Skip to comments.The fall of the house of Mondavi
Posted on 11/14/2005 9:56:37 PM PST by nickcarraway
Robert Mondavi created the Napa Valley as we know it and built one of the world's great wine dynasties. But last year, in a shocking turn of events, his winery was sold. How could Mondavi, now 92 and in failing health, possibly lose the empire on which he bet his family, his career, and his legacy? The same way he did everything else during a lifetime of irrepressible creativity and often bitter family conflict: His way By Paul Chutkow One day in June of 2000, I drove up to the Napa Valley to have lunch with Robert Mondavi. It was a glorious day, warm and bright, and from the mouth of the valley all the way up to Oakville, the landscape was bursting with ripening vines and brilliant sprays of color. Napa may not be paradise, but on days like this it can seem pretty darn close.
The Mondavi winery's signature mission-style archway and tower stood shimmering in the heat as I drove in. A few minutes later, Bob and I sat down to lunch at a table set right beside the vineyards, with a big white umbrella protecting us from the sun. Bob, as usual, was in ebullient form, warm, charming, and charismatic, and even at 87, he still had that marvelous, mischievous twinkle in his eye.
These lunches are very dear to me. We started them back in 1996, when we began writing Robert's memoir, Harvests of Joy. During that process, Bob and I became fast friends, and we've continued to meet for lunch on a regular basis. On this particular afternoon, Annie Roberts, Bob's stepdaughter and a fine chef, was cooking for us, and she started us off with plump scallops served on a bed of organic greens. We followed that with a tender filet mignon, served with russet potatoes and baby carrots and onions. We had a Mondavi Fumé Blanc Reserve with the scallops, and then out came a Pinot Noir Reserve from the Mondavis' vineyards in the Carneros region, at the mouth of the Napa Valley. The Pinot was so good that midway through our meal, Bob said to me, "Let's see how good this wine really is!"
Bob asked Hubert Verdeille, who helps run the visitors' programs, to look in the cellar and find us a really fine bottle of Burgundy. Hubert came back with a 1993 Romanée Conti, one of the most celebrated wines of France. He poured some for each of us, and Bob proceeded to give the wine a long, artful swirl in his glass. Then he placed his distinctive Roman nose above the rim and began evaluating the wine's color and bouquet. We each took a few sips. Then we went back for a few more sips of the Mondavi Pinot Reserve.
"Well," Bob said, giving me an expectant look. "What do you think? And be honest now..."
Over the years, I have learned one thing: never try to b.s. Robert Mondavi. Always give it to him straight; that's what he respects. "Well, Bob," I said, "your Pinot is absolutely lovely. But the Romanée Conti, well, what can I say? It's pure poetry."
Robert's face tightened. For a moment I thought he was going to explode. Then he took another sip of the Romanée Conti and swirled it in his mouth. "Darn it, you're right! That elegance, that refinement, those gentle layers of flavorthat's what we have to achieve! The French have been at this for centuries. We have to be patient. And we have to work harder. But by golly, we're going to get there!"
If Bob said it once, he's said it a hundred times: he wanted to be The Best. But words are one thing: to understand Robert Mondavi's drive, to feel the full, relentless force of his ambition, you had to see what happened when he came in second. With Bob Mondavi, good was not acceptable, and almost great was not much better. In his chosen domain, into which he poured all his heart, soul, talent, and pride, second best would never do.
At that lunch, Robert was at the height of his powers. For the past 40 years he had been focused on a single goal: to make wines that would stand next to the best of Bordeaux, Burgundy, and Tuscany. He had achieved that goaland become celebrated the world over as the preeminent figure in American wine. He'd left an extraordinary cultural mark as well, creating, endowing, or reenergizing Napa Valley institutions from Copia, the American Center for Wine, Food, & the Arts, to the Napa Valley Symphony. In the process, he had built a colossal family business, one that he imagined would continue for many generations to come. And when I left Bob that afternoon, I imagined the very same thing.
Four summers later, in August 2004, I drove up to Oakville once again. I hadn't seen Bob in a month or two, and right away I could see that he was not his usual self. He looked drained and a little stooped, as if he was carrying some terrible weight upon his shoulders. His hearing had long been in decline, and his wife, Margrit, told me that his hearing aids were bothering him. Over lunch, though, it became clear that his hearing aids weren't the problem.
A decade earlier, Bob had turned the reins of his company over to his sons and daughter. All three were mature and accomplished managers. Michael ran the business side of Mondavi, while Tim was in charge of all wine-making operations. Marcia served on the board of directors and for years had anchored Mondavi sales and promotion on the East Coast. It seemed a sturdy succession plan. But demanding patriarch and perfectionist that he was, Robert had never quite left the stage, and his children had never been able to fully emerge from their father's imposing shadow. The results had been years of internal wrangling and an endless series of power struggles inside the company.
