Case 25 E & J Gallo Winery

The dessert wine segment is very crucial for the players in the wine industry because it comprises a significant percentage of almost 13% or 92 million gallons out of the 716 gallons of wine sold in 2006.  For E & J Gallo Winery, the dessert wine market served as its bread and butter in its first few decades in the industry.  Moreover, the profit margin of this segment is relatively higher at 10% and its market share is compelling. Gallo's strategic positioning on the quality of its products contradicts its continuous production of Thunderbird and Night Train to cater the low-end market.

Hence, it taints the business strategy of the company.   Fortified wines are considered to have no redeeming features as products despite the demand in the market and the success of these products can be attributed to the growing interest in wine and the amplifying need of the lower class to purchase wine at a relatively cheap price.  Moreover, manufacturing of dessert wines is cost-effective since cheaper ingredients are used and the shelf life is longer because of the higher volume of alcohol that the products contain.

Eventhough the positioning of the Gallo's to the quality of the products contravenes with its production of the dessert wines, this contradictory strategy helps the winery in catering the needs of different market segments.  It allows the company to operate diversely and serve the needs of the high-end and low-end market which contributes to its bigger scope of market share in the industry and higher sales volume.

Gallo's operations evolved from being a low-end winemaker to being recognized for its expensive and premium wines.  As stated, the company's main market positioning is in the quality of the product.  However, Gallo refused to take social responsibility in manufacturing dessert wines which are considered to promote alcoholism among people because their dessert wines product lines are not marked and branded as their products.

This is an indirect deception for the public.  It is the company's moral and social responsibility to claim its furnishing of fortified wines in the market.  Hence, it is also the company's owners prerogative to admit and take on the responsibility of informing the market and the Gallos must not elude such obligation.

Furthermore, the company and its owners are not in the position to rally, speak or campaign against alcohol abuse unless they stop supplying the source of alcoholism.  Unfortunately, the Gallo are not the only winemakers who are guilty of such actions, most of the largest wineries do the same thing.

In this modern world, people tend to respect that everyone has different ideals and moral values. Consequently, there is ethical relativism involved in this situation.  Our society somehow have accepted the fact that we cannot impose our ideals to others. What might be right and valuable for one person might not be the same thing for the other.

If Gallo Winery decides to stop the production of the Thunderbird and Night Train brands, there might not be any impact at all. Since a lot of players are manufacturing the same products, their customers might shift to the competitors products or alternative products that will satisfy the customers needs.  The company have tries pulling out this product line for social responsibility reasons, however, the public searched for ways to purchase it while some tried to find alternative items that would serve the same demand.

On the other hand, if the company decides to abandon the operations of the dessert wines product line, it is its corporate responsibility as the employer to compensate the employees in case of lay off or to transfer the employees to other departments or divisions.

Gallo Winery must take social responsibility on its dessert wines operations.  If the company decides to continue producing this segment, it must clearly take ownership of the products by putting the company's name in the label of the products.  However, if for some reasons, the company decides to terminate the manufacturing of these product, it must willingly take its employer's responsibility to fairly compensate the employees in case of lay off.  Nonetheless, whatever the decision of the company, it must always observe ownership of its social and cultural responsibilities to the society and the public.