...Robert Mondavi and the Wine Industry Analysis EXECUTIVE SUMMARY The Robert Mondavi Winery became one of America’s most innovative, high-quality winemakers in the late 1960s and early 1970s. There are over 1 million wine producers worldwide and no winery accounted for more than 1% of global retail sales. Because of this and the fact that there are many substitutes, there is an issue to try to gain economies of scale and become a leader in the wine market. Wine tends to stay it its local region, which makes it harder to compete with its substitutes. In the strategic analysis portion of this case analysis, we discuss Porter’s Five Forces and how they affect the Robert Mondavi Winery. We conclude that in order for the winery to stay competitive and gain economies of scale, they should develop new joint ventures and reform their company structure into a decentralized federation. PROBLEM IDENTIFICATION After analyzing Robert Mondavi Winery the biggest problem they face being in the wine industry is the threat of substitution of their product. There is a range of different products in the alcohol industry. Wine is not the most consumed alcoholic drink in the world, making it a treat to having sustained and effective substitute products. Robert Mondavi Winery’s second biggest problem they must overcome is being able to sustain a competitive advantage over rival companies in different areas. Such areas include the Winery staying local and not being able to compete in...
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...benefits and drawbacks to the Mondavi Winery of becoming a public company? 300 words maximum Once the Mondavi Winery becomes a public company, there will be an immense increase in its equity and it can be used to fund Mondavi’s rapid growth. Despite the fact that family control can be retained by designing the rules of IPO, the uncertainty degree would still be higher than the company used to be. The fluctuation of share price would also affect the company image. Moreover, Mondavi’s historical financial performance, which had previously been a guarded secret, was made available to the public. 2. What types of investors are most likely to be interested in the company? How could you target those investors? 300 words maximum Wine stocks appeal to ‘the hobby stock holder’ who wants to be part of this industry. Investors can be targeted through the following process: 1. Look for wine lovers who know how to appreciate US-made premium wines. Some useful sources may be obtained from wine-related clubs, associations and institutes. 2. Hold social fairs or other events and share stories and visions with these potential investors instead of simply analysing financial data to have them involved in picturing a better future with strong evidences. 3. Emphasize on the expected big leap of Mondavi, which may serve as a growth booster of the whole US wine industry to arouse the need of purchasing Mondavi stock. 3. How would you recommend Robert Mondavi respond to the market’s current...
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...Book Review: The House of Mondavi: The Rise and Fall of an American Wine Dynasty by Julia Flynn Siler November 2004, the house of Mondavi took its final stand when accepting a $1.3 Billion bid from Constellation Brands, ending a family run business of over 100 years. This family business marks the effective beginning of the American wine industry, credit for establishing Napa Valley, and recognized as Unites State’s largest wine producer. Julia Flynn Siler, a writer for the Wall Street Journal, tackles the complicated story of the clashing Mondavi family, in her book, The House of Mondavi: The Rise and Fall of an American Wine Dynasty. After hundreds of interviews, Julia was able to give picture perfect descriptions of each character and their role in the Mondavi family business. The book starts by telling the story of Cecar and Rosa; two Italian immigrants who lived a poor life economically but rich with love. They both had an admiration for wine and enjoyed hours of quality family time appreciating every spectrum of the grapes. Julia went back to Indiana, where the Mondavi’s originally lived, and found out that the couple just followed their heart, moved to California with the solemn goal of becoming wine connoisseurs. Once the Mondavi’s got to California they realized their knowledge of wine surpassed those of the current winery owners and invested in their first wine garden. Roberto and Peter Mondavi, the second generation, both inherited Charles Krug...
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...Robert Mondavi Wine Case Study Robet Mondavi Winery was created in 1966, in Napa Valley. At its debut the company “became one of America’s most innovative and high quality winemakers.” introducing many new techniques such as Stainless tanks or the use of small French oak barrels. Robert Mondavi “set out to educate American consumers and to enhance their appreciation of fine wine” and also became a promoter of the California wine industry. The wine industry is divided in 5 segments. RMW is has developped 16 different brands and is present in all segments except jug wine. Source image :http://image.slidesharecdn.com/robertmondaviandthewineindustrycase-130320190248-phpapp01/95/robert-mondavi-and-the-wine-industry-case-8-638.jpg?cb=1363824203 RMW bestselling wine is the Woodbridge which represented 76% of the company’s case and 57% of its revenue in 2001. But there is increasing competition in this segment with many important companies entering this segment. In the mid-90’s Mondavi launched 3 joint ventures with French, Italian and Chilean’s firms. “Mondavi owned and leased 9’700 acres of vineyards in California and the joint ventures controlled additional 1’600 acres in Chile, Italy, and California.” But these vineyards provide only 7% of the company’s total grape supply in 2001. Although the firm did invest a lot in the 80’s and 90’s, acquiring many wineries in California, the production could not keep up with increasing consumption, making the firm highly dependent on its...
