Introduction and Point of View
Wine industry is highly developed in the whole world. Some countries are more famous for their wines, others are less, still, there are wineries in each country which rejoice the hearts of its citizens. The E. & J. Gallo Winery is the family-owned winery which is considered to be one of the biggest in the whole world in the relation to family business and largest exporter of wine in California.
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The industry of viniculture is rather competitive and full of hazards, but more and more people want to be involved in this business as it is rather profitable and prestigious. It is possible to divide the customers of wine on two big categories, those who prefer high quality products and those who but cheap wines.
Moreover, there are many issues which influence the industry and make the wine brands change its strategy. To understand the situation on the wine market, the following issues should be considered, competition, production, quality, marketing, distribution, business planning, merchandising, and financial analysis. E. & J. Gallo Winery is a company which produces both expensive high quality products and cheap ones.
This strategy may be confusing for many people as having created a positive image of high quality brand wines, the company could have already refused from producing low-quality products, but it continues to produce the skid-row wines. What is the reason? The main purpose of this article is to research the wine industry, consider its issues and offer some recommendations about the further strategy the company should use.
Identification of Issues
There a number of issues which are significant in the winery and which influence the whole industry and market. Production, product quality, marketing, distribution, business planning, merchandising, and financial analysis are the issues which may be related to the E. & J. Gallo Winery and the industry.
Here is a thorough analysis of each of the issues in the relation to E. & J. Gallo Winery. This family owned business produces more than 60 different wine brands of different taste and specifics. The production of wines of the E. & J. Gallo Winery is highly related to the wine quality.
It is impossible to produce a good wine on cheap recourses. The quality of wine has a direct dependence on it. Some companies have chosen the way of gaining profit by means of producing low-quality and cheap wine. There is nothing to blame them for as their wines are directed at specific layer of population, on people who cannot afford to buy an expensive bottle of wine and enjoy its taste (Armstrong, Green and Strickland C-449). E. & J. Gallo Winery produces three main categories of wines, red, white, and sparkling & rose.
Distribution is the issue which is really important for each company. E. & J. Gallo Winery begins its history with cheap wine and the distribution into the neighborhoods. Now, the company has entered the international market and Gallo wines may be seen on the holiday tables almost in each country of the world (Armstrong, Green and Strickland C-451). The supermarkets and restaurants order the band wines from the official representatives of the company all over the world.
Moreover the Internet technologies make it possible to order the Gallo products and get it in every part of the world. The company understands that it is impossible to control the world distribution from one country, so it tries to widen its expansion and purchases areas in different countries for growing grape and then produce wine in that country. The attraction of new importers in different countries is also the step which helps the company to remain the largest in the world (Armstrong, Green and Strickland C-453).
Dwelling upon merchandising in the company, it is important to mention that the owners of the company were the first to represent the world with the brand management and the techniques used in the modern merchandising. Having a positive image and brand name, the company can easily operate those notions to attract new clients, to make them interested in the products the company produces.
Competition, marketing and business planning are the most important issues for the company which should be considered in the paper. One of the main distinguishing features of the business planning of the company remains its production of both cheap and expensive wines. Moreover, the company tries to increase the number of importers in different countries to make the business larger and to cover the whole world.
Analysis of Key Issues
Competition and marketing are the key issues in the wine industry and they are really crucial for E. & J. Gallo Winery. The competition in the company is really high, but the company manages to keep the leading positions. Thus, if to check the statistics about the largest US wineries based on the volume of sales in 2006, it may be concluded that E. & J. Gallo Winery is on the first place with the sales volume of 62,000,000 cases.
The second position belongs to Constellation Brands with 52,000,000 sales volume cases. 42,000,000 sales volume cases belong to the Wine Group (Armstrong, Green and Strickland C-454). Therefore, it may be seen that E. & J. Gallo Winery stands firmly on the first place and does not want to move over in the nearest future. At the same time, the company should notice that red and white table wines are in higher demand.
It should be stated that more and more wineries begin to add more alcohol to the wines to make those stronger and more sugar to make those sweeter. Traditional high-quality dessert wines with 8-12% level of alcohol are considered to be expensive, so the wineries shifted to the production of cheaper and low quality wines.
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It is obvious that such wines should exist, still, they should not be confused with really quality brands and customers should know that he product they consume is a wine of low quality. The wines of low quality but with good taste characteristics overburden the market and it becomes rather damaging for the industry of high quality wines.
E. & J. Gallo Winery is the company which produces both cheap and high quality expensive wines. His makes the company possess some advantages in the field, as this means that the company is able to function on two markets at one and the same time. It may be also stated that while the world crisis was high, the expensive brand wines were out of demand and the company had an opportunity to get profit from cheaper ones.
Thus, it may be concluded that selling both cheap and expensive wines, the company wins. But, it is very difficult to create a positive image and make the brand name famous all over the world. The company risks by refusing from leaving only high quality brands and producing low-quality cheap wines. It may happen that one day the competing company with better image appear on the wine industry arena and will become the leader among the brands which produce only expensive high quality wines.
The company marketing strategy may explain its production of low-quality products. Thus, selling cheap products, the company uses its brand name. It is natural that people would better but the cheap wine produced by world known company than the wine released but any unknown one. Such marketing strategy is useful for those who buy cheap wines.
But, what is happening with those who used to buy expensive wines of high quality? Are they pleased with the fact that they consume products produced on the same factory with low quality ones? This fact does not add to the positive image of the company. One of the main marketing strategies used by the company may be the family story. Being a family-owned company, it has managed to conserve the initial traditions and relation to business.
The company has created the image of not a family business in viniculture, but as if the whole family lives are devoted to this, the impression that it is not a business is created. Telling the story of the company, the further generations always remember their grandmother who used to be the best in viniculture and always recollect her words. The marketing importance of this strategy is that traditional production is always perceived as something unique and special.
The company has been on the market for more than 75 years. Using the statistics of 2008, E. & J. Gallo Winery was considered to be the “largest wine producer in the world” (Armstrong, Green and Strickland C-448). The revenue rate in 2008 comprised 2000.00 M.
The total volume of wine the company sells in the USA is 20.6% in 2006. In 2007, the company managed to sell 70 million cases both in the country and in the world having gained 3.5 billion of revenue (Armstrong, Green and Strickland C-453). But, on the basis of the information dated by 2008, the revenue was – 36.50% in 1 year. This activity should push on some specific ideas.
Summary, Conclusions and Recommendations
In conclusion, it should be noted that E. & J. Gallo Winery is a family-owned company which has a positive image in the world and its brand name is recognizable, still, it has to change its strategy to remain the leader in the winery. The crisis is over and companies become develop more actively.
Having created the image of a brand high quality wine, the company should stop producing low-quality cheap wines. There are a lot of companies which may take this niche. The company should remember that it is better to concentrate on one specific niche and supply it with the products of high quality. The marketing technique directed at the creation of family comfort and conserving of family traditions may be ideal for the company which has decided to produce elite wine for real connoisseurs.
Armstrong, Marion, Green, Taylor, and A.J. Strickland. “Case 25: E. & J. Gallo Winery.” Crafting and Executing Strategy: The Quest for Competitive Advantage. Eds. Arthur A. Thompson, A. J. Strickland, and John E. Gamble. New York, NY: McGraw-Hill Irwin, 2009. C-448-C-461. Print.