Crafting Sustainable Wine Businesses: Concepts and Cases

Concepts and Cases

Armand Gilinsky, Jr.

• Publisher: Palgrave Pivot
• Year: 2015
• ISBN:
  9781137553089
• Topic: Biological Sciences
• Subtopic: Environmental Science
• Index: Biological Sciences

Sustainable wine businesses are being crafted around the world, leaving the land in better shape for the next generation. In this book, four case studies reveal that sustainability in the wine industry it is tied tightly to long-term profitability.

1

Introduction

Armand Gilinsky, Jr.

Abstract: Did you know that sustainable wine businesses are being crafted around the world? Priority number one for the wine industry is leaving the land in better shape for the next generation. Four case studies about wineries in both the Old and New Worlds reveal that while growth is a subsidiary goal to sustainability, it is tied tightly to long-term profitability. Students and practitioners will learn about why sustainability leads to success in the wine industry, how to develop and defend metrics for benchmarking wine business sustainability, to analyze and compare various wine businesses to other businesses using sustainability benchmarks, to evaluate a “sustainable” strategy in the wine industry, and develop and defend recommendations to justify new investments supporting sustainability.

Gilinsky, Armand, Jr. (editor). Crafting Sustainable Wine Businesses: Concepts and Cases. New York: Palgrave Macmillan, 2015. DOI: 10.1057/9781137553089.0006.

Today, being “natural” has become a cliché in the wine industry: I am only trying to attract consumers because they are interested in the quality of my products. First of all mine should be considered as a good wine and, second, it should be considered as a biodynamic wine . . . I would not say that “going green” is my strategy, unless you would define strategy as anything else than a coherent behaviour.

Stella di Campalto, owner, Stella di Campalto, Montalcino, Italy, quoted by Santini, C. et al. (2011)

In my vineyard, it is easy to see chickens and geese walking the vineyards that in addition to their contribution to soil organic matter are natural predators of many insects . . . a real respect for the environment.

Miguel Torres, Chairman and CEO of Bodegas Torres, a fourth generation Spanish wine business

Concepts

The global wine industry, which is comprised primarily of small-medium enterprises (SMEs), has survived numerous environmental jolts during its long evolution in the Old World (Europe) and relatively shorter existence in the New World (Australia, New Zealand, South Africa, South America, and the United States). Wine businesses today confront survival threats, such as rising energy prices, water scarcity, mounting concerns about chemical exposure, and climate change, from the natural world.¹ Mitigating these threats involves many different actors and institutions in the winery owner’s or manager’s decision to formalize a business case for sustainability. Stakeholder pressures can drive adoption of sustainable practices, which, in turn, can result in product innovation, pollution prevention, and stewardship of natural resources.²

As the scope and intractability of an environmental problem increase, so do opportunities for innovation of sustainable processes and products in the pursuit of a sustainable competitive advantage.³ Such process and product innovations may be positively related to business performance.⁴ Researchers earlier have found that business age, size, and ownership (public v. private) are related to investments in sustainable systems, also known as environmental management systems or EMS.⁵ Owing perhaps to the huge sunk cost associated with investments in EMS, incumbent businesses may resist adoption due to fears of cannibalizing existing product lines and instead elect to pursue solely those activities considered absolutely necessary for regulatory compliance.⁶ Younger, entrepreneurial agricultural businesses, conversely, show a propensity to invest in innovations that supplant existing structures, some creating new standards for sustainable processes and products.⁷

Successful enterprises search for a “sweet spot” where harmful environmental and social impacts are minimized, and an adequate rate of return is realized⁸. A successful business is conscious of the social and environmental impacts of its supply chain, operations, products, and services and acts responsibly to minimize any negative impacts and remain in business (Phypher and MacLean, 2009). This can involve a range of strategies, such as reducing pollutants and waste, making processes and products more efficient, or even working to ensure the company does not deplete its own supply chain. An example of the latter is found in chapter 2 of Green to Gold.⁹ Unilever changed its fish-buying strategy to ensure that it purchases 100% of its supply from sustainable fisheries in order to protect the supply chain and to not deplete the ocean of fish. A sustainable business must be “born green,” streamlined to run lean, profitable and constantly re-defining itself as green innovation continues, but always with a profitable bottom line.

Instructors and students who read this book should be able to relate sustainability to the wine industry and recognize that for practitioners in the wine industry, priority number one is leaving the land in better shape for the next generation. For instance, most farmers want their children and grandchildren to enjoy the land rather than working the land to get the most amount of money out of it and then discarding it. The latter is definitely not sustainable business. Environmental stakeholders in the wine industry include (but are not limited to) workers in the vineyards who could be exposed to chemical fertilizers and pesticides over long periods of time, people who live down the street from a winery, and the homes that receive the water from the river where a winery releases its used water. A wine business approaches sustainability by incorporating the following “triple bottom line” strategy elements in its diagnosis of the situation at hand, the creation of company policies, and coherent actions:

1Social stewardship—Fostering a shift in the social attitude of the company to do what is “right” for the environment and its inhabitants.

2Environmental stewardship—Implementing practices and policies that have a positive environmental impact (e.g. EMS, energy conservation, reduced carbon footprint).

3Financial stewardship—Aligning the above-mentioned concepts with an overarching framework that financially capitalizes on the positive benefits realized (e.g. better margins, reduced operating costs).¹⁰

The learning objectives of this book are to

broaden students’ understanding of success in the wine industry to include the concept of sustainability;

prompt students to develop and defend metrics for benchmarking wine business sustainability;

challenge students to analyze and compare various wine businesses to other businesses using sustainability benchmarks;

give students practice in using managerial tools (e.g. value chain, financial, PESTLE, and resources/capabilities analyses) to evaluate a “sustainable” strategy in the wine industry;

induce students to develop and defend recommendations to justify new investments supporting sustainability.

Sustainability may be generally defined as using business practices that are environmentally friendly, socially equitable in terms of treating employee and community fairly, and economically viable. In the wine industry this means that sustainable vineyards attempt to use organic products, but if necessary will resort to agro-chemicals to protect the crop. It also includes reducing the use of water and energy in both vineyard and cellar, which can mean an upfront investment that may take years to recoup. While to date a large percentage of wine consumers do not seem to be demanding eco-labeled wines, many members of the global wine industry have decided to be proactive in pursuing sustainability strategies, anyway. Why? Some do this because of philosophical beliefs in preserving the environment and gifting the business to future generations, whereas others focus on wine quality and business benefits.

Thus, growth should be a subsidiary goal to sustainability—that is, adopted when it is necessary for survival or is tied tightly to realistic objectives for profitability over time. For example, growth is essential to survival when a company must achieve the minimum level of scale or scope necessary to compete effectively as an industry goes through shakeout or changes in leadership—a situation that arises only under specialized circumstances. Growth may be integral to profitability when the wine business is striving to achieve an advantaged competitive position, or when it is taking advantage of particular changes in indus...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  Bodega Pirineos: A Sustainable and Collaborative Business Model in a Spanish Winery
• 3  Frogs Leap Winery in 2011The Sustainability Agenda [Case + Video]
• 4  The Science of Sustainability: Lime Rock Wines of New Zealand
• 5  An Integral Sustainable Innovation and Communication Strategy: First Non-sulfited Bierzo Wine Puerta del Viento Case Study
• Index