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9/17/2004
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Top Of The List: Recipe For A Better Winery

Equal parts technology and business acumen give winemaker Gallo a better view of its processes, business, and customers

It's 95 degrees in Modesto, Calif., an agriculturally oriented city of more than 200,000 people 90 miles east of San Francisco. It's hotter still on the factory floor of the Gallo Glass Co., where four furnaces turn sand, limestone, soda ash, and recycled shards into molten glass. It feels a few degrees shy of blistering. Over the roaring fans and the hiss of hydraulics, and through our earplugs, George White, IS manager, shouts that the ambient temperature can reach 140 degrees.

Every few seconds, fireballs of liquid glass fall from the furnaces overhead, careening down rails into bottle molds. Air-cooled to 2,000 degrees Fahrenheit, the glass freezes, taking solid form. Robotic arms extend and retract with menacing speed, releasing wine bottles onto conveyor belts. A handful of workers in protective gear tend to the assembly line. "It used to be people everywhere," White says. "Now it's all automated."

The information gleaned by the automated systems is fed into the shop-control system, which provides instant visual feedback about manufacturing to operators in the air-conditioned control room and on the shop floor. Amid heavy equipment that evokes Eisenhower-era manufacturing, 42-inch Sony flat panels display the up-to-the-second production statistics necessary to run at peak efficiency.

White's operation produces 2.5 million wine bottles a day for its parent company, E.&J. Gallo Winery, the largest wine producer in the world. Gallo also ranks first among the InformationWeek 500 because of successful innovation across its business practices, technology methods, and IT-staff management. The company has a long history of forward-thinking technology practices, as reflected by previous InformationWeek 500 rankings: third in 2003, ninth in 2002, 30th in 2001, and 177th in 2000.

"A lot of people recognize them as an innovative sales and marketing company," says Paul Tincknell, a partner in wine sales and marketing consulting firm Tincknell & Tincknell. "Much of that is being able to manage their technology effectively." The other major players in the industry, including Allied Domencq, Beringer Blass, Bronco, Constellation, Kendall Jackson, and Robert Mondavi, are no strangers to IT. Wine-industry consultant Jon Fredrikson of Gomberg, Fredrikson & Associates singles out the Australian wineries as particularly advanced, pointing to their adoption of automated pruning systems to compensate for labor shortages. But Gallo remains ahead of the competition, Tincknell says. "Their IT program is very advanced."


Gallo is focused on real-time information about its products in the supply chain, VP and CIO Kent Kushar says.

Gallo is focused on real-time information about its products in the supply chain, VP and CIO Kushar says.

Photo by Jeffery Newbury
That a winery would want to manufacture its own bottles offers some insight into the breadth and depth of the company's concerns. It's not just that bottles represent a major packaging cost for wineries. Owning a glass company lets Gallo bring new wine-bottle designs to market quickly, without tipping off competitors, and secures and controls a crucial portion of its supply chain, says VP and CIO Kent Kushar.

Watch a few thousand bottles soldier along conveyor belts to be filled, sealed, labeled, and boxed, and you start to get a sense of the magnitude of Gallo's supply chain. Information, and the technology to gather and use it, is essential to manage such complicated production. Gallo recently upgraded two of its 23 bottling lines to increase productivity, visibility, and control. "We had a need for better information systems," says Ulli Thiersch, VP of manufacturing. "We wanted our operators to have better real-time information."

There's a reason Gallo is so concerned about real-time information on products in the supply chain. "In the wine business, it's a three-tier business--meaning, as a winery, you must sell to a distributor who must then sell to a retailer," Kushar says. "So that three-tier supply chain requires you to have visibility to all those levels when you're moving product."

There's a bit of irony here: Visibility is something of an issue for Gallo. The privately held company is known for preferring privacy. "They're very secretive," Tincknell says. In fact, there are no signs identifying the Gallo facility in Modesto. Not that its location is any secret to locals. After all, Gallo is Modesto's largest private-sector employer, providing work for more than 2,300 people in the area and 4,600 people all told. Its estimated revenue in 2002 was $1.8 billion. Last year, it sold about 65 million cases of wine. Most wineries sell several thousand.

The total U.S. market in 2003 was 265 million cases, Fredrikson says. That's up 5% from 2002. Despite a slower 2% growth rate in the first half of this year, the result of a strong euro that has made French and Italian imports more expensive in the United States, Fredrikson nonetheless believes it's a buyer's market. "Today is a dream market for American consumers," he says. "There's never been such high quality for the price."

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