Towards Sustainable Wine in South Africa: A Case Study on Strategy Formulation of an Organic and Biodynamic Winery

Abstract

Integrating sustainability concerns in the strategy formulation has received wide-spread attention in strategic management literature. Especially in industries that are closely linked to agriculture, the sustainable use of resources is experiencing increased attention by consumers who are becoming more aware of wider social issues such as the environment and its protection. The wine industry, which depends on natural resources, is seeing shifts in the demand and newly arising trends. Organic wines, biodynamic wines and natural wines have enjoyed increased popularity. This thesis focuses on the South African wine industry, which is part of the so-called ‘New World’ and finds itself confronted with climate change and rising sustainability concerns. As an emerging economy, it is facing a different point of departure compared to the ‘Old World’ wine making nations and is struggling to access export markets profitably. Due to the recent rise of the industry, research on strategic options South African organic wineries have in the global and in the domestic market is scarce. By integrating the resource-based view, the industry-based view and the institution-based view ina strategy tripod approach, this thesis investigates how South African wineries develop strategic responses to external conditions based on environmental competencies. Through a qualitative single case study on the organic and biodynamic winery Reyneke Wines, the phenomenon of rising environmental awareness in the South African wine industry is illuminated. By conducting in-depth interviews with industry experts, the industrial conditions and the institutional environment are revealed. For the in-depth knowledge on the case firm’s development of strategic responses to the latter, interviews with the case firm were conducted. The findings reveal how South African wine farms can identify opportunities from the newly emerging sustainability demand and present the underlying external and internal factors that influence the strategy formulation. It emerged that there are several institutional voids arising from a lack of government support for the wineries, which aggravate to access export markets profitably. Numerous domestic industry associations stepped in, trying to fill such voids. For the strategy, environmental competencies proved to be of tremendous importance as such can be the basis of competitive advantages regarding differentiation and production cost advantages.