ENTHUSIAST'S CORNER June 2005
The Incredible Achievement of the Mondavis
Like many of you, I am passionate about wine. I enjoy its flavor, its mystique, its history. Wine is something I cherish. But wine is also a business. And in business, it's best to see clearly, without the blinders of passion or nostalgia.
In December, shareholders of the Robert Mondavi Corporation approved a $1.3 billion cash buyout by Constellation Brands. Prior to the final sale, both Michael and Tim Mondavi resigned their respective positions with the company. Robert Sr. will remain in an ambassadorial capacity.
Much has been said, before and since, about how sad it is that the Mondavi family is no longer in control of the Robert Mondavi winery, which they had founded in 1966. But I prefer to see this glass as half-full rather than half-empty. The Mondavi family—patriarch Robert Senior along with sons, R. Michael and Tim, and daughter Marcia—have been at the center of one the most successful stories in the history of the wine business.
Just look at the numbers. In 1992, the Mondavi family made a bold business decision to take their highly esteemed winery public. At the time, the stock was selling at $13. By the time of the sale to Constellation in 2004, the stock was selling at $56. From 1992 until 2004, company revenues grew at an annualized rate of 9.5 percent; the valuation of the company increased at an annualized rate of 27 percent, which is excellent. And once the sale to Constellation was consummated, members of the Mondavi family earned approximately $364 million.
So, yes, the Mondavi story is one of legendary accomplishment, global reach and financial success. But that image can be distorted, as Jonathan Nossiter, the director of the documentary film, Mondovino, recently proved. In the movie, he takes pains to depict the Mondavi family as a huge corporate behemoth trying to homogenize wine throughout the world. (Ironic, isn't it, that they themselves were acquired before this movie was even screened in the U.S.?) Not exactly a disinterested observer, Nossiter can't resist cheering the Mondavi's inability to acquire land in Languedoc to create a French wine project. His camera lingers lovingly on locals exulting that they managed to keep these "American outsiders" out of France.
Of course, this movie was filmed and edited just as the wine industry in France was undergoing the largest crisis in its history since the phylloxera epidemic. Wines were being poured into the streets, farmers were marching, if not rioting, in protest, and venerable wineries were going bankrupt. The causes were complex, but here's a major one: While wine, like so many other facets of the business world, was going global, France was remaining stubbornly insular. France has refused to market its wines with a contemporary approach. As a result, New World wines from Australia, Chile and the U.S. steal market share from sales formally held by the wines of France.
Just imagine if the dynamic Mondavis had been allowed to flourish in Languedoc and demonstrate some real-world marketing prowess and New World winemaking skills to those who cling to arcane techniques—insane overregulation, opaque pricing, incomprehensible labeling, indifferent overseas marketing. Would France be still facing the serious crisis it now is seeking to change if they had the modern techniques in their backyard to model against?
As cold as this may be to the Mondovino idealists, wine is a business. Businesses are measured by profits. The acquisition of the Robert Mondavi winery was a huge win-win for both the Mondavi family and Constellation Brands, who will be a superb shepherd of this famous brand and the quality of the wines in the bottles. Their recent history has proved it: Not only have the Constellation executives focused on quality with other acquisitions such as Ravenswood and Franciscan, they have allowed the winemakers the freedom to continue to pursue quality; the brands' reputations have not suffered one bit since the acquisitions.
The Mondavi family itself hardly walked away from the deal with empty pockets. And they are not standing still. Michael Mondavi has already started his own luxury wine importing company with his wife, Isabel, and their son, Robert. First on board for the company, which is called Folio: the entire Frescobaldi portfolio.
We can expect the legacy of the Robert Mondavi winery to flourish under Constellation's stewardship. The name "Mondavi" will continue to be associated with quality and innovation. More important: I think we will all be amazed at what members of the Mondavi family will achieve in the years to come.