Just as Michael’s Disney project was collapsing, Robert was struggling to get his new center on the Napa River off the ground. He’d begun his fund-raising campaign two years earlier, on an overcast day in March 1999, donning a towering white chef’s cap to help raise funds. As a crowd of well-wishers gathered on the undeveloped site in Napa, Robert stood on a platform with a stack of baguettes and urged the group to help “raise the dough” for the project. That day he announced he had given $20 million to get the project up and running and introduced the dynamic couple Garen and Shari Staglin, who were heading the project’s capital campaign.
A hot-air balloon floated above the group, lending festivity to the chilly gray day. Yet his dream project still had not yet won as much financial support from other vintners or food people as Robert had hoped it would, in part because some potential supporters were concerned that it would be a showcase for the Robert Mondavi Winery rather than for the wine industry as a whole. That led to a decision to drop the early idea of calling it the Mondavi Center in favor of the more neutral name of Copia: The American Center for Wine, Food, and the Arts. After the name change, it began to attract a few large backers, including Beringer Vineyards, the Hong Kong–based electronics magnate and dedicated wine-lover M. K. Koo, and Swiss entrepreneur Donald Hess. The center also had an impressive list of “Founding 70” supporters, which included many of Napa Valley’s great and good. Marcia and her husband, Thomas Borger, as well as Timothy and Holly supported Robert’s new project by making personal donations to it, but Michael and Isabel gave nothing at all—a fact that became a topic of endless dinner party conversations in Napa.
Michael and Isabel were still incensed by Robert’s decision to give away the bulk of his fortune to charity. Adding to that sting was the lingering memory of how Robert had refused Michael’s request to have the Robert Mondavi Corporation contribute to his effort to build a pediatric intensive care unit at the nearby Queen of the Valley Hospital, where he was a director. Those painful memories had festered over the years and by the time Robert was fund-raising for Copia, Michael withheld his support. “I’ve already given,” he reasoned, since his sweat equity had helped create the wealth his father was now giving away. At the same time, Michael was concerned about how much Robert was committing to his philanthropic projects, and because of the fund-raising shortfalls, Robert was indeed compelled to top up his initial $20 million pledge with another $15 million. Even so, Robert’s large gifts combined accounted for just under half the $70 million the project required. “We were in a race to make money faster than he could give it away,” Michael recalls.
Nearly as challenging was the center’s clash with the blue-collar city of Napa. Some feared the project would transform their working-class town into “Mondaviland”—making it a tourist destination on a par with Disneyland. One particularly vocal critic was the city of Napa’s vice mayor Harry Martin, an outspoken publisher who decried it as a vanity project, yet another monument that Napa’s most famous vintner was building to himself. “It’s cream de la pooh pooh,” the politician fumed. “The whole wine culture is about snobbism. It’s an artificial society. They are going to hold seminars on how to decorate your table. They want this to be another Carmel, a ticky-tacky town full of little boutiques.”
What Martin ignored was that Napa’s downtown, the historic heart of the valley, was long overdue for revival. It had been bypassed by Highway 29 and the chic tourist shops and restaurants of St. Helena and Yountville to the north and by shopping malls east on Highway 80. As a result, Napa’s family-owned shops and cafés were slowly dying on the banks of its abandoned and junk-filled river.
No doubt, Robert and Margrit’s generosity was slowly changing Napa’s character—yet by almost any measure it was changing it for the better. The New York–based Polshek Partnership, the architects who had overseen the renovation of Carnegie Hall and a number of projects for the Smithsonian Institution, came up with a modern, though controversial, design for the center, including plans for a five-hundred-seat outdoor amphitheater, three and a half acres of public gardens that would become a destination in themselves, and an eighty-thousand-square-foot building of glass, ceramic tiles, and polished concrete whose rolling roofline echoed the eastern hills of Napa. When construction crews broke ground for the project in 1999 with a seven-foot-tall purple corkscrew, it was the start of the first world-class complex ever to be built in Napa. Activists and city boosters saw it as the anchor of a dynamic new river city.
