In January 1998, at the peak of summer in the Southern Hemisphere, the Mondavis hosted another blowout. This time, it was to celebrate the release of the Mondavi and Chadwick families’ first jointly produced wine, named Seña, which means “distinguishing mark” or “personal signature” in Spanish. To make a splash, they jetted a group of importers, distributors, and wine journalists to Chile, where in sweltering ninety-eight-degree heat, the group boarded air-conditioned buses in Santiago and drove to the Chadwick family’s Don Maximiano estate in the foothills of the Andes. Since the construction of La Arboleda was not yet complete, the partners had made their first vintage of Seña there instead. On the estate’s formal lawns, bordered by rose gardens, guests nibbled on empanadas and sipped some of the Chadwick family’s wines.
At a black tie ball that evening, held at an imposing converted fortress in Santiago called Castillo Hidalgo, Seña made its debut. In a memorable entrance, a parade of waiters carried the distinctive bottles out to the group, amid applause. Priced at around $50 a bottle, the vintage 1995 Seña was one of the most expensive Chilean wines at that time. “It certainly is the best Chilean wine I have ever tasted,” wrote the wine journalist Anthony Dias Blue, who joined the festivities. After the wining and dining, the partners presented their guests with small gifts made of lapis lazuli. Not a mention was made in the media coverage of the joint venture’s ongoing problems.
The press was far less respectful four months later, when Mondavi unveiled a $10 million plan to develop a wine-themed exhibit in Disney’s California Adventure, a new fifty-five-acre park adjacent to the original Disneyland in Anaheim. “Don’t expect a Goofy Gewürztraminer or a Pocahantas Pinot,” noted the San Francisco Examiner. The Associated Press led its story on Mondavi’s $10 million Disney project with a lighthearted look at the partnership: “The Happiest Place on Earth may get even happier for adults who want to sip a little Merlot after a dizzying ride on Space Mountain.” “Huey, Dewey, Louie and Wine?” was the industry newsletter Market Watch’s headline. The Los Angeles Times noted that Walt Disney himself strongly opposed serving alcohol at his original park. “I like a drink,” Disney had quipped, “but if people want one, they can get it elsewhere.”
A few found the very idea of plunking a minivineyard in the middle of a theme park downright offensive: “Here’s a promotion I can’t help hating: Robert Mondavi will re-create a California wine country experience for Disney’s newest theme park…. Now you can simply go to Anaheimto experience the rest of the Golden State,” wrote Sumi Hahn, a columnist for the alternative Seattle Weekly. “I guess they deserve it.” Almost none questioned whether the tightly controlled corporate culture of Disney, which had $22.9 billion in sales in 1998, would mesh with the much smaller, more loosely controlled culture of Mondavi, which was driven both by the family’s passionate interests and a drive for profits.
Disney had first approached Mondavi about supplying wine to its new park, but the talks quickly evolved to forging a deeper partnership. It was Mondavi who pushed to develop and operate the new winery exhibit, and it didn’t take long for Michael to become the plan’s biggest internal booster, convincing Mondavi’s board to support it over the initial hesitations of his family. The business case was compelling enough for the company’s outside directors to accept it: Mondavi would become the sole wine company at Disney’s new $1.4 billion theme park. Under the terms of a ten-year contract, it would run and control the exhibit’s operations, including a real, twenty-thousand-square-foot working vineyard, a retail room, and an upscale restaurant modeled after the Vineyard Room in Oakville.
Mondavi planned to ride on California Adventure’s coattails. With Disney predicting seven to ten million visitors to its new park the first year, Mondavi used Disney’s estimates to forecast that it would attract to its strongly branded exhibit roughly a quarter of those, or as many as two and a half million visitors a year. Compared to the roughly three hundred thousand visitors to Mondavi’s Oakville winery each year, the company reasoned it was a chance to broaden its exposure, particularly to overseas visitors who might not include a trip through Napa Valley on their U.S. itineraries. Disney representatives traveled to Oakville to explain their marketing plan, which included promoting the new park to those who had never been to California as a way to make a quick swing through the Golden State. It seemed like the perfect platform to achieve Mondavi’s larger goal: bringing wine to the masses.
