Robert Mondavi Corporation Business Information, Profile, and History

Company Perspectives:

Our primary goal for the Robert Mondavi Family of Wines has always been to produce outstanding wines--those ranked among the great wines of the world. Recognized internationally, Robert Mondavi is known for promoting innovative research and experimentation and supporting diverse cultural programs to educate the public about the many enjoyable aspects of wine.

History of Robert Mondavi Corporation

Robert Mondavi Corporation, with its family of Robert Mondavi wineries, is one of the United States' premier winemakers and has done much to bring the Napa Valley region to the forefront of international winemaking. Dedicated to producing premium wines, the Mondavi wine family includes the brands Robert Mondavi, Woodbridge by Robert Mondavi, Vichon, Byron, Robert Mondavi Coastal, La Famiglia di Robert Mondavi, and a joint venture with Australian winery Rosemount Estates. Since 1979, Mondavi has also produced, in joint partnership with the Baron Phillippe de Rothschild wine family, the ultrapremium Opus One label. The company sells about 10 million cases of wine per year, with Woodbridge as its top-selling label. In 2001, the company earned $481 million in revenues and distributed wine in more than 80 countries. Founded by Robert Mondavi in 1966, the Robert Mondavi Corporation went public in 1993, although the Mondavi family controls 92 percent of voting stock. Robert Mondavi's oldest son, Michael, is president and CEO, and his youngest son, Tim, is managing director and winemaker.

Mondavi Family Beginnings

The Mondavi family's involvement in winemaking began in the early 1920s. Cesare Mondavi emigrated to the United States from Marches, Italy, in 1906, finding work in the iron mines of Minnesota. Two years later, he returned to Italy to marry. Returning to Minnesota with his bride, he opened a saloon and boarding house. Robert Mondavi was born in 1913 in the town of Virginia, Minnesota.

Prohibition brought the Mondavi family to California. A provision of the Prohibition laws allowed families to make up to 200 gallons of fruit juice per year. A member of the local Italian Club, Cesare Mondavi was sent to California to buy grapes, which could be processed into wine. Soon after, Mondavi settled in Lodi, California, with his family and set up a business shipping grapes from the Napa Valley and Central Valley regions. At age 13, Robert Mondavi began working for his father, including acting as the family's chauffeur, while attending high school. After high school, Robert Mondavi went on to study at Stanford University.

When the Prohibition laws were repealed, Cesare Mondavi moved from shipping grapes to pressing wine. In 1936, he bought a small winery in Napa Valley, the Sunny St. Helena, which produced bulk wines. Robert Mondavi, then in his last year of college, began taking chemistry courses in order to prepare to join his father's new business. After graduating, Robert Mondavi moved to St. Helena, and began learning to make bulk wines. His younger brother, Peter, then a student at the University of California at Berkeley, also turned his studies toward the making of wines, including cold fermentation techniques. The Mondavis incorporated cold fermentation into the making of their wine, producing a lighter, fruitier taste than the predominately sweet California wines available at the time. Before long, St. Helena's production reached more than a million gallons per year.

Mondavi Winery Gets Its Start

At the time, the bulk-wine market was dominated by a few large wineries, such as the Gallo Brothers, and bulk-wine making was made still less lucrative by a government imposed price-freeze that held the price of bulk wine at 27 cents per gallon. Robert Mondavi's interest began to lean toward producing the more sophisticated dry wines. In 1943, Robert learned that the Charles Krug Winery, one of the region's oldest, was up for sale. Robert planned to produce higher quality dry wines under the Krug label, while financing the purchase with the continued sale of St. Helena bulk wine. After Cesare Mondavi's initial reluctance, the family bought the Krug winery and its 160 acres of vines for $87,000. Robert and Peter Mondavi were each given 12 percent of the new business. Peter, then still in the Army, would join the business as its winemaker. Robert Mondavi became general manager, handling the development and marketing of their wines. The new company was called C. Mondavi & Sons.

The old Krug vines were torn out and replaced by Cabernet Sauvignon, Sauvignon Blanc, Riesling, and Chardonnay vines. The winery itself--which, in its later years, had served as a bulk wine factory--needed extensive renovations. Sales of the Mondavi's bulk wine, selling in half-gallon and gallon jugs, financed the new Krug operation. The bulk wine was renamed CK Mondavi, marking the first appearance of the Mondavi name on a label. The premium wine to be produced would be sold under the Krug label.

