Case Viña Concha Y Toro and its Restructuring Challenge

Abstract

This case narrates the restructuring case of Viña Concha y Toro (VCT), a Chilean holding company operating in the wine sector with a worldwide presence. The company's profitability decreased in 2016 mainly due to two risks: (i) the increase in the cost of its primary input (grapes) since a large part was purchased from independent farmers; and ii) fluctuations in exchange rates because more than 80 percent of its revenues are generated from international mar-kets. VCT had to show its investors a good level of profitability in the long term, therefore, Alfonso Larraín, chairman of the Board and the decision-maker in this case, designed a strategic plan during the first months of 2017. This plan should allow the firm to increase its profitability, as well as having flexibility to face the risks imposed by the envi-ronment. The plan based on both saving operating costs and increasing revenues through premium brands. Alfonso knows the great challenge he faced, but he was doubtful about both the measures that he should implement in the following years and the impact that this new restructuring plan would cause internally in the company. In particular, Alfonso wondered: Were a corporate restructuring plan necessary? What actions should be planned to meet long-term objectives? And how would shareholders assess a change of course towards a restructuring policy?