Risk and Technology

Risk and Technology

Assessment 2

Background information and tasks

Hawke Winery Limited (HWL)

Hawke Winery Limited (HWL) is a boutique, family-owned winery nestled in Marlborough which is one of New Zealands most prestigious wine regions. The winery is a small privately held company with one Executive Director. HWL is known for its dedication to quality and craftsmanship and operates with a clear strategic focus:

'To produce the finest wines possible by nurturing the vineyard and embracing the art of winemaking with an unwavering commitment to quality and traditional methods. Striving to making wines that are both reflective of their terroir and expressive of the human touch behind their production.'

At HWL, winemaking is not just a processit's an artisanal craft that blends nature, tradition, and care. The winerys grapes are grown on its own estate, ensuring that every bottle reflects the unique qualities of the land. The small-scale, hands-on approach ensures that every aspect of production, from vineyard management to fermentation and aging, is meticulously controlled and personalised.

Key personnel

The team at HWL is composed of a highly skilled and passionate group of individuals, each bringing a wealth of knowledge and expertise to their respective roles. The small team is unified by a common goal: to produce wines of exceptional quality.

John Hawke Founder, Owner, and Executive Director

John Hawke founded HWL with a vision to create wines that stand out for their complexity, elegance, and depth. With a background in viticulture and a deep love for New Zealands wine regions, John oversees the overall strategic direction of the winery. He is actively involved in the businesss day-to-day operations, from financial management to brand development. Since the compliance manager resigned six months ago, John has been overseeing legal and regulatory matters for the winery. John also serves as the public face of the business, promoting its values and unique offerings to local markets. When prompted, he often describes the HWL ethos as we craft exceptional wines that celebrate New Zealands rich terroir and artisan traditions, rooted in authenticity, and passion for personalised experience. Every bottle reflects our commitment to quality, community, and the beauty of natures finest grapes.

Sophie Davis Chief Winemaker

Sophie Davis is the creative force behind the wines produced at HWL. With over 15 years of experience in winemaking, she has honed her skills at some of the worlds most renowned wineries. Sophie is responsible for overseeing every aspect of the winemaking process, from harvest through to bottling. Her philosophy focuses on minimal intervention and respecting the natural qualities of the grapes. Sophie works closely with the vineyard team to ensure that the wines reflect the true essence of the estate-grown fruit, emphasising finesse, balance, and terroir expression. Her expertise extends to blending, barrel selection, and maturation, ensuring that each vintage reaches its full potential. Sophie also oversees the workforce management across all operations of the winery, which includes coordinating casual labour to meet seasonal operational demands. She has a strong focus on the winemaking operations but often fails to sufficiently plan for the appropriate seasonal workforce required. This has often led to understaffing of the winery.

Rachel Khan Vineyard Manager

Rachel Khan manages the vineyard operations at HWL. With a deep understanding of organic farming and sustainable practices, Rachel is responsible for ensuring the health and vitality of the estate's vines. Her role includes managing soil health, water management, pest control, and overseeing the harvest. Rachel works closely with Sophie to determine which grape varieties are best suited to the land, ensuring that the vineyard yields the highest-quality fruit possible.

Through careful attention to detail and a commitment to organic methods, Rachels work helps to maintain the balance between nature and the demands of the winery.

Nimesh Clarke Cellar Master

Nimesh is responsible for the hands-on management of the winerys facilities and the wines aging process. He ensures the optimal conditions for aging by overseeing the storage of wine and also maintains all fermentation and aging equipment. While Sophie sets the overall strategy, Nimesh closely monitors the fermentation and aging processes to ensure the wine develops as planned. In addition, he manages inventory, manages purchasing of materials, tracks the movement of wine from fermentation to bottling, and ensures all health and safety regulations are followed to maintain the wines quality. His emphasis is on fermentation and aging as these are highly technical aspects of winemaking which means he often forgets to purchase materials which can lead to production delays while awaiting bottles and labels. His system is manual wherein he emails the supplier when materials need to be ordered and after several email exchanges the order is finalised.

The winemaking process

The estate, located in an area renowned for its ideal climate and soil conditions, produces small quantities of carefully managed grapes.

