Citing weak sales, stiff competition and poor earnings, Robert Mondavi Corp. on Wednesday announced it is restructuring, introducing new wine brands, and cutting its workforce by 10 percent, a move that would eliminate nearly 100 jobs.
In a separate action that the company said was unrelated, chief winemaker Tim Mondavi will be taking a six-month leave that the winery termed "a sabbatical."
Chairman Michael Mondavi said his brother Tim, who has overseen winemaking at the main winery in Napa Valley since 1978, would return to his position for this fall's harvest.
"Everyone's been under a lot of stress, and Tim's been under a lot of stress," said winemaker Geneviève Janssens, who works with Tim at the Oakville facility, which produces Mondavi's best Napa Valley wines. "The company has to address a lot of issues and [Michael Mondavi] said [Tim] should take some vacation."
Janssens said Tim Mondavi would fulfill some winery duties during his sabbatical, and she expected he would return at harvest.
Despite Tim Mondavi's leave of absence, the winery is planning to introduce a new line of Napa Valley wines, priced in the $15 to $18 range, to help it gain market share and increase revenues. In addition, it will create a label priced between $1 to $1.50 less per bottle than its Woodbridge line, which sells in the $8 range.
Since numerous rivals have been trying to undercut the brand's price, said Mondavi, "We will come out with a brand to attack Woodbridge's attackers."
Noting that the war in Iraq had crippled travel and sales of top-end wines, Mondavi said the changes are intended to prepare the winery for what many expect will be even tougher economic times ahead. Most of the job cuts will come from the company's Napa Valley operations and be across the board, from top management positions to production.
Some of the job cuts will come from the closure of the Robert Mondavi Wine and Food Center in Orange County, which trains hotel and restaurant staff about wine, rents reception space, and offers cooking and wine-tasting classes to consumers.
Mondavi's stock has lost more than a third of its value in the past four months, and it closed at $22.97 in trading on Wednesday -- a four-year low. This morning, the stock fell $3.47, opening at $19.50, after the restructuring was announced after the markets had closed yesterday. The company said it expects to report a net loss of 5 cents to 10 cents per share for the first quarter of 2003.
The company identified three major factors that are hurting business. A weak U.S. economy has dampened demand for high-end wines and particularly hurt its hotel and restaurant sales. An oversupply of grapes is leading to intense price competition and a proliferation of new brands. And consolidation among distributors has contributed to increased buying power at the trade level, forcing wine producers to offer more discounts.
"We believe these three factors will be present for a while and we will not see relief from the intense competition until there is a material change in at least one of them," Michael Mondavi said before making the announcement about staff reductions to employees at the Oakville winery. "Therefore, we are initiating a series of fundamental changes in our business model that will immediately improve our competitive position."
In the past two years, Mondavi has tried to cut costs by putting Central Coast vineyards and two winery facilities up for sale, and consolidating winemaking into its other existing facilities.
Among the new operational changes, all of the marketing and sales responsibilities will be centralized under Dennis Joyce, newly appointed as executive vice president of marketing and sales, and all of the California production and vineyard operations under Peter Mattei, senior vice president of production. Both Joyce and Mattei will report to Gregory Evans, Mondavi's president and CEO.
In addition to its Robert Mondavi and Woodbridge brands, the Mondavi company produces La Famiglia di Robert Mondavi, Byron, Io, Arrowood and Grand Archer by Arrowood.
It also is involved in several joint ventures, including Opus One in Napa Valley; Luce, Lucente, Danzante and Tenuta dell'Ornellaia in Tuscany; Seña, Arboleda and Caliterra in Chile; and Kirralaa and Talomas, a new project to make Australian and California wines in partnership with Southcorp and Rosemount's Oatley family. And Mondavi imports the wines of Marchesi de' Frescobaldi, Attems and Viña Errázuriz in the United States.
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