Explaining differences in growth for New Zealand wineries M ’ T

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5-6-2009

Master’s Thesis 2009, Groningen, The Netherlands

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Georg Suurmeijer (s1336622)

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Master Thesis International Financial Management, June 5, 2009 Faculty of Economics and Business, University of Groningen Supervisor: Prof. Dr. C.L.M. Hermes

The New Zealand Wine Industry

Explaining differences in growth for New Zealand wineries

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Abstract

This thesis discusses which variables are of influence on growth in New Zealand wineries. The main variables of influence on growth of the wineries are financing (legal form, company age & bank relationship), market and control & ownership. The analysis did not find a statistical significant relationship between the determinants and growth in the NZ wine industry. However, exports to foreign markets seemed to be statistically more relevant for growth in small NZ wineries compared to medium sized wineries; though the causality relationship cannot be determined.

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Preface

I chose this subject because I have worked in the wine industry and I have experienced the growing success of the New Zealand (NZ) wines, the Sauvignon Blanc in particular. Thus far very little research has been performed in the New Zealand wine sector. Academic data is scarce in this field; this is due to the fact that the New Zealand wine industry has thrived mainly in the last ten years. I believe a Master’s Thesis should have value added by the student and relay the identity of the author. I can only be proud of my work if it really contains a part of me.

The way to do this, in my view, is to mix my passion with my studies. Because there is very little academic literature about the New Zealand wine industry, I believe my research can add something to this field. Data collection was totally different than is common for a ‘regular’ thesis. During daytime I was writing my thesis and in the night I was making phone calls to New Zealand (as we have a 12 hour time difference). The answers to the questionnaire revealed insights and presented data that I could only dream to have on paper. As mentioned, data on this topic was scarce and often outdated, however some academic literature could still be used to underline my research. With this thesis I want to ascertain which factors contribute to growth in the New Zealand wine industry.

I want to thank my supervisor, Prof. Dr. C.L.M. Hermes for his continuing support and advice during my Master and for assisting me with my Master Thesis. I want to show my gratitude to all the respondents for providing me with important information regarding their activities in the New Zealand wine industry. I want to express my gratitude to Victoria University of Wellington for granting me access to their online database system in order to retrieve academic information on the New Zealand wine industry. Moreover, I want to thank Lisette Buisman for proofreading my thesis and giving me valuable feedback.

Finally I want to dedicate this thesis to my parents: Frits-Jan and Ria Suurmeijer, who supported me throughout my entire studies. Without their support this thesis would not have been possible.

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Abbreviations and Definitions

AOC = Appellation d'Origine Contrôlée is a French quality check and certification for certain wines

MSB = Marlborough Sauvignon Blanc

New World = Non-traditional wine producing countries: New Zealand, Australia, Argentina, Chile, South Africa and the USA (California)

NZ = New Zealand

NZTE = New Zealand Trade and Enterprise, the government’s domestic economic development agency

NZWG = New Zealand Winegrowers, is an organization that represents, promotes and researches the (inter)national interests of the NZ wine industry

Old World = Traditional wine producing countries: France, Spain, Italy, Portugal, Germany and Austria

Terroir = Influence of the soil, (micro) climate, minerals and the sun on the vines.

TQM = Total Quality Management

Vin de Pays = Translates as country wine Vinification = Science of winemaking

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1 Introduction

New Zealand is part of the so called ‘New World’ of wines, with new vinification techniques and methods for marketing. New Zealand is essentially different than all the other New World countries, as it has a unique micro-climate and ‘terroir’ that is fundamentally different than its neighboring wine producing country: Australia. It has a cooler climate and grapes grow and ripen slower, giving them very intense flavors. The cool climate explains why only a few grape varietals can thrive in the country, the main one being Sauvignon Blanc. New Zealand wines, Sauvignon Blanc in particular, are considered high class and often referred to as ‘Premium Wines’.

The New Zealand wine industry has been growing very rapidly over the past decennia and exports in 2008 have grown with 14 percent, compared to the previous year, to 800 million NZ dollars1

This thesis is divided in 7 chapters. Chapter 2 will continue by discussing New Zealand wine making and the most important wine region and grape varietal. It will continue with chapter 3, which presents the literature review. Growth of the NZ wine industry as a whole will be explained and the chapter will reveal historical and current growth trends. It will continue by reviewing the various wineries and explains why the three determinants (finance, ownership . The target for NZ wine exports is 1 billion NZ dollars in 2010 (NZ Winegrowers, 2008). Growth in the last decade is not only noticeable in exports but also in total producing volume, amount of growing hectares and the number of wineries. In the last decennium the New Zealand wine industry experienced growth in wine exports, wine sales, amount of wineries, wine hectares as well as total wine volume. In 2008 there were 585 wineries in New Zealand of which 6 can be defined as large, 56 as medium and 523 as small (Yorke, 2008).

This research will try to find out what the determinants are that caused growth differences between the NZ wineries. It is important to find the reasons for these differences as it can help understand which factors are necessary in NZ wineries in order to grow. Very little academic research is available on this sector. Moreover, the existing literature in this field is often outdated. In one journal article it was remarked that there was very little written on the wine industry in New Zealand (Beverland & Bretherton, 1998a), ten years later this is still the case.

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& control and market) are chosen as the main factors that are of influence on growth of the NZ wineries. Moreover, the main research question is stated and the hypotheses are formed. Chapter 4 discusses the methodology and explains how data collection takes place and how it will be measured, followed by the analysis in Chapter 5. The thesis will end with the final conclusion in chapter 6 and recommendations for the NZ wine industry.

2 New Zealand Wine Making

New Zealand is a relatively young wine producing country. Therefore, it has to cope with obstacles such as strong competition, and learn new ways in order to promote their wine in the market. Less than twenty years ago there was little attention from wine consumers for this new wine producing country. However, in the last few years this has completely changed and nowadays more and more customers are asking for wines from New Zealand. This is hindering the sales of the French (Sauvignon Blanc) wines in the old world on a large scale and in the last few years France has found in NZ a serious competitor in the world wine market (Morris, 2008).

