E J Gallo wineries: A case study

2427 Words Feb 14th, 2005 10 Pages
For the purposes of this case analysis of E. & J. Gallo Winery, the wine industry is composed of all alcoholic beverages that contain between eight and twenty percent alcohol by volume. This distinction is based on the assumption that beer and the typical malt liquor contain less than eight percent alcohol by volume. The twenty percent limit is a result of state and federal tax and licensing laws. The three top competitors that are identified in this case study are E. & J. Gallo, Canandaigua and Mogen David.

This industry has seen very limited growth since 1986. Based on Exhibit 4 (C-271, the total wine consumption in the US) and Exhibit 5 (C-271, per capita wine consumption in the US) the wine industry is in the maturity stage. It could
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Although financial information is not available for all competitors, the top 3 competitors show a discrepancy in production efficiency. This would lead the analysis to support the existence of other significant factors influencing the value chain outside of production. These could be the cost of supplies, distribution and marketing.

The learning curve does not appear to be a significant factor in this industry because the winemaking industry has been around for a very long time. The industry competitors have years of experience and low cost labor at their disposal.

The following analysis will use Porter's 5 Forces Model to identify the market power. The grape growers are the suppliers, the winemakers are the sellers and the consumer is the buyer. This discussion could also include the suppliers of raw materials for bottling the wine, the shipping companies used to carry the wine to the point of sale and also the supermarket, liquor store and restaurant owners where wine is often purchased by the consumer.

The power of the supplier is very low since grapes are a readily available product both in the US and throughout the world. Most growers are also under contract with some of the major winemakers and therefore they are bound by law to provide grapes of specific quality to the seller. Grapes are an easily had agricultural commodity on the open market. This could change if the supply of grapes decreased significantly due

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