Essay About Wine Industry And Brand Equity

Robert Mondavi and the Wine Industry
1. “Robert Mondavi and the Wine Industry” Jorge Mtz Durazo 2. BackgroundMondavi is a winery located in Napa Valley founded by Robert Mondavi. It focuses in premiumwine that sells primarily in the United States. Mondavi operates six wineries in California. RobertMondavi spends a lot of time educating the american publicm about fine wine. In 2001, RobertMondavi stepped down as a chairmanof the board of the company. The family still held 50% ofthe company’s share and an overwhelming majority of the voting rights.As an Industry the global wine industry ranges from the $130 billion to $180 billion in retail sales.Industry participants divide the table wine market into five principal segments: jug or commodity(less than $3 per bottle), popular premium ($3 – $7 per bottle), super premium ($7 -$14), ultra($14 – $25) and luxury (more than $25). There were over 1 million wine producers world wide, andno firm accounts for more of the 1% of global retail sales. The past decade has seen some industryconsolidation. 3. Five Forces Analysis Threat of Buyer High High dependency on some distributors and lack of geographical diversification pose a serious threat . The premium wine industry is highly Threat of New pulverize world wide, Threat of Substitute Entrants thereforecompetitors Products High arefocused on Medium regional markets.Brand position and equity is paramount in this The increasing competition from rival firms,industry. Yet big companies can enter this large volume producers and global alcoholicmarket via acquisitions, pulverizing the industry beverage companies make produces toand altering competitive landscape. compete among them Threat of Supplier Medium The sourcing of quality critical inputs is essential to guarantee the quality of the end product. 4. Old World• Production quantitive oriented. VS. New World • Production quality oriented• Small family owned vynards • Large publicy traded firms• Consumers produce a lot of their • Consumer purchase nearly all of wine for self-consumption their wine• Artisanal based wine making • Technology and automation based process. wine making process.• Highly regulated production of critical inputs. • Acces to multiple avenues for• Region oriented wine soucing critical inputs. classification. • Variety of grapes wine classification.• Invest little in brand equity. • Invest heavily in brand equity.• Product oriented. • Product line oriented. 5. Indirect Direct 6. Resources Capabilities Tangible♣ 9700 acrees of Vynards in California ♣Reputed brand in the super♣ 1600 acrees of Vynards in Chile, Italy and CA in premium, ultra and luxuryJV’s wine segments♣ 6 operational Vynards in California♣ Highest Quality Fermentation and Agingprocesses. ♣Innovation oriented♣ 1,300 oak Barrel capacity ♣Leverages expertise via JV’s Intangible ♣ Top of the line production♣ Production based on technology andautomation procceses.♣ Mondavi’s Brand Equity♣ 35 year Tradition in the industry♣ “Growing Wine” Culture♣ Highly connected worldwide 7. How do they gain competitve advantage?The competitive landscape forces companies to differentiate in order to succeed. Inorder to do this, Mondavi’s will first have to pick the right segments and products tocompete with, preferabily those that better embody its long tradition in wine making,brand equity and culture of innovation. Such strategywill allow to provide the rightsupport to maximize core features of product line in target segments.. Porter Generic Strategies 35 year wine making tradition + brand equity + Growing wine culture + Production innovation C B B 8. Popular premium Super premium Ultra Luxury($3 – $7 per bottle) ($7 -$14) ($14 – $25) (more than $25) 20 percent 80 percent From the 16 brands of wine in Robert Account for the 88.5% in 2000, 89.2% in 2001 and 89.8% YTD inMondavi’s portfolio Woodbridge, Robert 2002 of case volume. In terms of Revenues, these brands Mondavil Coastal contribute 74.3% in 2000, 73.8% in 2001 and 76.3% YTD in 2002 From the 16 brands of wine in RobertMondavi’s portfolio, 25% focused on the While the remaining 75% of the brands focused on the Ultra Popular and Super premium markets and Luxury segments 9. The remaining 13 brands provide only marginal value in economic terms. Yet.. Enhanced Nothing provided more prestige for Mondavi that the Reputation Opus One pertnership Innovation …Mondavi began working with NASA in 1993 to apply remote sensing and digital mapping technologies… …The joint venture Economies ship the bulk wine to California for aging and bottling and sold of Scope approx. 25% of the porduct in the US. …became the first Expertise California vitntner to partner with an elite Sharing French winemaker and to produce and ultra premium wine in America. Experimen …The company introduced a capsule-free, flange- -tation top bottle that many soon adopted… 10. In summary… Critical Issues Recomendation ImplementationDependency on… Diversify its… Explore…►US wine martket ►Target Markets and segments. ►Spain, Belgium, UK, Japan and China show positive growth in consumption.►Woodbridge and Coastal brands for ►Cash streams by supporting portfolio cash flows brands that perform accordingly. ►Shifts in consumer prefrences as they substitute from Jug to Popular andIncreasing competition… Clear Differentiation… Super to Ultra.►In all segments and from all kinds of ►Increase brand clarity by communi- Brand equity… competitors. cating value proposition of each brand. ►Identified niche markets to promoteResource Allocation… Capital efficiency… customize brands/products.►High concentration of brands in ultra ►Evaluate financial performance,cagr Concentrate… and luxury segment. and roe of each brand in the portfolio. ►Similar brands to improve Cost of►Opaque benefits from synergies and ►Identify JV’s that show good prospects capital. JV’s. of growth for buyout/investment. ►Expertise from other ventures toFuture growth… Future growth… enhanced knwoledge base.►Decreasing consumption from target ►Gain market share in those regions Future growth… markets and segments. that show increasing consumption. ►Position brands that show better►Underperforming brands in portfolio. ►Asses brand performance in niche profit margin in existing and emerging market. markets.