Innovation and Entrepreneurship in Tohu Wine: Analysis of New Zealand's Wine Market

This research report analyzes the wine market in New Zealand, focusing on Tohu Wine. It covers the operational scenario, market growth, and strategic issues. Recommendations are provided for exporting to emerging markets.

Running head: INNOVATION AND ENTREPRENEURSHIP
Innovation and Entrepreneurship
Name of the Student
Name of the University
Author Note

1INNOVATION AND ENTREPRENEURSHIP
Executive Summary
This research report is an analysis of wine market of New Zealand. Report particularly
considers the operational scenario of Tohu Wine. The analysis performed in the report covers
a wide area of NZ’s wine market. Wine market in New Zealand in the recent time has
observed a tremendous growth due to demands in the global industry. Understanding this
demands there are several regional suppliers crowding in NZ’s wine market which is a
significant threat to Tohu’ domestic market. It has been identified that wine industry in New
Zealand contributes more than 1.5 billion to NZ’s GDP. Sparkling wine is positively
effervescent in the exported nations, like US, UK and China due to the trendy wine like
Prosecco, which has become a rapidly growing drink for regular celebration. Organization
Tohu Wine has developed a long and sustainable supply chain network which is reflected in
its overall sales increase. As a result, Tohu should mostly focus on exporting to emerging
market like Asia and Europe instead of resolving the issues of domestic market

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Table of Content
Introduction................................................................................................................................3
Organizational Background- Tohu Wines.................................................................................3
Business Strategies.....................................................................................................................4
PESTLE..................................................................................................................................4
SWOT....................................................................................................................................6
Competitive analysis with others...........................................................................................8
Strategic issues:..........................................................................................................................9
Opportunity for Wine Tourism................................................................................................10
Recommendation......................................................................................................................11
References................................................................................................................................13

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Introduction
This research report presents a detailed analysis of innovation and entrepreneurship
opportunities of the organization Tohu Wines which is located in New Zealand. Report also
covers a competitive analysis with the organization Vila Maria producing wine products.
Purpose of the report is to analyse and identify the existing opportunities and provide suitable
marketing strategies for the organization Tohu Wine. So, to perform the analysis both
external and internal market environment has analysed. Analysis also covers the strategies
issues that organization faces when running the operation in the sector. A set of strategic
frameworks have been applied to establish the analysis. Report starts a detailed
organizational background with respect to current market position, products, services and
financial performance.
Organizational Background- Tohu Wines
It has been identified that Tohu Wine is world’s biggest Maori owned wine
organization which focuses on manufacturing estate grown, single vineyard wines from New
Zealand’s premier grape growing regions. The major philosophy of the firm is to create wines
that incorporate the flavours of each regions’ unique environment while deposing with the
brand reputation alongside. Core value of the firm is to encapsulate care and respect for
people as well as relationship with the inclusion of natural environment (tohuwines.co. 2019).
This core values hep the firm to run the operation the way it wants and helps to develop
interaction with one another. It has been identified that 2016 has been a great start for the
organization with the maturity of New Zealand’s wine industry. When it comes to product
and development, Tohu Wines’ products and services are ranged in three different categories
namely Manaaki Range, Kaumatua Range and Rewa Range. All prodcuts are made sharing
and its practices from the vineyard to audiences which is guided by organization’s culture

4INNOVATION AND ENTREPRENEURSHIP
(tohuwines.co. 2019). The major dedication of the firm to produce an outstanding wine which
is deeply engrained in their duty to care for the environment.
Business Strategies
PESTLE
Political factor: It has been identified that the recent growth of the sector has
primarily been supported by considerable capital as well as intellectual investment into
vineyard, wine quality, sales and marketing. Considering this growth, government of the
nation is quite favourable to the organizations in the industry. In 2018, 134,700 tonnes of
grapes manufactured 95 million litre of wine along with 23 million litres being exported at a
value of NZ$ 256.4 million (Fleming et al. 2014). It has been noted that the government of
the nation has recognized this and willing to invest $12.5 million over the next four years.
Thus, it can be mentioned that Tohu Wine’s market is favourable enough along with the
support of the government.
Economical factor: According to Beverland and Lockshin (2001) the wine industry
in New Zealand contributes more than 1.5 billion to NZ’s GDP. It has also been identified
that wine exports have increased at an average of 24% each year from past few years which is
compared with 5.9% of growth in all exports goods. This growth is a great opportunity for
Tohu, as the industrial growth is stable and the gains from the export is most likely to
continue. Hence, the organization’s investment towards the expansion of that business could
be an appropriate choice for its business (Charters & Ali-Knight 2002).
Social Factor: It has been identified that urbanization in New Zealand is a major
driver for the growth of wine organization like Tohu Wine. Morrison & Rabellotti (2017)
mentioned the fact that sparkling wine is positively effervescent in the exported nations, like
US, UK and China due to the trendy wine like Prosecco, which has become a rapidly growing