Other signs of “Mondaviland” also appeared. Robert helped convince the Oxbow School, a program for high schoolers in the visual arts, to locate their new school directly across the Napa River from the American Center. He donated $4 million to renovate the buildings and $2 million for a tuition endowment program. And less than a mile away, Robert and Margrit were the first and largest backers of a project to renovate an old, shuttered theater with tattered awnings and plywood-covered windows known as the Napa Valley Opera House. The nineteenth-century theater with its Italianate edifice had never, in fact, truly been an opera house: It had been a venue for vaudeville, dance recitals, and political rallies and was only open for thirty-five years, from 1879 to 1914. Gilbert and Sullivan’s HMS Pinafore was its first performance. In 1905 Jack London read from its stage, and John Philip Sousa’s band once performed there. As movies replaced live vaudeville, it remained dark through the following years, and escaped demolition in the 1970s only by being designated as a historic landmark.
But the city of Napa was more notable among locals for the Mervyn’s Department Store sited directly across the street from the Opera House and its beloved Butter Cream Bakery on the outskirts of town, with pink-and-white-striped exterior, hot-pink vinyl booths, and sugar-and-fat-loaded comfort food. Situated “downvalley” and just beginning to shed its blue-collar image, it remained a town far less sophisticated than “upvalley,” which had become a global status symbol by the 1990s with the arrival of such glamorous new winery owners as the film director Francis Ford Coppola and an influx of Silicon Valley money that was expressing itself in showy vineyards and Tuscan-style megamansions.
Still, the city of Napa was trying to update its image. Prodded by river activists, it won countywide support to partner with the U.S. Army Corps of Engineers to build a model $250 million flood project that its backers hoped would restore the river and inject life back into downtown Napa. Robert and Margrit became the principal patrons of Napa’s renaissance following a boat trip that won them over to choosing the Oxbow site for their center. After years of fits and starts to bring Napa’s old theater back to life, the Mondavis offered a $2 million challenge grant to encourage other donations. Eventually, to acknowledge their generosity, the group renamed the Opera House’s upper-floor theater after Margrit, who posed for photographs on a bulldozer during its ground-breaking ceremonies, wearing her trademark whitish-blond bob and a smile.
With the value of Robert’s stockholdings rising, Robert and his wife assumed the mantle of Napa Valley’s leading philanthropists, giving generously and attending most of the valley’s important fund-raisers. The couple became so ubiquitous at society functions that some of the people who’d known them in earlier decades commented unkindly about their prominence, joking that “they show up for everything—even for the opening of an envelope!” Others marveled at their stamina and boundless civic energy as they moved into their seventh and eighth decades of life. Old friends valued the loyalty that brought them to every private event, however small, if they were in town.
Out of the public eye, the Mondavis’ personal style remained relatively modest. They were regularly sighted lunching in small Napa cafés, where Margrit quietly kept up old friendships, in spite of the minute-by-minute scheduling that now drove her and Robert’s days. They eschewed a chauffeur for local trips, Margrit usually at the wheel. Instead of hiring an interior designer, Robert asked Margrit to decorate the office whose dark wood furnishings and whitewashed walls were in keeping with the mission-style winery. His workspace was dominated by a large walnut desk, carved with bunches of grapes, and a soft leather couch where he’d occasionally nap. It had a homey feel to it: On his couch, for instance, rested an embroidered cushion with the saying “Age doesn’t matter unless you are wine.”
But in the increasingly competitive wine industry, image mattered more than ever. Perhaps the most memorable example of the Mondavi family’s and the company’s hospitality spending during this period came during the back-to-back parties in March 2001 to celebrate the renovation of the Oakville winery—a project whose budget had ballooned to upward of $26 million, rather than the $15 to $20 million first estimated. The winery hosted two evenings of black-tie parties in the new barrel room, the first for 385 of Napa’s mostly upvalley glitterati and the second for 325 members of the wine trade. To make the evening truly special, Margrit commissioned a composer to write an “Ode to To Kalon.” The company also published a custom, limited-edition book to mark the occasion, covered in linen and replete with lush color photographs, which it presented as gifts. The Napa Symphony—another recipient of the Mondavis’ largesse—performed the “Ode to To Kalon.” On both evenings, Robert, elegant in a tuxedo, rose from his seat to conduct the orchestra himself, waving a baton up and down in time to the music. The evening was completed by four courses of splendid food, paired with the company’s wines.
