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THE ROBERT MONDAVI CORPORATION
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Talking Points for August 20, 2004 Announcement
on B to A conversion/Recapitalization, Delaware Reincorporation and
Stock Repurchase Program
o The Board and management of Robert Mondavi Corporation are firmly committed
to strengthening the Company's competitive position and creating long-term
value for all shareholders. As such, they continuously review the
organization, practices and policies of the Company to ensure the best
practices in corporate governance and the right business strategies are in
place for our success.
o As you are aware, the Company has been steadily adopting corporate
governance practices that parallel some of the most respected practices in
the business world.
o The B to A stock conversion piece announced today is another step we are
taking to conform to the best current practices in corporate governance. In
this case, subject to shareholder approval, we are taking steps to change
the voting rights of shareholders by eliminating the class of stock that
enables the Robert Mondavi family to exercise super-voting rights. This
step will ensure all owners of Mondavi common stock have a say in the
governance of the company through the principle of "one share, one vote."
o By eliminating the dual class stock structure, and creating a unified
common stock, the best interests of all shareholders will be served.
o Additionally, seeking the approval of our shareholders to change the state
of incorporation from California to Delaware makes good business sense for
our company. Many publicly traded companies are incorporated in Delaware
and consider it to be one of the best states in which to incorporate
because of its modern and flexible corporate laws and its history of
dealing with a range of corporate matters.
o Our reincorporation won't result in a change to our Company's operations,
the location of our employees or the way the company does business. The
stock will continue to trade on NASDAQ under the symbol MOND.
o The Board has authorized a plan to repurchase stock following the annual
meeting and the approval of the stock conversion.
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Talking Points on Lifestyle/Luxury Reorganization
o Our Company is heading into a new era and we are positioning ourselves for
a successful future.
o Today we announced that we will create two businesses within Robert
Mondavi. I wanted to provide you with some context on what that means and
how that will impact the business and you personally.
o We have concluded the most logical and effective way to address our market
now is to see that it has divided into two distinct segments with different
consumer behaviors, marketing and production imperatives, and goals.
o As we see it, the "lifestyle" business - premium wines priced up to
$15 per bottle - has characteristics very similar to traditional
consumer packaged goods. A durable, well-regarded brand is a key
competitive factor in this category and results from a combination of
product quality, successful consumer marketing and sales execution.
Purchase decisions by lifestyle wine consumers definitely begin with a
desire for great tasting wine, but without sophisticated packaging,
advertising and merchandising, no brand can survive, let alone thrive.
o Successful producers competing in this segment are able to regularly
introduce innovative new products, brand extensions, and usage ideas
for their product lines. Pricing is also important in this category,
meaning profitability is dependent on achieving efficiency and
economies of scale in production and distribution.
o The "luxury" category, comprised of wines retailing for more than $15
per bottle, has somewhat different dynamics. Product quality is of
paramount importance, but brand reputation results less from marketing
activity and almost exclusively from product reviews, the opinions of
industry thought-leaders, and the intrinsic character ("terroir") of
the vineyards from which the wines are made. Selling in this category
is more knowledge-based and "high-touch", and value pricing is rarely
a merchandising technique or competitive factor.
o Because luxury wines are generally lower-volume, production and
distribution efficiency, while always important, are less critical
factors in profitability. At the same time, exemplary vineyard
management, winemaking, and distribution remain extremely important
factors in revenue growth, because in this category you must
re-establish your quality credentials with consumers every vintage and
also ensure that you are effectively represented in the relatively
small number of retail channels serving the luxury category. This is
doubly true for producers selling high-end wines above $50 per bottle,
a group that includes Robert Mondavi with brands such as Robert
Mondavi Winery Reserve, Opus One, Ornellaia, Arrowood, Byron, Luce,
and Sena.
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o For these reasons, we will create two businesses. Dennis Joyce will
lead the Lifestyle business as Chief Operating Officer. Over the next
few weeks, Dennis will be sitting down with leaders of various
disciplines around the organization to provide more direction on how
the "Lifestyle" business will operate.
o We are currently conducting an executive search for the leader of the
"Luxury" business. We will be looking both internally and externally
for this candidate and hope to have someone in place shortly.
o It is important to note that details on how this transition will take
place and ultimately how the reorganization will be structured will be
coming in the next several weeks. For the time being, please continue
to fulfill your current responsibilities as you have been. Dennis will
continue to lead the marketing and sales organization.
o I am sure you have many questions, and your direct reports will have
questions as well.
o We are going to offer a MENU class on corporate governance that will
help explain Robert Mondavi's move to adopt best practices, so
employees have a better understanding of some of the recent
announcements.
o I will be sending out an employee voicemail and email today.
Additionally, we have posted a Q&A on-line that provides additional
detail for you and your teams.
To Recap for Your Teams:
o I will send you an email immediately following this call that helps to
recap this discussion. Again, your employees will be receiving a voicemail
and email from me as well, but this will help you to provide a brief
explanation.
o One thing that we will need to touch upon with employees is that we
anticipate this news will be in the local and national press. It is likely
that reporters and others will speculate about what this means to the
future of the Company. What employees should know is that we (the leaders
of this Company) are committed to providing them with the facts, so
speculation by the press and others is simply that.
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Important Information For Investors And Shareholders
In connection with the proposed recapitalization plan, The Robert Mondavi
Corporation will file a combined proxy statement/prospectus and other relevant
documents with the Securities and Exchange Commission (the "SEC"). INVESTORS AND
SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES
AVAILABLE AS IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE RECAPITALIZATION
PLAN AND RELATED MATTERS. INVESTORS AND SHAREHOLDERS WILL HAVE ACCESS TO FREE
COPIES OF THE PROXY STATEMENT/PROSPECTUS (WHEN AVAILABLE) AND OTHER DOCUMENTS
FILED WITH THE SEC BY THE COMPANY THROUGH THE SEC WEB SITE AT WWW.SEC.GOV. THE
PROXY STATEMENT/PROSPECTUS AND RELATED MATERIALS MAY ALSO BE OBTAINED FOR FREE
(WHEN AVAILABLE) FROM THE COMPANY BY DIRECTING A REQUEST TO THE COMPANY'S
INVESTOR RELATIONS DEPARTMENT AT 841 LATOUR COURT, NAPA, CA 94558; TELEPHONE
(707) 251-4850; E-MAIL MOND@ROBERTMONDAVI.COM.
The Company and its directors, executive officers, certain members of
management and employees may be deemed to be participants in the solicitation of
proxies in connection with the proposed merger. Information regarding the
persons who may, under the rules of the SEC, be considered to be participants in
the solicitation of the Company's shareholders in connection with the proposed
recapitalization plan is set forth in the Company's annual report on Form 10-K
for the fiscal year ended June 30, 2003 filed with the SEC on September 26, 2003
and proxy statement for its 2003 annual meeting of shareholders filed with the
SEC on October 28, 2003. Additional information regarding such persons and a
description of their direct and indirect interests in the recapitalization plan
will be set forth in the proxy statement/prospectus when it is filed with the
SEC.
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