an exploration of managerial

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International Journal of WineBusiness ResearchVol. 20 No. 2, 2008pp. 138-152# Emerald Group Publishing Limited

1751-1062DOI 10.1108/17511060810883768

An exploration of managerialexpertise in the Western

Australian wine industrySteve Charters

Reims Management School, Reims, France

Marilyn Clark-MurphySchool of Accounting, Finance and Economics, Edith Cowan University,

Joondalup, Australia

Nicole DavisWestern Australian Wine Industry Association, Australia

Alan Brown

School of Management, Edith Cowan University, Joondalup, Australia, and

Elizabeth WalkerSchool of Management, Small and Medium Enterprise Research Centre,

Edith Cowan University, Joondalup, Australia

Abstract

Purpose – The purpose of this paper is to identify the key management skills for running asuccessful winery business, which in the Australian industry is predominately a small to mediumsized business, and explores the existence of such skills within the industry.Design/methodology/approach – The information was obtained through structured interviews

with a range of winery owners and managers in the four main wine regions of Western Australia.Findings – Whilst a set of universal management skills are identified by the industry participants,these are not universally held. The study examines skills and training issues highlighting thediversity of winery owners and managers.Research limitations/implications – The study was conducted using qualitative methodology inone state of Australia only.Practical implications – The findings require further quantitative testing, but strongly imply thatmanagerial skills in the wine industry are limited, and most managers are more focused on technicalexpertise than financial, strategic, marketing or HR planning and management.Originality/value – The paper has benefit for the wine industry showing the strengths andweaknesses of its managers, and also for theorists who seek to understand management processes ina specific sector predominantly comprising small and medium sized enterprises.

Keywords Wines, Viticulture, Marketing strategy, Human resource management, Australia

Paper type Research paper

IntroductionWine accounts for 3 per cent of Australian agricultural production with exports thatare worth more than $2.5 billion (Australian Government, 2005). Using variousindicators the Australian wine industry has, over the last fifteen years, witnessed

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1751-1062.htm

The authors would like to acknowledge the support of the Grape and Wine ResearchDevelopment Corporation and the Faculty of Business and Law at Edith Cowan Universitywho provided grants to assist in funding this project.



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substantial growth. Since 1998 the area of vineyard land has increased - from 78,090hectares to 166,665 hectares in 2005, with a corresponding growth in wine productionfrom 680 to 1420 million litres (Australian Wine Online, 2007). There are now over 2000wineries, most of them small and medium sized enterprises - defined as those with

fewer than 200 employees (Australian Bureau of Statistics, 2007). As more wine isproduced by ever more businesses there has also been a change in consumptionbehaviour. Over the same period the country has seen a slight increase in apparent percapita consumption by those over 15 from 25.2 litres in 1993 to 28.1 litres per person in2005 (Australian Bureau of Statistics, 2007). Western Australia, the focus for thisresearch, produces only 4.4 per cent of all Australia’s wine (Australian Wine Online,2007), but it is regularly claimed that over 20 per cent of the country’s premium winecomes from the state, making it insignificant in volume terms, but important for thevalue of its production. This jump in Australian production at a time of moderategrowth in domestic consumption has combined to change the market in whichAustralian wine businesses operate. Exports have naturally become more significant;total exports increased by over 5 per cent from 2003 to 2007, while over the same period

domestic sales increased by 7.7 per cent (Australian Wine and Brandy Corporation,2007). Meanwhile, limited growth in demand for wine in the local market has thusintensified the competition between wineries.

Of the 2000 producing wineries in Australia in 2005 just seven accounted for 75 percent of the total wine grape production. This confirms that small and medium-sizedenterprises are the main business size in the industry. The substantial growth in theAustralian wine industry over the last 15 years has been very beneficial foragricultural expansion, especially export; but such rapid growth and the pressure onmarkets makes the effective management of wine businesses even more critical,especially given the concerns about the sustainability of the industry at its presentscale – and it is this focus on management of small and medium wine-producingbusinesses which forms the focus for this research project.

