Mondavi

In: Business and Management

Submitted By mohamed3
Words 268
Pages 2
Buy grapes Cost = $500 per ton of grapes (average California price for grapes p. 21)); Produces 620,000 liters of juice, or 827 bottles; at $1.40 gross profit per bottle (assuming gross profit quoted in exhibit 9 is omitted of land purchasing cost), that equals $1158 in revenue per ton or $658 in gross profit per ton (at premium gross profit average).If Mondavi were to acquire grapes, they may be able to produce wine at lower costs. Additionally, if they acquired imported grapes (if the cost justified the potential revenue and profit), they could leverage from the import sales growth they have been experiencing. Although the initial cost of international joint ventures and buying grapes would need to be analyzed and contrasted with the cost and revenue potential difference from internal growing, Mondavi has seen a consumer interest in this wine category and therefore could jump on this market opportunity. Furthermore average pricing per bottle of import wine is set almost 80% higher than premium wines average prices (exhibit 13) and additionally, by buying or partnering with international vineyards, Mondavi could avoid land purchases, development, and some production costs (or only be responsible for 50% if within a JV) but be rewarded with higher gross profits and margins per bottle sold. Finally, although industry forecasts that premium wine will grow among the consumer interest, so is competition and market sharing. There is an obvious market trend among Mondavi wine consumers for their import brands, which are higher priced, and potentially (depending on the strategic situation of buying grape sources) lower cost for Mondavi to…...

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