There were also, arguably, some benefits to having two Mondavi centers in southern California, since the Costa Mesa Center for the Food and Arts was located near the park. And the deal appealed to Michael’s family pride: Out of hundreds of wine families, Disney had chosen to team up with the Mondavis. “The opportunity to showcase wine as a part of the California experience on this level is the fulfillment of a lifelong dream for my father and our family,” enthused Michael when he announced it. The deal seemed to demonstrate his ability to think outside the box: Rather than relying on his father’s methods of comparative tastings and word of mouth, the Disney deal showed that Michael was finding novel ways to expose the Mondavi brand to a new generation of customers, just as he was embracing the Internet and sponsoring an IMAX film on California. Michael predicted it would be profitable in its first year.
But the market’s confidence in Michael started showing cracks. On January 21, 1998, the company announced its second-quarter results, which were in line with what analysts had expected. But the stock began to tumble after Mondavi announced that it was facing a Chardonnay shortage. The company’s shares dropped 16 percent, to $40 a share, and then another 9 percent to $38. Analysts were further spooked by the news that Mondavi had asked retailers such as Costco to reduce the amount of Woodbridge Chardonnay it was shipping to its stores in order to keep some of the brand on its shelves. They had refused and Michael explained that the stores preferred to sell off their Woodbridge inventory until it ran out.
It was an ominous sign, since it suggested that Mondavi had stumbled in managing the supply of its wines to important retailers. It also indicated that Mondavi had flunked a key test of being a public company: not surprising analysts. Around that same time, more bad news hit. The company was named in a civil complaint against former agriculture secretary Alphonso Michael “Mike” Espy, who was accused of having accepted illegal gifts from such organizations as Tyson Foods, Quaker Oats, and Sun-Diamond Growers of California. The Robert Mondavi Corp. was a bit player in the drama, having given Espy six bottles of wine worth $187 and dinner at a Washington restaurant for him and his girlfriend, worth $207. It also issued Espy a standing invitation to visit the company in Napa and offered the political appointee the use of a guesthouse.
The case drew in Mondavi’s head of public affairs, Herb Schmidt—a true Mondavi loyalist who carried three business cards: The first read “Herb Schmidt, Vice President, Public Affairs”; the second, “Herb Schmidt, Industry Gladiator”; and the third, in deference to his employers’ Italian roots, “Herb Schmidtavi, Affairs Publici.” In July of 1998, Mondavi agreed to pay a $100,000 fine and $20,000 to defray the costs of the investigation in return for dismissing the two-count civil complaint—a mere slap on the wrist compared to the $6 million fine slapped on Tyson Foods. In mid-June 1998, the company threw a big party to celebrate Robert’s eighty-fifth birthday. Margrit presented him with a pair of emus and Robert, acting decades younger than his age, donned sunglasses, picked up a guitar, and started jamming with the band. He displayed more confidence than musical talent. But on June 22, the company scheduled an unusual conference call with analysts. Michael warned that Mondavi’s fiscal fourth-quarter and full-year 1998 results would be 15 cents below analysts’ consensus estimates. The merriment of a few days earlier instantly vanished.
While missing estimates by 15 cents isn’t, in itself, unusual or particularly egregious, it was the fact that Mondavi had waited until just eight days before the end of the fourth quarter and fiscal year to alert the market to the shortfall that cratered investors’ confidence. As Michael, Greg Evans, and the company’s controller, Steve McCarthy, sat around the long glass table in Michael’s office at Latour Court, they watched as MOND ticked 15 percent, then 20 percent, then 25 percent down as they were on the conference call with analysts. Officials at NASDAQ ended up halting trading of Mondavi’s stock.
As an offering to Wall Street to prove that it was serious about boosting earnings, the company said it would lay off seven executives to get the company down to its “fighting weight.” It was a small number of job cuts and analysts who followed the company closely weren’t impressed: Many of the people who lost their jobs were close to Robert and Margrit and seemed untouchable in their job security. Alan Schnur told Axel Fabre, who had run the Great Chefs program for more than a decade, and the other terminated executives to immediately clean out their desks. Within five minutes, they were escorted off the premises. Fabre and several others wept as they left.
