NZ-Competitive Advantage Through Sustainability

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Searching for competitiveadvantage through sustainabilityA qualitative study in the New Zealand wine

industry

Daniel J. FlintDepartment of Marketing and Logistics, University of Tennessee, Knoxville,

Tennessee, USA, and

Susan L. GolicicDepartment of Management, Colorado State University, Fort Collins,

Colorado, USA

Abstract

Purpose Sustainability is becoming increasingly important in supply chains, particularly in thosethat function in highly competitive industries. The purpose of this paper is to understand more deeplythe role sustainability plays within supply chains based on a qualitative study conducted in the NewZealand wine industry.

Design/methodology/approach This research followed a grounded theory methodology whichused in-depth interviews with managers from wineries, retailers, and restaurants; observations ofoperations; and interpretation of field documents/artifacts.

Findings The findings show that managers within the New Zealand wine supply chains are tryingto find ways to leverage sustainability-related competencies for competitive advantage in what is nowa highly competitive industry. Within this context, the emergent theme of searching for advantagethrough sustainability involves: pursuing and leveraging sustainability; telling a story that involves

sustainability; managing supply chain relationships around sustainability; and experimenting withsustainability initiatives.

Research limitations/implications The research is limited to the context and participants of thestudy. As a qualitative inquiry, findings are exploratory. The research implications, however, involvedeeper studies into how wine industry firms in other nations and regions of the world are treatingsustainability and searching for competitive advantages. Further validation of the models that emergecan be accomplished through future research, which would draw on aggregate data.

Originality/value The approach and context within which sustainability is explored is unique. Byseeking deep insights from managers on the cutting edge of sustainability initiatives, we are able toget close to strategic thinking and explore the impact on distribution relationships.

Keywords Economic sustainability, Competitive advantage, Supply chain management, Wines,New Zealand

Paper type Research paper

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

www.emeraldinsight.com/0960-0035.htm

The authors contributed equally to this research and are listed alphabetically.The authors would like to acknowledge the financial support of the Colorado State University

Office of International Programs and the Visiting Erskine Fellowship at The University ofCanterbury for making this research possible.

This paper has been through a double-blind peer review in accordance with IJPDLMs reviewprocess. This paper will be presented at the 4th Annual Supply Chain Management & IndustrialDistribution Symposium (SCMID), 5 November 2009, New Orleans, LA, USA: www.cba.ua.edu/scmid

Searching forcompetitive

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841

Received April 2009Revised August 2009

Accepted September 2009

International Journal of Physical

Distribution & Logistics Management

Vol. 39 No. 10, 2009

pp. 841-860

q Emerald Group Publishing Limited

0960-0035

DOI 10.1108/09600030911011441


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IntroductionDistribution networks ought to serve as a means for competitive advantage (Mentzeret al., 1989). A competitive advantage exists when a firm has one or more competenciesthat allow it to create superior value, relative to competitors, for some market segment

(Hunt and Morgan, 1995). As business becomes more dynamic and managers moresavvy, relying on the product alone to provide such an advantage often only results intemporary benefits. Thus firms increasingly rely on competencies obtained throughtheir supply chain to excel (Markley and Davis, 2007). One such competency that hasreceived increasing attention in the literature is environmental sustainability. Indeed,Porter and Kramer (2006), propose that sustainability is an inescapable priority forbusiness leaders in every country (p. 78). Early studies found positive associationsbetween environmental management initiatives and financial performance (Klassenand McLaughlin, 1996; Russo and Fouts, 1997). Subsequently, research has argued thata proactive environmental strategy creates entry barriers and is a source of competitiveadvantage in international markets (Aragon-Correa and Sharma, 2003; Porter andKramer, 2006).

In order for a firm to gain and sustain an advantage, it must be difficult forcompetitors to duplicate the benefits of the firms competencies due to the fact that theyare rare, valuable, imperfectly imitable and have few strategically equivalentsubstitutes (Barney, 1991). A sustainability competency therefore provides adifferential advantage if this competency is relatively unique in the firms market.Supply chain management, and in particular distribution-related competencies, isrecognized as providing such an advantage for numerous firms (Mentzer et al., 1989).However, costs to business organizations as well as to the environment can be high intodays global supply chains. As such, sustainability initiatives have focusedsignificantly on the upstream and downstream distribution aspects of businessmanagement due to the costs associated with distribution. But beyond cost reduction

efforts themselves, can environmental sustainability initiatives within and throughoutthe supply chain be leveraged, as logistics competencies can be leveraged (Bowersoxet al., 1995), for differential advantage in the marketplace? And what role(s) cansustainability-related capabilities play in helping companies differentiate themselvesin a highly competitive and established marketplace?

