“Robert Mondavi and the Wine Industry”

Presented by: Group-F

Neeraj Soni
B.Govindarajan
Benjamin Nandy
Sunny Seth

Date: 07/01/2018.
 Background
Mondavi was the world’s finest and most innovative winemakers over the past 35 years.

Wine is more than a drink. It’s a culture.

 Located in Oakville, California and founded by Robert Mondavi in 1966.
It focused on premium wine that sells primarily in the United States.
 Mondavi operated six wineries in California.
Mondavi’s popular brand were RMW, OPUS ONE, ARROWOOD, LA FAMIGLIA
Robert Mondavi spends a lot of time educating the American people about fine wine to stimulate
demand for his products.
In 2001, Robert Mondavi stepped down as the chairman of the board of the company.
Mondavi’s EPS had grown at a CAG of 28% since FY 1994.
Mondavi remained an independent company heavily dependent on US market.
Robert Mondavi was selected as the Decanter "Man of the Year" in 1989.
Mondavi conducted Initial Public Offering in 1993 to finance in WC, land and replanting.
Mandavi worked with NASA in 1993 to apply remote-sensing & digital technoligies.
Mondavi was sold at $1.3 billion bid from the global drinks giant Constellation Brands in Nov’2004.
Abstract-The Global Wine Industry
At the beginning of 21st Centuary the industry ranged from $130 to $180 billion in retail sales.
Industry participants divide the table wine market into five principal segments:
jug or commodity (less than $3 per bottle)-sales declined 3% per year during past decade
popular premium ($3 - $7 per bottle)- sales grew 8% to 10% per year
super premium ($7 -$14),
ultra premium ($14 - $25)
luxury (more than $25).

There were over 1 million wine producers world wide, and no firm accounts for more than the 1%
of global retail sales. Global consumption overall growth was 1%-2%.
04 firms accounted for 75% for Australian Market, 20 firms controlled 75% of US market and
European Market was highly fragmented.
75% of world’s production and consumption took place in Europe (France, Italy and Spain).
 The past decade has seen some industry consolidation.
This case study examines the distinctive economic structures that exist in the wine industry in
various regions of the world.
It identifies the critical forces driving changes in the structure of this industry.
The paper accomplishes these objectives by applying concepts from industrial organization
economics, agency theory, and the field of competitive strategy.
Old World
Europe
• Production quantitive oriented.
VS.
• Small family owned vynards
• Consumers produce a lot of their
wine for self-consumption
• Artisanal based wine making
process.
• Highly regulated production of critical
inputs.
• Region oriented wine
classification.
• Invest little in consumer branding.
• Invest little in advertisements
• Product oriented.
• Stick to single product.
New World
US, SA, Australia, Chile
• Production quality oriented
• Large publicy traded firms
• Consumer purchase nearly all of
their wine
• Technology and automation based
wine making process.
• Acces to multiple avenues for
sourcing critical inputs.
• Variety of grapes wine classification.
• Invest heavily in consumer branding.
• Invest heavily in advertisements for
brand equity.
• Product line oriented serving different
market segment.
• Vertical and horizontal Integration
 SWOT - 1966
VISION: 1966
To become the first winery in California to produce premium wine brands that could compete
with premium wine brands of the world.
STRENGTH
California wine making expertise
Ability to innovate
California wine country terrior
Passion for excellence
WEAKNESS
- Perception of US produced wine as being low quality

OPPORTUNIITY
Regulation & tradition with the wine industry internationally
Ability to innovate

THREAT
- High quality premium wines produced By France, Italy, Chile & Australia
 Mondavi Business Plan
Build Brand Reputation: Produced a limited quantity of luxury to ultra premium wines using the most
prestigious varietal grapes.
Locate winery in the best vineyard in Napa Valley- To Kalon Vineyard, Oakville, California.
Build a State of the Art Winemaking Facility-Functional & Distinctive.
Develop best in class wine making procedures-Assemble team of viticulture experts and develop new
technologies and process innovations.

