How important is the dessert wine segment to the industry? to E. & J. Gallo Winery? How do these products fit with Gallo’s stated position on the quality of its products? Do brands like Thunderbird and Night Train have any redeeming features as a product, even if they are in demand by a segment of the population? Dessert wines are very important since it makes up a large portion of the wine industry. Before Gallo upgraded their image, they had more of a brownbag jug wine image through products like Thunderbird and Night Train wines. These products for Gallo Winery do very well for the company.Consumers remain loyal to the brands, especially those that cannot afford other brands. The Gallo Company associates itself only with the premium brands. Even though the brands of Thunderbird and Night Train still exist and perform well, Gallo does not mention them due to their poor image.
Even though they have a poor image consumers like their taste for a light and casual carbonated drink that has less alcohol than its competition and its cheaper than the luxury wines. 1. What are the key success factors in the dessert wine segment? Is there strategic fit between Gallo’s fortified wines and its other wines?The key success factors in the dessert wine segment are low pricing and minimum costs allowing the profit margin to be higher. It is easier to market, especially in low income neighborhoods. There is very little or no advertising needed.
Gallo chose a low-cost strategy driving the organization’s costs down below the costs of its rivals in the wine market and also with its premium wines The company could always offer its products for a lower price than its rivals because of the company’s vertical integration Gallo had divisions in virtually every step of the wine producing process.But they chose a focused differentiation strategy in the wine cooler market (product: Bartles&Jaymes). “They distanced the product through skillful marketing and sales by creating fictional proprietors named Frank Bartles and Ed Jaymes to maintain a sense of warm, down-home, folksy legitimacy”. www. businessweek. com The wine coolers and the fortified wines and the more expensive wines may be the same strategic fit when it comes to Gallo’s internal environment but it is not when it comes to Gallo’s external environment.Gallo tries to distant itself from the wine coolers and the fortified wines.
2. Is Gallo being socially responsible by supplying dessert wines? What responsibility does Gallo have to consumers in furnishing dessert wines? Does the Gallo family have any personal responsibility to speak out against alcohol abuse? Should they be doing more than speaking out? Should production and sale of Thunderbird and Night Train be discontinued? How does ethical relativism factor into this scenario?The dessert win business is till profitable. It is always hard for a producer of alcohol to fight intensively and publicly against alcohol abuse. It is important to speak out against alcohol abuse as an ethical and social responsibility or to mention it in advertising.
However, those who abuse alcohol have underlying conditions or problems that should not be the responsibility of the manufacturer of the product. Thunderbird and Night Train are not identified with Gallo Winery.The products are still advertised in poor neighborhoods and inner cities where these products have their most customers.
Ethical relativism is the view that different groups of people ought to have different ethical standards for evaluating acts as right or wrong. Gallo Winery distances itself from the dessert wines because they know they have a poor image in catering to those who abuse alcohol or who cannot afford more expensive wines. Yet they continue to produce it because it is very profitable.However they feel it is right to produce dessert wines because, as the result of their study, if they stopped, that segmented population that purchases the dessert wines would just go and drink something else.
However, “by 1989, in the face of public concern over alcoholism and internal family pressure, Gallo had asked distributors not to sell its flavored fortified wines to retailers in low-income neighborhoods. ” (Hoover’s profiles). 3.
Which approach to managing a company’s ethical conduct (see chap. 9, table 9. 2) would you say Gallo seems to be applying?What are the challenges associated with this approach? Gallo seems to be applying the unconcerned or nonissue approach. They distance themselves from being associated with Thunderbird and Night Train brands but they allow it because its legal to sell liquor and they are not worried – everyone else is doing the same thing. The challenge they face is that stakeholders may not agree with borderline ethical/legal conduct and not invest in the company.
This can lead to image loss and financial downfalls and undermine the entire company. . If Gallo Winery decides to abandon the Thunderbird and Night Train brands, what will be the impact on those individuals who abuse the dessert wine products? Gallo Winery did a test and did not distribute the Thunderbird and Night Train brands for six months in San Francisco to see what the impact would be on those individuals who abuse dessert wine products.
The results of the test concluded that this segment of the population just drank something else if these brands were not available. 5.What responsibility does Gallo have to the employees in its dessert wine operations should the company elect to abandon the production of Thunderbird and Night Train? Gallo has a bigger responsibility to its employees than toward the consumer. If the company elected to abandon the production of Thunderbird and Night Train they would need to vertically integrate the skills of those employees to grow in the new market.
6. What actions would you recommend the company take, especially with regard to its cheap fortified wine product offerings? Gallo should sort out their portfolio and not produce any products with a poor image. • They should try to create a new low quality wine with less alcohol. They would obtain better profit margins.
• Perhaps offer a high quality wine with an old name as a marketing strategy. • Study and understand customer needs and to be the first to recognize market trends.http://www.
answers. com/library/Hoover’s+Profiles-cid-4935105 http://investing. businessweek. com/research/stocks/private/snapshot.