I regrettably had to miss class on Thursday, which was such a bummer because I was looking forward to hearing from the Mondavi family! It's one of the few names that a casual wine drinker such as myself recognizes.
I thought the aftermath of the Mondavi public offering was very interesting - it was a very logical move for the family to raise money, but the financial markets were not optimistic about the offering. I think they saw that worldwide wine consumption was growing significantly, but they didn't believe in Mondavi's ability (or any other winery for that matter) to capitalize on that growth, despite good past performance (leader in the field, almost $170M in revenue in 1993). I think the biggest obstacles were the hesitation of Mondavi's lender, Bank of America, the phylloxera louse, and international competition from Chile, Australia, South America, and Europe.
One thing that stuck with me is that during the pitches, the Mondavi sons said "we sell wine through education..." I think the family had to be able to convince the analysts of "why Mondavi" in order to improve the share price.
I had a couple ideas of how to react. Firstly, I think ensuring the narrative and business actions consistent was important. Mondavi made the finest wine using old-world techniques and wanted to make sell them to the American consumer who wasn't as refined as a French consumer. As such, Mondavi would try to create a culture of appreciation for premium wine, and this is consistent with the narrative. What I didn't think was consistent with the narrative was the Woodbridge investment - I think Mondavi should've concentrated on the more premium lines instead of moving down the market. I wonder if he talked about that investment in class?
Lastly, I think Mondavi needed to convince analysts of its growth potential - either through growth in the U.S. or even international expansion. China would be an attractive market if Mondavi can establish a name there. I think it would be easy since they already had a partnership with Baron Phillipe de Rothschild.
I would really appreciate it if someone who attended class could fill in the blanks for me. What did Robert Mondavi do after the IPO? What's their strategy now?
Ultimately, Mondavi ended up selling the company in 2004 to Constellation Brands, one of the largest alcohol conglomerates in the world, for ~$1 billion. Apparently, the Mondavi story is considered one of the great tragedies of Napa Valley because it is the story of a great family run brand ultimately losing its way and selling to a multinational goliath (http://archive.fortune.com/magazines/business2/business2_archive/2005/04/01/8256045/index.htm). Robert Mondavi remained in the industry (albeit with a substantially reduced footprint and profile) until his death. He founded a small winery, Continuum Estate, with his son Tim and daughter Marcia.Interestingly, we learned that there had been a reconciliation between the Peter (Krug) and Robert branches of the Mondavi families. In fact, in 2005 Robert and Peter produced a small barrel (60 magnums) wine together for the Napa Valley Wine Auction. Moreover, some of the Mondavi cousins produce wine together to this day.
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