Three factors suggest that the level of managerial skills is more uncertain in thewine industry than in other industry sectors. Firstly, the lifestyle attraction of growinggrapes and producing wine (Charters and Loughton, 2000) has induced many peoplefrom a variety backgrounds to enter the wine industry, and they may not have beeninvolved in previous managerial positions. Secondly, running a small winery comprisesa primary industry (grape growing), secondary processes (wine production) and oftentertiary activities such as restaurants and cellar door sales (Carlsen, 2004), requiring awide range of expertise. Thirdly, the recent rapid growth of the Australian wineindustry has resulted in a focus on increasing production to satisfy demand (Beverlandand Lockshin, 2001) rather than improving the overall managerial skills andcompetence of the business owners and managers. This is confirmed by research

suggesting a focus on pursuing quality as a priority in being competitive but not as astrategic business tool (Orr, 1999).

Literature reviewLiterature relating to the wine industry tends to be focused on production oroperational issues, rather than examining the business perspective. One major studywas conducted by ACIL consulting in 2002, at request of the CommonwealthGovernment of Australia (ACIL Consulting, 2002). This provided a mass of information, and a series of focused recommendations. However, whilst the reportnoted that majority of smaller wine operations had no business or marketing plan,



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most of the recommendations focused on the wider economic environment (such astaxation, or the development of regional wine tourism). Little research examining indetail the managerial expertise of winery owners has been undertaken, nor has theaspect of wineries as small businesses been considered. Consequently this literature

review discusses both operational and managerial issues in a broader context.

Operational perspectiveMost studies examining the business operations of the wine industry have consideredspecific operational issues such as, production quality (Orr, 1999), exporting (Suarez-Ortega, 2003; Wickramasekera and Bamberry, 2003; Wickramasekera and Oczkowski,2004) accounting (Blake et al., 1998), and the impact of technology (Sellitto et al., 2003).Additionally there is a comparatively substantial literature on marketing related issues(for example, Batt and Dean, 2000; Beverland, 2004; Charters and Pettigrew, 2006;Lockshin et al., 1997; Quester and Smart, 1998). Of particular significance, however, isthe role of customer service quality; this is especially important for wineries with directcustomer links, such as operating cellar doors, and it has been noted that serviceprocess factors have a significant relationship to purchase decisions (O’Neill et al.,2002). Nevertheless, most studies do not explore the skills levels of those who run smallwineries nor their ability to implement proposed marketing strategies. Beverland(2000), focusing on small New Zealand wineries, suggested that the danger to smallproducers as the market develops means that a wide range of marketing approachesmust be used.

Another examination of the situation in New Zealand was offered by Harfield (1999)who noted that critical success factors were necessary both for individual wineries andat a collective level. Nevertheless, as with Beverland’s study (2000), Harfield did notexplore the skills levels of managers as individuals nor whether they were sufficient toachieve that success.

Managerial perspectiveA few research projects have examined issues relating to business skills training.Becton and Graetz (2001) examined the impediments to training for small, ruraltourism businesses. They noted that a survey undertaken by Tourism TrainingVictoria in 1996 identified a lack of management skills or training among owner-managers and scarcity of skilled staff. They implied that winery entrepreneursunderstand the problem but find it hard to access training as locations and deliverymodes are inflexible. This seems to be a common complaint for small businessesgenerally, whatever their geographic location or industry type (Billett, 2003; Storey,2004; Webster et al., 2005). Becton and Graetz (2001) further suggest that in order todiscover the best way to provide training qualitative research is necessary; this is oneof the aims of the present study.

It may also be true, as a research study amongst farmers (another agriculturalindustry) in New South Wales suggested, that owners and managers in rural smallbusinesses tend to prefer to develop new skills by informal means, rather than inorganised training (Bamberry et al., 1997). The same report noted that the keyorganisation skills required by farm managers were perceived to be the ability to takedecisions, managing their limited resources, financial control, marketing andmanaging change. Additionally, it has been noted that informal training is moregenerally adopted for all SMEs, and that as SMEs grow they tend to adopt more formal




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methods – although interestingly this transitional development does not seem to applyto family businesses (Kotey and Folker, 2007).