By then, Robert Mondavi had spent many years consulting wine-growing experts and experimenting with wine production techniques. In an effort to improve the quality of the Krug wines, he bought a number of used brandy barrels. By aging the wine in smaller barrels, in contrast to the giant aging vats common in the American wine industry at the time, Mondavi hoped to produce a finer wine. It was not long before the Krug wines began to win its first prizes at state fair competitions. Still more important to Krug's growth were Robert Mondavi's tireless promotional efforts. Mondavi was convinced that the Napa Valley region could produce a grape--and wines--equal to those of the renowned French and Italian wine-growing regions. He also insisted on blind tastings, which allowed his wines to stand on their own merits, uncompromised by the stigma still attached to Californian wine. Soon, the Napa Valley name--and Krug's--appeared on more and more wine lists and store shelves across the country.

Tensions Split the Family: Robert Mondavi Begins His Own Business

Unfortunately, tensions arose between Robert and Peter Mondavi. Peter Mondavi resented Robert's interference in the winemaking, and Robert's salesmanship also placed continuous pressure on the winery's production capacity. By 1946, the brothers faced a crisis: Robert had placed large orders for grapes from the local growers, but a bumper crop that year cut the price of grapes in half and the Mondavis faced a loss of nearly half a million dollars. Nevertheless, the family made good on its contracts with the growers, and the Krug winery went into debt. Robert Mondavi continued to promote the Krug wines, and continued to push his brother to expand the winery's production.

In order to meet the demand that Robert was creating, however, Peter was forced to release their wines before they were properly aged. Quality declined, followed shortly thereafter by sales. Robert appealed to Cesare Mondavi, who still controlled the majority of the company, and was placed in full control of the winery's production. When Cesare Mondavi died, however, Rosa Mondavi, inheriting the majority of the company, made herself president, and Rosa favored Peter's vision of running the Mondavi wineries. Meanwhile, both Peter and Robert were trying to establish their sons in the family business. Nonetheless, largely due to Robert Mondavi's abilities as a salesman, the Mondavis were showing pretax profits of $200,000 by 1965.

The tensions between Peter and Robert reached a head in that year and ended in a fistfight. Robert was dismissed as general manager and given a six-month leave from the company. At the same time, Robert's eldest son, Michael, then 23, who had grown up at the Krug winery and recently graduated from the University of Santa Clara, was barred from working at the company for ten years. It was then that Robert Mondavi decided to open his own winery.

Together with two partners, Mondavi raised $200,000 and purchased property in Oakville, California. Financing for construction was arranged through an insurance firm, while a glass company funded a bottling line. In September 1966, the Robert Mondavi Winery was ready for its first crush. It was the first new winery to appear in Napa Valley since Prohibition. From the outset, the Mondavi Winery was dedicated to producing premium wines. It was Robert Mondavi's ambition to produce wines that could compete with Europe's best.

The Krug side of the Mondavi family responded to the new winery by dismissing Robert Mondavi from the company altogether. This set the stage for a legal battle that would not be resolved until 1979. Robert Mondavi still controlled 24 percent of C. Mondavi & Sons, and remained on its board until 1973. The feud between the brothers extended to include the pronunciation of the family name. Peter called himself "mon-day-vi," the Americanized pronunciation first adopted by Cesare Mondavi. Robert Mondavi began calling himself "mon-dah-vi," the traditional Italian pronunciation.

Robert Mondavi Winery Begins

The new winery featured many of the innovations Robert Mondavi had introduced to California winemaking, including cold fermentation. On a trip through Europe in 1962, visiting the great chateaux and tasting their wines, Mondavi discovered what he considered a key element to the quality of French wines: they were aged in small barrels. Over the next several years, Mondavi experimented with a variety of wood types and barrel sizes, finally choosing small French oak barrels for his wines. At the new Mondavi winery, all wines were to be aged in French oak barrels.