Vineyard Management

The process starts with Rachel and her teams careful cultivation of the estate's vines. Vineyard practices focus on sustainability and organic farming principles, such as composting, crop rotation, and minimal pesticide use. Rachel and her team monitor soil health closely and regularly testing to ensure optimal growing conditions. The vineyard is managed to achieve a balance between vine health and environmental stewardship, with a focus on water conservation and reducing the winerys overall carbon footprint.

Harvesting

At harvest, only the ripest fruit is handpicked to ensure that each grape has reached its full potential. Grapes are picked early in the morning to preserve freshness and avoid heat stress. Sophie and her team oversee the harvesting process. Careful handling is essential to avoid damaging the delicate fruit, ensuring that only the highest quality grapes make it to the winery.

Crushing and Fermentation

Once the grapes arrive at the winery, they are hand-sorted to eliminate any under-ripe or damaged fruit. The grapes are then gently crushed to release the juice. Yeasts, both natural and cultured, are used to start fermentation, and temperature control is key to ensuring the process is gradual and smooth.

Aging and Blending

After fermentation, the wine is transferred to barrels or tanks for maturation. The wines are carefully monitored by Nimesh, who checks their development regularly through tastings. Blending takes place after aging, with Sophie and Nimish working together to create the final blend. This process is one of the most critical in the winemaking process, as it determines the wine's overall flavour profile, structure, and aging potential. The winery has a reputation for their artisan blending process and impeccable quality. A blend might not meet quality standards if it has not aged properly or if Nimesh and Sophie cannot create the right balance in acidity, tannins, alcohol, or fruitiness. Blends that dont meet the quality standard are sold to supermarkets as unbranded wine sold at discounted prices (otherwise known as cleanskin wine) to avoid waste and try to recover some of the costs from production. Recently, this quality cost of unacceptable wine has been increasing, with more wine being sold as cleanskin.

Bottling and Packaging

Once the wine has reached its optimal flavour profile, it is filtered, stabilised, and bottled. The bottling process is done with the utmost care to avoid any disruption to the wines delicate structure. Hawke Winery Limited is committed to sustainable practices in its packaging.

Sales

HWL has multiple sale methods, the most popular being directly from HWL itself. Customers can log into their account via the HWL website and purchase any product they have in stock. If the customer is new then they must complete an age verification process, this is done by uploading their licence or any other proof-of-age to the secure authentication portal where a HWL employee will then check the details and verify the new customer. If the customer would prefer, once they have verified their age, they can also call HWL directly to submit an order, with payment being done over the phone or on delivery of the goods if they are local. The website is managed by a local IT company who pride themselves on a 99.9% service uptime. HWL's website has never experienced an outage since it was launched.

Local bottle stores and boutique stores also stock HWL wine, John has expressed the importance of maintaining this sales channel as tourists may see HWL wine in stores and deicide to order more once they return from holidays. He estimates 20% of all new customers are first exposed to HWL wine via these physical stores.

The future of Hawke Winery Limited

John has several concerns about HWL. Financial management is becoming increasingly difficult. Vine yields are reducing due to more extreme weather events and quality costs are increasing due to larger quantities of wine being sold as cleanskin. These issues are putting pressure on net margins and overall operating profit. The wine industry is also increasingly competitive, and John worries that the winery will be 'left behind' in its strategy to use traditional methods while other wineries in the region are leveraging new technologies to streamline operations and improve the quality of their product. John acknowledges that competitors are beginning to leverage IT infrastructure to assist in customer support, quality control and ordering however is apprehensive to explore these options due to a lack of in-house IT expertise.

Through his own research and talking to management of other wineries in the area John has created a list of proposals he would like to investigate further. He believes that each proposal will improve operations, quality of the product being produced or will provide management information they have not previously considered.

Identifying customer retention reasons

Conduct extensive customer surveys to ascertain if customers are choosing HWL because of their traditional methods of producing wine. Customers would be requested to complete a survey when they complete their next order. To assist customers in giving their responses to the survey, they will be requested to enter their name, when the name is verified as being a customer their entire purchase history will be available for viewing which includes delivery address, price and payment method. This will allow customers to identify specific orders that weren't delivered or order where customers had concerns regarding the quality of the product.

Expanding taste testing methods

John is aware that some of their competitors are outsourcing taste testing and quality control to company's operating in countries experiencing extensive political turmoil. This allows the competitors to have a much larger testing population as wage costs for these organisations are significantly lower than in other countries. HWL would also be able to increase what is being tested in their wines (for example tannins, colour, sugars, acidity, antioxidants and many more). If HWL wanted this same level of quality control they would need to invest in large, expensive machinery and triple their wages costs to cover the labour needed to operate the machines.

