Marketing: Structure, Global Market, Competition (Mondavi)
Brian Siegel
Marketing
Mondavi Case
1.Structure of the global wine industry, how/why it’s changing, and threats to Mondavi.
Most wine sales around the globe can be placed into three categories. Table, dessert, and sparkling. Table wine accounted for most of this market share. The table wine industry then can be divided into jug, popular, super premium, ultra premium, and luxury. A big pattern in the industry is to diversity your product line, own your own vineyards and in source grapes for your production, form partnerships or joint ventures, and acquire land and position globally in locations such as Italy, France, Australia, Spain, California/US, and South Africa. Things that are affecting the industry are strict regulations in Europe, which urged wine makers to venture into other areas, technology, innovations, joint ventures/acquisitions, grape producing, vineyard management/land/winemaking process, distribution, marketing, and consumer attitude/taste.
Mondavi adapted to the changing industry by maintaining their position as being innovative and creative technologically. One way this was done was by emphasizing the education of the public interested in wine or winemaking through events, concerts, art exhibits, and wine tasting events to create a connection to consumers and the public. Mondavi had most of it’s revenue through it’s Woodbridge brand started in 1979 focused towards the popular premium market, accounting for 76% of case sales, and 57% of revenue in 2001. The popular segment is in the $3-$7 bottle range, catered towards the less luxurious wine drinkers, yet available to a larger demographic due to taste, yet associated with the quality and image of Mondavi. Competitors in this market began acquiring land near the Napa valley in CA, and across the globe to compete with the likes of wine makers such as Mondavi. Mondavi preferred to maintain it’s position where it was at in the Napa Valley, and it’s other vineyards across the globe. Mondavi focused on technology and innovation such as experimenting with new techniques that were natural, environmentally friendly; gentle handling of grapes, oak tanks that enhanced aroma, and a gravity flow system. Other winemakers ventured into the market by acquiring other vineyards, land, or even businesses such as how Diageo owned Pillsbury until they sold it to General Mills, Guinness and Burger King. Mondavi focused specifically on wine. Mondavi has a great reputation, entered the market early so they have cost advantage as well as have great relationships with past partners and from land deals/distribution/land management. Threats to Mondavi are if they don’t grow and produce more, stay technologically ahead of the game, and maintain their stronghold in the market. A lot of their competitors are producing similar product, but seem to be differentiating themselves through similar means, only at larger levels. Mondavi has a quality image, and a quality name, but their competitors and the trend is joint mergers and acquisitions, leading to larger and more competitive wineries. Everyone seems to be venturing to the same areas of CA, Italy, and France that Mondavi has. To remain competitive, you must become integrated globally by importing, exporting, and maintaining cost advantages, as well as image on both ends.
2. The Napa Valley
The Napa Valley has grown ever so popular to grow grapes for wine production in the United States. Due to this popularity, as most businesses dealing with property and real estate, the price of land has gone up tremendously, especially for producing ultra premium wine. Land in other countries such as Australia is 30-60% less compared to the 100K-250K for the scare property in California. If you had early entry, you also had early cost advantage on the land. The winery and grapes were valuable, but the land had also become a commodity! Mondavi operated vineyards in the Napa Valley, and did so with sufficient grape irrigation, land management, technology, and harvesting techniques. To enhance their position with better quality and taste for better image, Mondavi utilized oak barrels, gravity flow system, and high quality fermenting processes. The cost of land was increasing rapidly, and competition was acquiring land more rapidly. I would invest more in other parts of the globe due to the increasing price, and leverage a great distribution channel for logistics and transportation of the wine to import it from somewhere like Australia that has cheaper land/cost. The advantage Mondavi has is they can react quickly due to having a sales force of 200, which isn’t large enough at times, but gets feedback from consumers and all ends of the spectrum that can relay info to the leaders of Mondavi to create a pro active strategy. With that comes increased cost and market responsibility in regards to advertising, magazines, channels, consumers, and its image. Mondavi has product lines in each of the main categories, owns their own vineyards, and therefore can exercise their grape production they in source, relationships they’ve build with their distribution channels such as wholesalers/retailers (Southern Wine and Spirits, Costco), and create advantages on those ends. Also, Mondavi can exercise their international connections that are superior to small independent producers and merge into the on and off premise markets more swiftly. By having different product lines, it allows to reach more demographics/taste, and leverage risk of putting “eggs all in one basket” in case taste, cost, or the market changes. By having more capital, events and advertising can be reached with better ease than a smaller independent winery. With more capital, R&G, innovations, and technology for wine production, management, and employees can be obtained.
