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THE ROBERT MONDAVI CORPORATION
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Distributor Letter
September 14, 2004
Dear [personalize with name]:
As you know from our ongoing conversations, Robert Mondavi Corporation is
undergoing a significant evolution designed to better serve the changing needs
of our market and the demands of our consumers. Today, we emerge from our Board
of Directors meeting with a new strategy that will be announced to the public
tomorrow.
While my preference would be to meet with you in person to discuss this, I
am sending you this letter to ensure you hear the news directly and initially
from me. Please consider this letter simply a "placeholder" for a conversation
that either Eric Morham or I would like to have with you and your team in the
very near future. While I would encourage you to call in the short-term with any
questions, we will attempt to reach out to your distributorship within the next
few days.
Unveiling the New Strategy
Tomorrow, the Robert Mondavi Corporation will announce that we will focus
our efforts entirely on our lifestyle brands. We understand that this is a
significant change. However, it is important to recognize that our current
lifestyle portfolio accounts for more than 80% of our revenues and
profitability. The reality is that we have been a lifestyle company for a long
time.
We first launched lifestyle wines in order to reach the broader population
with the pleasures of wine, and that quest continues. In fact, it will continue
with an unrelenting focus and an ability to bring a host of quality wines at
accessible prices to consumers.
We believe that we have the ability to become the leading premium lifestyle
wine company in the world. We have a keen understanding of consumer insights
that has helped us to develop powerful brands like Woodbridge, which is the #1
wine brand in the world, in its segment. We have seen impressive growth with
Robert Mondavi Private Selection, when other wines in its segment are in
decline. And we have had proven success in launching new wines like Papio. Our
commitment to quality is steadfast. We are dedicated to producing the
highest-quality wine for consumers to enjoy every day. And we know that with
your continued support, we have the market influence to execute and create
successful brands that build our respective businesses, bring shareholder value
and delight consumers.
Our lifestyle business is incredibly successful, yet can improve on
maximizing its potential. The lifestyle category is where we believe a
successful future lies for our company and for your business.
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Moving forward, the new acutely focused Robert Mondavi Corporation will be
anchored by Woodbridge and Robert Mondavi Private Selection. We will serve the
broad popular market with our existing high quality value wines as well as
exciting new products, like Papio.
As a result of this new direction, we will pursue the divestiture of our
luxury assets. These assets include:
Robert Mondavi Winery and its vineyards - we are taking actions to ensure
Robert Mondavi Winery endures as one of the world's great wine estates.
Opus One
Luce della Vite
Lucente
Ornellaia
Sena
Arboleda
The Byron Winery and its vineyards
The Arrowood Winery and its vineyards
Grand Archer
We anticipate that it will take time to divest these assets, and we will
need to continue to sell these wines in the interim.
Announcement of Key Leadership Positions
We have agreed to the following leadership team and position announcements
to lead our organization forward.
o Greg Evans remains our Chief Executive Officer. Reporting to Greg:
o I will serve as Chief Operating Officer
o Hank Salvo, Executive Vice President and Chief Financial Officer
o Greg Brady, Senior Vice President New Business Development
o Valerie Deitrick, Senior Vice President of Human Resources.
Continuing Senior Vice Presidents :
o Mike Beyer, Senior Vice President of Legal reporting to Hank Salvo.
o Steven Soderberg, Senior Vice President of Information Technology and
Logistics reporting to Hank Salvo.
o Eric Morham, Senior Vice President of Global Sales reporting to me.
o Pete Mattei, Senior Vice President of Production and Vineyards
reporting to me.
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Promotions:
o Rodney Williams is being promoted to the position of Senior Vice
President of Global Marketing, from his current position as Vice
President, Marketing, Woodbridge and New Brands. He will report to me.
New Positions:
o A new position for Senior Vice President of Supply Chain Management
has been created and will report to me.
o A new position for Managing Director of Robert Mondavi Winery.
R. Michael Mondavi's Role Changes
We also need to tell you that, Michael Mondavi has decided to limit his
role with the company to serving as a member of the Company's Board of
Directors. As a founder of the Robert Mondavi Winery, Michael Mondavi has helped
shape our Company from its inception. The entire management team - past and
present - are very grateful for all of his contributions and wish him the best.
Impact to Employees
Frankly, the most difficult decision we had to make as leaders concerns the
impact to our employee population. However, as we sell certain parts of the
business, we have identified that our new business model does not need the same
number of employees. While some of these changes are a result of selling certain
facilities, others come as we try and reconfigure the organization given our new
lifestyle focus. Therefore, we will be notifying employees affected by job cuts.
We will be saying goodbye to many friends and colleagues who have
contributed to our success in the past. We thank them for their contributions.
Culturally and professionally, it will be challenging to go through this
change. However, we understand the importance of our relationship, and will
strive to minimize the impact felt to your business.
***
These are challenging times. While some of these challenges will be
energizing as we share our plans on how we'll build the business together for
the future; others will be more difficult as we transition out of the luxury
wine business. I hope that we can all work together as productively as possible
to focus on growing our company and brands in the future.
If you have questions before I have the opportunity to call, please don't
hesitate to call me directly.
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Sincerely,
/s/ Dennis Joyce
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Dennis Joyce
Chief Operating Officer
Lifestyle Division
Important Information for Investors and Shareholders
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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 OMPANY'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.
Forward-looking Statements
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This announcement and other information provided from time to time by the
company contain historical information as well as forward-looking statements
about the company, the premium wine industry and general business and economic
conditions. Such forward-looking statements include, for example, projections or
predictions about the company's future growth, consumer demand for its wines,
including new brands and brand extensions, margin trends, anticipated future
investment in vineyards and other capital projects, the premium wine grape
market and the premium wine industry in general. Actual results may differ
materially from the company's present expectations. Among other things, a soft
economy, a downturn in the travel and entertainment sector, risk associated with
continued conflict in the Middle East, reduced consumer spending, or changes in
consumer preferences could reduce demand for the company's wines. Similarly,
increased competition or changes in tourism to the company's California
properties could affect the company's volume and revenue growth outlook. The
supply and price of grapes, the company's most important raw material, is beyond
the company's control. A shortage of grapes might constrict the supply of wine
available for sale and cause higher grape costs, putting more pressure on gross
profit margins. A surplus of grapes might allow for greater sales and lower
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grape costs, but it might also result in more competition and pressure on
selling prices or marketing spending. Interest rates and other business and
economic conditions could increase significantly the cost and risks of projected
capital spending. The separation of the company into two operating units may
impair management's ability to focus on other needed areas of business
execution. There are also significant risks associated with separating the
company's sizeable sales force into two operating units. Some of the company's
strategic alternatives would involve lay offs and significant restructuring
changes which could materially impair future earnings. For additional cautionary
statements identifying important factors that could cause actual results to
differ materially from such forward-looking information, please refer to Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in the company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2004, on file with the Securities and Exchange Commission. For
these and other reasons, no forward-looking statement by the company can or
should be taken as a guarantee of what will happen in the future.
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