gallo winery

7/30/2019 Gallo winery

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GalloWinery


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MUHAMMAD NOMAN

BABAR YOUSUF

MUHAMMAD AKMAL HUSSAIN KHAJA MUHAMMAD IMAD GHORI


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History of the firm

Josephs vineyard

Began small grape- producing company

prohibition, govt allowed wine productionfor medicinal and religious

Joseph Gallo, an Immigrant from italy,

came to Modesto California


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Dramatic Solution

Joseph left his young sons

Responsibility and decision making

After the death of parents, Probition wasrepealed

sons decided to move from grape growing

to wine producing two pamphlet on wine making

$36000 in hand


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Gallos dominant position

In 1930 and 1940s

Eenest developed marketing sense

Julio cultivate and refined

Sold in bulk to bottlers

In 1950s

Gallo, Success with THUNDERBIRD(a high-alcohol and low-price)


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But!

o Gutter image

o Further tarnished by the POP-Wine

(Boones Farm and Spannada wines in 1960to 1970s)


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Image

at that time started

upgrade its image

Maintain

its market share and sales

It began

Premium table wineszinfandel,Sauvinon Blanc, Ruby cabernet

and French Colombard


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Vertically Integrated

Truking companies

Own bottles

Midcal Aluminum Company Distributors

Federal trade commission Took offense


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Bartles & Jaymes Wine cooler

It had Extensive product line and

Premium wines

But didnt have snob appeal

In 1984 , Gallo entered in wine coolercategory(a carbonated drink with half

white wine and half citrus juice)


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NUMBER ONE POSITION

o Summer of 1986

with that initial $36000,some ingenuity, alittle luck and a lot of spunk

$1billion sales and earning of $50 million


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Key executives

Ernest was president

Polite , but blunt

Market and distribute Julio was chairman of the board

Farmer at heart

Producing wine


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Internal operations

Gallo was tightly held and secretive

Few loyal senior ran the divisions andreported to Ernest

300 pages training manual

Diana Kelleher said

I never saw a profit and loss statement


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Industry History and analysis

the wine cooler industry emerged

three separate events were cited

1. Mixing Seven-u with wine2. Thomas Steid formulated own wine

cooler recipe

3. California cooler, Crete and Bewleyo Refresher having batches of white wine

and fruit juke


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Coolers entry

Factors

1. Drunken driving laws

2. MADD (Mother Against Drunk Driving)

3. Fitness and health

4. Legal drinking age

5. Lobbying to remove liquor advertising from TV


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Wine cooler industry to succeed

Taste

Flavors

Packaging

Advertising

marchandizing


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competition

in first quarter of 1986, the world largestwinery, brewery and distillery were vyingfor the top spot

Cost of entry $10million just for advertising

Estimated 60 to 65 million cases at end of1987

More than 150 kinds of cooler werecompeting the top seven


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TOP SEVEN

Wine coolers Market shares (%)

E & J. Gallo Winery 22.1

California cooler 18

Sun country 13.1

White moutaint 12.4

Calvin cooler 8.3

Seagrams Golden 6.9

Seagrams Premium 5.5


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Growth strategy:They went for related diversification because distributionand other activities.

Related diversification:Enter in new cooler industry

Vertical integration:

Forward and backward.

Product development.

Introduced premium wine to upgrade itsimage(ZINFANDEL,SAUVIGNON BLANC, RUBYCABERNET AND FRENCH COLOMBARD)

Corporate strategy


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FOR WINERIES:

Overall low cost(THUNDER BIRDS)

Differentiation( extensive product line)FOR WINE COOLER:

Focus strategy: differentiation through

advertising and distribution.

BUSINESS LEVEL STRATEGY


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Skillful marketing & sales:

Advertising etc!

Extensive distribution Self supplier:

( Midcal aluminum, grapes production and

trucking company CALIFORNIA )

FUNCTIONAL LEVEL

STRATEGY


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Advertising and distribution:

Fictional character, Bartley and James,creative ads, used extensive wine

distributor ship, separate sales force.

Distinctive competencies


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remove

Entry barriers:

Economies of scale. High favorable.

Capital requirement high favorable.

Access to distribution channel

strict favorable.

Govt policy legal age boundaries

Unfavorable.Exit Barriers: these were low, thus attractivefirm.

1) THREAT OF NEWENTRANTS


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Numbers of competitor of equal size:

winery, brewery, distillery were vying fortop spots thus unfavorable for industry.

Rate of industry growth; it was high,13% up to 1993. Thus favorable.

Product or service characteristics:Specialty Vs commodity specialty productlike wine cooler malt based, spirit basedproduct- favorable for industry.

2)Rivalry among existing firms


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Amount of fixed cost:

It was low thus favorable for Industry.

Capacity increased by any firm:No capacity constraint thus favorable.

Height of exit barrier:

Exit barrier were low thus favorable.


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Power of buyer was high thus

unfavorable for the industry.

Because.

Alternate suppliers are plentiful becauseproduct is standard or undifferentiated.

Switching cost of changing supplier low.

The purchased product is unimportant to thefinal quality or price of a buyers product orservices and thus can be easily substitutedwithout affecting the final product adversely

3) POWER OF BUYER


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Power of supplier was low thusfavorable for industry.

The supplier industry is not dominated bya few companies

The product or service is not unique.

Low switching cost

Substitutes are available.

4) Power of supplier


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o It was high thus unfavorable for the

industry.

It was high because.

Aggressiveness of substitute products inpromotion

Switching Cost low

Perceived price/ value

5) Threat of Substitute.


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Fallowing are same steps which GALLOShas taken to consolidate its position.

EXTENSIVE DISTRIBUTION:

It overcome power of buyer rivalry among existingfirms threat of new entrants .

SKILLFUL ADVERTISING:

It over come threat of substitute.

VERTICAL INTEGRATION: it over comepower of both buyer & supplier

QUESTION # 3


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Question 4


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JAMES and BARTLEY giving astrong response to current and

expected key success factor inindustry environment.


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Question 5


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LIST OF OPPORTUNITIES

AND THREATS


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LIST OF STRENGTHS AND

WEAKNESSES


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Directional Policy Matrix


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RECOMMENDETIOIN

They should extend their product line in winecooler.

They should try to create back up forthemselves.

They should decentralize their power because

educated and able manager have not part indecision making

They should unveil secrets to employees inorder to motivate them.

QUESTION 9


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THANK YOU!

gallo winery

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