In regard to general management and marketing issues, it has been observed thatwhilst having a business plan shows a close relationship to growth, fewer than a third

of SMEs plan formally (Orser et al., 2000), and failure rates are greater amongst thosewho do not plan than those who do (Perry, 2001). Further, the marketing orientation of small businesses, and their general innovativeness, is dependent very much on theowner’s own innovativeness (Verhees and Meulenberg, 2004).

The business life cycle of small New Zealand wineries was examined by Beverlandand Lockshin (2001). They noted that previous research had not been able to identify ageneral model of business life cycles, but they did suggest that there was a focus onproduction factors rather than management and business issues when small winerieswere in the start up stage. The current study examines the development of the businesswith owners/managers and offers some ideas about how managerial skill requirementschange over time.

As a summary it can therefore be suggested that although there is a fairly extensiveliterature on the management of small business, research related to the wine industry islimited. What literature there is generally focuses on the management of discrete areasof the business, like exporting or segmentation instead of examining business owners’ability to implement the discrete strategies, which are recommended. Littleconsideration is given to the relationship between the three levels of activity - primary,secondary and tertiary. This study aims, in part, to fill these gaps.

MethodologyThe research reported here was essentially exploratory, and thus the use of qualitativeresearch methods was deemed appropriate, as these are useful for generatingpreliminary ideas (Calder, 1977) and exploring the perceptions of key actors in wine

industry management (Douglas, 1985; Patton, 1989). The prime method for datacollection was the use of semi-structured interviews, selected to gain rich data whichwould help in understanding the complex perspectives of managers without pre-determined hypotheses or assumptions about the data which could constrain thedevelopment of the research (Fontana and Frey, 1994).

The sample of winery owner/managers was taken from four wine regions of Western Australia. The regions were chosen for specific reasons:

(1) The Swan Valley. This is the oldest wine region in Western Australia havingproduced wine for over 160 years. Many of the region’s wineries have been inexistence for a number of generations. However, in reputation it has now beeneclipsed by other areas. Six interviewees were from this region.

(2) Margaret River. The biggest and most significant wine region in the State, andthe only one with an international reputation. It has seen a dramatic rise inwinery numbers over the last ten years as part of the growth of the Australianindustry. The largest number of interviewees (eleven) came from this area.

(3) Great Southern. A widely dispersed region. It has been producing wine for over40 years, but is some distance from Perth. This, plus the fact that the reputationof its wines has never matched that of Margaret River mean that it has neverdeveloped the momentum of the latter region. Nine interviewees came from theGreat Southern.



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(4) Peel. This region has comparatively few wine producers and could be describedas nascent rather than flourishing. Because it is still trying to create an identityand a reputation it was selected as a contrast to the other regions. Fourinterviewees were taken from this area.

In total 30 owner/managers were interviewed. Members of the research team(individually or in pairs) conducted the interviews, which were both recorded indetailed field notes and also taped and later transcribed. The interview guide wasproduced before the project based on the literature reviewed and the pre-existingknowledge team members had of the wine industry. However, as the process wasexploratory, and attempting a phenomenological identification of the managers’ ownperceptions of their managerial environment (Calder, 1977), the guide was developedand refined as interviewing took place, in order to provide access to a greater depth of data. Topics raised in the interviews included the history of the enterprise,measurements of success, the manager’s role, relations with agents, training for themanager and staff, future plans and succession issues where relevant. However, as the

process was semi-structured other topics were discussed when it was felt they wouldbe interesting and contribute to the research.

The sample was selected on the basis of providing a good mixture of small familyrun businesses and some larger, although still independently owned, businesses.Generally the interviewee was an owner/manager, and in many cases also thewinemaker. In three cases (two medium sized wineries and one small winery)the interviewee was a manager without any equity in the company. In another case, theinterview was conducted with a husband and wife team who took joint responsibilityfor the business, and were therefore interviewed together. In addition in two instanceswhere the male CEO of a small family company was interviewed his wife was alsointerviewed separately to explore aspects of the company’s organisation and theimpact of family dynamics on the business.