Wall Street kept punishing Mondavi, pushing its stock down another 14 percent in the days after the news. Although the Chardonnay shortage had begun easing up by the early summer of 1998, another problem loomed: Because Woodbridge Chardonnay was temporarily unavailable, some Mondavi customers began switching their loyalty to other moderately priced wine brands instead. Analysts lowered their investment ratings, explaining they’d lost confidence in Mondavi’s management and its ability to fix the slowing trends in Mondavi’s crucial Woodbridge brand. From its record high of $56.75 on October 22, 1997, the stock lost nearly a third of its value, tumbling to below $30 a share as the 1998 harvest approached.
Behind the scenes, Mondavi’s directors were planning a more radical move. In early August, when the company announced full-year results, it tapped the company’s longtime chief financial officer, Greg Evans, to become chief operating officer, taking on some of the duties that had been Michael’s. Then forty-nine, Evans had a far better academic pedigree than Michael’s and a less volatile personality. While Schnur publicly insisted at the time that the shift didn’t mean that Michael or the family was stepping back from Mondavi’s management, that’s exactly what was happening. The analysts and industry observers who were following the company closely felt the change was overdue.
In his former role as chief financial officer, one of Evans’s challenges had been to try to smooth the company’s earnings—a task faced by every CFO of a publicly traded company, as he or she sought to avoid surprises. But that wasn’t easy in an agricultural business vulnerable to the vagaries of the harvest and market each year. So one of the first steps Evans and his newly appointed CFO, Steve McCarthy, took after the earnings shock of the summer was to change its method of accounting for its inventory from the LIFO method—which stood for “last in, first out” and helped save on taxes by minimizing earnings—to the more aggressive FIFO method, which meant inventory would be counted “first in, first out” and improved the company’s ability to predict and manage earnings.
In explaining the change to investors in the fall of 1998, Mondavi argued that the switch allowed it to better match revenues and expenses of the wines it was selling and would also help it more closely link its executive incentive plans to its financial results. Despite this move, there remained a lingering skepticism toward Mondavi management.
Opus One remained the jewel in the Mondavi family’s crown. But despite its success, it was hardly a model for a smooth or easy partnership. Over the years, the bickering between the French and American sides rarely ceased. And the internecine warfare between Michael and Timothy, of course, continued. Finally, the boardroom situation grew so paralyzed that the Rothschilds insisted on having an outsider evaluate the business. The partners hired a local investment banker specializing in the wine business named Vic Motto, overseen by a task force headed by Evans and a Rothschild executive. When Motto took on the assignment in 1998, he discovered a joint venture resembling “a marriage without love.”
One of the key strategic issues facing Opus One was its dependence on Mondavi’s sales force for sales and distribution. Under Mondavi’s watch, the elite brand had occasionally landed on a bargain retailer’s shelves. To the dismay of the Rothschilds, wine buyers for a time could even buy it at Costco. Worse, positioning and selling Opus One seemed almost like an afterthought to Mondavi’s sales organization, as its pipeline of products swelled with new offerings from France, Italy, and Chile. With Motto’s help, the partnership eventually agreed to kick all the owners off the board, including the Mondavi siblings, and work toward giving Opus One more independence from its parent across Highway 29.
Michael suffered no lack of glamorous events to attend, however, as president of Primum Familiae Vini in 1998. During a swing through Asia earlier in the year, with stops in Hong Kong, Taipei, and Singapore, the group marketed itself as being comprised of the world’s leading wine dynasties. Even Michael, whom one observer described as set apart from the Old World family representatives by his California accent and feel-good manner, emphasized the dynastic elements of the Mondavi business. When asked indelicately toward the end of the wine-saturated evening, “Do you stand in the shadow of your father?” Michael replied, “I say that when you stand on his shoulders, you can see much further.” Using some computer terminology that he’d picked up at executive training seminars and elsewhere, Michael explained how the company aged its reserve wine for eighteen months in French oak barrels, noting that “we want to make it smooth and, to use the computer term, user-friendly.” The remark provoked laughter all around.
Michael also explored the possibility of adding another continent to the company’s rapidly expanding portfolio. In addition to North America, South America, and Europe, he grew interested in Australia, although Southcorp, Australia’s largest wine producer (which also made washing machines, refrigerators, and water heaters) had first approached Mondavi. In 1998, its managing director, Graham Kraehe, made the long journey to Napa to meet with Michael and discuss combining their wine businesses. That evening, Kraehe was invited to dine with Robert, Michael, Evans, and others at Mondavi’s guesthouse. Kaehe proudly arranged to serve his hosts his company’s finest wine, the $200 Penfolds Grange, an intensely concentrated red. The next day, at a board meeting that included a tasting of many of Southcorp’s wines, Robert didn’t bother hiding his feelings: “What the hell is this?” he asked, sputtering in outrage that there was no way he was going to enter into any sort of partnership with a company that made what he considered to be such lousy wines.