3. Larger firms entering premium wine market, strategies make sense, and Mondavi’s position in comparison.
Mondavi’s competing firms such as E&J Gallo, Diageo, Foster’s and Allied Domecq made great moves entering the premium market. By acquiring other wineries, teaming up with once competitors, and forming joint ventures, these large firms are entering the largest demographic of table wine and premium wine. These firms once concentrated on high-end wines or low-end jug wines, now were aggressively seeking position in the premium wine market. They too were attempting to advertise by winning wine competitions, having events, joint ventures, and grape growing, and technology. Mondavi chose to work with local partners during expansion versus how Kendall Jackson was to buy land and operate without an environmental/neighborhood friendly environment. Mondavi wanted to maintain it’s prestige in quality and image rather than aggressively moving into markets. There is a lot of money to be made in the premium wine sector, so that’s why firms wanted to enter that market, because there is a lot of money to be made if they get their name, shelf space, and consumer buzz out there! Their strategies include primarily acquisitions, advertising, and organization.
4. International Joint venture of Mondavi, and its approach vs. rivals
Mondavi wanted to produce fine wines and venture into other regions of the world besides just North America. They believed highly that quality of the wine will reflect the image. Mondavi formed a relationship with Opus One, and entered the luxury segment. Mondavi wasn’t against acquisitions or joint ventures, but they preferred to grow by partnerships and maintain relationships rather than aggressive acquisitions. The could relate to their “soft” attitude by how they wanted to work “with” the people in other regions rather than go in and start bullying their way around, and do it in an environmentally sound way with not only the land, but the people. They formed joint ventures in Italy and Chili with brands such as Sena, Caliterra for the popular premiums, and the crushing and fermenting took place in Chili. Through investments and partnerships rather than aggressive acquisitions, Mondavi decided to make this their strategy for growth. Through partnerships, they will succeed and be able to react and leverage their positions globally with more ease rather than having to be accountable completely for risk in regards to the changing markets in different areas, and managing relationships together rather than alone. They can combine efforts and expertise in the ever-changing market of wine making rather than invest more time, which means money in learning the region rules and obstacles for production, and knowing the demographic.
5.
I prefer the partnership approach versus the costly acquisition approach. I believe Mondavi must remain focused on having consumer feedback, technology, and being innovative. Their larger competitors may move into their market, but Mondavi must remain pro active with their sales force, and listen to their distribution channels and partners and what the have to say. Mondavi was a pioneer by combining events with wine and spreading the word of their products along with education. The education and time involved with that may be costly, but more costly if they don’t remain in touch with the consumer and retailers by educating them. Their organic growth seems to be working, and I suggest staying on a path with a similar strategy. It differentiates itself from its competitors, and also makes them “look nicer”, and adds an immeasurable quality to the organization that is a “friendly” and thoughtful firm. The in sourcing of grapes and maintaining their land, wineries, and relationships will be crucial for success. If they want to grow at a rapid rate, I suggest they analyze what E&J Gallow did and invest in Lime quarries, glass, and trucks and utilize vertical integration to grow. That, or form better relationships with firms that perform these actions well, and combine their talents for cost, production, distribution, and material advantage.
Take aways:
Gain expertise of locals, don’t have to establish large capital to start up globally, instead they’re partnered up! Joint ventures/relationships, along with quality/image facilitate growth and progress. Establishing great land, early entry, good product lines with great price points allows for success.