Competitive Strategies
Domestic Brand Diversification.
Build brand portfolio in the premium wine market.
Develop new brands using new wine appellations.
Use long term debt to finance acquisitions.
Gradually raise brand prices as popularity increases.
Global Strategic partnerships:
-Expand brand portfolio beyond California.
-Combine the wine making expertise of Nepa Valley with that of the great global wine producers.
-Develop a global recognition for Mondavi Brands in- France,Italy,Chile,Australia.
 Product Life Cycle
•Decline
•Maturity

•Growth Ph

•Intro Phase
 Product Life Cycle Theory
Introduction Phase (Overcoming Buyer Inertia)

Growth Phase (Buyers Rush in Once Product Successful)

Maturity Phase (Penetration High, Growth Declines)

Decline Phase (Decline in Sales As Substitute/new Products Appear)

 INTRO GROWTH
COMPANY 1943 : His Parents Purchased 1960s-70s : His winery became one
Charles krug winery for of America’s most innovative high
$75,000. quality winemakers
1966 : Established his own winery in
California
BUYERS Whole sellers sold products to Operated 6 wineries in california.
both on premise and off Produced 16 different wine brands.
premise retail locations. RMW brand : Sold 3,56,000 cases of
Costoco accounted for more wine in 2001.
than 10 % of the total sales RMCPS : Coastal sales grew rapidly
volume. in 1990s and it became the world’s
second highest selling brand.
1980s :Woodbridge accounted for
76% of company’s case volume.
PRODUCTS 1970s: Entered the popular 1980s: Woodbridge became the
premium segment best selling wine (generated 265$
million revenue).
MARKETING He set out to educate American •Encouraged visitors to tour the
consumers and to enhance winery and taste the wine.
their appreciation of fine wine. Products
He began to host concerts, art
exhibits and other cultural events.
MATURITY
2000-Industry consolidation took
place. Many companies purchased
wineries.
RMW : Retailers demanded
discount of RMW wines.
RMCPS : Competition from
Australian imports. Pricing became
competitive.
1990s :Produced luxury wine with
JV in Italy
In 1998 Launched first major Radio
Advertising Campaign to promote
woodbridge and coastal bramnds.
In 2000 Did first national television
advertisement.
 INTRO GROWTH MATURITY

MANUFCTG. & DESTBTN. •The company introduced new
techniques such as cold
fermentation, stainless steel
tanks and use of small french
oak barrels.
•Introduced gentle natural
techniques throughout entire
grape growing process and
environment friendly farming.
•Employed modern technology to 80 % of occurred through supermarkets
ensure the gentle handling of and mass merchendisers.
grapes and the highest quality of
fermentation and aging process.
•A single sales force supported all
the company’s brand.

COMPETITION Faced 3 types of competitors :

•Rival firms producing premium wines.
•Large volume producers moving into premium wine business.
•Global alcoholic beverage companies that were acquiring wineries.

STRATEGY Late 1970s-Entered popular
premium segment. Created
woodbridge winery which
became the company’s best
selling wine.
•1979 : Partnered with French
winemaker to produce ultra
premium wine in America. By
1998 the partners sold wine in
more than 65 countries.
•1990s : Initiated several JVs
•1993 : Launched IPO to finance winery’s
investments. Started working with NASA
to enhance vineyard management.
•1995/96 : formed JV companies of Italy
and Chile.
•2000 : Acquired Aroowood winery and
made its presence felt in the sonoma
region.
•Made several investments in California.
 Resources Capabilities
Tangible
Reputed brand in the super
9700 acrees of Vynards in California
1600 acrees of Vynards in Chile, Italy and CA in premium, ultra and luxury
JV’s wine segments
6 operational Vynardsin California
Highest Quality Fermentation and Aging
processes. Innovation oriented
1,300 Oak Barrel capacity
Leverages expertise via JV’s
Intangible
Top of the line production
Production based on technology and
automation
procceses.
Mondavi’s Brand Equity
35 year Tradition in the industry
“Growing Wine”Culture
Highly connected worldwide
 Industry Consolidation
Premium wineries purchased or merged with Direct rivals (viz-Southcorp & Rosemount).
 Jug wine producers acquired premium wineries to address changing consumer taste (viz-
Constellation Brands purchased Franciscan Estates.
Alcoholic Beverage firms diversified into the premium wine buisness (viz-Foster’s purchased
Beringer’s in 2000)