Timothy had championed the To Kalon project on the argument that newer production facilities would improve the quality and sales of the company’s most prestigious red wines. But some of the decisions made in the course of that renovation were questionable. For instance, instead of using stainless steel fermentation tanks, which were easier to clean and less likely to harbor bacteria, Mondavi chose to install fifty-six handcrafted oak tanks, imported from France, for its red wine fermentation. With a capacity of five thousand gallons and costing $27,500 each, the oak tanks alone cost more than $1.5 million. Rival winemakers and even some of Mondavi’s own production staffers wondered if Timothy and others had made that choice for aesthetic more than practical reasons.
There was little doubt that the company was intently focused on the public relations value of the project. Not only were the tours redesigned to show off the new facilities, but the To Kalon project as a whole was designed to present an image of winemaking as a craftsman’s art to the hundreds of thousands of visitors who streamed through the Oakville winery each year—suggesting that Mondavi was much smaller and more personal than, in fact, it was. The To Kalon project communicated gentle hand-crafting, whereby the winemakers employed gravity-flow to coddle the incoming grapes instead of pumps and basket presses.
But most of the company’s wine was, in fact, made in an unglamorous factory-like setting in the Central Valley. By 2001, Woodbridge alone accounted for 75 percent of Mondavi’s case sales, while the Oakville winery’s share was just over 5 percent. The reality was that the company was more of a volume producer, with most of its wines selling for less than $10 a bottle. Upscale consumers had become enamored of highly concentrated “cult” wines from tiny, artisan producers—a group of customers that Timothy and Robert identified more closely with. Everyday wine drinkers, in contrast, were moving toward inexpensive foreign imports from Australia and elsewhere, pushed by low-cost retailers such as Costco. For a company that sold wines at both ends of the range and whose capitalization was by then around $600 million, the market’s radical polarization touched off a corporate identity crisis.
Family members staked out clashing positions on what kind of company Mondavi should be. Timothy, who described winemaking as “liquid art,” felt it should focus on its most elite wines. Michael, as the company’s chairman, felt his brother’s view was hopelessly naive and out of touch with the realities of running a public company, where investors demanded growth and punished executives who failed to deliver. Conjuring the spirit of Cesare to support his focus on popular, lower-priced, volume wines, Michael frequently told the story of walking in Charles Krug’s vineyards with his grandfather, sometime in the 1950s. Explaining to his grandson that Robert and Peter had every right to be proud of their reserve wines, Cesare then warned Michael: “Never forget that most people, most of the time, drink our other wines, and those are the wines they really judge us by.”
The brothers seemed locked in an impossible, decades-long argument that neither could win. Sometimes the hostile feelings underlying that argument would erupt in public. In a hardly diplomatic fashion in the months following the To Kalon parties, Michael expressed his disdain for the old way that the company had marketed its wines: “All those black tie events. We were complacent, cocky, and started believing our own press. In the old country, wine was a blue collar beverage, not an elitist, white collar drink.”
At the same time, the brothers united in their determination to fend off what they considered the usurpation of the To Kalon name by a neighboring winemaker, Fred Schrader, and vineyard owner, Andy Beckstoffer, who were preparing to release a wine together called “Beckstoffer Original To Kalon Vineyard” wine. The trademark dispute escalated to a tangle of suits and countersuits, adding an unappealing entrée to the Mondavi brothers’ overfilled plates. To Beckstoffer, the dispute was another example of the Mondavis’ overexpansiveness—this time in the use of the To Kalon name.
Amid these discussions and distractions, Mondavi’s production culture quietly started slipping as Michael and other sales, marketing, and finance executives at Latour Court pushed for growth. In the early years, when Robert was in charge, he would emphasize making the very best wine the company could, despite the cost. But in the years after going public, and as Robert’s influence waned, Mondavi began taking quality shortcuts to save money, such as cutting surplus oak tanks in half to reuse as red wine fermenters, sometimes using plastic tanks, not cleaning the tanks as frequently as they had before, and automating the process of filling and emptying the wine without slowing down to taste it and to smell the empty barrels. Even Mondavi’s top-end Cabernet was racked four times instead of five. To do an experiment in the cellar, permission was now required from an executive at the Latour Court office as part of an effort to organize a companywide research group. Mondavi also changed the financial incentives for managers, linking their pay to return on capital investments for the first time. That quiet internal act was a very loud statement of a profoundly changed corporate culture.
