Robert Mondavi and the Wine Industry: Five Forces Analysis

This case study analyzes Robert Mondavi and the wine industry through the lens of Porter's Five Forces model. The analysis examines the competitive forces shaping the industry, including the threat of new entrants, bargaining power of suppliers and buyers, threat of substitution, and rivalry among competing firms. The study contrasts the 'old' and 'new' wine industries, highlighting changes in production, distribution, consumption, and marketing. It discusses how globalization, technological advancements, and evolving consumer preferences have reshaped the competitive landscape. The assignment identifies key strategic challenges and opportunities faced by Robert Mondavi, such as competition from international brands and the need for promotional strategies to increase brand awareness. The document outlines the impact of these forces on the company's performance and strategic decisions, offering insights into the dynamics of the wine industry.

PORTER FIVE FORCES

Porter`s five forces model
This model is used to identify and examine the five competitive forces, which shape every
industry that helps to regulate the weaknesses and strengths of the industry. Competitive
forces which Robert Mondovi faces in US is described below-
Threat of new entrants- in the old industry, the threat of new entrants was less. During
1960s, many beverage conglomerates such as Coca-Cola have decided to enter the premium
market by merging with the ultra-premium wineries. By the time, it was noticed that the wine
groups acquired and complemented beer and distilled spirit organisations. Whereas, in new
wine industry, growing number of wineries which are owned by multinational companies
have free flow of cash so that it is able to get the advantage of economies of scale by
collaborating with RMC1.
Bargaining power of suppliers- Earlier, the bargaining power of the suppliers was high as
there were limited number of producers in the old wine industry. During 1982 when RMC
group ltd. was able to increase its profits that had led to making of aggregate plants and US
plants. Therefore, the company started growing grapes for wine. Whereas, new wine industry
has huge number of cultivators and started availing grapes and RMC started working to
improve the grape quality, which has improved the price stability as most of the cultivators
see RMC for nutrition and their quality2.
Bargaining power of buyers- It has noticed that old wine industry gave a wrong message
regarding the consumption of wines. As it was believed that wine is consumed only on
special occasions whereas beer can be consumed on every occasion. During early times,
companies undertake the marketing strategy to educate people about the fine wine. In the new
industry, five countries such as Australia, Chile, US, Canada and New Zealand have signed a
trade agreement in 2001 regarding the reduction of trade barriers. With the globalisation of
the industry, many international wine brands have been trying to position themselves through
powerful supermarkets3.
Threat of substitution- Various categories includes alcoholic and non-alcoholic drinks such
as distilled spirits and beer. In the old industry, threat of substitute production exist in the
wine category as many people think beer can be a substitute to the wine. However, other
drinks are compliment rather than a substitute product as each drink has its own
1 : Perovic, Nikola. "Global Crisis In Wine Industry." researchGate (2012): 4,5. Web. 7 Feb. 2019.
2 "Company Perspectives." History of RMC Group p.l.c.. N.p., 2019. Web. 7 Feb. 2019.
3 Mondavi, Robert. "Robert Mondavi And The Wine Industry." N.p., 2019. Web. 7 Feb. 2019.

characteristics. In early times in 1999, all the channel distributors started substituting
Chardonnay brand at the retail selves as soon as RMC faced shortfall in supplying
Woodbridge. In the new industry, it has numerous wines with same taste, price, and quality,
which are available with the local and international brands4.
Rivalry among Competing Firms- old wine industry majorly relied on the fiercing
competition in the early world and it was limited to three main competitors as they too
focused on producing the premium wines. During 2001, it is seen that US`s wine industry
engages 1500 wineries with 70 percent of total production. RMC “potential grapes grower”
faces intense competition from the large producers such as E&J Gall Winery and Southcorp
holds the market largely controls 50 percent of market. New industry focuses on new
emerging competitors to give suitable promotional strategies that increased brand awareness.
Moreover, new producers have also employed wine testing and several educational activities
to aware public in order to sustain in the competition5.
4 Same (2)
5 Bačar, Franci. "The World Wine Industry Is Shifting From Old To The New Wine World." Vineyard.
N.p., 2019. Web. 7 Feb. 2019.