Robert’s visceral dislike of Southcorp and what he saw as its soulless corporate winemaking effectively blocked the possibility of a business combination between the two companies. But Southcorp’s courtship piqued the family’s interest in finding another way into the booming Australian wine market. They turned to Robert’s longtime friend Robert Oatley and his Rosemount Estates, Australia’s largest family-owned winery. But over the years, when the Mondavi patriarch had suggested teaming up, Oatley had declined, fearing that he would be the junior member in the partnership. Hoping to change his mind, Michael, Timothy, and Evans took a trip that year to pay their respects to the family and their privately held company, laying the groundwork for a venture down under.
Soon Mondavi itself was on the radar of rivals looking to expand. Beringer Wine Estates Holdings, the venerable Napa Valley wine producer that had been sold by Nestlé to the Texas Pacific Group in 1996, contacted Philip Greer to explore a possible combination of Beringer and Mondavi. But that idea was abandoned after it became clear in the organizational chart drawn up that Beringer’s longtime head, Walter Klenz, would get the chief executive job for the combined companies, not Michael. Then they came up with a second plan. In a stock exchange, Beringer would control Woodbridge, Private Selection, and other lower-priced wine brands, while the Mondavi family would have majority ownership and control of the Oakville winery. After running the numbers, Greer concluded that it not only addressed Timothy and Robert’s worries that the company was shifting focus away from its luxury wines, but also satisfied the family’s desire for control. To Greer, “it made a hell of a lot of sense.”
That idea didn’t fly either. Evans claimed “governance issues” were the deal’s major stumbling block. But the fact that such a potentially important transaction didn’t get a full hearing by the board proved discouraging to some directors. James Barksdale, the former CEO of Internet pioneer Netscape Communications Corporation, quit soon after the demise of the Beringer deal. Since Mondavi’s independent directors seemed to have no voice, he didn’t see, at a time when he was starting a new company of his own, why he should bother.
Back in Napa Valley, Michael turned more of his attention to his home. He and Isabel arranged for a local fire department to burn it down to make way for a new nine-thousand-square-foot house, including a “mudroom” that was larger than many condominiums, a butler’s closet, two fireplaces, an elevator, a pool, a heated spa, and a cabana. They raised eyebrows in Napa by donating the home they’d built in the 1970s to their local fire department for use as a training site—a donation sometimes used by wealthy homeowners to get a tax write-off. Michael and Isabel’s home was a particularly welcome gift to the Yountville Fire Department because of its large size and open design. Even before the fire crews moved in, the local SWAT team used the house for an exercise. It took place over four to five days, and Michael periodically stopped by to watch what was going on. When the new house was completed, Michael invited members of the Yountville Fire Department to his new $4 million-plus estate.
Michael still maintained a sharp interest in the Disney venture, and his enthusiasm for the project translated into a full-blown effort to make it a success. The first employee hired for the new venture was Jonathan Smiga, who had an MBA and was a graduate of the Cornell Hotel School. Inspired early on in his career by what he called the “romance of the restaurant business,” Smiga wrote his college thesis on how wine and food function as an art form rather than as a craft. His mindset seemed perfect to uphold the Mondavi family’s core values of offering quality wines in every price range. Fluent in the management-speak that so many of Michael’s new hires seemed to possess, Smiga arrived in February of 1999 as the Disney project’s manager.
Before Smiga joined the company, Michael had signed a contract with Disney, obliging it to pay some $10 million in return for the licensing rights to the Golden Vine Winery for a decade. Out of that sum, Disney would build the exhibit, working closely with Mondavi on aesthetic details. The project was very hush-hush: New employees were barred from taking photographs and were issued security passes allowing them to enter and leave the park. Aware that Robert, Margrit, and Timothy were nervous from the start that the populist Disney venture would tarnish Mondavi’s upscale image, Smiga and his team paid close attention to aesthetic details and spared no cost.