Prior research in competitive advantage from sustainability[1] has been largelyconceptual or has been limited to studying the advantage obtained by the first moverin the market. This paper seeks to begin to fill this gap and explores the phenomenonwithin the context of the New Zealand wine industry. New Zealand has a richecological heritage and was one of the first countries to address the interdependencebetween economic and environmental systems as well as establish voluntarysustainability initiatives within business (Patterson, 2006). An absence of a core of

heavy industry, a low population density, its relative geographic isolation, a sizablesmall to medium enterprise business base, and an economy dependent on a buoyantagricultural sector all contribute to the value New Zealand places on a clean greenimage (Brown and Stone, 2007) as well as effective distribution networks. Thus, thecountry is committed to goals of sustainability, particularly within the agriculturalsector, which accounts for 50 percent of all exports and 15.7 percent of the countrysGDP (Aerni, 2009). The New Zealand wine industry, which has experienced a boomover the past two decades (the number of wineries increased 173 percent and the value

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of exports grew 816 percent from 1990 to 2000), capitalizes on the image of the countryand promotes products through the catch phrase, the riches of a clean green land(Hughey et al., 2005). This specific industry is one of the oldest in civilized humanhistory and has seen a significant increase in both consumer demand and in the

number of global wine producers competing for that demand (Anderson, 2003). Weoriginally posed this specific research question: How do managers in the New Zealandwine industry conceptualize sustainability and what role does it play in their supplychain? It was in pursuit of an answer to this question that the notion of searching foradvantage emerged. The paper is structured as follows. First, we review foundationalliterature on competitive advantage, sustainability, and branding. Second we explainthe grounded theory qualitative methodology we chose to explore the phenomenon.Third, we discuss the findings from our fieldwork. Finally, we offer a discussion aboutpossible implications for managers and researchers.

Foundational literature

As is typical with qualitative, inductive inquiry, and specifically grounded theory(Glaser and Strauss, 1967; Strauss, 1987), we initially used the literature to establish theimportance of the phenomenon of inquiry. During our inductive inquiry, we discoveredthat sustainability was playing a role consistent with competitive advantage andbrand equity theory. We introduce this relevant literature next even though in truth,literature and field immersion occurred simultaneously in a tacking back and forthfashion.

The global wine industryInterestingly, the history of the wine industry closely parallels that of the automobileindustry. The US Big 3 automakers (General Motors, Ford, and Chrysler) made themistake in the 1970s and 1980s of believing that Toyota and Honda were not worthy

competitors and their historical dominance would keep them on top of the market.Toyota is now the most profitable automobile manufacturer while General Motors andChrysler declared bankruptcy despite billion dollar government loans to remain viable.Similarly, the Old World wine producers (those within Europe) relied on their centuriesof tradition and were thus unprepared for the rapid invasion of their global marketsfrom New World producers. A 2001 report commissioned by the French Ministry ofAgriculture admitted, Until recent years, wine was with us. We were the center, theunavoidable reference point. Today, the barbarians are at our gates: Australia, NewZealand, the USA, Chile, Argentina, South Africa (Anderson, 2003, p. 47). While thetop four Old World producers[2] still accounted for almost 55 percent of globalproduction in 2004, they are losing market share as their exports decreased or grewmuch more slowly than those from New World producers (Hussain et al., 2007).

The high levels of competition in the wine industry are being driven by severalfactors. Although demand is growing due to changing regulations and consumptionpatterns along with reports of the apparent health benefits of wine, the world currentlyproduces more wine than it can consume. Production surpluses have ranged between15 and 20 percent over the past ten years (Hussain et al., 2007). Consolidation in all tiersof the supply chain is escalating making it increasingly difficult for the tens ofthousands of wineries to get their product onto the shelves of fewer and more powerfulretail establishments. Consumer behavior with respect to this product is also changing.


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Purchases by most segments are governed by reducing the perception of risk(Spawton, 1991), a foundational driver of branding success; therefore consumers arebecoming more educated about products/brands and demanding more variety. Thisincreased knowledge is expected to lead to discrimination between brands and

preferences for differentiated products. What in the past has been characterized as acottage enterprise is expected to be indistinguishable from any other highlycompetitive global industry (Anderson, 2003). Thus those countries and producers bestable to adapt to these market changes and differentiate themselves and their brandswill gain competitive advantage.

On competitive advantageA functionalist perspective on competitive advantage can be traced back at least toAlderson (1957), which states that every firm must seek and find a function thatenables it to maintain a position in the marketplace. How firms perceive their marketand competitive environments, whether local, regional or global, will influence the

opportunities they see for differentiation. The competitive challenge is to outperformrivals in light of internal and external constraints and to satisfy continually changingconsumer wants and needs (Dickson, 1992). As Hunt and Morgan (1995) stipulated,firms constantly struggle for comparative advantage through resources, which willyield competitive advantages enabling unique marketplace positioning and eventuallysuperior financial performance. As firms move to leverage their resources forcompetitive advantage, rivals observe these actions and retaliate (Kuester et al., 1999).This expected behavioral norm prompts some competitors to signal or mask theirintentions (Prabhu and Stewart, 2001). These processes can be seen playing out inmany markets and industries daily as firms and their supply chain partners attempt toobtain resource advantages through unique distribution networks providing anecdotalsupport for the use of distribution systems as a differential advantage. What we do not

know is how the recent emergence of environmental sustainability, which has beenstrong across disciplines but extremely so within supply chain management, hasimpacted this search for differential advantage.

