1. Introduction
Robert Mondavi had a dream, to put the United States on the map for premium wines. The quest to
build his wine empire began in 1966. Mondavi did the impossible, by taking a mix of traditional and
risky approaches to ensure Robert Mondavi Corporation’s survival. Or was he just buying time? The
focus of this study will be to analyze the operations of Robert Mondavi Corporation (RMC). The
question remains, “How far can a corporation stray from its vision before disaster strikes?”
Wine Market Snapshot
Although Americans ranked 13th in wine consumption per capita in 1999, sales grew dramatically
throughout the 1990’si. Wine could be broken into the following four categories. Prices are listed on a
per bottle basis.
Jug Wine (Below $3)
Popular Premium ($3-$7)
Super Premium ($7 - $14)
Ultra Premium ($14 and up)
Wine was produced in every state, aside from Alaska, and sales dollars reached record highs.ii
Source: The Gomberg-Fredrikson Report/Wine Institute
Competitive Environment

2. Even with stable sales growth in the wine sales market, the industry was dominated by seven wineries.
These seven wineries make up nearly 65% of total U.S. table wine sales, as highlighted below.
Source: Adam’s Wine Book 1999
Mondavi’s vision was, “To do whatever it took to make great wines and to put Napa Valley on the
map, right alongside the great winemaking centers of Europe."iii Large beverage firms such as Nestle
and PepsiCo also aggressively sought this position by acquiring wineries. The reason lies in the high
profit margin that the premium wine market offers. Shown on the following page, the percentage of a
particular genre of wine produced, and the amount of revenue it provides in the United States market.

3. Source: Source: 1999 estimates by Gomberg, Fredrikson, and Associates
The wine market in the United States is feeling intense pressure internationally. Chile and Australia
were aggressive in international sales. US firms, including Mondavi, felt that expanding globally was
the next step in the evolution of the wine business. Mondavi embarked on three international
partnerships. Mondavi was now producing wine in Italy, Chile, and France. Mondavi boasted the first
American ultra premium wine (Opus One)iv as a result of these endeavors.
Competitive Advantage
Conventional methods of appealing to consumers through advertising are futile in the premium wine
market. Premium wines work on a “pull” demand strategy. Success lies with the following:
Wine competitions (local – international)  medal winners would receive press in various journals and
publications. This form of advertising helped provide brand awareness. Mondavi has won 100s of
awards over the years.
Wine tourism  allowing the consumer to learn how the particular bottle is conceived from start to
finish. Robert Mondavi fully appreciated this element, and built Mondavi Winery as such. “... I wanted
my winery to have elegance and style, to be a place that would properly highlight our talents and the
work going on inside. I also wanted it to be a place that would attract streams of visitors.”
5 Star Restaurants  wine lists at restaurants are highly sought after and Mondavi traveled the US
showcasing his fine wines to chefs, waiters, and sommeliers.
Wine Clubs/Specialty Stores  Mondavi offered consumers the Mondavi Spotlight Wine Club.v
New Market Entrants
Relatively inexpensive to open a small winery (-)
Distribution system may be too costly for small firms to expand (+)

4. Small wineries can focus more on premium, profitable products (-)
New World competitors must offset lack of demand in home countries by aggressively going international. (-)
Premium U.S. Domestic
Wine Competitive Position
Supplier
Weather (temperature/climate) can have an adverse effect on the grape crop (-)
Phylloxera and other insects can destroy an entire crop. (-)
Transportation costs of international grapes are on the rise (-)
Many wineries grow grapes on site, giving owner complete control. (+)
Buyer Power
Popular premium wines’ demand outweighs the supply (+)
Supermarkets accounting for over ½ of wine sales carry countless competitors (-)
Cost does not play strong role in decision making process (o)
Competitive Rivalry
7 firms account for clear majority of sales (-)
Industry is still growing (+)
Reputation can be easily damaged (-)
Substitutes
Local wineries premium wine (-)
International wines including recent New World wines (-)
Wine Coolers (-)
Fruit flavoured juice/beverages (-)
For a small winery this could be a very attractive industry. A focus on quality even with limited
distribution channels can be very profitable. For a winery trying to compete on a similar scale as
Mondavi, it is very unattractive. Securing distribution and international expansion proves to be too
costly.
Mondavi Corporation – A Closer Look & Shareholders’ Concern
Strengths Weaknesses

