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• Group 1
History of the firm
• Joseph Gallo, immigrant from Italy, began his small grape producing company. • Depression dealt with his company made Joseph to commit suicide. • Joseph left the burden of responsibility & decision making on the shoulders of his two sons named Ernest & Julio Gallo. • Both Gallo’s decided to move from grape growing to wine producing. • With less then $6,000 in hand the ambitious Gallo's began their empire. • Ernest use to handle marketing matters, while Julio use to manage the manufacturing process. • In 1938, they became the world’s largest winery with annual sales of $1 billion & yearly earning of $50 million. • Then their next high alcohol & low-priced product became exceptionally popular named as “Thunderbird” • In 1960’s & early 1970’s their image tarnished by the popular “Pop-wine” craze of which it was a leader.
History of the firm
• The company decided to attempt to upgrade its image & at the same time attempt its market share & sales. • With the development of its wine sales it became extensively vertically integrated. • It had divisions in virtually every step of the wine producing process. • Gallo’s was the only wine producers that made its own bottles, & its Midcal Aluminum Co. supplied it with screw tops. • They took an active role in marketing of their product. • In 1984, Gallo’s entered into the Wine Cooler category. • Then they introduced Bartles & Jaymes which aimed at more sophisticated consumer. • In 1986, Bartles & Jaymes took over the No. 1 position in the wine cooler market with a share of 22.1%.
Background of Key Executives
• Julio, the 77-year-old president of the firm, & Ernest, chairman of the board at 78. • Julio was in charge of producing the wine & Ernest marketed & distributed it. • Julio tried to produce more than Ernest could sell & Ernest trying to sell more than Julio could produce. • Julio described himself as a “Farmer At Heart.” He was not the hard-core, intense businessman as his brother. • Ernest ruled over the company and made all the final decisions. • He was characterized as being polite, but blunt moreover a very demanding, driving boss. • Acc. To him the secret to Gallo’s success was a "Constant striving for perfection in every aspect of the buss.”
•Internal operations of gallo was so tightly held and secretive. •A few loyal senior managers ran the divisions of the Vertically integrated firm and reported to ernest. •Even own employee of gallo did not know what wasHappening.
• 1972 :-Crete and bewley’s drink was initially served to their friend. • 1977 :-Joseph bianchi owner of bianchi vineyards observed people at a summer party mixing seven up with wine. • 1981 :-Thomas steid owner of canada dry craf’s bottling company formulated his own wine cooler initially batches of white wine and fruit juice were mixed in a beer barrel and served from plastic hose. labels were stuck on by hand and average workday consisted of bottling 100 to 150 cases.
• At the point of the cooler’s entry, other sectors of the beverage industry were experiencing declining sales. • wine industry. • beer industry.
Several factors caused for declining in sales. • • • Drunken driving law. Public interest groups such as MADD. Health conscious consumers grew in number. • Raising of the legal drinking age. • Remove liquor advertising showed wine and beer as the villains in society.
• In view of social factor and to survive alcohol industries. wine cooler industry emerged. it contained more alcohol than beer but less alcohol than wine. • For the wine cooler industry to succeed several characteristics had to be present taste, packaging, advertising techniques, price.
Trends faced in 1986
• Americans were drinking more soft drinks. • Increasing cost of competition. • Dollar level was low and investment spending in high.
• Focus was the major thrust of cooler’s marketing plan. • Appealed to each and every consumer. • Product offered high margins and low capital requirements.
• Seagram’s premium and Seagram’s golden wine coolers • Market share 12.4% • Color- Clear not cloudy with 4% alcohol • Flavors- citrus, peach, wild berry and apple cranberry. • Add- young energetic people with same background music
• Target to women • Later introduced a new spirit based drinks with name Seagram’s golden spirits • Flavor in spirit based drinks Mandrin Vodka, Peach Melba rum, Spiced Canadian (Whiskey) and Sunfruit Gin
• Joseph Victory Wines • Market share 8.3% • In all flavors but raspberry was most successful • Packing of four packs and 2 liter pack • Weak hold on distribution channel and low ad budget as compared to other player
• Anheuser-Busch • Market share 2.8% in 1986 • Very first unique type of product with 4% alcohol and 135 calories in 12 ounce quantity • No artificial sweeteners and more water to cut calories • Focus on young women and low calories content of product in the ad.