The wineries varied in size from a production of 500 cases of wine per annum to150,000, with an average of 20,590. The wineries had been operating for between 2 and74 years, with an average of 15 years. Nine of them had associated tertiary activitysuch as a cafe or gallery, and all but two had or were about to open a cellar door forsales to the public. Table I outlines details of the interviewees and their businesses.

All interviews were tape recorded and the recordings transcribed. In addition verydetailed field notes were kept. The research team met regularly to discuss and reviewthe project, and this formed the basis for the analysis of the data; in essence, it was ananalysis of multiple perspectives, refining understanding as discussion proceeded.This effectively established a form of triangulation to add to the trustworthiness andcredibility of the research (Denzin, 1989). It is important to stress, however, that the

project was limited by the very regional location of the study, the qualitative nature of the research and the self-reporting process used to obtain data.It is worth stressing that the focus of this study was on small and medium sized

businesses. In this context such businesses were defined as being those without a largeparent company they could call on to supply any managerial expertise that might belacking rather than defining these by a metric such as turnover or number of employees. In wine industry terms none of the businesses interviewed were large; onlytwo made more than 50,000 cases per annum. This focus was deliberate since the needsand expertise of smaller producers are qualitatively different from the larger producersin the industry. Small producers are by far the biggest group by number and therefore




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it is important that the specific experience and needs of this group be understood. Thesmaller owner/managed business is more likely to be at risk if key managerial skillsare lacking, compared to larger businesses where expertise can sometimes be providedfrom a parent company or the financial capacity is available to buy in required skills.

FindingsThe focus of this research was on managerial skills, which are dealt with in detail inthis section. However, it is worth highlighting that for many interviewees the majorperceived skill requirements centred on production issues. When asked the question‘‘what skills are important for a successful wine business’’ there tended to be a greateremphasis on growing grapes and making technically correct wine than on marketing,strategic planning or financial control. Where business skills were mentioned,marketing was often perceived to be the most significant; however many, probablymost, interviewees confused marketing with sales, including the training of cellar door

TableSummaryinterviewe

Role at winery Winery GICases

producedYears in

operationTertiaryactivity

GS1 CEO Great Southern 1,00,000 30 No

GS2 Managing Director Great Southern 8,000 24 YesGS3 Managing Director Great Southern 4,000 3 NoGS4 Owner/Manager Great Southern 4,000 21 YesGS5 CEO Great Southern 1,50,000 8 YesGS6 Owner/Manager Great Southern 1,000 5 YesGS7 Owner/Manager Great Southern 7,000 8 YesGS8 Owner/Manager Great Southern 90,000 30 YesGS9 General Manager Great Southern 25,000 28 YesMR01 Winemaker/Director/Owner Margaret River 15,000 32 NoMR02 Director/Winemaker Margaret River 14,000 26 NoMR03 Principal/Managing Director Margaret River 1,500 8 NoMR04 Director/Winemaker Margaret River 6,000 8 NoMR05 Managing Director Margaret River 82,000 7 YesMR06 General Manager Margaret River 4,000 8 NoMR07 Owner/Manager Margaret River 6,000 10 YesMR09 Managing Director Margaret River 17,500 6 NoMR10 Owner/Manager Margaret River 7,500 6 YesMR11 Everything Margaret River 2,500 3 NoSW1 Owner/Manager Swan District 3,000 10 YesSW2 Owner/Manager Swan District 8,000 74 NoSW3 Owner Swan District 5,000 8 YesSW4 Owner Swan District 1,000 10 NoSW5 Manager/Chief Winemaker Swan District 40,000 16 YesSW6 Owner/Manager Swan District 500 8 NoPE1 Owner/Manager/Supervising

Winemaker Peel Region 1,500 7 NoPE2 Owner/Manager Peel Region 4,500 33 No

PE3 Owner/Manager Peel Region 450 8 NoPE4 Marketing/Winemakerand owners Peel Region 750 2 Soon

Note: The ‘‘role’’ is self-reported



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staff. For a number of owner/managers the business goal was dealing with the currentpressure on sales from the glut of cheap wine and the concentration of retail wineoutlets in the hands of large companies, (which tends to exclude the product of smallwineries), rather than on any strategic future for their businesses.