Sustainability in New ZealandThere has been an increasing range of business initiatives in New Zealand focused onsustainability. Businesses have begun producing triple bottom line reports (accountingfor the social, environmental and economic impacts of a firms actions) and joiningorganizations such as the New Zealand Business Council for Sustainable Development.In accordance with its heritage as described in the introduction, the government hasstated that sustainable development must be at the core of all policy (Roper, 2004).While the policy development in this area has progressed significantly, these initiatives

are largely voluntary. The argument is that it is more robust in the longer term to relyon market pressures for implementation rather than mandates through regulations(Brown and Stone, 2007). This logic appears to be working within the wine industry asmany producers are implementing environmental management systems (EMS) as ameans of differentiation. For example, a select number of vineyards and wineries haveimplemented ISO 14001, and a few have obtained organic certification through Bio-GroNew Zealand (Hughey et al., 2005). Currently, over 600 of the countrys wineries andvineyards are members of Sustainable Winegrowing New Zealand (SWNZ) in

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anticipation of this being a requirement to export wine in the near future (SustainableWinegrowing New Zealand, 2009). Firms in the wine supply chain believe these EMSserve as a marketing tool and are becoming more important in order to compete in theindustry. Some even believed that their EMS enabled product differentiation and their

business experienced a competitive edge (Hughey et al., 2005). With so many firmstrying to pursue sustainability, it is possible that the first mover advantages for thoseindividual New Zealand wineries leveraging sustainability in the marketplace has beenlost at this point with respect to other New Zealand wineries. However, the nationwideinitiative may very well be behind part of the increased brand equity of New Zealandwines in general globally. So it could be that efforts, which have differentiated theregion, may help the national industry but simultaneously not help individual wineries,brands and retailers.

On brand equityBrand equity is determined by customers and represents the power of a brand in themarketplace. It is the differential effect of brand knowledge on customers responses tomarketing efforts (Keller, 1993). This knowledge is comprised of brand awareness andbrand imagery (e.g. associations, attributes linked to benefits). Customers, bothbusiness and consumer, prefer certain brands over others in part because theassociations customers perceive represent better value (Woodruff, 1997). Due to brandequity being determined by customers and the dynamic nature of competitive businessenvironments, customers perceptions of value change over time as they are exposed tocompetitive offerings (Flint, 2006; Flint et al., 2002), and as a result brand equityperceptions change as well. In the broadest sense, firms and even nations have brandidentities, and perceptions of products associated with firms, regions and nations aremalleable as well.

How is this related to distribution and supply chain management? As customers

become aware of unique availability options (e.g. place utility), and uniquetransportation or distributive options, they naturally value some products, serviceproviders, and suppliers over others. We would therefore expect that in the wineindustry, certain attributes, capabilities and resources become associated with specificbrands of wine, distributors, producers, and even regions of wine production. Theattempted management of these associations is at the heart of branding. When weentered into this research, we were essentially interested in how sustainability wasplaying out within the wine industry. It was only after becoming immersed in the fielddata that we discovered that one role sustainability initiatives were playing, beyondsimply striving toward sound business practice, was one of differential advantagethrough brand associations and brand awareness.

Methodological approachThe research question we posed (how do managers in the New Zealand wine industryconceptualize sustainability and what role does it play in their supply chain?) isexploratory and as such demands a methodology appropriate for digging deeply intohow mangers interpret, interact within, act on and create their worlds as they attemptto solve the differentiation business problem. Grounded theory (Glaser and Strauss,1967; Strauss, 1987) is a particularly good inductive-partially deductive researchtradition that helps to reveal how social actors interpret and act on their environments


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as they attempt to solve problems they face. We describe in this section basic tenants ofgrounded theory and how our use of the approach elucidated how New Zealandmanagers in the wine industry were addressing differentiation in a highly competitiveenvironment.

We address only the highlights of grounded theory here, encouraging readersunfamiliar with the tradition to seek out additional details in available texts andmanuscripts dedicated to grounded theory (e.g. Glaser, 1992, 2001; Strauss, 1987). Weadopt the Glaserian approach to grounded theory in this study due to the interpretivefreedom it allows (Glaser, 1992, 2001). This approach aims to construct substantivetheory grounded in field data, i.e. from the bottom up, and draws on a solid foundationin sociology and social psychology that emphasizes how people interact with others,make sense of their environments, and use aspects of their environments to definethemselves, and solve problems. Finally, it relies on multiple sources of field data,primarily but not limited to in-depth interviews, to reveal conceptualizations that areconstructed through rigorous coding and interpretation procedures.

Our data, collected in the first half of 2009, consist of formal (11) and informal (16)in-depth interviews, over 60 hours of observation, and the collection and interpretationof over 100 contextually (culturally) relevant documents, e.g. winery brochures,photographs, advertisements, press releases. Data collection was conducted primarilyon the South Island of New Zealand in the Canterbury, Waipara and Marlboroughregions but also included brief visits to management offices in Auckland on the NorthIsland. The formal interviews were pre-arranged meetings with wine industrybusiness managers (winery chief executives, wine makers, grape growers, winery salesand marketing managers, restaurant managers/owners, sommeliers) and lastedbetween 60 and 90 minutes. Some people we revisited several times for follow-upconversations. We initially contacted firms (growers, producers, retailers) thatattempted to be sustainable and/or innovative based on information provided on their

web site (e.g. a description of an innovative practice). In other words, we contactedthose in which we expected to observe our phenomenon to maximize internal validity.We then contacted them through email or professional network contacts we had inthose regions. As grounded theory theoretical sampling dictates, we let initialinterpretations of initial interviews help guide us toward who we should interviewnext. We made sure to obtain a variety of companies (large and small, public andprivate, old and new) to maximize external validity. All formal interviews weredigitally recorded. Table I provides descriptors of the formal interview participants.

