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Marketing,Wine,Wine Business,Wine Education

How much shelf space is E.J. Gallo controlling?

As I spoke with a client, I was made aware of something that has – to date – escaped me, and probably a whole lot of other people in this business, too. Most of us just go about our day-to-day lives, while the E.J. Gallo Winery Sales wine school is headed toward cornering the wine market. Some would say, “Fine, I don’t have time for that.” Others – like me – will say, “What?”

I went to the site and began to read….

Gallo Management Development Program

Our accelerated, one-of-a-kind program offers a depth and breadth of learning unlike any other.

As part of our Management Development Program, you’ll find a unique level of challenge and opportunity…in a fast-paced environment with exciting career paths and outlets for your initiative.

You can choose one of three guides:

  • James ~ Current Management Development Participant (MDP)
  • Armando ~ Eight (8) year veteran
  • Catalina ~ 10 year veteran

When I clicked on James, I read the following, and it only took me a millisecond to “get it:”

Through the Gallo Management Development Program, you’ll gain extensive, on-the-job training across all aspects of sales. Serving as a sales representative with our distributor partners, you’ll develop and provide expertise in wine education, selling through display and restaurant merchandising, retail advertising and promotions and competitive pricing. Ultimately, you’ll be the driving force in helping Gallo stay connected to our consumers.

What could I possibly see “wrong” with this picture? Let’s just take the very last sentence and change the very last word to “customers,” and you have a whole new dynamic. Of course, they wouldn’t be that blatant to just write “customers…” like their distributor partners, but let’s think about this for a minute:

  • Line up with a wholesaler with “James” as your new employee, while going through Gallo’s Management Development Program, and James is already keeping every inch of shelf space “occupied” by Gallo.
  • Does this constitute a monopolistic environment?
  • Or is this headed toward a monopsony

If you wonder what’s making me go in this direction…

A Wikipedia review of important economic terms and their definitions:

  • In economics, a monopsony (from Ancient Greek μόνος (mónos) “single” + ὀψωνία (opsōnía) “purchase”) is a market form in which only one buyer faces many sellers.
  • In the microeconomic theory of imperfect competition, the monopsonist is assumed to be able to dictate terms to its suppliers, as the only purchaser of a good or service, much in the same manner that a monopolist is said to control the market for its buyers in a monopoly, in which only one seller faces many buyers.
  • In addition to its use in microeconomic theory, monopsony and monopsonist are descriptive terms often used to describe a market where a single buyer substantially controls the market as the major purchaser of goods and services. Examples include the military industry[1] and the space industry.[2]

Now, Gallo might argue, “We’re just part of an oligopoly.” (Again, Wikipedia: An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher costs for consumers.

It’s where this is all going… Squeezing out all of the mom and pop businesses. The big companies argue that the mom and pop business can still sell directly to consumers, assuming that they can get them interested. But in the end, your shelf space is controlled by the big four and no more… Amen.

I wonder how many more years we have left, before that’s all you’ll get in the supermarkets… what the big four are delivering…

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16 Responses to “How much shelf space is E.J. Gallo controlling?”

  1. gdfo says:

    No matter how you define it, Gallo is going to try and keep a strong hold on market share along with a couple of other Big Boys. Remember that they actually sued a relative in Italy who made and sole Gallo cheese.

  2. RAA says:

    Actually, it was not a relative in Italy and cheese. It was the brother of Earnest and Julio Gallo, who was pushed out of the family inheritance by them, when he started making Gallo salami and cheese, in the US.

    Great book describes it all, “Blood and Wine”, no longer in print but available thru many second hand book sales sites.

  3. Jo Diaz says:

    I’ve heard about Italian relatives suing each other. It’s seems unconscionable to me, but I do have a string of attorneys in my family and perhaps why that seems like it would be a mess. It just cracks me up that families can be so dysfunctional as to get tot hat level. Thanks, gdfo.