Mondavi’s winemaking style also suffered from the aggressive quest to expand its sales. With Timothy traveling between Tuscany, France, Italy, and Chile throughout the 1990s, the company’s chief winemaker was frequently jet-lagged. Compounding the problem, the Oakville facility was bursting at the seams. In the late 1970s, it had produced only about a hundred thousand cases of wine a year.
Meanwhile, the Napa vineyards had became an unmanageable jungle of eight different trellising systems, a mishmash of rootstocks, and wrong varieties planted on the wrong soil. Almost inevitably, the production and winegrowing problems seeped into the bottle.
Wine critics spotted the flaws. Just a few months before Mondavi completed its To Kalon project, it received a devastating blow when wine critic Robert Parker, in his bimonthly newsletter The Wine Advocate, blasted Mondavi for producing mediocre wines. In his December 2000 newsletter, Parker reviewed thirty-five Mondavi wines from late 1990s vintages. He awarded most of them meager scores in the 80s, with the exception of the 1997 Cabernet Sauvignon To Kalon Reserve, a $150 bottle of wine which he gave a 94+ score. “In twenty-two years, I have never been more distressed as well as perplexed by evaluations of a particular winery than those that follow,” he wrote. “No one in the United States has done more to promote the image of fine wine than Robert Mondavi and his family. They have had a profound positive impact on American culture and we all have benefited from it.”
Yet Parker then went on to savage Timothy’s wines, calling them “indifferent, innocuous wines that err on the side of intellectual vapidness over the pursuit of wines of heart, soul, and pleasure.” In short, the world’s most powerful wine critic, a man who could single-handedly make or destroy a winery’s reputation, had judged Mondavi’s wines “collectively superficial.” His verdict sent Mondavi’s stock skidding: After it was published, MOND dropped fourteen points.
Parker, whose palate has been called the enological equivalent of Einstein’s brain, wasn’t the only one who noticed a change for the worse. Just a few months after the To Kalon festivities, the influential critic from Wine Spectator, James Laube, also wrote a searing article entitled “A Question of Style of Mondavi,” which suggested that Timothy Mondavi had lost his way as a winemaker. “At a time when California’s best winemakers are aiming for riper, richer, more expressive wines, Mondavi appears headed in the opposite direction…. Call it a matter of preference of style, but the current Mondavi wines leave me wondering if the winery is just in a temporary slump, exacerbated by a pair of challenging vintages in 1998 and 1999, or if it is seriously off-track.”
Laube followed up with several more critical articles, including one in October 2003 that argued that the company’s rapid overseas expansion and involvement with such ventures as Disney had diverted its focus from its Napa Valley wines. “We’re passionate about wine,” Laube quoted Marcia in the article, in a not-so-subtle jab at her brothers, “but maybe we’re not the best management.”
Timothy took the criticisms hard. Although he remained cordial to Laube and Parker in the aftermath of the reviews, their published critiques heightened the tensions between the three Mondavi men. One instance of this took place in the Vineyard Room, when the Mondavis invited Laube to taste some of their new wines in barrel and discuss his views over lunch. As Laube recalls, they started to “politely critique my critique.” But almost immediately, they shifted their attention away from the writer and instead started attacking one another. Emotional and frustrated, Robert insisted the problem was that they had taken their eyes off Oakville and failed to get their message across, allowing other winemakers to steal a march on them. Not long after this incident, the company hired the famed Bordeaux-based wine consultant Michel Rolland to help it improve its top wines. Not coincidentally, the wines made by Rolland’s clients are some of Robert Parker’s favorites.
The bad reviews came at what was already a deeply stressful time in Timothy’s life. Always somewhat flirtatious, he hadn’t changed his ways even after marrying for a second time. On August 6, 2001, Holly Peterson barred Timothy from returning to the Kortum Canyon home they shared. The rumors in the valley were flying as to why—some believed it was an extramarital episode that had led to his wife’s kicking him out of their home. Holly remained publicly discreet about the circumstances of the split, but Timothy acknowledges he’d become involved with other people during his marriage to Holly.
Whatever the cause, it was an ugly breakup. Although the couple underwent marriage counseling for more than a year, their marriage was irreparably torn. Holly filed for divorce on May 8, 2002, and hired a team of advisors, including a forensic accountant, to help her win a large divorce settlement. In court records, it quickly became clear that to finance what Holly described as a “spectacular lifestyle,” the couple had been spending far more than Timothy earned.
