It should take approximately 15-30 minutes to read this case thoroughly. The best way to use this case in class would be to give out discussion questions to students a day ahead of the class session.

As supplements to the main questions, Instructors may wish to encourage students to analyze the company and to reflect on a number of aspects of strategy in considering their answers to those questions. Here are some suggestions:

1. Understanding and explaining Vincor’s Strategy

Vincor’s spectacular rise through acquisitions forms the core of its growth and international strategy. Leaving aside the financial impact for the moment, students can be asked to find a strategic rationale that explains the pattern of acquisitions: is the idea to build product strength leading to a global brand or brands?

Examine the company portfolio and decide which products are complementary and which are competitive with each other: how does this compare with the product portfolio of the competitors listed in the case? Is the strategy primarily geography-based: establish in Canada first and then use additional revenues to move into the US? In other words, is the initial strategy primarily one of bulking up before acquiring US labels? Ultimately, will this build a stronger company or only a larger one? How do the acquisitions affect the “value proposition” Vincor represents?[1]

Compare the possibilities and potential of an organic-growth strategy: would more attention to organic growth have generated a stronger product/market focus and a superior value proposition? What kind of internationalizing strategy did Vincor have? Can students suggest some underlying reasons for the approach taken by the company?

2. Costs and Impact of an acquisition based strategy

• Tables 1 summarizes Vincor's acquisitions and the costs:

Table 1: Vincor’s Acquisitions and Associated Costs

Source:
Allday, E. 2000. Canadian wine seller to buy R. H. Phillips. Press Democrat. August 29.

Food & Drink Weekly. 2000. Vincor International, Inc. May 8.

Globe and Mail. 1996. Profit to rise in 1996, Vincor says. September 18.

Leong, M. 2002. Vincor buys Australian winemaker -- Ontario firm uncorks $53.7 million deal for Goundrey Wines. Toronto Star, October 10: D3.

Market News Publishing. 2001. Vincor International Inc -– Acquisition of the Hogue Cellars. August 8.

Market News Publishing. 2004. Vincor International Inc – Acquisition of UK-based Western Wines Ltd. July 29.

Walker, L. 2003. Vincor International Inc. purchases Kim Crawford Wines. Wines & Vines. July 1.

Walton, D. 1997. Vincor profit jumps 79%: Changing demographic tastes and new acquisitions boost earnings. Globe and Mail. August 7.

Gazette. 1998. Masson sale closes. June 3.

• Table 2 shows the impact on the company’s revenue and value

Table 2: Vincor’s Acquisitions, Revenue, Debt, and Shareholder’s Equity

Source: Vincor Annual Reports (2002, 2003, 2004, and 2005)

Based on this information, students could be asked to refine their conclusions about the acquisitions strategy. Was there “a bridge too far?” Was there an obvious motivation behind each of them, e.g. is Vincor’s approach based on a consumer market segmentation or just a territorial/geographic segmentation?[2] In this connection, students could be shown the Vincor investors’ presentation attached to this teaching note.

Additionally, especially if there are finance majors or specialists in the class, the instructor may wish to examine the financing methods used in the merger and acquisition process. Were there more sophisticated financial tools that would have lessened the cost of debt?[3] Was the strategy based on maximizing market to book value rather than earnings growth?[4] In this connection, the instructor may wish to go over the company’s financial performance as shown in the annual reports (the 2005 report is attached). In particular, the 2005 cash flow report may be particularly helpful in this discussion: note the public share issue in 2004. Was this the step that ultimately exposed the company to takeover?

3. Vincor: The Challenge of Capturing Value from Better Integration

If we set out Vincor’s value chain and supply chain after its last acquisition, what opportunities did it have to generate superior value from integrating operations? Where could processes be combined to achieve economies of scale and reduce costs? What opportunities were there to generate new value from knowledge sharing and promotional and distributional synergies? Financially, did the combined performance of the underlying companies generate additional resources for product improvement and innovation? Could students create a matrix suggesting where operations should be centralized or decentralized?

Once these opportunities have been identified, one must also ask what organizational form (holding--its form at the time of the case--product groups, territorial divisions, process hubs, matrix, hub & spoke or other network, etc.) would be necessary to align the organization’s incentives and capabilities with a winning global strategy and what resources would be required to make that strategy a reality. As a final exercise, one could compare Vincor with its acquirer Constellation Brands Inc. (http://www.cbrands.com/CBI/constellationbrands/).