The overarching finding was that there are a range of managerial skills identifiedby those in the industry as being important in order to run a successful winerybusiness. However, the crucial nature of these skills and the risks to which the businessmight be exposed without them was generally underestimated or ignored. Also theemphasis seemed to be on the skills and training required by staff rather than by theowner/manager themselves. The importance of some skills was recognised by mostrespondents while for other skills opinions varied. These differences were based on arange of factors such as the winery’s size, ownership and the interviewees’ measures of success in the industry. The most important business and managerial skills identifiedare outlined below.

Marketing, sales and distribution

I put my success down to planning – looking at where there is a gap in the market andworking out how you can address it well (male, owner, Swan Valley).

Most interviewees indicated that marketing and sales skills were extremely importantin the industry regardless of whether they were focused on selling locally orinternationally. There are many dimensions to marketing including the ability tounderstand international markets, distributors and agents, cellar door sales skills andmanaging relationships with distributors and customers. However, little distinctionwas made between marketing and selling, and where the business had a distinctmarketing orientation it was almost invariably the result of the owner’s own vision(Verhees and Meulenberg, 2004).

Many respondents had developed and were expanding international markets fortheir products with exports ranging between 5 and 74 per cent of sales. Most managersspent a large amount of time travelling to develop and service their customers andmarkets. If they did not do this themselves, they relied on agents and distributors butoften had concerns regarding the agents’ having the right marketing and sales skills.Some had changed their distribution agents based on poor performance. The need tobe careful in selecting a reliable distributor was often mentioned, particularly one whoworked for the good of the particular winery and their brand. There was a feeling thatagents who worked with too many companies and/or with the larger producers couldnot be relied on to look after the smaller winery. It should be noted however, in manycases any expansion of business via export markets had come about opportunisticallyand reactively (for example someone asked to import the producer’s wine) rather than

by any process of planning or market analysis, a factor which contrasts withtraditional analyses of wine industry export success (Remaud, 2006).The importance of sales and marketing skills in cellar door operations was

acknowledged by a significant number of interviewees, a point already observed byacademic researchers (O’Neill et al., 2002). They indicated that it was particularlyimportant to recruit and retain top quality people for this role since, while sales volumemight not be as significant as export and bottle shop sales, the cellar door representedthe public face of the brand and there were particular tax benefits to selling through thecellar door. A particular skill mentioned here was communication; being able to engagecustomers in conversation so that the experience would be a memorable one. This was




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particularly apparent in the Margaret River region where for most wine tourism was asignificant aspect of their business and, with around 100 cellar door options in theregion, also highly competitive.

Financial

I think administration and accounting is difficult. It’s burdensome and we constantlyunderestimate the amount of work that is required (male, owner/winemaker, Margaret River).

Most respondents identified financial expertise as an important skill for long termsurvival; however it was not evident at a number of wineries. Several wineries were notoperating at a profit and had to be subsidised from external sources. For example; somewere owned by professionals such as doctors or lawyers who worked part-time in theirprofession and used that income to subsidise the winery; others were part of a broaderfamily farming business and others were operated in a part-time capacity supportedby full-time employment elsewhere. A number of interviewees stated that they did nothave financial skills but overcame this by employing accountants for financial advice.

However, some expressed concern that they did not fully understand the financialaspects of their business, particularly as it grew and became more complex. They feltthis left them exposed, as they were not equipped to judge the quality of the advice theyreceived. An extreme response compared to skills development in the peer group, wasone interviewee who completed an MBA with the specific goal of becoming morebusiness and fiscally aware to enhance the business.

Financial planning strategies also came high on the list of required skills. Theability to manage cash flows, fund new ventures, innovations and expansion and tofund losses was seen as a key to survival, although again it was not always evident inpractice. Succession planning was also mentioned in regard to longer term financialplanning and management. Some interviewees had clearly thought about successionplanning, normally within the family; others had not. Again the owner/managersexpressed the need for these skills but did not necessarily demonstrate that theypossessed them or express a determination to acquire them.

Strategic management and planning

You’re often too caught up in the business day-to-day to see what changes should be made(male, owner/winemaker, Swan Valley).