In 2000, Timothy reported a hefty after-tax income of $438,205, but nearly half of that went to support Dorothy and their children. At the same time, he and Holly spent almost half a million that year—resulting in a deficit of more than a quarter of a million dollars. The pattern continued in 2001, but this time the spending gap climbed to $341,469. To cover the expenditures, Timothy sold off $3.9 million in the company stock, using a large portion of that to pay down a line of credit he’d been using to finance his and Holly’s rich lifestyle, which including $6,237 a month to support four horses (two were named Bacchus and Decanter), to buy a new Mercedes and a boat, and to spend $497 a month on maintaining Timothy’s aquarium.
Timothy, who was then fifty-one years old, had an estimated net worth of between $20 and $25 million. The judge initially ordered him to pay Holly $12,800 a month for a two-year period representing half the time they were married, which was just over four years. Holly, then forty-three, hadn’t worked much since marrying Timothy, instead dedicating her “time, energy, [and] professional expertise completely to Tim, his family, his work, his winery, his travel and events.” In her court arguments, she declared she had no substantial income of her own.
Thus began a brutal and prolonged legal battle over the division of the couple’s assets. In just over a year, they together racked up $679,552 in attorney and accountants’ fees, with Holly spending far more than Timothy. In January of 2003, Richard Peterson stepped in to try to help his daughter and estranged son-in-law reach a settlement. The judge was skeptical of Holly’s claim that Timothy “has litigated this case in a fashion reminiscent of Grant through Georgia.” To the contrary, the judge found Holly just as much to blame for the protracted fight as her former husband.
They did, however, finally reach a settlement on September 29, 2003. Holly got $1.08 million, including equity in the Kortum Canyon home, Timothy’s company retirement benefits, and cash from the sale of a St. Helena property. She also got alimony of $13,000 a month until the fall of 2005. Timothy ultimately won his freedom, but not without a heavy emotional and financial price.
As chairman of Britain’s Diageo PLC, the world’s largest alcoholic beverages company, one of Anthony Greener’s more pleasurable duties was visiting the Napa Valley to review its fine-wine holdings there. On such a trip, the patrician-looking Greener, with graying sideburns, a restrained, no-nonsense manner, and a slightly snaggletoothed smile, was chauffeured to the Oakville winery. Stepping out of the back seat of the limousine, he then strode through the archway and met Michael Mondavi for the first time. Greener, who favored properly British pinstriped suits, had met Robert several years before at VinItaly, the giant trade exposition held in Verona, Italy, each year. Greener considered the Mondavi patriarch a “visionary” and “an absolutely outstanding man.” But he’d never met Robert’s elder son; Michael was an unknown quantity to him.
Michael and Greener hit it off well. Neither man had excelled in school—Greener never attended university—and both had been born into family businesses. Greener’s father had owned a cotton factory in Manchester. Although Greener never joined the family firm, he spent fourteen years at another privately held family business, Dunhill, transforming it from a fusty purveyor of pipes and tobacco to a luxury goods retailer with such brands as Chloé and Lagerfeld. More recently, Greener had helped orchestrate the merger of drinks giants Guinness and Grand Metropolitan. Called “Mr. Nasty” by his detractors after laying off six hundred Guinness workers in Scotland shortly after becoming the beer maker’s chairman, he was maligned in the British press as dour, arrogant, and aloof.
Yet he also earned the well-deserved reputation of being a turnaround artist, with the ability to spot and reinvigorate tired brands. Even-tempered and practical, Greener seemed like a perfect fit for Mondavi’s board, since he brought international experience, a deep knowledge of brand management, and a cool head for crises. The two men stayed in touch as Michael began recruiting high-powered directors. In the mid-1990s, he brought on James Barksdale, the former CEO of Netscape Communications Corporation, to the board. Barksdale, who was on the board of Federal Express with Greer, had met Michael during a corporate retreat in Napa, but resigned in 2000, not long after Mondavi rebuffed Beringer’s approach. To take Barksdale’s place, Michael recruited Greener, who by then had retired as Diageo’s chairman and had been knighted by the queen of England for his service to British industry.
