In order to offset the recent disappointing earnings and descending stock price The Robert Mondavi Corporation must make several changes to its business and marketing strategy. Flattening jug wine sales have caused many large volume wine producers to venture into the popular premium to ultra premium wine market, thus penetrating into Mondavi's market share. This is an area in which Mondavi has been traditionally strong, with its popular premium brand, Woodbridge, accounting for 60% of net revenues in 1998. The outbreak of phylloxera of the late 1980's through early 1990's also significantly hurt Mondavi's ability to compete due to the grape supply shortage. Although the barriers to entry into the overall winemaking industry are high because of the large amount of time, land, resources, and other capital investment required, the barriers to entry into the premium winemaking segments are not necessarily as high for those companies that are already in the winemaking industry. Therefore, the company needs to focus on sustainable, creative improvements in order to survive in an industry where the competition is fierce and the number of substitutes is great. Several strategies, which can be exercised exclusively or jointly, can give Mondavi the needed advantage to secure and reinvent its position as one of the leaders in the wine industry.
The first strategy to undertake is one of wine segment diversification. Some of Mondavi's actions signify that they have attempted this to some extent in the past - Mondavi's introduction of Coastal wines to help penetrate the lower end of the super premium segment and its joint venture that produced the popular and super premium Caliterra brands. However, most of Mondavi's brands still fall in the ultra premium to luxury premium wine segments. We propose Mondavi diversify more aggressively into the popular premium wine segment. They should be able to leverage what they learned with Woodbridge, a very successful popular premium brand, and introduce other brands at this level. Because Mondavi prides itself as being one of the highest quality vintners, this strategic move must be approached delicately to avoid tarnishing Mondavi's high quality reputation and prestigious name with the introduction of low-priced wines. Mondavi could follow E & J Gallo Winery's tactic that they used to enter the premium wine segment. E & J GALLO either removed or shrunk their name on some of their new premium products to attempt to reduce the consumer's association of the premium brands with E & J Gallo's legendary jug wines.
The first assumption is that the prices will increase 2% before inflation. The production level per ton of grapes and yield per acre will increase to 1992 levels due to the new market strategies. Sales are expected to grow 13% in 1995 after which estimate of 12%, 6%, and 8% for 1996, 1997 and 1998, respectively show growth while recognizing a shift toward white wines. The tax rate of 37% and inflation rate of 2% is factored in to the forecast. Therefore the prices per case for each category has 2% price growth as well as 2% inflation rate, total of 4% was reflected in arriving at the forecasted income statement. Maximum capacity of 110,000 was assumed in the forecast and does show that even with the increase levels of production will not hit this ceiling in the next 5 years. Depreciation was calculated on 5-year straight-line basis, while SGA was constant 14% of sales. The key drivers of this model are Gross margin on each of the 5 main product group, tax rate, inflation rate, real price growth level, interest rate, Inventory to COGS, Accounts Receivable to Sales ratio.
Burkons, R. Tasting Panel the Magazine: Rao’s Signature Wines Open in Las Vegas (2009) Retrieved April, 17, 2011, https://www.strawberryridge.com/raos/press/TastingPanelMagazine-Sept09.pdf
Executive Summary- Mountain Man Beer Company (MMBC) is experiencing declining sales for the first time in the company’s history. Chris Prangel, who will inherit the family-owned business in five years is faced with a hard decision that whether to take the risk of launching a new product to attract younger customers or to follow his father’s steps, continuing doing the 80-year-old Mountain Man Lager business. His father has concerns about the profit, the core business and the cannibalization and Chris has done several researches to estimate the potential business opportunity of the new product Mountain Man Light Through an analysis about the company, the product and the market, it is clearly beneficial for MMBC to launch Mountain Man Light. But Mountain Man Lager is the core business without which it is impossible to develop a new product and grasp a new market share, which is the spirit of the decades-old brand. Therefore, while I recommend that launching Mountain Man Light to create a new business, appealing to younger and female customers and making profit, Chris should take these strategies into account: keeping enough effort on existed product and holding the top market position, developing the brand and expanding the product line, if he plans to make profit from the new product in two years.
Currently, the company lacks of focus as it has a diverse product line with too many varieties of cheese products. With so many products it cannot be sure to decide as to which market segment to target in order to take the advantage of the growing market.
Mondavi has apparently shown great results from the restructuring, the concentration on the two largest-volume brands have accounted for 20% of the growth of all U.S. varietal wines. They reported record gains in their first quarter report of 2000. The bottom line of the annual report for 1999 shows a 14% increase in net income.