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...Robert Mondavi Case Robert Mondavi is facing several threats in 2002, the most important of which is increasing competition in the popular premium segment. The company in 2001 derived 57% of its revenue from the Woodbridge brand and pricing pressure is being applied by Gallo, Fosters and jug producers. Additional pricing pressure is coming from the Australian wines infiltrating the US and UK markets, growing their sales in the US at the rate of 30% per year. Additional challenges include customer dissatisfaction with the current sales representation. The company also has opportunities. Its Robert Mondavi Winery name is held in high esteem and wines of this label command premium prices. The company has consistent financial performance over the preceding four years with growing sales and income. The company has developed advanced production methods that give its wines consistent quality and modest costs of production. Business Environment / Attractiveness of the Wine Industry Among producers in the size range of Mondavi, the wine industry has many companies, which generate net income of about 10% of sales. This would compare to such mainstream US industries as real estate leasing, food manufacturing and agriculture. The barriers to basic entry in the industry are very small. However, the building of a recognized brand name which allows pricing control is a time consuming process, sometimes representing generations of work. The industry is experiencing consolidation...
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...determined by two major variables: asset specificity and frequency of transaction and ultimately by the need to hedge against uncertainty Asset specificity: Obtaining the quality grapes needed to make its premium wines is a transaction that should be considered asset specific because wineries such as Mondavi targeting the premium segment want to be able to differentiate the grapes its wine is made of from competitors. Hence the vineyards it uses need to be tailored to produce grapes of a certain quality. In this sense, Mondavi is exposed to serious risks of loss and damage if the quality of the grapes is not as expected. Consequently, it needs to seek maximum control of the process to minimize the risk of producing a less adequate wine and eroding brand equity. This involves high transaction costs to make sure suppliers are taking the necessary steps to ensure the quality of the grapes. This is likely the reason why Mondavi has expressed his objective to increase internal sourcing from 7% to 25%. By investing in its own vineyard, this will eliminate the cost of monitoring the quality of grapes, the cost of having to search for suppliers that will produce the level of quality required by Mondavi. By integrating upstream, this will simultaneously decrease transaction costs and eliminates the uncertainty having to depend on suppliers, and ultimately ensures that grapes are of good enough quality to protect their brand...
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...equals $1158 in revenue per ton or $658 in gross profit per ton (at premium gross profit average).If Mondavi were to acquire grapes, they may be able to produce wine at lower costs. Additionally, if they acquired imported grapes (if the cost justified the potential revenue and profit), they could leverage from the import sales growth they have been experiencing. Although the initial cost of international joint ventures and buying grapes would need to be analyzed and contrasted with the cost and revenue potential difference from internal growing, Mondavi has seen a consumer interest in this wine category and therefore could jump on this market opportunity. Furthermore average pricing per bottle of import wine is set almost 80% higher than premium wines average prices (exhibit 13) and additionally, by buying or partnering with international vineyards, Mondavi could avoid land purchases, development, and some production costs (or only be responsible for 50% if within a JV) but be rewarded with higher gross profits and margins per bottle sold. Finally, although industry forecasts that premium wine will grow among the consumer interest, so is competition and market sharing. There is an obvious market trend among Mondavi wine consumers for their import brands, which are higher priced, and potentially (depending on the strategic situation of buying grape sources) lower cost for Mondavi to...
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...Case 3 Robert Mondavi and the Wine Industry 1) Evaluate the structure of the global wine industry? How and why is that structure changing? What threats do these changes present for Robert Mondavi? The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there. The Old Market consumers are more sophisticated and price sensitive than those in the New World. The main sales channels are supermarkets and other off-premise locations in Europe, which will allow more buying power to consumers. Whereas, the variety of wine in the New World brings in differentiation in products, which leads to lower buying power. In terms of power of suppliers, Wineries in Europe is are not much exposed to the external force because they use grape mainly they produce for higher quality of wine. However, the makers in the New World depend on outsourcing to some extent. Therefore, the power of supplier is stronger in the New World. However, in terms of risks involved in the grape farming, the outsourcing can helps diversify the risks. In addition, the regulatory environment in Europe restricts the European wine makers to diverse...