But Mondavi insisted on cutting corners in another area. When Disney’s construction left sharp corners on the mission-style building, the Mondavi team insisted on rounding them off, paying extra to do so. The counters of the seven wine bars were cut from custom-made granite and wrought iron doors were hand-forged. Margrit herself approved the dishes, replications of the famed ceramics from Deruta, Italy, and based on a famous thirteenth-century pattern, as well as the Frette linens in a palette of sienna and terra cotta, and Riedel glassware. Even the glasses at the wine bars, which under Disney regulations could not be real glass, were custom-ordered: Smiga found a Canadian supplier who made an elegantly tapered version out of acrylic for them. The exhibit’s seven-minute film, Seasons of the Vine, cost $1 million to produce—nearly $143,000 per minute. Unlike most Disney exhibits, which were façades, Mondavi’s Golden Vine Winery was real, bearing the family’s personal touch.
Mondavi also worked hard to make sure its new employees were well-trained, hiring many of them seven months before the opening scheduled for February of 2001. In September, five months beforehand, Mondavi flew some of its key “cast members” to the Oakville winery for a week of rapid education in wine and winemaking. The idea was to transform these workers, some of whom had been recruited from Disneyland in Anaheim, into “Wine Ambassadors” both for Mondavi and the California wine industry. Those who didn’t go to Napa were bused to the company’s Byron Winery, in southern California’s Santa Maria Valley. Mondavi seemed to have done everything right: It located its new Golden Vine Winery not far from a parade route. It also offered four levels of food service, from modestly priced snacks to $50-per-person dinners at the upscale, ninety-seat restaurant called the Vineyard Room. In the days leading up to opening day, the Golden Vine Winery’s food operations were packed, perhaps because much of the menu was offered at half-price and the operation hosted many nonpaying guests.
On opening day, the Mondavi family converged on the park, including Michael and his family, Timothy, Marcia, and Robert and Margrit. Smiga and other employees of the venture were nervous. There had been some problems already with the people at Disney, including a last-minute request before a VIP dinner to replace the organic, farm-raised veal on the menu, which the chef had flown in, with chicken. When Smiga explained they didn’t have the high-quality chicken they’d need for that evening, the Disney manager asked, “Why can’t you just go to the store or defrost some?” The chef eventually managed to find some, and pulled the veal. The expensive delicacies in the Golden Vine Winery’s pantry, which included truffle oil and prosciutto di Parma, were outside the experience of Disney’s institutional food service operations.
The Mondavis couldn’t disguise their sense of superiority on matters of food and wine. On opening day, when the real Robert—not an audio-animatronic one—made an appearance at the park, he took a sip of 1997 Cabernet Sauvignon and declared he felt proud that his family had thrown in its lot with the Magic Kingdom. But his praise was tinged with an awareness that his partners also could learn something from Mondavi about the good life. “Disney is good at certain things, but it doesn’t understand wine yet,” the patriarch of America’s fine-wine industry said.
The Golden Vine Winery’s restaurant won good reviews from food writers, but still, opening day was a disappointment. The crowds in the lead-up to the day vanished as soon as the discounts ended. The tables on the patio were empty on a weekend day and Mondavi was soon forced to close some of its seven wine bars due to lack of traffic. Sales failed to cover the project’s hefty labor costs, let alone its food costs, overhead, and investment of around $12 million—about $2 million more than it had originally expected. Families on a theme park vacation balked at paying $50 per person for dinner with wine and $14 per child—on top of the park’s already hefty admission price. Those who just wanted to pick up a bottle of wine couldn’t take it directly back to their hotel with them; it had to be picked up at a package center later in the day. Despite the effort to educate their guests, the most popular purchase was a glass of White Zinfandel wine, which is generally considered a sweet, unsophisticated “starter” wine.
Despite its close attention to aesthetic details, such as placing linens soaked in wine to create the scent of wine in the barrel room where the film was shown, larger problems arose. Although dining al fresco had seemed like a good idea, that spring’s unseasonably cold, wet weather forced Mondavi to issue Barbour-style jackets to its wait staff to keep them from shivering in their Disney-issued uniforms. And the vines in the demonstration vineyards kept dying, in part because of a pest called the glassy-winged sharpshooter. Mondavi was forced to replant them at least three times.