Strategic management is seen as a key skill requirement for all businesses. Howeverthe majority of the owner/managers revealed little evidence of having a strategic planfor the future of their businesses, a finding that reflects what happens in some otherparts of the world (Nowak and Anderson, 1999; Orser et al., 2000). Most of the planning

was short term, with the main longer term strategy being to develop the brand nameand new markets; this was mentioned as being particularly important to long termsurvival. Most referred to the current glut in the industry which had caused problemsfor many producers. Those who stressed the importance of strategy indicated that intheir own business they had not succumbed to price cutting and that their basicstrategy was to develop brand loyalty and seek international markets. This had so farensured that they were reasonably insulated from the current problems of over supplyand the predatory behaviour of multinational retail chains, but the lack of any form of strategic planning by many of the others suggests the probability of increasing failurerates in the current competitive climate (Perry, 2001).



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Other strategic plans centred on introducing new ranges to sell in the discountmarket sector in order to protect their premium label. The ability to plan for and adaptto changing consumer tastes and the changing wine marketplace was also consideredto be an important skill; for example, the ability to adapt to changing wine styles such

as shifts between red and white and different grape varieties. Most planning centred onthe product and ways to change marketing strategies to keep up with market forces.This is in essence reactive planning.

Human resources

What are the hardest areas of the business? Staffing issues, and employing others. Deliveringa high quality service is hard and crucial (Female, co-owner and marketing manager, PeelRegion).

Many wineries were small family operations with family members making up the bulkof the workforce. Hence, human resource management was often not perceived to be abig issue. Employment outside the family was largely limited to casuals at certaintimes of the year. At the other end of the spectrum the larger wineries had a significantnumber of employees and so people management became much more critical. Manyinterviewees acknowledged that good people management was at the core of a goodbusiness. Many identified recruiting and retaining quality and skilled cellar door staff as particularly important since they played an important role in relationship marketingand represented the public face of the brand name. Skills such as the ability to carry outpleasant conversations with people not just about the wine but also about the region.were seen as important. Many indicated that it was critical to retain good cellar doorstaff during the current labour shortage.

Production management

I would spend two months every year just blending the fortified wines if I could afford thetime (male, owner/winemaker, Swan Valley).

The ability to produce a quality product and ensure quality processes was seen bymost interviewees as the single most important management skill, confirming theprevious perspective of Orr (1999). Assuring quality at all stages in the productionprocess was considered to be vital for success in the industry and a key successmeasure. Many indicated that having a quality wine is central and that this isdependent on good grapes, a good winemaker, and good production techniques.Winning awards was considered an important external measure of quality along withwine critics’ comments and feedback from customers. Nevertheless, as Orr (1999)noted, quality was seen much more as a production issue – not as an element of strategic management.

It was a general opinion that quality wines are able to weather fluctuations in themarket and hold sales levels even in times of heavy discounting, for example due to aglut. As a result some wineries were able to increase prices in a market where othershad been forced to do the opposite. Quality was seen as holding the key to profitability.One interviewee commented that marketing was very important to get someone topurchase the product initially but quality was critical for repeat purchases, aperspective not necessarily borne out by research on consumer choice processes(Charters and Pettigrew, 2003; Lockshin and Hall, 2003).




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Although quality was perceived to be a fundamental production goal, there was lessclarity about precisely what it comprised. For some it was peer approval, perhaps interms of wine show medals; for the more commercially minded it tended to be customerapprobation. Generally, whilst most producers thought they could fine-tune their

production, they believed that they were producing at an appropriate and high qualitylevel.

What is perhaps most interesting about this ‘‘managerial’’ skill is that productionskills would not normally be viewed as a generic management competence. The fourgeneric management competencies are normally seen as planning, organising, leadingand controlling. These are ‘‘overarching’’ rather than ‘‘technical’’ skills. Production does,of course, include elements of planning, organising and controlling but productionskills are essentially technical skills. This could explain why some owner/managersappeared to be less business-like than others, as their primary focus was on the endproduct rather than the efficient operation of their business.

What skills exist? Most young winemakers are useless – they aren’t practical enough. You have to ‘‘learn as you goalong’’. The industry doesn’t provide the right training (male, owner/manager, Peel Region).

