The study of wine marketing is attractive because knowledge in this area is not enough. At the moment, the field of wine marketing is recognized as a full-fledged part of the wine environment. However, the lack of empirical research in this area leads to underestimating marketing in the wine industry. As in other areas, marketing in the wine industry includes product formation, pricing, promotion, and branding. In addition, the area of ​​wine marketing should include specific topics such as consumer behavior towards wine. The choice of wine by the end consumer is often more complex than other food products and therefore requires more detailed study. Understanding how consumers choose wine will provide a solid basis for making decisions about pricing and promotion strategies.
The E&J Gallo winery was selected as one of the most successful wineries to analyze the marketing strategy and evaluate the impact of consumer behavior. The E&J Gallo website, which tells about the company’s history, is used as the primary source. Based on the specified data, information was obtained about the company’s mission, benchmarks, goals, and strategy. No sources are studying the marketing strategy of this company, and there are no specific studies regarding recommendations for improving the marketing strategy of the wine industry. Secondary sources include research on consumer behavior in the wine industry.
E&J Gallo has a rich history and is one of the most popular on the market. However, at the moment, on the shelves of stores, the buyers can mainly see wines of medium and low price categories. This choice is due to the desire of the company to extract the most significant profit at the lowest cost. The study explains why this marketing strategy may not be profitable due to changing consumer behavior.
The Purpose of the Study
The study aims to identify consumer behavior characteristics concerning wine products and apply the data obtained to improve the E&J Gallo marketing strategy. It is assumed that the definition of consumer behavior can significantly improve the company’s marketing policy and increase profits. The study will review the previous literature and draw conclusions regarding further expansion of the study. In addition, when analyzing the discrepancies between theory and practice, it will be possible to compile a list of recommendations for improving the service.
Secondary Data
The study Assessing Consumer Behavior in the Wine Industry and Its Consequences for Wineries: A Case Study of a Spanish Company was used as the secondary source. The work explores the features of the winemaking process in Spain in connection with the changing behavior of consumers of wine products (Muñoz et al., 2019). The article analyzes the degree of consumer requirements in the new conditions of the digital world. The study concludes that the client is playing a new role in the wine industry, including aspects such as advances in communication (Muñoz et al., 2019). One of the leading Spanish wineries was chosen because the adaptation is especially noticeable in its example (Muñoz et al., 2019). The results and conclusions obtained will allow researchers to expand the results for application to other countries and cases.
The article Analysis of the Wine Consumer’s Behavior: An Inferential Statistics Approach explores what wine companies need to focus on. The main components, according to statistics, should be quality and brand (Lanfranchi et al., 2020). The manufacturer must use its brand that evokes specific consumer associations. As far as wine as a product is concerned, even packaging plays a fundamental role, also performing a communicative function (Lanfranchi et al., 2020). Therefore, the essential elements are the bottle with the cap, the packaging, and the label. Nowadays, the design of the bottle and the material from which it is made have become crucial, as they convey a particular image to the consumer. Concerning the price factor, three elements must be taken into account: demand, the choice of competitors, and the product’s cost (Lanfranchi et al., 2020). To determine the price and the previously defined variables, it is vital to mainly consider the production chain, which combines the various activities of grape production, vinification, storage, and bottling of wine.
The study Millennial Consumers’ Wine Consumption and Purchasing Habits and Attitude towards Wine Innovation provides a new understanding of the relationship between millennials and the wine sector in Italy. Millennials represent a promising consumer group focused on innovation (Castellini & Samoggia, 2018). To prepare an effective marketing plan for wine products, organizations need to know how consumers feel about wine and their perceptions and habits. This is true for all target segments, but more so for younger and fast-growing generations such as millennials (Castellini & Samoggia, 2018). In addition, the global wine market is characterized by increased competitiveness (Castellini & Samoggia, 2018). Wine consumption has declined in a downward trend; the emergence of a new class of consumers may represent an important market for wine sales and a goal that wineries should consider.
The Marketing Strategies
The priority direction of the grape and wine companies is the system of marketing activities of agriculture. The main goal of marketing in the wine industry is to establish and maintain direct contact with end consumers. First of all, contact with consumers is necessary to satisfy the goods produced, leading to greater profitability and higher profits. Such a marketing strategy involves selecting products, setting prices, promoting the market, and choosing the best place to sell. The main task of the company’s marketing service is to analyze and specify the problems of the winemaking market along the entire chain of the existing production organization system. The main restrictions are imposed by the state’s fiscal policy, an unformed legislative framework.
