When talk turns to Napa Valley royalty, Robert Mondavi and the Mondavi family indisputably qualify as the ruling monarchy of the Napa Valley –and frankly the US- wine industry. With an almost biblical or Shakespearean flair, the Mondavi family story of the last 100 years is one of passion, pettiness, family squabbling, wild success, dramatic failure, and of course, wine. In her new book, The House of Mondavi: The Rise and Fall of an American Wine Dynasty, author Julia Flynn delivers a masterful narrative on the Mondavi clan. IntoWine.com recently had the privilege of chatting with Julia about the book and the evolution of the Mondavi family story.
What inspired you to chronicle the Mondavi family wine story?
“The House of Mondavi: The Rise and Fall of an American Wine Dynasty,” began as a front page story for The Wall Street Journal which ran in June of 2004. A publisher contacted me a day or two after the story ran, asking me if I would consider writing a book based on the story. At that point, the company was in turmoil but it had not yet been taken over by Constellation Brands. I agreed to write a book and found myself in the fortune and very unusual position of being able to report closely on the company throughout the summer and fall of 2004, when the board stripped the family of voting control and Constellation mounted its takeover. One of the last scenes of the book takes place at the Oakville winery, shortly after the sale had been announced. I could report that employees were crying at their desks because I was there that day to witness this end of an era in the Napa Valley.
In researching the book, what were you surprised to learn about Robert Mondavi?
I was fascinated to discover how Robert Mondavi brought a lawsuit against his elderly mother, his younger brother, and his two sisters, for his share of the family business in the early 1970s.
Surely, in taking such a drastic step, Robert Mondavi must have known that the ensuing legal battle would, perhaps irreparably, create a deep rift in the family. The court case, Mondavi vs. Mondavi, which was tried in 1976, became one of the most famous in California legal history, and it created deep emotional scars in the family that never fully healed.
Of the many innovations for which Robert Mondavi can be credited, which stand out?
Robert Mondavi and his family were early adopters of such techniques as the use of French oak barrels for fermentation. As in many areas, they were not the innovators, but they helped spread good ideas and technologies. Perhaps most notably, Robert Mondavi, along with Julia Child and Alice Waters, helped lead America’s culinary revolution by tirelessly preaching that Napa Valley wines were just as good as those from such storied regions as Bordeaux. In the 1960s—back in the dark ages of American food and wine marked by TV dinners, “space food,” and jugs of Hearty Burgundy” – Robert Mondavi set out to turn America into a nation of wine drinkers by spreading the word that it was a civilizing beverage that had been embraced through the centuries.
The Mondavi story is arguably as much a tragedy as it is a success. Looking back, what were the most lamentable hardships the Mondavi family endured?
The Mondavis suffered from a recurring pattern of intense sibling rivalry. Cesare and Rosa Mondavi, who came to America from Italy shortly after the turn of the century, had two sons: Robert and Peter. For decades, the brothers worked together at the original family wine business, the Charles Krug winery. But when Cesare died in 1959, the simmering resentment and animosity between the brothers boiled over – leading to Robert punching Peter in the autumn of 1965, in the midst of an emotional dispute involving a mink coat.
Soon after, Rosa banished Robert from the family business. When Robert went a few miles down Highway 29 and founded the Robert Mondavi Winery, he, too, very much hoped his two sons – Michael and Timothy – would work together in harmony. But in an eerie repetition of the family pattern, Robert’s sons also clashed repeatedly over the years, eventually leading the independent directors of the company to strip them of their operating control of the company. The Robert Mondavi Corp., which by 2004 was publicly traded and operated on five continents, was sold against the objections of several key family shareholders.
Mondavi partnered with Baron Philippe de Rothschild to create the famous Opus One label. At launch in the early 80's it was considered a resounding success by many. What impact have the events of the past 15 years -the IPO, the sale of the company to Constellation Brands- had on the reputation and image of Opus One?
Opus One remains a 50-50 joint venture between the Rothschilds and the Robert Mondavi Winery, which is now owned by Constellation Brands. What’s changed since Constellation bought the Robert Mondavi Corporation for more than $1 billion in 2004 is that Opus One operates independently from its two owners: CEO David Pearson, for the first time, has full operating control of the winery now. Speaking personally, I think Opus One wines remains an absolutely delicious wine.
