Seventy-five years ago, Ernest and Julio Gallo, the sons of Italian immigrants, opened their own California winery with only $6,000 in starting capital and a crash course in commercial winemaking from pamphlets found in the Modesto Public Library. Despite the odds against them, the Gallo brothers became one of the great American business success stories by combining Julio’s winemaking expertise with Ernest’s innovative talent for marketing and selling wine. Today, E. & J. Gallo Winery is the largest family-owned winery in the world and markets more than 60 brands, including more than a dozen import brands.

Headquartered in Modesto, Calif., E. & J. Gallo has evolved from a small winery to a global empire, now operating seven wineries throughout California and producing around 69.2 million cases annually. The largest exporter of California wine,  E. & J. Gallo sells wine in 92 countries. Yet despite the company’s size and scale, at its core, Gallo remains a family operation guided by the founders’ family values, including a strong work ethic and a focus on quality, as well as a deep passion for winemaking. Even after the passing of Julio in May 1993 and Ernest last March, the roots of the Gallo family tree go deep within the company as 15 family members are currently involved in the wine operations. The third generation of the Gallo family continues Ernest and Julio’s legacy, offering a broad portfolio of popular and premium wine brands to meet the needs of diverse wine consumers around the world.

“We feel that the most important thing you have to do is focus on the consumer needs,” says Joseph (better known as Joe) Gallo, E. & J. Gallo Winery CEO and co-president and Ernest’s son. “We strive to cater to those needs. We have a lot of advantages in California to offer the consumers a real value because of our location, our commitment to the industry and our investment. With our research and development we can continually invest in our wineries to improve products for the consumer.”

Ernest and Julio were considered instrumental in introducing American consumers to wine and paving the way for the modern American wine market. The Gallo family continues to build on this foundation by skillfully blending tradition with innovation and successfully balancing the art and business of wine.

The Art of Wine
Following in the footsteps of her grandfather Julio, Gina Gallo is the winemaker for Gallo Family Vineyards, a portfolio of award-winning wines including Sonoma Reserve, the vineyard-designated Single Vineyard and the top-of-the-line Estate wines, which are based in Sonoma County, the epicenter of Gallo’s premium wine operation. The portfolio also includes the California-appellated Gallo Family Vineyards Twin Valley wines.

“I have a lot of great memories of sitting around the dinner table and listening to my grandfather Julio and my father talk about the business, about creating wine and what new varietals they were looking at, and I got a strong feeling from the beginning of wanting to be a part of it,” remarks Gina.

Carrying on her grandfather’s legacy of creating wines to be enjoyed with family meals, Gina creates Gallo Family Vineyards Wines that are balanced and stay true to the land through a commitment to sustainable agriculture. Ernest and Julio Gallo are recognized for introducing innovative approaches to land conservation and sustainable practices back in the 1930s.

The Gallo Family Vineyards Wines portfolio has garnered international and national acclaim, including being named International Winery of the Year by VinItaly International Wine Competition three times and Best American Wine Producer.
Gina believes being a family-owned and operated business is ultimately Gallo’s advantage as it can make substantial investments in research, planting and equipment to improve the quality of its wine.

“It takes five years to get grapes once you plant them, so being privately, family-owned, you can make those long-term decisions and commitments,” she says. “There’s also a family commitment to keep the founders’ philosophy alive because everyone within the family and even the employees, who are extended family, feel the deep-rooted history and tradition that the foundation of this business was built on.”

Yet along with this sense of tradition there also is a spirit of experimentation and innovation, Gina notes, as the winemakers blend time-honored methods with modern techniques.

“With wine, you have to stay rooted to your traditions because there’s so much history in the land. My grandfather Julio used to always say that our richest good is the soil beneath our feet. So how do you keep the vitality and health of the land? By being very hands-on, and technology will never take the place of that,” she says. “But the beauty of California is that you have the freedom to really explore and be at the forefront of creating wines today.”

