Gallos, in a Shift of Marketing Strategy, Court Wine Elite With Varietals

MODESTO — While the daily temperature in this unlikely wine town in the heart of California’s long, low and fertile Central Valley topped 100 degrees last week, it remained precisely 68 degrees in the vast, underground aging cellar of the E. & J. Gallo Winery.

From that cool reserve this hot summer are being drawn and bottled a 5-year-old red Zinfandel and a 6-year-old Cabernet Sauvignon, only the second and third vintage-dated red wines produced in the 53 years since Ernest and Julio Gallo began commercial production at the end of Prohibition.

Last Monday night, the normally intensely private septuagenarians played host to nearly 200 members of the Society of Wine Educators, wining and dining them and showing off the 250-acre plant here, where wines crushed from 750,000 tons of top-quality grapes--more than one-third of the state total--are finished, bottled and distributed nationwide.

The precision of production is not new for Gallo, but the introduction of vintage-dated premium varietals marks a recent and significant departure for the world’s largest wine-making operation. It explains the brothers’ uncharacteristic courting of the wine elite, having long since conquered the mass market over the last 30 years--first with its flavored specialty wines sporting such fanciful and fading brand names as Thunderbird, Spanada and Boone’s Farm, and later with well-made generic wines of consistent quality under the Gallo label.

Closely Guarded Operation

Today, Gallo is also one of the nation’s biggest closely held corporations, and one of the most closely guarded, with sales estimated by the trade as high as $1 billion a year.

The apparent goal of the brothers’ latest marketing strategy is to demonstrate “Today’s Gallo.” This is the theme of their current promotional campaign, succeeding the initial effort, begun in 1983, to associate Gallo bottlings with “All the Best.” This shift in strategy by the market leader reflects both the company’s maturity as a wine producer and the evolution of the United States as a serious wine-consuming nation.

Gallo has always sought to make the wine that the public wants to drink, and Ernest and Julio Gallo steadfastly decline personal or even trade publicity, preferring, they say, to let their wines speak for themselves.

Once the company is sure of where the consumers are, it has always seemed ready to provide the products they want at prices below the competition. Their vintage-dated premium wines retail for significantly less than $10 a bottle--and some can be found discounted at less than $5--while offering quality and care of production that more than one wine critic has judged as equal to bottles bearing double-digit price tags.

Gallo, for example, was far from the first to enter the wine-cooler market pioneered by California Cooler, just up the valley in Stockton. But since it launched its intensely promoted Bartles & Jaymes brand just 15 months ago, its carbonated citrus-wine blend climbed fast and its sales reportedly have already overtaken the field, even California Cooler with its substantial head start.

Doesn’t Like to Comment

“Reportedly” must be attached to almost everything regarding the winery, since it systematically refuses to provide any information on sales, strategy or even observations regarding the industry it leads. The company’s first communications director, Dan Solomon, hired in 1974, once described his job to reporter Becky McClure of the Modesto Bee as “the Gallo spokesman, who is unavailable for comment,” adding the house phrase: “We prefer to let our wines speak for themselves.” And what those wines have had to say to consumers has made E. & J. Gallo Winery “the undisputed king of California wine,” according to Impact, a trade newsletter published by M Shankin Communications in New York.

The winery’s Gallo brand wines, including Chablis Blanc and Hearty Burgundy, are the nation’s top-selling table wines. Its Carlo Rossi label, which often competes with Gallo, runs a close second, each nearly double the sales of third-place Almaden Vineyards of San Jose.

Taken as a separate brand, the Gallo varietals are the nation’s top-selling premium wines, according to Impact’s figures for 1984, the most recent available.

Sales of Gallo, Carlo Rossi and Gallo varietals (the latter designated “from the wine cellar of Ernest and Julio Gallo”) accounted for 36% of the California table-wine market. In addition, its Andre brand sparkling wines and E. & J. brandy are market leaders in their classes.

“The Gallos recognized early on that the majority of Americans were unfamiliar with wine and didn’t much care about corks or barrel aging,” Impact reported in its industry survey. “In fact, they reasoned, those factors were intimidating to neophyte wine drinkers.”

Integrated Operation

While Gallo reportedly spends more than $30 million a year in promoting its wines and prices its products aggressively, its wine-making operation may also be the world’s most efficient and technologically advanced. It is integrated, all the way from growing grapes, which they also buy, to making its own bottles from recycled glass to shipping and distributing the final product.

The Modesto facility is split between the production area, which resembles a refinery and tank farm, and the Gallo Research Laboratory and the airy Administration Building, which stand in a verdant campus-like setting. No sign indicates the Gallo Winery presence; the only clue that this is indeed Gallo headquarters is modest-sized lettering at the entrance to Gallo Glass Co. on the edge of the production side of the complex.

Despite the millions of gallons of wine that Gallo blends, ages, bottles, bins and ships at Modesto, the only wine made here is produced by the winery’s well-regarded Gallo Experimental Laboratories. At its underground cellar, the company ages in oak varietal wines made at its Sonoma County vineyards and at several other San Joaquin Valley towns. Other wines are stored in more than 100 towering metal tanks, each coated with four inches of foam to insulate them from Modesto’s often-torrid summers.

The company buys more of Napa Valley’s wine crop than any other winery. It uses 32% of the wine grapes produced in Sonoma County, where it grows Cabernet, Zinfandel and Chardonnay grapes near Healdsburg on the Russian River, and Gewurztraminer and Johannisberg Riesling grapes in the rolling hills near Sebastopol. Sauvignon Blanc, French Colombard and Chenin Blanc come from the San Joaquin Valley.

Shuns Seedless Grapes

But Gallo prides itself on using no Thompson Seedless, a fine table and raisin grape that has long been a cheap blending staple for bulk wines.

Gallo President Julio Gallo, 76, watches over wine-making operations, while Ernest Gallo, 77, presides over sales and marketing.

Both men are respected as innovators. The winery’s alumni list reads like a Who’s Who of California wine making. It includes Legh Knowles, who heads Beaulieu Vineyards, Art Palombo of Paul Masson, Dick Maher of Beringer, Art Ciocca of Franzia and Terry Clancy of San Martin. Other former Gallo employees contribute to the Monterey Vineyard, Cuvaison, Freemark Abbey, Sebastiani, Souverain, Joseph Phelps and Chateau Montelena.

But the essence of the operation comes down to the grape, as Julio Gallo remarked on receiving the American Society of Enologists’ Merit Award in 1975 (11 years after Ernest Gallo was similarly honored): “Nobody can make good wine out of bad grapes, but what we don’t want to do is to make bad wine out of good grapes.

“Everything we’ve done are things which come naturally in this business,” Julio Gallo continued. “Research and quality improvement is a constant practice, a process of gradual improvement over a long period of time, which comes naturally with our operations. It results in constant refinement, but rarely results in a breakthrough.”

But beyond that, the Gallos will say little of their work.

“We don’t want to give our competitors a leg up,” says Solomon, the Gallo spokesman.