Global Dynamics of the Wine Industry, Stanford Graduate School of Business, Winter Quarter 2017

Images from my trip to the Robert Mondavi winery on January 15, 2017. The vines had just been pruned and the vineyard was bathed in fog. It was a beautiful vista.
After reading the Mondavi case for class and visiting the winery I was curious what happened after the case which ended soon after the IPO. Yesterday in class we reflected on some of the challenges inherent in family businesses. As the case we read demonstrates, the history of the dispute between Robert and Peter Mondavi had a powerful impact on the wine industry in Napa. It seems that the family disputes continued after the case ended in 1993. Although Robert had turned over daily operations to his two sons Michael and Tim, he was still deeply involved. By 2003 he had become highly critical of their decision to focus on the cheaper, high volume Woodbridge brand  to the neglect of the winery's premium label wines. Mondavi commented that his sons, “were interested in making money, and they forgot to promote Robert Mondavi Napa Valley wines. We have to protect our tradition.” The dispute prompted them to bring in professional managers to run day-to-day operations but the family was soon arguing with them over the strategic direction of the winery. The stock price plummeted from a high of $56 in 1997 to under $20 during 2003 after Michael, who was chairman at the time, decided to rebrand some of the company's lower priced wines as Robert Mondavi Private selection, a move which undercut the winery's other higher priced brands. This move led to the ouster of Michael. The board proposed a reorganization that decreased family control of the winery and sought to sell the premium wine part of the business to focus on the higher volume bargain priced wine labels in its portfolio.  Analysts were not pleased with this proposal and it ultimately led to a $1B takeover bid by Constellation, which was consummated in 2004. Thus, a pioneering wine making family in the Napa wine industry lost control of its winery. The lesson I learned from this story is that leadership transitions are very difficult in family companies, especially when a charismatic founder is loath to completely step away from the business he or she has built. Blood is not always thicker than water or wine and family fights over family businesses are particularly nasty.
Source: Galisky A, Lopez RH The Prize? The Price?
Constellation Brands’ Proposed Merger with the Robert Mondavi Company
http://www.caseweb.org/journal_sub/TheCASEJournalVolume5Issue2Case8.pdf