The Wrath of Grapes - Robert Mondavi Corporation in France

Even relatively small multinationals can anger and alienate people from more traditional cultures when they try to impose a foreign way of doing things. When it comes to an American operation trying to tell the French how to make wine, certain tensions are perhaps completely inevitable. But as Gordon Redding, INSEAD's Director of the Euro-Asia and Comparative Research Centre, and Charlotte Butler, Research Studies Manager of INSEAD-EACrc reveal, the citizens and politicians of the Languedoc-Roussillon region of southern France had firmly ingrained pride in their indisputable expertise, as well as a profound, perhaps almost visceral suspicion of American-style management techniques.

by Charlotte Butler and Gordon Redding
Last Updated: 23 Jul 2013

Even relatively small multinationals can anger and alienate people from more traditional cultures when they try to impose a foreign way of doing things. When it comes to an American operation trying to tell the French how to make wine, certain tensions are perhaps completely inevitable.

The California-based Robert Mondavi Corp., one of the largest wine producers in the world, had already set up successful joint ventures with family-run vineyards in Chile and Italy. But as Gordon Redding, INSEAD's Director of the Euro-Asia and Comparative Research Centre and Charlotte Butler, Research Studies Manager of INSEAD-EACrc reveal, the citizens and politicians of the Languedoc-Roussillon region of southern France had firmly ingrained pride in their indisputable expertise, as well as a profound, perhaps almost visceral suspicion of American-style management techniques.

But Mondavi could not be dismissed as a faceless, soulless entity. Founder Robert Mondavi was widely considered the patriarch of the now-major California wine industry, and had always demonstrated every regard for European expertise. His son and successor Michael viewed the company's foreign partnerships as "the continuity and tradition of the family business. This is not just a business, it's a way of life".

Specific cultural sensitivities aside, Mondavi Jr. was looking for production locations with international marketability considerations firmly in mind. Syrah grapes were the base for Mondavi wines that had proven very popular in several countries, including France. (Mondavi already had a lucrative JV with the ultra-prestigious Baron de Rothschild.)

The company was looking to further its already established stake in the increasingly competitive and price-sensitive higher end of the international market. Its international distribution network would hopefully also appeal to potential Languedoc partners, who were very eager to boost their foreign profile in the face of falling domestic consumption. (The (A) case includes an overview of the current French wine market, increasingly under pressure from foreign competitors that are both unhindered by the country's strict appellation rules, and who have generally been far more aggressive in their marketing.)

Alas, as the (A) case so clearly demonstrates, a corporation's attempts to establish a more substantial presence in a foreign country can run into major obstacles, despite what many might have felt was adequate due diligence. In 1999, Mondavi thought he had found his partner, a producer of a local vintage that had unofficially become the region's grand cru.

The owner was, however, something of a chauvinist about the superiority of all things French when it came to wine cultivation. Moreover, he saw himself as an early victim of the country's trade liberalisation a decade earlier. Since no other regional producers met Mondavi's strict requirements, other options had to be considered.

(B) Case: options and obstacles

Having concluded that neither a suitable partner, nor an existing vineyard was readily available, Mondavi decided to adopt a green field strategy. While the company's leaders were well aware that the potential pitfalls of this were plentiful, other MNCs were already in the region.

Their competitor's approach had been more low-key, however. Mondavi was soon caught up in local politics, and a public outcry erupted. The region's winemakers were more divided, with many more open to the possibility of taking advantage of Mondavi's proven international marketing power and technical support. Unfortunately, the producer that the Americans had first approached was now leading the anti-Mondavi movement.

INSEAD 2004

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