A New Vintage Gallo

Barry Stavro is a Times business writer

The countryside roads in Sonoma County are choked with directional markers, a dozen arrows or more set up per pole, that point the way to many of the 135 wineries in this Northern California community. Clos du Bois, Kendall-Jackson, Matanzas Creek, Ravenswood and other local wineries harvest from some of the most valuable cropland on the continent. In this premium end of the wine trade they are selling magic in a bottle, a mix of romance and mystery and their winemaker's handcrafted subjective artistry, all packed under a cork. It requires constant marketing to turn this into liquid gold, so most wineries want visitors to stop in, look around, taste their product, buy it and keep on buying it. * And then there is the family--one of the county's biggest landowners with 6,000 acres, about 2,500 of them covered with grape vines and more being planted--who don't lay out any welcome mats for the public. A driveway entrance to their vineyard in Healdsburg has a simple red and and white sign that reads: "Private Property No Trespassing Violators Will Be Prosecuted," the words in both English and Spanish. If anyone misses that message, 100 yards down the drive is another sign that warns: "Stop Private Property Check-In Prior To Entry." A security guard in the sentry shack has a small emblem on his sweater with the letters "E&J;," the first clue that this is part of the vast family-owned empire that calls itself E&J; Gallo Winery Inc.

Started in 1933 by Ernest and Julio Gallo, the brothers built their company into the biggest winery in the world, making a fortune by selling street wines such as Thunderbird and Night Train, screw-top jug wine hits like Carlo Rossi and Gallo Hearty Burgundy, plus E&J; Brandy, fruit-flavored Boone's Farm and Ripple wines, coolers such as Bartles & Jaymes, Andre and Tott's champagne, and many other brands. Not long ago, though, Gallo had two big worries. There was a tectonic shift by consumers to more expensive wines, not a family hallmark. And there was the question of who would replace Ernest and Julio. Julio died in 1993 from a broken neck when he rolled a jeep on a family ranch, and Ernest Gallo is now 87 years old.

In a metamorphosis that has been as startling as it has been swift, Gallo has reinvented itself. Using its incredible financial resources, over the last two years it found a way to sell more expensive bottles of Chardonnay and Pinot Noir, overcoming customer resistance to its old low-cost image. Gallo's new Turning Leaf and Gossamer Bay varietal wine brands are big sellers in supermarkets, and one reason is because the Gallo name isn't anywhere on the label. Credit for cracking this market goes to Ernest and Julio's sons. Today, one out of every four bottles of wine sold in the United States still comes out of the E&J; Gallo Winery. The company has 5,000 employees and sells about 65 million to 70 million cases of product a year, and last year its sales hit $980 million, with a net profit of $44 million, according to Forbes magazine. The family has also been pushing aggressively overseas, and Gallo is now the biggest American exporter of wines with sales to 85 countries.

Now another eager wave of family reinforcements is moving in from the third generation: 15 of Ernest and Julio's 20 grandchildren are scattered in jobs throughout the empire, including Gallo's big push into Sonoma County. Here the family is turning out premium wines to compete in the top echelon of the business, against Caymus, Beringer, Robert Mondavi, Dunn, Opus One and other fine-wine benchmarks. The grandchildren are working hard to win the one thing the Gallos still crave: the respect that goes to the true blue chips of the premium-wine business.

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Ernest and Julio Gallo remained workaholics into their 80s, and very private. There are no Gallo signs on company vineyards because, as Ernest fondly told his grandchildren, "We know where all the buildings are." Each brother worked on a different floor of their Modesto headquarters. Julio controlled the winemaking, Ernest was in charge of sales. Julio tried to make more wine than Ernest could sell, Ernest tried to sell more wine than Julio could produce. Questions flew in the wine trade about what would happen when the two geniuses went to their graves, and the family infighting that might follow.