5INNOVATION AND ENTREPRENEURSHIP
drink for regular celebration. On the other side, neighbouring market like Tasmania have
started to crack the champagne code with the new spines on some classic recipe. So, when
developing taste for the wine lover, Tohu Wine must have to consider these factors. On the
other side, Anderson (2013) mentioned that due to rapid urbanization and growth in the
tourism sector in New Zealand, domestic market is always attractive for wine producers
because hotels, restaurant and bars are significant consumer of Tohu Wine.
Technology: As put forward by Anderson and Wittwer (2013), technology forces
such as the design and process technology observed New Zealand wine producers tend to
develop joint venture with the large international organizations to share the technological and
process knowledge in exchange for the growing market presence. Lewis (2016) mentioned
about Recent Montana/Aliced Domecq, Nobilo/ Constellation Brands joint venture are the
greatest example of the technology based forces. Furthermore, Malborough Wine Research
Centre is at the heart of New Zealand vine technology as well as fast-paced development of
wine sector. So, it is worth stating that in the journey of Tohu’s wine production, it is most
likely to receive a tremendous technology-support because independent science-based
research organizations tends to works with universities as well as research facilities to deliver
scientific leadership and technological advancement to support the development of regions’
naturel resources in the most sustainable way (Dodds et al., 2013).
Environmental factor: It has been identified that New Zealand’s is geographically
the most unique in several ways and one of the primary features is that it is one of very few
nations in the world could produce high quality cool climate wines that possess unique
flavours and intensity that could include climate grape varieties could create in wine. In this
context, \New Zealand includes a natural competitive advantages, particularly over the most
of wine manufacturing regions in the neighbouring Australia. Anderson & Wittwer
(2015)mentioned the fact that preservation of natural resource is a significant concern for the

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organizations in the wine sector. However, to resolve this issue, Tohu Wine is responsible for
protecting as well as enhancing its previous natural resources that its major life forces. For
example, the grapes grown with the soil knowledge passed down from Maori Tapuna. This
means that organization has developed a deep and inextricable relation with the land to
prosper its environment that should be developed and healthy (Velikova, Murova & Dodd,
2013).
Legal Framework: It has been identified that APEC report portrays the historical
development of New Zealand wine sector as the major shift from a heavily regulated,
protected inward-looking as well as successful sector which makes a low quality products for
the regional market to a ‘changing market’ competitor. This must make a highly quality
wines for the export. Carlsen (2004) mentioned about another significant concern, when the
wine sector is protected by high tariffs as 70%, high end consumers could afford to purchase
top quality wine from the oversea market but cheap imported might not be available. This
fact indicates that logical short-term strategy for the sector would be about making a low
quality wine. This is more of a challenge because the demand of wine product is relatively
high, quality cannot be compromised.
SWOT
Strength Weaknesses
 The organization Tohu Wine has
developed a long and sustainable
supply chain network which is
reflected in its overall sales increase
(an increase of 31% in last five years
due to exports in overseas market)
 Extending export network is positively
 The organization has a poor reach
in the domestic environment due to
increasing number of small
producers (Forbes et al., 2009)
 As the major market, the firm is
widely dependent on four nations
such as AU, US, UK and Canada,

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influencing the sales of Tohu Wine
 A strong and growing achievement in
premium and super-premium wine
 Contribution to the overall market
share of wine industry being one of
the industry leader (key market is
USA, UK and other European nations)
(tohuwines.co. 2019)
 Tohu Wine is one of the innovative
and quality focussed on producers
 Achieved a tremendous success in
emerging success in spirits
while it is not able to meet the
growing demands of other markets
 It is identified that the brand lacks
a strong super-premium heritage
brands as expected by demand and
status (tohuwines.co. 2019)
 Focus is on limited culture of
super-premium branding
Opportunities Threats
 There is a growing income in Asian
nations which is an emerging
opportunity for Tuhu Wine
 There is a rapidly growing demand for
premium wine item, so the
organization stretch its focus on the
demand-based areas
 There is a strong and increasing
demand in Asia for premium fortified
wines and growing reduction of global
ocean supporting higher price
 It has been identified that the brand
 There is an ongoing consolidation
of the sector which could be a
significant for the sector
 Even though the growth of the
sector is increasing, organization
finds it difficult to find good
distributors to gain access into the
major markets (Dana et al., 2013)
 Tohu Wine has to be aware of the
fact the increasing growth of bulk
wine trade minimizing the value of
wine