New Zealand counts a total of 585 wineries in 2008; ten years ago this number was 334. The NZ wine industry has grown on many fronts (see table 1). Within a decade, the amount of wineries almost doubled in the country. The largest wine region is Marlborough, located in the northern part of the South Island (see appendix A). In 1973 the first vines were planted in Marlborough, with only a handful of grape growers and wineries. In 2008 there were 109 wineries (60 in 1999) and 524 grape growers (254 in 1999) in Marlborough, topping all other regions. The total amount of hectares for winegrowing in New Zealand was 29.310 in 2008. The Marlborough region takes 15.915 hectares for its account; this is half of the total winegrowing area of New Zealand. Sauvignon Blanc is the most grown grape varietal in New Zealand, covering 13.988 hectares in 2008 compared to 2.843 hectares in 2001. The grape also produces the most wine in the country, 169.613 Tonnes of the country total of 282.352 in 2008 (NZ Winegrowers, 2008). This implies that more than half of the wines produced in New Zealand is a Sauvignon Blanc wine. Or in other words: one out of two New Zealand wines is a Sauvignon Blanc.

Moreover, when a consumer buys a New Zealand wine there is a 70 percent chance that it originates from the Marlborough region, if this wine is indeed from Marlborough there is a 90 percent chance that it is a Sauvignon Blanc2

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Author’s calculations based on NZ Winegrowers (2008) data

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Table 1: New Zealand Wine Industry Key Indicators

Indicator 1999 2008 % change

Number of Wineries 334 585 ⁭ 175

Producing Area (hectares) 9000 29310 ⁭ 326

Total production (million of litres) 60,2 205,2 ⁭ 341

Domestic Sales NZ Wine (millions of litres) 38,4 46,5 ⁭ 121

Export Volume (millions of litres) 16,6 88,6 ⁭ 534

Export Value (millons of NZ$) 125,3 797,8 ⁭ 637

Source: New Zealand Winegrowers, Statistical Annual (2008)

Within a decade NZ wine exports have grown from 125 million NZ dollars to 800 million NZ dollars in 2008 (NZ Winegrowers, 2008). This is a tremendous increase, and largely attributable to the Marlborough Sounds region and the Sauvignon Blanc (see appendix B). It is obvious that in the last decade growth has been substantial on many fronts: exports, volume, wineries, winegrowers and hectares.

2.1 Marlborough & Sauvignon

New Zealand is gaining more prestige as a large producer of Sauvignon Blanc and is becoming a large competitor for the French wine (newzealand.com, 2008).

The Sauvignon Blanc is the most valued white wine in New Zealand and is, what many wine critics consider, the best Sauvignon Blanc in the world. A famous British wine critic, Oz Clarke, wrote in the beginning of the nineties that the Sauvignon Blanc from New Zealand is without a doubt the best in the world (Noel, 2008). This claim is disputed by many winemakers in ‘Old World’ countries such as France. They argue that winemakers from New Zealand do not produce their Sauvignon Blanc according to high quality standards and traditional methods.

The Sauvignon Blanc has historically been used in various French regions in both AOC (Appellation D’Origine Controleé) and Vin de Pays wines. However, the French winemakers cannot deny the immense impact on their sales accredited to the rise of Sauvignon Blanc wines from New Zealand.

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preserve the natural sharp acidity which is very characteristic for the Marlborough Sauvignon Blanc. The Sauvignon Blanc is made from green-skinned grapes, and when growing conditions are optimal and the vinification methods are performed accordingly, the New Zealand Sauvignon Blanc is one of the most desired white wines in the world (McFarland, 2009). The grape is grown in many parts around the world, but the best vintages are considered to be derived from the Sancerre & Pouilly Fumé region in France and the Marlborough Sounds region in New Zealand. The Sauvignon Blanc likes tempered climates and reaches high quality vintages in New Zealand. The New Zealand Winegrowers perceive the Sauvignon Blanc wines as the motor of growth for the New Zealand wine industry with over 10 million cases forecast by 2010 (Yorke, 2008).

2.2 Growth: Historical and Current

It is argued that the growth and success of the NZ wine industry can be accredited to the large trade liberalization of the country in the early 1980’s. In that period New Zealand became one of the most open and deregulated economies in the world. Due to the liberalization the wine industry moved away from the production of cheaper low quality wines to quality production, and became more export orientated (Mikic, 1998). Barker et al. (2001) found that trade liberalization is not the only factor that stimulated growth. The viticultural innovation (winemaking skills), passion for winemaking by the winery owners, experimentation, and constructing a reputation for quality wines are the combined factors that contributed to the success of the New Zealand wine industry (Barker, Lewis, & Moran, 2001).

When discussing growth, it is argued that many businesses that experience growth also have the motivation and desire to grow (O'Farrell & Hitchens, 1988). On the other hand, it is reasonable to assume that many small wineries are part of hobbyism and do not pursue the desire for growth and desire only continuity. Small (family-owned) companies do not always focus on pursuing growth as a main outcome (Carland, Hoy, Boulton, & Carland, 1984).

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agreed with the distributors as New Zealand wineries at that time supplied around 35-40 percent of the domestic market. The authors stated that the importers (e.g. supermarkets) of foreign wines would not easily give up their hard earned market share and therefore would compete with wines being imported at price levels being very difficult for New Zealand wineries to match. Ten years later the distributors were proven right. In 2007 New Zealand had an average wine consumption per capita of 25.3 litres (Datamonitor, 2008). In the same year the per capita consumption of domestic New Zealand wine reached 12.2 litres (Morris, 2008). This totals to a domestic NZ wine consumption of 48.2 percent, very close to the projected amount in 1998.

Research by Datamonitor (2008) projects that the total wine market in New Zealand will be worth $1,795 million in 2011 with a compound annual growth rate of 4.1 percent. In terms of volume the company projects that the New Zealand wine market will total 122 million litres in 2011 with a compound annual growth rate of 4.3 percent (Datamonitor, 2008).

When looking at the growth of New Zealand wineries it is obvious that it has been large in the last 10 years. Between 1998 and 2008 the number of New Zealand wineries doubled (see figure 1). In more detail, the number of small wineries has doubled, the medium wineries have tripled and there was a slight increase in large wineries.

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Figure 1: Number of New Zealand Wineries

Wineries 1998 2008 % change

Small 272 523 ⁭ 192

Medium 17 56 ⁭ 329

Large 4 6 ⁭ 150

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3 Literature Review

The focus of this research is to give an explanation for growth differences of NZ wineries. Accordingly, the main research question is formulated as follows:

“What are the reasons for growth differences between New Zealand wineries?”

There are three main determinants that have been studied extensively in (academic) literature to describe growth of the New Zealand wine industry. These three are:

1) Financing (McIntyre, 2006), (Beverland & Lockshin, 2001), (Morris, 2008).