Besides, Bob was a tough act to follow. When he created his winery in 1966, there were 25 wineries in the valley, none making wines of exceptional quality. Today there are more than 400, plus a comparable number in Sonoma County, and many of them are making first-class wines. Five million visitors come to the Napa Valley every year, in part to taste the kind of life that Robert and Margrit Mondavi have been championing for decades.
But in recent years, a wine glut, combined with increased competition from abroad, had hit the business hard. By the time of our lunch last year, sales of the Mondavi ultrapremium wines, including the flagship Oakville Cabernet Sauvignon Reserve, had plummeted. The mass-market Woodbridge line was hurting as well. And several ancillary initiatives had soured: two failed ventures in France, a Mondavi Wine & Food Center in Orange County, a flashy $13 million wine center at Disneyland. A start-up featuring two Italian varietals had not gone well either. Bob, I knew, could rationalize those setbacks; they were attempts to be innovative and exciting and thus could be forgiven. But a huge drop in high-end sales? That was staggering. It threatened the entire Mondavi image, the Mondavi brand.
Annie Roberts was cooking for us again, and soon after her delicate squash soup arrived, Bob started in on the wine critics. The current fashion, he said, was for big, "jammy" wines. They might be fine for drinking by themselves or being judged by voguish critics, but Bob preferred wines that were gentle and sophisticated, with subtle layers of flavor, wines that harmonize with fine food. He had been preaching the virtues of such wines for decades, but tastes had changed and now the preacher had lost his pulpit.
With his winery in crisis, his first instinct, even at 91, was to fluff up his mane and charge into battle. But the truth was, he could do little more than sit and stew. Tired and distant, he seemed a far cry from the can-do man I had known for so many years. I couldn't help but think that an era of incredible dynamism, and with it an important chapter in California history, was drawing to a close. Still, we all maintained a festive face; the Mondavi spirit wouldn't have it any other way.
Over coffee and dessert, Robert launched into an astute analysis of the winery's situation. The problem, he said, was clear: the company had lost its focus, it had gotten too big and too corporate, it had lost its drive to be the best. The business side had put too much emphasis on mass-market sales, and the quality of the high-end wines had slipped. Yes, they had invested in a new facility for the luxury wines, and Bob was certain their quality would improve dramatically. But would it be too late?
He finished his espresso, and then, with a few simple words, he explained exactly how he felt. "I built an empire," he said, "and now I'm watching it collapse around me."
Just a few weeks later, with sales still slumping and burdened by debt, the Mondavi Corporation's board of directors announced plans to break up the company. It was stunning news, but in the midst of the crisis, Constellation Brands, a wine and beverage group based in New York, bought the company and most of its assets and debt for $1.36 billion. With their shares of stock, Robert and his children each walked away with tens of millions of dollars. But no amount of money could bandage the wounds or hide the truth: the Mondavi empire had fallen, and no honest epitaph could be written without using words like "ineptitude" and "squander."
How did it happen? What went so terribly wrong? And how does Bob feel about the collapse of so much of his lifelong dream? Over the past decade, I have followed his story from a privileged position. Working on Harvests of Joy, I was able to probe deep into his character and the internal dynamics of his complicated family. More recently, I've gone even deeper, through a long series of interviews for a documentary film that I produced with a colleague, James Rigler, and a team from KRON 4. Since the fall, I've talked in depth with all the key players in the drama.
Now, a year after the sale, I want to tell the full story behind the headlines. Bob's health isn't what it once was. His knees are giving out, his memory is shaky, and the voice that used to roar like a lion is mostly a soft, gentle purr. Although no one envisioned the way it would end, his is still an epic tale of the American dream. But it also has elements of classical Greek tragedy. Robert Mondavi was hell-bent on turning his visions into a shining reality, for all the world to see. And as his own family can attest, God help anyone who stood in his way.
When Americans think of Italy, many of us envision the Sistine Chapel in Rome, the rolling hillsides of Tuscany, the lyrical canals of Venice. Bob's roots lie in different terrain. His parents grew up in a drab, industrial region known as Le Marche, a few hours' drive south and inland from Venice. The local nobleman lived up the hill in an imposing manor house; sharecroppers like the Mondavis lived in primitive stone farmhouses below, allowed to stay on his land if they gave him half of what they raised. To feed their families, many men also worked full shifts in a nearby mine.
In 1906, Cesare Mondavi followed his older brother across the Atlantic to work in an iron ore mine in northern Minnesota. After his brother died in a mining accident, he and his new wife, Rosa, opened a grocery store and turned their home into a boardinghouse for Italian immigrants. Their town was small and provincial, and the Swedes, Danes, Finns, and Norwegians ran the show. At school, some kids called Bob and his siblings "wops" and "dagos," sometimes even worse. By temperament Bob was a fighter, more competitive than his brother, Peter, or his sisters, Mary and Helen. Those insults burned deep. They also hardened his resolve.