  4. Jo Diaz says:

    Thanks for the clarification, RAA, and the book recommendation.

  5. Ed says:

    Look, guys, it’s business. Period. Gallo, like all giant businesses, must grow continually or die. In order to do that they must swallow up the competition until the big 4 are dukeing it out and there’s nobody left.

    Fortunately, that’s not going to happen and here’s why. The beauty of the wine biz, and I’ve been in it for over 40 years, is that it’s still stocked with independent MFers who buy from Southern, but still hate them. So, anytime they have a chance to buy from real people, they do so and, best of all, they promote the little guys more than the rest. Yes, I know there are few left, but human nature has never settled for being dick tated to. Get my drift?

    It’s a long haul, but there is light at the end of the tunnel. A lot of wine consumers still buy from independents because they like SERVICE and after buying a bunch of crap they don’t like, it dawns on them that spending a little more saves them money because they get what they like when a REAL person listens to them and recommends something for them, not something the salesman HAD to sell to make his numbers.

  6. Jo Diaz says:

    I agree in most parts with you, Ed.

    Where I don’t agree is that they “promote the little guys more than the rest.” As the director of a wine advocacy group for little guys, most giants could care less to support the group I work tirelessly for. We struggle to survive on pitiful dues income each year… We spend inordinate hours to promote a variety that they all grow and market. (One could consider them volunteer hours; or the other side of it… being paid a bit more than minimal wage. It just depends on how you want to define the conditions).

    There’s one guy who, every time he buys a winery, there goes the membership. It’s now happened three times, and I can imagine it will happen again. He inherited the PR and marketing that went into build that brand that he just bought, fires everyone save a couple of necessary office staff, and then cancels all memberships.

    It’s a rare behemoth that sees that light of generosity of spirit… I’ve learned on my side of the fence, after 22 years of waiting for them to have a light bulb go on.

  7. Ed says:

    Jo,

    You misread. I never said they promote the little guys. Ever! They don’t. They want us exterminated. Been part of the little guys my whole life. By choice.

  8. Jo Diaz says:

    Yeah, Ed, I did misread you.

    Best part of that is I got to say something that’s been bothering me for a very long time, so I’m not retracting it. Love it!

  9. Ed says:

    Don’t retract a thing, Jo. We’re on the same page.

  10. Paul Moe says:

    Jo,
    Take it one step further and compile a list of wines that Gallo produces and markets under a non-Gallo name, and don’t forget to include wines from outside the USA. Their reach is much further than a lot of people reailze.

  11. Keith says:

    Gallo, OMG this has all been going on since the 80’s. Nothing new to the industry… K.J. does it and etc…. But get this, it used to be worse.

    But when it comes down to it, its all about the employees in the store and they are the ones who guide the consumer. As an owner of stores, staff controls the floor and is responsible for all the inventory. OH and Gallo owns some great properties and they keep expanding. Many consumers do not know all that they own and many would be very surprised…

    Wine, It’s a Way of Life!

    Keith Miller
    Wine Life Radio

  12. Love the article Jo.

    Two quick things.

    1. If you can compile that list or someone can link to one already made. it would great help small independent retailers – like myself.

    2. There is also the problem of the big guys changing the taste of wine. The best example is Meiomi Pinot Noir – which tastes nothing like Pinot Noir, but through marketing, is starting to define the “Pinot Noir Taste” in the USA market. Problematic.

    Thanks
    Austin

  13. Jo Diaz says:

    Austin, I agree about how the taste of wine is being defined by the big guys. Hopefully, those with a great palate won’t buy into the stripped down flavors.

    Thanks for commenting.

  14. Jo Diaz says:

    Yes, it is, Keith. Thanks for weighing in… Remember the Hearty Burgundy days?

  15. Paul Moe says:

    Austin,
    Here’s a link from the Gallo website:
    http://gallo.com/wine/united%20states/brand%20names/browsebybrandname.html
    65 wine labels and 6 spirits, too.

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