Robert Mondavi and the Wine industry

The wine industry is very much global, and is traditionaly rooted in typical variety coming from distincts regions of the world : California Napa Valley, the French regions of Burgundy and Beaujolais, fine Italian wines. Wine is very much tied to the winery it comes from in both brand and regional recognition. The global supply chain for the wine industry can take on several forms depending on where the wine is produced, who grows the grapes, where the wine is sold, and how it gets there.

Within the United States, most wine production is controlled by large companies who produce many of their own brands of wine, often owing many wineries in California and even abroad. While the dominants brands do shift, the strong companies stays at the top. Recently in the industry there has been a movement toward consolidation, as the large companys on top buy up smaller wineries and add them to their collection. International trade in wine has only expanded in recent years.

While there is always a tension between the old-world and the new-world styles of winemaking, there are wineries around the world who employ both. Generally, the larger producers use more modern technology, and smaller, often family owned wineries still use time honored traditional equipment and methodologies.

Robert Mondavi is a leading producer of premium table wines from around the world. He found the Robert Mondavi Winery in the heart of Napa Valley in 1966. He is a precursor of today modern California wine industry and established a reputation as the industry’s leading innovator. The company is now under the leadership of his sons, Michael Mondavi, Vice Chairman, and Tim Mondavi, Vice Chairman and Winegrower. The company is recognized throughout the world for its winemaking excellence.

Key to success of the Mondavi empire is the Mondavi family. Throughout the company history, the Mondavi inner circle : Robert, Michael and Tim has been part of the management team. Whatever the company’s success or failures, the responsibilty lies basically on the family’s shoulders. The Mondavi management style has come under increasing pressure since the family took the company public in 1993. Indeed, growth remains vital to the company’s success.

Robert Mondavi Corporation has a unique opportunity to become a leader in providing top quality premium and super-premium table wines to consumers around the world. By focusing their efforts and resources exclusively on this popular table wine segment, they will bring their wines to market in a highly effective and efficient way.

For wines as well as other alcoholic beverages, profit growth at the low end of the market may continue to be elusive, as this segment continues to experience pricing pressures. Manufacturers of low-end wines may find their thin margins reducing further if grape costs start to rise. For the other end segments of the wine market such as Mondavi target’s, continued profit growth should be feasable especially with the reputation they have.

As now competition becomes more and more agressive. There is now many new wineries in the Napa Valley, many of which are now producing premium to ultra-premium wines that directly competed with RMC brands. A growing number of these wineries in the premium market are owned by multinational corporations. The nature of competition within the United States wine market varied by wine category. While the basis of competition in the lower segments of the wine market is primarily driven by price and brand imaging, the other end focus mainly on quality and image.

The goal of Mondavi corporation at looking at international joint venture is mainly to spread out its reputation. Michael wanted to be reknown worldwide as a top quality winemakers, and by this, establish his company in other regions of the world. Michael Mondavi said : « We sell two things, the quality of the image and the quality of the liquid. The higher the quality of the wine, the higher the image and the more the consumer is willing to pay for it. » While Mondavi was looking towards joint venture and partnership, other companies ware oriented towards acquisition and buying out small winneries to increase volume and sales.

Mondavi knows that going in that direction would be contrary to the quality and image that the company is aiming since its existence. Also, as declared by Michael Mondavi : « Wine properties have grown increasingly expensive in recent years. » So acquisition is really not the solution to stimulate their growth.

Organic growth however seems to suit their needs of keeping good reputaion. The combination of their strong brands, their wine-maker skills, their market capability, makes their table wine business attractive from both an economic and business standpoint. From an investor’s perspective, this category is attractive because of it’s potential for future growth. This provides them with a great advantages when looking for their joint strategy.

Finally the quest of Robert Mondavi corporation to develop strategic plan for future should bring it to a different path than its rivals. While others concentrates on acquisition and globalization, Mondavi prefers keeping itself organic and preservates its quality title.

Reference

1.Michael A Roberto, Robert Mondavi and the Wine Industry,Harvard Business School,

2. www.robertmondavi.com : retrieved October 3, 2004

3. www.beverageindustry.com : retrieved October 3, 2004.