capital from a local bank and 60 per cent
equity capital, 20 per cent from Andrew and 40 per cent from other shareholders. These other
shareholders comprised grape growers, who were also suppliers to the business, colleagues
from Andrew’s former employment with Coopers and Lybrand, and the original winemaker for
the company. Andrew Hendry arranged the partnership structure so that the winemaker owned
one third of the company, Andrew owned another third and the other shareholders owned the
final third. Later on, as profits were generated, Andrew bought out the partnership and, by
2000, he owned 71.3 per cent of the shares of the business and the ratio of debt to equity was
1:1.5. The original winemaker partner left the business to return to the USA, selling his
shareholding to Andrew. Only one grower retained a shareholding, although all of the
shareholder growers experienced capital gain. Essentially the growers decided they could no
longer operate on both sides of the fence: as growers they wanted to negotiate the highest price,
but as shareholders they wanted to bargain for the lowest prices. Most of the other
shareholders had retained or increased their shareholdings.

Coopers Creek established collaborative relationships with a group of four local competitors in
the West Auckland area. These relationships were formed in 1990 on the initiative of Andrew
Hendry who, on a visit to Australia, observed some Australian wineries collaborating locally.
This group of Auckland companies regularly gathered in an informal committee to decide on
their next collaborative efforts. Sometimes all five companies were involved, at other times only
two or three went ahead with particular initiatives. The West Auckland group initially came
together for joint advertising and promotions, increasing the custom from retailers, restaurateurs,
wine vendors and visitors for the group of wineries beyond what they could achieve individually.
The success of these marketing initiatives led to collaboration on the production side of the

3
companies’ operations, sharing equipment and processes like grape crushing at key times.
Investigations made to collaborate on joint purchasing of key inputs, like barrels, corks and
bottles, resulted in Coopers Creek sharing the costs of container-loads of barrels with three
other wineries. Although the local collaborative grouping still existed in 2000, its configuration
had changed with one winery dropping out and a new one taking its place with its relocation to
the West Auckland area. Also, one of the original wineries had been taken over by another in
the grouping and, in turn, this combined winery was taken over by an Australian winery.

A feature of the more recent networks in which Coopers Creek was involved was a focus on
horizontal or competitor-based cooperation. Competition in the domestic marketplace was
considered to be intense, but this did not impede collaborative efforts where these were deemed
more efficient or beneficial, while paying heed to the need to avoid anti-competitive behaviour.
According to Andrew Hendry, there were very few secrets in the wine industry as transfer of
technology and know-how between wineries was highly developed and was a source of national
competitive advantage for the industry. In international market the competition for sales and
market share was seen by New Zealand wine companies to be from other countries rather than
from individual firms. However, once the customer had decided to purchase New Zealand
wine, Coopers Creek considered itself to be in competition with all New Zealand wineries
present. The newer producing countries, such as Chile, were perceived to be the bigger threat
due to rapid advancements in production quality. However, even within the international
marketplace there was cooperation, with industries across countries sharing information and
learning about new techniques and processes. This international learning was achieved often
through informal means. For example, Coopers Creek organised exchange visits by producers
and sent its winemaker to spend the off-season in Northern Hemisphere wineries to build
connections and to benefit from low-level technology exchange.

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 rate flotation and general
anti-inflationary measures. The opening of New Zealand’s 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 Zealand’s 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 overseas
markets was an increasingly strong focus on quality, a case in point being the New Zealand wine
industry.

4
The New Zealand wine industry accepted the consequences of the liberalisation of the domestic
economy and recognised the need to understand how on-going changes in the international
economic environment affected its prosperity and how to plan accordingly. Building from a low
international base in the 1980s ($4.5 million in exports in 1987), New Zealand wine exports
achieved phenomenal growth and accounted for $168 million in 2000, comfortably exceeding
the $100 million by 2000 target set in 1997. The UK market was the most important export
market for the industry in 2000, and at $84 million it accounted for around 50.22 per cent of
total exports by value and 54.28 per cent by volume (see Figure 1). Europe accounted for 66
per cent of exports with 85 per cent of that going to the UK. Four large firms, namely Corbans,
Montana, Nobilo and Villa Maria, dominated the wine industry in New Zealand in 1999. The
following year, Montana purchased Corbans and Nobilo was bought by BRL/Hardy of
Australia. Between them, these large firms accounted for around 80 per cent of all exports in
2000, with another 17 medium-sized companies, of which Coopers Creek was one, handling
16 per cent in combination. For the most part, industry participants exported between 30 and
35 per cent of their production, but a few producers had a much higher export intensity.