By 1919, when Congress imposed Prohibition, Cesare was a bigwig in the Italian community. Noting a loophole in the law that allowed families to make 200 gallons of wine per year for home consumption, the local Italian club asked him to go to California, select the best grapes he could find, and have them shipped back to Minnesota. He did, and a few years later he moved the whole family to Lodi, in California's Central Valley, where he started a wholesale grape business. Congress repealed Prohibition in 1933, and a couple of years after that, before Robert was to graduate from Stanford, Cesare came to him with an idea.
"You know, Bobby," he said, "a lot of the grape growers I work with are thinking about getting into wine now." Intrigued, Bob asked his father where he could best learn the wine business. "Go to the Napa Valley," said Cesare. "Up there they produce the best darn Cabernet Sauvignon grapes in the whole of California."
In those days, the Napa Valley was still a sleepy farming community, the landscape dominated by almond and fruit orchards, open grazing lands, and small, family-run ranches and farms. There were only 25 wineries, led by the "Big Five": Beaulieu Vineyard, Beringer Brothers, Louis Martini, Inglenook, and Charles Krug. Bob got a job as an assistant to the winemaker in the cellars of the Sunny St. Helena Winery and learned the craft and business of wine making. Then in 1943, he got wind of a golden opportunity: the Krug winery was for sale, and Bob talked his father into buying it.
As head of a family business, Bob had a deferment from military service, so he was free to plunge into resurrecting the Krug operation. His brother, Peter, was serving as an airman in the U.S. Army, but when he came home, he studied the chemistry of wine making at UC Davis. At the time, most of the California wineries were producing bulk table wines in huge fermenting tanks made of wood or concrete and then shipping them around the country in railroad tank cars. Peter studied the process of cold fermentation and the way the French used oak barrels to age their wines, techniques that were years away from implementation in California. Then he joined Bob at Krug.
For the next 20 years, the extended Mondavi family lived and worked on the Krug compound. Bob had married Marjorie Declusin, a gracious woman of Irish heritage who had been his high school sweetheart back in Lodi; Peter, too, had married and also had a young family. Their kids played together on the Krug grounds, and about once a month, Rosa and Cesare would drive up from Lodi for the weekend. Mary and her husband were often there on weekends, and in the summer, Helen and her children, Peter and Serena, were there, too.
By the end of the 1950s, however, tensions had begun to simmer between Bob and Peter. In Peter's eyes, Bob was always "forward, forward, faster, faster," signing contracts and selling wine faster than Peter could produce it. In Bob's eyes, Peter was just not aggressive enough in improving either production or the quality of the wines. As Peter, now 90, admits, the brothers also had different levels of ambition and energy: "Frankly, I couldn't keep up with him." Bob was a brilliant salesman, Peter says, and he was not. "Let's face it, Bob was a promoter. That was not my style. That created the big differences."
Cesare's death in 1959 had a profound impact. It left a terrible vacuum, one that Bob, as the older son, was eager to fill. That did not sit well with Peter. "It got to the point that Bob was going so fast on everything, and he wouldn't listen as a family member should in a family business."
Then, in 1962, Bob and Marge made a grand tour of the magnificent wine-producing regions of Europe, visiting renowned wineries in Bordeaux, Burgundy, Tuscany, and the Moselle region of Germany. That's when a vivid dream began to take shape in Bob's mind. Back then, California vintners had two basic methods for making wine: one for red and one for white. The Europeans treated each variety of grape differently, working hard to bring out the natural character and flavor of each varietal and aging the wine in small oak barrels. Bob was also impressed by the way the aristocratic wine families lived, with their châteaux, their manicured vineyards and gardens, their devotion to art and music.
California, he reasoned, had the climate, the soil, and the varietals to make great wine, too. What its winemakers lacked was know-how, methodology, and those all-important French oak barrels. It would take time and substantial investment, but Mondavi was convinced that California winemakers could succeed in making world-class wines. And guess who was determined to lead the parade.
Peter wasn't buying it. He just didn't see a big market in this country for luxury wines. And since Cesare's death, he'd been managing the grape-shipping business in addition to handling production at Krug. Bob says that Peter and his wife, Blanche, were also annoyed by his lavish and costly travel promoting the wines while Peter was home doing the unglamorous, backbreaking work of making them.
What happened next has become part of Napa Valley lore. One day in 1965, Peter was in Lodi on some grape-shipping business when Bob popped in. "He was mad at me," explains Peter, "because I wasn't going for what he wanted. He became angry and, frankly, he punched me once. It wasn't a fistfight. It was one blow, and that was it. When my mother asked, 'Where'd you get your bruise?' I said, 'I don't know.' But eventually it came out."
