Wal-Mart Will Begin Selling Private-Label Wine Made by Gallo

Wal-Mart Stores Inc. next month will begin selling its own premium wine, the giant retailer’s first foray into private-label alcoholic beverages and a strategy that analysts expect to spread to other retailers.

The Chardonnays, Cabernets, Merlots and White Zinfandels will be produced by E. & J. Gallo Winery and sold under the Alcott Ridge Vineyards name for $6 to $7 per 750-milliliter bottle in 1,300 Wal-Mart and Sam’s Club stores around the world.

For years, vintners have feared that retailers would begin selling their own wine, just as they now sell their own dairy products and packaged goods. If big retailers such as Wal-Mart stock their own private-label wines, some wineries could get squeezed off shelves.

“It definitely limits the space for other brands and creates more competition,” said Gregory Popovich, owner of Palos Verdes Estates-based Castle Rock Winery, which sells its own wines and produces private-label wines for others.

Wal-Mart stocks many private-label items, such as cookies and dog food, because they are more profitable and can be sold at a lower price.

If Wal-Mart does well with Alcott Ridge, many industry analysts expect supermarkets to follow suit and begin selling their own wine. Restaurants and smaller chains such as Trader Joe’s already sell their own private-label wine.

“To the extent that Wal-Mart is successful, I would not be surprised to see a Safeway Select wine soon,” said St. Helena, Calif.-based wine consultant Vic Motto.

It could be a highly profitable niche for retailers, with grape prices plunging in much of the state. And it could help Gallo and eventually other wine producers in the Central Valley get rid of the oversupply of grapes they’re stuck with this year.

Alcott Ridge will be made with grapes from the north end of the Central Valley, Wal-Mart said without being more specific.

Indeed, with jug wine sales declining, many wine grape growers in the Central Valley are hoping to begin making premium wines with a California appellation, or region of origin, on its label, rather than a city such as Bakersfield or Modesto.

As the economy has surged, more middle-class baby boomers are drinking premium wines, and wine has begun moving off Wal-Mart shelves more rapidly.

“Many of our customers are demanding a greater selection of wine products at prices they can afford,” said John Ryan, senior vice president of global sourcing for Wal-Mart.

The deal will allow Modesto-based Gallo, already a wine Goliath, to sell millions more cases of wine both here and abroad, albeit under someone else’s name. The privately held company declined to say how much wine it expects to produce for Wal-Mart. Gallo will continue to sell wines in Wal-Mart under its own label.