In the early 80's, Mondavi made the aggressive business decision of marketing Mondavi wine to the masses under the Woodbridge brand. While sales skyrocketed, what was the long term impact of this decision?
Harvard Business School has written five case studies on the Robert Mondavi Corp. and one of the key lessons to be drawn from the Mondavi business story is about how they managed their famous brand name, which Robert Mondavi sold to the company in the late 1970s.
Particularly after the company went public in 1993, it faced rising pressure to extend its brand name from its finest Oakville reserve wines to its mid-priced “Robert Mondavi Private Selection,” and even to its lowest priced “Woodbridge by Robert Mondavi.” Brand management, at best, is a delicate balancing act. But a strong case could be made that, facing increasing pressure from investors to improve its profitability, the company overextended the Robert Mondavi brand name, reducing its potency and confusing some customers. By the time Constellation bought the company, Woodbridge accounted for the vast majority of its sales and profits, while the “halo” of its super-premium Oakville wines had been dimmed by the ascendancy of such cult Napa wines as Screaming Eagle and Harlan Estate.
In 1993 Mondavi took the company public. What drove this decision and, looking back, what was the resulting effect?
Like many other wineries in Napa at the time, the Mondavis faced a threat from a microscopic pest called phylloxera, a voracious form of aphid that hid beneath the soil and quietly sucked on the roots of the vines until they shriveled up and died. The family first spotted the pest in 1988. By the early 1990s, they acknowledged they had a potential crisis on their hands. About 80 percent of its Napa Valley vineyards – about 750 of its 937 total acres – were infested. The company was forced to write down more than half a million dollars in vineyard assets in the fiscal years 1990 to 1992 and the estimated replanting bill was $20 million or so. At the same time, its lender, the Bank of America, was reluctant to extend it additional credit, beyond its existing line. By raising money from the public markets, the Mondavis could pay down their bank debt and afford to replant their vineyards. An initial public offering was also attractive to the family because it would allow them to tap into their wealth. The resulting effect was additional pressure from investors for growth. The business of winemaking, which is subject to the vagaries of nature and requires heavy capital investments, may in hindsight have posed special challenges for a publicly traded company.
The sale of Mondavi to Constellation Brands was shocking from many angles. Why?
Before deciding to take their company public, the Mondavi family and its advisors studied such family controlled companies as Levi Strauss, Coors, The Washington Post Company and The New York Times Company.
Using these models, it, too, decided to adopt a dual-class shareholder structure, which would give the Mondavi family the vast majority of voting shares of the company and the right to elect three-quarters of the company’s directors. At the time, this seemed to ensure that the company would be “takeover-proof.” So my question was how this seemingly “takeover-proof” family controlled company, in fact, end up being sold against the wishes of some of the key family shareholders?
I discovered the answer to this question the following year, when I finally was granted a series of lengthy interviews with Ted Hall, the former McKinsey & Co. consultant who had been brought in by the board to replace Michael Mondavi as chairman. The closely guarded secret, until then, was that Robert Mondavi had become financially overextended as a philanthropist, which was a source of deep worry to his family and his advisors. He had given away much of his fortune to such institutions as the University of California at Davis, Copia: The Center for Wine, Food and the Arts in Napa, and Stanford University. And when Robert Mondavi Corp.’s stock dropped below $20 a share in early 2003, Robert was underwater --- the dollar value of his shares couldn’t cover his many philanthropic commitments.
To boost the stock price and thus help rescue Robert from this predicament, the board staged a coup which removed Michael as chairman and stripped the Mondavi shareholders of their voting control. In the midst of this turmoil, as the company was studying all of its options for improving shareholder value, Constellation Brands came into the picture – sensing an unusual buying opportunity. One of the most explosive quotes in “The House of Mondavi,” comes from Timothy, Robert’s younger son, who told me: “We felt the directors were holding a gun to our father’s head and asked us to pull the trigger. I could not run the risk of his bankruptcy, even if he would have.”
Fill in the blank: When history looks back, Mondavi's legacy will be ________________.
......as the person who put Napa Valley on the world’s winemaking map.