In the early 1990s, RMC began to develop heavy financial constraints due to the combination of expansion, increased competition, and a phylloxera infestation.1 Several of Napa County`s vineyards died of phylloxera, forcing the company to replant many of its vineyards at a time when the company`s high debt burden was already high due to acquisitions in the 1980s. The company now had some 200 new wineries in the Napa Valley, many of which were now producing high-end to ultra-premium wines, directly competing with RMC brands. An increasing number of these high-end market vineyards were owned by multinationals that could afford to replant phylloxeme-infested vineyards and pay higher prices for grape stocks until the re-swollen vineyards returned to production. Small family-owned wineries have been at a financial disadvantage compared to larger, fully integrated and, in many cases, conglomerate companies, and have faced either the sale of assets or a large loan to finance existing farms. Due to the dwindle in capital resources, Robert Mondavi felt that RMC would not be able to seize future opportunities and that it risked being sidelined by larger competitors in the high-end market, unless additional capital could be raised. Wines & Vines reported in 1999 that the United States had only 4.2 percent (by volume) of the world export wine market, while it produced 8 percent (by volume) of the wine produced worldwide. The U.S. wine industry exported only 13% of the wine it produced, while other countries had developed their export markets more intensively. Tariffs and trade barriers have been instrumental in hindering U.S. wineries` access to various domestic markets. Ten wineries in the United States accounted for more than 89% of exports. Nearly 50% of U.S.
wineries exported their products. The largest U.S. exporter was E&J Gallo, which accounts for about half of U.S. exports and more than four times the volume of its next export competitor. E&J Gallo exports about 13% of its total production. U.S. vineyards generally exported only a small percentage of their production. Wente Vineyards was a remarkable exception. Wente has made exporting a cornerstone of its long-term strategy, with 60% of annual revenue coming from 147 domestic markets. Sinton, Peter (1999). « California Wines Quenching in the World, » San Francisco Chronicle, January 23.
Export markets. As for international markets, wine has been produced commercially in more than 60 countries, with 23 percent (by volume) of wine produced worldwide to Wines & Vines to international markets….