Mondavi Case

1273 Words Nov 24th, 2010 6 Pages
Case 3 Robert Mondavi and the Wine Industry

1) Evaluate the structure of the global wine industry? How and why is that structure changing? What threats do these changes present for Robert Mondavi?

The structure of the wine industry is quite different around the world. The barrier to entry is relatively higher in the New World than in the Old World. Referring to the market data on the level of concentration in 1998, people can see a few players dominate the markets in Australia and the U.S. while the level of concentration is quite low in Europe. Therefore, the rivalry in Old World is intense there.

The Old Market consumers are more sophisticated and price sensitive than those in the New World. The main sales channels
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Its bread and butter products face severe competitions. Woodbridge, for example, contributes to 57% of Mondavi’s total revenue but the competitors such as Gallod or Beringers’ are trying to penetrate into the market with aggressive prices and new brandings. Also, the competitors are spending money for marketing and promotion activities in sophisticated ways while Mondavi revamped its marketing messages recently.

2) How attractive are the economics of owning a vineyard of 100 acre in Napa Valley? Would you invest in such a venture? And why or why not?

It depends on what types of products one plans to produce using the land. Since the winery business requires high investment in real property, it is important for one to make an investment decision on what market segment it wants to play in. Napa Valley is widely known as a good place for staring a vineyard and the land price is relatively higher than anywhere else in the US. The initial investment would affect the cost structure, which eventually drives up the price of wine. For example, budget wine consumption is very price sensitive and some competitors are trying to maintain their competitiveness with a lower price. If a company decides to produce wines from the winery in Napa Valley, soon, it would be forced to put a premium on the wine price to maintain a level of margin and ,eventually, the company would lose its competitive edge if it is a price player.

However, for a

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