Gallo grandchildren take on increasing responsibilities with vision, determination

McClatchy Newspapers (MCT) - Ernest and Julio Gallo used to gather their grandchildren around their dinner tables and talk about the wine business.

They would ask the young people what they thought of new brands, packaging and other ideas.

"At a very early age, it was as if our opinions mattered and we were making a contribution in our own way to the business," said Stephanie Gallo, a granddaughter of Ernest Gallo.

Today, this third generation plays a major role at E.&J. Gallo Winery, an industry giant that brothers Ernest and Julio launched in Modesto 75 years ago today.

G-3, as this group has been called, faces challenges as it looks to the future. They include global competition, a still developing U.S. wine market and a business environment not always friendly to family-owned companies.

But they have a vision for success _ one that depends in part on many other families gathering around their own tables.

"People are so busy that they really look at wine as a way to connect," said Stephanie Gallo, director of marketing at the winery. "... It's a signal in our society now, with cell phones and BlackBerrys, that we just need to chill out and just reconnect with family, friends and loved ones."

She talked with The Bee earlier this month along with cousins John Gallo, who is the vice president in charge of Gallo Glass Co., and Greg Coleman, the vice president for grower relations.

Julio Gallo died in 1993; Ernest Gallo, last year. The company is headed now by Ernest's son, Joseph E. Gallo; Julio's son, Bob Gallo; and Julio's son-in-law, Jim Coleman. Ten members of the third generation and two in the fourth also are involved.

Greg Coleman, who oversees grape growing in the Central Valley, said his grandfather imparted family members both skills and values.

"With Julio, it was always the emphasis on quality, from the vineyards all the way through to the winemaking." he said. " ... And the other thing was building those relationships. In the area that I work in, I know that was very important to him and something that he worked hard at. I remember that, and we deal with that every day."

John Gallo, another grandson of Julio Gallo, agreed. "Grandpa was very respectful of people, the way he worked with employees, the way he built the relationships with the growers, the suppliers."

Julio Gallo mostly oversaw wine production, while his brother handled the marketing. This split in responsibilities has continued with several members of the third generation, Stephanie Gallo said.

She said her task as a marketer is to get consumers to feel that they are getting good wine for their money.

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"Now that we're in an economic downturn, what we're seeing is that our value and economy wines are starting to grow again," she said. "It's really about continuing to produce great-quality wine at an affordable price, or delivering a value, whatever that price point may be. At the same time, you have consumers who are willing to pay more for what they perceive to be a better-quality product."

The company has bolstered its offerings in two main ways _ by expanding into Sonoma County and other premium regions, and by improving the quality of wines from the San Joaquin Valley.

"We've learned a lot about how to manage the vine better _ irrigation and trellising and canopy and how we harvest the grapes," Coleman said.

He noted that his grandfather had an organic garden and a longtime commitment to protecting the environment.

"We have the 50-50 giveback program," Coleman said. "For every one acre of vineyard that we plant, we leave one acre out for preservation and enhancement of wildlife habitat."

This effort extends to the glass plant, where furnaces melt recycled and new material. The bottles these days weigh less, meaning less emissions in manufacturing and shipping, and the furnaces are a clean-burning technology installed before being required by law, John Gallo said.

"The whole idea of sustainability that Grandpa started, you saw it in the second generation," he said. "We're continuing it throughout the manufacturing environment as well."

The Gallo family members said they are confident that the company will remain family-owned for a long time.

They said wineries absorbed into publicly traded companies often face shareholders' demands for quick returns, but they are tough to produce in this industry. New vineyards take several years to produce, the wine has to be aged and the brands need time to become known in the market.

"Given the nature of the industry, how capital intensive it is, it really forces you to take a long-term view, and that's where I think family-owned, privately owned is a real advantage," Coleman said.

Stephanie Gallo agreed. "We've seen a lot of our great friends and competitors who have sold out to publicly traded companies. Wall Street isn't kind to wineries."

Family-owned does not mean relying just on family, she said. Her grandfather's advice included, "Hire people that are smarter than you."

That kind of savvy also means knowing, among other things, what people like to drink. Stephanie Gallo cited the recent popularity of pinot grigio, an Italian white wine that was little-known in California a decade ago.

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Gallo competes in a market that was stirred six years ago by the introduction of $1.99 varietals under the Charles Shaw label, produced by Bronco Wine Co. of Ceres and better known as Two Buck Chuck. Gallo aims for this same mix of good quality and low price.

"What (consumers) are writing in is, 'Thank you for producing a great value. I can enjoy wine at an affordable price,'" Stephanie Gallo said. "I think around the same time it was the demystification of wine, but at the same time, people still want wine to be special."

The grandchildren said the company will keep its Modesto presence, as the founders wished, while meeting the challenge of competing on the global stage.

Gallo accounts for 55 percent of wine exports from California, and it benefits from having salespeople keeping track of trends around the world, Stephanie Gallo said.

These G-3 leaders see great potential for building a wine culture in the United States, long a beer-drinking nation.

"It's a fairly new industry," Stephanie Gallo said. "We've only been around for 75 years, so we're just excited."

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© 2008, The Modesto Bee (Modesto, Calif.).