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...Robert Mondavi Corp. Analysis I. Summary Company founded in 1966 by Robert Mondavi in Napa Valley, California Company vision to make California a recognized wine producing region alongside great winemaking regions of Europe Major focus on technology and wine growing techniques Production of premium to super ultra premium wines Mondavi focuses on personal sales, wine competitions, and lavish parties to promote the wines rather than conventional advertising Mondavi has a portfolio of premium to super ultra premium wines to fill various price points and niches in domestic wine market 1981 Opus One joint venture with Baron Philippe de Rothschild Through 1980's and 1990's, Mondavi acquires many wineries and vineyards throughout California Mondavi develops national following Phylloxera (vine killing insects) begin to infiltrate California vineyards 1993, Mondavi, in need of capital due to extensive acquisition expenditures in previous decade plus the replanting costs, issues public shares In the mid-1990's, Mondavi begins 3 joint ventures with a Chilean, an Italian, and French firms Wine production in California accounts for more than 70% of wine consumed in America Wines in America are sold through a three-tier distribution 100's of wineries emerge in California, 90% of Mondavi's revenues generated domestically II. Case Profile Problem/Issues in Case Managing multiple brands in the global markets Maintaining domestic...
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...beverage”- Robert Mondavi 6000 B.C- is the time when, Mesopotamians first began to produce Wine. Since then Wine is playing an important role as enjoyable, romantic and authentic beverage for the people of all the classes. As the centuries passed, Europeans introduced their Wine making techniques to the rest of the world including America, Australia and South Africa. 1966- To become the first winery in California to produce premium Wine brands that would compete with the other premium wine brands of the world, Robert Mondavi founded the RMC Winery. With the clear strategy of gaining high reputation in premium wine segment, RMC at very inception align its business plan with its competitive strategy. As to produce limited quantity of super to ultra premium wines using high quality grapes, this helps them to build diversified brand portfolio particularly in price points and niches premium Wine market. Again as a part of their competitive strategy RMC lead the Wine industry in several process innovation and operational improvements including gentle grape handling, cold fermentation, stainless steel fermentation tanks and Oak barrel aging. In 1972 Los Angeles Times recognized RMC’s Cabernet Sauvignon as the best Wine produced in California. At marketing front to stimulate demand, RMC took some notable steps like Tours of Winery, Training sessions at fine restaurants, this helps them educate American consumer to enhance their knowledge and appreciation of Mondavi Wines. 1976- RMC...
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...Nicole Terry MBA 810 Mondavi Case Study The Wine Industry - Old World versus New World The wine industry has evolved throughout history and no longer does the European “old world” market dominate the industry. More recently there has been a push from what has become known as “New World” wine manufacturers to capture more of the market share. As new companies enter into this market and the wine industry as a whole shifts the question remains, is the “New World” approach structurally stable enough to sustain growth and shift the industry from what we know as the traditional or “Old World” thinking? This case analysis will make a comparison between the “old and new world” within the wine industry and also use the five force model to analysis the structural soundness of the “new world” approach within the global wine industry. To compare the Old World to the New World in the wine industry it is best to look at the strengths and weaknesses of both segments. The Old World wine industry has years of experience to build on, an unique ability to cater to those who enjoy consuming wine that is handpicked, authentic to Europe and specific to certain regions. Strengths for the “old world” include first in industry with a consumer base already built up. Old World has no governmental regulations on the distribution process but government does play a role in the processing of their wine and this regulation creates a major weaknesses in comparison to the “new world”. The New...
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...International Business & Economics Research Journal Volume 2, Number 9 The Changing Structure Of The Global Wine Industry Michael A. Roberto (E-mail: mroberto@hbs.edu), Harvard Business School Abstract This paper examines the distinctive economic structures that exist in the wine industry in various regions of the world, and 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. T he economic structure of an industry affects the intensity of competition and the average profitability of firms in a particular market.1 While strategy scholars have debated the extent to which industry structure explains differences in firm profitability, virtually no one disputes the idea that structural forces have a sizeable impact.2 More recently, researchers have demonstrated that industries exhibit substantial structural differences across various geographic markets around the world. These structural differences are driven by institutional heterogeneity and contrasting patterns of historical development. 3 Over time, the structure of a global industry can change dramatically. In particular, many industries have experienced consolidation in recent years. Industry consolidation raises several important questions for scholars and practitioners. First, why do these structural shifts take place? Second...
