In the United States wine represents a $28 billion industry comprising mainly of dessert wines. Notably under desert wines are fortified wines that contain added alcohol, and it is considered low-grade and cheap (Hussain and Castaldi 50). For a long time, fortified wines are famous among people with budget constraints and low incomes. Fortified wines are also relatively strong, pleasant tasting and inexpensive. Critics of these cheap fortified wines have emerged arguing that distributors and sellers are making huge profits ignoring consequences such as addiction. With critics arguing that fortified wines are seriously abused, they have continued to express their views that it is unethical for wineries to continue manufacturing and selling cheap fortified wines.
Producers and marketers have defended production and selling of low-end dessert and fortified wines arguing that it is legal in the US to pursue existing market opportunities, and it is wrong for critics to characterize all fortified wine buyers. Most companies including E. &J. Gallo chooses not to list these low-end fortified wines in their label list sparking more criticism. This has been interpreted as hypocrisy and intentional strategy to avoid being linked to being the producers of these brands.
E&J Gallo Winery is notably one of the most successful companies in US wine and brewery industry. The founding brothers Ernest and Julio are acknowledged throughout the wine industry. Julio is accredited for wine production and his technical innovations while Ernest is accredited for his effective marketing and distribution expertise. Gallo set out to become a leader in US wine industry with the end of alcohol and wine prohibition. Gallo’s growth was attributed to vertical integration strategy combined with low-cost mass production and strong distribution. Gallo was majorly known for its famous low-end wines Thunderbird and Night Train.
These two brands had created a reputation for the company associating it with low-end wines that have become a key major competitive weakness. During the 1990s, the family second generation took over, and they gradually shifted to more upscale wines while spending hundreds of millions in advertising positioning itself as a high-end fine wine maker. Consumption of wine in the US since 1935 has been exhibiting an increasing trend majorly in the dessert and fortified wine segment. The wine industry in the US has faced attempts to control excessive consumption of high-proof wines.
Marketing strategy of E. & J. Gallo Winery
Gallo from the beginning crafted its marketing strategy considering that wine consumption could not continuously rise as it was relegated to the second position after hard liquor (Aaker 40). The initial marketing strategic vision was to make Gallo wine brand labels renowned throughout the wine industry. This was achieved through a marketing strategy that ensured Gallo products are visible and available in all liquor store shelves.
The company followed a marketing strategy of expanding into new markets when all the existing markets are fully conquered. The company focused on market research in various market segments studying consumer’s consumption trends and preferences. After only 25 years since its inception, all Gallo wine brands were available throughout US markets. Ernest’s first marketing strategy was embedded in the company’s distribution system. The company marketed its wine brands reflecting their consumers taste and preference of that period (Nowak and Olsen 318).
During the 1950s, Gallo’s marketing strategy focused on low-income and depressed neighborhoods. It introduced Thunderbird that undoubtedly became a key marketing success during the 1950s to late 1970s. Marketing strategy under the leadership of Ernest adopted strategies based on detailed market research on consumer behavior and preferences (Graves and Thomas 154). The company adopted specific marketing strategies to its various wine selections considering price and quality scale in different market segments. During the 1980s, Gallo shifted its marketing strategy to premium wine market launching premium Chardonnay and new “blush” surprisingly taking a lead in the premium wine market.
In 1990s second Gallo generation took over and the company focused more on domestic marketing and advertising. It is during this period that wine consumers moved towards more expensive wines, Gallo marketing strategy focused its marketing strategies on the middle-priced and premium wine market segments. Gallo’s marketing strategy shifted away from low-end fortified wines trying to rebrand its image as this category of wine faced criticism from public perception (Goodhue et al. 11).
Gallo’s third generation in the 21st century has also significantly contributed to the company’s marketing success. The company has consistently positioned itself from low to high ends of the wine market (Goodhue et al. 15). The marketing strategy of the Gallo’s has evolved over time but it has consistently followed the direction of its founders.
Companies and abused products
It is evident that most companies do not want to be associated with products that are abused even when they are the manufacturers themselves. Alcoholic products abuse has become an issue of concern in the US public domain. These concerns may impact negatively on the image of a company (Thach 156). Companies in wine industry face the dilemma regarding association with alcoholic products that is perceived to be abused. E. & J. Gallo tried in many occasions to avoid being associated with abused products when they tried to pull out Gallo’s Thunderbird and Night Train. With companies taking seriously on matters concerning corporate social responsibility and business ethics, it might not be favorable for companies to be associated with products that are considered to be abused (Aaker 68).
Aaker, David A. Strategic market management. New York: John Wiley & Sons, 2008. Print.
Goodhue, Rachael, et al. “California wine industry evolving to compete in 21st century.” California Agriculture. 62.1 (2008): 12-18. Web.
Graves, Chris, and Jill Thomas. “Determinants of the internationalization pathways of family firms: An examination of family influence.” Family Business Review. 21.2 (2008): 151- 167. Web.
Hussain, Mahmood, Susan Cholette, and Richard Castaldi. “Determinants of wine consumption of US consumers: an econometric analysis.” International Journal of Wine Business Research. 19.1 (2007): 49-62. Web.
Nowak, Linda, Liz Thach, and Janeen E. Olsen. “Wowing the millennials: creating brand equity in the wine industry.” Journal of Product & Brand Management. 15.5 (2006): 316-323. Web.
Thach, Liz. “Wine 2.0—The next phase of wine marketing? Exploring US winery adoption of wine 2.0 components.” Journal of wine research. 20.2 (2009): 143- 157. Web.