New Zealand Wine Exports 1995-2000

90

80

70

60
NZ$million

50 1995
1997
40
2000

30

20

10

0
UK

en

rs
an

d
a

any

US

nad

lan
ali

ds

he
ed
Jap

rlan
str

rm

Sw

Ot
Ire
Ca
Au

Ge

the
Ne

Source: Statistics New Zealand and Wine Institute of New Zealand 5

All New Zealand winemakers had to belong to the New Zealand Wine Institute. In order to sell
wine, companies were legally obliged to acquire a licence and take out membership of the
Institute. The Institute acted as a self-regulatory body for the wine industry. Among its
regulatory activities, the Institute administered the Ministry of Health’s export certification
procedures, which involved chemical testing and blind tastings. In 2000, there were 293
members of the Wine Institute, with the majority comprising small, ‘boutique’ wineries. Some
Institute members with export interests in specific markets had established special interest
groups, of which the UK Wine Guild was one (see Section 4.2). Other groups, termed Country
Action Groups, were established to share information, experiences and promotional activities
relating to Germany, the USA, Canada and Australia. The groups developed marketing plans
to explore and, ultimately, exploit export opportunities within the chosen markets, and these
were implemented through a semi-formal funding arrangement whereby individual companies
contributed to costs on a project-by-project basis. For example, only those companies
interested in a particular promotion contributed to the costs of mounting it. Countries were split
into Tier 1 markets, where New Zealand had a strong and growing presence (UK, US and
Australia) and Tier 2 markets, where there was a smaller presence and growth potential
(Canada, Germany, Ireland and Japan). These markets received differential attention and
funding. As well as the UK Wine Guild, Coopers Creek was actively involved in the Canadian
and US Country Action Groups in terms of joint promotional efforts. In those markets where
collaborative efforts had been employed, the principal aim had been jointly and effectively to sell
the New Zealand label ahead of individual wine company labels. Promoting the generic New
Zealand brand in this way was seen as a way of benefiting all New Zealand exporters.

With the management of the quantity and quality of the grape supply proving to be a critical
resource issue within the New Zealand industry, investment in plantings had been important for
the industry as a whole. Rising grape prices followed poor yields in the 1992, 1993 and 2000
seasons. Some wine producers diversified away from high-priced contract grapes and invested
extensively in their own vineyard plantings. After two relatively small harvests, the 1995 and
1998 vintages produced bountiful crops. Along with the New Zealand industry entering early
maturity (see later), oversupply situations caused concern that the industry would focus on the
production of lower-cost wines, either by growers forming a cooperative to utilise the excess
grapes and produce their own wine or by wineries focusing on low-cost competition. It was
anticipated that a low-cost competitor would affect the export market more than the domestic
markets, because domestic customers valued particular winery and vineyard labels while export
customers were considered to be more price sensitive because they lacked this local
knowledge. However, it should be borne in mind that, in the past, the liabilities of a small
economic base and the vagaries of the New Zealand climate had left the industry without
sufficient product to tackle export market diversification.

By 2000, the New Zealand wine industry was considered to be at an early maturity phase of its
lifecycle, as evidenced by a small number of takeovers and increasing concentration.
Historically, the industry had focused on the production of premium wines, given its constrained
supply, small scale, high cost structures and distinctive ‘clean and green’ growing conditions.

6
This was in keeping with the general trend of New Zealand producers to move away from the
commodity mentality to more value-added, quality products. The wine industry's strategy was
to retain a focus on a quality, differentiated product, hold its premium price position, play to its
strengths in white wines and introduce more red wines into its portfolio. In the UK market it
obtained the highest average prices for wines, closely followed by Australia. The Wine
Institute’s marketing strategy was intended to maintain this position and not to compromise it by
attempting to achieve volume production. Whilst the emerging global wine companies in the US,
Australia and Europe1 sought to supply reliable, consistent supermarket sales, the New Zealand
producers aimed for the 'fine wine', connoisseur niche market.