The global wine industry is being influenced by numerous factors, specifically consumer demand and changes in the way wine is produced and sold (Old vs. New). In regards, consumers and producers have shifted away from the traditions of the Old World and have transitioned to accept the innovating techniques the New World has brought to the wine industry, thus the challenge the new world is presenting upon the old.
In order to achieve this objective Robert believed that he needed to build a Robert Mondavi brand in the premium wine market segment. This resulted in the initial pro¬duction of a limited quantity of premium wines using the best grapes, which brought the highest prices in the market and had the highest profit margins per bottle. How¬ever, he soon realized that this strategy, while establishing the brand, did not allow the company to generate enough cash flow to expand the business. In order to solve this problem Robert decided to produce less expensive wines that he could sell in higher volumes. He dedicated time and effort to finding the best vineyards in Napa Valley for the company's production of grapes. In addition, he signed long-term con¬tracts with growers in Napa Valley and worked closely with each grower to improve grape quality.
Cordano, Mark, R. Scott Marshall, and Murray Silverman. 2005. “The greening of the California wine industry: Implications for regulators and industry associations”. Journal of Wine Research. Vol. 16, No. 2:151-169
Compared to the industry as a whole, Mondavi is not responding to the changing marketplace and demands. While there has been some growth in the ultra and luxury premium market segments, the explosion in the last 15 years had been in the popular premium ($3-7 per bottle) and super-premium ($7-14) sector. Mondavi’s own Woodbridge offering is responsible for 76% of its case volume and 57% of its revenue as of 2001, but seemingly exists in isolation amidst all the high-end offerings from the company. Competitors that have established themselves in jug wine, beer, and other spirits are taking advantage of their sales volume and migrating upward. While E&J Gallo, Constellation, and the beer producers may not have the reputation for quality and craft that RMW possesses, their substantial financial weight has allowed them to develop or purchase brands that could compete in the higher altitudes and price segments. Meanwhile, competitors with similar histories in premium winemaking are taking advantage of lower production costs to horizontally integrate, acquire land, and build new wineries in different countries, as Kendall Jackson has done with the Villa Arceno (Italy) and Yangarra Park (Australia) wines.
In the 1976’s American wine, industry had forever changed. France has been the leader thought the winemaking world for centuries. This movie “Bottle Shock” is based on a true story of California wine makers on their first milestone of the winery industry. The wine industries in California show the world that the French is not the only credible wine producers. The movie helps us to see the significance in wine culture had a change not only the French opinion of Americans, but the entire world’s opinion had changed. I will explain the meaning of the movie along with significant details that happened to become the reason how American wine will rival the French wines and changed the world.
In 2002 the resulting flat sales of steak sauce from the stability in the market, along with the undeniable 15% annual growth in the marinade market, lead to the relaunch of the A.1. marinade line. Successfully, by the end of year the relaunch accrued $15 million and captured 10% share of the marinade category. Let it be noted that A.1. is launching a new marinade product in the current year that requires heavy advertising and trial building. The new product requires $10 million for advertising and $5 million towards consumer promotion. The marinade line at the end of 2003 projects to lose around $7 million in oper...
Mondavi’s Strategy, Success, Threats, and Risks Bargaining Power of Supplier: Necessary products to make the wine e.g. grapes are easily available that allows Mondavi to have a considerable amount of choice to choose and keep their costs and expenses. Threat of Substitutes: There are a significant number of replacements for the Mondavi’s product that includes beer, wine coolers, spirits, and various other drinks. Threat of New Entrants: The wine industry is undergoing consolidation. Even several beer and spirits companies were moving toward the wine industry, which was growing more and more. Current Competitors: Mondavi wine has many different competitors from small size to large wine companies.
In this report, we will be analyzing the current performance of Kingsford in the marketplace and identify the main cause of revenue deterioration. Thereafter, a comprehensive strategy and marketing plan will be presented.
When initially analyzing the Old World Wine Industry versus the New World Wine Industry, the differences are evident. Strong representations of this include factors such as size, production methods, brand equity, and production orientation. Through conducting an analysis using Porter’s Five Forces, one can clearly see the clear delineating factors between the Old and New World.
There were fierce competitions among the producers that have scale and scope of operations which were similar to each other. For instance, the Pepsi Co. and Coca Cola companies have developed the strategy and infrastructure, which are hard for the local sellers to complete with them. However, there were still many producers including new entrants that try to access the market and compete seriously with low price and differentiation- strategies among rival...