After wrenching discussions with the family, Rosa put Bob on a six-month leave of absence. It was designed to be a cooling-off period; she hoped he would then come back into the family fold. Instead, Bob chose to go his own way. What ensued was not pretty: a lawsuit, a very public court case, and wounds that took 40 years to heal. In hindsight, the fight was probably inevitable. Bob had forged a glorious vision of the future, and there was no reining him in.
"My grandmother was asked to choose between her two children," says Serena Mondavi Ventura, "and as most mothers do, she chose the youngest and the one she believed to be most vulnerable. There is no question that there's an invulnerability about Robert Mondavi. My mother used to say that he had a stomach of steel."
Peter and Serena both feel that Bob never acted out of malice; he acted out of blindness. "His ambition got the better of him," says Peter.
"Anyone who's been enormously successful possesses that kind of passion," Serena says. "In that regard, his tunnel vision was his greatest asset. I also believe it was his greatest liability because he absolutely decimated anything in his way, and a lot of people still bear the scars. Uncle Bob is a very, very endearing human being, no question about it, and one can't help but admire his achievements. But if you're part of the family, you kind of bite your lip."
In less than a year, Bob had launched the Robert Mondavi Winery, the first winery built in the valley since 1933. His oldest son, Michael, then 23, joined his father in the new venture. So, eventually, did several people from Krug. Marcia Mondavi, four years younger than Michael, and their brother, Tim, eight years younger, worked there during summer vacations.
Miljenko "Mike" Grgich, one of the first winemakers to join Mondavi, was amazed at all the energy going into this new venture: "Busy. Motion. Everybody was running." Mondavi was setting into motion far-reaching changes. Out went the wooden fermenting tanks and in came glistening new stainless steel tanks, which were easier to clean and specially designed to control the temperature during the tricky process of fermentation. In, too, came 60-gallon barrels of the finest French oak. In came the latest presses from Germany and a high-tech bottling line to speed production and delivery. Mondavi also invested heavily in research, determined to combine American science and technology with the best of traditional French wine making.
To improve grape quality and yield, Bob designed a new system of financial incentives for contracted grape growers and educated them on new planting methods. At the winery, Bob oversaw production, guided the sales and marketing teams, ran every aspect of the company. "He was like Patton," says Peter Ventura, Serena's brother and an executive in the family business in the eighties. "If he said, 'Go march off that cliff,' we'd do it."
Eventually, several of his early winemakers left to make their own wines. Grgich took over the wine making at Chateau Montelena, and Warren Winiarski, Mondavi's first winemaker, created his own winery, Stag's Leap Wine Cellars. Bob didn't begrudge their decisions; he knew it would take a whole group of pioneering winemakers to turn Napa into a great wine-producing region.
The turning point came in 1976, the year of the American Bicentennial. Steven Spurrier, a British-born wine expert with a top-quality wine shop in Paris, came up with a clever way to clink glasses in the name of Franco-American friendship. He organized a blind tasting of the best wines of France and added some wines from the Napa Valley upstarts. There were to be two rounds of judging.
In the first round, the eminent French judges appraised several of the finest white wines of Burgundy, all world-class vintages. They swirled and sniffed, sipped and spat, and then rendered their verdicts. The result was a shock: first place went to a 1973 Chardonnay crafted by Mike Grgich for Chateau Montelena. Was this just a bizarre mistake? No; third and fourth places also went to Napa Valley wines, from Chalone Vineyard and Spring Mountain Vineyard, respectively. Mon Dieu!
For the second session, Spurrier set out an array of reds, including some of the very best from the regions of Bordeaux, plus wines from Sonoma's Ridge Vineyards and Napa's Mayacamas Vineyards, Clos du Val, Heitz Wine Cellars, and Freemark Abbey. This time the earth really shook. The winner was another California wine, a 1973 Stag's Leap Cabernet made by Warren Winiarski. Adding insult to injury, Time magazine trumpeted the results in a full-page story, headlined "Judgment of Paris."
Back in Napa, Mondavi was disappointed that Spurrier had not selected any of his wines for the competition, but he was thrilled for Winiarski and Grgich. They were graduates of his new school for American wine making, and Bob knew that with their victories, the wineries of Napa had arrived on the international stage with a terrific splash.
"The Paris tasting inspired all of us here," says Grgich. "It also inspired winemakers in Australia, New Zealand, Chile, Argentina, and other parts of the world. They all saw they could make fine wine in their own soil."
As the Napa Valley grew in prominence, Bob began adding food and culture to his grand vision. Here the real force was Margrit Biever. She'd come to the Napa Valley with her husband and children in the early sixties and had been shocked by what she found: there was no art, no music! Raised in the Italian portion of Switzerland, she had grown up in a world where the arts were not luxuries; they were the essence of civilization and of a life well lived.