Thus, the role of marketing is to select a permanent contingent with which to maintain and strengthen relationships and justify the organizational changes within the enterprise necessary to form a chain of interaction. This strategy gives marketers a unique position and puts them at the center of entrepreneurial activity. In a broad sense, the goals of the marketing activities of wineries can be divided into three groups: marketing itself, distribution and sale of goods and services, and increasing the business’s profitability.
E&J Gallo Winery Marketing Strategy
E&J Gallo Winery is a company with a rich history whose marketing strategy has undergone many changes until now when the company has become one of the largest in the market. Initially, E&J Gallo Winery chose a strategy of selling low-grade fortified wines (E&J. Gallo Winery, 2022). Manufacturers following this strategy profited from the fact that high alcohol content and cheapness attracted especially many buyers. The focus on low quality but robust wines ensured high sales at relatively low production costs. The company was founded in 1933 and, at that time, turned out to be very profitable due to the chosen strategy (E&J. Gallo Winery, 2022). However, the sale of low-quality alcohol was a public health hazard, which is now taken into account in wine production. Such a strategy also jeopardized the image of the E&J Gallo Winery brand, it could be recognized as a company that produces bad products, and most consumers would not choose it.
The company managed to get out of the problematic situation by reorienting production and controlling the quality of products. In addition, the most successful marketing strategy of E&J Gallo Winery was the careful study of tastes and consumer preferences; as a result, the company became the market leader (E&J. Gallo Winery, 2022). Subsequently, the company took a course on experimenting with tastes, which paid off and ensured a good reputation. The company has gained a competitive advantage by guaranteeing farmers to minimize financial risks. At the same time, Gallo had the opportunity to offer a low price since they received 95% of the grapes from the farmers and used the minimum margin to capture a significant market share. This strategy was profitable because they had substantial control over the supply chain, developing the brand’s image and experience and expanding functions in the global market.
E&J Gallo has reached a diverse and large target market by offering wines available worldwide through a strong network. In 2007, one-fifth of the wine was produced for the US market and 79.4% for the world market (E&J. Gallo Winery, 2022). As a privately held firm, it could offer the lowest price to become the market leader in the industry, although it had to incur losses from time to time to introduce new brands or expand the business in a new location.
The Consumer Behavior and its Implications
Consumer behavior is how people interact with their marketing environment. Consumer behavior characterizes the choice of products and points of sale, taking the image into account. Every company needs to study consumer behavior. This will let the company know exactly how customers choose, buy and use products and services. Thanks to this, the organization will be able to develop new products, manage pricing, and open new sales channels. The primary behavioral model is determined by the need, interest, and financial opportunity. The actual behavior of the consumers largely depends on what product they buy, directly affecting the complexity of decision-making.
Consumers Behavior in Wine Industry
The study of buying behavior in the wine industry is essential for business performance. It can be concluded that the purchase of alcohol, wine, in particular, is somewhat falling compared to previous years (Muñoz et al., 2019). There is not enough research on this subject, especially regarding the changes that have taken place in recent years, including the time of the pandemic.
It is known that buying behavior can be planned when the purchase is made according to the intended scenario and impulsive, under the influence of advertising or momentary desire. It is unknown to what extent such a classification can be applied to wine purchases. What is clear is that people have moved away from the daily drinking of wine, along with food, to a model of drinking on special occasions (Lanfranchi et al., 2020). This change in attitude caused the wine industry to stand out from the competition.
In addition, with the growing popularity of a healthy lifestyle, sales of wine products have fallen, and the idea of ​​what kind of wine can be considered reasonable. For many segments of the population, organic wines have become preferable (Lanfranchi et al., 2020). It is essential for buyers that the production process of grape wines is environmentally friendly, for the manufacture of unique agricultural methods were used both when growing grapes and during subsequent processing at the winery.
Wineries have undergone essential transformations and upgrades in recent years. In contrast, their customers have simultaneously gained more power than ever before through the availability of information and the technological tools needed to access it (Muñoz et al., 2019). Accordingly, the client is now playing a new role in this new scenario of rapid change, which includes intensive use of technology, advances in communications, and digital transformation.
