So exactly what is E. &J. Gallo Winery getting with its $1.7 billion purchase from Constellation Brands?
Wine production in New York state, for one thing, new territory for the 85-year-old Modesto company. Gallo also will add about 30 brands in regions where it already operates, such as the Central Valley, coastal California and Washington state.
Industry observers have described the deal as a way for Constellation to shed $11-and-under brands, where demand has slowed, and concentrate on its premium wines.
But they hardly think Gallo bought a lemon. The company brings efficiency and marketing savvy to the wine business, from the vineyards to the fermentation tanks to the Modesto plant that makes its bottles. And the deal includes some premium wines along with the lower-end stuff.
“Those brands they are buying actually play into Gallo’s strengths,” said Tomas Gomez-Arias, dean of business at California State University, Stanislaus, in a phone interview last week. “Gallo is better at taking brands and growing them.”
Stan State has alumni among the 6,500 or so people working for Gallo in Modesto and elsewhere. The deal with Constellation, based in Canandaigua, New York, will add about 700 employees. The purchase, announced April 3, is expected to close around June 1.
Gallo already has more than 100 brands, mostly wine but also brandy, gin, vodka and other spirits. It does not disclose details on its sales or volume, but Wine Business Monthly estimates that it will have 22 percent of U.S. volume with the additions.
“They are the No. 1 family wine company in the world,” said Cyril Penn, editor of the magazine, by phone early this month. “They know what they are doing. They are very professional.”
Gallo has declined interview requests about the purchase but did email a statement:
“These are iconic brands within their categories that resonate with consumers. We are excited about the strong presence these brands have throughout the U.S. and around the world. We plan to respect the legacy of these brands while devoting our efforts to revitalizing these brands and continuing to make the highest quality wines and spirits.”
Gallo stresses that it remains family-owned long after its founding in September 1933 by brothers Ernest and Julio Gallo. Industry experts have noted that this structure fosters long-term investments, while a publicly traded company like Constellation has to satisfy shareholders in annual reports.
The deal includes two large wineries in the Valley — Turner Road Vintners in the Lodi area and Mission Bell Winery in Madera County. They mainly produce wines with the “California” appellation, which are cheaper than specific grape sources such as Napa and Lodi.
Gallo’s new brands in this category include Vendange, Black Box, Rex Goliath, Toasted Head, Blackstone, La Terra, Primal Roots, Simply Naked, Milestone and Cooks. A few acquisitions, such as Clos du Bois and Mark West, have premium as well as California-appellation wines.
Gallo is adding Franciscan to its Napa selections and Ravenswood and J Roget in Sonoma. On the Central Coast, it will have Hidden Crush, Estancia and Wild Horse along with its current brands.
The deal includes Hogue Cellars, which will be Gallo’s second winery in Washington state. It also gets Blufeld from Germany and Diseno from Argentina, adding to imports already from France, Italy, Spain, Argentina and New Zealand.
The winery Gallo is buying in western New York is perhaps the most intriguing part of the deal. It produces the Taylor line of table and dessert wines, the Arbor Mist fruit-flavored wines, and a low-cost stalwart called Wild Irish Rose. And then there’s Manischewitz kosher wine, some of it approved for use at Passover, which starts Friday.
Blessings will flow as well from Cribari, a Fresno-based producer of wine for Christian services. Gallo bought it, too.