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Mondavi at the Crossroads

Napa's famous winery struggles to regain luster and to grow amid turbulent times

James Laube
Posted: October 20, 2003

Robert Mondavi at a harvest celebration in the early 1970s.
 
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Robert Mondavi has overcome many obstacles, but his namesake company may be facing its toughest challenge ever -- a battle for survival. It is torn between the desire to be recognized for producing classic wines from Napa Valley and, due to mounting financial pressures, the need to grow in volume and revenue.

In June, Robert Mondavi turned 90 and the Robert Mondavi Corp. marked its 10th year as a publicly traded company. Amid a spirited birthday tribute to the visionary vintner, one cynic wondered out loud which of the two was healthier.

On that day, the nod may have gone to Mr. Mondavi. Slowed only by age and aided by a walking cane, he is still very much the feisty, competitive, free-speaking and self-critical Robert Mondavi who engenders wide respect and admiration. He may be hard of hearing, but he can clearly see his company is stagnating. By most accounts, he is Robert Mondavi Corp.'s toughest and most vocal critic.

Earlier this year, he unleashed some especially harsh words about his sons' management decisions.

"We made plenty of mistakes," Mondavi admitted this summer. In an interview late last year with the St. Helena Star, a Napa Valley weekly, he was even more candid. He said his sons, Michael and Tim, "were more interested in making money, and they forgot to promote Robert Mondavi Napa Valley wine. We lost the image. And now we're trying to bring back that by telling the truth more clearly."

Since the 1970s, growth has been a constant at RMC. The company expanded beyond its Napa base into other areas of California through winery and vineyard acquisitions, and internationally through a series of investments, mostly joint ventures, in Australia, Europe and South America. Today, RMC owns or is partner in a dozen wine companies, selling more than 9 million cases a year and making it the fifth largest wine company in the United States.

Yet in the past couple of years, that growth has slowed, and even reversed course in some cases, cutting into profits amid one of the deepest wine industry recessions in decades. While RMC struggles to increase volume and market share for its stockholders, it also must now convince wine drinkers that its Napa Valley winery hasn't lost its quality edge. The Mondavis are hoping that a recent management reorganization and expansion of the product line will rekindle the flame, rev up sales and help the brand endure as one of Napa Valley's elite companies.

Almost four decades ago, Mondavi had a dream: He wanted to make wines that would compete with the best from France. It was a lofty ambition. But with vision and hard work, he and his family achieved worldwide respect for the Mondavi winery as well as for Napa Valley and California wines in general. Ironically, the very strategies that Mondavi used to achieve his goal now threaten to undermine not only the company's success, but perhaps its very existence.

But Mondavi, the son of Italian immigrants, whose career has been marked by tremendous energy and insight, has been counted out before. The wine industry in general, and Napa Valley in particular, is watching and waiting.

Mondavi's Dire Straits

The Mondavi winery has long been a locomotive for Napa and California wine and a key barometer of Napa wine's health. If it's ailing, vintners worry: Can other wine companies be far behind?

Robert Mondavi "obviously is an icon of the industry, and [the] brand and its prosperity are essential to the survival of the wine industry," says Jess Jackson, CEO of Kendall-Jackson wine Estates, one of Mondavi's top competitors. Right now, "we're all suffering," Jackson says, and despite Mondavi's bumpy ride of late, he doesn't think the company is "at risk, anymore than the whole industry is with worldwide competition."

The family acknowledges it faces problems. For the past several years, RMC has behaved "like an adolescent going through puberty," says chairman Michael Mondavi, 60, Robert's oldest child.

Earlier this year, the company admitted that it was in trouble. Sales were down, competition had stiffened, and a confluence of negative factors -- a Perfect Storm scenario -- had struck: a wine glut, a grape glut, and the poor economy that resulted from the terrorist attacks of 9/11, which crimped business and travel spending, both key sources of wine sales.

Despite its global reach, the biggest problem for Mondavi may be closest to home. A major challenge for the Mondavis is regaining the luster of their flagship Napa Valley winery in Oakville, where the company's best wines -- the reserve Cabernet Sauvignon and reserve Chardonnay -- are made.

Robert founded the Oakville winery in 1966 after a bitter family dispute. He had been ousted from Charles Krug, the run-down winery in Napa Valley that he convinced his parents to buy in 1943 and then helped set right. But Robert had long clashed with his younger brother, Peter, over management decisions. Robert pushed for better wines, while Peter favored a more conservative path.