In terms of the industry's structure and positioning, New Zealand was facing major challenges.
As an industry facing early maturity, the number of new entrants into the smaller production end
of the industry continued to grow. However, concentration was occurring among the medium
and large players as a result of both local acquisitions and acquisitions by overseas purchasers.
Two related challenges faced the industry: the rise of the global wine company and access to
production inputs, such as grape supplies and expertise. Historically, the New Zealand industry
had a small level of international ownership of wine companies. However, international wine
companies from Australia, France and the Americas were becoming more active globally and in
New Zealand. Of the original top 4 larger producers in the New Zealand wine industry,
Corbans, Montana, Nobilo and Villa Maria, only one had been partly overseas owned in 1997.
By 2000, only Villa Maria remained 100 per cent New Zealand owned. Whilst this
international interest was motivated by portfolio ambitions, risk spreading and issues of market
access, perhaps the key reason was to gain access to New Zealand’s unique growing conditions
and the local industry's technology, skills and talent. On the one hand, this could strengthen the
resource base behind the New Zealand industry and facilitate access to increasingly
concentrated distribution channels in Europe and the US, but, on the other hand, it could impact
on New Zealand's unique position in world markets.

Coopers Creek

Operations

In order to keep up with growth, principally driven by exports, Coopers Creek had to increase
its supply of grapes from the original four hectares west of Auckland. This was achieved by
acquiring additional land for its own plantings in West Auckland and Hawkes Bay, also in the
North Island, as well as buying grapes from independent growers in Gisborne in the North
Island and Marlborough in the South Island. This strategy enabled the company to spread the
risk of adverse weather conditions in any of the four major New Zealand growing regions. By
2000, Coopers Creek sourced 90 per cent of its grape supplies from 20 independent growers.

1
For examples: LVMH, Castel Freres, Pernod Ricard in France; E&J Gallo and R Mondavi in the US; and
Southcorp, BRL Hardy and Mildara Blass in Australia.

7
These purchases were made on long term contracts, which were based on the potential quality
of the site and the grower’s husbandry of the grapes. The company would have liked to have
grown more of its own supplies, but decided to wait until prices stabilised before purchasing
more land. Given this, Andrew Hendry had to plan with growers for longer-term quality
plantings, especially with the company’s shift in emphasis from retail sales to on-premise sales
(that is, sales to restaurants). To that end, Coopers Creek had effectively leased blocks of vines
from grape growers and the price per hectare was determined according to the targeted wine
style for the end market. Buying in bulk wine from other wineries has enabled Coopers Creek
to meet extra export demand without having to produce cheaper wines itself. Andrew Hendry’s
intent was to avoid being production-led and to leave the production of cheaper wine to
wineries with the overhead structure to support it.

The batch production system at Coopers Creek was well set up to produce in 25-30 tonne lots,
a modular approach based on grape truck load capacities. The company had the capacity to
crush 100-120 tonnes of grapes a day, giving it a major competitive advantage: for example, in
one year in five wineries may have to crush all of their grapes over a short period, as Coopers
Creek did in the bad cropping year of 1995. Coopers Creek also had the capacity to juice for
other wineries, as outlined above. The cost difference when installing the crushing plant was
insignificant so it made sense to Andrew Hendry to install the larger machinery, and one person
could operate this machinery alone if necessary. The batch operation system allowed for tank
traceability on each consignment or bottling run and samples were kept on hold in the winery.

