“Robert Mondavi and the Wine Industry” Jorge Mtz Durazo

Background Mondavi is a winery located in Napa Valley founded by Robert Mondavi. It focuses in premium wine that sells primarily in the United States. Mondavi operates six wineries in California. Robert Mondavi spends a lot of time educating the american publicm about fine wine. In 2001, Robert Mondavi stepped down as a chairmanof the board of the company. The family still held 50% of the company’s share and an overwhelming majority of the voting rights. As an Industry the global wine industry ranges from the $130 billion 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), popular premium ($3 - $7 per bottle), super premium ($7 -$14), ultra ($14 - $25) and luxury (more than $25). There were over 1 million wine producers world wide, and no firm accounts for more of the 1% of global retail sales. The past decade has seen some industry consolidation.

Five Forces Analysis

Threat of Substitute

Products

Medium

The sourcing of quality critical inputs is essential to

guarantee the quality of the end product.

The increasing competition from rival firms,

large volume producers and global alcoholic

beverage companies make produces to

compete among them

High dependency on some distributors

and lack of geographical diversification

pose a serious threat .

Threat of New

Entrants

High

Brand position and equity is paramount in this

industry. Yet big companies can enter this

market via acquisitions, pulverizing the industry

and altering competitive landscape.

Threat of Buyer

High

Threat of Supplier

Medium

The premium wine

industry is highly

pulverize world wide,

thereforecompetitors

arefocused on

regional markets.

Old World • Production quantitive oriented.

• 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 brand equity.

• Product oriented.

New World • 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

soucing critical inputs.

• Variety of grapes wine classification.

• Invest heavily in brand equity.

• Product line oriented.

VS.

Indirect Direct

Resources

Tangible

9700 acrees of Vynards in California 1600 acrees of Vynards in Chile, Italy and CA in JV’s 6 operational Vynards in California Highest Quality Fermentation and Aging processes. 1,300 oak Barrel capacity

Intangible

Production based on technology and automation Mondavi’s Brand Equity 35 year Tradition in the industry “Growing Wine” Culture Highly connected worldwide

Capabilities

Reputed brand in the super premium, ultra and luxury wine segments

Innovation oriented

Leverages expertise via JV’s

Top of the line production procceses.

Porter Generic Strategies

How do they 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 strategywill allow to provide the right support to maximize core features of product line in target segments..

C B B

35 year wine making tradition + brand equity +

Growing wine culture + Production innovation

Luxury (more than $25)

Ultra ($14 - $25)

Super premium ($7 -$14)

Popular premium ($3 - $7 per bottle)

20 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

80 percent

From the 16 brands of wine in Robert Mondavi’s portfolio Woodbridge, Robert

Mondavil Coastal

While the remaining 75% of the brands focused on the Ultra

and Luxury segments

From the 16 brands of wine in Robert Mondavi’s portfolio, 25% focused on the

Popular and Super premium markets

The remaining 13 brands provide only marginal value in economic terms. Yet..

Enhanced Reputation

Experimen

-tation

Expertise

Sharing

Economies of Scope

Innovation

…became the first

California vitntner to

partner with an elite French winemaker

and to produce and ultra premium wine

in America.

…Mondavi began working

with NASA in 1993 to apply

remote sensing and digital mapping technologies…

…The company

introduced a

capsule-free, flange-

top bottle that many

soon adopted…

Nothing provided more prestige for

Mondavi that the Opus One pertnership

…The joint venture ship the bulk wine to California for aging

and bottling and sold approx. 25% of the porduct in the US.

In summary… Critical Issues

Recomendation Implementation

Dependency on…

►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.

Diversify its…

►Target Markets 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 in the portfolio.

►Identify JV’s that show good prospects of growth for buyout/investment.

Future growth…

►Gain market share in those regions that show increasing consumption.

►Asses brand performance in niche market.

Explore…

►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.