2) Market (Heijbroek, 2008), (Deloitte, 2008), (Morris, 2008), (Riddiford, 2008), (Yorke, 2008), (Duncan & Greenaway, 2008).

3) Ownership & Control (Beverland & Lockshin, 2001), (Beverland & Bretherton, 1998a).

These determinants are therefore chosen as the main factors that influence growth of NZ wineries. Naturally there are more (less strong) determinants that could have been included. However, using the most quoted determinants in the literature gives clarity and narrows down the factors that are mainly responsible for the growth of New Zealand wineries.

3.1 Financing

The first determinant is ‘financing’. In order for wineries to expand, capital is needed. Moore (1994) found in a survey among 292 small firms that financial constraints are the most significant barriers to growth (Moore, 1994). This is also known as the ‘finance gap’ (Dewhurst & Burns, 1983). The finance gap is a barrier that involves the ‘debt gap’ and the ‘equity gap’. The debt gap represents the difficulties to acquire credit, especially the access to (often short term) bank loans. The equity gap represents the shortage and access to equity capital mainly caused by asymmetrical objectives between (potential external) shareholders and owner-managers (Fletcher, 2002). The access to financing, which is needed for growth, can be difficult for NZ wineries. Several factors can determine the access and availability of capital to New Zealand wineries which will be discussed in this paragraph.

3.1.1 Financing Structures

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expand, it is common that they face difficulties to finance this growth. Small businesses often experience growth in sales that exceeds the access to new sources of finance to sustain that growth (McMahon et al., 1993). Hence, insufficient access to capital is often the main factor that inhibits young, small businesses to expand and grow (Gregg, 1985).

In general at start-up many small companies are financed using internal sources of finance (Holmes & Kent, 1991). These sources at start-up are often personal or family savings and post start-up is mostly financed with retained profits (Walker, 1991). By the time external sources of financing are necessary to fund growth, the banks are an important source of finance for small businesses (Dewhurst & Burns, 1983).

A study among 2000 UK business by Cosh & Hughes (1994) showed that the financial structure of small companies, compared to larger companies, is consistent with the ‘Pecking Order Hypothesis’. The Pecking Order Hypothesis states that funds are sought in a manner that minimizes external interference and retains ownership. When internal financing is no longer possible, companies will turn to the cheapest method of external financing, which is short term debt. Equity financing will be the last resort under the Pecking Order Theory as it is more expensive and leads to surrendering part of the control to the shareholders (Myers, 1984). Short term debt (in the form of overdrafts) is in general more used by small companies than long term debt because interest on overdrafts is paid on a daily basis, on the amount that is used, and less monitoring of the bank is taking place, which maintains the level of independence and control of the owner-manager (Cosh & Hughes, 1994).

The study by Cosh and Hughes (1994) revealed that small companies are characterized by having a relatively larger reliance on short-term loans and less reliance on equity finance compared to larger companies (Cosh & Hughes, 1994). One of the reasons for the reliance of short-term debt over external equity financing by small companies are the tax advantages of debt as described by Modigliani & Miller (1963), this theory will be explained in paragraph 3.2.2.

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limited liability. Freedman & Godwin (1994) revealed in a study among 146 small companies that small companies perceive it to be too difficult, too costly and too formalized to obtain external equity (Freedman & Godwin, 1994).

Furthermore, obtaining external equity means relinquishing part of the control of the company to the external shareholders. Hence, diluting their control rights is something that most small (family owned) companies are not often willing to do (Hall, Hutchinson, & Michaelas, 2000). Aguilera & Jackson (2003) discuss capital in the corporate governance equation and the exercise of control through debt or equity. Their model states that “owners often prefer debt to equity as a way to maintain the value of their shares by […] not diluting their rights through issues of new stock” (Aguilera & Jackson, 2003).

Hence, the reasons mentioned above often cause owners of small companies to avoid equity financing and rely more on retained profits followed by external short-term debt which minimizes external interference (Lopez-Gracia & Aybar-Arias, 2000), which is in accordance with the pecking order hypothesis (Myers, 1984).

Around 90 percent of the wineries in New Zealand are small wineries and most of these are family owned companies with little or no separation between ownership and control (Yorke, 2008). A survey amongst twenty NZ wineries of different sizes by Beverland & Lockshin (2001) revealed that older, larger NZ wineries acquired new capital through equity financing arrangements whereas younger, less successful wineries relied heavily on debt financing (Beverland & Lockshin, 2001). Furthermore, since small companies are usually owner-managed. The owners are often risk averse and prefer debt financing over external equity financing in order to retain ownership and control over their company which effects the capital structure decisions (Berger & Udell, 1998). Debt financing is happening on a large scale within small New Zealand wineries (Deloitte, 2008). Statistics pertaining to 2007 show that the debt to equity ratio for small New Zealand wineries was 251 percent, emphasizing that the majority of the assets were financed through debt. For the larger wineries the ratio was around 96 percent which indicates more financing through equity (Deloitte, 2008).

3.1.2 Barriers to Finance

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because the interest paid on debt is tax deductible. This implies that a company should be financed through large amounts of debt, leading up to an optimal capital structure of 100 percent debt. However, in reality there is always risk of default by the borrower when issuing debt and with it losing control to the creditors when that event occurs (Aghion & Bolton, 1992). The more debt is issued, the more risk of bankruptcy (Myers, 1984). Moreover, in the real world there are multiple factors that hinder the access to credit such as information asymmetries (Jensen & Meckling, 1976).

3.1.3 Adopting a legal form

Information asymmetry is a barrier that disturbs the information flows between the lender (i.e. banks) and the borrower (i.e. winery). Companies that are informationally opaque (Berger & Udell, 1998) often have less access to external finance (credit), than companies that supply more external (positive) signals of performance (Bopaiah, 1998). Information asymmetries exist more in small companies for several reasons. First, because they posses fewer instruments to send out information from the inside of the company to the external financers (i.e. business valuation and growth potential). Second, the high relative costs to gather and monitor the information. Third, the quality variability of the financial statements because the statements are often not professionally audited it can leave room for error. (Chittenden, Hall, & Hutchinson, 1996). It will now be discussed which effect the adoption of a legal form, e.g. becoming incorporated, has on information asymmetry problems between the bank and a firm and its consequences to access finance. The differences between unincorporated and incorporated businesses will now be discussed.

