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THE MONDAVI FAMILY – A BITTER CUP

Source : Family Wars – Grant Gordon & Nigel Nicholson

ORIGINS

The central character in this story is Robert Mondavi, an inspirational entrepreneur who pioneered a revolution in the Californian wine business that saw it emerge in the latter part of the 20th century as a region that is now recognized as one of the world’s great sources of fine wines. Leading by example, he was able to demonstrate that the business acumen of his native US citizens could be combined with the best skills from the Old World to produce wines that could be widely marketed to people who could appreciate good quality in their glass.

It is testimony to the drive and determination of the man that Robert was able to implement his vision when he was well into his 50s. It was the 1960s, and he was armed with a vision of how he could go about merging the art of Europe with the savvy of North America. Robert was spurred into action by a desire to prove himself, and his rivalry with his younger brother Peter.

Robert and Peter were born in Minnesota just before the beginning of the First World War, the youngest of four children to parents Césare and Rosa Mondavi who had recently emigrated from Italy to the United States. Father was the provider and believed strongly in self-reliance, while their mother worked hard, helping the family make a living by lodging other immigrants as boarders in their house. Césare, wishing to make a better living for his family, saw the opportunity to go into wholesale supply of grapes to the wine-producing Italian community of America.

RIVALS

In their youth the siblings were already rivals, competing in the summer along with groups of workers in the family winery business to see who would nail together the most wooden boxes. With his strong fighting spirit and desire to win, Robert usually came out top, happily crowing over his brother that he was ‘world cham- pion’. During the 1930s the Mondavi boys were growing into young adults. Robert was the first to join the wine business in 1936, and immediately it ignited his passion. The family business took an important strategic turn in 1943, during the Second World War, when Robert persuaded his parents to acquire the Charles Krug winery and move out of the wholesale business into higher-margin bottled wines. Césare made only one stipulation for his son Robert on buying the winery: that he should work together harmoniously with his brother Peter. So it was at the end of the Second World War that when Peter was discharged from the army he joined Robert at Krug.

The brothers were very different in terms of motivation, interests and values. Robert focused on the business, where he held the reins in terms of sales and marketing, with few outside interests, apart from getting married to Marge in 1937. His subsequent lack of attention to his growing children and to his marriage was to haunt Robert later on in life. His younger brother Peter followed a more balanced approach to life, leaving time outside his work, where he was responsible for all the production aspects of the company, to devote to his hobby – fishing – and his family. Robert, wanting to develop the business, constantly pressured Peter to produce better wines to improve the family firm’s reputation for quality. When Peter did not deliver Robert was angered. Increasingly the two grew apart.

THE BROKEN CUP

With the death of the patriarch Césare in 1959 the family no longer had a peacekeeper and the divisions between the siblings widened. The family firm was no longer unified by a shared vision. Robert’s ambition to be the best was not matched by Peter’s honest but more modest aims. In November 1965 the Mondavis assembled for a family gathering, which turned out to be the stage for a fundamental point of fracture. Robert and Peter got into a fist fight over an argument about Marge’s new mink coat, and whether it had been bought with company money (which it transpired it had not). Robert, now in his 50s, seemed to gather the negative energy of their decades of rivalry and let his emotions rip, landing several blows on Peter. The fight ended with neither apology nor handshake, even though it transpired that the original cause was a misunderstanding.

Indeed it divided the family and left Rosa the matriarch heartbroken. As a result of the bust-up Robert was forced by the board to take six months’ paid leave from the company, leaving behind his brother Peter to manage the business. The fallout was a cloud of acrimony, with Robert accusing the firm of wrongful dismissal and demanding he should be free to cash in his 20 per cent share in the business. Robert fought his case in the courts to secure this claim, which he eventually won after a decade-long battle.

The biggest change that followed from the family split in 1965 was Robert’s liberation to pursue his vision of founding a new and bold high-quality wine venture in the Napa Valley. He set out to create the best winery, producing fine wines that would sell by reputation and not by price, emulating the finest European producers. At the outset, because his financial resources were limited, he brought in a partner. Some years later when he had achieved the settlement with his family and the new business was beginning to flourish, he was able to buy out his partner and become fully independent. The Robert Mondavi Winery earned its spurs in spades, producing what the founder had set out to do, and becoming an exemplar for other Californian wine pioneers to follow. Mondavi’s reputation grew to the point at which Baron Philippe de Rothschild, seeing the potential in New World wines, knocked on the door of Robert Mondavi when he decided he wanted to develop a winery in California. In 1978 their partnership winery Opus One was established; another venture that was to earn high accolades among wine connoisseurs.

RIVALS, MARK II

With his freedom from the rest of his family Robert had been able to push forward to ever greater heights. Now in his role as founding father of his own company Robert wanted to develop his sons to become the future leaders of the firm. But the skills of business visionary and family steward do not necessarily go hand in hand. Part of the issue was that Robert, like his father, wanted to see both his sons Michael and Tim take a leading involvement in the family business. By placing the two sons in open competition with each other he was unwittingly reproducing his own past and driving a wedge between them. Often, when they made a mistake, he would dress them down publicly, humiliating them in front of employees.

Robert’s apparent lack of any ‘soft’ side was a liability. He seemed oblivious and unconcerned about the problems that his harsh behaviour caused. Michael, the elder and more extrovert of the siblings, was perceived to be the natural leader. Tim, the younger and more reflective brother, had been reluctant to join the family business, remembering the family fights between his father and uncle. Robert played around with different leadership models and eventually installed his sons as co-CEOs in 1993, following the public flotation of the business. He had been afraid that in choosing one of his sons for the role that the other would leave the company. But this decision muddied the waters. During these years the business was growing fast and was beginning to over-extend itself. The co-CEOs were lacking in the required discipline and clarity of decision making. Co-leadership in this case was struggling to provide either of these important management attributes.

Robert’s strong suit clearly lay elsewhere than in developing a family business continuity plan. The Mondavis’ approach to succession planning was to try every solution in the book. Part of the reason behind the failure to get to a lasting solution was the senior generation hanging on to power. But equally the next generation, particularly Michael, never fully rose to the challenge. Perhaps their father had too zealously tried to mould his sons to reflect his view of the world, rather than just instilling in them good ownership skills and bringing them on as stewards. Maybe their sister Marcia was the leader that they should have had. She served on the board of the company and had strong views; for example it was she who challenged the proposal to float the business.

In fact the initial public offering (IPO), which was designed to help the business finance growth, marked the opening of the final chapter for the family business. This period culminated with the loss of independence of the firm a decade later when the business was taken over. By the time the company was put up for sale in 2004 both of the brothers had left the company. Michael’s reign of leadership was unsuccessful and in 2001 after a relatively short period at the helm he stepped down as CEO. Although he remained as chairman of the board he had become a lame duck leader and the board ousted him in early 2004, with no evident opposition from his father. With the board firmly in non-family hands the decision to sell the business in the face of an offer from a larger competitor went through unopposed, bringing to an end the family business.

If there was to be a consolation prize for the sale of the business, it was the public reconciliation of Robert with his brother Peter, by then both in their 90s, announcing that they would co-produce a barrel of wine for a charity auction.