Engaging contractors during harvest season

HWL is finding it difficult to harvest all grapes from their vineyard in an appropriate time to begin processing due to being understaffed. John is proposing that contractors could be engaged for the 23-month period where the grapes are ready to be harvested. To limit costs a minimum wage will be offered to contractors and the work force will be sourced from school leavers or working holiday tourists. HWL has never engaged contractors previously however John is confident the finance team will be able to maintain all compliance obligations associated with hiring contractors.

Expanding grape range

HWL is using all farmable land available to them and cannot afford to expand their land holdings. John has proposed that grapes from local and international suppliers could be sourced and used to bolster their wine production throughout the year. John is concerned that customers will be less inclined to purchase from them if it is known that grapes are being sourced from outside HWL's vineyards so has decided, if the grape range expansion goes ahead, to continue advertising the wine as being grown in-house.

Pesticides

John has proposed the usage of a new pesticide that could assist in crop production. The pesticide ('Weed-be-gone') has been on the market for 1-month and is well known for being highly effective at removing all pests that are common on vineyards. There is a strong negative sentiment in the public for Weed-be-gone as it was not tested for how it may impact humans ingesting a food product that has been sprayed with it. John doesn't agree with the concerns that have been raised in the media.

In presenting this proposal to key management for their thoughts, John has mentioned that no local pesticide suppliers would sell the pesticide to him. All local suppliers he approached raised their concerns regarding the usage of this pesticide on goods intended for human consumption with some saying they would lobby local bottle-shops to immediately remove HWL wine from their shelves and cease ordering from HWL until John confirmed that Weed-be- gone was not going to be used in the vineyard. John has therefore sourced an order of Weed-be-gone from an international supplier which should be delivered in 3-months. John's friend, since learning that John has made an order for Weed-be-gone, has mentioned the purchase to several local pesticide suppliers.

In the last month there has been a significant decrease in local store wine sales. John is at a loss for what could be causing this significant drop in sales and has asked you to investigate the underlying cause.

The above remains unchanged from Assessment 1.

Additional information: Expanding HWL's grape range has now been actioned, with John sourcing a limited number of grapes from overseas suppliers to assist with shortfalls in production. No other future plans were implemented. You have been asked by John to provide commentary on the recently completed six-month trial of CellarAI.

Required

While you do not need additional external resources to complete the assessment, if you choose to use additional resources, these must be credible and appropriately referenced.

1. Review the initial six-month trial proposal from CellarAI in Appendix
   
   
   
   • Identify and explain two (2) ethical issues of using
   
   
   • For each ethical issue identified in 1(a), recommend one (1) mitigation
   
   
   
   

2. Referring to Appendix B, identify four (4) relevant ESG risks relating to HWL's operations. Discuss the impact on HWL if each risk was not addressed and provide a mitigation strategy for each.

3. John has attempted an analysis of the CellarAI tool; however, his analytics knowledge is limited so he has approached you for assistance. Review John's analysis in Appendix C and critique his chosen technique and variable choices for the following questions he was trying to answer. If John's chosen technique is not appropriate for the question provided, recommend the most appropriate technique as part of your response.

1. What is the central tendency of the average customer perception of the HWL brand and weekly revenue?


2. Is there a relationship between efficiency and revenue?


3. Is there a statistically significant difference between the customer perception of HWLs brand and likelihood of customers to purchase from HWL?


4. Has the implementation of CellarAI impacted revenue for FY24?

4. Review the relevant tabs in Appendix C, and interpret the results of each data analysis:

1. Determine whether there is a statistically significant difference between the average weekly volume of wine sold as cleanskin before the CellarAI trial and after CellarAI was implemented.


2. Determine whether there is a potential relationship between the volume of wine sold as cleanskin and revenue earned

5. John believes that there is more analysis that can be done to provide insight into the effectiveness of CellarAI. Provide two (2) unique additional data analysis questions and explain why these would be relevant to HWL in generating insight into the effectiveness of CellarAI. You do not need to perform the analyses.

6. Using the information you have collected from the other tasks, recommend to John if HWL should adopt CellarAI