Creating a Competitive Advantage in Times of Trouble

Prepared by: Name: Ashley Ratcliff

Title:

Date: 15th October 2014

A bit more about me!

Family

Home Garden

Angaston Show

Gifts for Family & Friends

Chilli Sauce

Oxford Landing Estate

The Australian Wine Industry

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The Australian Wine Industry – Background

The first grape vines arrived in Australia with the First Fleet in 1788

Export growth occurred in the 1990’s

Dominated by a handful of varieties (Chardonnay, Shiraz, Cabernet

Sauvignon & Merlot)

World's fourth largest exporter of wine with approximately 750 million litres

a year to the international export market with only about 40% of production

consumed domestically

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The Australian Wine Industry – 2025 Vision

• The vision is that by the Year 2025 the Australian wine industry will achieve $4.5 billion in annual

sales by being the world's most influential and profitable supplier of branded wines, pioneering

wine as a universal first choice lifestyle beverage

• Export growth is expected to occur in three phases:

Volume growth (1996-2002) during which the rapid vineyard expansion of recent years will overcome product shortages thereby enabling expansion in existing and penetration of new markets.

Value growth (2002-2015) which will place increased emphasis on building brandstrength, sector share and margins.

Pre-eminence (2015-2025) when Australia will have established brand leadership in specific market segments.

• Grape production will need to rise from the existing peak of around 850,000 tonnes (1996) to 1,650,000 tonnes (2025)

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The Australian Wine Industry – Vintage Production

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Tonnes Crushed 1,147 1,500 1,800 1,500 1,860 1,920 1,900 1,420 1,830 1,730 1,580 1,600 1,580 1,830 1,680

Vintage 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0

500000

1000000

1500000

2000000

2500000

The Australian Wine Industry – Segment Definition

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The Australian Wine Industry – Exports

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The Australian Wine Industry – Domestic Consumption

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The Australian Wine Industry – Winery Balance

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The Australian Wine Industry – Winery Balance

Private Equity

Private Equity

$190 M write down

$30M loss 2011/12

The Australian Wine Industry – Financial Summary

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The Australian Wine Industry – Summary

Since 2007 the profitability of the Australian wine industry has declined significantly

This decline in profitability has been driven by a ‘perfect storm’ that has intensified by;

Export returns have declined sharply

Domestic margins have been squeezed by retailers

The decline in export demand has created an

‘oversupply/under-demand’ of grapes and wine in certain quality segments

Basically the Australian Wine Industry is positioned in the ‘mature’ phase of the industry life-cycle and possibly entering the ‘decline’ phase!

The ‘Optimism’ of the Wine Australia’s 2025 Strategy drove huge investment and growth in the Australian Wine Industry……..and hence resulted in reaching oversupply…….a position that has cause significant brand damage!

The Riverland

The Riverland

The Riverland

The Riverland

• Soldier Settlement

• 2hrs NE of Adelaide

• 400,000t of grape/year (82% growers grapes)

• 22% of the national crush

• 62% of SA crush

• 300mm rain/year

• 20,739Ha (Barossa 11,168Ha)

• Reputation for bulk wine

The Riverland – Current Situation

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Why Invest in the Wine Industry??

Ricca Terra Farms

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Ricca Terra Farms

Established in 2003 by Ashley & Holly Ratcliff (200t)

Good profits in early years…..no need to think strategic!

Growth over 11 years to 1,200 tonnes

Past 5 years has seen profits eroded significantly

A strategy of doing nothing would have be disastrous

……..our approach was to make change…..think how we could

create s strong competitive advantage!!

Building a Competitive Advantage

Strategy Development

‘Discover the critical factors in a situation and design ways of coordinating and focusing actions to deal with

those factors’

‘Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose

accomplishments will lead to a cascade of favourable outcomes’

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The Core of Strategy (Good Strategy/Bad Strategy)

Discover the critical factors in a situation?

Ricca Terra Farms was growing grapes that were;1. easily substituted by customers

2. not valued by customers3. in abundant supply within the industry

Ricca Terra Farms was growing a ‘Commodity’ crop……if Ricca Terra Farms did not change it would fail.

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The Core of Strategy (Good Strategy/Bad Strategy)

Producing at a lower cost than competitors, or if can deliver more perceived value than competitors, or a mix of the two, then you

have an competitive advantage

Extending a competitive advantage requires looking away from products, buyers and competitors and looking instead at the

special skills and resources that underlies a competitive advantage. In other words ‘build on your strengths’

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Competitive Advantage

What Will The Future Look Like??

Establishing a Competitive Advantage

Passion/Best/Resource

Building a Competitive Advantage Through Collaboration

Building a Competitive Advantage Through Collaboration

Building a Competitive Advantage Through Collaboration

The ‘Tipping Point’ in Competitive Advantage

Things Started to Happen!!

……..and Happen!!

……..and Happen!!

……..and Happen!!

……..and Happen!!

The ‘Tipping Point’ in Competitive Advantage

Being Visible!!

Being Visible!!

Being Visible…..and Communicate!!

Competitive Advantage = $$

Discover the critical factors in a situation?

Ricca Terra Farms was growing grapes that were;1. easily substituted by customers – No longer the case

2. not valued by customers – Highly valued3. in abundant supply within the industry – Very limited supply

Ricca Terra Farms was growing a ‘Commodity’ crop……if Ricca Terra Farms did not change it would fail.

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The Core of Strategy (Good Strategy/Bad Strategy)

Producing at a lower cost than competitors, (yes) or if can deliver more perceived value than competitors (yes), or a mix of the two,

then you have an competitive advantage’

Extending a competitive advantage requires looking away from products, buyers and competitors and looking instead at the

special skills and resources that underlies a competitive advantage. In other words ‘build on your strengths’ (we are quickly building a

reputation of growers who grow high quality grapes and help promote customer’s wine – difficult to replicate by competitors)

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Competitive Advantage

Establishing a Competitive Advantage

Final Comments/Thoughts

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Final Comments/Thoughts

Identify the critical factors influencing your business

Finding your competitive advantage is critical

Be honest about your business & industry’s future

Work out what you passion is, what you can be the best at and

make sure the two can drive resource engine

Build a brand or otherwise be a commodity producer!

Keep things simple!

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Thanks

Australia Macadamia Society

The Yalumba Wine Company

Oxford Landing Estate