The acquisition included entry-level brands such as Arbor Mist, Black Box, Clos du Bois, Estancia, Franciscan, Hogue, Manischewitz, Mark West, Ravenswood, Taylor, Vendange and Wild Horse, as well as five wineries in California, Washington and New York.
The similarity highlights the difference between the two spirit giants: Constellation focuses on the lucrative, high-growth wine and spirits segment, while Gallo focuses on and is committed to the long-term success of wine in all price points.
Gallo is a multi-generational family business with deep roots in the wine industry. The company’s identity and history are also linked to wine. As family businesses, they can and should take a longer-term intergenerational approach aimed at creating a successful business for future generations.
The challenge for Gallo and the wine industry is to attract new consumers, particularly millennials and Gen Z, to the wine category and rebuild the consumer base as boomers reduce their consumption. Although the premium segment seems the most lucrative today, new consumers don’t typically buy 20 bottles of wine for $20 right away, and attracting new consumers to the wine category requires an attractive entry-level offering.
Stephanie Gallo, director of marketing for E. & J. Gallo Winery and grandson of Ernest Gallo, explains how the brands acquired by Constellation Brands fit into Gallo’s long-term strategy.
When the acquisition of Constellation’s wine brands was announced, Gallo focused on growing the wine industry. What role will newly acquired brands play in achieving this objective?
Our goal is to provide pleasure in the moments that matter, and to do that we must have products that meet all consumer needs. We believe in providing quality products to our consumers and customers at all prices. Consumers buy wine in all price ranges, depending on the occasion. Studies show that most consumers are in the under $11 category. Consumers who enter this category because of wines under $11 are twice as likely to make repeat purchases in the under $11* category.
The under-$11 category not only attracts new consumers, but also offers the most innovation in wine format and style, allowing consumers to choose from a variety of offerings for different occasions. This acquisition has allowed us to expand our portfolio of $11 offerings and meet the diverse needs of our customers and consumers.
*National Consumer Group IRI* All-American Outlets. The final 52 weeks ended December 29, 2019. Customers filtered by target audience New Wine 3. Percentage of returning customers
Most of the acquired brands belong to price segments in which market share was declining before Covid, due to the premiumisation trend. Do you think this trend can be reversed by attracting new consumers to the wine category?
In times of uncertainty, people turn to the brands they know and trust. By 2020, consumer behavior has certainly changed. Multiple data sources show that both retail sales and the number of retail customers have increased. We understand how important it is not only to attract these new consumers, but also to maintain their interest once they are in the category.
That means innovating and making sure their unique needs are met. As we continue to invest in our premium and luxury wine business, we see this acquisition as an excellent opportunity to make new friends for wine. With a diversified portfolio we can continue to offer our customers and consumers quality products in all price ranges.
What do you think are the main barriers and opportunities to attract new consumers to the wine category?
Our goal is to make wine accessible to everyone. Within our company and as part of our commitment to the community, we must reflect what is going on in society today, including what the American consumer looks like. Today, all Americans enjoy a richer and more diverse landscape than ever before. Everyone should feel welcome, have a sense of belonging and have access to products that understand them and their unique needs.
America’s future is multicultural and inclusive. One of the most important things we can do at Gallo is to embody and reflect the diverse world we live in, so that we can better prepare for and respond to the new challenges that will arise in the future.
Does Gallo have a plan to reposition some of these brands to specifically appeal to new consumers?
These are iconic brands in their categories that resonate with consumers. We are pleased that these brands have a strong presence in the United States and around the world. We intend to respect the heritage of these brands while continuing to produce wines of the highest quality.
How do these newly acquired brands fit into Gallo’s existing wine portfolio?
Gallo wants to remain a family business specializing in wines and spirits. We believe that the brands added through this acquisition complement and strengthen our diverse portfolio. We are determining how our brand portfolio can continue to engage and support our consumers and communities, now and in the future.
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