Gallo goes agency shopping -- again

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E&J Gallo Winery, which has a reputation in the agency business as one of advertising's toughest and most mercurial clients, is contacting shops about a number of brand assignments.

Marketing for Gallo, which has shuffled at least eight agencies on and off its roster since 1980, is overseen by iron-fisted, 91-year-old founder Ernest Gallo. Company VP-Marketing Jerry Glasgow declined to discuss Gallo's latest agency plans, but issued a statement saying: "From time to time, we evaluate new agencies for potential new product assignments."

Gallo spent $23 million on advertising last year, according to Competitive Media Reporting.

Among shops believed to have been contacted by Gallo are Deutsch, New York, and Wieden & Kennedy, Portland, Ore. Wieden declined comment. Deutsch said it was not pursuing the assignment.

It was not clear whether Gallo will meet with resistance from agencies. Executives at some shops, particularly on the West Coast, may be reticent about signing up for the business as a result of Gallo's reputation.

"It would be hard for me to get anyone in my place to go for a visit" to Gallo, said one high-level California agency executive whose shop was not contacted by the winemaker. "There are just so many stories" about Gallo's reputation, the executive added.

Gallo consolidated much of its advertising at FCB Worldwide, San Francisco, in 1994. During that time, the winery began using Gina Gallo, a winemaker and granddaughter of the late Julio Gallo, as a spokeswoman for its superpremium-price Gallo of Sonoma brand.

In April, the two parted acrimoniously, with FCB San Francisco Chairman Geoff Thompson claiming the marketer had consistently asked the agency to compromise its standards and integrity.

ASSIGNMENTS

After the split, the winemaker parceled out assignments to a number of shops. For example, former West Coast creative director Harvey Hoffenberg, who now operates a New Canaan, Conn., shop called Propulsion, created spots for Gallo's Wild Vines, a wine and fruit beverage.

Mr. Hoffenberg was said to be working on other assignments as well, among them Gallo of Sonoma. London shop Mountain View, which introduced Gallo wines to France, also was reported to be working on a U.S. assignment for Gallo of Sonoma. The status of that assignment was unclear; Mountain View executives and Mr. Hoffenberg were unavailable at press time.

Among the assignments Gallo is said to be shopping to agencies is a new entry into the alcohol-spiked lemonade category, popular with young drinkers and populated by brands such as Anheuser-Busch's Doc Otis and Seagram Spirits & Wine Group's Rick's Spiked Lemonade. Gallo is also in the process of introducing Walkabout, an Australian wine.

The agency inquiry comes at a crucial time when questions have arisen about Gallo's future, when the California wine business is in ferment, and when smaller vintners are developing a palate for marketing. A Gallo spokeswoman denied rumors that PepsiCo is interested in buying the winery. And although Mr. Gallo has a firm grip on marketing, plans are also being made for the next generation; the spokeswoman said a trust has been established that allows company management to transition to a number of family members after his death.

FUNDAMENTAL CHANGE

The business that built Gallo into the world's largest winery also has evolved. The strongest wines in Gallo's cellars are economy-price jug brands, such as Carlo Rossi and Livingston. But the industry's fastest-growing and most profitable wines are higher-price bottled brands.

"The wine industry has fundamentally changed, and Gallo has not changed as rapidly," said Vic Motto, a wine business consultant.

Gallo's share of the U.S. wine market has held steady since 1995, dropping slightly from 26% in 1995 to 24% in 1998 and 23% last year, according to Impact's "Annual Wine Study."

Even so, "Gallo is making money and they are still by far No. 1," said Frank Walters, senior VP-director of research at Impact.

While Gallo long has been the 800-pound gorilla in the wine marketplace, "ironically, the bigger advertisers [now] are the smaller wineries Gallo never paid attention to," said Mr. Motto. Smaller vintners began to consider advertising five years ago, tested campaigns and found them successful, he said.

COMPETITORS' CAMPAIGNS

For example, Robert Mondavi Corp. this week launches a $10 million national advertising campaign from Dailey & Associates, Los Angeles, featuring CEO Michael Mondavi.

Later this month, Sutter Home launches a $9 million branding effort from Goodby, Silverstein & Partners, San Francisco, centered on humorous vignettes from the life of owner, Chairman-CEO Bob Trinchero.

An innovative element of that campaign is a free CD on wine bottles and over the Internet that will allow users to hear the sounds of rainfall and geese. Rob Celsi, senior director of marketing, said he hopes the software, created by agency Red Sky Interactive, San Francisco, will serve as a viral marketing device.

Mr. Celsi said with recent consolidation and acquisitions in the business, such as the purchase of the Beringer Wine Estates in August by Foster's Brewing Group, vintners who once focused on grapes and corks are now more marketing-savvy.

"There will be no qualms about advertising," he said, adding, "Come on in, the water's fine."

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