Joined by Michael Mondavi and, later, by Tim Mondavi, the Robert Mondavi Winery produced its first wine for sale--a $3 Chenin Blanc--in 1967. By the following year, sales of this wine, previously known as White Pinot, increased fivefold. In that year, Mondavi also introduced a new wine, Fumé Blanc. This wine was, in fact, a Sauvignon Blanc, not a highly regarded wine variety. Mondavi changed the fermentation, blended the wine with Semillion, and aged it in French oak barrels, producing a drier wine. In order to distinguish his new wine, Mondavi coined the new name. The Americanized structure of the name--with the adjective first--connected it to California, while achieving a link to the renown of the French Blanc Fumé wines. Fumé Blanc was an immediate success, and did much to put Mondavi on the winemaking map.

The success of Robert Mondavi's wines was not enough, however. By 1969, Mondavi had run out of capital he would need to increase production beyond 25,000 cases per year, and he was forced to look for a fresh source of financial backing. Mondavi advertised for investors in the Wall Street Journal and received more than 250 responses. Both Suntory of Japan and Nestlé approached Mondavi with partnership offers, but Mondavi turned them down. Then Mondavi's two partners sold their share of the winery and vineyards to the Rainier Companies, a Seattle-based brewer, 48 percent of which was owned by the Molson Companies of Canada. The Mondavi Winery now had the capital to expand: over the next decade, Rainier poured more than $6 million into expanding the winery. At the same time, Rainier had also gained 100 percent of the vineyards and 75 percent of the winery, with Robert Mondavi retaining only 25 percent of the winery. Importantly, however, he remained its president, still in control of its winemaking operations.

The feud over the C. Mondavi & Sons winery--which enjoyed considerable success through the 1960s and 1970s--gave way to a series of lawsuits and trials in the mid-1970s. Robert Mondavi emerged victorious in 1976, and by the following year, the courts ordered C. Mondavi & Sons to be sold in order to pay Robert Mondavi fair market value for his 24 percent interest. Eventually, the brothers reached an out-of-court settlement. Robert Mondavi received more the $5 million, which included five million gallons of wine and 430 acres of vineyards. The settlement enabled Mondavi to take back financial control of his winery. After Rainier sold its brewing operations to G. Heileman Brewing Co. in 1977, Molson agreed to sell its interest in Rainier to Robert Mondavi, at $9.40 for each of its one million shares. At the same time, Rainier, now little more than a holding company for the winery, began liquidation procedures, including buying back its stock from its shareholders. In the end, Robert Mondavi and his family regained full control of the Robert Mondavi Winery.

Mondavi Wines Gain Notoriety

Despite several years of losses and nearly $10 million in debt by 1978, Mondavi's wine enjoyed considerable success during the 1970s. In 1972 the Los Angeles Times named the Mondavis' 1969 Cabernet Sauvignon as its top wine. Production expanded to include red, rosé, and white wines by 1974, and by 1975, Mondavi wines were distributed nationwide. Two years later, Mondavi began exporting. In 1976, Napa Valley wines gained international renown when a 1973 Cabernet Sauvignon from the Stag's Leap winery won in a blind tasting of Californian and French wines that became known as the Paris Tasting.

Napa Valley's reputation was further enhanced when Baron Phillippe de Rothschild, of the famed Chateau Mouton Rothschild, announced plans to collaborate with Robert Mondavi on a new ultrapremium wine, to be called Opus One and to be produced in the United States. Importantly, the U.S. market for premium wines was beginning an explosion: by the end of the 1970s, U.S. wine consumption had grown to more than 450 million gallons per year. Robert Mondavi, with its commitment to quality, became one of the most powerful brand names in the U.S. wine industry. This, despite the fact that the company spent almost no money on advertising, relying instead on the salesmanship--and showmanship--of Robert Mondavi himself.

Through the 1980s, Mondavi continued to expand its product line. Its purchase of the Woodbridge Winery in 1979 allowed it to expand into California varietal wines, selling premium wines in the important $3-$7 per bottle market. In 1980, the first Mondavi vintage-dated wines were introduced, selling in the super premium, $14-per-bottle-and-over category. Mondavi purchased the Vichon Winery, in Napa Valley, in 1985, giving it greater vineyards and research capacity. Five years later, the company bought the Byron Vineyard & Winery in Santa Maria Valley in Santa Barbara County. Exports continued to grow, from 1 percent of the company's sales in 1980 to 6 percent in the 1990s, reaching more than 75 countries. By 1988, its revenues had reached $95 million, with earnings of $7.2 million.