Unincorporated businesses are not statutory audited and are not obliged to report and disclose

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brings risk for the lender when providing a loan. This risk can be default or bankruptcy of the borrower and can cause the bank to refuse a loan. Furthermore, information asymmetry can cause agency costs in the form of moral hazard problems for the lender (Stiglitz & Weiss, 1981; Fama & Jensen, 1983). The agency relationship states that ‘agents’ exercise control on behalf of the stakeholders or ‘principal’ (Jensen & Meckling, 1976). In case of financing a small company, the agent is usually the owner-manager of the small company and the principal is the supplier of external finance (Read, 1998). The incongruent goals of both parties can lead to conflicts in the relationship which causes agency costs. One of these are monitoring costs due to moral hazard problems. Moral hazard problems refer to situations in which the agent does not act in the best interest of the principal (Jensen & Meckling, 1976). For example, the agent can take advantage of the information asymmetry to gain personal wealth and does not invest the funds as agreed upon in the contract. In other words: the agent might not invest or spend the credit responsibly, which conveys risk to the principal.

In order to hedge against the high monitoring and information costs that agency problems impose, a bank often places high interest rate levels on the loans to small businesses (Read, 1998). Especially for the wineries that cannot pay these higher interest levels it will be difficult to access financing. Moreover, when information asymmetries exist, it can lead to credit rationing by the bank. Credit rationing can take place because the bank can not distinguish safe borrowers from risky borrowers (Stiglitz & Weiss, 1981).The chance that this happens is higher for unincorporated businesses as they are not statutory audited, leaving them more informationally opaque to those who are a legal body. This makes it more difficult for the banks to distinguish safe from risky borrowers. Furthermore, when the bank estimates that the risk when granting a loan is high, in the form of default or bankruptcy, it can even lead to a loan refusal.

Access to credit can also be difficult because the lender often demands a predetermined production level, to hedge against risk, which is reflected in the balance sheets as tangible assets (e.g. equipment, inventory and accounts receivable) and can function as collateral (Berger & Udell, 1998). When wineries do not have these assets it will be difficult for these companies to obtain a loan. However, some banks do not accept these types of collateral due to the high monitoring costs that is required (Berger & Udell, 1995). Instead, personal guarantees (such as the house of the owner) often have to be made which makes the owner fully liable.

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costs and moral hazard issues which can lead to credit rationing and loan refusals by the banks. As a consequence this can lead to a ‘debt gap’ (Dewhurst & Burns, 1983) for these companies and poses a barrier to growth (Moore, 1994).

Incorporated businesses are legal bodies, unlike unincorporated businesses, and are therefore

subject to strict auditing requirements and have to report externally. This solves information asymmetry issues to large extent, and increases the chance that external financers are willing to provide financing. Freedman & Godwin (1994) conducted a questionnaire among 125 small incorporated companies and 146 unincorporated companies to investigate the reasons for adopting a legal form. The main reasons why the incorporated companies adopted a legal form were the limited liability benefits and the creation of credibility and status towards the financers (Freedman & Godwin, 1994). This credibility and openness by the businesses that adopted a legal form, can increase the willingness of banks to provide credit which avoids a ‘debt gap’ (Dewhurst & Burns, 1983). Hence, this transparency makes has a positive effect for legal bodies in that it is easier to acquire credit finance from the banks which consequently stimulates growth (Gregg, 1985).

Size of a company is important for becoming incorporated. For a company to become a legal body it is costly and time consuming to be professionally audited. Larger companies often have economies of scale to offset these downsides whereas small companies often do not (Berger & Udell, 1998). Hence, when the size of a company increases it can improve its access to the capital markets because the average fixed costs for adopting a legal form decreases. Smaller companies that are dependent on the banks for credit have lower bargaining power in the market (Bopaiah, 1998).

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collateral, by legal bodies, can act as a positive signal towards the banks concerning the safety of their investment and reduces the chance that the borrower invests in risky projects or projects with a negative net present value (Besanko & Thakor, 1987). In short, legal bodies (companies that are incorporated) increase their chances to acquire credit financing by the banks due to better transparency and less information asymmetry. The limited liability of the borrowers and the risk of moral hazard are frequently offset by personal guarantees.

The literature described above can indicate that incorporated wineries have less information asymmetry issues, leading to better access to finance which is necessary for growth. Bopaiah (1997) also noted in her research that firms that provide better information to the banks have better access to credit. This leads to the following hypotheses:

H1 Incorporated New Zealand wineries have better growth due to better access to credit.

3.1.4 Age of the company

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underdeveloped management skills (Boardman, Bartley, & Ratliff, 1981). Dickson (1983) stated that lenders are reluctant to finance young companies because the founders are inexperienced and do not have a track record (e.g. too few human capital assets). It is likely that banks find it too risky to provide credit financing to companies that are younger because their human capital assets might not be as much developed as older companies. When these younger companies have difficulties to acquire credit financing, this can make it difficult for these companies to grow.

This leads to the following hypothesis.

H2 Due to less access to credit, there is a negative relationship between young wineries

and growth in New Zealand wineries.

3.1.5 Banking relationships & Access to Finance

Murphy (1984) found that banks offer loans based on their perception of risk. This can explain why the relationship between the customer and the bank is found to be very important when loan request are being evaluated (Hester, 1979). (Petersen, 1997) found that the accessibility of credit increases when there is a strong relationship between the lender and the borrower. Bradford (1993) advocates that clear and regular communication is an important factor for a lasting relationship between the bank and the borrower. (Ongena, 1999), states that the relationship between the bank and the company is the solution to the ongoing credit needs of companies. Regular communication between the lender and borrower strengthens the relationship and helps to ease the flow of information between both parties. Information asymmetry issues as discussed in paragraph 3.1.3 and the subsequent monitoring costs, (which are often passed on by the banks to the borrower in the form of charges) can largely be overcome when there is a strong relationship between the bank and the borrower (Read, 1998). (Myers & Maljuf, 1984) found a similar result in that banking relationships can alleviate information asymmetries between the manager and the outside investor.

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risk of the bank when providing a loan to the borrowing company. Moreover, Berger and Udell (1995) noted that the length of the relationship between the lender and the borrower had a downward effect on the price of the loan and are less likely to pledge collateral. Research conducted on banking relationships in Japan found that Japanese firms with strong banking relationships grow more than their counterparts with less strong banking relationships (Takeo, Kashyap, & Scharfstein, 1990). A research amongst the largest NZ banks by PriceWaterhouseCoopers (2003) revealed that the banks, who are lending to small and medium businesses, are indeed intensifying the emphasis on relationship management.