“Sir Anthony,” along with the existing outside directors Frank Farella and Philip Greer, began pushing to further professionalize the board. In 2002, Greer helped recruit John M. Thompson, an executive who’d begun his career as an IBM systems engineer in Canada and ended it, before retiring, as vice chairman of the board of the IBM Corporation, as well as chairman of the Toronto Dominion Bank Ltd. Greener, in turn, helped recruit a Rhodesian-raised executive named Adrian Bellamy, who made his mark running the hugely successful retail operations at London’s Heathrow and Gatwick airports and was executive chairman of The Body Shop PLC. The new directors brought a worldliness that Mondavi’s board had previously lacked.
But to Greener and the other seasoned newcomers, it quickly became clear that Mondavi’s corporate governance was poor and that the company was heading into a full-blown business crisis. This was the result of the company’s capital spending spree in the late 1990s, which, to the directors, in retrospect, seemed to have been based on wildly optimistic projections of the sales that would result from the acquisition of new vineyards, the To Kalon renovation, and the Disney project. Greener, for one, felt alarmed not only by the business problems, but by the dysfunctional relations between Robert, Michael, and Timothy, which were demoralizing Mondavi’s professional managers.
Michael hoped Greener and Bellamy, in particular, could help the company grapple with managing and protecting its valuable brand name. Robert had sold his name to the company in 1979, well before the IPO, and now the company was struggling with how to fully exploit the Robert Mondavi name without sapping its strength by overusing it on too many different products. One case arose with the Coastal brand, whose sales grew rapidly in the 1990s. But although Coastal became the company’s second highest seller after Woodbridge, Mondavi was disappointed that it was not a category leader. So Michael, Evans, and their recently hired team of marketers, supported by Greener, decided to rebrand Coastal as “Robert Mondavi Private Selection,” hoping to use the family’s name and reputation to spur on sales.
Timothy strongly opposed the move, objecting to the idea of using the Robert Mondavi name prominently on their inexpensive wines. He was acutely aware of the history of Napa Valley’s Inglenook brand, which had been widely esteemed as a fine wine but which nosedived into an inexpensive, everyday wine under its new corporate owners. Robert, too, raised questions, and both were concerned about the graphics on Private Selection’s label: Michael wanted to incorporate the famous image of the Oakville winery’s arch and tower, images associated with its reserve wines.
His brother and father argued passionately against it. Yet Evans and Michael, backed by the board, prevailed by pushing research showing how consumers were confused by the existing low-price labeling. Also working in their favor was Timothy’s damaged credibility, a result of the savage reviews of his winemaking and news of his messy divorce. On both the label design and the name change to Private Selection, Michael and Greg Evans triumphed.
Mondavi was facing an onslaught of competition from fast-growing bargain wines. They came from Australia and Chile but also closer to home, from a challenger nicknamed “Two-Buck Chuck.” Sold exclusively at the Trader Joe’s grocery stores, “Two-Buck Chuck” got this name because it was sold under the Charles Shaw label, which had once been an upscale Napa brand. Ironically, it was Michael’s friend and fellow alumnus from Santa Clara University who had bought the troubled label and turned it into a low-price phenomenon. Fred T. Franzia, like Michael, was the scion of a California winemaking family and related by marriage to the Gallos. But he, his brother, and their cousin were effectively pushed out of the family winery in 1973 by their fathers’ decision to sell their stakes in the family company to Coca-Cola Bottling of New York. As part of the deal, they were barred from using the Franzia last name in a winemaking venture—since the name was one of the assets sold. Franzia boxed wines—which are now unconnected to the Franzia family—remain one of the industry’s top-selling brands.
Franzia, who was thirty at the time of the sale, tried to convince his father not to sell out. When his father sold anyway, it fueled the Franzias’ drive to start again. So in 1974, they began distributing other wineries’ products. Their first client: the Robert Mondavi Winery. But Mondavi eventually turned over its distribution to Southern Wine and Spirits and dropped the Franzias as distributors.
Then the Franzias ran into legal trouble. In 1993, Franzia and his company, the Bronco Wine Company, were accused of passing off cheaper grapes, costing $100 to $200 a ton, as more expensive Zinfandel grapes, that sold for as much as ten times that amount. To avoid detection, Franzia scattered Zinfandel leaves as camouflage on top of non-Zinfandel grapes as they lay in bins waiting to be crushed into wine—a step that Franzia called “the blessing of the loads”—a parody of the wine industry’s tradition of blessing the grapes at harvest time. Bronco pleaded nolo contendere and paid a $2.5 million fine. Franzia pleaded guilty, paid a $500,000 fine, and was banned for five years from sitting on Bronco’s board or holding a position within Bronco that had responsibility for grape purchasing, wine production, or compliance with federal regulations.