When Margrit and a friend decided to put on a classical music concert at a local winery, the Mondavis agreed to host it out on the lawn at Krug, and it was a considerable success. Impressed, they hired Margrit to be the valley's first female tour guide, and in 1967 she joined Bob at his new winery. Here Margrit launched Mondavi's Great Chefs of France program, bringing in stars such as Paul Bocuse and Pierre Troisgros and serving as hostess and translator; later she helped Mondavi form important relationships with tastemakers like Julia Child and Alice Waters. With her worldly background and fluent French, Italian, Spanish, and German, she quickly became indispensable, and as anyone close to the family could see, her creative partnership with Bob put her on a collision course with his wife.
Marge had helped create the atmosphere of warmth and trust so critical during the early years of the winery, and she had worked hard to prepare exquisite meals at home and in the winery when Bob entertained clients. She tried valiantly, but in the end, she was no match for Margrit. In 1980, Bob and Margrit divorced their spouses and married. The move did not sit well with his children, but as Bob acknowledged to me, "As usual, I was moving full speed ahead and not looking back."
Indeed, the Mondavi empire was just beginning its full ascension. Two years earlier, Bob had begun a venture with a member of one of the most prestigious families in Europe: Baron Philippe de Rothschild, a canny businessman of legendary wealth, style, and panache. Together, across the road from the Mondavi Winery, they built Opus One, a winery of exceptional elegance and grace with wine to match. Now Bob had entered a magic circle. Soon to follow was a joint venture with the Frescobaldis of Florence, an Italian noble family that had been bankers to the Crown of England and had been in the wine business for 700 years, and another with the distinguished Chadwick family in Chile.
In 1979 the Mondavis had founded Woodbridge, an inexpensive brand made from grapes grown around Lodi, which was a big success. With demand for fine wine growing as well, the company purchased the Byron Vineyard and Winery in the Santa Maria Valley and Vichon, a small, creative winery in Oakville. It also bought a thousand acres of vineyard land on the Central Coast of California. By 1990, revenues had climbed to $115 million a year, a rise of about 400 percent in ten years. Over the next ten years, those numbers nearly quadrupled.
As his wealth and stature grew, Bob doubled his efforts to change the valley's cultural landscape. In addition to Copia, Bob and Margrit have been instrumental in the creation or growth of the Oxbow School, an innovative art school in the town of Napa; the Robert and Margrit Mondavi Center for the Performing Arts at UC Davis; the Culinary Institute of America; the renowned Napa Valley Wine Auction; the Napa Valley Symphony; the Napa Valley Opera House; and the new Robert Mondavi Institute for Wine and Food Science, also at UC Davis.
Not all went according to Mondavi's plans. Like his father, Bob was an old-school Italian patriarch: he set the line of march and expected everyone else to follow. He thought he was grooming Michael, Tim, and Marcia to run the family business after he was gone, but he constantly undercut his sons' authority. As Peter Ventura says, "Bob is temperamentally incapable of not being the boss."
"Different people stimulate others in different ways," Michael told me. "Some encourage them; others challenge them to go beyond. Dad's not a good cheerleader. He is a very good taskmaster. When you share the taskmaster's vision and want to accomplish it, you'll put up with a lot of crap."
Tall, handsome, and a polished speaker, Michael started out on the wine-making side of the company but found he was better suited to the business end. He became respected in the wine industry and was highly regarded inside the company. But he almost never got a pat on the back from his father.
"The first few years, I supported Di-Gel and Gelusil individually," Michael says. "I had a lot of heartache and problems because I did not interpret that my father's criticism was not personally directed at me but at trying to attain perfection. When I finally understood that, it made it a lot easier. But at times it was frustratingto never be able to please the one person you wanted to please, not to his full satisfaction."
And Robert was the man who had transformed the California wine industry. Where could his children find room to shine? "For 40 years I never knew what my job description was," says Michael. "You learned to stand back and eat a little humble pie. He's the father and founder, and I'm not."
Like his father, Michael is thoroughly Italian in his looks and directness. Eight years younger, Tim has more of the Irish of his mother. He's tall, with reddish blond hair and beard, more of an artist by temperament. In 1976, when he was only 25, he became Mondavi's head of wine making, a job usually reserved for much more experienced winemakers. In that capacity, Tim oversaw the creation of the different Mondavi brands and later shared the duties of managing the wine making at Opus One and Luce, a joint venture with the Frescobaldis. No matter how much he succeeded, though, he always ran into one very tough critic.
I once sat in on a tasting of a new Cabernet Sauvignon blend that Tim had crafted and was presenting privately to his father and the larger wine-making team. The Cab was excellent, but it was not up to Robert's expectations: "It's very goodbut it could be better!" Nor did Bob deliver his verdict with diplomacy; he delivered it with a sledgehammer. The next day, I couldn't help saying, "I'm sorry, Bob, but the way you beat up on Tim was awful."
