-Robert Mondavi & the Wine Industry

Introduction:  Wine Industry growing in a valuation of $130 Billion to $180 Billion in retail sales, it has become competitive over the time. As the industry has aggressive competition, our company’s 16 different products through various company owned wineries and joint ventures is our core strength in the industry. We, the representatives of Robert Mondavi, the current Chairman Michael Mondavi and CEO Greg Evans have come with the Porter’s Five Forces and Value Chain analysis which focuses on the following issues which are: - The firms wine sells have softened - Australian imports have become a substantial and persistent threat - Global Wine industry is consolidating - Rivals merging, beverages were making an aggressive push - Mondavi is still an U.S. focused Winery These issues have become an obstacle to our vision which is, “To established and  strengthen the competitive advantage of Mondavi and to sustain an  intern source develop in scope of having a major share in the worldwide wine industry.” In this regard, our current objective is to focus on the following factors - Identifying our competitors, buyers substitute, suppliers bargain power, rivals altogether the porter’s five forces to identify our stand point. - To understand our value chain and focus where our value can truly exist and feasible to increase. In that regard, below is the

Porter’s Five Force’s Analysis:           

      

                                                                            

Threat of New Entrants 

    

 

i.

The worldwide threat is low due to high cost but regional is high with ease of export.

ii.

Huge capital is required in entering wine industry as the cost of acquiring land is high.

iii.

The 7 years’ timeline to generate revenue keeps the new entrants away.

iv.

Consumers have high brand loyalty; thus new entrants have low success chance.

v.

Existing players are consolidating the global wine industry, merging and leveling up the competition, providing a high barrier to entry.

Threat of Substitutes  i.

The main substitute is the beer produced by breweries.

ii.

As the market is shifting to premium quality wines, the market is at a threat due to this shift with jug depleting and ultra-premium rising in demand.

Bargaining Power of Buyers:  i.

Having three price wise category in the wine industry, standard pricing leads less bargaining power.

ii.

With more options but in same pricing category leads to less bargain.

iii.

Wine marketed as a special occasion drink or elitist drink, buyers usually don’t tend to go for bargaining.

iv.

Cheaper wine availabilities ask for buyers to call less bargain.

Bargaining Power of Suppliers:  i.

Have over 100 of suppliers and sources leaving little bargaining power of suppliers.

ii.

Have strong and developing, own production source of grapes for premium quality wine thus less power to suppliers.

iii.

Have long term contract established thus less chances to bargain.

iv.

Since switch cost is high, that is where suppliers have more power to bargain.

Industry Rivalry:  i.

Over 1 million wine producers worldwide.

ii.

Top 20 firms controlled 75% of the US wine market.

iii.

Faced 3 types of competitors focused on making premium wines, largevolume producers and global alcoholic beverage companies.

iv.

Focused competitors are Kendall-Jackson, Trinchero Estates and Southcorp.

v.

Large-volume competitors are E&J Gallo and Constellation Brands. vi. Alcoholic beverage competitors are Foster’s Group, Diageo, BrownForman, and Allied Domecq.

The Porter’s Five forces identifies quite a few of advantages over the industry wide scenario. In regarding that, we would like to focus on our own value chain and see where we could improve overall to provide more value.

Value Chain  Research and Development Department:  i.

Experiments and made new processes for wine processing and grape producing.

ii.

Made improvements in manual and automated work capabilities.

Procurement:  i.

Ensuring to procure best grapes for their best wines, focused on internal grape production.

ii.

Have long terms commitments with over 100 sources around the world.

iii.

Have joint ventures with leading producers of different regions to procure better grapes.

iv.

Have worked with NASA and others to even procure and established best equipment.

Operations:  i.

Having both manual and automated grape procuring operation.

ii.

Used French Oak Barrel Operation for improving fermentation.

iii.

Stainless steel tanks for more easy operation.

iv.

Cold fermentation operation.

v.

200 People consisting Marketing Operation.

Marketing  i.

Conducts seminar, concerts and art shows to bring more people in the wine tasting.

ii.

Creating more awareness among consumers offering wine testing, conducting functions to influence the opinion leaders.

iii.

Tour to Oakville winery.

iv.

Having TV-adverts and Magazine adverts like in Wine Spectator, Bon Appetite and Food & Wine.

v.

200 direct people sales team to influence wholesalers and distributors.                       

  

Distribution 

     

         

  

i.

A vastly educated wholesaler (Southern Wine and Spirits) accounted for a hefty 29% of the firm’s sales.

ii.

Over 100 independent wine and spirit distributors nationwide.

iii.

A myriad number of liquor stores sell Mondovi wine.

iv.

Different upscale restaurants, fine dining and hotels both nationally and internationally serve fine Modavi wine.

Recommendations:  i.

Focusing on the organic growth, the company needs to set its foot outside of US.

ii.

As the consumer market is shifting to middle tier, products in that category needs to be more developed and marketed as well as educating consumers.

iii.

Modavi needs to focus on more connecting with suppliers and have vast options as well as develop their own supplies.

iv.

They need to market Wine as a product for any occasion like beer for jug/table level.

v.

Their own internal development will help them in having competitive advantages.

Conclusion:  With that in mind, we believe our overall analysis and the short term recommendation with rigorous approach to further develop strategies for our winery will help us to sustain our position and increase our sales which we have lost in the past two quarters. (959 words)