Fewer than 2 percent of all wineries in the United States account for 84 percent of all wine production. More than half of all wine sold in domestic wine shops and supermarkets is centered in three wine companies.
After penning last week’s column I began to ruminate on the enormity of these statistics. Of the 8,800 wineries in the United States, less than 200 dominate wine sales. The three dominant producers are E.&J. Gallo, The Wine Group and Constellation Brands. While each ascended to their dominant role through a combination of organic growth and financial investment in proven wineries, none has done so with the sheer force and history of Gallo.
Much of the current Gallo brand image is mired in its early history of producing inexpensive and nondescript alcoholic beverages. Much of their early success was driven by marketing acumen rather than winemaking artisanry.
So it was with my impression, until I reported on the broad and deep portfolio of wines in the current Gallo portfolio. I decided to delve further into this iconic wine family’s history and domination of the United States wine industry–from an immigrant family’s vineyard to today’s status as the largest privately held winery in the world. My research uncovered information I had forgotten, information I remembered but wanted to forget, information I didn’t know and information I didn’t know that I didn’t know.
Herewith a brief history of the empire built by Ernest and Julio Gallo.
Ernest was born in 1909 and Julio a year later. When Prohibition was enacted in 1920, Ernest and Julio’s parents began growing and selling grapes–legally–to home winemakers. But the family business suffered during the Great Depression, and in 1933 Ernest and Julio’s parents died as a result of their father’s murder-suicide.
Now 24 years old, Ernest decided to become a winemaker. Convincing his brother to join him, they borrowed $5,000 from Ernest’s mother-in-law and began making wine. The only problem was that they had no experience as winemakers. Self-taught, they started the E.&J. Gallo Winery, with Ernest heading up sales and marketing and Julio focusing on the vineyards. They quickly exploited a niche for cheap wines–Carlo Rossi, Thunderbird and Ripple–that had mass appeal. Hence their early reputation for unappealing, unsophisticated wines. The Gallos were very aggressive in soliciting government approvals for many controversial practices, doling out huge sums to government lobbyists and political parties to garner favor for their company.
However, building off of these cash cows, the Gallo brothers embarked on a massive campaign to upgrade their vineyard management techniques, winery operations, marketing efforts–and their image. With little fanfare and avoiding the public limelight as much as possible, beginning in the 1990s they practiced sustainable grape growing, eschewing the then popular chemicals used by their competitors. They introduced environmental-friendly processes to reduce power consumption, carbon emissions and water contamination. Today they are considered a leader in sustainable grape and wine production. Unfortunately, their image remained mired in their self-inflicted bad press of the post-Prohibition era.
Beginning in 1993, the Gallos sought another tactic to enhance their image. They began marketing wines under private labels, with no mention of Gallo to be found on labels. They also began to aggressively import wines from around the world. All of these brands had the Gallo operations and marketing juggernaut supporting them. Today, Gallo brands span low-end and premium brands, generating estimated annual revenue of $3.4 billion, on sales of 80 million cases. They employ 5,000 workers worldwide.
Both founders have passed away, Julio at 83 in a 1993 car accident and Ernest at 97 in 2007. What is the legacy of Ernest and Julio? Celebrating its 80th anniversary this year, Gallo is still closely held and controlled; 14 family members are actively engaged in fostering and enhancing the legacy of four generations of Gallos.
What’s next? Gallo has entered the fast-growing Chinese wine market. Carlo Rossi is the top imported wine brand, with annual sales of about one million cases. Perhaps this is the next frontier for Gallo to wield its mighty force. Ernest and Julio would approve.
Nick Antonaccio is a 35-year Pleasantville resident. For over 15 years he has conducted wine tastings and lectures. He also offers personalized wine tastings and wine travel services. Nick’s credo: continuous experimenting results in instinctive behavior. You can reach him at firstname.lastname@example.org or on Twitter @sharingwine.