New Generation of Mondavis Take Over

In 1990, at age 76, Robert Mondavi turned over active management of the company to sons Michael and Tim. Michael was named managing director and chief executive officer; Tim became managing director, and continued his role as head winemaker. Robert Mondavi remained chairman of the company, and continued his role as promoter of California wines. By the following year, production had reached 500,000 cases per year. However, despite growing revenues--reaching $145 million in 1992--income had dropped, struggling to reach $7.1 million that year. By then, the company was carrying more than $126 million in debt.

A greater problem threatened the Mondavis, and the whole of Napa Valley, in the late 1980s and early 1990s. Grape phylloxera, a species of lice that attacks the roots and leaves of grape vines, had attacked much of the Napa and Sonoma valleys. With no cure for the disease, growers were forced to tear out their old vines and replace them with phylloxera-resistant varieties. Grape production throughout the Napa and Sonoma valleys, which accounted for some 80 percent of grapes used in the making of premium wines, was expected to drop by more than a third over the coming years. The majority of the Mondavis' grapes came from outside growers, however, so they were largely shielded from rising grape prices because most of their grape purchases were done through long-term contracts. Nevertheless, some 15 percent of their grapes were grown in their own vineyards, and the Mondavis were faced with spending $20 million or more to replace their damaged vines with new stock, which would take five years or more before they were ready to produce commercial quantities of grapes--which would require still more years of aging before they could be released as Mondavi wine. Meanwhile, growing competition from such countries as Chile and Australia, as well as increasing exports from Europe, forced U.S. wineries to keep their prices low despite rising grape costs. More and more wineries were being bought by large, cash-rich corporations.

Intent on maintaining control of their company, the Mondavis went public to raise funds. Despite misgivings from some industry analysts, the initial public offering of Mondavi stock, made in 1993, raised $32.3 million. A secondary offering two years later raised an additional $35.5 million. Yet the Mondavis still retained control of 92 percent of the voting stock. Production rose to 3.9 million cases in 1993 to 4.5 million in 1995. Revenues had grown to nearly $200 million in 1995, while net income more than doubled from $8.6 million in 1993 to $17.8 million in 1995. The company also discovered a hidden benefit of the phylloxera plague: the new disease-resistant vines could be planted closer together, allowing up to four times more vines per acre. In keeping with the Mondavi tradition, the company intended to grow fewer grapes per vine, producing a more intense flavor; nonetheless, it expected a 50-70 percent increase in yields.

Winery Expands With New Endeavors

In 1995 the company planned to spend $2.5 million on its first print advertising campaign, while Robert Mondavi continued to be the company's chief spokesman, salesman, and ambassador. By 1999, the advertising had expanded to radio and television, with a focus on the Woodbridge line in an attempt to increase everyday wine consumption in the United States "We want them to think of wine as a wonderful, social, everyday beverage to enjoy," said Michael Mondavi.

Big additions came to the winery during the last half of the 1990s, not only in terms of wine, but also in architecture, visitor experiences, and a return to age-old winemaking techniques. In 1998, the company embarked on a new kind of endeavor when it partnered with the Walt Disney Company to create a $10 million wine-country attraction at Disney's new California Adventure theme park. The experience offered a demonstration vineyard, tasting areas, and a film on wine.

In 2001, the interest in architecture expanded to yet another creation: Copia, the American Center for Food, Wine & the Arts, a museum dedicated to the culture of food and wine. Thirteen years in the making, it cost $55 million and covered 80,000 square feet. Robert Mondavi conceived it as a way to raise awareness of his region's wine profiles. The center boasted a cooking school, museum, restaurants, movies, concerts and picnics, a rare cookbook collection, wine tastings, kitchen showrooms and other attractions. Partners included UC-Davis, Cornell University, Wine Spectator magazine, and the area's large wineries. Julia Child and Martha Stewart have honorary board seats. Food masters hailed it as finally celebrating food and wine as a "serious subject." The Center anticipated 300,000 guests a year.

New changes to the winery itself were in order as well. By 2001, the winery was receiving 350,000 visitors a year; with a newly renovated visitor center the winery could now comfortably handle them all. The project cost $28 million and took two years to complete. It included a new red-wine fermentation cellar housing 56 French oak tanks, a departure from the stainless steel casks that caused a stir in the industry 40 years earlier. Two new public tasting rooms offered visitors a choice of eight different tours and samplings, and a reservations system ensured the experience ran smoothly.