However, Fred Franzia and Michael stayed in touch with each other over the years. Together, the Franzias and the Mondavis had a business venture together called Montpellier Investment Partnership LP, which owned some vineyards in the Central Valley and, for a time, a low-cost brand called Montpellier. As members of two California wine families whose roots reached back to Prohibition, they also socialized together. Franzia always invited Michael and his father on the annual “Deer Camp” weekend up in Napa or Sonoma, where members of the Old Italian wine families would gather at the start of deer hunting season each August. Franzia also invited Michael and Robert to a dinner in 2001 to celebrate the opening of his controversial new bottling plant and winery on the outskirts of Napa.
By then, the disruptive role that Franzias’ “extreme value” wines—selling for $2 to $3 a bottle—was playing in the industry could not be ignored. Trader Joe’s began selling the Charles Shaw brand in early 2002 and by the fall of that year, the Charles Shaw brand began biting into Mondavi’s sales. The following year, “Two-Buck Chuck” became America’s fastest-growing wine brand by volume. At the same time, Franzia was embroiled in a protracted legal battle with Napa’s wine establishment over the question of whether he could keep selling wine made from grapes grown outside the Napa Valley in bottles with Napa labels—a practice his rivals considered to be cheating. Fred Franzia’s rivals, and even some of his friends, considered him the industry’s bad boy.
At one point during the candlelit evening in the new Franzia Winery’s barrel room in a Napa industrial park, Robert stood up, turned to his son’s old friend, and asked a question that was on most Napa wine producers’ minds that year: “Fred, I just don’t know how you do it. How can you make money selling wines so cheaply?” Franzia deflected the question with a joke and revealed no secrets. But the simple answer was that he was profiting from a dramatic glut in the wine market, buying good-quality wines in bulk from Mondavi itself, as well as Beringer and other well-known producers. Was it possible that Michael hadn’t let his father know he was selling Mondavi wines at bargain-basement prices to Franzia? Were Mondavi’s profits under so much pressure?
The simple answer was yes. During the booming 1990s, Mondavi could paper over its mistakes as sales soared. But when the market for premium wines started to sour as supply mounted and prices dropped, its problems became more obvious. In 2002, its revenue fell 8 percent to $441.4 million and net income plunged 41 percent to $25.5 million. It was the first time the company’s profits had dropped since its IPO. The following year was hardly better; in 2003, the company’s net income dropped another 32 percent, to $17.3 million, in part because of charges related to its plan to cut another 103 jobs. The layoffs were the trigger for the almost inevitable collision between Mondavi’s management, led by Evans, with Robert and Timothy, who viewed the company’s problems with a mixture of pain, fury, and powerlessness.
The company’s stock price reflected the strains. It touched an eight-year low of $18.53 in March 2003, tumbling from the low $30s just four months earlier. The low stock price erupted into a personal crisis for Robert, one that threatened to embarrass him personally and destroy his legacy as a philanthropist. The roots of the problem lay in the late 1990s, when Mondavi stock was trading near the top of its range. During those halcyon days, Robert had promised to give the University of California at Davis a stunning $35 million, the largest single private gift ever received by the school and one of the largest ever made to the University of California system.
In keeping with Robert and Margrit’s mission to promote wine, food, and the arts, $10 million would support the campus’s new performing arts center and $25 million of the gift would go toward a new Robert Mondavi Institute for Wine and Food Science. Margrit played a key role in the $10 million portion of the gift. She’d heard Davis was building a center for the arts and convinced Robert to see the project a week or so later. As the couple walked into Mrak Hall for a lunch on campus, they were greeted with a standing ovation by faculty members and administrators. Robert pushed to sign a preliminary agreement right away, so the Gallos or some other big donors could not trump them. As her husband spoke, Margrit drew Bacchus, the Roman god of wine, on her coaster, and signed that afternoon. The university decided to call it the Robert and Margrit Mondavi Center for the Performing Arts. It became by far the largest gift to have Margrit’s name on it—and the first to drop the Biever name entirely. The final paperwork sealing the gift was completed just after September 11, 2001.