The above indicates that companies that have better relationships with their banks, have relatively easier access to credit which positively influences growth. This leads to the following hypothesis:

H3 Due to better access to credit, there is a positive relationship between wineries that

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3.2 Market

The second determinant is ‘market’. Companies can operate on the domestic and/or the foreign market to sell their product. This section will review how the market choice can influence growth and how this can be applied to the NZ wineries.

3.2.1 Theory on Exporting & Growth

The export-led growth (ELG) hypothesis states that export activity leads to economic growth. Literature indicates that increase in exports has a positive impact on economic growth because production efficiency and resource allocation can be improved by expansion of export in foreign markets (Beckerman, 1997). The theory “learning-by-exporting’’ posits that exporters gain information from their foreign customers who can give suggestions for improvements in the quality of the good, product design and the manufacturing process, which can lead to better products and can contribute to the growth of a firm (Alvarez & Lopez, 2005). However, there is still controversy in the literature about the direction of the causal relation of exporting and growth. Growth could be caused by exports, or both are caused by other factors (Irvin & Tervio, 2002; Rodriguez & Rodrik, 2000). The literature also recognizes that smaller companies mostly operate on the domestic market whereas larger companies mostly operate on the foreign markets (Helpman, Melitz, & Yeaple, 2004).

3.2.2 Empirical evidence

Extensive empirical research has been conducted on exporting to foreign markets and its effect on growth. A survey among 500 Australian manufacturing firms found statistical support to their hypothesis that a larger foreign market orientation lead to better growth performance (Wijewardena & Tibbits, 1999). Other studies indicate that increase in export to foreign markets lead to growth in company productivity, total sales, return on assets and other company performance measurements (Park, Yang, Xinzheng, & Yuan, 2009; Frankel & Romer, 1999). This is confirmed by Bernard and Jensen (1999) who found in their research, among US companies, that besides gaining higher productivity, the exporting companies also had higher employment, capital intensity and wages compared to those that did not export (Bernard & Jensen, 1999).

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their empirical analysis may suggest that companies that primarily seek growth, view exporting to foreign markets as the first consideration (Cavusgil, 1984).

As mentioned by Helpman et al. (2004), the size of the company is often of importance since in general smaller companies operate mostly on the domestic market, whereas larger companies mostly operate on the foreign markets. A research amongst 7,000 German firms confirms this theory. It found that the probability that a German firm was operating on the foreign export market indeed increased with firm size (Wagner, 1995). Similarly, an empirical research amongst 14,072 Canadian manufacturers found a significant and positive relationship between company size and the intent to export to foreign markets (Calof, 1994). When looking at the “leaning-by-exporting” theory, Park et al. (2009) discovered in their research that “learning-by-exporting” is greater when companies export to more developed countries which can boost growth. Moreover, a study among 93 countries found that countries who are open for international trade experienced faster productivity growth (Edwards, 1998). 3.2.3 Application to NZ wineries

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Figure 2: Wine exports as percentage of domestic wine production

Source: The Economic Journal, The Economics of Wine (2008)

When applying the “learning-by exporting” theory to this sector, New Zealand wineries export primarily to developed foreign markets which, according to Park et al. (2009), should boost growth. The three key export markets for the New Zealand wine industry, in order of importance, are currently the United Kingdom, Australia and the United States of America (NZ Winegrowers, 2008). Hence, these are all developed foreign markets.

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earnings) are active in the foreign markets but are still dependent on the domestic market (Deloitte, 2008).

Empirical research on New Zealand wineries suggests, in accordance with the export-led growth hypothesis (Beckerman, 1997), that wineries who enter foreign markets to export their wines, have higher growth perspectives than those that stick to the domestic NZ market (Perkins, 2001). This is because the wineries that are active on the foreign export markets have a large advantage against players on the domestic market because they can maintain high price premiums. This can largely be accredited to the fact that it is the only country in the world with undersupply for wine. Undersupply of a product causes an upward boost to the price of a product. Due to scarcity, consumers are willing to pay more to acquire the product (Hamel, Prahalad, & Gary, 1996). As can be seen from figure 3, New Zealand has the highest average export prices for wine out of all wine producing countries.

Figure 3: Export prices of wine between 1997 and 2007

Source: World Wine Map, Rabobank (2008)

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New Zealand wineries in the long term, (Perkins, 2001). This is due to its small size and little growth in per capita consumption, as can be seen from figure 4. Growth of domestic NZ wine consumption in the last decade has been very low (around 10 percent). The wineries that are active on the foreign markets in the last decade have gained more income due to the price premiums than the wineries that are active on the domestic market.

Figure 4: Domestic wine consumption per capita

The literature discussed suggests that engaging in exports to foreign markets, by NZ wineries, has a positive effect on growth. This leads to the following hypothesis:

H4 There is a positive relationship between exporting to foreign markets and growth in

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3.3 Ownership & Control

The third determinant is ‘ownership & control’. This paragraph will review how control by family owned companies can influence growth in the New Zealand wineries.

3.3.1 Theory on Family-Owned & Controlled Businesses

According to the literature companies are family-owned when it fits at least 2 of the 3 criteria. (1) More than 50 percent of the company’s equity (shares) are held by one single family, (2) one family has decisive influence on long-term strategies (i.e. business strategy and succession), and (3) a majority of at least 2 board members are coming from one family. In case the company is founded less than 10 years ago at least 1 family member of the director should be employed of have ownership (Jansen, R.H, & Flören, 2006). When the above criteria mentioned are met, and the majority of the management consists out of family members, we can state that the company is family-controlled.

An article by Schultze et al. (2001) states that strong family control will cause entrenchment leading to dealings that can distract from company profitability and leads to lower firm performance which is measured by for example sales growth. (Schulze, Lubatkin, Dino, & Buchholtz, 2001). The entrenchment theory argues that high levels of stock ownership will lead to senior management decisions that are inconsistent with growth-oriented risk taking. (Wright, Ferris, Sarin, & Awasthi, 1996). These decisions are for example turning down profitable projects due to the high risks that are involved. Hence, growth opportunities for the company are not fully used due to risk aversion by the controlling family members. Because they risk their own money, the controlling family members can become risk averse and choose ‘safe’ projects which generate lower returns instead of riskier projects generating higher rates of return (resulting in more growth).

Other dealings which can obstruct growth by the controlling family members are for example secure employment for (incompetent) family members, pet projects and the choice of non-pecuniary benefits (taking away resources from profitable projects for personal gains) (Demsetz, 1983). These privileges can distract from firm performance and can subsequently lead to a stagnation of growth.