On the wine front, global expansion and new offerings continued. In January 2001, the company introduced a new Chilean wine called Arboleda. Later that year, a new partnership with Southcorp's Rosemount Estates marked the company's foray into Australian wine. The family-owned winery, based in the Hunter Valley region of Australia, combined forces with Mondavi to create two new wine lines, one from California, one from Australia. Mondavi agreed to sell the Australian wines worldwide while Rosemount sold the Mondavi brands in Australia. CEO Michael Mondavi said: "This allows us to add a world-class Shiraz to our luxury wine portfolio while participating in the growth of the Australian super premium wine segment."

A Return to Old Traditions for the Mondavis

The new French oak tanks signified a return to old-fashioned, wood-barrel wine-making, coined the "To Kalon" project. The family concluded the best way to make wine was with as little technology as possible. Pumps were replaced by traditional gravity systems, grapes were grown too close for tractors to harvest (requiring human pickers), and bladder presses were replaced with basket presses. The temperature-controlled, steel fermenting tanks were reserved for the white wines. The new techniques also meant visitors could have more access to the winemaking process, with tours leading them through the oak-barrel-full cellars. The company also continued to experiment with grape-growing techniques, keeping true to its natural-farming practices.

However, not every endeavor was successful those years. The company canceled an $8 million project to create a winery in France, the first foreign-owned vin de terroir (a special designation for French wine), when the local French protested the move, fearing the loss of their forest and the creation of an industrial-sized winery. Some Napa Valley residents displayed much criticism for Copia, citing lost taxes and a decline in city resources. In 2001, the corporation cut its involvement in the Disney adventure, turning over day-to-day operations to them. The theme park failed to meet predicted attendance records, and Mondavi ended its 10-year agreement, taking a $12-$13 million loss.

Still the company continued to grow and give back to the community Robert Mondavi grew up in. The winery gave a $35 million gift to UC-Davis in September 2001, earmarked for creation of the Robert Mondavi Institute for Wine and Food Sciences. Although Robert Mondavi released control of the company to sons Michael and Tim--and new CEO Gregory Evans--in May 2001, he continued to serve as "ambassador-at-large." The senior Mondavi's autobiography, Harvests of Joy, was published in 1998, and in late 2001, Forbes Magazine named the Robert Mondavi company one of the "200 Best Small Companies in America." With the new Copia center, the advertising campaign, the return to traditional techniques, and a renovated visitor center, the winery looked forward to continuing its efforts in public education and appreciation of wine.

Principal Subsidiaries:Robert Mondavi Winery; Robert Mondavi Coastal; Seña; Caliterra; Woodbridge by Robert Mondavi; Vichon Winery; Bryon Vineyard & Winery; Opus One Winery (50%); Luce.

Principal Competitors:Allied Domecq; Bacardi USA; Beringer Blass; Brown-Forman; Cervecerias Unidas; Chalone Wine; Constellation Brands; Diageo; Zignago; Kendall-Jackson; Pernod Ricard; Ravenswood Winery; Sebastiani Vineyards; Terlato Wine; Trinchero Family Estates; Stimson Lane Vinyards and Estates.

Chronology

• Key Dates:
• 1966: Robert Mondavi Winery opens in Oakville, California.
• 1969: Summer Music Festival concert series begins. Tasting rooms open.
• 1972: Cabernet Sauvignon is named top California wine by Los Angeles Times.
• 1975: Robert Mondavi wines distributed nationally.
• 1978: Company acquires Woodbridge Winery in Lodi, California.
• 1981: Robert G. Mondavi and other vintners launch Napa Valley Wine Auction.
• 1985: Company acquires Vichon Winery in Oakville.
• 1989: Robert Mondavi Wine & Food Center established in Costa Mesa, California.
• 1992: Company formally adopts its natural farming program.
• 1993: Robert Mondavi Winery goes public.
• 1998: Seña, a Chilean joint-venture wine, is introduced. Alliance with Disney to form wine experience at Disney's new theme park is initiated.
• 2001: Joint venture with Australian winery Rosemount Estates is finalized. Oakville winery renovation and facilities completed.