Interview questions began broadly by asking participants about their businessesand personal roles within their organizations. The interviews generally moved inconversational manner to explore participants perceptions of the current businessenvironment, the aspects of their businesses that make their organizations unique, the

way they were trying to market, the ways they viewed their supply chains and supplyrelationships, and their views on sustainability. These were open-ended conversationsconducted by both authors who are well experienced in qualitative interviewingtechniques, bracketing of a priori conceptualizations, and interpretive analyses. Manyprobes were used in order to gain deeper and deeper insights to issues raised by thestudy participants by tapping into actual lived experiences. Although an initialinterview guide was used, most conversations moved into areas that emerged fromwithin the interviews.

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The informal interviews were not pre-arranged and thus, not digitally recorded. Theseinterviews occurred during drop-in visits to various companies as recommended byformal interview participants and area literature. Every participant was aware that wewere researchers collecting data on the wine industry. This sample primarily includedwine retail managers and cellar door (i.e. wine tasting rooms on winery premises)managers. Extensive notes were taken by one member of the research team, duringboth formal and informal in-depth interviews to record observations. Both researcherswere involved in all phases of the study.

Recorded interviews were transcribed verbatim and combined with other sources ofdata such as the extensive informal meeting notes and other accumulated companydocuments. Coding of the documents involved open coding of meaning units, i.e.words, phrases, sentences, paragraphs, which essentially involves labeling concepts.After some time, concepts began to form patterns or clusters and as such, fit intocategories, i.e. addressing or forming aspects of the same issues or more abstractconcept. After a constant comparison by tacking back and forth among all data sourcesand interpretations, a core category emerged as it should in grounded theory. This core

Pseudonym Descriptors

Bob Operations and marketing manager at family owned winery in Canterburyregion; parents began the winery; Bob returned to help add business/marketing

discipline and run operations several years prior to the interview; helps setstrategy for organization

Vick Chief Financial Officer of wine holding firm managing four major brands; has along history in the wine industry both as manager and producer/owner; highlyinvolved in strategic decision making for firm

Ann Marketing director for small, relatively new winery; decade of experience inmarketing for large, Australian winery; formal brand management training

Ted Chief Executive Officer for boutique winery; significant experience in Australianwine industry; supply chain specifically designed to leverage and support theindigenous (Maori) ownership of this winery

Cindy Founder, owner, chief chef at high end restaurant in Christchurch; also runs asommelier school and other retail and product ventures

Jim Partner in multi-brand wine company responsible for strategy, positioning,

partnerships and operationsGina Sommelier at Cindys restaurant; formerly trained in wine selection and foodpairings; responsible for wine recommendations for patrons

Mike Austrian sommelier for a second high-end restaurant in Christchurch; veryknowledgeable about menu, wide variety of wines, and customers preferencesand reactions to organic wines; a former student of Cindys school

Jeff Part owner in largest, most successful wine retailer in Christchurch; veryinnovative in creating customer-oriented atmosphere; very knowledgeable aboutwines and their differential advantages

Adam Wine maker for higher end winery; responsible for managing supply anddistribution relationships as well; key manager designing and coordinatingminimum carbon foot throughout the supply chain working with major U.K.retailer

Paul Senior Controller at large and one of the fastest growing wineries in the region;

responsible for setting up state of the art operations, acquiring state of theequipment; leveraging state-of-the-art processes

Table I.

Formal interviewparticipants


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category we termed searching for advantage through sustainability and will bediscussed in detail in the findings section[3].

Findings

The core category which emerged as searching for advantage through sustainability,was not sought a priori. We began our investigations merely trying to understand howmanagers approached sustainability and innovation in such a competitiveenvironment in the New Zealand wine industry. We wanted to know what theywere up to as an ethnographer might put it. It turned out that many of them describeda phenomenon whereby they were trying to work with supply chain partners in orderto find an edge (advantage) and had seemed to have landed on the notion ofsustainability, or something closely related to it, as a way to do it. The core category ofsearching for advantage through sustainability involves important sub-categories ofconcepts, which include leveraging the brand, telling a story, managing supply chainrelationships, and experimenting with sustainability, each of which is described next.

Leveraging the brandSearching for an advantage from participants perspectives meant finding a way todifferentiate oneself from competitors. In the New Zealand wine industry that mayoccur at multiple levels. For example it may sometimes mean differentiating NewZealand wine from wines produced in other countries, differentiating wine from theWaipara region near Christchurch from the more well-known and established northernwine region of Marlborough, or differentiating one winery from another:

The Canterbury region has done a poor job marketing itself. Waipara [region only 30 kmnorth] has done a better job marketing the region; they try to distance themselves from theplains growers in Canterbury (Bob).

Demonstrating this point, the Waipara wine region has its own web site. The web sitefor Waipara Valley Wine Growers prominently claims that Waipara is the worldsgreenest wine region (Waipara Valley Wine Growers, 2009), clearly placingenvironmental concerns front and center. Within that region is a winery namedWaterstone who not only claims to be environmentally responsible, but also wellconnected to everything in nature as noted on their web site. Thus they are buildingtheir brand based on sustainability:

Waterstone is comprised of a small teamwho lovehunting, fishing and the natural NewZealandenvironment.Wehaveplantedover3,500nativetreesonourvineyardandwecontinueourquestto produce the best wine for a high country rainbow trout cooked over a river stone fire.

