Robert Mondavi and the Wine Industry Exec Summary & SWOT Analysis

Executive Summary & SWOT Analysis of Robert Mondavi and Wine Industry By Bilal Quadri Brad Ufkes Katie Leeb Shane Miller Saswat Tripathy George Brown College

HOST – 4113 International Culinary Strategies Professor James Smith Thursday, March 31, 2011

Executive Summary Since 1966 Robert Mondavi has been creating innovative wines and today is one of the world’s finest brands valued at $600 million. Due to the recent economic downturn, Mondavi and general wine sales have slowed forcing the global wine industry to consolidate. Industry consolidations began to occur to New World producers by premium wineries purchasing or merging with rivals, jug wine producers’ acquiring premium wineries in order to keep pace with changing consumer tastes, and lastly alcoholic beverage firms diversifying into the premium wine market. Despite these types of consolidations Mondavi remained an independent company relying on the U.S. market for sales. While competitors spent money pursuing acquisition strategies, Mondavi chose to focus on the organic growth of its popular premier brands. Today the global wine industry reports retail sales ranging from $130 to $180 billion in the classifications of: jug or commodity, popular premium, super premium, ultra, and luxury wines. In the United States, jug wine sales had declined approximately 3% per year over the last 10 years, while premium wines increased 8% to10% annually. A shift toward high quality premium wines is occurring in many wine producing countries such as the United Kingdom, while Europe still consumed a great deal of table wine. Currently 4 firms account for 75% of wine sales in Australia, while 20 firms controlled 75% of the U.S. wine industry, and the European market remained highly spread apart by region. New World wine producers invested heavily in technology to create a consistency of quality in their wines and to reduce operating costs. After developing a recognizable name, wine producers extended the brand to an entire line of products, each specific to a different market segment. In terms of distribution Mondavi sells its wines through more than 100 independent beverage distributors in the U.S., and also employees nearly 200 sales representatives to market the company’s brands to independent distributors and large retail outlets. They provide key information on marketing and promotional campaigns, and gather feedback from the wholesale market. The main problem that Mondavi was experiencing involved the sales force not being able to market Mondavi’s complete product line effectively because the time needed for educating retailers about Mondavi’s ultra-premium and luxury wines was too little. Typically the sales team would focus on promotions, competitive pricing, demand forecasting, and shelf management for popular products. Rather than marketing to the channel, Mondavi may be more successful by hiring a third party experiential marketing organization to communicate directly with consumers. By having representatives create individual customer experiences; Mondavi will likely move much more product and by pass educating retailers who are bombarded with information from many different brands. Customers would remember Mondavi representatives and have a long term connection with the brand. Also Mondavi would not have to rely on the retailers influence over the consumers. Potential solutions for dealing with distributors would to be scale back from the 100 current distributors to a more manageable number of important distributors. Currently the company’s largest wholesaler Southern Wine and Spirits, accounts for 29% of the firm’s sales, while 15 distributors represent approximately two-thirds of Mondavi’s sales. Limiting distributors will reduce costs and offer expansion for successful distributors to take over regions of under performing competitors. By offering sales incentives, distributors will also be motivated to sell Mondavi products over the other products they are responsible for. Lastly having distributors educate retailers on brand information was not successful because of time constraints. Rather than teaching brand knowledge to staff, Mondavi should reallocate money for signage to marketing directly to the consumer through television, billboards and the internet. Retailer’s education should be reduced to printed material sent to every store to be reviewed at their discretion.

SWOT Analysis

Strengths  Mondavi chose to focus on the organic growth of its popular premier brands.

 In terms of distribution Mondavi sells its wines through more than 100 independent beverage distributors in the U.S.

Weakness  Relied on the U.S. market for sales.  Letting distributors educate retailers on brand information was not successful because of time constraints.

 Nearly 200 sales representatives market the company’s brands to independent distributors and large retail outlets.  They provide key information on marketing and promotional campaigns, and gather feedback from the wholesale market.

Opportunities  Rather than marketing to the channel, Mondavi may be more successful by hiring a third party experiential marketing organization to communicate directly with consumers.

 Limiting distributors will reduce costs and offer expansion for successful distributors to take over regions of under performing competitors. This will further maximize the profit.  Rather than teaching brand knowledge to staff, Mondavi should reallocate money for signage to marketing directly to the consumer through television, billboards and the internet. Retailer’s education should be reduced to printed material sent to every store to be reviewed at their discretion.

Threats  Due to the recent economic downturn, Mondavi and general wine sales have slowed forcing the global wine industry to consolidate.  Industry consolidations began to occur to New World producers by premium wineries purchasing or merging with rivals, jug wine producers’ acquiring premium wineries in order to keep pace with changing consumer tastes, and lastly alcoholic beverage firms diversifying into the premium wine market.