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owner-managed family firms avoid agency costs due to the fact that agent and principal are either the same person or at least have many levels of interaction, which reduces monitoring costs to a very large extent (Jensen & Meckling, 1976). Contracting problems (between the agent and principal) which may occur (because of self-interested agents) are moral hazard and averse selection. Moral hazard refers to the lack of effort on the part of the agent, and adverse selection refers to the misrepresentation of ability by the agent. It is difficult for the principal to decide if the agent has behaved appropriately. These contracting problems could lead to agency cost as discussed in paragraph 3.1.3. Family businesses have their unique characteristics with the agency theory, because contractual relations are balanced by family and business (economic) ties (Blanco-Mazagatos, Quevedo-Puente, & Castrillo, 2007).This efficient relationship (because of high family control) lowers agency costs. Therefore, the theory opts that the greater the degree of family control, the greater the overall firm growth.

However, under the agency theory this means that hiring outside non-family managers should be avoided as much as possible, because agency costs could increase (moral hazard, adverse selection, goal incongruence). The organizational growth model, as developed by Greiner (1998), states that companies go through several phases of growth (see figure 5). The model shows phases in which a dominant management style is needed to achieve growth, however each phase is characterized by a dominant management problem (crisis) that has to be resolved before growth can continue (Greiner, 1998).

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Figure 5: Five Phases of Growth

Source: Greiner, L.E., Harvard Business Review (1998)

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3.3.2 Empirical evidence

La Porta et al. (1999) analyzed ownership structure in various countries and found that family-owned companies are very common. They showed that families are often the controlling shareholders and that the controlling families often fill the senior management positions in their companies (La Porta, Lopez-de-Silanes, & Shleifer, 1999). An empirical study by Mishra and McConaughy (1999) found that family control is related to debt levels (financing). They revealed that the risk of a loss of control in family-controlled businesses motivates the use of less debt. This type of financing is in accordance with the pecking order theory as described in paragraph 3.1.1.

Much empirical research has been performed on family controlled firms. The entrenchment theory is confirmed in a study by (Shleifer & Vishny, 1997). The authors discovered when owners have a too much control; they may forego maximum company profits and use the firm to generate private benefits. A similar empirical study by Oswald et al. (2009) studied family companies and the effect of family control on financial firm performance. They revealed a statistically significant negative relationship between the percentage of family control and total sales growth. Moreover, the study found a strong inverse relationship between the percentage of control the family has over top management and all the measures of financial performance. Furthermore, the study found that companies with a large share of family control experienced more entrenchment problems due to very little decision scrutiny, leading to biased judgments on the executive decisions. The study ends by concluding that there is danger of incongruity between the goals of the controlling family and the best interest of the business (Oswald, Muse, & Rutherford, 2009). Examples of these incongruities are risk avoidance (denying growth opportunities), reluctance towards innovation and pet projects serving only the image of the executives at the expense of company profits.

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family-controlled companies generated higher sales growth compared to than non-family-family-controlled companies. This is similar to an observation by (Shleifer, Burkart, & Panunzi, 2003) who found in their study that companies with more active control by family members tend to have better performance and sales growth.

In summation, the literature and empirical evidence remains divided on the effect of controlling family members on firm performance and sales growth.

3.3.3 Application to NZ wineries

La Porta et al. (1999) found that family-owned companies are very common. This also seems to count for the NZ wine industry. Around 99 percent of the New Zealand wineries are small and medium sized and a significant portion of those wineries are family owned (Yorke, 2008).

Beverland and Lockshin (2001) found in their research among 20 family-owned NZ wineries that they were often reluctant to seek outside equity as they feared for losing control of the business (Beverland & Lockshin, 2001). Most first generation winery owners had been poor; therefore the prime motivation was to buy wealth generating assets such as equipment and land and to maintain control of these assets to insure against further hardship (Beverland & Bretherton, 1998a). Retaining control by these families however seriously stalled the development and growth of these smaller wineries. The desire of the families, owning the smaller wineries, to retain control had a large impact on the strategies that followed. For example, one of these strategies was the reluctance to borrow, which is similar to the study by Mishra and McConaughy (1999) on family control and debt level, and the uncommonness of equity partners. The level of retained earnings is rarely sufficient to finance major expansions which lead to stunted growth in these wineries.

Because the family-owned wineries often refused capital and knowledge from outside the family, the necessary skills and funds needed for future growth were not available. This often led to cash-flow problems and therefore contributed to financial difficulties and stagnation of growth (Beverland & Lockshin, 2001). This is in accordance with the discussed theory of Lee (2004). Hence, the family members took up all the senior management positions in these small wineries.

The literature and empirical research leads to the following hypothesis:

H5 Growth in family-controlled NZ wineries will decrease with higher percentages of

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4 Methodology

The NZ wineries are divided by the New Zealand Winegrowers into three categories. First, the small wineries which are defined by annual grape wine sales not exceeding 200.000 litres. Second, medium wineries with annual grape wine sales between 200.000 and 4.000.000 litres. Finally, there are the large wineries which are defined by annual grape wine sales exceeding 4.000.000 litres (NZ Winegrowers, 2008).

In 2008, the NZ wine industry consisted out of 6 large wineries, 56 medium wineries and 523 small wineries. Because the 6 large wineries are all foreign owned, export on a large scale and use mainly equity finance, the choice was made to exclude these wineries from the sample and focus only on small and medium sized wineries as designated by the NZ Winegrowers. As mentioned before, almost no academic research has been conducted on the New Zealand wine industry. Secondary data about this sector was very scarce and difficult to acquire. Moreover, because face-to-face interviews were not possible due to the large distance between New Zealand and the Netherlands, the choice was made to conduct an empirical research with the use of an online questionnaire. In this way results could be obtained quickly and from a larger group of NZ wineries.

The email addresses of all small and medium sized wineries were obtained from the 2008 annual report of the New Zealand Winegrowers. Around 600 emails were sent to small and medium sized wineries, with the main inquiry to answer the online questionnaire.

4.1 Questionnaire

The questionnaire consists out of 19 quick-to-answer multiple choice questions (see appendix C). Complete anonymity was promised in order to keep the response rate high. After sending the original and a reminder email to 579 wineries, a total of 110 winery owners filled in the questionnaire giving a total response rate of 19 percent. 23 owners of medium sized wineries completed the questionnaire, giving a response rate of 41.1 percent in this category. 87 owners of small sized wineries completed the questionnaire leading to a response rate of 16.6 percent in this category.