Andrew Hendry considered production based on 1,000 tonnes of grapes crushed to be an

optimal level for Coopers Creek. If production rose much above those levels, then the
company would be moving into higher administrative costs and away from quality-based wines.
In addition, lifestyle aspirations meant that Andrew Hendry had consciously avoided dilution of
shareholdings to fund expansion. Future growth was to be through servicing the export market.
He had a strong commitment to a rifle rather than shotgun approach to international marketing
and relationship building. Coopers Creek’s strategy was based on having a carefully controlled,
but finite quantity of wine to sell in any one year. The company considered the requirements of
each market for certain wine styles and, as the grapes came in, it looked at the targets, the price
points and the maintenance of quality standards in each market. The company produced in
expectation of sales (planning for which was linked to previous years’ performance and also to
the grape supply) and, in order to retain flexibility, the company did not label bottles of wine until
it was known exactly where the product was going. Nonetheless, major decisions had to be
made at the supply stage and sometimes this involved the buying of bulk wine from other New
Zealand producers to keep supplies going. For example, Tesco’s in the UK wanted to do a
summer price promotion in 1997 on a New Zealand wine. When one of the larger New
Zealand wineries failed to respond, Coopers Creek took up the challenge, although it did not
have all the wine to meet Tesco’s requirements. The company sourced additional wine through
a commodity purchase from some local companies and even made some money from the wine
purchase.

8
The domestic market

Andrew Hendry observed that the New Zealand marketplace had become increasingly
competitive, with nearly 400 New Zealand producers and cheaper imports from Australia.
Coopers Creek serviced the three segments of on-premise, liquor store and supermarket sales
in the domestic market. The winery had recently employed two sales representatives, one
concentrating on restaurant and inner-Auckland retail sales, the other focusing on retail sales in
the outer-Auckland and local country areas. According to Andrew, the advent of supermarket
wine sales, as well as the increasing competition, required more personal representation.
Elsewhere in the country, Andrew continued to use commissioned sales representatives. In the
Wellington region, Coopers Creek shared a representative with another winery based in
Tauranga, south of Auckland, and was looking for a similar arrangement to cover sales to the
South Island.

Domestically, the last few years have seen some ups and downs for Coopers Creek in terms of
public relations. In November 1997 the company received a major national award for
excellence in exporting. Then in March 1998 came an accusation that Coopers Creek had, in
1995, altered the composition and labelling of an export wine in breach of export regulations. In
the media lax rules were blamed, together with a lack of government funding to police the
compliance requirements of three different laws facing wine producers. The Wine Institute
publicly expressed its concern that sloppy monitoring of wine producers was leaving the industry
open to abuse and announced that it would take a more active role in policing wine standards
and would act to safeguard wine authenticity. The New Zealand Ministry of Health investigated
the allegations for a breach of the Food Regulations Act and the Food Act. Coopers Creek
voluntarily suspended all exports pending an external audit of its vintage records, which was
carried out by a senior partner of Ernst & Young. By April 1998 Coopers Creek had resumed
exporting. Whilst in May 1998 the Ministry audit did find discrepancies in record-keeping and
in the make-up and labelling of some 1995 and 1996 wines, no further action was taken. In an
ironic twist, two of the wines which were the subject of some of the controversy later won
awards at the London International Wine Challenge, and in early 2000 British Airways added
Coopers Creek Reserve Pinot Noir 1998 to its first class wine list.

The negative publicity knocked the local business back for a while, mostly in the retail sales
area, but the following year’s sales were up 15 per cent on the previous year and Coopers
Creek’s representation in the on-premise segment was stronger than ever. Andrew Hendry
believed that the export sales were not really affected, although he did observe that, not
unexpectedly, other New Zealand wineries distanced themselves from the issue with visiting
international sales representatives. In addition, it was noted that whenever negative publicity
arose for another New Zealand winery, the New Zealand press would raise the Coopers Creek
case as a prior example of a problem relating to the industry.

9
Major international markets

The international development of Coopers Creek drew on the shared learning, marketing efforts
and resources with other wineries in the New Zealand Wine Institute, the UK Wine Guild and
other market development groups, although considerable individual company effort was also
expended in the process. For example, in perhaps the toughest market in the major economies
served by Coopers Creek, Ontario, where a 100 per cent margin is imposed on liquor prices by
the state monopoly, the winery received a Trade New Zealand export commendation in 1994
as the first New Zealand wine producer to receive a general listing by all of the 630 government
liquor stores. Recently, Coopers Creek had been offered two more listings by the Ontario
board, which would bring exports there to a potential 6 thousand cases per year. Andrew
Hendry’s approach to exports had been to delay efforts until the company had secured enough
long-term commitments from grape suppliers and had established a firm foothold in the New
Zealand market. However, Andrew found the opportunity to enter the Australian market in
1984 irresistible due to the devaluation of the New Zealand currency making New Zealand
products attractive in the Australian marketplace. Entry into the Australian market was
facilitated by the New Zealand Wine Institute, which coordinated a wine expo in Sydney. By
1987, less than one per cent of Coopers Creek produce was exported, mainly to Australia.

