SWOT Analysis Robert Mondavi and the Wine Industry

von: Malko Ebers

Structure

1. Introduction  1

2. Opportunities vs. Threats: Analysis of the environment the Robert Mondavi Company is settled in  1

2.1 Global environment  1
2.2 The US wine industry – an overview  2
2.3 Competitive forces in the US wine industry  3

2.3.1 Potential entrants  3
2.3.2 Bargaining power of buyers  4
2.3.3 Bargaining power of suppliers  4
2.3.4 Closeness of substitutes to the industry’s products  4
2.3.5 Intensity of rivalry among strategic groups  5

3. Strengths vs. Weaknesses: Internal aspects of the Robert Mondavi Winery 

3.1 Resource situation  6

3.1.1 Tangible resources  6
3.1.2 Intangible resources  6

3.2 Strengths and weaknesses along the company’s value chain  7
3.3 Making the difference – Robert Mondavi’s Core Competencies  8

4. Conclusions 9

4.1 Current standing in the industry 9
4.2 Under Pressure – recent strategies to face the new environmental challenges  9
4.3 Future prospects  10

Appendix  11
 

1. Introduction

The Robert Mondavi Company has been one of the most innovative high quality winemakers in the US history. However during the last years the company is facing increasing competition, especially in their main segment – premium wine. The first step of this SWOT analyses is an examination of the environment the Robert Mondavi Company is settled in. Afterwards we will give an overview regarding three internal aspects: resource situation, strength and weaknesses of the value chain and core competencies. In the third part we will draw the line using the gained information of the SWOT analyses and the company’s current situation to explain the recent strategies and future prospects. The leading question will be: Is the companies resource allocation and strategy still adequate to succeed the new challenges and what are possible alternatives?

2. Opportunities vs. Threats: Analysis of the environment the Robert Mondavi Company is settled in

To analyse the specific opportunities and threats the Robert Mondavi company is facing, we will give a short overview of the general environment of the wine industry including political, technological, economic and global segments. Hereby we will focus mainly on the situation of the US market. Once the boundaries have been identified we go on analysing competitive forces in the industry environment by using Porter’s five forces model. The leading question to answer will be: How is the market structured and what factors cause environmental change?

2.1. Global environment

The size of the global wine industry ranged from $130-$180 billion in the beginning of the 21st century with an average growth rate of 1-2% per year since 1994.1 In general this market is highly fragmented – no company reached more than one per cent of global retail sales in 2001.2 To describe the macro- level of this industry it is useful to separate between two different wine markets, the “New World” and the “Old World”. The international wine industry has been undergoing a significant restructuring. No longer do “Old World” producers such as Italy, France, Spain and Germany dominate the industry to the extent that they once did. No longer are “New World” producers such as Australia, New Zealand, South Africa and California regarded with the contempt that they once were. There are significant differences regarding consumption, production and innovation between the “Old World” market in Europe and the “New World” market in countries such as America, Australia, South Africa and Chile (for details see Appendix, Table 1). Europe, especially France, Spain and Italy shares 75 per cent of world wide wine consumption and production. But during the last decade the “New World” is on the advance, and this trend is accelerating. For example between 1987 and 1999, the vo lume of Australian wine production increased by over 70 per cent.3 Even the relatively high competitive advantage of European quality wine making is declining. Studies such as “ma rketing focus in the Chilean wine industry” by Forster et al and several international wine rankings show the increasing quality of new world wines.4 In the world wide market table wine accounts for an “overwhelming share”. 5 There are five principle segments among the table wine market: jug or commodity (< $3 per bottle), popular premium ($3 – $7 per bottle), super premium ($7 – $14 per bottle), ultra premium ($14 – $25 per bottle), and luxury (> $25 per bottle). In the New World we can observe a trend towards the higher quality premium segment, whereas the European consumer beha viour hasn’t change significantly.

2.2. The US wine industry – an overview

In the last few decades the US wine market has changed dramatically.6 Since the boom years of 1968 to 1972 per capita demand for wine started increasing significantly. In 1986 per capita wine consumption reached 9,2 litres, which was an increase of 82,9 per cent compared to 1972. Population growth led to a total increase in wine consumption of 114,7 per cent from 1968 to 2000 (see Appendix, Figure 2, Table 2). Nowadays the wine industry is an important segment of the American economy, worth $45 billion and creating almost half a million jobs. Due to geographical circumstances this industry is concentrated in California, with a 90 per cent share of the US wine production.7

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1 Roberto, M. A. (2002): p.1.

2 Roberto, M. A. (2002): p.2.

3 Wittwer, G.; Anderson, K. (2001): p.179.

4 Forster, W.; Beaujanot, A.; Zúniga, J. (2002), p. 37f., Wittwer, G.; Anderson, K. (2001): p.184., Wine Enthusiast Magazine voted 4 New World wines amoung the Top 10 in 2003.

5 Roberto, M. A. (2002), p.1.

6 Follwell, R. J.; Volanti, M. (2003), p.25f.

7 Nickening, R. (2004), p.16.