"Well, damn it, that Cabernet wasn't very good! He's got to do better!"
I felt he was putting his sons in a miserable box. "Bob, you can't continually clip their wings and then complain about the way they fly!"
Tim told me later that his father's reaction was par for the course, and he shrugged it off. If he took on his father directly, he would surely lose. Rather than fighting, he preferred "to stand on the shoulders of a giant and go much further as a result."
In Bob's mind, his three children had unique assets that, when combined, would lead the family business for generations to come. But his unrelenting criticism sent a very different message. Some in the family say that Bob often played one son off against the other, and as Bob later admitted publicly, he didn't want to appear to favor one son for fear that the other would leave. This was clearly not the way to implement a sound, secure succession, but Bob seemed incapable of harmonizing his paternal instincts and his business instincts. And it always kept him in place as top dog. Peter Ventura says that Bob's management approach came down to this: "Divide and rule."
It is the crushing irony in the tale of the house of Mondavi: the visionary had blind spots that hurt his family and, ultimately, his business as well. A primary responsibility of any corporate leader, especially in a family-run company, is preparing his or her succession. In this regard, Mondavi can claim no victories.
The early nineties brought other problems, including phylloxera, a nasty little louse that eats away at the roots of vines; it can destroy an entire vineyard in two to three years. The infestation struck across Napa and Sonoma and cost California vintners a fortune. In some cases, whole vineyards had to be ripped out and replanted with more resistant root stock. The Mondavis had to replant 600 acres. With that expense plus financing the expansion, the company suddenly found itself with some heavy debt. So the family took a gamble, not without apprehension: working with the investment firm Goldman Sachs, they decided to go public.
Bob worried about losing control of the company, but Goldman Sachs came up with a two-tier stock formulavoting shares for the family, nonvoting shares for the publicthat won the family over. The need to raise capital made the IPO seem like a good idea at the time. On June 10, 1993, the Mondavi company was launched on the NASDAQ exchange. The offering was 3.7 million shares, and the opening price was $13.50 per share.
Almost immediately, the IPO itself precipitated a crisis: the stock plunged to $8 a share, and then to $6.50. Bob was just turning 80 years old. What to do to stem the tide? When he began to focus on how he had worked with Michael and Tim, he realized, "I had not done a great job of grooming them inside the company.... The time had comein fact, it was long overduefor me to give them all the trust, power, and responsibilities they clearly deserved."
The formal transfer of power that year to Michael, Tim, and Marcia, along with sweeping organizational changes, ended the crisis. By 1998, the share price had climbed to more than $50 a share. Now Michael and Tim laid out a dynamic plan for the future. As president and CEO, Michael forged new joint ventures with the Frescobaldis and the Chadwicks, launched two ventures in the south of France, and set his sights on the burgeoning markets in China and Japan. He and his team had several ambitious marketing plans as well, including a mini-vineyard, restaurant, and Mondavi wines gift shop in the California Adventure theme park that Disney was planning in Southern California.
Michael believed he could please the critics with the high-end Oakville wines and the shareholders with the numbers generated by the mass-consumption wines. Some wineries put out their lower-end wines under a totally separate label. Some companies have separate operations for their high-end and everyday wines, with different sales staffs, marketing teams, and brand managers. That balance is especially hard to maintain, wine industry specialists say, when you have a brand as powerful as Robert Mondavi: there's a temptation to put the name on every wine, no matter its price. Michael tended to do just that, as evidenced by the lower-priced labels Robert Mondavi Coastal and the Robert Mondavi Family of Wines.
Tim moved boldly as well, and he proved a true pioneer in his attempt to develop sustainable, organic vineyards. He worked closely with the winemakers in France, Italy, and Chile and oversaw the creation of To Kalon, a $29 million state-of-the-art facility for the Oakville wines that featured a turn away from stainless steel fermenting tanks back to classical oak.
Transforming a family-run company into a major, publicly traded corporation with global reach and a global brand would be a daunting task for anyone. And probably no winery in the country had a more recognizable name and a more identifiable face than Robert Mondavi. Michael and Tim had to convince both the wine world and Wall Street that they had a touch of their father's magic, even if their father didn't show that he believed it himself.
If the boom period of the nineties had continued, many of the decisions made by Michael, Tim, and their management teams might seem farsighted. But early in the new century, the wine glut and the depressed economy after 9-11 hurt both sales and profit margins. Fierce competition from abroad hurt, too, and the Charles Shaw wines, featured at Trader Joe's and popularly known as "Two Buck Chuck," took a heavy toll on sales of the Woodbridge and other moderately priced wines.
There were other setbacks as well. The new ventures in France and La Famiglia, the startup featuring Barbera and Sangiovese grapes, failed. The family pulled out of the project at Disneyland. The wine and food center in Orange County closed. On top of all that, Robert M. Parker, the most influential wine critic in the country, and the industry journal Wine Spectator both gave lackluster reviews to Mondavi's 1998 and 1999 vintages. Wall Street didn't fail to notice: by June of 2003, Mondavi's stock price had fallen by more than 30 percent.