Our intrinsic connection with the natural landscape

We realise we are the caretakers for land we need to derive an income from, but also feel wehave a responsibility to increase its biodiversity and recolonise the landscape with nativeplantings.

Searching for advantage is about survival right now for individual players in the wineindustry survival domestically and globally. Excess capacity is a relatively newphenomenon for New Zealand wineries. Combined with the global recession and theextreme variety of choice consumers have, this has served to create an intensely

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competitive time in the industry. As Ted, who has seen similar patterns before fromyears working in large, mass producers of wine in Australia, there is a train wreckabout to happen and most (NZ) people dont see it. This is why people who do see itare frantically searching for a competitive advantage.

Participants readily spoke about searching for better ways to differentiatethemselves through their brand(s). For example, Vick discussed the importance ofhaving a physical presence in the valley and tying his brands together. This presencewas critical for effective distributor relationships:

A decision we made last year was that we needed a real footprint in the area . . . so the

challenge of locating our Cellar Door to where we were, we didnt have adequate officefacilities in [ZZ]. We bought this to act as a function of the purchase of the [XX] brand; this

was [XX]s Cellar Door originally, and we felt that we could utilize this door in the fall for

business administration and local marketing functions which we are doing anyway and that

we could refurbish the Cellar Door and re-brand it and incorporate that in our overallre-branding of the whole company. So were looking at re-branding the whole company as the

[YY] Wine Company. So we actually have a number of entities within our corporate structure,so were working through that central structure and really putting [YY] at the head of thatcompany, as the key brand . . . . So for me this facility that we look at now is more about

presence to the trade having real roots here as opposed to where we were (Vick).

Similarly, Ted expressed standard views of brand associations and differentiation:

The wine industry is relatively unique, I mean I suppose every industry is relatively unique to

some extent, but the wine industry being a luxury item . . . there is a lot thats based aroundperception. Okay so its not just expense, there is a lot of qualitative as well quantitative

aspects to measure when the consumer is actually considering what benefits theyre getting

out of your produce versus someone else (Ted).

Ted went on later to describe how his choice of distributors affected his ability to

export and penetrate markets and move appropriate brands through the network:

When you . . . take that step to exporting . . . you dont just take a trip across to the UK or the

US and set up an office and hope to god that you make it work. You must first partner up with

people and you get to know the distribution and the way things actually work over there . . .The core in this business in terms of goodwill is coming effectively down to brands, but also

bearing in mind that brands have lifecycles so as one brand is petering out were making sure

weve got another brand coming up behind it (Ted).

In essence, the right distribution partners help in leveraging a brands image fordifferential advantage.

We interviewed managers downstream in the wine supply chain as well, includingretail owners, restaurant owners, and sommeliers. Each was seeking ways to

differentiate themselves. Some of these efforts involve leveraging aspects ofenvironmental awareness. For example, the owner of a high-end restaurant (i.e.Cindy) leveraged the fact that all of the lamb served at her internationally knownrestaurant was raised organically on her family farm. She and her sommeliers wouldsteer patrons toward appropriate pairings between the lamb and wine selections,sometimes emphasizing the taste benefits of organic wines over non-organic. Anothersommelier who we interviewed echoed the same view, i.e. that organic wines have morecomplex and superior taste. Because few restaurants offered or emphasized organic


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food or wine, this helped differentiate these two restaurants in a competitive diningindustry within Christchurch.

Telling a story[You need to] create the story around your wine . . . thats really important. When people lookat a label they dont think about the wine in the bottle; they think about what that labelrepresents, and so that is very much what we are trying to do here . . . . a brand that reflectsthe place in which its grown, the idea of terroir . . . weave those stories into anything you say.For example the water stone the symbol of our wine and the symbol of what being andliving here is all about . . . the area is very much about outdoors hunting and fishing . . . [itsabout] . . . brand associations (Ann).

Searching for advantage often seemed to involve a related concept that emerged as theidea of telling our story. Each winery, wine business, restaurant and retailer seemedto strive for a unique story to tell, be it the unique circumstances surrounding thefamily who began the winery, the naturally raised lamb served in a restaurant andraised on the owners property, or the relationship between the owners of the mostwidely known wine retailer in the city. These stories seemed to be critical for creatingemotional bonds between customers and wineries/restaurants/retailers. Participantsconsistently raised the topic of the story independently and unprompted.Participants from many of the wineries with who we met liked to positionthemselves as boutique to contrast themselves from the few, extremely large,mass-producers in the country. This boutique positioning demands an almost quaint,personal relationship with customers, a relationship forged on the hearth of the localstory. Many participants explained that their stories helped to create such memorableexperiences for visiting consumers that the consumers became strong advocates forand loyal buyers of their brands back home. For a winery this story is told often at

cellar doors:You get to tell them the story. Try to make it a bit different. Often its not just the story of thegrapes, its about you (Bob).

Even for a high-end restaurant owner, the story had become more critical in finding anedge within these tough economic times:

Up to last year I would say (my view on business was) more, better . . . today I would say . . .survival. Its critical to have a local flavor, a local story (Cindy).