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winery owner. This regarded his or her age, education background and prior experience before starting the winery.

Section 3 contained the financial questions in which for example the relationship with the bank was ascertained. This question was measured by using a 5-point Likert scale which rated from "1 - very bad" "2 - somewhat bad" "3 - somewhat good" "4 - very good" "5 - excellent". This scale was chosen as it is an easy way to measure how the winery owners perceive the relationship with their banks. Furthermore, narrowing down the options to a fine scale with only 5 alternatives gives clarity and a little room for misreporting.

The last section contained questions on the percentage of exports to foreign markets and the percentage of wine sales growth between 2007 and 2008.

4.2 Dependent variable Growth

The dependent variable (Y) in this research is growth. The time period of the depended variable is set to one year: 2007-2008. Because the dependent variable relies solely on the information provided by the winery owners, it is important not to ask the growth percentages that go way back. This could increase the chance of misreporting, which would pollute the outcomes. Growth (Y) is measured as the percentage increase in average wine sales in NZ dollars. As mentioned, we will look at small and medium sized wineries. The literature review discussed the importance of size when reviewing growth of the NZ wineries. Therefore both winery types are separated in two categories: growth in small sized wineries (Ys) and growth in medium sized wineries (Ym). Growth is measured from 0 percent up to over 100 percent. Negative growth equals no growth in this model or 0 percent. This is mainly because most NZ wineries have all experienced growth in 2007-2008 and did not experience negative growth (NZ Winegrowers, 2008).

4.3 Explanatory variables

A number of independent variables are used in order to explain differences in growth. These variables will be explained in more detail below.

Incorporation

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the banks, because the company to which it is lending its money is more transparent (Berger & Udell, 1998). This reduces the probability of banks to ration credit and provide better access to finance, which again has a positive influence on growth (Gregg, 1985). The literature will be tested on the NZ wine industry (H1). Incorporation (Inc = X1) is measured by (1) or (0) and is therefore a dummy variable.

Age of winery

Dickson (1983) stated that lenders are reluctant to finance young companies because the founders are inexperienced and do not have a track record. Hence, the age of the winery is of influence for bankers to extend loans (H2). It is likely that banks find it too risky to provide credit financing to companies that are younger because their human capital assets might not be as much developed as older companies. When these younger companies have difficulties to acquire credit financing, this can make it difficult for these companies to grow. The age of the winery is measured by the period in which the winery is founded (founded = X2).

Bank relationship

It was found that the relationship between the customer and the bank is very important when loan request are being evaluated (Hester, 1979). A strong relationship between the bank (bank

rel = X3) and the lender can help overcome information asymmetry problems (Read, 1998)

and therefore increase the availability of credit (Petersen, 1997) which contributes to growth (Takeo et al., 1990). This again is tested (H3) with the use of a 5-point Likert scale, the higher the score the stronger the relationship between the winery owner and the bank.

Percentage of exports

The literature discussed the positive impacts of export on growth and this will also be tested on the NZ wine industry (H4). The questionnaire asked which percentage of the production is destined for export on a scale from 0- up to 100 percent (pct export = X4).

Percentage controlling family managers

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managers run the company and how many are not

4.4 Multicollinearity

family members. From this the percentage of family members controlling management is calculated (pct fam man = X5).

Control Variable

O’Farrell and Hitchens (1998) discussed that growth is also influenced by the desire of companies to actually grow. The control variable therefore is growth importance (growth imp

= C1). The winery owners were asked in the questionnaire to fill in how important growth

was to them on a 5-point Likert scale. The higher the score, the more important growth was for the winery owner. The control variable is used in order to clarify the relationship between the other variables. Again the cause and effect relationship has to be taken into account. Naturally growth can be positively related to the desire to grow, however the desire to growth can also be influenced because wineries experienced growth and want to continue this process.

It is essential to check for multicollinearity between the independent variables (X1 to X5) and the control variable (C1) in order to set up the regression analysis. A two-tailed Pearson correlation was performed in which no significant collinearity was found between the variables. Therefore no adjustments had to be made to the model. The cross correlation table can be found in appendix D. Furthermore, it was assumed that the variables are not normally distributed. To account for this the OLS regression was run under the heteroscedasticity (White) test.

4.5 Regression Model

This paragraph explains the model that will be used in order to test the relationship between the independent variables (X1 to X5) and the dependent variables (Ys) and (Ym). The objective of the thesis is to find an answer to the question what the reasons are for growth differences between NZ wineries. In order to answer this question a linear regression analysis will be used. The regression analysis determines if a significant relation exists between the dependent variables and one or several independent variables (Xn). Besides the statistical significance of the relationship, this analysis also determines whether there is a positive or negative relationship between the dependent and independent variables, which is expressed as

beta.

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Ys = β 0+β1*X1+ β2*X2 + β3*X3+ β4*X4+ β5*X5+ ε Ym = β 0+β1*X1+ β2*X2 + β3*X3+ β4*X4+ β5*X5+ ε Yms = β 0+β1*X1+ β2*X2 + β3*X3+ β4*X4+ β5*X5+ βc*C1 + ε Stated differently:

Growth (small sized winery) = β

0+β1*(inc)+ β2*(period founded)+ β3*(bank rel)+ β4*( pct

exports)+ β

5*( pct fam man)+ ε

Growth (medium sized winery) = β

0+β1*(inc)+ β2*(period founded)+ β3*(bank rel)+ β4*( pct

exports)+ β

5*( pct fam man)+ ε

Growth (medium & small sized) = β

0+β1*(inc)+ β2*(period founded)+ β3*(bank rel)+ β4*(

pct exports)+ β

5*( pct fam man)+ βc*(growth imp) + ε

Where: β

0 = Intercept β

n = Regression coefficient

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5 Analysis

When analyzing the output of a regression analysis, several elements are of importance. First of all a statistical significance (Sig.) of the results are necessary in order to find a relationship between the dependent and independent variables. This research considers a significance level of 0.10 to be significant. Another important element is the R square (R²) value. This measures the extent to which variations in the dependent variable can be explained by the regression. An R² value of 0 means no variation is explained whereas a value of 1 means all variance is explained. When R² is close to 1, it indicates that the variables in the model explain the variations. When R² is low, say under 0.5, this may indicate that there are other important factors which are not present in the model.

The beta coefficient signifies the steepness and the direction of the regression line. +1 indicates a perfect positive relationship between the independent and the dependent variable whereas -1 indicates a perfect negative relationship. The descriptive statistics on the results can be found in appendix E.

