Gallo’s Values and Value Proposition
The value proposition of E.&J. Gallo Winery is associated with the offering of more than a hundred unique wine brands to address the different needs and expectations of a diverse customer profile. The core company values include integrity, respect, humility, innovation, commitment, and teamwork. Integrity is achieved through being ethical in the words and actions, while respect is exercised through being open to different points of view.
Humility is the value that ensures that the company never assumes that it is at the top of its game or underestimates its competition (“Company values,” 2020). Innovation is placing great value on new ideas and challenging conventional methods, while commitment is achieved by taking action to create higher valued products. Finally, teamwork is the value that enables the building of strong and trusting relationships with partners and customers.
Risks of Value Brand Retirement and Current Competition
The significant risk that Gallo takes in repositioning the company in the market by discontinuing its value brands is losing a segment of customers that purchased the value products based on their affordability and high quality. Even though the premium range will be of high quality, it may not be as accessible, and companies selling lower-priced wines can win a large chunk of clients. According to the findings of Zoominfo (2020), the largest competitor Gallo Winery is Constellation Brands, with a revenue of $7 billion compared to Gallo’s $4 billion. It is followed by Distell Group with $1 billion of revenue, Trinchero Family Estates with $461 million, Breakthru Beverage Group with $1 billion, CEDC with $1 billion, and Winebow with $220 million (Zoominfo, 2020).
Gallo’s Market Positioning and Retiring Value Brands
Now, Gallo Winery positions itself as the producer of premium products that appeal that wine tastemakers by showing that the company is above labels and is dedicated to high quality. The competition, such as Constellation Brands, strategically positions itself as a company with an unrivaled and diverse portfolio that appeals to different customer segments, including the mid-premium sector (Constellation Brands, 2006). Besides, the company is working on closing the high-end share gap in the premium wines sector.
The decision to retire Gallo’s value brands does not consider the company’s operations in the long run. According to research by Thach and Olsen (2015), it is vital that wine marketers consider the different behaviors of low, moderate, and high spender consumer segments and offer a variety of products at different price points. In order to reach the low-spender segment, companies may need to create impactful deals and promotions that will encourage them to buy more.
Therefore, the absence of a value brand within Gallo’s selection could, in the long-run, alienate the low spender segment from purchasing its products. In addition, associating the company’s name only with high-end wines will also present challenges in terms of negotiating deals with distributors. In contrast to Gallo’s strategy, other brands such as Whole Foods or Sainsbury’s have been introducing their own value brands to target the low-spending customer segment as well as to provide a differentiated range of products.
Gallo’s History and Trends for Future Development
E & J Gallo Winery has a rich brand history as the company opened for business back in 1938 by the sons of Italian immigrants settling in the Sierra Nevada Foothills. The founders of the company went through the period of Prohibition and learned commercial winemaking when preparing for the opening of their business. To manage the challenges associated with governmental policies and changing market demands and trends, Gallo’s owners were the pioneers of brand management and merchandising in the wine industry, which helped them bring new products to stores.
Besides, they were the first to initiate quality initiatives as long-term contracts for growers. Later in the process of brand evolution, E & J Gallo Winery purchased wine labels from Australia and Europe, the company collaborated with Martha Stewart and developed other partnerships to produce different brands and labels under its umbrella. Therefore, Gallo’s brand history is strong enough to allow the company to have a strong presence in the market when it comes to advertising its products to a large consumer segment.
The major wine industry trend that has been significantly influencing the market is the emergence of natural, organic, and biodynamic wines. Even though this trend has captured the European market predominantly, it has the potential of transferring to the US and worldwide as a part of the broader western trend. In the development of its luxury brand, Gallo should consider the use of sustainable and organic materials as one of the advertisement strategies intended to attract a potential market segment. Therefore, the focus on the high quality of wine that Gallo has introduced fits with the current trend; although, considerations regarding positioning and price differentiation should be introduced.
Targeting Gallo Winery to Gen Z: Issues and Recommendations
To effectively target Gallo Winery products to the Generation Z demographic, the company should consider introducing an effective social media advertising campaign while also establishing a substantial online presence. The current online ad campaign is not strong enough to appeal to Gen Z. For example, the company’s Instagram profile has less than 10K followers and very few likes on its Facebook page. The only recent successful online marketing campaign is the Barefoot Wine campaign that got some traction during the COVID-19 quarantine (McAteer, 2020).
However, the campaign involved hard seltzer drinks and not wine specifically and seemed appealing to an older audience rather than the Gen Z target market. Therefore, the first recommendation for the company is associated with improving its online presence. Considering the high attachment of Generation Z to online communication, online purchasing, as well as sharing of experiences digitally, it is essential that Gallo Winery improves its online presence as the current methods are insufficient to capture the target customer group.
The second piece of advice is to involve the potential customers from the Gen Z generation in market research and the understanding of their preferences, needs, and expectations. By engaging with potential consumers on a regular basis, the company’s marketing team will be capable of developing a set of strategic objectives in alignment with the customer perspective of what Gallo Winery should be, ranging from packaging to pricing. The third and final recommendation is concerned with continuing collaborations and new product developments to facilitate innovation in the wine industry. Ranging from natural and organic wines to collaborating with popular non-wine brands can spark interest in Gallo Winery among the younger customer segment that is only starting to develop unique tastes and expectations associated with wine consumption.
References
Company Values. (2020). Web.
Constellation Brands. (2006). Strength in numbers. Web.
McAteer, O. (2020). How E.&J. Gallo Winery’s Barefoot Wine is navigating a huge spike in at-home drinking. Web.
Thach, L., & Olsen, J. (2015). Profiling the high-frequency wine consumer by price segmentation in the US market. Wine Economics and Policy, 4(1), 53-59.
Zoominfo. (2020). E.&J. Gallo Winery. Web.