Back in St. Helena, the Peter Mondavi family was ripping out nearly half of Charles Krug’s 850 acres and replacing them with Cabernet Sauvignon grapes and other Bordeaux varietals. The replanting was long overdue. Hampered by losses for many years, the family finally found the money to replace a hodgepodge of vines dating back to the 1950s and 1960s. They financed the $21.6 million effort privately, having rebuffed potential buyers of their business over the years. And, unlike Robert’s family, they had never seriously contemplated taking their winery public. The decades since Krug’s court-ordered receivership and the burdensome debt Peter and his family took on to settle the dispute with Robert had been marked mostly by scrimping and making do.
But by the late nineties, the old-fashioned, unionized Krug Winery was turning out wines that were starting to win some good critical reviews. Case sales grew steadily and Peter Mondavi Sr. appeared ready to turn over business to his two sons, Marc and Peter junior. In early 1996, he told his staff he’d relinquish control of daily operations and hand it over to the next generation. But Peter senior—like his brother, Robert—was in fact unable to truly turn over the reins. Then in his mid-eighties, Peter senior continued to work nearly every day in his large office with plate-glass windows, which overlooked the winery’s crushing pad, and still sat in on blending sessions with his sons and the winemakers.
Like his brother across the valley, Peter senior also ran into trouble with his offspring. Marc, the older of the two, preferred stalking big game, reeling in steelhead, smoking cigars, and spending time outdoors to sitting inside Krug’s drab, 1950s-style offices. Peter junior, the younger brother, took after his father in both his attention to detail and his low-key manner; insiders called him “re-Pete.” Like his father, Peter junior was a Stanford grad, with undergraduate and graduate degrees in engineering, as well as an MBA. One of Pete junior’s early projects had been to computerize the winery. Marc, in turn, studied viticulture and enology at UC Davis. In a repetition of the family pattern, Marc worked in winemaking and production, while Pete junior oversaw sales and marketing.
Shouting matches sometimes erupted between Peter senior and his older son, usually behind closed doors. Known to wander down from his office past the ancient oaks toward the cellar, Peter senior almost seemed to look for things to criticize Marc for. Deriding his older son in front of some of their employees, he’d ask, “Don’t you use more than half your brain?” Marc, who had a fiery temper, would lash back at his diminutive, octogenarian father. “The only reason you come down here is to find fault with things. You don’t help, you don’t do anything. We’re going to bury you out in the vineyard, old man!” More than once, Marc quit his job in a huff.
At one point in 2001, Peter senior and his sons called employees into Marc’s office individually to tell them that the company was undergoing a restructuring. Explaining that there was too much overlap between the Charles Krug and the CK Mondavi brands, the family announced that Marc would became head of the popular priced CK Mondavi wines and Pete junior would take over Krug’s best wines. Whereas Marc had previously overseen all the production for both brands, suddenly Peter junior—who had no formal winemaking training—was responsible for the company’s prestige label, supervising the winemaker and vineyard manager. The transition was abrupt. Even so, Peter senior continued to sign all the checks.
The changes didn’t calm the waters, though, particularly on the labor front. On September 5, 2001, during a union lockout, several Krug workers were carrying picket signs on the long driveway of the Krug Ranch, where Marc and his family, along with the rest of the Peter Mondavis, all lived. Driving an olive, open-topped 1954 Jeep, Marc spotted the picketers and grew enraged. He hit the gas pedal and accelerated toward a production worker named Kenneth Drost, who had worked at Krug for twenty years, swerving just in time so that only its right fender brushed against Drost’s pants leg. Marc later maintained the worker had stepped in front of his Jeep, blocking his way.
“Get the fuck out of my driveway. Get the fuck off my property,” Marc shouted at Drost, who defended his rights to stand there by replying that he was on the public walkway. Marc’s face reddened and became contorted with rage. Turning to a female picketer, Emma Martin, he added, “Fuck you!” Before screeching out onto Highway 29, he screamed at the picketers as a group, “You people are ruining my life!”
The French town of Aniane delivered a similar, though more polite, message to the Robert Mondavi Corporation. Although its town council had approved Mondavi’s plan to build a hillside vineyard, the vote precipitated a violent backlash. Hunters worried that the wild boar would desert the region as its forest habitat was converted into vineyards. Some environmentalists argued that a virgin forest from the Middle Ages was being razed—an exaggeration that was repeated in the press. The forest, in fact, was not virgin. David Pearson sipped pastis with the hunters and reassured them they and the company could live well together on the site; they would be able to continue hunting and Mondavi would leave much of the land untouched. Instead of planting one large vineyard, the company intended to plant small “islands” of vines inside the forest. This tactic would preserve the natural habitat.
