Photographs -- Italian-Swiss Colony of Asti, CA

Ernest Gallo - Obituary

March 07, 2007

He turned $5,900 and a recipe from a public library into the world’s largest winemaking empire

March 18, 1909 - March 6, 2007

Ernest Gallo, with his younger brother, Julio, created the largest wine-producing company in the United States. At its height the Gallo wine company made more wine than Chile, and aside from the wine they bought from other growers in California, the brothers owned 3,000 acres of the prestigious Napa and Sonoma Valleys. At Ernest’s death, E. & J. Gallo employed 4,600 people and produced more than 900 million bottles of wine a year. The company was private, and the man himself was addicted to secrecy. Ernest Gallo was one of the richest men in America.

Gallo was born 80 miles east of San Francisco, in Jackson, California, in 1909. His parents were poor peasants who had emigrated from Piedmont in Italy. He was not an impressive schoolboy and he liked to relate in later years that his teacher had told him he was the stupidest boy she had ever taught.

The Gallo empire was made by Prohibition: Ernest and Julio seized on a loophole in the law which allowed for the sale of grapes and wine kits for home production. In the Gallo household wine had always been made that way. Ernest assumed the role of the sales and marketing man, while Julio gravitated towards the winery when it opened in nearby Modesto. He learnt how to make wine from a pamphlet borrowed from the public library. From the beginning the brothers challenged one another: Julio tried to make more wine than Ernest could sell and Ernest tried to sell more than Julio could make.

For many years Gallo wines were associated with screw-cap concoctions marketed to the bottom end of the American market. One such product was the fortified wine Thunderbird, introduced immediately after the repeal of Prohibition as a means of achieving the brothers’ aim of becoming the “Campbell’s Soup Company of the wine industry”. The beverage, with an alcohol content of nearly 20 per cent, quickly established itself as the chosen palliative for the residents of America’s slums and forged an unsavoury association in the consumer psyche that endured for decades.

Thunderbird was just one of many downmarket wines that sustained the Gallos until recent decades. There were Ripple, Spanada, Gypy Rose, Andre (a sparkler), Carlo Rossi, Boone’s Farm and Bartles & Jaymes. With Hearty Burgundy and Chablis Blanc, Gallo prepared to moved up a notch, creating the American use of “chablis” as a synonym for white wine, much to the fury of the growers of French Burgundy.

The addiction to secrecy bred many rumours and much acrimony. Ernest and Julio’s younger brother, Joseph, claimed that his brothers had cheated him out of his rightful share of the winery and documents from the case formed the basis for Ellen Hawkes’s book Blood and Wine: the Unauthorised Story of the Gallo Wine Empire. In her account the company began in the early days of Prohibition when the boys’ father, an Italian immigrant, began to supply the thirsty US market after discovering a loophole in the anti-liquor laws that permitted home wine-makers to produce 200 gallons of wine a year. According to Hawkes, Julio and Ernest simply carried on the family business after their parents’ death in a murder-suicide shooting in 1933.

This unflattering account prompted the reclusive brothers, who had rarely spoken publicly about their lives, to publish the rebuttal, Ernest and Julio: Our Story. In addition to reasserting their claims to have independently founded their company, the book attempted to clarify negative stories behind their introduction of fortified Thunderbird wine, their treatment of Cesar Chavez and the United Farm Workers during labour disputes in the 1970s and their occasionally fractious relations with marketers and distributors that resulted in disciplinary action by the Federal Trade Commission in 1976.

Ernest worked ceaselessly to promote the brand, taking long sales trips around the country by car, and in 1936 was reportedly hospitalised for six months due to exhaustion.

At a time when wines were often relegated to the bottom shelf in America, he introduced a Gallo display rack and was able to persuade retailers to give it a prominent position on the sales floor. Dispensing with salesmen employed by wholesalers, he created a dedicated Gallo sales force charged with extending market share and, with characteristic attention to detail, even decreed that they dust the bottles at each outlet they visited.

Understanding the benefits of vertical integration, Ernest set up a bottling plant on the winery grounds in 1942, and eventually Gallo controlled every stage of wine production, bottling and shipping with the exception of the growing and cutting of cork. The brothers were also technical innovators, investing heavily in research and development and pioneering the introduction of computers in the blending process and the use of stainless-steel fermentation casks.