When Robert left Krug, he ended up owning most of the family's best Napa Valley vineyards, and he set his new winery on a course to make world-class wines. By the end of the 1970s, Mondavi was Napa's biggest name, making inroads into markets that had long been foreign to California.

Yet by the late 1990s, it appeared complacent and caught unawares by the inundation of new and better Napa Valley wines. Ironically, many of the vintners who over the past two decades grabbed the spotlight from Mondavi were those who had found success with Mondavi's encouragement -- vintners such as Bill Harlan, Dennis Groth and Warren Winiarski, to name a few.

"We definitely need to get the excitement back," Michael admits. however, that is proving to be a difficult task. Wine quality, particularly at the Oakville winery, has been inconsistent, and has lagged stylistically. Moreover, Mondavi's Napa Valley wines no longer get the market buzz the brand once thrived on.

"My sense is the wines should have had more oomph, more character," says Charles Thomas, a former Mondavi winemaker who is troubled by what he views as a decline in quality. "I would have expected more from their vineyards."

Paul Hobbs, another former RMC winemaker, believes the winery looked too hard at French styles and ignored what was happening in California. He faults Tim Mondavi, 52, the youngest of the siblings and the one charged with overseeing Mondavi winemaking. "I think Tim got trapped in a time warp with the French," says Hobbs. "He looked too much at France instead of our environment."

The flagship wine, the Mondavi Reserve Cabernet, remains a rich, elegant wine that consistently earns outstanding reviews (90 to 94 points) on the Wine Spectator 100-point scale. It had a strong decade in the 1990s, making it one of the highest rated and most expensive Cabernets from Napa, selling for $125 a bottle today with production in the 20,000 case range. The Reserve Chardonnay 2001 ($30) is fine, sleek and concentrated, though sometimes quite lean. Yet it too is in a highly competitive market, and maintaining visibility is a constant challenge.

But others in the lineup -- including the Pinot Noirs from 1998 to 2000, which were light and herbal, and the Fumé Blancs from the same time frame -- veered into an austere, high-acidity style that the Mondavis insist is their house style. Those wines received good (80 to 84) to very good (85 to 89) marks, but did not rank among the state's best. The 2001 Fumé Blancs, however, show improved quality.

Other wines, such as Merlot and Zinfandel, also ranked in the good to very good range in the 1990s, but seemed like afterthoughts. Admitting as much, the company hired Michel Rolland, the famed Bordeaux enologist, in an effort to add more richness and character to the Merlot, his specialty.

"They know the sizzle is gone from [Oakville]," says Martin Johnson, a former Mondavi senior vice president of marketing who is now with Kendall-Jackson. In today's market, Johnson says, "You're either sexy, hot and new, or you're a classic. If you're not one or the other, you're dead."

In an effort to regain focus, improve quality and build up demand, production has been sharply cut at the Oakville winery, from about 400,000 cases in the late 1990s to 275,000 cases more recently. This has occurred as sales of Napa wines have slowed considerably, not only at Mondavi but also at other wineries. Two tough vintages -- 1998 and 2000 -- and higher prices have made consumers more cautious in their buying choices.

As Mondavi's Napa Valley wines came under fire in some quarters, the winery sounded defensive, saying critics misunderstood their winemaking style, which tends, says Michael, "to be more classic."

"It's really a matter of style and preference," agrees his sister, Marcia Mondavi Borger, 56, the middle sibling. "Tim's wines are more subtle, more silent," says Borger.

This fall, Tim Mondavi returned to the company as its chief winemaker, after having taken a sabbatical of several months. He said he intended to remain with the company, but needed a break from the pressures of work and a divorce, his second. For many years, people close to the family have encouraged Tim to leave the nest. Striking out on his own, he could create his own style of wines and leave Michael in charge of the family business.

Tim takes a long-term and philosophical view of the wines, how they've evolved and the critics' reactions to them. "I'm very proud of our wines, our history and our track record," he says, adding that the wines, "should reflect our land and our style."

There's rarely a shortage of criticism whether it's from Robert, wine writers, retailers or consumers. "I listen to all of the criticism and consider what's being said. The input is important," Tim says, "but fundamentally you have to do what you think is right and be true to yourself. Otherwise you're left chasing the critics."

Beyond the Napa Valley wines lie other challenges in terms of achieving both consistent quality and growth. Some in the industry believe the company may be trying too hard to please too many people and be all things to all consumers.

The Roots of the Problem

It's not hard for old-timers in Napa to imagine Mondavi heading down a perilous path. Many vintners still remember the tragic demise of John Daniel Jr.'s Inglenook, once Napa Valley's greatest estate. The parallels with Mondavi are close enough to worry many observers.