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...Malko Ebers / Simon Wied SWOT Analysis Robert Mondavi and the Wine Industry Seminar paper Dokument Nr. V27469 http://www.grin.com/ ISBN 978-3-638-29511-6 9 783638 295116 Midterm Group Project Robert Mondavi & The Wine Industry SWOT Analysis Course Strategic Management: Concepts & Cases Chair of Management, especially Strategy and Leadership University of Konstanz - Summer Term 2004 by Malko Ebers Simon Wied Malko Ebers, Simon Wied II Structure 1. Introduction ............................................................................................................... 2. Opportunities vs. Threats: Analysis of the environment the Robert Mondavi Company is settled in ................ 2.1 Global environment ............................................................................................ 2.2 The US wine industry – an overview ................................................................. 2.3 Competitive forces in the US wine industry ...................................................... 2.3.1 Potential entrants ....................................................................................... 2.3.2 Bargaining power of buyers ...................................................................... 2.3.3 Bargaining power of suppliers .................................................................. 2.3.4 Closeness of substitutes to the industry’s products ................................... 2.3.5 Intensity of rivalry among...
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...1 2 3 TO LAKE COUNTY 4 5 6 7 A 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 7 BARLOW DUN E AW A . L LN CALISTOGA TOM EDDY JAX BENNETT LN. 2 JERICHO CANYON OLD LAWLEY TOLL RD. COOMBSVILLE 17 SUMMERS LAVA VINE ENVY/CARTER SL UBB N. B 6 DIAMOND CREEK T W.H. SMITH VERMEIL N COL LIN ST. B CELLARS 11 12 13 14 DYER C AZALEA SPRINGS CASTELLO DI AMOROSA BEHRENS FAMILY SHERWIN FAMILY MARSTON L M ARK EAD LN. 15 16 BRAVANTE COOK FAMILY FAILA CADE BALE LN. BIG TREE RD. HOWELL AT THE MOON 17 EHLERS LN TUDAL Map not to scale . VINEYD 29 TRINCHERO FANTESCA BOESCHEN LODI LN. DOZEN VINTNERS REVANA FAMILY MARKHAM BREMER FAMILY TAMBER BEY BELLO FAMILY CLIF FAMILY DOWDELL DAVIS FULTON CROCKER & STARR CHAIX LN. ROS S 13 PRATT AVE . POPE ST. I RD D . ST. HELENA WINERY We encourage responsible drinking. Please do not drink and drive. It is illegal to operate a motor vehicle at or above .08 BAC in the state of California. Only wineries with public access shown VALLE Y RD. CONN Wineries with Public Tasting Rooms Wineries Requiring an Appointment Additional Winery Tasting Rooms in the downtown areas WineCountry.com Map Sponsor TAPLIN RD. 12 THE TERRACES HALL AUBERGE RD. E DEL DOTTO WHITEHALL LANE TRES SABORES 11 4 RUTHERFORD RD. NIEBAUM LANE MANLEY LANE MIDSUMMER CELLARS 8 BROWN ESTATE F ´ YOUNT MILL RD. 10 GARGIULO...
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...I. Summary Mondavi Wineries intends to grow the company’s wine market share organically, without benefit of established wine acquisitions or joint ventures. An analysis of the industry and competition should help establish future strategic course. II.a. Barriers to Entry The industry contains excessive barriers to enter the wine production market. First, the wine industry requires quite an extensive amount of financial resources. In New World and European markets, costs of premium wine land range from $100,000 to $250,000 per acre in addition to development and maintenance of a vineyard. Premium grapes are also costly, and the wines have a maturation phase that must be passed before a rival firm can enter. In addition, the wine-making process became technologically dependant, utilizing new technology to combat weather conditions, pest control, and wine processing. A winery is not simplistic to start, because it is capital intensive, and market entry can take many years due to initial production time for vineyards and wine. A good knowledge base is also required in order to make wine and understand the complexities of the industry. II.b. Supplier Power Wine industry supplies consist of bottles, packaging, corks, machinery and equipment, land treatment and grapes. Prices for these raw materials are relatively stable and are set as a result of considerable competition. This situation obviously creates less bargaining power for suppliers. The move to backward...
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