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!