5. Pioneer of Premium U.S. Wines
Strong Brand Recognition
Offered in 5 Star Restaurants Too focused on goals and objectives, ignored
Diverse product offerings surroundings (unable to quickly adapt)
International partnerships including 1st Ultra Expanded too quickly
Premium US wine Ignoring core competencies
Innovative  from techniques of producing wine, to Phylloxera infestation resulted in loss of a crop, and
working with NASA on root growth analysis consumed a considerable amount of cash on hand.
Countless awards and recognitions, “Man of the Leadership team unable to compromise and prioritize
Year” – Wines & Dines, to EU “Lifetime Only premium wine company publicly traded wine
Achievement Award” in 1998 (at the time)  difficult for Analysts/investors to
Distinctive Competencies  Differentiation assess
product offering premium wine praised worldwide
Opportunities Threats
US market still shows signs of future growth Continued growth in market share from New World
International market still considerably untapped wine rivals (ex: Australia & Chile)
Reposition focus back to core brands that contribute Market fears company turnaround is not likely 
90% of revenue stock price continues to drop
Evaluate selling off less expensive brand(s) Natural disasters or problems
Growth in premium and ultra premium wine market
of small wineries
Other large competitors aggressive and expensive
push to steal Mondavi market share
Stockholders have every reason to be concerned. The stock price has been at best inconsistent as shown
on the following page.
Source: Robert Mondavi Corporation (RMC) SEC Filings
Due to expansions it is clear that Mondavi is not a conservative firm and would have difficulty
accessing financing. (Note: Most firms fall in between 33-50%)

6. Source: Robert Mondavi Corporation (RMC) SEC Filings
Performance by Mondavi should be considered failing in stockholders’ eyes. Generally companies
have a 15%-25% return on the shareholders’ investment. Mondavi is clearly heading in the wrong
direction. The chart on the following page shows the three year trend.
Source: Robert Mondavi Corporation (RMC) SEC Filings
The Multi Personalities of Mondavi – Clearly Different Roads to Travel

7. RMC (1966) RMC (2004)vi
Vision Vision
"To do whatever it took to make great wines “To enrich life through wine” Divided RMC
and to put Napa Valley on the map, right wines into two categories. Luxury > $15 and
alongside the great winemaking centers of Lifestyle > $15.
Europe."
Strategy Strategy
Pioneer the premium to ultra premium Strong push on lifestyle brands. Divest in
market in the United States. Focusing on a luxury brands, and all logistics associated
few key brands. Market the most expensive/ with such. Use licensing to take advantage of
highest profit margin fine wines. Aggressive brand equity. After divesting, freed up capital
sales approach, and strong Old World winery can be used to consider new products.
influences.
Many can speculate on the future of Mondavi if the 2004 vision and strategy would have been
implemented, but instead Constellation Brands acquired RMC in December of 2004. Listed below
details the events in a comparative analysis on what could have been if the 2004 plan went ahead.
Constellation Brands acquire RMC (2004) New Strategic Plan (2004)
Background Background
Constellation headquartered in NY is the largest Family struggles have caused several recent board
producer/marketer of over 200 beverage alcohol member and CEO changes.
brands. Board deemed “major strategic review” was needed
Gross sales are $5 billion
Sells products in over 60 countries.
Strategy Strategy
Sold the Arrowood, Grand Archer, and Byron wine Refocus strategy to sell/market lower price wines
assets for $40 million. Byron is considered a Super Sell off assets/brands including Opus One
Premium Wine. Eliminate unnecessary staff
Selling 90 million cases annually as the world’s End expensive contracts with grape distributors
leading wine producer/marketer. Relocate headquarters to Delaware
Constellation not only acquired additional product Strong push towards new brands
lines, but the quality brand image of RMC. Eliminate different stock class structures (no A & B)
Shareholder Response Shareholder Response
Class A shareholders received: $56.50 a share & It not would have been favorable. The particular
Class B received: $65.82. With the stock price of industry Mondavi is interested in actually reported
$40.35 as the high in the 4th quarter of 2004, negative growth the year prior. Mondavi’s core
shareholders should consider this acquisition as an competences are a strong reputation of providing
acceptable business solution. premium wines. Investors had previously questioned
Mondavi since its first public offering, and now
selling off profitable product lines would be
considered a poor choice. This is reflected by
Mondavi having to issue another press release

8. ensuring stockholders the value of the dissolution of
many assets.
Conclusion
Robert Mondavi believed he saw something in those vineyards of California that could change the
World, and he was correct. Unfortunately for Mondavi Corporation rapid expansion left little room for
costly surprises. In 2004, RMC by strategic standards was a complete stranger to the ideas and
principles of yester years. RMC had forgotten what their original goals and intentions were, and most
importantly they had forgotten what had made RMC a successful firm to begin with. RMC should have
focused on producing the highest quality of wine, and demanding the highest price the market will pay
for such. Slow international expansion could occur after RMC proved to shareholders that it could
eliminate a large portion of debt, as well as increase current assets (i.e. cash) to help finance future
endeavors.
i High Spirits. California Wine and Food Magazine http://www.californiawineandfood.com/wine/wine-2.htm 2000
ii Robert Mondavi Corporation (Case Study). Silverman, Gilinsky 06/2001
iii Robert Mondavi Corporation (Case Study). Silverman, Gilinsky 06/2001
iv Wine Business Monthly: http://www.winebusiness.com/html/MonthlyArticle.cfm?dataId=13473
v Robert Mondavi Corporation (Case Study). Silverman, Gilinsky 06/2001
vi Bank of American Securities 34th Annual Conference. http://media.corporate-
ir.net/media_files/irol/90/90413/presentations/BofAConinSF_92004/sld001.htm 9/2004
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