To remain dominant as the world's largest winery, Gallo also had to solve another problem. Per capita wine consumption in the U.S. has been falling, down about 25% in the past decade. The one growth spot is in varietal wines, those made chiefly from one grape variety such as Cabernet Sauvignon, Chardonnay or Merlot. Varietal wines now account for about 60% of all U.S. shipments. Gallo made its fortune selling cheap, blended wines like Hearty Burgundy, but could it sell more expensive, vintage-dated ones that you open with a corkscrew?

Gallo answered that question by attacking two price points at the same time: the mass market for $5 to $10 vintage-dated varietal wines sold in supermarkets, and the true effete, premium wines that cost more than $15, where reputations can rise and fall based on a small group of wine critics and the urgings of restaurant sommeliers.

Buddy Romano has been a Gallo distributor in Chicago since 1962, and the Gallos helped make him rich. But a few years ago, he says, "To be honest, I was worried." The first vintage-dated Gallo varietal wine, a Cabernet with Ernest and Julio's names proudly on the bottle, hit supermarkets in the mid-'80s, and others followed. But with most of its varietal wines selling for $4 to $5 a bottle, Gallo was stuck in the low-rent district of the varietal strata.

Instead, yuppies were snatching up Kendall-Jackson, Robert Mondavi, Fetzer, Beringer and other brands, while ignoring Gallo's best efforts. "How can I say it tactfully?" Romano says. "Gallo came in with all these wines. And the wines are very good. But once they got in the stores, it's very difficult for them to move off the shelf. People still thought Gallo should sell wines below $5." Not only did baby boomers veer away from Gallo's low-cost image, there remained some prejudice against Gallo, dating back to wine boycotts in the '70s when the company was battling with the United Farm Workers.

The solution was to hide the Gallo name. Two new vintage-dated varietal brands--Turning Leaf, introduced in fall 1995, and Gossamer Bay, which hit supermarket shelves last year--don't mention Gallo anywhere on the label. Gallo invested in some eye-catching packaging and TV advertising, and by last fall the Turning Leaf line had cracked the top 12 of all varietal wine brands sold in supermarkets. Turning Leaf and Gossamer Bay sell for $5 to $10 a bottle at retail, and wine analysts say that Gallo sold 1.5 million to 2 million cases last year, a phenomenal showing for brands that didn't exist two years ago. "Gallo has clearly demonstrated they are not going to be an IBM in a Microsoft age," says Gallo distributor David Taub in New York.

One oddity of having fathers who worked into their 80s is that Ernest and Julio's children are now of the age where, in most corporations, they'd be considering retirement. But Turning Leaf's success shows that the second generation is belatedly coming into its own.

Gallo is run now by four co-presidents. They include Ernest's sons Joe, 55, in charge of domestic and international sales, and his brother David, 57, who oversees domestic marketing and advertising. Julio Gallo's son Bob, 62, is the boss of vineyards and winemaking, while Julio's son-in-law Jim Coleman, 60, runs warehouses and bottling plants. Gallo, to use a textbook cliche, is vertically integrated--and makes everything from screw caps to bottles and has a truck fleet to help deliver the final product.

"Joe Gallo had a lot to do with coming out with Turning Leaf and Gossamer Bay. And it's moving off the shelves. He's got me thrilled," Romano says. Ernest Gallo once said that the family name should be on their best wines. "But he's so brilliant that he saw not to interfere with his own son," Romano says. "Joe is right on top of his business."

But retailers don't think Gallo had any choice. Mark Rojek is wine buyer for the Thrifty Payless drugstore chain, based in Wilsonville, Ore. "Let's face it. The Gallos' own marketing over the years has told them that customers do not associate their name with quality." The Gallos concluded, that "if you want to be in the varietal business, you have to put a different name on it."