By 1975 the company was earning an estimated $335 million in annual revenues and exporting to more than 60 countries. As the company’s success increased, it broadened its range of products in an attempt to rid itself of its association with the bottom end of the market.

Although Julio had long championed the blended “demi-sec” Gallo wine that was consistent in taste from one year to the next, in 1983 the brothers began producing moderately priced varietal and vintage wines. The first was a 1978 Sonoma County Cabernet, the predecessor to the range that is now a ubiquitous presence in every off-licence in Britain.

The Gallos continued to have great success with jug and bag-in-box wines such as Carlo Rossi and Peter Vella but they were anxious to break into the fine-wine market in the 1980s and 1990s. Their campaign was coupled with a lavish advertising campaign and a more-than-generous PR campaign to win over the opinion formers. The Sonoma estate wines were a radical departure for the Gallos. They sold for more than $40 a bottle.

A New Yorker cartoon of the period portraying two wine buffs enjoying a glass of vintage Gallo captured the moment of the transition of the company’s image. The caption read: “Surprisingly good, isn’t it? It’s Gallo. Mort and I simply got tired of being snobs.”

To Ernest, who had long craved critical acceptance of his wines, the drawing was vindication of his work and was prominent on the wall of his office in Modesto, California. With the shedding of its unrefined image the company’s sales soared.

By 1986 the company profits were such that the Gallos were able to give more than $1 million to the campaigns, think tanks and charitable foundations of Bob Dole. In return he introduced the 1986 inheritance tax bill, nicknamed the “Gallo amendment”, which allowed the brothers to bypass the 55 per cent tax on transfers of more than $1 million from grandparent to grandchild, thus saving the brothers an estimated $104 million.

Although the fraternal alliance came to an end in 1993 when Julio Gallo was killed in a car accident, Ernest was active behind the scenes at the company until the time of his death. It remains a family business with 17 of the brothers’ 20 grandchildren working at Gallo Wines, and the younger generation have shifted the focus from “value” wines towards more profitable estate-bottled wines.

One of every four bottles of wine sold in the US now bears the family crest. With more than 50 brands and estimated annual sales of $1.5 billion Gallo is now the largest winery in the world, selling 70 million cases a year and consuming 30 per cent of the annual Californian wine grape harvest.

The Gallos went to great lengths to make sure that only E. & J. Gallo should be allowed to use the name. In 1986 Ernest and Julio Gallo successfully sued their younger brother Joseph for using the family name for his cheese-making business. In 1990 the company successfully sued the Gallo Nero wine consortium of Chianti who had used the word “gallo” (cockerel) on their bottles. Ten years later the brothers took the Chianti wine-makers to court again over their domaine name.

In the meantime they put pressure on a small domaine called Santa Marcellina in Chianti because they had a “Marcellina” trade-mark among the many they had patented. In 1994 they attacked a Mexican company called Pasatiempos Gallo. In 2002 it was the turn of a lady potter in Texas, who used the word “gallo” because she made ceramic representations of roosters. Gallo himself made no excuses for his behaviour, saying: “We don’t want most of the business. We want it all.”

Whatever the truth behind the company’s beginnings it is indisputable that Ernest Gallo transformed a struggling Depression-era vineyard into one of the most successful global concerns in modern viticulture and in so doing profoundly affected the American taste for wine.
Gallo’s wife and a son predeceased him, and another son survives him.

Ernest Gallo - Obituary

Workaholic marketeer who overcame family grief to found the world's largest wine company in California, with his brother


Julio Christopher Reed
Wednesday March 7, 2007

Ernest Gallo and his brother Julio turned their wine company into the biggest in the world. Photograph: AP

As patriarch of a three-generation family of winemakers, Ernest Gallo, who has died aged 97, built the company he ran with his late brother, Julio, into the world's largest producer, and was influential in cementing California's reputation as a premier international vintner.

But the E&J Gallo Winery of Modesto, in central California, won its decades-long leadership by producing a high-alcohol "street" wine called Thunderbird, aimed at poor black Americans. The ethics of Ernest's sales methods - he was the finance and markeeting chief while Julio made the wine - were also questioned, and the Federal Trade Commission investigated the company in the mid 1970s.