The Business of Wine
In the wine business, relationships are critical to success and Gallo prides itself on its strong partnerships with growers, distributors and retailers, as well as its 4,600-plus employees, who are considered the backbone of the operation.

“My father (Ernest) believed there were eight keys to our success and we strive to follow them—be independent and a master of our own destiny; hire good people; strive for perfection; never be satisfied; don’t plan too far ahead; have a sense of urgency; work like hell and be lucky,” remarks Joe. A little luck doesn’t hurt, but ultimately, it’s the Gallo family’s ability to take advantage of opportunities in the market that has led to the company’s prosperous growth.

The Gallo brothers are often credited with creating the modern American wine market by introducing brand management and modern merchandising techniques and were early pioneers of wine advertising campaigns. They were the first to establish their own national sales force, not to mention a significant foreign sales and marketing force to export California wine overseas. That legacy continues today with a world-class sales organization and category management capabilities.

“We have structured our sales organization to specialize in each channel. For the on-premise operator, our sales people spend a great deal of time conducting wait-staff training seminars on selling wine. In a grocery store, where wine is more of an impulse buy, we give more attention to in-store merchandising or food and wine pairing,” remarks Stephanie Gallo, senior director of marketing, who, following in her grandfather Ernest’s footsteps, builds brands based on quality and value.

Recognizing that wine is often perceived as an elitist beverage, Gallo has been ahead of the wine industry in terms of its wine marketing initiatives that position wine as a social beverage. For instance, the Barefoot Cellar brand, which Gallo acquired in 2005, is a line of affordable, approachable California wines that has seen phenomenal growth. “If you take a Barefoot wine home and serve it to your guests, you don’t have to explain what vintage date it is,” says Joe. “It’s not intimidating, and that’s getting people to try wine and as they try it, they start to experiment upward, which helps to build the whole category.”

According to Gary Ippolito, Gallo executive vice president and general manager, each brand within the Gallo portfolio is strategically positioned against a specific consumer lifestyle.

“I believe in the power of brands within the wine category, particularly as people are getting into the category,” says Stephanie. “Our family has always believed that you can produce a great quality wine at an affordable price and that’s nothing to be ashamed of.”

In the past six years, the company has expanded its portfolio by strategically acquiring a number of smaller California wineries and brands, such as the historic Louis M. Martini winery in St. Helena, Mirassou, one of the oldest wine brands in California, and the William Hill Estate Winery, including the popular Canyon Road brand, this past August.

“We’ve had some very big successes with our acquisitions, such as Barefoot and Mirassou, where the companies were well-established in the US, but were under capitalized. We had the opportunity to buy them, put them in our system and take them to the next level,” notes Ippolito.

After 63 years of being exclusively focused on California wines, Gallo expanded into the imported wine business when it introduced the Italian Ecco Domani brand to the US market in 1996, the first foreign-based brand developed and imported by the winery. Since that time, Gallo has built an impressive portfolio of imported brands, from 11 wineries in nine countries. As part of its international winery import partnerships, Gallo imports and markets brands such as Red Bicyclette (France), Don Miguel Gascón (Argentina), Sebeka (South Africa) and McWilliam’s Hanwood Estate (Australia). Today, Gallo’s size and scale—with seven wineries and 20,000 acres of vineyards—allows the company to successfully compete on the world stage, notes Ippolito, as it has the vantage point of observing wine trends across the globe.
Looking ahead, the wine industry is poised to face tremendous opportunities, such as increased wine consumption, as well as some challenges, yet the Gallo family believes its business is well positioned to continue leading the US wine market as the No. 1 family-owned winery in the world.

“Being family-owned and operated, we can make decisions for the long term and we’re not beholden to the stock market or to Wall Street. The wine industry is extremely capital intensive, whether you’re planting a vineyard, investing in cooperage or deciding to build a brand. It requires time, patience and investment. Being privately held enables us to do what’s right for the long term,” remarks Stephanie.

From Beverage World February 15, 2008