The university had held a muted ceremony in Davis on September 19 to honor Robert and Margrit for their generosity. Robert, beautifully turned out in a crisply tailored dark suit, stood by Margrit, who was wearing a chartreuse pashmina shawl and matching hat. Explaining that he had used Davis professor Maynard Amerine’s textbook on winemaking as “his bible,” Robert credited much of his success to Davis’s teaching and research. “I learned to make wine only because I followed that book so religiously. I succeeded because of that….” The ceremony was attended by California governor Gray Davis and Timothy, but not by Michael, and it was just as much Margrit’s moment as Robert’s. The large gift to Davis was backed by his stock in the Robert Mondavi Corporation. Soon it began causing him and his advisors anxiety, particularly as the shares plummeted. When the stock dropped below $20 a share, Robert was underwater—the dollar value of his shares couldn’t cover his many philanthropic commitments, which by then had swelled to include not only Copia and UC Davis, but also Stanford University’s Cantor Arts Center, which had named a gallery after him, and a host of smaller bequests. The few people around Robert who understood his situation were deeply worried that he would not be able to keep his promises.
The knot that Robert’s philanthropy had tied around him was seemingly intractable. He was in a dire financial situation and faced insolvency if the stock continued to decline. Timothy and Marcia pushed Robert’s lawyer, Frank Farella, to try to renegotiate the terms of Robert’s gift to Davis. By convincing the university to lengthen the term of his father’s payments, they hoped Davis would relieve some of the financial pressure on Robert. Farella gently broached the idea of whether the project at Davis might be delayed but got nowhere. The university had already set aside the site, drawn up the building plans, and included Robert’s contribution in its financial plans, which had wound their way through the state legislature. The university also planned to drop the Mondavi name from the Institute if Robert reneged on his pledge. Keenly aware of the bad publicity that could ensue, Robert and his advisors were stuck.
The deadline for funding the gift to Davis was January 2006—still almost three years away. The real stress during that period came from Robert’s pledge to Copia, which was secured by his shares. When the price of the shares dropped below $20, Robert came perilously close to breaching the coverage of the escrow deposit required by the insurance company, entitling them to foreclose on the escrow shares. Farella succeeded in convincing the insurer to reduce the ratio from 1:15 of the value of the shares to 1:1. As well, Robert borrowed fifty thousand shares from all three of his children as security in case the shares dropped even further, though he never ended up having to use these shares and eventually returned them. Robert’s deadline for meeting his full $23 million commitment to Copia was also January 2006, and his advisors had put a stock-selling program into effect. Thus, it was in his and his advisors’ strong interest to boost the share price.
Robert’s forceful personality wasn’t enough to solve the problem. Approaching his ninth decade, hard of hearing, and serving in a largely ceremonial post, he relied on his advisors to write out their thoughts for him, since he could barely hear them. In meetings, he was constantly twiddling with his hearing aids, hoping that by adjusting them he might capture conversation more easily. He was no longer capable of doing what he’d long told his sons and other employees to do when encountering a problem, which was to “just fix it.” For years, he’d lay out his ideas for Michael and Timothy in an attempt to communicate with them more clearly, sometimes rising from his warm bed in the middle of the night to scrawl down his thoughts on yellow legal pads, occasionally asking Margrit for spelling help. But by 2003, with his coordination failing, he could no longer reach them that way.
Robert turned to an instrument of power that had long been his friend. In the six months leading up to his ninetieth-birthday celebrations that June, Robert gave several press interviews where he lashed out at his sons. “We could have promoted our high-end wine, but, no, we were too busy looking at dollars and cents and not realizing we were losing the image,” the elder Mr. Mondavi told The St. Helena Star. He told the reporter that he talked to his sons constantly but “they weren’t hearing. Basically, they were making money.” To the Los Angeles Times, he took direct aim at his elder son and Greg Evans, declaring that “when you have to make money in a corporate environment, you begin to cut a few corners,” referring perhaps to the production shortcuts that had begun in the 1990s. The once-powerful patriarch had slashed back at his sons and Mondavi’s management in public, as the palpable measure of his triumphs and accomplishments seemed to be slipping away.