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substantially lower debt to asset and debt to equity ratios than
either Canandaigua or Mondavi.
Dr. Spiro summarized the totality of the differences between
Korbel and both Mondavi and Canandaigua as follows:
Whereas both comparable companies produce and/or market
many products, Korbel essentially only produces two
products, champagne and brandy. Korbel also has less
revenue and greater revenue variability during the
course of a fiscal year than the two comparables.
Korbel’s greater revenue variability results from the
nature of champagne consumption in the U.S., which is
closely linked to celebrations and parties. This
results in a seasonal sales pattern with most sales
coinciding with the holiday season between Thanksgiving
and New Year’s Eve. In contrast, wine is consumed more
steadily throughout the year, often with dinner or as a
social drink. Korbel’s lack of product diversification
and comparatively small size tend to increase investor
risk, necessitating a greater investment return. * * *
Gary Heck testified to the following significant differences
between the production and marketing of wine as opposed to
methode champenoise champagne: The second fermentation in the
bottle, which makes production of the latter more complex,
expensive, and time consuming than the production of wine; the
fact that sales of champagne do not benefit from the so-called
“French Paradox” (i.e., reports that link the moderate daily
consumption of red wine to cardiovascular health); and the fact
that champagne sales are subject to higher Federal excise taxes
than are sales of wine.
3. Dr. Spiro’s Opinion
In Dr. Spiro’s opinion, comparability is established by the
fact that both Mondavi and Canandaigua, like Korbel, produce, a
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