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needs to leverage success of New
Zealand wine sector which is a
significant opportunity for the
organization as it can pay attention to
the emerging areas (Anderson 2004).
 Growing range of New Zealand
 Organization finds limited
opportunity of shipping water
across its regions if the production
is not much of premium product
Table 1: SWOT analysis
Competitive analysis with others
It has been identified that Maori values cannot be integrated to the conventional
governance theory in the wine sector due to the issue of concomitant requirement to integrate
the major Maori values completely into the organization. Thus, Hayward and Lewis (2008)
mentioned that having the right governance structure, nonetheless, can provide the culture
space as well as context for the expression of Maori culture values through a range of
frameworks. It has been identified that Maori Culture concept and values could include
tikanga, rangatiratanga, manaakitanga, kotahitanga are greatly relevant in the contemporary
business world for developing standards as well as achieving sustainable development
(tohuwines.co, 2019). It has been identified that the organizations with the Maori values tend
to create significant competition between themselves in the industry. Flint and Golicic (2009)
mentioned the fact that New Zealand wine industry had an estimated turnover of NZ$
2billion in 2014, with the export earning which makes up around NZ$ 1.33 billion of this.
As the demand of wine products both in domestic and global markets are rapidly
increasing, existing organization like Villa Maria is leaving no stone unturned to hit the
market with their strategies. For example, to differentiate itself in the crowd of wineries, Vila
Maria has developed seven unique product portfolio such as Private Bin, Celler Selection,
Platinum Selection, Reserve, Single Vineyyard, Ngakirikiri, etc. On the contrary, Tohu Wine

9INNOVATION AND ENTREPRENEURSHIP
is sticking to its conventional winery items. Morrison and Rabellotti (2018) mentioned the
fact that Villa Maria has increased its market share by 11% in 2015-2018 by paying attention
to some segmented areas like business events, wedding and café. Moreover, Villa Maria has
gained a tremendous market reputation both in global and domestic market due to its growing
involvement in CSR activities unlike Tohu Wine. Major sustainability initiative of Villa
Maria is International Organization for Standardization, Certified Emission Measurement and
Reduction Scheme (CEMARS), Customer Assurance Programmes - such as British Retail
Consortium (BRC) and TESCO and Quality Assurance – ISO 9001, Wine Standards
Management Plan, ISO 17025 (villamariawines.com 2019). All of these programs covers and
effectively resolves health and safety welfare and employment, and CSR. Compared to this
items, Tohu Wine reported a steady involvement in greenery initiatives, which means it is
majorly involved in the preservation of Natural Resources.
Strategic issues:
Even though Tohu Wine mostly relies on its Maori culture for development and
production of its winery products, this is an issue when the operation is considered at a macro
level. According to Sharples (2002), New Zealand’s strategy for wine mostly depend upon
the high quality production of niche product and the market does not rely on regulated
appellation system. On the other side, offshore ownership of New Zealand wine producers
minimizes the availability of social capital among the industry players as well as indeed the
impact of a wider network of social as well as economic institution on industry approaches is
potentially a rich area for the further study. On the contrary, Gabzdylova, Raffensperger and
Castka (2009) mentioned the fact that as the wine industry in New Zealand is that the niche
strategy of specialization could lead to Tohu’s system focused on that one product and
thereby able to compete in world market. Nonetheless, there is still a crisis of such
overconcentration of efforts, even given the overall limited production quantity that a smaller