But Mondavi and Pearson couldn’t brush off one far-reaching charge—that the invading Anglo-Saxons would destroy the village’s social cohesion and subvert traditional winemaking methods, imposing an alien, money-grubbing industrial model. Leading this crusade was a crusty septuagenarian winegrower named Aimé Guibert. In the 1970s, Asian competition drove Guibert’s glove factory in central France out of business. He moved south to the hills above Montpellier—right next to Mondavi’s site, having done the exact same thing that the American company was proposing—and began making wine. He studied traditional vine stocks, hired famed enologist Émile Peynaud, and planted a new vineyard with mostly Cabernet Sauvignon grapes. He became one of the region’s first producers of high-quality wine at his small-scale Daumas Gassac Vineyard in Aniane.
“See that forest? All that is going to be destroyed to satisfy the pride of the Americans and their so-called New World wine,” barked Guibert. He claimed he could trace his vine stocks back to the Middle Ages, although most of his vines had been planted since the 1970s, and liked to describe his wine in poetic terms. “The Mondavis will end up destroying our traditional artisans who make wine, just like McDonald’s is destroying French gastronomy,” he charged. Guibert was aided by José Bové, the militant sheep farmer who became a French hero by wrecking a McDonald’s outlet near Aniane in protest of U.S. sanctions on Roquefort cheese, and who came through Aniane just once. Bové went on to interrupt the World Trade Organization’s talks in Seattle and was the darling of left-wing antiglobalists the world over. Even the actor Gérard Depardieu got into the act, comparing the villagers’ fight with the Gauls’ struggle against the Romans. What became known in the French press as “L’Affaire Mondavi” became cited as a key example of French anti-Americanism writ large.
In municipal elections, Aniane’s voters threw out the town council and elected an anti-Mondavi communist, Manuel Diaz, mayor. Diaz denounced Mondavi as a menacing multinational similar to British retailer Marks and Spencer, which was in the process of closing down all its shops in France. Robert, the same man who had struck the path-breaking deal with Philippe de Rothschild a generation before, pulled the plug himself. In May 2001, Mondavi canceled the vineyard project and sold off its Vichon brand, amid its own darkening financial picture. Against the backdrop of poor sales and heavy investments, the company’s cash reserves sank to $5 million for the year ended June 30, 2001, compared with $32 million in the previous fiscal year.
By mid-2001, Mondavi’s financial performance was worrying the board of directors. Over a meal in a Sydney hotel, overlooking the harbor, directors Anthony Greener and Philip Greer broached the subject with Michael of making a management change. His strengths, they told him, were in serving as the company’s “Mr. Outside” with the marketplace, not in planning or administration. For the good of the company, he ought to let someone who was better suited to the everyday duties of running a company become CEO.
The discussion continued on the sixteen-hour flight back from Sydney, where Michael and Greener sat in adjoining first-class seats. By then, Robert’s hearing had started to deteriorate, making it more difficult for him to participate in board meetings. Greener calmly explained that asking the patriarch to step aside, since he was getting deaf, was simply proper corporate governance. “We need you to become chairman so we can ask your father to retire,” he told Michael, soaring miles above the earth. If Robert didn’t, they warned him, Mondavi’s directors and officers could be held liable if something went wrong. The argument appealed to Michael’s long-held desire to be in charge, without interference from Robert.
After about a month of further discussions, Michael agreed to the change. It came at an opportune time. Exactly two weeks before the announcement of Mondavi’s withdrawal from France, the company kicked him upstairs as chairman and promoted Greg Evans to chief executive. In doing so, they made Evans the first nonfamily member to assume the role of CEO and it was Evans who became the messenger of the failed venture in France. Robert, in turn, was named chairman emeritus. Timothy was the clear loser in the reshuffling, giving up the title of managing director and becoming vice chairman, a more amorphous, nonmanagement position that gave him little operational control, although he still had some management responsibilities as the company’s winegrower. Essentially, the board sidelined the Mondavi men, turning over day-to-day management to professionals. “This new management structure will ensure that our greatest achievements are yet to come,” Robert said in a news release announcing the changes.