Wine ads on television, or even radio, are relatively rare because few companies have the cash to buy advertising spots. But Gallo does. And its Turning Leaf and Gossamer Bay commercials were regularly booked on NFL games, plus network shows such as "Friends" and "Ellen," to aim for the 21- to 45-year-old audience. On a Monday Night Football game last fall, a Gallo ad prompted color commentator Frank Gifford to ask, "Where is that Gossamer Bay anyway?" which led to repartee by the three commentators about the new wine brand. "Those are the kinds of things you can't buy," says Patrick Dodd, a Gallo marketing executive.

Joe's daughter Stephanie Gallo, 24, works as a Gallo sales rep in Chicago. She thinks too much fuss has been made about Gallo's success in selling more expensive wines without the family's name on the label. "It's just the way we decided to position the product," she says.

Whatever the reason, Turning Leaf and Gossamer Bay are drawing attention along supermarket aisles. At a Ralphs store in Woodland Hills, Rick Swan pushed a shopping cart holding two bottles of Turning Leaf Chardonnay. "For $7 [a bottle] it's not bad. I don't buy it continuously. I like variety," he says. Who makes Turning Leaf? "I can't remember without looking," he says, spinning the bottle, searching for the answer. But the fine print doesn't reveal any secrets. It reads: Vinted And Bottled By Turning Leaf Vineyards, Modesto, CA.

Wendy Betton, a shopper at a Lucky store in Woodland Hills, had a bottle of the Gossamer Bay Chardonnay in her cart. "It was the price and the TV commercial that sold me on it," she says. When told the wine was a Gallo product, Betton said, "Oh, is it really? If I'd known, I probably wouldn't have bought it. I don't like Gallo. It's cheap."

Rojek committed plenty of space at Thrifty stores for Gallo's new wines, and it's paid off. "Gallo is one of the few beverage companies, that if they introduce a product like Turning Leaf or Gossamer Bay, you as a buyer felt very confident that the customer would know about the product. A lot of other major wineries introduce brands, and the customer never sees it" before coming into the store, he says. John Anderson, a wine consultant in San Francisco, explains, "95% of the wine-drinking public buys with their eyes and ears. Not their nose and mouth."

Jeff Yapp, a former Gallo sales executive, credits Joe Gallo for also making the company the biggest American wine exporter. "It was Joe's idea to make it a worldwide brand," Yapp says. Wine analysts estimate that Gallo sold 6 million cases of wine overseas last year, more than most American wineries could ever dream of selling in the United States. In England, Gallo went from nonexistent to the No. 1 imported wine in three years by marketing Gallo not as a bargain brand, but by emphasizing the care the family took in growing quality grapes.

"One of the great moments of my life was traveling with Ernest through customs in England four or five years ago," Yapp says. "The customs officer looked at his passport and said, 'Are you the Ernest Gallo who makes those great California wines?' "

But Yapp, like many younger Gallo executives, finally left. He now works for 20th Century Fox. "I love the Gallos," Yapp says. But he wanted an equity stake where he worked. "And in their company, short of marriage, that was not going to happen."

For the Gallos, the final territory in which to stake a big claim is at the top end of the wine trade. "The Gallos wanted to be the biggest. Now they want to be the biggest and best in better wines," says Romano. "Face it, that's what Ernest's dream is. Look how much money they're spending in Sonoma."

The Gallo family has been on a shopping spree in Sonoma County--one of the prime wine-growing areas in the United States--in recent years and now owns eight vineyards. Last May they paid $7 million to buy a 1,700-acre cattle ranch owned by the late actor Fred MacMurray, who used the spot as his escape from Hollywood. The Gallos figure only 300 to 500 acres of the ranch can be used for grapes because of a bowl of mountains and forests that encircles the property. But Bob Gallo wanted the place.

The Gallos not only control a lot of land--they sculpt it. Using a fleet of giant earthmovers--equipment bought from the Alaskan pipeline project--they remove four to six feet of topsoil, digging into the hard-pack, then use earthmovers for the actual contouring. Drainage pipes are put in, topsoil is spread back on and the grapes planted. Other growers are awed and envious. Most of them have to make do with the lay of the land: If a spot is hilly, they carve out terraces and plant. Sculpting the land, as the Gallos do, is an expense they can't afford. "I've never seen anything like it," says Ed Everett, president of New World Wines, a San Francisco wine importer and consultant.

