Word: mondavi
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Geddes is doing more in America than getting mentioned in magazines. In 1995 he engineered the first Italian-American joint venture with California's Mondavi, a fifty-fifty partnership in which the two companies jointly hold the Luce della Vite corporation, which owns two Tuscan estates. A shared board develops marketing and distribution strategies, and winemakers from each company collaborate on the wines. The resulting lines are designed to compete at three different price levels, an essential for mass competition in the global market. Luce is made from a blend of Sangiovese and Merlot grapes grown entirely in Montalcino...
Geddes plans to double Frescobaldi's business by the end of 2004, with 60% coming from Frescobaldi-owned lines and 40% from the Mondavi partnership. "There will be fewer cases, but we'll be getting more than double per case," he promises. When Geddes looks out from the Palazzo Frescobaldi toward Santo Spirito, he can't help thinking of the family history. "But," he adds, "you have to be able to connect the past with the future...
Witness Robert Mondavi Corp.: for a decade it had increased revenues at an average of 15.5% a year, leading an industrywide wine boom. Profits kept pace until 1998, but then they dropped more than 20% from a year earlier, to $29 million. Partly that was bad luck, the delayed effect of late rains in 1996 that ruined harvests and kept the company from making enough of its best-selling Woodbridge Chardonnay to meet demand a year later. But Mondavi neglected to warn retailers of the shortage and failed to put them on allocation--tell them each store could get only...
...took Mondavi another year to get its shelf space back, which it accomplished by wooing retailers and cutting prices. The average wholesale price for a 12-bottle case of Woodbridge dropped from $37.75 in 1998 to $36.65 this year. Partly to balance that, it raised prices on some of its more expensive wines (yes, there are still some businesses in which that is possible). Mostly because of increased Woodbridge volume after the price cuts, profits in the most recent quarter bounced up 24% over the previous year...
...burned Hewlett-Packard, Rockwell and many other U.S. companies in 1998 has yielded to a weak recovery that is at least less profit-destroying than a continued collapse. Contrary to all predictions, the American boom has not only rolled on but also speeded up. And marketing errors such as Mondavi's are relatively easy to recover from in an atmosphere of rising incomes and free consumer spending. But even if the 1998 profit lag was an aberration, as many economists think, U.S. and global production capacity still exceeds demand, and price competition is relentlessly sharp. Keeping profits up still requires...