Term Paper on "Global Wine Industry"

Term Paper 4 pages (1202 words) Sources: 1

[EXCERPT] . . . .

Robert Mondavi and the Wine Industry

Since 1966, Robert Mondavi established itself as one of the leading wine producers of the Napa Valley. Founder Robert Mondavi recently relinquished his post as Chairman of the Baord, and was succeeded by his son Michael. Michael's brother Tim remains chief winemaker and Vice Chairman. The Mondavi family retains 50% of the company's shares and the majority voting rights (Roberto p. 6). Known for their innovation and quality as well as their business acumen, Robert Mondavi has been a consistent industry leader in the production of premium wines. The Mondavi firm has been publicly traded since 1993. Since FY1994, Mondavi's earnings per share have grown at a compound annual growth rate of 28% (Roberto p. 1). Mondavi's firm market value totals about $600 million.

However, Robert Mondavi faces still competition from three main sources. Direct rival firms in California who produce premium wines such as Kendall-Jackson and Southcorp pose an immediate threat. Similarly, large-volume producers that focus on low-end jugs like E&J Gallo have begun to tap the premium wine market, and global alcoholic beverage corporations like the Foster's Group are also getting in on the wine crazy by acquiring or consolidating with wineries around the world that make high-end products. CEO Greg Evans, a 20-year employee of Mondavi and the first non-family member to hold that position, helped the firm reassess its position in light of increased competition and market-related setbacks. As Mondavi has invested considerably over the years in expanding its product line and revamping its production facilities, the future plans of the firm do not include further acquisitions but rather an "organic growth of its premier brands," (Roberto p. 16).

Historically, founder Robert Mondavi dedicated himself to increasing wine awareness in the United States. Through concerted efforts at wine appreciation, Mondavi helped both deliver a message he personally believed in and stimulate sales of his products. Mondavi purchased his first vineyard in 1943 and would soon become one of the world's leading producers. The Woodbridge line, launched in the 1970s, would put Mondavi on the map. Its range of wines in the popular premium price category became fast best-sellers and helped Mondavi expand his product line of fine wines.

The global wine industry generally divides its products into five market segments. Jug or commodity wines are the cheapest and generally poorest quality, being produced from second and third pressings. Jug wine usually sells for less than $3 per bottle. Sales of commodity/jug wines have consistently declined at a rate of about 3% per year over the past decade, whereas overall sales of wine in the premium categories have grown between 8 and 10% per year (Roberto p. 2). In 2001, jug wines accounted for 38% of case sales but only 13% of total retail sales. Robert Mondavi ignores the commodity market segment, instead focusing on the range of premium wines. Wines in the popular premium segment sell for between $3 and $7 per bottle; super premiums sell for $7-$14 per bottle; ultra premium for $14-25 per bottle and luxury wines sell for $25 and up (Roberto p. 2). Markets vary between regions, too: in Europe the average price per bottle sold is $4.80 compared with $7.20 in the United States (Roberto p. 2).

Following the success of the Woodbridge line of popular premium wines in the 1980s, Mondavi partnered with Baron Phillipe de Rothschild, a leading French producer to create a line of ultra-premium wines. By 1998, their joint venture wines labeled Opus One were sold in 65 countries worldwide and the fifty-fifty partnership marked the first ever U.S.-French endeavor in the… READ MORE

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