Under Daniel, the grand Rutherford winery produced amazingly long-lived Cabernets -- wines that some still consider the best ever made in Napa. But by 1964, financial problems and the need for cash (to modernize) spurred Daniel to sell Inglenook; it went from being family owned to corporate owned.

First it was owned by United Vintners and then by Heublein, a large East Coast drinks conglomerate. Heublein found a way to make Inglenook hugely profitable. In the 1970s, it introduced a line of inexpensive wines under the Inglenook Navalle (short for Napa Valley) label, and that brand, produced in the Central Valley, rocketed to multimillion case sales and became one of the most successful brands ever in California.

Meanwhile, the prestigious Inglenook label languished. Eventually, despite courageous efforts at revival -- including attaching the name Napa Valley to it in 1983, making it Inglenook-Napa Valley -- drinkers moved on.

One of the places they turned to for new, cutting-edge wines was right down Highway 29. Robert Mondavi, who gave Daniel one of the first cases of wine he produced, was preaching about making Napa Valley wines that belonged on the same table as the great French wines, and people were listening.

"There was a big pall about Inglenook," recalls Winiarski, who moved to Napa in the 1960s and worked for Mondavi before founding Stag's Leap Wine Cellars. Mondavi "gave [the valley] a new vitality and created a vision, a sense of style that carried on as to where the valley was going and where the industry was going. He gave the industry elevated goals when it had rusticated."

In a curious way, however, the current state of affairs at Robert Mondavi Corp. can be traced to two unrelated decisions the company made in the 1970s, at the peak of its early success.

The higher profile of the two moves was the company's joint venture with Bordeaux's Château Mouton-Rothschild, sealed by a handshake in 1979, which linked the magnetic Robert Mondavi with the charismatic Baron Philippe de Rothschild, one of the most influential French vintners of the 20th century. The two formed a partnership the next year to produce a Bordeaux-inspired Napa Valley Cabernet, which became known as Opus One.

For that first wine, from the 1979 vintage, Tim Mondavi and Lucien Sionneau, Mouton's winemaker, selected wines in barrel from Mondavi's top cuvées, which otherwise would have wound up in the Mondavi Reserve.

For some, from that day forward, Opus, with its ties to Bordeaux aristocracy, its elite image and single-wine identity, has been the more prestigious wine, overshadowing the Mondavi Reserve Cabernet. The public perceptions are telling. Anyone can make an appointment to visit the Mondavi Oakville winery. But to tour Opus, you need to know someone. Its gated entry, aura of mystique and aloofness are a draw for upscale consumers. It began to drain the prestige from the Mondavi winery itself.

The Mondavi Reserve, a sleek, concentrated, sensual wine, built around a core of anise-scented currant and black cherry fruit, averaged an impressive 92 points per vintage from 1990 to 1999, and sold for an average of $84 a bottle, with its current release, the 2000, selling for $125.

Opus, which has a strong resemblance to a top classified-growth from Bordeaux, right down to its distinct earthy, leathery core of currant, herb and spicy flavors, averaged 92.5 points per vintage during the same time frame. Yet it sold for an average of $104 a bottle and the 2000 sells for $150; despite the negligible difference in quality, Opus has consistently retailed for about 20 percent more, its price tag suggesting its superiority.

Several years before Opus began to take form, Robert Mondavi Winery started its first red and white generic table wines, colloquially called Bob Red and Bob White. A rosé and White Zinfandel followed. The former two wines were good quality blends, and were sold in magnum for about $3.

Produced at Mondavi's Woodbridge winery in the San Joaquin Valley city of Lodi, Bob Red and Bob White supplied immediate cash at a time when the winery was growing and had a wine surplus. The grapes were purchased mostly from local growers. Woodbridge created entry-level wines aimed at providing affordable, everyday drinking. The hope was that consumers would ultimately trade up from these wines to Mondavi's better, higher-priced wines.

However, the Woodbridge label had Robert Mondavi's name on it, and that decision, critics warned, would eventually lead to the erosion of the prestigious Mondavi name, much as the Navalle brand had eroded the name Inglenook; people would associate the name Mondavi with inexpensive wine, not grand cuvées. "Woodbridge makes a lot of things happen," says Johnson, "but there's a huge image risk when the line [of Mondavi] wines goes from $7 to $150."

Senior editor James Laube is Wine Spectator's lead taster on California wines.

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