All this can cost $25,000 per acre of planted vineyards, $5,000 of that for reshaping the earth, and this excludes the purchase price, says Matt Gallo, 33, Julio Gallo's grandson, who is in charge of the family's big Sonoma County operation. "When is the payback? I don't know," Matt says. "The payback is longer than in most companies. Our investments are generational and very long-term. We're more concerned with successful wines. What we're trying to accomplish in Sonoma in the next 20 years is to become a legendary winemaking family in ultra-premium wines."

It's been a learn-as-you-go campaign in the fine-wine trade, but the family is winning some converts. Their Gallo Sonoma brands, which cost $15 to $40 a bottle retail and have Ernest's and Julio's signature on the label, are getting more space in fine wine shops and restaurants. The vanguard restaurant Chez Panisse in Berkeley recently bought its first batch of Gallo Sonoma wines, and the Wine Spectator magazine named a Gallo Sonoma Chardonnay as one of its top 10 wines of 1996.

At Mixx, an upscale Santa Rosa restaurant in the heart of wine country, one of the special draws is its wine list, made up mostly of local producers. Wine buyer Paul Johnstone has several Gallo Sonoma wines on his list. He likes them and tries to push his customers to be adventurous and try them. "They usually say, 'Gallo?' I say 'Gallo.' Once I get it into their mouths, the customer thinks this is very good. The hardest part is overcoming the Gallo name-thing," he says.

A nagging problem for Gallo has been to get the most influential wine critic in the country, Robert M. Parker Jr., to pay more attention to them. In 1978, Parker put out a wine newsletter and introduced a numerical scoring system, from 50 to 100, to help quantify the ethereal elements of a wine review. Since then, his newsletter and books have made Parker the wine industry's Siskel & Ebert. When Parker raves about a wine, stores put up a piece of cardboard next to a case of wine that simply reads: Parker and his score.

Parker pays his way to wineries around the world, tasting 10,000 wines a year, but he hasn't been to Gallo's Sonoma complex yet. "They have put a lot of pressure on me through letters, faxes and phone calls. Given what they're trying to do, I should have already visited them," Parker says.

Parker did review some of the first Gallo reserve wines from Sonoma. "I liked the Chardonnay, and the Cabernet [somewhat] less," he says. "There is no reason Gallo is not capable of making some of the best wines produced in California. They have endless financial resources. Unless the quality is hurt by a corporate mentality who want wines almost too sterile and too one-dimensional. Sometimes a corporate board mentality creeps in and says you can't take chances."

Last year, Gallo sold 100,000 cases of its premium Sonoma County wine brands, its best ever, but a relative drop in the bucket for this corporate behemoth. Still, it marks a sea change as some wines from a single vineyard may produce only 2,500 cases. "For the first time being sold out is not a sin," says Dodd, the Gallo marketing executive.

Granted, Gallo is still heavily dependent on inexpensive products--it probably sold 10 million cases of coolers last year and 11 million cases of Carlo Rossi jug wines--but those 2 million cases of Turning Leaf and Gossamer Bay, plus its Sonoma brands, are finally nudging up its prices. Every case of Gallo's Sonoma wines sold is now the equal of five cases of jug wines in revenues, says Ed Everett. "What really matters in Modesto is dollars, not gallons. My bet is the dollar volume is up very, very substantially," he says.

Fine wines mean finer profits. If Forbes' guesswork is right, Gallo averaged about 4 cents of profit for every $1 in sales in recent years. At Canandaigua Wine Co., whose Inglenook, Almaden and Cook's brands put it second to Gallo with about 18% of the U.S. wine market, the company has averaged a 3% profit. By contrast, Robert Mondavi Corp., the legendary varietal winemaker, has turned an 8% profit margin.

