US winemaker Robert Mondavi has announced Q1 income down 27%. Due to a growing tendency among Americans to stay at home, Mondavi has seen a significant loss of revenue through its on-trade channels, which represent much of its distribution.

Although Mondavi was having difficulties even before the terrorist attacks, the company needs to strengthen its presence in the off-trade if it is to weather the current climate. Liquor stores are revelling in the growing trend for Americans to stay at home in the evenings, while anyone who earns a large part of their income from the restaurant and tourist trade is quietly cursing their luck. This is certainly the case for Robert Mondavi.

The Californian winemaker, which makes a quarter of its sales through restaurants, hotels and other tourist outlets, reported that adjusted net income for Q1 was just US$8.2m, or US$0.50 per diluted share, compared to US$11.3m, or US$0.70 per diluted share a year ago.

Net revenues slipped 15% to US$80.9m, as unit sales fell by a similar amount. But, true to American buying habits in uncertain economic periods, the off-trade aspects of Mondavi's business were more positive. Sales of Mondavi's wines through food, drug and liquor stores were up 5% compared to the same period last year.

The company was also affected by charges of US$11.2m relating to the restructuring of its Disney California Adventure project and US$3.8m in one-time charges related to inventory and fixed asset write-downs.

Mondavi is one of many winemakers that have rediscovered the risks of over reliance on a single distribution channel. Its more expensive ranges distributed through restaurants, bring in a large proportion of the company's total revenues. For example, its high-end Cabernet is usually a particularly important contributor and was one that Mondavi hoped would help boost sales in this quarter, but it relies very much on on-premise sales.

As a result, Mondavi needs to consider revising its strategy and strengthen its off-premise channels if it is to see growth in the next year.

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