In the 1980s, Gallo began producing fine vintages instead of relying on its cheap screwtop table and jug wines, and despite a downmarket reputation, the quality of the select wines eventually persuaded doubters. The change was aided by Gallo's purchases of several California wineries with a history of making fine wines.

Gallo became the world's largest wine company, and only in 2003 did multiple acquisitions by rival Constellation Brands of New York state push that company slightly ahead. But Constellation also sold beer, and although Gallo produced its own brandy, sherry, port, and sparkling wine, it always stayed with the grape.

Ernest was born near Modesto almost exactly one year before Julio - and they resembled twins. A younger brother, Joe, named after his father, was born 10 years after Ernest, and had the loving childhood, denied to Ernest and Julio, who were worked mercilessly by their father, an immigrant from Piedmont, on the family's 70-acre vineyard.

This background might explain an extraordinary court case when, between 1986 and 1989, the older brothers successfully sued Joe Jr over putting the Gallo name on a brand of cheese produced at his prosperous dairy. He also lost a counter-suit claiming he had been denied his rightful share of the estate. Joe Gallo was no longer family.

The legacy dispute arose from a mysterious murder-suicide in 1933, when Joe Sr shot his wife, the mother of their three sons, then turned the gun on himself. The older brothers, who found both bodies at the family farmhouse, never spoke publicly about the incident and the tragedy's cause remained a secret.

The family's winery had begun to succeed when Joe Sr took advantage of a loophole in the anti-alcohol national law by growing and shipping grapes for private consumption (permitted personal wine production). This history was contrary to Gallo's official line that, taking advantage of the end of prohibition in 1933, the older brothers started the winery with a $5,900 loan and a book on winemaking borrowed from the public library. This was two months after the death of their parents.

At first they sold in bulk, but in 1941 they started their own label. Yet despite Ernest's aggressive selling skills, the winery remained behind the leaders in what was at that time a small and unsophisticated US market. Then in 1957 Gallo launched Thunderbird, a mixture of white port and lemon juice, at 21% alcohol, that salesmen noticed was popular among African-Americans. It sold for 60c a quart and was an immediate success.

Although Gallo later denied exploiting black people with cheap booze, an early radio jingle gave them away: "What's the word?/Thunderbird/ How's it sold?/Good and cold/ What's the jive?/Bird's alive/ What's the price?/Thirty twice." Ernest enjoyed telling his salesmen how he had once called to a black man in Atlanta: "What's the word?" He was delighted when the man instantly replied: "Thunderbird."

In the decade following the launch, Gallo, through Ernest, began to transform wine vending in America. Salesmen made frequent, aggressive visits to retailers and insisted on prominent Gallo displays. Ernest also vertically integrated the corporation to save money, and inexpensive table wines of reasonable quality gained popularity in America.

In 1972, Time magazine, undeterred by Gallo's intense press secrecy, featured the brothers on its cover as the wine industry's twin chiefs. Soon their fortunes were estimated at $500m (£259m) each.

Meanwhile, they began financing prominent politicians, including senators Bob Dole of Kansas, a Republican, and the late Alan Cranston of California, a Democrat. In 1978 and 1986, these two helped pass tax law provisions nicknamed "the Gallo wine amendment" that saved the brothers millions in estate taxes.

Gallo's prosperity continued with the acquisition of highly regarded wineries in Calfornia's prime viticulture counties and the company's introduction of generic wines priced up to $50. Ernest encouraged exports and entered business partnerships or made acquisitions in Australasia, and Europe. By 2004 Gallo had 45 brands, compared with 11 in 1980.

Julio's death in 1993 from a driving accident did not diminish Ernest's work obsession and he was assisted by his brother's children. In his 90s, Ernest continued to work at his desk in the imposing "Parthenon West" headquarters he had built in Modesto, in his never-ending quest to improve Gallo's image. He is survived by his son Joseph, chief executive of E&J Gallo. His wife Amelia, whom he married in 1931 died in 1993, and another son, David, died in 1997.

· Ernest Gallo, wine seller, born March 18 1909; died March 7 2007