This document discusses the history of the wine industry in the United States, focusing on Gallo wines. It describes how Gallo pioneered a vertically integrated supply chain model, controlling the production process through to marketing. It also discusses how mergers and acquisitions enabled horizontal integration, allowing wineries to expand domestic production and source grapes internationally. Finally, it provides an overview of the three-tier system of manufacturer, distributor, and retailer in the US wine industry and some recent innovations and ongoing challenges around consolidation, direct-to-consumer sales, and unpredictable supply and demand.

1. Gallo: The Wine Revolution
Michael McGuigan
Robert Douglas
Chris Grant
Michael Hurcomb
Andres Cordoba

2. Thomas Jefferson “the Patron of the American Wine
industry”
The Agricultural Society of Albermale County (1817)
Wine consumption fast growing in the 19th century
The Dry Period (1919-1925)
The three-tier system (Manufacturer,
Wholesaler/Distributor, Retailer/Consumer)
Ernest & Julio Gallo (Pioneers of the Vertical
Distribution Network)
The Wine Industry in the U.S.

6. Gallo’s Vertically Integrated Supply
Chain Model

7. Mergers, Acquisitions, Horizontal
Integration and the Supply Chain

8. Vertical & Horizontal Integration
Benefits
The firm has greater
control over its products
and can push the
products that are more
profitable.
A-B-C classification of
items and the firm can
push their A and B
products rather than rely
on the retailer.
Vertical
The firm continues to do
what it does best while
delegating others to take
care of the other processes.
Horizontal Integration is
what enabled wineries to
explore buying locations
outside of the U.S., while
also expanding its own
domestic product to the
Global population.
Horizontal

9. The Three-Tier System
Manufactuter
•Focus on the
production
process and the
way it is
marketed.
Distributor
•Middle person
between winery
and retailer
•Determines how
to transport the
products
•Warehouses the
product for
period of time
Retailer
•Determines what
products to buy in
order to satisfy
consumers needs.
•Mark up the price
to a suggested
retail price
•On promise and
off premise
locations

10. •Consolidation of wineries and distributors (last 20 years)
•Direct to Consumer sales (DtC)
•Distribution Service Centers (A-B-C)
•Grapevine Portal (intergrade multiple business systems)Innovation
• The supply and demand in wine is often hard to predict
• Forcing wineries to become more horizontal integrated
• Port Labor Union strikes
• Stagnant economy - increasing taxes – regulations -
grape and fuel costs.
Challenges
Innovation & Challenges

11. Thank you!