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Certainly the fate of Gallo's premium wine effort in Sonoma County now depends heavily on Ernest and Julio's grandchildren. But the Gallo cousins also fill jobs across the kingdom: in sales posts in Boston and Chicago, in public relations and marketing, at the Livingston winery and at the vineyards in Fresno.

Ed Everett has assayed the Gallos for decades, though given the family's secrecy it's been like watching the Kremlin during the Cold War. "Gallo is preparing for a very orderly transition," says Everett. "They are lucky to have the grandkids ready to step in. Nobody knew about them a few years ago. Everybody was looking at Joe and Bob [Gallo] and that obviously was not the only place to look. The fact their children were already in place and in elevated positions throws a whole new light on it."

Credit for this orderly transition goes back to how Ernest and Julio raised their children, who then passed it on to their kids. The method seems to be: make everybody feel part of the business as early as possible, learn that nothing is going to be handed to you and that the family respects hard work. Certainly the Gallo cousins grew up in households where wine was served at the dinner table, and wine talk was served with it. They held various summer jobs at the winery, from grape-picking to testing PH levels in the wine lab to putting on bottle labels.

"Obviously it was conveyed to the second and third generation that this is a family-owned company and so we need you all to participate," says Don Quigley, a former Gallo executive. "It would be hard to look at Ernest and Julio in the eye and not be interested in working for the world's largest winery, and to carry on the name for generations to come."

What the Gallo grandchildren bring is a sense of loyalty and new ideas. The second generation is about as tight-lipped as the first, but the grandchildren are a bit more talkative. One reason is that at the premium end of the wine trade, retailers and consumers expect a little hand-holding, and publicity helps move the product. So Matt Gallo and his sister Gina Gallo, 29, one of the Sonoma winemakers, have become two of the family's designated mouthpieces. Gina appears at wine industry conferences to help put a face on the family's new products, and she's been in radio commercials.

Gina Gallo was riding in the jeep when her grandfather Julio died. "I think of him every day," she says. "He was my mentor. And we're trying to keep the heritage alive."

"We're pretty lucky to get to work with our family," Matt says. "It's like many people would love to take over their dad's drugstore. That's part of the American culture." But Gallo is bigger than a drugstore, and the grandchildren make it plain they want to keep this a family-owned empire.

"I can't imagine us being a public corporation, like what happened at Ford," Matt says. "It's not a 9 to 5 job. It's your life."

In a sense, Matt has worked in the family business since he was 8, when he pruned vines as part of his winter chores. "Since the '50s, Ernest and Julio dreamed and pointed to fine wines, and we're here celebrating what they were planning," he says.

At 10:30 a.m. on a recent day, Matt and Gina are inside their Healdsburg wine cellar, probably the world's biggest at 600 feet by 300 feet and about 35 feet high. The concrete cellar is insulated by 12 feet of dirt, and on top of the cellar sits a soccer field where workers play pickup games. The air inside the Gallo cellar stings the nostrils with an intense mix of oak and alcohol. Forklifts buzz down the aisles, where 40,000 barrels of wine are stored in 55- and 70-gallon oak casks, the wine racks set six barrels high, with enough juice to fill 1 million cases of wine.

Gina carries a wine glass and a glass tube to draw samples from the casks, while her brother totes a white plastic bucket. She samples about 60 wines a day. She tastes, then spits into a bucket. "I'm always spitting, otherwise you'd never make it" through the day, she says.

Gina dresses casually in jeans and clogs, and she talks quickly, like someone on a caffeine rush. She draws samples from three Pinot Noirs, all harvested from the same Gallo vineyard, and each made by a different fermenting technique. Matt tastes the third sample, spits out a stream into a bucket and pronounces it "Pinot Noir funk. This one takes longer to develop more complexity," he says. "Exactly," Gina says. "This starts out very dumb."

