Peter Mondavi on Relationships and Innovation

FILED SEPTEMBER 1, 2009

Dear Client:

You can argue that forming and maintaining relationships is the hardest part of running a business but also the most necessary. That seemed to be the crux of Peter Mondavi Junior’s message at the Wine Symposium this week as he spoke on the importance of relationships and innovation in maintaining a family winery. It’s no secret that the Mondavi family has had its ups and downs but somehow managed to remain a pillar in the industry. “Why are we still standing here stronger than ever? Two words: family and relationships,” said the Charles Krug proprietor.

THREE-TIER IS “ESSENTIAL.” Aside from family, the company’s relationship with his distributors has been a huge help in growing the business. “They appreciate that we want to remain a family owned business,” he said, which has been pivotal in the company’s success.

The company also uses direct to consumers shipping and wine clubs to build sales but Peter said the “three tier will continue to prosper and be essential” to a wine company like his. He admitted, though, that there are some concerns about consolidation among wholesalers and suppliers and the outcome for smaller companies like Charles Krug.

CONTROL FREAKS. Remaining private has given CK a lot more flexibility and control over their business, said Peter. The family’s motto is to keep things simple and manageable but also to have a hand in everything the company does.

“I’ll be the first to admit it, the family is a bit of a control freak,” said Peter. “We are the polar opposite of the absentee owner.”

Charles Krug has consistently followed trends and innovation through the years, and avoiding Wall Street has given it more wiggle room. The winery is smaller now than it’s been in the past (production peaked in the early 80s), for example, and has become more focused on ultra premium wines in recent years as consumers showed signs of trading up. “Organic evolution is how we innovated over the years.”

ESTATE PLANNING “CAN’T BE IGNORED.” In speaking on family relationships, Peter highlighted the importance of estate planning, which he said a lot of family owned wineries give little thought. We want to “ensure a smooth transition to subsequent generations in estate taxes,” he said, with help from a team focused exclusively on estate planning. He noted that “the most frustrating part about estate planning” is that it’s left to interpretation.”

“Estate planning can’t be ignored” but most family owned wineries don’t work on estate planning.” This is a problem California wineries are experiencing right now as the generation in charge runs into problems handing over the business to the next generation. Either the younger family members aren’t interested or aren’t prepared. Peter said it’s important to prepare the next person taking over, so at CK the next generation has to be meaningfully employed elsewhere for at least 5 years.

He admitted, though, that succession planning at CK “has been anything but a smooth and calculated process,” but it helps ensure the longevity of the family business.

IMPORTANCE OF DIVERSIFICATION. Sales are up 18% at the winery largely due to diversification, said Peter. They have a cheaper brand (CK Mondavi) “that is leading that charge,” while “Charles Krug is higher priced and not leading that charge.” However, the Charles Krug brand is only down “single digits, perhaps a little better than some of our competitors.”

It’s also important to keep the brand identities separate. Peter said his company goes to great lengths to ensure there is separation between its various brands. “Though we were diversified we maintained distinct differentiation between brands...minimized mingling in the marketplace...that is key.”

ALTRIA HAS “NO PLANS” TO SELL STE. MICHELLE

Looks like Altria has no plans to sell Ste. Michelle Estates after acquiring the winery from UST last year. A report in Motley Fool says: “Interestingly, Altria says that it has no plans to sell off UST's wine business, although the recent problems that wine and spirits makers like Diageo face probably make it an inopportune time to divest the booze business. Besides, Altria owns 28% of SABMiller, so the company isn't completely uninformed on the alcohol market.”

WSD BRIEFS:

THE SAINT JAMES COMPANY, which specializes in the acquisition and distribution of New World wines, has appointed George McCarthy as chairman. He’s been with the industry for over four decades and is currently chairman of Corby Distilleries Limited. In the past he served as president of the Americas for Allied Domecq Spirits and Wine, along with other executive positions in the industry.

IMPORTER MARGATE WINE recently signed a long-term distribution agreement with Tuscany’s Bruna Baroncini, owner of the Poggio Il Castellare, Querciarossa and Casuccio Tarletti estates.


Until Monday, Megan

“Reading is to the mind what exercise is to the body.”
Sir Richard Steele

--------- Sell Day Calendar ----------
Today's Sell Day: 14
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Wed.
This month last year ended on a: Tues
YTD sell days Over/Under: 0

WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com

© 2009 Wine & Spirits Daily, all rights reserved. May quote with attribution.

Follow me on Twitter http://twitter.com/WineSpiritDaily

Go back to listing Go to next article Go to previous article

Comments

Top Secret News Hotline:

Got wine and spirits news for WSD?

Submit Anonymously
twitter facebook