Constellation makes offer for Mondavi

Dana Myers says,

Dana, I have been hoping that the immediate family of the still-alive 91 year-old Founder could at least keep their "home winery" holdings together until the Old Man is gone.

I think the latest developments are sad and ugly. Ugly, particularly since, twenty years ago, one of the most awful New York State producers of plonk decided to get into the fine wine business by leveraged buyouts.

First they bought out Seagram's operations in the the Finger Lakes, which included Taylor, a venerable name in wine history, distinguished in heritage, but not perhaps in modern-styled wines.

Farmers all over the Finger Lakes have been in an economic funk ever since. The Finger Lakes have been in economic depression.

Then, Canandaigua changed its name to "Constellation Brands", a name I myself invented and proposed, ironically, to members to the Seagram Group in 1982 (specifically, Sterling Vineyards marketing people: they weren't interested).

Sterling and others of the better properties of Seagram were later sold by the Bronfman family (who wanted to sell out of the liquor business and enter Hollywood).

That parcel, and I think Heublein, was eventually sold to Deageo, the British multi-national which also controls Beaulieu in Napa Valley.

Now, Constellation, which already controls Franciscan in the Napa Valley, and Simi in Sonoma County, has its eyes on the prize.

I am revolted by the developments. I always expected that the Mondavi family would sell off their Woodbridge "plant" (which resembles an oil refinery), raise cash from that sale, and buy back and concentrate on what made them great, the original, "home" Oakville vineyards and their long association with Mouton-Rothschild at Opus One.

Now it appears that the New York financial sleaze-balls who transformed Canandaigua from a shitty, third-rate upstate New York producer of sweet, fortified ghetto "misery" wines, to an international, avaricious Devour and Conquer conglomerate, are at the bottom of this takeover for Mondavi's unimpeachable lustre as the most honorable and respected winery in America.

I want to puke. I've lived in Napa Valley for 29 years, and have been involved with its progress for all of that time.

I CHOSE Napa Valley as my business model and my life's career, because of the anarchic, quirky personalities of its defiant, independent pioneers.

Now, after decades of success, the Napa Valley might as well surrender to Proctor & Gamble.

I wash my hands. I had my day. Now its all corporations, Parker, Hollywood and "hang time", seeing how much alcohol and extract you can get from a grape cluster to flim-flam the world wine scene, to exract another point on the 100 pt. scale.

This is not winemaking It's bullshit.

---Bob

Well, it's been a while since that was possible. You probably know more ex-Mondavi people than I do, and I know a few. The sons, or, shall we just say, The Son, have not run the company the way father did. If there's a bomb going off now, it was launched some time ago.

You're not alone in wishing the kids could have kept it together. They couldn't.

Ironically enough, Constellation seems to be offering the best path out for Mondavi. Mondavi *together* seems to be worth more to Constellation than anyone else, Mondavi especially.

More irony - if there was indeed a plan afoot by the Boys to gather up the flagship winery at a bargain, Constellation is keeping them honest. That's nothing but good, even if I wasn't a shareholder. I'd hate for Mondavi to become known as the Enron of Napa Valley. I doubt that will happen now.

Marketing people are far worse than software engineers when it comes to NIH.

... and Ravenswood and Estancia. Have those properties really suffered a worse fate under Constellation than they would have otherwise? Remember how long it took to complete the Franciscan remodel - and how quickly it was done once Constellation owned them? Perhaps there's a sad truth in there.

Well, I used to think that, too. Then I started thinking about it like a businessman. Woodbridge has been generating far more income than Oakville for a long time. If you look at it as a business, Oakville is subsidized by the bulk operations. Can anyone say "Canopy Management Inc." ?

The lustre has been gone in all but our sentimental memories for several years.

The '90s saw fit to render those anachronistic dreamers into retirees or businessmen. There are a scant few exceptions. The Napa you speak of has been gone for over a decaded, a victim of home-grown success.

Mondavi chose to go public. The Constellation offer is probably the best thing that's happened to Mondavi in several years. It's way better than the divestiture proposal from a sentimental perspective.

You're talking about something else now, something Mondavi has little to do with, and you could not be more right. You don't just get extract, sometimes you add it. Conc. You know. Even some of the highest-end wines end up with an odd touch of residual sugar.. but look at the color! Parker and Laube. 15% ABV Chards.

There are still Winemakers in the Valley. They're just not as well-known.

Dana

Dana,

Well-spoken. I think that Mr. Chai is still visiting Disneyland (maybe the R. Mondavi exhibit?) in his view of the indurstry, the white knights of Mondavi, and the Constellation Evil Empire. Ask the Huneeus family and the people at BRL Hardys their impressions of Constellation. They are brilliant financial strategists, but are also smart enough NOT to micro-manage the CA wineries that they now own. Costellation's de-centralized business approach is a refreshing change from the Diageo/Allied-Domecq/Brown-Forman's of the world that think that all decisions have to be centralized and distributors brow-beaten.

Yes, Constellation has some brands on the low-end of the totem pole. But their breadth runs pretty deep. After all, outside of the Napa Valley, consumers by and large don't drink $40 NV Cab Sauv from Oakville with their pizza! Being in the industry, I would hope that Mr. Chai recognizes that this "plonk" helps to bring in new consumers to the category. In my book, that's a good thing.

Good observation about the Constellation price keeping the piecemeal suitors "honest." An accurate read. As far as what's better for the industry and the folks at Mondavi, I think that's an easy decision- look at layoffs, months of indecision for the brands, a size de-compression of R. Mondavi Napa (THAT helps stockholder value???) or everyone that owns R. Mondavi stock makes a lot of money, all brands remain part of the same family, and the family still stays intimately involved in the company. While the stockholders have not put all their cards on the table, I think that the pot is TOO BIG to pass up- not to mention be in the company's best interests.

Bottom line, the wine business IS BIG BUSINESS! The idea of buying a nice little parcel of land in Napa/Sonoma and making 10K cases of $20+ wine is now more or less the domain of the super-rich or corporate entities. But guess what, there's still the opportunity for the virtual winery entrepeneur to make hay in this biz if they're good and creative, which makes this industry still a lot of fun.