Marketing
Mondavi Case
1.Structure of the global wine industry, how/why it’s changing, and threats to Mondavi.
Most wine sales around the globe can be placed into three categories. Table, dessert, and sparkling. Table wine accounted for most of this market share. The table wine industry then can be divided into jug, popular, super premium, ultra premium, and luxury. A big pattern in the industry is to diversity your product line, own your own vineyards and in source grapes for your production, form partnerships or joint ventures, and acquire land and position globally in locations such as Italy, France, Australia, Spain, California/US, and South Africa. Things that are affecting the industry are strict regulations in Europe, which urged wine makers to venture into other areas, technology, innovations, joint ventures/acquisitions, grape producing, vineyard management/land/winemaking process, distribution, marketing, and consumer attitude/taste.
Mondavi adapted to the changing industry by maintaining their position as being innovative and creative technologically. One way this was done was by emphasizing the education of the public interested in wine or winemaking through events, concerts, art exhibits, and wine tasting events to create a connection to consumers and the public. Mondavi had most of it’s revenue through it’s Woodbridge brand started in 1979 focused towards the popular premium market, accounting for 76% of case sales, and 57% of revenue in 2001. The popular segment is in the $3-$7 bottle range, catered towards the less luxurious wine drinkers, yet available to a larger demographic due to taste, yet associated with the quality and image of Mondavi. Competitors in this market began acquiring land near the Napa valley in CA, and across the globe to compete with the likes of wine makers such as Mondavi. Mondavi preferred to maintain it’s position where it was at in the Napa Valley, and it’s other vineyards across the globe. Mondavi focused on technology and innovation such as experimenting with new techniques that were natural, environmentally friendly; gentle handling of grapes, oak tanks that enhanced aroma, and a gravity flow system. Other winemakers ventured into the market by acquiring other vineyards, land, or even businesses such as how Diageo owned Pillsbury until they sold it to General Mills, Guinness and Burger King. Mondavi focused specifically on wine. Mondavi has a great reputation, entered the market early so they have cost advantage as well as have great relationships with past partners and from land deals/distribution/land management. Threats to Mondavi are if they don’t grow and produce more, stay technologically ahead of the game, and maintain their stronghold in the market. A lot of their competitors are producing similar product, but seem to be differentiating themselves through similar means, only at larger levels. Mondavi has a quality image, and a quality name, but their competitors and the trend is joint mergers and acquisitions, leading to larger and more competitive wineries. Everyone seems to be venturing to the same areas of CA, Italy, and France that Mondavi has. To remain competitive, you must become integrated globally by importing, exporting, and maintaining cost advantages, as well as image on both ends.
2. The Napa Valley
The Napa Valley has grown ever so popular to grow grapes for wine production in the United States. Due to this popularity, as most businesses dealing with property and real estate, the price of land has gone up tremendously, especially for producing ultra premium wine. Land in other countries such as Australia is 30-60% less compared to the 100K-250K for the scare property in California. If you had early entry, you also had early cost advantage on the land. The winery and grapes were valuable, but the land had also become a commodity! Mondavi operated vineyards in the Napa Valley, and did so with sufficient grape irrigation, land management, technology, and harvesting techniques. To enhance their position with better quality and taste for better image, Mondavi utilized oak barrels, gravity flow system, and high quality fermenting processes. The cost of land was increasing rapidly, and competition was acquiring land more rapidly. I would invest more in other parts of the globe due to the increasing price, and leverage a great distribution channel for logistics and transportation of the wine to import it from somewhere like Australia that has cheaper land/cost. The advantage Mondavi has is they can react quickly due to having a sales force of 200, which isn’t large enough at times, but gets feedback from consumers and all ends of the spectrum that can relay info to the leaders of Mondavi to create a pro active strategy. With that comes increased cost and market responsibility in regards to advertising, magazines, channels, consumers, and its image. Mondavi has product lines in each of the main categories, owns their own vineyards, and therefore can exercise their grape production they in source, relationships they’ve build with their distribution channels such as wholesalers/retailers (Southern Wine and Spirits, Costco), and create advantages on those ends. Also, Mondavi can exercise their international connections that are superior to small independent producers and merge into the on and off premise markets more swiftly. By having different product lines, it allows to reach more demographics/taste, and leverage risk of putting “eggs all in one basket” in case taste, cost, or the market changes. By having more capital, events and advertising can be reached with better ease than a smaller independent winery. With more capital, R&G, innovations, and technology for wine production, management, and employees can be obtained.
