Napa Valley and Family Business; Planning is Necessary

Quote of the Week:
"How beautiful it is to excel; and the goodness of giving from your heart." - Robert Mondavi

Successful family businesses aren’t easy. We learned yet another remarkable example while at an investment conference in Napa Valley, California last week.

Selling their wine operations in 2004 for $1.36 billion, the Mondavi family had come a long way since Cesare and his bride Rosa arrived penniless at Ellis Island in the early 1900’s. Moving from New York to Minnesota to California, Cesare eventually founded a wholesale fruit company. His style was hard work and the company flourished. As the years went by, so did Rosa and their little boys, Peter and Robert.

After Prohibition, Cesare and his boys, by then Stanford graduates, acquired the Krug Ranch and Winery in Napa Valley in 1943, entering the wine business. More and greater success for the family followed…for awhile.

Sadly, after Cesare’s passing in 1959, Robert and Peter parted ways in melodramatic fashion, actually coming to blows. Robert was exiled from the business. In succeeding years, Robert would create his own winery and after many court battles, win a costly legal victory over his brother and mother. Leaving Peter and their mother to languish in the old operation, Robert, with his vision and legendary salesmanship, acquired vineyard after vineyard. His company became America’s preeminent wine operation.

Melodrama often repeats. Robert's children grew up and became his partners. The family faced internal strife along with economic challenges and by the early 1990’s the free spending Mondavi’s, perhaps out of necessity, took the company public. But continued overexpansion and bad investments proved their undoing. They lost control of their enterprise; Mondavi’s board of directors approved the sale of the company in 2004 to Constellation Brands. Although the Mondavi’s walked away with millions in their pockets, Cesare, were he alive, may not have enjoyed the outcome: a family and business divided.

It’s tough to say what makes some family businesses endure while others, like a shooting star, glow brightly, then die. We like to think that a focus on communication, execution, principle based leadership, and most of all, solid long term planning improves the chances of long term business success, and succession, immeasurably.**

Sources:
http://www.nytimes.com/2007/06/20/dining/20pour.html?pagewanted=all
http://en.wikipedia.org/wiki/Robert_Mondavi


Market Week: March 26, 2012

The Markets

Reports of weaker manufacturing data from China and Europe helped take the edge off the prior week's strong equities gains. The S&P slipped back below 1,400, but the Dow remained above 13,000 despite being outgunned by its domestic peers, while the Nasdaq continued to lead the pack. Ten-year Treasury yields slipped a bit as investors seemed to have second thoughts about the previous week's flight from quality.

Last Week's Headlines

• Housing starts fell 1.1% in February, and the Commerce Department said most of the decline came in single-family construction, which was down 9.9%. However, housing starts were still 34.7% higher than the previous February. Also, building permits--an indicator of future construction--were up 5.1% for the month and 34.3% from a year ago.

• Purchasing managers in both China and key European countries reported contraction in their manufacturing sectors, raising concerns about what that might mean for the global economy.

• A piece of Apple's pie: The tech giant finally broke down and announced it would start distributing some of its cash stockpile to investors in the form of $2.65 quarterly dividends beginning with the July-September 2012 quarter. It also will launch a three-year stock buyback program in FY 2013.

• Sales of existing homes were 0.9% lower in February than the month before, but still 8.8% higher than a year earlier, according to the National Association of Realtors®. New home sales also dipped in February, though the Commerce Department said the 1.6% decline still left sales 11.4% higher than the previous February. The median new-home sales price rose more than 8% during the month, to $233,700.

• Saudi Arabia suggested it is prepared to try to help offset any negative global economic impact of higher oil prices. Coupled with concerns about slower Chinese economic growth, the announcement helped oil prices ease slightly.

• The Federal Reserve earned slightly less in 2011 than it did the year before. However, the $77.4 billion, mostly from interest on bonds bought as part of its quantitative easing efforts, was still the second-highest amount on record. Roughly $75 billion will be turned over to the U.S. Treasury.
Eye on the Week Ahead

As the U.S. Supreme Court listens to three days of arguments on 2010's health-care reform legislation, data on personal spending and durable goods orders will help flesh out the portrait of the U.S. economy, along with the final gross domestic product numbers for 2011's last quarter. Institutional investors also will be using the week to try to protect or improve their first-quarter results.

Key dates and data releases: home prices (3/27); durable goods orders (3/28); final Q4 GDP (3/29); personal income/spending (3/30).


Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2012