Gallo Rice

Sig. Cesare Preve, marketing director for the Gallo brand of rice, was reviewing Gallo’s current market position in three different countries. Volume share was 21% in Italy, 17.5% in Argentina, and less than 1% in Poland respectively. Preve was trying to determine a strategy for deepening Gallo’s market penetration in each country. One of the questions that needed to be answered included whether or not resources should be focused in new high growth markets or should he focus on mature markets. Another question was if he could take what was learned from success or failure in one country to another country.

Gallo was the market leader in rice in Italy. It was a trusted brand and known for good quality. Eighty-five percent of retail rice sales in Italy were white rice and 15% consisted of paraboiled varieties by volume. Paraboiled and specialty rice were growing approx. 10% per year while white rice was losing 1%-3% share annually. Gallo’s white rice volume accounted for 17.3% of Italy’s white rice volume. Gallo’s Blond line volume share in Italy was 35.4%. Their super-premium line was 1.2% volume. Gallo was carried in grocery stores that accounted for 80% of all grocery sales in Italy. These stores generally stocked 5 Gallo products (2 whites, 3 parabo

Preve was concerned that he may begin to lose market share in the paraboiled rice segment. Retail trade margins on Gallo’s blond line were around 1% and around 7% on the competitor Flora’s paraboiled lines. He was concerned that chains would develop their own rice lines to improve their bottom lines. I would recommend that Preve work on monthly promotions with the major grocery chains with the goal of the grocer helping drive Gallo’s volume and offering the grocer some margin support. Some examples would include: Gallo discounting the price to grocers to help raise their margins and Gallo offering the consumer a rebate or offering coupons as a sales incentive. In exchange, grocers would merchandise Gallo products in high traffic areas and feature Gallo products in their promotional flyers. In addition, Gallo should focus new product development on dry rice mixes (risottos) in the quick drying Meta 'Tempo brand. These products sell for 3 to 4 times the price of white rice. Advertising for the product launch should include consumer coupons and recipes or use with the risottos. Advertising should be in the Italian language. Products that enhance the consumer experience and that are convenient will create a positive brand image and increase customer loyalty.

Again, Gallo was the market leader in the rice industry in Argentina. Ninety-two percent of households in Argentina consume rice at least once per week and 30% of households consume rice three times per week. Paraboiled rice consisted of 18.2% of the market and basic white and brown rice accounted for the remainder. Gallo’s volume share was 17.5%. Gallo brand rice could be found in outlets that represented 77% of all retail food sales in Argentina. These supermarkets carried an average of 7 Gallo products per store. However, there was a lot of competition in Argentina. Large supermarkets generally sold 5-7 different brands of rice.

There were two main issues of concern to Preve. One of his competitors, Molinos, had double the advertising budget. The other was tight economic condition and whether to spend more when product prices were high compared to other products. Given the data provided on rice consumption in Argentina, I believe Gallo’s loss of market share is due to poor advertising and not because of the tight market. The aggressive marketing by the competition has made an impact. Gallo must increase their advertising budget and they must spend on advertising for more than just the Gallo Oro line. Preve is resisting price reductions when raw material costs have dropped significantly. If that is the case, the additional revenues generated could be rolled over into the advertising budget. Gallo should develop the Gallo Quick product and promote it to young professionals who are concerned with quality and convenience. Most often they can afford to the premium prices those product types demand. As suggested in Italy, print advertising and product packaging should include recipes