Once a week Gina participates in a blind taste-tasting of 12 white wines or up to eight reds, with a Gallo wine hidden in the lineup. She can't always pick out her own wine. "My grandfather said, 'You feel like you know it. And when you unveil them, you're completely wrong.' "

As children, Matt and Gina lived on a 250-acre vineyard. Gina remembers at age 10 following Julio into the family orchards and vineyards and watching him work. "We grew up as farmers, not urbanites," Matt says. When he was 8 or 10, his grandfather and father would fly off in a twin-engine plane to scout for property or to visit growers, and Matt would tag along. "It was a lot of fun, and I was exposed to a strong work ethic."

After taking a winemaking course at UC Davis, Gina told her grandfather that she wanted to be a winemaker. So Julio put her to work in a pilot vineyard that was having problems. "I found an area that I truly love. I spend more than half my life at work. What's the point if you don't love it?" Gina says.

At 6 feet 4, Matt is more than a half foot taller than his famous grandfather. He has the big hands and beefy build of a javelin or discuss thrower, which he was at UCLA, where he studied political science. He thought of leaving the family orbit and working at another agricultural firm. But eventually he found himself, like a magnet, "pulled back into what you are interested in," and returned to Modesto. As the Gallos bought more land in Sonoma County, it was decided they needed some family management on the spot. "So they flew me up here one day and dropped me off," Matt says. Now he lives with his wife and child at one of the family's Sonoma vineyards.

Matt drives a Chevy Suburban over the dirt roads through the family's Frei Ranch in Healdsburg. Julio Gallo bought part of the ranch in the '40s, and the family took full ownership in 1977. "He built these vineyards," Matt says.

Several of Julio's trademarks can be seen on these 2,500 acres. He built retaining ponds to trap rain, and one of his design styles was to leave old trees standing; the joke was he respected anything older than he was. Matt stops in front of a massive bay tree, with vines planted carefully away from the branches. "Wouldn't you have left it up?" he says.

Matt and his father, Bob Gallo, still follow Julio's policy of leaving about half the land untouched, to serve as a wildlife refuge and watershed. On the Healdsburg ranch, a forest running up into the mountains sustains deer, turkeys and wild pigs. "We're not in an economic situation where we have to maximize every acre," Matt says.

Every Thursday Bob Gallo leaves Modesto in a helicopter and lands in Healdsburg to meet with his son and to plot goals for the coming week. Julio inaugurated these Thursday vineyard tours. Why Thursdays? Matt pauses, as if being asked why taxes are due on April 15. "I don't know. I'll have to ask my dad."

A common thread is a mix of awe and respect for the empire their grandfathers built. Caroline Coleman Bailey, 32, one of Julio's grandchildren, works in Sonoma on marketing and export projects. She remembers having dinner at a restaurant in Helsinki, Finland. "And I see sitting across the table someone drinking our wine and eating salmon from the Baltic Sea. It's just amazing the places you see the wines. Oh, I'm very proud."

Many of the younger generation start out in sales jobs, such as Stephanie Gallo. "The only way to know the business is out interacting with customers," Stephanie says.

Another common link for the Gallo cousins is what they call "the Dole Bill." The Gallo family, heavy political contributors, were delighted in 1986 when the then-Senate majority leader shepherded a bill through Congress that paved the way for Ernest and Julio to transfer $2 million to each of their grandchildren at a lower inheritance tax rate.

What did Stephanie do with her "Dole" money? "I can't discuss that."

She does try to make the point, though, that her cousins don't have to work, but they do anyway. She assumes that any of her cousins would receive company stock even if they didn't work for the family winery. "I don't know why we work so hard," she says. "It's part of our family values."

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Among boutique wineries in Sonoma county, the mood is mixed about Gallo's big push into fine wines. David Stare, owner of Dry Creek Vineyard, is a Gallo neighbor who turns out about 100,000 cases of wine a year. "We own 100 acres. I wish we owned a few hundred more," he says. "There is an awful lot of envy of Gallo. It's not animosity, so much as jealousy."