The Gap Between Theories and Real-life Strategy
As the wine evolves from an everyday product to a special occasion purchase, the marketing strategy must be adapted to these changes. However, at the moment, mass production companies are more focused on producing cheap and average-quality products. E&J Gallo is no exception, but observations show that such a strategy will soon cease to be profitable. Modern wine buyers also care about the sustainability of its production and quality. E&J Gallo does not focus on producing wines of a higher segment, nor does it use organic production as a marketing strategy.
Results
The study results revealed several important things for the wine industry and the selected company in particular. First, with the spread of healthy lifestyles, wine consumption has declined, pushing producers to invent new ways to attract customers. Secondly, consumers are focused on buying wines of a more expensive price segment; quality and environmental friendliness of production are important. E&J Gallo is focused on producing wines of the low and medium price segment, which is becoming of little relevance as part of the change in consumer behavior towards the rejection of daily consumption of wine products.
Conclusion and Discussion
The decline in wine consumption in recent years can be called a positive trend in improving the population’s health. For wineries, however, this could mean lower sales and profits. The trend to choose higher quality wines for special occasions also indicates that shoppers have become more knowledgeable. To adapt to these changes and operate effectively in the new environment, wineries need a new effective marketing strategy.
E&J Gallo is focused on producing mid-range and low-priced wines to capitalize on increased demand among low- and middle-income families. However, the identified trends have shown that such a strategy can no longer be effective. Despite its dominant role in the market, the company may face a decline in profits in the future. At the moment, the target buyer is the middle-aged population. However, millennials, the new generation, will soon play a significant role in the wine market (Castellini & Samoggia, 2018). Their peculiarity lies in that they are little open to new things, but they are most adapted to innovations.
The most profitable strategy in the face of changing consumer behavior will be the reorientation of production to promote new types of wine in higher price categories. At the moment, consumers are interested in expensive and high-quality wines, while the brand must remain recognizable. E&J Gallo can look to emerging trends such as organic wine production to target new consumer audiences. The modern wine buyer demands attention to nature, quality, and the ability to get a good product for special occasions. Therefore, large companies like E&J Gallo need to meet the new requirements not to lose their leading positions in the market.
Further studies of consumer behavior in winemaking can be aimed at clarifying impulsiveness or planned actions. There are currently no studies in this area. Understanding how well-planned consumers act will help wine companies think through advertising campaigns and choice of product distribution points more intelligently. Understanding what strategy the consumer is guided by during the choice can be a method to increase sales in a rapidly changing market environment.
Recommendations
Based on the data obtained in the study, several recommendations can be made for E&J Gallo Winery, allowing the winery business to adapt to the conditions of changing consumer behavior. Currently, the existing strategy is mainly focused on producing low and medium-price wines, which may no longer be relevant. First, it is necessary to pay more attention to wines of a higher price segment. As consumers increasingly focus on buying wine for special occasions, they will now be choosing more expensive wines. The fact is that people who buy wine drinks less often are willing to pay more money for improved quality.
The current strategy is aimed more at making a profit by selling a cheap product. Time should be spent on a better advertising campaign for more expensive products. Since the brand is already recognizable, it will not be difficult to advertise several new products. Secondly, attention should be paid to the enthusiasm of buyers of organic products, including those in winemaking. It should draw the attention of buyers to the fact that the production of products is environmental. E&J Gallo Winery is a well-known company with a rich history, so they should keep up with the times and provide customers with what they are interested in.
References
E&J. Gallo Winery. (2022). Our Story. E. & J. Gallo Winery.
Castellini, A., & Samoggia, A. (2018). Millennial consumers’ wine consumption and purchasing habits and attitude towards wine innovation. Wine Economics and Policy, 7(2), pp.128-139. Millennial consumers’ wine consumption and purchasing habits and attitude towards wine innovation (econstor.eu)
Lanfranchi, M., Alibrandi, A., Zirilli, A., Sakka, G., & Giannetto, C. (2020). Analysis of the wine consumer’s behavior: An inferential statistics approach. British Food Journal, 122(3), pp. 884-895.
Muñoz, R.M., Fernández, M.V., & Salinero, M.Y. (2019). Assessing consumer behavior in the wine industry and its consequences for wineries: A case study of a Spanish company. Frontiers in psychology, 10(1), pp. 1-7.