For many of our participants, this story had come to include a focus onsustainability-related initiatives. We say sustainability-related because the termsustainability when raised by our study participants carried a specific connotation. It

specifically meant the national initiative for all New Zealand wineries to adopt astandardized sustainability program by 2011 in order to export wine (SustainableWinegrowing New Zealand, 2009). This standardized program serves to highlightprocesses and metrics for maintaining a winery in an environmentally responsibleway. As one participant described it:

Its kind of like a beginners guide to growing grapes in a sustainable manner . . . helps themto convert [from using chemicals] . . . managing disease and pests, using cultural means . . .beneficial bacteria . . . machines for mechanical weeding . . . (Bob).

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Yet, even though the initiative was positioned as a beginners guide, when asked howhe would describe his winerys positioning, Bob said it would be, Single vineyardwine grown in a sustainable way . . . To Bob, it all makes sense as well. After seeing apromotion for the initiative, he thought, Thats a good idea. Its backing up New

Zealands clean green image. . .

It makes marketing sense and it makes sense fromlooking after the land as custodians of the land . . . .

Sustainability as seen by our participants usually meant this initiative specifically.But the overall idea of an environmental focus also meant carbon emission and organicinitiatives:

The New Zealand wine industry in general is pretty much focused on sustainability. All thewineries will not be able to export unless they are part of the sustainability program. A cleardirection is a move toward carbon zero. The concept of organic or biodynamic is significanthere and in the UK market, but I dont think it is significant in other markets at the moment. . . but it will be (Ted).

Because the New Zealand sustainability initiative is essentially mandatory, compliance

may help differentiate New Zealand wine from other wine nations, but will do little todifferentiate regions or individual wineries. Thus, many wineries have adoptedadditional environmentally related initiatives as Ted mentioned, such as carbon zero.Carbon zero, known specifically as carboNZeroe in New Zealand, is another voluntaryinitiative which strives for a minimal carbon footprint. Tree Hill is one winery whichforcefully markets themselves as The Wolrds first carboNZero certified winery. Wespoke with cellar managers at Tree Hill who repeated sentiments stated on thecompany web site:

The company has for many years operated to minimise its adverse environmental impactsand this has led to awards and acclaim for its environmental management, wastemanagement and energy conservation [name of representative of the New Zealand Wine

Council], says the Company is extremely proud to have achieved carboNZero certification, asignificant environmental milestone: We have a proud history of environmental awareness,including habitat rehabilitation, and becoming carboNZero certified now places us at thecutting edge of global sustainability.

An image demonstrating the overt leveraging of carboNZero for branding purposes isprovided in Plate 1.

Another winery manager participant, Adam, freely criticized his competitorsefforts to promote the carboNZero certification as not that significant because it merelyfocuses on the wine component of the product and not the final product on the shelf.Instead of pursuing the carboNZero certification, he and his winery had launched aninitiative with a major grocery chain in the UK, a major export market for most NewZealand wines, to develop a process to track and target a truly minimal carbon

emissions footprint over the life cycle of the final product, including all supply chainoperations from raw materials to the shelf. Through a partnership with growers, othercomponent suppliers, the grocer, supply chain service providers, and a consultant, hewas coordinating the monitoring and management of every carbon emissions-relatedaspect of production and distribution. This required a fair amount of work on the partof supply chain partners, including growers. At the end of the day, Adams goal was tobe the worlds first winery classified under this initiative (i.e. low carbon footprint bystock keeping unit). Clearly, Adam feels that being known as the first, will create a


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competitive advantage, just in the way Tree Hill promotes itself as the first carboNZerocertified winery.

Some participants dismissed these initiatives as an inappropriate focus for thelong-term. Instead, they were more concerned about organic initiatives:

By 2010-2011, all New Zealand growers need to be sustainable; it will be impossible to trade;its not a choice

. . .This does not get any brand differentiation; carbon zero makes no

difference. What really will make a difference is bio-dynamics and organic; we are seeing agrowing movement for organic sustainability is merely an ante to the game, organic iswhere it is (Vick).

Yet, even here, there are differences, which can be made between organically grownand an organic wine, the latter of which includes the winemaking processes.

All of these attempts to position a firm or brand along environmentally friendlylines can be seen on promotional literature we collected as well using terms such asworlds first carboNZero, grown in a sustainable way, connected to the earth, concernfor biodynamics and so forth. An example of a flier demonstrating the recognizedimportance of the story is offered in Figure 1. To achieve what is being claimed, the

winery needs to coordinate with over 30 growers in some cases to ensure compliance.To position ones restaurant or retail establishment as supporting sustainabilityinitiatives, it too requires extensive coordination with and oversight of numerouspartners in the supply chain.

Managing supply chain relationshipsRegardless of the initiative adopted, each seems to require close collaboration andcoordination with numerous supply chain partners. In order to be seen as an organic

Plate 1.Overt marketing ofcarboNZero

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vineyard, grape growers must not only alter their own processes, but must also useproducts that are organically friendly. Wine makers, in order to minimize the carbonfootprint of bottling, were partnering with local bottle manufacturers who usedrecycled glass. One member alone of a wine supply chain cannot claim to besustainable, carboNZero, or organic without having already developed solidrelationships with appropriate supply chain partners. Thus, searching for advantage

through sustainability by its very nature demands seeking out and developing andmanaging relationships with like-minded business partners. As Ted described it, hespent a lot of time working on supply chain alignment of goals, alignment of thecapabilities, . . . do they understand our story? . . . [Dealing with the bad supply chainpartners who dont get the story] is like a death of a thousand cuts.