Bill MacIver owns the Matanzas Creek Winery, whose Chardonnay and Merlot are placed by critics among California's best wines. In one sense, MacIver is happy to have the Gallos nearby. All the land they are buying, he says, helps slow urban sprawl in Sonoma County. But he's not a Gallo fan. "Gallo is a copycat. They see what other people are doing. And they do it bigger. A helluva lot bigger," he says.

MacIver isn't too worried about Gallo as a competitor in fine wines. "Fortunately, before they made a move, we got ourselves pretty well entrenched. They can say they make a $30 bottle of Chardonnay as well, but they can't say they make it better than a lot of us smaller operators," he says.

But in the supermarkets, where wars are fought to sell mass-marketed varietal wines, Gallo has become a big force, and it's one reason why Gallo faces a March 10 trial date in U.S. District Court in San Francisco to defend itself in a trademark infringement suit filed by rival Kendall-Jackson Winery Ltd.

Jess S. Jackson, owner of Kendall-Jackson, is himself a modern-day wine success tale. An attorney, Jackson bought some farmland in Sonoma County, and when he couldn't find a buyer for his grapes he started making wine. In the early '80s his company came up with a slightly sweet Chardonnay that helped launch the Kendall-Jackson brand. It now sells for $10 and up in grocery stores and has, says Robert Parker, set a quality benchmark for mass-market wines.

Kendall-Jackson has been the best-selling Chardonnay in supermarkets for years, and by 1995 his company's total sales volume had shot up to more than 2 million cases. Part of his success, Jackson's suit contends, is a prominent autumn-colored leaf on Kendall-Jackson's wine label.

When Turning Leaf showed up in supermarkets, Jackson discovered that Gallo had also picked an autumn-colored leaf logo, albeit in a somewhat different shape. Kendall-Jackson is still the top-selling supermarket Chardonnay, but by last fall Gallo's Turning Leaf Chardonnay had cracked the top five and was eating into Jackson's sales.

Last April Jackson sued Gallo, alleging it was intentionally using a copycat label to confuse consumers into thinking Turning Leaf is a cheaper Kendall-Jackson brand and tarnishing his company's reputation. Jackson also wants Turning Leaf taken off store shelves and profits turned over to him, plus punitive damages.

Jackson's attorney, Frederick Furth, owns the small but well-regarded Chalk Hill Winery in Sonoma County. "The people in Modesto stood by with their hands in their pockets and recognized their own sales were going down in jug wines and cheap wines. It drove them absolutely nuts when they realized that Jess Jackson had come up with an idea and that they'd completely missed this fantastic market. They wake up in the '90s and say, 'My God. What's happening? Here is this new winery on the scene selling 2 million cases,' So what they did was come in with a copycat label," Furth says.

Gallo's official response is that Jackson's suit is nonsense.

A jury will get its say. But Stare, the Dry Creek Vineyard owner, has already reached his verdict. "Frankly, they [Gallo] are trying to make a look-alike Kendall-Jackson wine. There is a remarkable resemblance in color and design."

In some ways, the new Gallo is like the old Gallo, ready to fight hard to defend its turf.

Back in July 1994, workers at Gallo's Sonoma vineyards voted 80 to 21 to have the United Farm Workers represent them. Gallo countered with a legal battle, arguing that the vote represented only a portion of its peak number of workers in the fall. In December, after the state Supreme Court refused to hear the case, Gallo sent the UFW a letter saying it wanted to start negotiations.

The UFW hasn't had a contract with Gallo since 1973. But Dolores Huerta, a UFW co-founder, met with Gallo's new management and she thought they were a bit more open-minded than the first. "I was surprised they [Gallo] put up the [legal] fight they did," Huerta says. "There is still a master-slave mentality, that somehow farm workers are there only to make them rich."

