At a landmark winery, big changes

By Michelle Locke
Associated Press

OAKVILLE, Calif. — With its famous Mission-style bell tower and elegant arched entrance, the Robert Mondavi Winery looks every inch the Napa Valley landmark it has been for four decades.

With its famous mission-style bell tower and elegant archway, the Robert Mondavi winery looks every inch the Napa Valley landmark it has been for four decades. But behind that gracious exterior, there is prodigious change. The Mondavi family is out as managers of the publicly held company, at least for now, and the empire is on the block. The idea is to sell off the luxury wine business, leaving a reshaped corporation that will focus on $15-and-under brands, where the greatest market growth is expected. Eric Risburg • Associated Press

The company plans to sell the luxury side of the business, including the Robert Mondavi Winery in Oakville, and use the money to build its $15-and-under brands like Woodbridge, which face stiff competition from Australian imports and domestic brands like California's Two Buck Chuck.

Mondavi company officials cast the sale as a chance to put the luxury business back in private hands and away from shareholders' short-term expectations. They believe there's more room for growth in the cheaper, high-volume "lifestyle" brands and expect to realize $400 million to $500 million from the sale, which would be used to develop the lifestyle business.

"There's no question in my mind that this is a major opportunity for us as a company," said Dennis Joyce, chief operating officer of Robert Mondavi Corp.

Outside the company, opinions differed on what lay behind the plans to sell.

In August, when restructuring changes were announced that had the net effect of lowering the Mondavi family's voting stake to 39.5 percent from 84.9 percent, Prudential Equity Group analyst Jeffrey Kanter said in a written report it was possible the action was prompted by an outside offer to buy part of the company. Or, conversely, an offer by a competitor to sell out to Mondavi.

After the planned sale was announced in September and founder Robert Mondavi's son Michael resigned from the board in disagreement with the strategy two weeks later, Kanter wrote that "our belief that Michael and his family wind up 'cashing out' of the business is a little more visible now."

Others theorized that the plan was to put the luxury business back into the hands of the Mondavis, speculation that grew when Michael Mondavi said a family bid was possible.

Still, after Michael Mondavi resigned — company officials said they asked him to, he said he quit — analyst Tim Ramey of D.A. Davidson, who had been among those expecting a Mondavi bid, said a family buyback looked less likely.

Under the divestiture plan, the company is selling the business that makes the signature Robert Mondavi Winery and Robert Mondavi Winery Reserve wines that can go as high as $125 a bottle. Also for sale is Mondavi's stake in the high-end Opus One winery, a joint venture with the Rothschild family of France, as well as other winery operations.

In Napa Valley, where the 91-year-old Robert Mondavi has spent a lifetime championing California wine, news that the empire was splitting up was a blow.

"The emotional thing, of course, is big here in the valley because we all love Robert so much," said Agustin Huneeus, owner of the upscale Quintessa winery.

Adding interest to the story was the whiff of dynastic drama that has followed the Mondavis since Robert Mondavi had a stormy falling out with his brother Peter nearly 40 years ago. It was that split which ousted Robert from the family's Charles Krug Winery and, after a legal battle, found him starting over with the Robert Mondavi Winery in 1966.

"The wine business isn't that big a business, and everyone in a sense knows everybody and the Mondavis are a fascinating story," said Harvey Posert, a wine-industry consultant and former public relations director for the Robert Mondavi Winery.

Michael Mondavi and his brother Tim, the company's vice chairman, have also clashed over management styles, although Michael Mondavi told the Napa Register that despite their disagreements over timing and scale, they are in "lockstep agreement" most of the time.

After the plan was announced, Michael Mondavi said in published reports the family may bid and also said he, Tim and their sister, Marcia Mondavi Borger, voted against breaking up the company.

Company officials said they subsequently asked Michael Mondavi to resign, contending that his statements violated the confidentiality of board discussions. However, Michael Mondavi said in his letter of resignation he was leaving because "I fundamentally disagree" with the board's strategy for the company's future.

Tim Mondavi remains as vice chairman and winegrower, and he and Borger are still on the board.

Stock prices dropped a bit on news of the divestiture in mid-September, but were trading near $40 as of early October, up from the $30.15 of 52 weeks previously. Meanwhile, 360 employees, mostly at the Oakville winery, have received layoff notices.