Ann described how connecting the environmental story, one that they know theircustomers care about, to supply chain partners was critical for entering global markets,such as Australia:

Figure 1.Example of story

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Weve been in Australia for the last five months . . . were really keen to build our brand, buildour story, managing relationships . . . [we will] partner with smaller more focused distributorsrather than large houses where you can get lost. We will always know our customers. Thereis always a risk of not knowing who your end customer is if you only work with the

distributors (Ann).Recall that Adams initiative for a low carbon footprint on the shelf required significantcoordination and collaboration among supply chain partners who willingly monitoredcarbon emission-related processes and shared the results of their evaluations withother supply chain partners. Ted noted, the supply chain relationships that help alongthese lines are great, sharing relationships. It is interesting how the story helpssupply chain partners, i.e. distributors, succeed as well. As one winery managerparticipant put it:

Oh its [the story] absolutely critical you know in terms of we go out and we spend time withour agents and their sales reps as much as we can in different countries, and its fascinatinghow if you just arm them with some additional bits of information . . . it just gives them the

extra ammunition that opens the doors, it makes it more appealing. . .

for them to be able tosay, ah look . . . the story just makes it, and you know you . . . give them somethingmemorable with some good points around it, thats about it. The storys got to be simple, itsgotta be appealing and its gotta fit with your business (Jim).

Jim went on to describe how exclusive arrangements with distributors and retailers forhis various wine brands helped all of them differentiate themselves significantly. Itenhanced each of their brand images. One of the consistent themes through their brandstories beyond simply quality was the sustainable way through which they wereproducing and distributing the wines.

Experimenting with sustainabilitySeveral participants commented on their views of a New Zealand cultural attitude, i.e.

that of a desire to experiment:

Kiwis like to try things out . . . They will try one varietal and if that isnt working out, rip outthe vines and try something else. This experimentation attitude is who we are in NewZealand. Kiwis will say okay, lets give it a go! about almost any good sounding idea and bequick to switch if it doesnt work out (Vick).

This experimentation attitude is reflected in how supply chain partners seem to like towork with each other. They are each willing to give initiatives a try if the logic seemssound. Adams partnership with a major retail chain in the UK is in essence anexperiment, and within that relationship, the partners are experimenting on ways toproduce and distribute wines in a sustainable way and then leverage that in themarketplace.

Even the way wineries seem to be using connections with the environment and theland itself as a differential advantage seems to be part of this willingness toexperiment. For example, Taonga Wines is positioned on its Maori ownership, a NewZealand indigenous people who are known to be good custodians of the land:

Taongas competitive advantage is two-fold actually. Its wholly indigenous owned onlyMaori owned wine company in the world. We are also a boutique winery . . . So it comes downto the original question, why is someone going to buy our wine? It comes down to the brandstory . . . Getting a piece of the Maori culture is the story we are trying to get across (Ted).

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Continuing on the theme of experimentation to find a story, Ted commented that,Wine growers are trying out different varieties, some just dont have it right yet; somedont have a brand of their own their own story so they are trying to find it.

As a way of experimenting with supply chain sustainability issues, Adam, his

partner growers, his distributors, a major retailer in the UK and a consultant allgenerated a detailed process map of their wine distribution from grapes on the vine toconsumer purchase and container disposal. At the time of our interviews, they were inthe process of identifying carbon footprint data at every step, setting targets, andmanaging toward their goal of being able to leverage a fully minimized carbon footprinton the shelf. For example, this process contributed toward Adam selecting a local glassmanufacturer over a cheaper per unit-imported bottle due to the sustainable ways inwhich the local glass bottles were produced combined with the reduced transport costs.

Discussion and implicationsThe searching for advantage phenomenon emerged out of our field data gathered fromwithin the New Zealand wine industry as involving aspects of leveraging the brand,telling a story, managing supply chain relationships, and experimenting, and thecontinual interaction among these aspects. This phenomenon is depicted in Figure 2.

The search for differential advantage is not a new concept. However, it is interestingto note that in New Zealand it seems many managers in the wine industry are findingthat their sustainability efforts can be used to differentiate themselves in what hasbecome an intensely competitive, almost commoditized, global market space.Sustainability in New Zealand and its related initiatives, carbon zero and organicgrowth/production, are discussed as the right things to do and as useful from a

Figure 2.Searching for advantage

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competitive advantage perspective. They serve as a classic case of how supply chainmanagement expertise, i.e. the coordination that occurs across organizations, can serveas more than a cost focus; it also serves as a differential advantage. Additional imagesof documents as examples of hundreds we gathered from the field demonstrating how

wineries and regions were trying to leverage their sustainability efforts in themarketplace are shown in Figure 3.

The implementation of Sustainable Winegrowing New Zealand (SWNZ) has beendiscussed by others as a key initiative that helped to position New Zealand wine in theglobal competitive landscape by leveraging the environmentally focused culturalimagery often associated with the nation (Brodie et al., 2006; Hughey et al., 2005). Ourparticipants freely discussed this initiative and its effects but called into question theability of SWNZ to help them differentiate their individual brands. Other environmentalmanagement systems are also evident in the New Zealand wine industry such as ISO14001 and Bio-Gro (Hughey et al., 2005) which again have served to differentiate thenations wine somewhat, but have yet to significantly help differentiate individual

businesses/brands in the supply chain (e.g. growers, wineries, retailers, restaurants).

