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Impact Seminar: Gallo On Transforming Leadership, Ricard On Premiumization

March 18, 2019

E. & J. Gallo CEO Joseph Gallo opened the 2019 Impact Seminar with a speech on “Transforming Leadership from Two Legendary Founders to a New Generation,” discussing how his company has evolved since he took the reins from founders Ernest and Julio Gallo.

Gallo noted the words of his father, Ernest, who in a 1999 interview with M. Shanken Communications chairman Marvin R. Shanken, said, “Do the obvious.” Following that advice, Joseph said he took a pragmatic approach to restructuring the business over the years.

First, the company moved to appoint a single CEO, as opposed to co-presidents or co-CEOs. “We realized that divided leadership at the top creates the potential for inefficiency that would be counterproductive,” he said. The company then hired outside members to its board of directors and gave them voting authority, gaining new perspectives and expertise. Lastly, the Gallo portfolio was significantly expanded and realigned to better suit the premiumization trend.

Gallo noted that the premiumization of the portfolio and the development of wholly new products were the most challenging aspects, requiring a multi-pronged approach that involved investments in production facilities, premium vineyards, and strategic acquisitions.

Looking to the future, Gallo said his company will remain dedicated to pursuing innovation and excellence. In recent years, E. & J. Gallo has made a number of moves in the premium-and-above spheres, making acquisitions that have included Dave Phinney’s Locations and Orin Swift Cellars, as well as Napa’s Stagecoach Vineyard, among others.

Pernod Ricard, the number-two spirits player worldwide, is also no stranger to premiumization. Speaking on the topic, “The Longevity of Luxury,” Pernod CEO Alexandre Ricard said luxury is at the core of his company’s strategy.

Recalling a 2009 broker’s note amidst the global financial crisis that declared that the era of premiumization was over, Ricard urged Seminar attendees, “Don’t believe everything you read in broker reports. If you look at world GDP growth from 2000 to 2017, it has grown by 5% per annum on average.”

Noting that the global population of high net worth individuals continues to grow rapidly, Ricard said wealth creation remains broad-based, occurring across Asia, North America, Europe, the Middle East, and parts of Africa. “The global luxury industry is estimated at €1.2 trillion ($1.4t), and the fourth-biggest segment in that luxury market is wine and spirits.” Ultra-premium and prestige spirits (beginning at $50 and $85 respectively) are growing at 11% annually, he observed, highlighting that Pernod is playing across multiple upscale segments with brands like Glenlivet and Royal Salute. The company’s luxury business was up 19% in the six months through December, accounting for 14% of total sales.

“Luxury is now not only about products, but about experiences,” Ricard said. That’s why Pernod is upgrading its facilities and brand homes to meet the expectations of consumers increasingly curious about the production process. It’s also tailoring its portfolio to meet specific occasions and types of accounts. “It’s all about the right portfolio, in the right account, activated the right way, against the target high net worth individuals,” Ricard concluded.—Julia Higgins & Daniel Marsteller

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