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For all of Gallo's recent moves, much of the company's legacy dates back to cheap wines.

Thunderbird is a sweet fortified wine that Gallo introduced in 1957, and it helped cement the family's fortune. Although Gallo has long disputed this, it's been reported that Gallo created Thunderbird to compete with other wines sold in poor black, urban areas.

In the past decade, after many protests, Gallo has limited some sales of Thunderbird in inner cities, although liquor stores can usually find a way to stock the wine. And Gallo is not the only maker of high-alcohol wines; rival Canandaigua Wine still turns out Richard's Wild Irish Rose, a high-octane drink.

But on Main Street in downtown Los Angeles, a few blocks from the Midnight Mission on Skid Row, Ernest and Julio's Thunderbird is still a big name. It's early afternoon and a gray mist is turning into heavy rain. Three middle-aged men, two black, one Hispanic, stand beneath an X-rated movie marquee trying to figure out how to cadge enough money to buy their next bottle.

Do they drink Thunderbird?

James Robinson, 42, tall and thin, with a pitch-black Ho Chi Minh-like goatee, answers by song. "What's the word?"

"Thunderbird!" answer the others.

"What's the price?"

"A dollar twice!" all three answer, laughing, as they trade more rhymes inspired by a four-decade-old Gallo jingle.

Two dollars buys what Robinson calls "a short dog," a half-sized bottle of Thunderbird. Why does Robinson drink Thunderbird? "Because I'm an alcoholic," he says. "It's the EEE-fect. The EEE-fect works real quick." The effect is the 18% alcohol content, compared to Turning Leaf's 12%.

Thomas Cruz, 36, is short and plump, his Dallas Cowboys T-shirt spread tight like a drum over his belly, his sneakers left untied. "I learned from my dad. He always saved Thunderbird for last because of the high sugar content. It's good for a hangover," Cruz says. "They should keep on making Thunderbird. It's like tobacco or marijuana. It doesn't do anybody no harm."

Says MacIver of the Matanzas Creek Winery, "Gallo has a lot to live down with those Skid Row wines. And I'll make them take grief about it any time."

For Stephanie Gallo, born 15 years after her grandfather first sold Thunderbird, there is only one riposte for the question: Why keep selling Thunderbird?

Other companies, she notes, make the same kind of product. "It's something there is definitely a demand for," she says. "As long as there is a demand, we'll continue to make it. I don't think that's something to be ashamed of."

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The Great Debate

Gallo faces a March 10 trial date in U.S. District Court in San Francisco in a trademark infringement suit filed by Kendall-Jackson Winery Ltd. In the suit, Gallo is accused of intentionally copying the Kendall-Jackson logo to confuse consumers into thinking Turning Leaf is a cheaper Kendall-Jackson brand. Kendall-Jackson has been the best-selling Chardonnay in supermarkets for years, with more than 2 million cases sold in 1995.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Top 10 U.S. Wine Marketers in 1995*

Company: E & J Gallo Winery

Millions of 9-Liter Cases Sold: 49.7

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Company: The Wine Group

Millions of 9-Liter Cases Sold: 34.0

*

Company: IDV / Grand Metropolitan

Millions of 9-Liter Cases Sold: 18.0

*

Company: Sebastiani Vineyards

Millions of 9-Liter Cases Sold: 6.6

*

Company: Sutter Home Winery Inc

Millions of 9-Liter Cases Sold: 5.5

*

Company: Robert Mondavi Winery

Millions of 9-Liter Cases Sold: 4.9

*

Company: Brown-Forman Beverages

Millions of 9-Liter Cases Sold: 4.7

*

Company: Beringer Wine Estates

Millions of 9-Liter Cases Sold: 4.5

*

Company: Banfi Vintners

Millions of 9-Liter Cases Sold: 4.1

* figures do not include export sales, malt-based coolers, private labels and bulk wine sales to other wineries.

Source: Impact Databank

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