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Mondavi
 

Mondavi

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    Mondavi Mondavi Presentation Transcript

    • Robert Mondavi Company Family Owned, Professionally Managed
      • 2003 Annual Shareholders Meeting
      • HEELCO Financial Consulting, Inc.
      • Keith R. Dickson
      • Simone Furlan
      • Adam Takace
      • MBA 670
      • March 10, 2003
      • Dr. Dave Odett
    • Agenda
      • 1. Introduction
      • 2. Vision
      • 3. Competitive Strategies
      • 4. Going Public
      • 5. Strategy Execution
      • 6. 2003 Financial Report
      • 7. Financial Metrics
      • 8. The Future
      • 9. The Mondavi Brand Portfolio
      • 10. Audience Participation
      • Simone Furlan
      • Keith R. Dickson
      • Adam Takace
      • Keith R. Dickson
      • Keith R. Dickson
      • Simone Furlan
      • Adam Takace
      • Keith R. Dickson
      • Simone Furlan
      • All
    • Mondavi The Man
      • Born Virginia, Minnesota – 1914
      • Immigrant parents
        • Marche region of Italy
        • Old World traditions
      • Graduate Stanford University – 1937
        • Economics and Business Administration
      • Post Graduation – parents winery
      • (Sunnyhill Winery) , St. Helena, Ca.
      • Parents purchase of Charles Krug Winery
      • for $ 75,000
      • Father’s death – Mondavi ran winery with brother Peter
      • Personality conflict with brother
    • Robert Mondavi
      • “ Wine has been with us since the beginning of civilization. It is the temperate, civilized, sacred and romantic mealtime beverage”
    • Since 6000 BC
    • Mondavi Vision
    • Wine Industry Fundamentals
      • Appellation
        • name of region in which wine is produced
      • Varietal
        • type of grape used to produce a wine
      • Terroir
        • environmental factors of the region in which wine is produced determine the quality
      • Old World Wine Producers
        • Centuries of wine making tradition, high quality
          • France
          • Italy
      • New World Wine Producers
        • More modern wine producing methods
          • Australia
          • Chile
          • Argentina
    • SWOT - 1966
      • Strengths
      • California wine making expertise
      • Ability to innovate
      • California wine country terroir
      • Passion for excellence
      • Weaknesses
      • Perception of US produced wine as being low quality
      • Opportunities
      • Regulations and traditions within the wine industry internationally
      • Ability to innovate
      • Threats
      • Financial suicide
      • High quality premium wines produced by France, Italy, Chile, and Australia
    • Mondavi Vision
      • 1966
        • To become the first winery in California to produce premium wine brands that could compete with the premium wine brands of the world.
    • Wine Classification Sparkling k k Dessert > 14% alcohol Table < 14% alcohol Jug (Commodity) Luxury Ultra Premium Super Premium Popular Premium Mondavi’s Target Market $3 - $7 $7 - $14 $14 - $25 > $25
    • Grape to Wine to Consumer Process Flow Grape Procurement Grape Growing Aging Process Grape Crushing Grape Fermentation Bottling Process Packaging Process Marketing & Distribution
    • Mondavi Business Plan
      • Build RMC Reputation
        • Produce a limited quantity of super to ultra premium wines using the most prestigious varietal grapes
            • Cabernet Sauvignon
            • Pinot Noir
            • Chardonnay
            • Johannesburg Riesling
      • Locate winery in the best vineyard in Napa Valley
        • To Kalon Vineyard, Oakville, California
      • Build a State-Of-The-Art Winemaking Facility
        • Functional and distinctive
      • Develop “Best-In-Class” Winemaking Procedures
        • Assemble team of viticulture experts
        • Develop new technologies and process innovations
    • Competitive Strategies
    • Competitive Strategy
      • Domestic Brand Diversification
        • Build brand portfolio in the premium wine market
          • Price points
          • Niches
        • Develop new brands using new wine appellations from California Wine Country
        • Use long-term debt to finance acquisitions
        • Gradually raise brand prices as popularity increases
    • Competitive Strategy
      • Global Strategic Partnerships
        • Expand brand portfolio beyond California
          • Combine the wine making expertise of Napa Valley with that of the great wine producers of the world
          • Develop a global recognition for Mondavi brands
            • France
            • Italy