Michael began a major rescue operation, putting one brand and about 1,500 acres up for sale and cutting the staff by 100 people. At a private board meeting, Tim sharply criticized his brother's plans. As a result, in a disturbing echo of what had happened between Bob and Peter almost 40 years earlier, Tim was promptly put on a leave of absence.
Then their father added more fuel to the fire. In a series of interviews on his 90th birthday, Bob did what he always does: tell it like he thinks it is. "We've got to get the world to realize the elegance of the wines we have here, and we have to do a better job of wine making," he told the New York Times. You didn't have to be a tarot reader to see that as a slap at Tim, the winemaker. Furthermore: "We have to concentrate on our best wines, because they are our tradition." That appeared to be a slap at Michael, whose marketing and sales team had been emphasizing the Woodbridge wines from Lodi over the premium wines made in Oakville. The wine world was stunned: Bob seemed to be giving his sons a very public no-confidence vote.
A few weeks after our August lunch, the crisis deepened. The board of the Mondavi Corporation proposed a plan that stripped the family of full control. The family's share of the company would increase from 36 to 39 percent, but its share of voting stock would drop from about 85 percent to less than 40 percent. Several severe staff cuts were in the works as well.
Ted Hall, a prominent business consultant and Napa grape grower, had replaced Michael as chairman of the board, and Tim's future as winemaker was still uncertain. Now Hall and Greg Evans, the corporation's president and chief operating officer, announced plans to split the fine wines and everyday wines into different companies, and they seemed intent on selling off the high-end wine business. A month later, Michael publicly criticized those plans and was promptly tossed off the board, ostensibly for breaking the confidentiality of the board's proceedings.
Meanwhile, across the country in Fairport, New York, at the headquarters of Constellation Brands, Richard and Robert Sands were following the unfolding events. Their father, Marvin Sands, had been a pioneer in the wine business in New York and had been friendly with Bob Mondavi over the years. His sons had built Constellation Brands into a diversified beverage empire with a vast number of brands in wine, beer, and spirits. At the lower end of the wine market, they owned Inglenook, Almaden, and Paul Masson; at the higher end, they held, among other brands, Ravenswood, Simi, and Franciscan. In prestige terms, though, Constellation had nothing remotely comparable to the Mondavi Winery.
In October 2004, the Sands brothers sent a letter to Ted Hall, offering $970 million for the company and all its assets. When Hall deferred the conversation, Constellation upped its bid to $1.36 billion, and this time the Mondavis and the board agreed to sell. It had few other options, and none of them was very good.
I interviewed Bob just a few weeks later. I had imagined that the aging patriarch would be devastated over the impending sale, but I was wrong. Maybe he was in shock, but in some palpable way, he seemed relieved. At least the turmoil and uncertainty had been brought to a close. And just the night before, Richard Sands had told him that Constellation would do everything possible to protect and enhance the Mondavi brand, and thus Bob's legacy.
"I find that it is going to work out very well, much better than I'd thought," Bob told me. "They're going to do exactly what I would have liked to do. They have the right spirit."
His optimism may prove well founded. Jon Moramarco, who heads Constellation's fine-wine division, and Jean-Michel Valette, who now oversees Mondavi, have restored a sense of calm and stability to the winery. They've moved aggressively to address what had been a festering problem: consumer confusion about the brand. Constellation has two separate wine divisions, one to sell everyday wines in bulk to big retail outlets like Costco and Cost Plus, the other to sell luxury wines to the finest restaurants and wine shops. The Mondavi lines, they believe, will easily fit into that framework.
Moramarco and Valette are coolheaded professionals who no doubt will bring less emotion to the task of running the house of Mondavi. They got some good news recently: Robert M. Parker tasted a range of Tim's new high-end wines and gave them rave reviews. "Having this icon brand does shine a light on our total business," Richard Sands told me. "But that will continue only as long as we build on the voice, the vision, and the culture that Robert started. It's in our best interest to build on that legacy."
On a gray Sunday this past April, in a quiet, dignified ceremony at Opus One, Bob stood proudly, and a little shyly, as France's ambassador to the United States pinned a small, artfully crafted ribbon to his lapel. On behalf of the president of France, Ambassador Jean-David Levitte made Mondavi a Chevalier de la Légion d'Honneur. This is France's highest civilian honorcomparable to a knighthood in Britaina tribute reserved for the most influential figures of their time. Few Americans ever make the list. Ronald Reagan did. So did Colin Powell, Norman Schwarzkopf, and David Rockefeller.