Having ascertained what overall business skills interviewees believed were required tooperate a successful winery; they were then asked what skills they believed actuallyexisted in the industry and also about their own business skills. Formal qualificationsvaried, with some of the owner/managers having tertiary qualifications and othershaving management diplomas or having attended short courses in management andbusiness skills. Tertiary qualifications held were sometimes in business or commercebut were also in very diverse areas such as zoology, botany and geology. As alreadymentioned, only one respondent had deliberately undertaken a formal qualification (an

MBA) to improve management skills for his business. Some interviewees hadcompleted or were in the process of completing courses such as those offered for thewine industry by various Australian institutions but these focus on production ratherthan business management.

When asked about their own business skill-set, most interviewees focused onviticulture and production (as the quotation above suggests). All referred to the need tomake good wines, that managing production was a critical process and that therefore itwas vital to have a good winemaker, which in many cases was the owner/managerthemselves. However when pressed to consider management skills there weredifferences in the skills they believed they possessed. Most owners were aware of theimportance of a good quality product and the people and processes which areresponsible for delivering this. However, general recognition of the need for qualitymanagement across the business was much less evident. A number of owner/managershad other previous or current business ventures (including property development,farms, catering, architecture and project engineering). They suggested that businessskills acquired and developed in that context had helped in their wine business.

A few owners had marketing and sales backgrounds prior to becoming an owner/manager of a winery. Some had attended seminars and courses to develop these skills.Generally though, most did not have such skills. There were regional differences thatappeared to influence the need for marketing skills. A strong brand identity exists forsome regions, for example Margaret River and more recently the Swan Valley, but less



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so for others, for example the Peel region. This increases the need to understand theimportance of strategic marketing rather than just product marketing.

One owner/manager had a legal and financial background which they saw ascritical for handling the move into a large publicly funded operation. The majority

however had no legal or financial training and therefore would rely on buying in thatexpertise when the need arose.

Whilst most thought that they had reasonable strategic management abilities theyalso conceded that they could be better at this. Many of the owner/managersinterviewed were similar to the general small business population in that they confusedgeneral business planning with strategic planning and were therefore predominantlyreactive rather than proactive in their approach. Many of the smaller wineries had nospecific long-term or strategic plans for their business and only vague thoughts aboutwhat their next development moves would be. This encompassed not just a lack of succession planning from those who felt that they were building a family asset but alsoa general lack of recognition from most about how, in the longer term, they would beable to realise the value of their asset once they no longer wished to be actively

involved.There was little evidence of proactive strategic planning, with the exception of some

of the slightly bigger wineries or the owner/managers who had extensive businessexperience prior to owning the current winery. Issues that may affect small wineriesnot mentioned by the majority of the interviewees were: anticipating what changesmay occur in agriculture in general over the next 5-10 years; the long term impact of thecurrent grape glut; the impact that changes in legislation may have on small businessboth good and bad (e.g. the new Industrial Relations Bill); and finally overall lack of sound business capabilities which could severely hamper any future expansion.

There was little evidence of formal human resource management skills among theinterviewees. For small family entities, it was not really raised as an issue. Most saidthat when new staff were needed they would use industry and personal contacts to findpeople. The current labour shortage has raised the profile of human resource issues,particularly recruitment and retention of top quality people. The interviewees thatmentioned that they had difficulty in retaining staff put it down to the current skillsshortage and the difficulty of getting the ‘‘right’’ person when they were operating insmall rural communities. Even where a smaller winery had staff, managing them wasnot always perceived to require particular expertise and knowledge about appointingstaff was rarely considered important. Like many management competencies, such asmarketing, planning or general management, most interviewees thought theypossessed sufficient human resource management skills, irrespective of whether theyhad any formal training in those skills, and therefore they did not need any furthertraining in these areas.

Attitudes to training and education courses

We want to develop all of our skills more and we need to – but we are constrained by time andfinance. I think we feel, rightly or wrongly, that we’ve inevitably got to do a lot of workourselves (male, owner/winemaker, Margaret River).