            • Chile
            • Australia
    • Competitive Strategy
      • Grape Sourcing
        • Company owned and leased vineyards
          • 50% for highest quality wines
          • 25% - 2005 goal for all wines
          • Densely spaced vineyards
          • Sustainable farming practices
          • Hand harvesting for higher quality grapes
        • Outsourcing
          • Over 300 independent grape growers
          • 75% of contracts – 3 to 7 years
          • Partner-like relationships
            • Prices paid based on grape quality
            • Lending Mondavi vineyard specialists to partners
    • Competitive Strategy
      • Process Innovations
        • Gentle Grape Handling
        • Satellite Imaging (NASA)
        • Cold Fermentation
        • Stainless Steel fermentation tanks
        • Gravity Flow Systems
        • Oak Barrel Aging
        • Capsule-free, flange top bottle
    • Competitive Strategy
      • Sales and Distribution
        • Domestic
          • More than 100 independent wine & spirits distributors
          • Winery retail shops
        • Internationally
          • Regional and national importers
            • High-end hotel chains
            • Premium restaurants
    • Competitive Strategy
      • Marketing
        • 12% of consumers drank 88% of wine purchased in US
        • Identify the opinion leaders within this group
        • Enhance their knowledge and appreciation of Mondavi wines
          • Tours of winery
          • Training sessions at fine restaurants and hotels
          • Magazines – “Bon Appetit”, “The Wine Spectator”, “Food and Wine”
        • Electronic media
          • Radio – 1998
          • Television – 2001
        • Grow the customer base by removing wine’s mystery, while maintain the magic
    • Competitive Strategy
      • Organization Prior to 2001
        • Vice Presidents
          • Production
          • Sales
          • Marketing
          • Finance
      • 2001 Reorganization
        • RMW Business Unit
        • Woodbridge Business Unit
        • Joint Ventures & Small Wineries Business Unit
      • Executive compensation linked to amount BU return’s exceeded cost of capital
      • Objective
        • Develop a clear and distinct competitive market position for each brand
    • Going Public
    • SWOT - 1993
      • Strengths
      • Mondavi brand portfolio
      • Family-owned business
      • Weaknesses
      • Financial constraints
        • Rapid expansion
        • Increased competition in Napa Valley
        • Phylloxera infestation
      • Opportunities
      • Maintain ability to capitalize on future opportunities
      • Threats
      • 200 new wineries in Napa Valley producing premium to ultra premium wines
      • Large companies with capital to cover replanting costs
    • Initial Public Offering
      • June 10, 1993
        • Class A Common Stock
          • Mondavi family - 10 votes per share
        • Class B Common Stock
          • Public – 1 vote per share
          • 3.7 million shares at $13.50
          • Raised $ 49.95 million
      • Post IPO Stock Price
        • Days later - $ 8.00
        • Six months later - $ 6.50
      • Stock Valuation
        • Two other wine companies public
          • Low end jug wine segment
        • Uncertainty over phylloxera infestation
      • Mondavi’s Response
        • Educate the investors
        • Mondavi’s experience and know-how to build a strong, enduring business
    • Strategy Execution
    • RMC History 1966-1980 Robert Mondavi Winery Founded 1970 1960 Woodbridge Winery acquisition Opus One JV established 1980 1966 1979 Robert Mondavi personal marketing efforts
    • RMC History 1980-1990 Vichon Winery Oakville, Napa Valley acquisition 1985 1980 1990 Byron Vineyard & Winery acquisition, Santa Maria Valley
    • RMC History 1990-1993 1990 1993 1991 1992 Natural Farming adopted Opus One Winery Opens RMC IPO
    • MOND Price History
    • Mondavi Brand Portfolio
    • RMC 2003 Financial Report
    • Fiscal Year 2003 (Ending June 30, 2003)
      • Decrease in Net Income and Earnings per Share
        • Net Income: $ 17.3 Mil from $ 25.5 Mil (FY 2002)
        • Earnings per Share: 1.06 from 1.56 (FY 2002)
      • Restructuring charges: $ 22.2 Mil (0.85/share)
        • Staff reductions
        • Grape contract buyouts
        • Wine inventory and fixed asset write downs
      • Disposal of non-strategic fixed assets
        • La Famiglia Winery (retain brand name)
        • 750 acres of vineyard California Central Coast
        • Gains: $ 7.3 Mil
    • FY 2003 Actions
      • Stimulate Sales and Grow Market Share
