Today, we'll look at how E. & J. Gallo Winery, the biggest producer of wine in the world, is using IT to manage its growth. As wrote Mary Hayes, "IT is key to secretive winemaker's move to a collaborative business."
Gallo is an enigma in the wine industry. Its tremendous market force, along with a culture of intense privacy that was cultivated by founders and brothers Ernest and Julio Gallo, generates a great deal of curiosity about the $1.5-billion-a-year winery. At the same time, Gallo is changing as a company, realizing that it must allow a certain degree of openness to strengthen its relationships with business partners and customers. One of the most powerful drivers of this change is IT, which lets Gallo work more closely with the distributors and retailers that sell its wines and better understand the consumers who drink them.
Gallo's market share has remained steady since it distanced itself from its reputation as a jug-wine company and got in step with the increasingly sophisticated consumer palate and rising per-capita consumption of wine in the United States.
[Now,] Gallo still makes inexpensive brands such as Thunderbird and Carlo Rossi, but its portfolio has ballooned to more than 50 brands that include its premium labels such as Turning Leaf and Indigo Hills, and its ultrapremium, award-winning brands like Gallo of Sonoma Estate that can sell for more than $50 a bottle.
Here are two of the several successful business-technology projects that Gallo completed last year.
Walt Sumner, beverage director at Quality Food Centers Inc., a chain of 85 markets in the Northwest, can open up a data file Gallo sends out weekly by E-mail and see what sold well at each of his stores last week and what didn't, as well as what sold at competitors' stores. He can also access demographic information such as the estimated average income for a store's customer base. With that information, Sumner knows how many $20 bottles of cabernet sauvignon he should stock in proportion to $6 bottles of chardonnay at any given store. Or he can spot a store that regularly sells a lot of seafood and try an on-site cross-promotion with salmon and white wine, and then check sales data the following week to learn the results. "It's the first time I've seen this kind of technology put together in a practical use," says Sumner.
Also this year, Gallo created for retailers software templates for planning shelving and displays for its beverages based on stores' dimensions and layouts. Sumner creates those plans based on the knowledge he gleans from the data Gallo provides, and then shoots them off to store managers over the Internet. "It's amazing stuff," he says.
For more achievements or future Gallo's projects, please read the full story.
And how much do you think the company is spending on IT? According to sources close to the food and beverage industry, the average spending on IT is about 1.5% of annual revenue. But it seems that Gallo's IT budget exceeds this percentage. So it should be in a $20 to $30 million range annually.
It sure looks like a wise investment to me.
Source: Mary Hayes, InformationWeek, September 23, 2002
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