5 May 2011
Robert Mondavi and the Wine Industry
The structure of the global wine industry began to change after the economy had faltered in 2002 with wine sales weakening in the case of Mondavi. With such weakening sales, Australian imports began to pose a serious threat, growing nearly 30% per year since 1995 according to the case. With general wine sales slowing down, the global wine industry began to consolidate, particularly among the New World producers. Many of Mondavi’s main rival wineries began to merge with rivals, jug wine producers, and pushed into the premium wine business. Though Mondavi was presented with the threat of industry consolidation among their main rival wineries, the company was initially persistent to remain independent, relying on the U.S. market for boosted sales. While their main competitors pursued other acquisitions, Mondavi focused on the growth of its popular premier brands.
At the turn of the twenty-first century, the global wine industry reports that retail sales have ranged from $130 billion to $180 billion. There were three categories of wine that vineyards produced and sold: table, dessert (or fortified), and sparkling (champagne). Table wine possessed the largest share of the market. The table wine market was divided into five segments: jug or commodity, popular premium, super premium, ultra, and luxury. The shift towards premium wines was shown through sales numbers as jug wine sales in the U.S. declined an estimated 3% per year during the past decade, while premium wine sales grew a substantial 8% to 10%. The increased demand for higher quality premium wines was also occurring in non-European wine-producing nations as well as in the U.K. The structure continued to change at the turn of the century since many New World wine producers invested a substantial amount of money in technology in order to enhance the quality of their wines while also reducing operating costs. The shift to more premium and super-premium wines...