        • Increase efforts in trade promotion
        • Creation of new brands
          • Woodbridge Select Vineyard Series
          • Papio – popular premium segment for the “adventurous and young at heart”
          • Discovery Series – for restaurant consumers seeking “something different”
      • Maintain brand pricing in this highly competitive environment
        • Strong Wine Brands
          • Mondavi wines are synonymous with quality
    • Financial Metrics
    • US Wine Market Percentage Market Share (Volume)
    • Sales By Geographic Region
    • Sales Volume (000,s l) per Brand
    • Sales Revenue per Brand
    • Total Cases (9 liter) Sold
    • Sales Rev - COGS Gross Profit - SG&A
    • EBIT - Interest - Taxes
    • Net Income
    • Earnings Per Share
    • The Future
    • SWOT - 2003
      • Strengths
      • Mondavi brand portfolio
      • Family owned
      • Professionally managed
      • Weaknesses
      • Weak US economy
      • Lower premium wine demand
      • Opportunities
      • Improve operating efficiencies
      • Expand market share
      • Threats
      • Oversupply of premium wines
      • Competition-new/current brands
      • Aggressive pricing
      • Competition for shelf space
    • Competition
      • Focused Competitors
        • Producing premium wines
          • Kendall-Jackson – 1982
          • Trinchero Estates – 1947
          • Southcorp (Australia) – 2001
      • Large Volume Producers
        • E&J Gallo
        • Constellation Brands
      • Beer and Distilled Spirits Producers
        • Foster’s Group
          • Diaego
          • Brown-Forman
          • Allied-Domecq
    • International Market Segmentation
      • Countries that consume and produce significant amounts of wine domestically
        • France
        • Italy
      • Countries with significant levels of consumption, but no large local wine industry
        • Switzerland
        • United Kingdom
      • Countries that do not yet drink significant amounts of wine
        • Asian countries
        • Developing countries
    • Forward Looking Competitive Strategies
      • Improve Operating Efficiencies
        • 10 % staff reductions – ($ 6 Mil annual savings in SG&A)
        • Reduce product costs by 10% in FY 2007 ($ 30 Mil annual savings)
          • Reduce overhead costs
          • Streamline packaging and distribution activities
          • Increase production from Mondavi vineyards
      • Continue to Identify Non Strategic Assets for Disposal ($ 40 - $ 50 Mil book value)
        • Re-deploy capital to meet long term strategies
      • Improve Return on Invested Capital
        • FY 2003 Actual: 4%
        • FY 2007 Goal: 9%
    • Domestic Brand Labels
    • Robert Mondavi Winery Spotlight District Reserve Napa Valley
    • Robert Mondavi Private Selection
    • W oodbridge
    • Arrowood
    • Byron
    • Io
    • Opus One Baron de Rothschild Joint Venture
    • La Famiglia
    • Import Brand Labels
    • Sena Eduardo Chadwick Joint Venture
    • Arboleda Eduardo Chadwick Joint Venture
    • Caliterra Eduardo Chadwick Joint Venture
    • Luce and Lucente Frescobaldi Joint Venture
    • Danzante Frescobaldi Joint Venture
    • Talomas and Kirralaa Rosemount Estates Joint Venture
    • Audience Participation
    • References
      • Bond, G., Porter, M. (2000). Robert Mondavi: Competitive Strategy. Boston: Harvard Business School Publishing.
      • Laube, J. (2003) Mondavi at the Crossroads . Available: http://www.winespector.com/Wine/Main/Feature
      • Mondavi, R. (1998). Harvests of Joy . New York: Harcourt Brace & Company
      • Roberto, M., (2002). Robert Mondavi & Wine Industry. Boston: Harvard Business School Publishing.
      • Silverman et al. (2001). Robert Mondavi Corporation. In Thompson, A., Strickland, A., Strategic Management: Concepts and Cases (pp. 247-262). New York: The McGraw-Hill Companies.
    • MOND Price History 1 2 3 4 5 6 7 8 9 10 11
    • MOND Price History La Famiglia di Robert Mondavi Frescobaldi family JV, Italy RM Private Selection - Coastal Sena luxury Chile wine – Ed Chad. JV Lucente Italian wine – Fresc JV La Famiglia Winery opens La Arboleda Winery opens 1 2 Ed. Chadwick family JV, Chile & Caliterra introduced Byron Winery opens 3 4 5 Luce Italian wine – Fresc. JV Io – Byron Danzante Italian – Fresc. JV 6 Arrowood Vineyard Winery acquisition To-Kalon project “first crush” Rosemount Estates JV established 7 1 2 3 4 5 6 7 Arboleda Wines – Ed. Chad. JV Arrowood Grand Archer – introduced La Famiglia winery sold 8 8 Tenuta dell’ Ornelia acquisition 9 Talomas Wine introduced, Rosemount JV 10 9 10 Caliterra Brand, Assets sold 11 11