Coopers Creek initiated a serious export strategy in 1989, having delayed for one year because
1988 was a bad season for the production of grapes. The UK was the next major market
targeted by the company, again in partnership with the Wine Institute. From this, the UK Wine
Guild evolved. This was a partnership of Trade New Zealand, a publicly funded body
concerned with promoting overseas trade, and wineries either already established in the UK
export market or interested in entering this market. Established in 1992, the UK Wine Guild
was supported by one third funding from Trade New Zealand for a limited period and two
thirds funding from active exporters and collected as a one per cent levy on free-on-board sales.
These funds were used to establish an office in London with two full-time employees to promote
and support the sales of New Zealand wines. Sales and distribution remained the responsibility
of the exporting firms. The overall Wine Guild administration, based in the offices of the Wine
Institute in Auckland, was initially controlled by a board of directors, of which Andrew Hendry
was one. Essentially, the board provided financial and marketing expertise for the successful
operation of the Guild, as well as ideas for future developments. Although a voting system was
in place, decisions were usually made by consensus. By 2000, the configuration of the UK
Wine Guild had changed and, with the end of government funding, the board of directors was
disbanded and control came under the function of the Wine Institute. The Institute moved to a
system of presenting UK promotion initiatives to members and inviting participation and
payment, which, according to Andrew Hendry, resulted in the loss of feeling of involvement in
the Guild.

The winery catered for buyers’ own brands in the UK market and, although considered useful,
this segment was not particularly profitable. Coopers Creek’s own branded product was the
winery’s focus and, in 2000, it was anticipated that it would sell more in the USA than in the

10
UK. Andrew Hendry was concentrating on the development of a small number of markets and
selling a broad range of higher margin wines in the on-premise segment. This focus allowed the
company to reach consumers willing to pay more expensive prices as New Zealand wines
became a permanent category on restaurant wine lists.

Andrew Hendry visited his overseas importers on a regular basis, spending 12 weeks per
annum overseas, as much overseas contact as any other New Zealand winery regardless of size.
The visits were usually linked to wine trade shows in the UK, France and the USA. Apart from
the exchange of views on the state of the market, details of latest vintages and discussions on
prospective new customers, the visits had proven successful in providing a constant reminder
that the winery was committed to the market, encouraging the agent to focus attention on the
Coopers Creek brand and making sure export customers were very clear about the amount of
product they could expect from the winery in coming years.

The UK market

By 2000, Coopers Creek was no longer selling through the same liquor chains in the UK. Their
initial arrangement with Victoria Wines changed when the company was taken over by
Threshers, now named Thirst Quench. Unfortunately the takeover coincided with Coopers
Creek being out of stock for six months as a result of Andrew’s decision to sell off the 1998
Sauvignon Blanc vintage in bulk because it was of a poor standard. This stockout, combined
with the rationalisation of stock following the takeover, led to the Coopers Creek brand being
dropped. Recently sales commenced with two new UK retail groups, the supermarket Aldi and
a buying consortium representing 60 independent wine merchants. Meanwhile, Coopers Creek
encouraged their UK distributor to set up an on-premise division in 1997, which enabled the
easy re-alignment of the company’s sales to focus on the restaurant segment. Sales through the
UK distributor have picked up again after a slowdown caused by its takeover of another
distributor. The winery’s relationship with the Tesco supermarket chain was still strong, nearing
nine years in length by 2000, with Coopers Creek producing wine for the supermarket’s
specific own label requirements. This arrangement resulted from Andrew Hendry’s basic
inclination to conduct some personal selling in export markets in addition to his appointed
agents. The winery was actively involved in the promotion of new vintage releases through the
supermarket chain and was looking to extend this arrangement to the Co-Operative chain of
supermarkets in the UK.