In presenting the award, the ambassador hailed Bob's role in elevating the quality of American wine and food and in helping turn the Napa Valley into one of the great wine-making regions of the world. "Robert and Margrit helped change the way millions of Americans eat, drink, and live their lives," Levitte announced. "They changed the culture. They brought to America what we French call l'art de vivre, the art of living."
Even in this moment of triumph, though, there was a sign of enduring pain: Tim and his children were on hand, but Michael and his kids were not. Since the sale of the winery, Michael has more or less withdrawn from the extended family circle. No doubt he needed a breather after the years of turmoil, and he has been busy launching his own venture, the Folio Wine Company, distributing a number of fine wines from around the world.
Tim, by contrast, has drawn closer to his father, as has Marcia. He says that he has lined up fermenting tanks, is buying grapes, and plans to make his own luxury wines. He and Marcia are looking for a plot of land in Oakville on which to build their own winery, with their father as a partner.
As the French were acknowledging that day, Robert Mondavi is a breed apart. Bob often says that while many have vision, few have the wherewithal to turn their visions into reality. "I'm at peace," he told me in one of our last conversations. "I've accomplished 90 percent of what I set out to do. How many men can say as much?"
Paul Chutkow, who lives in Marin, has written several books on business and on artists. His documentary on Robert Mondavi premieres on KRON4 on October 23.
Wine list ping!
90% of the wine that I buy is owned by neither of "the big two," although I do enjoy Louis M. Martini and Rancho Zabaco (both Gallo).
Robert Mondavi is largely responsible, btw, for turning Napa from a ho hum agricultural valley into a spot for the rich and famous.
What a damned shame. To be old and dieing and know that your dream, your legacy, will not live on.
At first, I placed them with the jug wines like Almaden, while I scampered about the truly exclusive wineries in Napa. Prager, Joseph Phelps, the stuff that wasn't sold at Safeway..
Foolishly, I only recently became aware of how good his wines truly were.
I was fortunate to have bought the last six bottles of his 2001 Pinot Noir left on my island. At $22.00 a bottle, I hesitated, but now I'm glad I did.
You may be interested in this thread.
Wine news ping.
Not sure I share that assessment. IMO, Mondavi just got a little big for the type of product (wine) and became fragmented.
The boutiques will always be there and there is no end in sight.
There were Mondavi projects in Italy (Luce), Chile (Sena' which is spectacular) to name a few and had difficulty managing all the different tiers and price points and still maintain quality.
And of course with new markets (South Africa, Argentina, to name a couple) the competition took it's toll. I know it's hindsight but they would have been better off selling pieces over time for cash and concentrating on their core business.
I've met Tim Mondavi a number of times and the man is a delight to talk to. One day talking to him after a seminar I asked him about how the Chilean Sena' vineyards came about and mentioned I thought it was the best wine from the southern hemisphere. He reached into his pocket and handed me an engraved Sena' stainless corkscrew of a quality I have never seen before. I've used it for eight years and opened over a million $ in pricey wine with it. I like to tell that story to trainees and the younger set, their eyes always light up.
They will be missed.
Their reserve cabs can top out to $200 a bottle in top restaurants. You might try to find some vintages at a decent price at a reputable auction house, it is worth the risk to try it once.
I've always admired Robert Mondavi. Perhaps he is a relentless taskmaster, but his mark on the California wine industry is indelible.
Only if you buy all of your wines at a supermarket. I have no problem buying wines not owned by these companies. The wines that Robert Mondavi produced were spectacular. I recently had a 1987 Reserve Cab that was still bright and alive and still had another 10 years to reach its peak. When he launched Opus One he created a wine that all other Napa wines were to be measured against. At its best, it was the greatest wine coming out of Napa. Unfortunately, today other wine makers are handling these wines, and it shows. The latest vintages of the Reserve Cab and Opus One are watery insipid wines, and sully the reputation of the man who put California on the world wine making map.
Very interesting article. Thanks for the ping.
Opus One had a few good vintages LONG ago. Since they expanded the production and started outsourcing the fruit it went downhill fast. Over-rated and over priced. I've never met anyone who thought Opus was better than Mondavi's best reserve cabs. JMO.
Not likely! Most every Cab by every winemaker is a blend to some degree, just not to the same higher percentages as in Opus or other meritage blends.
Typically a few a varying percent of Merlot, Cabernet Franc, Petite Verdot and Malbec are blended in. They are not required to put that on the label if up to 25% of the total volume.
There are exceptions like Robert Mondavi Stags Leap District Cabernet Sauvignon, or Caymus Special Select (and other high-end, low volume producers) that reflect 100% varietals. But they are few and far between and usually out of the price range of most buyers would ever get the chance to experience! And if they are 100% they tend to put it on labels because it is a bragging right.
None? I recall the 1957 Beaulieu Vinyards' Private Reserve Cabernet Sauvignon as being as being exceptional, even bought a case.
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