Figure 3.Examples of leveragingaspects of sustainability

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Thus, individual businesses are seeking a capability within the environmental realm thatas a resource or assortment of resources, serves to create comparative advantage becauseit is perceived by some market segment as valuable and/or helps them reduce costs ascomparative advantage theory would predict (Hunt and Morgan, 1995).

From one perspective, the nationwide environmental initiatives may have been a solidfirst step that laid a necessary foundation for markets to recognize New Zealand wine,with the next stage being individual businesses searching for differentiation within thatlandscape. However, from another perspective, the nationwide initiatives might havehurt; had they not been implemented, individual businesses might have been able toleverage their own initiatives had they pursued them. As it stands now, businesses arefinding that in order to differentiate within this space, they must find a unique edgeand/or simply execute in a far superior fashion in order to break out of the pack. Andthey can only do this by aligning themselves with superior and likeminded supply chainpartners. It seems that our studys participants are coming to the conclusion that growthis increasingly dependent on coordination across many supply chain organizations, asothers have articulated (Caniels and Romijn, 2008). For environmentally focusedbusinesses in the New Zealand regions of the wine world, our findings suggest that thereis an opportunity maybe even necessity to align themselves with like-mindedenvironmentally-focused supply chain businesses. Leveraging a sustainabilitypositioning requires many coordinated organizations all focused on sustainability. Itseems apparent as well that membership in this coordinated environmentally-focusednetwork of relationships needs to become part of each organizations story that is told.

From a research perspective, there is still a great deal more to learn about how wineindustry organizations are attempting to understand and leverage all of the emergingsustainability options at their disposal. There is significant opportunity to continueexploring these issues, through both qualitative as well as quantitative means. Forexample, the themes discovered from this research should be examined across other

new and old world wine regions. Ethnographic research or supply chain case studiescould be conducted in these different regions to determine if similarities exist or if thereare anomalies dependent on certain characteristics, such as history, culture, or evenregulations. These qualitative studies could begin to develop theory or theories aboutthe role of sustainability in building competitive advantage within the supply chain.Quantitative research, e.g. surveys, quasi-experiments, or content analysis ofsecondary data, could then be used to further develop and test theories. Futureresearch may also examine other competitive industries to determine how they areattempting to leverage sustainability in their supply chains for a competitive edge.

We would like to conclude with an implication for supply chain managers, and thatis although sustainability initiatives such as organic, bio-dynamic, and low carbonemissions can all be used to differentiate companies and supply chains in some way,

marketing purposes need not be, nor should they be, the sole reason for pursuing them.For some, being organic is merely a way of doing business. Curt described awell-known winery in the region for example:

Organic is how they do things, its not a marketing thing for some wineries; it is what theystand for; it is integral to who they are; [Curts winery] is not at that level . . . (Curt).

However, it is beneficial if you can also grow a business and achieve an advantage bydoing what is sustainable as well as integral to who you are.


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Notes

1. For this research, we are limiting our definition of sustainability to only the environmentaldimension.

2. France, Italy, Germany and Spain.

3. Please note that we have disguised all names of participants and their companies in thefindings and discussion by using pseudonyms. While we used company web sites andmarketing literature as data sources, we do not include these in the reference list forconfidentiality purposes.

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About the authorsDaniel J. Flint (PhD University of Tennessee) is The Proffitts, Inc. Associate Professor ofMarketing and Director of the Marketing PhD Program in The Department of Marketing andLogistics, The University of Tennessee, Knoxville. He has an engineering degree from The USNaval Academy, is a former Naval Flight Officer and sales engineer for Alcoa. Dr Flint haspublished in both marketing and logistics premier journals such as The Journal of Marketing,

Journal of the Academy of Marketing Science, Journal of Business Logistics, Industrial MarketingManagement, Journal of Business & Industrial Marketing, Marketing Theory, Services Marketing


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Quarterly, and International Journal of Physical Distribution & Logistics Management. His areasof interest cover business buyer behavior and relationships, customer value dynamics, shoppermarketing and its supply chain implications, supply chain management innovation, valueco-creation, sustainability as a differential advantage and new ventures.

Susan L. Golicic (PhD University of Tennessee) is an Assistant Professor of Supply ChainManagement at Colorado State University. She has an MBA in logistics and operations from theUniversity of Tennessee and a BS in Chemical Engineering from Wayne State University. Herresearch focuses on managing business relationships, strategy and sustainability in the supplychain. She has several years of professional experience in logistics and environmentalengineering. She has consulted with numerous firms on supply chain management andforecasting, presented at many academic and practitioner conferences and has published in

Journal of Operations Management, Journal of Business Logistics, International Journal ofPhysical Distribution & Logistics Management, Journal of the Academy of Marketing Science,Industrial Marketing Management, Transportation Journal, The Wall Street Journal and SupplyChain Management Review. Susan L. Golicic is the corresponding author and can be contactedat: [email protected]

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NZ-Competitive Advantage Through Sustainability

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