The changing nature of the UK Wine Guild in New Zealand coincided with a change of staff in
the London office and the perception that there were fewer attendees per winery at organised
tastings. Coopers Creek was not alone in its concerns about the changes to the UK Wine
Guild. A number of wineries had reduced their involvement in the Guild, including Coopers
Creek, and a knock-on effect was experienced with lost support for other Country Action
Groups and initiatives of the Wine Institute. In addition, the makeup of Coopers Creek exports
to the UK, with 85 per cent comprising buyers’ own brands, meant that the Guild levy system

11
caused some concern to Andrew Hendry. Essentially, the winery was in a high fees category,
given the total volume of sales, but only a small percentage of these sales promoted the Coopers
Creek label. As Andrew Hendry states:

“The main thing is to get New Zealand known as a big brand, once it has a
following then you look at your own. New Zealand has reached that stage
and it reached that stage in the UK a long time ago. It probably reached
that stage in the States last year [1999].”

However, Coopers Creek was involved in discussions with two other New Zealand wineries to
undertake some joint promotions, possibly in the UK and other markets, taking advantage of
Trade New Zealand funding that is available to groups of applicants rather than individual
applicants.

The US market

A major aspect of the longer-term plan was developing the US market. An on-premise focus in
the US was critical because, in the retail sector, Australian and New Zealand wines were
marketed together and Australian wines were cheaper due to the ability to achieve scale
economies. Coopers Creek had changed to a larger distributor with expertise in on-premise
representation, being one of the top three distributors in New York servicing some 2,000
restaurants in Manhattan alone. Until recently the winery had focused on increasing its network
of distributors and conducting regional tastings on a state-by-state basis, mainly focusing on the
East Coast, but also California, Colorado and Wisconsin.

A new development, initiated by Andrew Hendry, had been a collaborative arrangement with a
Chilean winery, a Californian winery and a USA importer. Together they had shared the costs
of employing a brand manager in the USA, with the importer paying half of the manager’s salary
and the other half being split between the three wineries on the basis of cases sold. The brand
manager had begun by organising all of the USA promotions and going out with the importer’s
sales representatives, essentially doing the same sort of job that Andrew Hendry did on his
overseas visits. Since coming up with this arrangement, Coopers Creek’s sales have trebled,
growing from 1,500 cases in the late 90s to 6,000 in 2000 rising to 10,000 cases. Coopers
Creek and the Californian winery were of a similar size, selling wine at similar price points, while
the Chilean winery was much larger and focused on selling cheaper wine. Andrew has since
taken on the brand manager for Coopers Creek and increased his role, essentially cutting out
the importer and distributing across 15 states from warehouses in California and New Jersey.
By cutting out the intermediary, Coopers Creek was able to reduce the cost to restaurants by
35 per cent, making its wine extremely competitive in the critical on-premise segment.

The Future

12
The New Zealand wine industry, despite entering early maturity, remained constrained by issues
of supply. Whilst the cost of new land for grape planting was rising and more previously
marginal land became economic to grow on, the problem was still one of access to capital for
these resources. Overseas investors were welcomed by the industry, so long as New Zealand’s
distinctiveness and competitive advantage were not compromised. The key was to lock this
investment in for the long-term economic good of the industry and the country.

Andrew Hendry believed the self-funded, relationship-based approach to growth achieved

good fit with the nature of the New Zealand industry, namely the strong reliance on scarce
resources on an annual basis. He and Coopers Creek had bounced back from the difficulties of
1998, and indeed Andrew was enthusiastically pursuing new opportunities. However, with the
local industry showing signs of concentration, should Andrew Hendry maintain a focus on
building relationships with other domestic producers? Is he right to begin seeking collaborative
arrangements with overseas producers given the nature of the wine industry globally? Can
Coopers Creek remain independent, retain the benefits of small size and yet still achieve
exceptional returns in the changing environment? Is it time for Coopers Creek, and Andrew
Hendry, to fundamentally rethink the winery’s dominant strategy?

13