3. Larger firms entering premium wine market, strategies make sense, and Mondavi’s position in comparison.
Mondavi’s competing firms such as E&J Gallo, Diageo, Foster’s and Allied Domecq made great moves entering the premium market. By acquiring other wineries, teaming up with once competitors, and forming joint ventures, these large firms are entering the largest demographic of table wine and premium wine. These firms once concentrated on high-end wines or low-end jug wines, now were aggressively seeking position in the premium wine market. They too were attempting to advertise by winning wine competitions, having events, joint ventures, and grape growing, and technology. Mondavi chose to work with local partners during expansion versus how Kendall Jackson was to buy land and operate without an environmental/neighborhood friendly environment. Mondavi wanted to maintain it’s prestige in quality and image rather than aggressively moving into markets. There is a lot of money to be made in the premium wine sector, so that’s why firms wanted to enter that market, because there is a lot of money to be made if they get their name, shelf space, and consumer buzz out there! Their strategies include primarily acquisitions, advertising, and organization.
4. International Joint venture of Mondavi, and its approach vs. rivals
Mondavi wanted to produce fine wines and venture into other regions of the world besides just North America. They believed highly that quality of the wine will reflect the image. Mondavi formed a relationship with Opus One, and entered the luxury segment. Mondavi wasn’t against acquisitions or joint ventures, but they preferred to grow by partnerships and maintain relationships rather than aggressive acquisitions. The could relate to their “soft” attitude by how they wanted to work “with” the people in other regions rather than go in and start bullying their way around, and do it in an environmentally sound way with not only the land, but the people. They formed joint ventures in Italy and Chili with brands such as Sena, Caliterra for the popular premiums, and the crushing and fermenting took place in Chili. Through investments and partnerships rather than aggressive acquisitions, Mondavi decided to make this their strategy for growth. Through partnerships, they will succeed and be able to react and leverage their positions globally with more ease rather than having to be accountable completely for risk in regards to the changing markets in different areas, and managing relationships together rather than alone. They can combine efforts and expertise in the ever-changing market of wine making rather than invest more time, which means money in learning the region rules and obstacles for production, and knowing the demographic.
5.
I prefer the partnership approach versus the costly acquisition approach. I believe Mondavi must remain focused on having consumer feedback, technology, and being innovative. Their larger competitors may move into their market, but Mondavi must remain pro active with their sales force, and listen to their distribution channels and partners and what the have to say. Mondavi was a pioneer by combining events with wine and spreading the word of their products along with education. The education and time involved with that may be costly, but more costly if they don’t remain in touch with the consumer and retailers by educating them. Their organic growth seems to be working, and I suggest staying on a path with a similar strategy. It differentiates itself from its competitors, and also makes them “look nicer”, and adds an immeasurable quality to the organization that is a “friendly” and thoughtful firm. The in sourcing of grapes and maintaining their land, wineries, and relationships will be crucial for success. If they want to grow at a rapid rate, I suggest they analyze what E&J Gallow did and invest in Lime quarries, glass, and trucks and utilize vertical integration to grow. That, or form better relationships with firms that perform these actions well, and combine their talents for cost, production, distribution, and material advantage.
Take aways:
Gain expertise of locals, don’t have to establish large capital to start up globally, instead they’re partnered up! Joint ventures/relationships, along with quality/image facilitate growth and progress. Establishing great land, early entry, good product lines with great price points allows for success.
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