 SWOT - 1993
STRENGTH WEAKNES
Mondavi Brand Portfolio Financial Constraints
Family Owned Business Rapid Expansion
Increased competition in
Napa Valley

OPPORTUNIITY THREAT
Maintain ability to 200 new wineries in Napa
capitalize on future Valley producing wines
opportunities Large companies with
capital to cover replanting
costs
-
 SWOT - 2003
STRENGTH WEAKNES
Mondavi Brand Portfolio Weak US Economy
Family Owned Business Lower Premium wine
Professionally Managed demand

OPPORTUNIITY THREAT
Improve opportunity Oversupply of Premium
efficiencies Wines
Expand Market Share Competition-new / Current
Brands
Aggressive Pricing
-
 Five Forces Analysis
Threat ofBuyer
High
High dependency on some distributors
and lack of geographical diversification
pose a serious threat .

The premium wine

industry is highly
Threatof New pulverize worldwide, Threat of Substitute
Entrants therefore competitors Products
High are focused on Medium
regional markets.
Brand position and equity is paramount in this The increasing competition from rival firms,
industry. Yet big companies can enter this large volume producers and global alcoholic
market via acquisitions, pulverizing theindustry beverage companies produces to compete
and altering competitive landscape. among them
Threat of Supplier
Medium

The sourcing of quality critical inputs isessential to

guarantee the quality of the end product.
 20 percent
From the 16 brands of wine in Robert
Mondavi’s portfolio Woodbridge, Robert
Mondavil Coastal
From the 16 brands of wine in Robert
Mondavi’s portfolio, 25% focused on the
Popular and Super premium markets
80 percent
Account for the 88.5% in 2000, 89.2% in 2001 and 89.8% YTD in
2002 of case volume. In terms of Revenues, these brands
contribute 74.3% in 2000, 73.8% in 2001 and 76.3% YTD in 2002
While the remaining 75% of the brands focused on the Ultra
and Luxurysegments
 In summary…
Critical Issues Recomendation Implementation

Dependency on… Diversify its… Explore…

►US wine martket
►Woodbridge and Coastal brands for
cash flows
Increasing competition…
►In all segments and from all kinds of
competitors.
Resource Allocation…
►High concentration of brands in ultra
and luxury segment.
►Opaque benefits from synergies and
JV’s.
Future growth…
►Decreasing consumption from target
markets and segments.
►Underperforming brands in portfolio.
►TargetMarkets and segments.
►Cash streams by supporting portfolio
brands that perform accordingly.
Clear Differentiation…
►Increase brand clarity by communi-
cating value proposition of each brand.
Capital efficiency…
►Evaluate financial performance,
CAGR and ROE of each brand.
►Identify JV’s that show good prospects
of growth for buyout/investment.
Future growth…
►Gain market share in those regions
that show increasingconsumption.
►Asses brand performance in niche
market.
►Spain, Belgium, UK, Japan and China
show positive growth in consumption.
►Shifts in consumer prefrences as they
substitute from Jug to Popular and
Super to Ultra.
Brand equity…
►Identified niche markets to promote
customize brands/products.
Concentrate…
►Similar brands to improve Cost of
capital.
►Expertise from other ventures to
enhanced knwoledge base.
Future growth…
►Position brands that show better profit
margin in existing and emerging
markets.
How do they could have gain competitve advantage?
The competitive landscape forces companies to differentiate in order to succeed.
 In order to do this, Mondavi’s will first have to pick the right segments and products to
compete with, preferabily those that better embody its long tradition in wine making.
 Brand equity and culture of innovation. Such strategy will allow to provide the right
support to maximize core features of product line in target segments.

Countries with significant levels of consumption, but no large local wine industry-
Switzerland, UK.
Countries that do not yet drink significant amounts of wine- Asian Countries, Developing
Countries.

Focussing on Competitors:
Producing Premium wines-Kendall-Jackson, Trinchero Estates,Southcorp
Large Volume Producers-E&J Gallo, Constellation Brands.
Beer and Distilled Spirits Producers-Foster’s Group, Diageo, Brown-Forman,Allied-
Domecq