10INNOVATION AND ENTREPRENEURSHIP
producer could put on the market (Banks & Overton, 2010). Thus, it can be added that if
NZ’s reputation for excellence tend to rest upon the growing demand for its culture based
product item, it must go out of fashion because a major adjustment technique does not only
stay upon the production side but it is also on the dynamic flexibility and adaptability of the
system.
Among the stated ones, the major issue is that even though UK, US and European
nations are Tohu’s major markets, world wine market is going through a major change
because of the shifts in consumer demand (Reid et al., 2001). As being the owner of highly
priced discretionary item, export market are largely dependent on consumer preference as
well as economic growth but there is a risk that growth in world premium production could
overtake the growth in demand as well as premium price presently overtake. On the contrary,
importance of supermarkets in wine retailing has been increasing in Europe, Australia and
North America and this impact has its own margin. This is a significant concern for the
organization Tohu Wine. Moreover, due to the growing demand, Tohu is in the rubs of
meeting consumer demand but number of competitors in the market are rapidly increasing. It
has been identified that Tohu Wine tends to face the challenge related to scale of economies,
changing climate conditions and higher cost of equipment required for manufacturing.
Wine tourism boom: It has been identified that number of tourists in New Zealand is
rapidly increasing and consequently, consumer is seeking a unique wine experience. So, it is
a growing sector that ripe for picking and organization like Tohu wine is in the need of
helping the sector to get a share. As customers’ needs are diverse in nature, organization’s
Maori culture cannot be the only defender against the needs. NZ’s wine market has a range of
vineyard experience. As a result, industry and the organization is in the need of working with
the sector but it lacks digital specialists to manufacture emerging online tools.

11INNOVATION AND ENTREPRENEURSHIP
Single revenue stream- It has been identified that Tohu Wine is mostly relied on its existing
revenue chain due to its existing culture based wine items. However, the organization is
lacking the insight about the diverse taste and preferences of Wine items. Business of Tohu
wine is in the need of product differentiation.
Singe target strategy- When focusing on consumer market, it did not specify its consumer
group. Tohu wine tends to target the large market with own traditional view of approaching
consumers.
Opportunity for Wine Tourism
It has been identified that there is a major focus on in the marketing area in the
coming year and the ongoing year has been the major establishment of wine tourism as the
most significant activity of focus. Thomas (2000) mentioned the fact that almost 27% of
holiday visitors to New Zealand visit a winery and those do spend 52% which is more than
the average tourists. They stay longer and visit more regions and consequently, they spend
around $3.8 billion but this is more of challenge to Tohu Wine to manufacture products and
experience that holds values more of that money flows to its members (Alonso, 2009). It can
be stated that as the tourism market in New Zealand is rapidly increasing, Tohu Wine has the
opportunity for its expansion of culture based products. The organization has the opportunity
to develop and manufacture a diverse winery items on the basis of the tastes and preferences
of consumers of overseas markets. Hall et al., (2009) mentioned the fact that wine tourism
provide a significant wine tasting experience and a much more with the inclusion of a range
of tours, accommodation and a variety of food items. So, for Tohu, these cellar door
experience is a significant marketing and sales as well

12INNOVATION AND ENTREPRENEURSHIP
Recommendation
It has been identified that wine industry in New Zealand has largely been dependent
on the export market (especially UK, US, Australia, Asia and European nations) and it is
seeking to deal with the growing competition of world market. Hall et al., (2009) argue even
though the growth in the sector is relatively, Tohu needs to differentiate itself from others
with respect to winery items. As discussed above, tourism sector is effectively creating the
demands of diverse wine items. Number of visitors from the Asian markets in NZ is rapidly
increasing. So, when manufacturing the product items, the brand needs to think of regions
based products with the concept of diversification. This means that the brand should represent
itself with its uniqueness and diversified product items instead of being a part of NZ’s
flourishing Wine market. On the other side, organization also needs to consider the fact that
consumers’ taste and preferences are rapidly changing, Tohu needs to majorly focus on new
product development. As Gabzdylova, Raffensperger and Castka (2009) mentioned the fact
that New Zealand wine sector has a higher cost base relative to its competitors.
Considering this fact Tohu Wine needs to pay attention to ultra and super premium
brand positioning which only caters for the niche segment of the market. Moreover, SWOT
analysis performed above helps to observe the fact that number of local suppliers in the sector
have started to increase irrespective of limited economic scale. However, taking this as a
significant concern, Tohu should mostly focus on exporting to emerging market like Asia and
Europe instead of resolving the issues of domestic market. On the contrary, in order to beat
Villa Maria, the organization Tohu needs to develop innovative marketing strategies such
approaching the overseas consumers who are visiting hotel in New Zealand with its Maori
Heritage wine market instead of presenting itself as NZ’s wine producer.

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