Within a month, Michael felt he’d made a terrible mistake. With the outside directors’ backing, Evans was in charge and Michael had been reduced to a largely ceremonial role, serving as the face of the Mondavi brand to distributors and retailers. Although the directors felt Michael was now in a job where he was highly competent and effective, they had relieved him of responsibility in most other areas. Greer had been so intent on selling him on the benefits of his new role that he hadn’t gone into detail on what he would be giving up. Michael, in turn, became convinced he’d fallen prey to a “bait-and-switch game.” But if he did not understand how limited his operational control would be after he became chairman, he may simply have not probed deeply enough in the face of Greener and Greer’s convincing sales job.
Meanwhile, back in Aniane, the region’s worsening wine glut left the village’s winegrowers withering on the vine. After Mondavi’s Aniane project fell apart, some thirty other village mayors wrote asking the Oakville-based wine producer to invest in their village. It was too late. “For now, we’ve decided it is too difficult to make wine in France,” Pearson said. In September 2001, Pearson became managing director of Byron Vineyards, another Mondavi winery near Santa Barbara. The francophile American left France, in mourning for the failure of a project he had believed in. “I felt like the Cuban boy Elián González, who became a symbol, in a weird, deformed way, of the clash between two worlds,” Pearson lamented, just before leaving.
Mondavi’s defeat in France wasn’t the only blow it suffered. By the summer of 2001, the Disney venture was hemorrhaging about half a million dollars a month, which meant it could lose $6 million in its first full year of operation after investing about $12 million. Mondavi went through two rounds of layoffs and lowered its revenue forecasts to $18 million a year, from $25 million. But the problems were damaging employee morale. Michael flew down to Orange County in the midst of the layoff rounds to rally the troops. In the open-aired Vineyard Room, with a view of Disney’s replica of Monterey’s famous Cannery Row, he declared, “One thing I can promise you: We will never sell,” referring to the Robert Mondavi Corporation, which the family controlled through its dual-class shareholding structure. Smiga, who by then was deeply worried by the problems he saw not only at the Golden Vine Winery but also at Woodbridge and Mondavi’s international joint ventures, thought Michael’s statement was at best an example of his tireless cheerleading and, at worst, was misleading.
Sure enough, just eight months after opening day, Mondavi and Disney announced the collapse of their venture. Disney would take over management of the Golden Vine Winery from Mondavi, as well as another restaurant in Disney’s California Adventure run by the celebrity chef Wolfgang Puck. The attendance problems that had begun almost as soon as the Mondavi-operated attraction opened were compounded by the terrorist attacks on September 11, 2001; instead of attracting about 19,000 visitors to the park a day, it was drawing on average about 4,500. But Mondavi also made mistakes, the most glaring of which was signing a contract that did not protect it or penalize Disney strongly enough if the crowds that were projected didn’t show up. In short order, Smiga and the other 150 or so remaining employees of the venture were let go. Some were hired by Disney, while others took Mondavi’s generous severance package.
Michael shouldered the burden of communicating that bad news himself and he worked hard to spin the news of the changed relationship with Disney in the most positive way he could, arguing that by becoming the exhibit’s sponsor rather than its operator, the company preserved the educational and public relations benefits while eliminating the operating risk. Although he may have believed in the silver lining at the time, Disney quickly erased most traces of Mondavi’s involvement in the project, with the exception of a tiny sign hung above the entrance to the “barrel room” theater, noting that the film Seasons of the Vine was sponsored by the Robert Mondavi Winery. Upstairs at the Vineyard Room, plates made in China supplemented the dishware picked by Margrit and hard liquor was offered at the restaurant in addition to wine.
At around the same time, Mondavi also quietly decided to sell off the troubled Vichon–La Famiglia winery on Oakville Grade, and shift production of the La Famiglia wines to Oakville and elsewhere. It was another reversal involving a capital-intensive operation, and the last thing Mondavi wanted to do was to draw attention to the failure. The Disney fiasco resulted in a $12.2 million charge to the company’s 2002 earnings. It also further eroded Michael’s standing as chairman of the board. Although it was neither the biggest problem Michael faced—which was the competitive assault on Woodbridge—nor the most financially burdensome, it became symbolic of Michael’s tendency to do too many things at one time. Some came to call the Disney project “Michael’s Waterloo.”