The future for winemaker Robert Mondavi
Back in August Mondavi's shares got a boost on news that the company said it intended to do away with its class B shares (changing its ownership structure to make it more investor-friendly) and break its business into separate, distinct segments targeting opposite ends of the market. Last week the company said that break will be followed by a focus on premium and superpremium "lifestyle wine" through current and new brands.
And yesterday the company's shares advanced more than 3% following the announcement at a Banc of America conference that it expects its luxury and nonstrategic assets to be worth as much as $500 million after taxes on the open market. The company's full-year operating expenses tend to run in the $100-$150 million range, so that's not chump change.
Apart from the impact that Mondavi's new strategy is expected to have on near-term EPS -- the company's shares took a hit last week on news of scaled-back earnings guidance, powered in part by increased marketing as it retools for 2004 -- it's difficult to fault the company's efforts to reposition itself.
Mondavi looks more and more like a company willing to sacrifice cachet and near-term results for a long-term position in its market -- and with the low end currently the high-growth area the strategy seems logical. While it might damage the pride of the Mondavi family, which has given up substantial power within the organization, it may make their investments significantly more valuable down the road.
Fool contributor Dave Marino-Nachison doesn't own shares of Mondavi.