Table 2: Regression analysis output

Growth 07/08

Size Category: Medium Small Small & Medium

R² 0,489 0,172 0,297

F-statistic 1,915 2,653** 5,551***

Variable beta Sig. beta Sig. beta Sig.

Inc -0,05 0,871 0,061 0,516 0,017 0,826 period founded 0,153 0,056* 0.126 0,003*** 0,104 0,001*** bank rel -0,069 0,378 -0,004 0,93 -0,016 0,642 pct fam man 0,176 0,44 0,061 0,529 0,084 0,258 pct exports 0,217 0,407 0,136 0,19 0,143 0,089* growth imp 0,063 0,002***

Significance levels: *** = 1% level, ** = 5%, * = 10%

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the two size groups are combined, it can be seen that the R² is 0,297 and the F-ratio is significant at the 1 percent level. The F-ratio indicates how much the model explains the variance in the dependent variable.

When looking at the first hypothesis (H1) regarding the influence of being a legal body (incorporation) on growth, we can see that being incorporated (Inc) has no significant relationship with the dependent variable (growth). The results are (0,516) for small wineries, (0,871) for medium wineries and (0,826) for the combination. The literature described that legal bodies have less information asymmetry issues due to statutory auditing requirements (Freedman & Godwin, 1994). The transparency lowers risk for the banks (Stiglitz & Weiss, 1981; Fama & Jensen, 1983) leading to less credit rationing and better access to finance (Dewhurst & Burns, 1983). Hence, transparency has a positive effect for legal bodies in that it is easier to acquire credit finance from the banks which consequently stimulates growth (Gregg, 1985). However, the results do not show a relationship with growth in NZ wineries. Perhaps this is due to the fact that almost all respondents were incorporated; only 20 winery owners out of 110 indicated they were not incorporated. The fact that most NZ wineries in this sample are incorporated does also imply that information asymmetry issues (between banks and wineries) are less of a problem due to the auditing requirements and external reporting.

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The third hypothesis (H3) states that a good relationship between the bank and the winery owner can lift information asymmetry problems, leading to better access to credit, which has a positive effect on growth. The output of the analysis however did not find a significant relation between the bank relation (bank rel) and the dependent variable. The results are (0,93) for small wineries, (0,378) for medium wineries and (0,642) for the combination, meaning the hypothesis cannot be accepted. Again there was very little variation in the answers, 84 percent of the winery owners indicated that the relationship with their bank was excellent. The literature review described that the accessibility of credit increases when there is a strong relationship between the lender and the borrower (Petersen, 1997). Moreover, banking relationships can alleviate information asymmetries between the manager and the outside investor (Myers & Maljuf, 1984). It appears that the relationship between the NZ winery owners and their banks are generally quite good. This also means, according to the theory, that less information asymmetry issues arise which could indicate better access to credit for the NZ wineries.

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The final hypothesis (H5) states that growth in family-controlled NZ wineries will decrease with higher percentages of family control. Again the outcome of the analysis indicated that this variable had no significant influence on growth for medium (0,44) and small (0,529) wineries. Also the combined group found an insignificant result (0,258). Hence, the hypothesis will be rejected. Neither theory (agency or entrenchment) can be used to explain growth differences in NZ wineries. It could well be that other factors come into play such as passion for wine making as discussed by Barker et al. (2001) that are of more importance than the ownership-control relationship in NZ wineries.

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6 Conclusion

The main research question was: “What are the reasons for growth differences between New

Zealand wineries?” The three main determinants that were expected to be of influence were:

financing, market and ownership & control. The regression results did not give conclusive statistical significance to the tested hypotheses. Being a legal form (incorporated) was not found to be of significance for growth in small and medium sized wineries. However, the fact that almost all NZ wineries were incorporated could have influenced the outcome. Most of the small and medium sized wineries actually were a legal body. It can be concluded from this outcome that, according to the theory, less information asymmetry issues arise between the banks and the wineries due to the fact that incorporated wineries are statutory audited, which could lead to better access to credit.

The age of the company had a statistical significance with growth, however the relationship was inverse. This means that the younger the winery is, the more it grows (which is in general very common for young companies). However, the literature found that young companies often have difficulty to finance growth due to little human capital assets, which makes it difficult to get a loan. Apparently the obstacle to access finance is not very present for young NZ wineries.

According to the theory, a strong relationship between the bank and the winery owner can lift information asymmetry problems, leading to better access to credit, which has a positive effect on growth. However, the regression could not prove this with statistical significance. As mentioned; 84 percent of the winery owners indicated that the relationship with their bank was excellent, giving the maximum score on the 5-point Likert scale. The little variation could have influenced the outcomes in the regression. It can be concluded from these findings that the relationship between the NZ winery owners and their banks are generally quite good. This also means, according to the theory, that less information asymmetry issues arise which could indicate better access to credit for the NZ wineries.

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In the literature two conflicting theories were described regarding the combination of family ownership and control and its effect on growth. The results however did not show a statistical significance effect of family control and growth in NZ wineries. Therefore, neither the agency theory nor the entrenchment theory could be applied in this sector. It is possible that the level of (family) control is not very important for growth in the NZ wine industry. Possibly other factors have a stronger effect on growth such as passion for winemaking which is not bound to family ownership and control.

In conclusion, no statistical evidence could be found in this research to establish the reasons for growth differences between NZ wineries.

6.1 Limitations & Future research

There are several limitations that should be taken into account. First of all, this is the first (known) academic research that tries to find the determinants that influence growth in the NZ wine industry. Little access to secondary sources and information made the research largely dependent on data gathered from the online questionnaires. The fact that no prior research has been conducted means that there was no existing framework on which could be built upon. This makes this research more of a challenge because it is the first in its kind. On the other hand this research can now provide a framework on which future research can continue. Moreover, a bias was present. 23 medium sized wineries filled in the questionnaire against 87 small sized wineries, which could have influenced the outcomes of this research. Furthermore, the cause and effect relationship is difficult to separate in this research. For example exports can lead to growth, as discussed in the literature, but the opposite is also possible. Irvin & Tervio (2002) debated the direction of the causal relation which demands caution when making conclusions in this field.

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6.2 Recommendations

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Explaining differences in growth for New Zealand wineries M ’ T

5-6-2009

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HESIS

Abstract

Preface

Table of Contents

Abbreviations and Definitions

1

Introduction

2

New Zealand Wine Making

3

Literature Review

4

Methodology

5

Analysis

6

Conclusion

References