Whilst most interviewees were clear about what skills and abilities were important inthe industry, many failed to recognise that they themselves might need some trainingand development. Others had found that seminars and training events had been helpfulin providing them with additional skills. There still seemed to be a view in the industry




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that experience counted for much; that having a background in the industry wasimportant and could overcome other skills deficits. Where skills development wasconsidered necessary it was often sought through informal means, confirming thestudy by Bamberry et al. (1997) into Australian farmers.

Where training was considered important the role of local/regional industryassociations was seen to be critical. Courses provided through these organisations hadmore credibility because of a perception that they would be more relevant. Manyrespondents said that if they were seeking training for themselves or their staff theindustry associations would be their first port of call. However, the wine industryassociations usually focused on more technical training such as viticulture, winemaking, wine appreciation and trends in the industry. They could provide programs onmanagement and business skills but generally had not done so. Some regionalassociations did not see themselves as a training organisation but focused on anindustry marketing role. There was a perception that universities’ modes of deliverywere not industry friendly and that formal qualifications such as degrees or MBA’stook too long to complete. Such institutions needed to look at modes of learning to

focus on the management and people skills required in the industry.It seems clear that the most needed skills are business/strategic planning,

marketing, financial management, and human resource management. Despite the factthat interviewees perceived courses tailor made for the industry as more relevant andworthwhile it should be noted that the needed skills are generic management/businesscompetencies, training in which is widely available.

ConclusionsThis research has identified some universal management and business skills which areimportant in the wine industry. The most significant are marketing, strategic planningand management, financial management and human resource management. It has alsohighlighted diversity in the industry with different sectors having different needs.

Having analysed the current state of and attitudes to business and managementskills it would appear that there is a significant gap between what owner/managersthink they know and need to know to operate a successful business and the actualbusiness and management skills they possess. What appears to be needed is trainingthat is specific to wineries and an acceptance by managers of more generic training.While it is acknowledged that there are some differences between the wine industryand other small business there are also many commonalities. Better management skillsare needed as the wine industry is becoming increasingly competitive and there will beless room for all business types in terms of their ability to maintain their businesses. Tosucceed they will have to realise that passion for the product alone is not enough tocontinue and the operation of a profitable business will become more important.

While industry associations were often the preferred source of relevant trainingthey were perceived to be technically focussed organisations. They were not perceivedas training providers in the areas of business and managerial skills. Some respondentsexpressed concern that the peak providers of technical wine industry education (e.g.universities and specialist colleges) do not include a business training component intheir courses.

There was a significant difference in attitudes to technical (i.e. wine related) trainingand business training. The more established wineries in particular felt they had a rolein providing the former but very few saw a role in providing the latter. In technicalskills the industry was highly collaborative; willing to share information and expertise.



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However in business skills, including sales and marketing, a personal focus seemed todominate. Whether or not a respondent had formal business qualifications themselvesthere was no discussion of these skills being passed on to others in the organisation orthe industry. Broadly this supports the assertion that the wine industry tends to be

much more product focused than consumer oriented, contrary to the perspective of modern marketing theory.

It might be argued that an assessment of whether or not owners had adequate levelsof management skills is dependent on what measures they used to assess whether ornot their business was successful. Some were not seeking significant growth beingmore interested in lifestyle and the production of good wine than in financial success.However, for any business to have a stable future there must be a level of soundmanagement, forward planning and financial success. In this context it seems thatmanagerial skills were not adequate in a number of small, owner/managed wineries.Many of these businesses could not survive without financial subsidisation from someother sources of income even though, in most cases, a desire was expressed to give upthe other income producing activity over time. There was a desire for the winery to

stand on its own feet but no clear plan for how this might be achieved, as evidenced bythe overall lack of strategic planning.

There is of course a greater likelihood of long term financial survival and successwhere good management and business skills are present and there is certainly evidenceof this where wineries have identified a clear strategy and are pursuing it. This isparticularly true with regard to export markets. In general the owner/managers of small wineries are highly analytical about the technical aspects of their business and,in some cases, about the importance of sales and marketing functions. However, theyare relatively unaware of and unconcerned with issues of management expertise andgeneral business management skills.

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Corresponding authorSteve Charters can be contacted at: [email protected]

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