Robert Mondavi Case Review

Robert Mondavi Case Review

Robert Mondavi Corporation

Robert Mondavi began making wine in Napa Valley in 1943. He started working in the wine industry with his family. He later started his own winery in Oakville, California. Mondavi, along with his two sons, Michael and Timothy, would guide the Robert Mondavi Winery to the strong position the company enjoys today.

Mondavi introduced many new techniques to the California wine industry that included cold fermentation, stainless steel tanks, and the use of small French oak barrels to age fine wine. To stimulate the consumption of fine wine, Mondavi hosted many tours and educational events. He also established the Great Chefs program; the first winery culinary program in the U.S. Mondavi also launched television and radio advertising at the turn of the 21st century.

Mondavi takes great pride in the winemaking process. Mondavi uses natural techniques throughout the entire grape growing and winemaking process. They have also introduced many environmentally friendly farming and winemaking practices over the years. Most of the grapes (63%) for Robert Mondavi Winery (RMW) label are obtained from company vineyards. This ensures that the quality of grapes are the highest for RMW.

The Mondavi Company owned and leased 9,700 acres of vineyards in California, while joint ventures accounted for an additional 1,600 acres in Chile, Italy, and California. These vineyards accounted for approximately 7% of the company’s total grape supply in FY2001.

By the year 2005, Mondavi plans to increase internal grape sourcing to 25%. The remainder of the grapes comes from 360 independent growers, 100 of whom operated vineyards in Napa Valley.

The company operates six wineries in California: Robert Mondavi Winery, Woodbridge, Byron, La Famiglia di Robert Mondavi, Arrowood, and Opus One that use modern technology. The flagship winery has a state-of-the-art gravity flow system that eliminates the need for pumps to transfer juice. Oak barrel aging remains the trademark of Mondavi’s winemaking process.

Robert Mondavi produces 16 different types of wines. Each brand has a high level of quality in that particular market segment.

Robert Mondavi Winery sold 356,000 cases of RMW in FY2001, making it the firm’s third highest selling label. The brand consisted of four classes of wine: Napa Valley, District, Reserve, and Spotlight. The Napa Valley wines were the brand’s core product. The District wines represented particular appellations such as Oakville, Carneros, and Stags’ Leap. Reserve were the highest quality, while Spotlight were limited editions only available at the winery store.

Robert Mondavi Coastal Private Selection is the line of products at the lower end of the super premium. They were intended to help keep a higher price for RMW. They were initially introduced as Coastal brand, but the name Robert Mondavi was added to help enhance the image of the wines. The wine is the second highest selling brand.

Woodbridge is Mondavi’s popular premium wine introduced in 1979. It accounts for 76% of the company’s case volume and 57% of revenue in 2001. Woodbridge carried the Mondavi name at first, but the company decided to lose Robert Mondavi on the wine to highlight the profile of the Woodbridge brand.

Other Mondavi brands include the Bryon Winery, La Famiglia di Robert Mondavi line of Italian varietal wines, and Arrowood winery. The Bryon winery wines are in the ultra premium and luxury segments. La Famiglia is marketed to upscale Italian restaurants, and Arrowood is priced over $40.

Mondavi has joint ventures with companies all over the world. Opus One with Chateau Mouton-Rothschild is the one that enhances its reputation as one of the world’s finest winemakers. Mondavi also has joint ventures with wineries in Italy (2), Chile, and Argentina.

Mondavi has an extensive distribution network throughout the United States. They have a network of 100 independent wine and spirits distributors. They also have a sales force of 200 sales people to help market the products. Mondavi sells its wine to brokers in other countries, but only 8% of its revenue comes from exports.

The company decided to switch from being functionally organized with senior vice presidents in charge of production, sales, marketing, finance to three distinct business units. RMW (including Coastal), Woodbridge, and Joint Ventures and Small Wineries. This helped with compensation of executives and the brand image of the product.

Competition

There were three different types of competitors that challenged Mondavi from different angles. The first type was those firms that focused on making high quality premium wines. The next type was the large volume producers that were aggressively moving into the wine industry. Finally, the third type was the global alcohol companies that were acquiring wineries to further diversify their alcoholic beverage distribution.

High Quality

The three main rivals in the area that focused on high quality wine include Kendall-Jackson, Trinchero Estates, and Southcorp.

Kendall-Jackson was started in 1982 in northern California. Kendall-Jackson became a direct competitor to Mondavi because there leading bottle of wine was in the same price range. By 2001, Kendall-Jackson was making over $400 million a year. Bids were made to buy out the company in 2000, and the asking price was rumored to be between $1.5 billion and $2 billion. Michael Mondavi was quoted on the differences between the two firms:

“Our philosophy is to work with local partners. Jess’s (founder of Kendall-Jackson) philosophy is to go into the country, buy the land and maybe talk to the neighbors. He has created a lot of waves. We have a similar passion for excelling and hunger for learning. But we’re not smart enough to do what Jess is doing.”

Judging by this quote, one might notice the sarcastic undertone that is present. It leads the reader to believe that Robert Mondavi does not particularly agree with Kendall-Jackson’s business strategy.

Trinchero Estates was started in Napa Valley in 1947 by John and Mario Trinchero. In 2002, annual sales of Trinchero were very similar to that of Kendall-Jackson. The more common name that these wines go by is Sutter Home. The product line is very similar to that of Mondavi and Kendall-Jackson. They too came out with a wine that was made out of a blend of grapes.