Business

Gallo is buying 34 wine and spirit brands you’ve heard of — for $1.7 billion

The front entrance of the new Dry Creek office building at the E&J Gallo Winery in Modesto, Calif., on Tuesday, August 30, 2016.
The front entrance of the new Dry Creek office building at the E&J Gallo Winery in Modesto, Calif., on Tuesday, August 30, 2016. aalfaro@modbee.com

E.&J. Gallo Winery has 34 new wine and spirit brands to its name after reaching a $1.7 billion deal to purchase properties from its rival Constellation Brands.

The Modesto-based company reached an agreement with Constellation, best known for producing beers like Corona, Modelo and Pacifico, to acquire several well-known wine brands, including Northern California labels Clos du Bois, Black Box and Ravenswood, in addition to sparking wine and spirits.

Included in the purchase were wine brands: Clos du Bois, Black Box, Ravenswood, Estancia, Mark West, Franciscan, Toasted Head, Hogue Cellars, Wild Horse, Blackstone, Vendange, Rex Goliath, Diseno, Hidden Crush, Taylor Country Cellars, Blufeld, Manischewitz, Wild Irish Rose, Arbor Mist, Milestone, La Terre, Taylor Dessert, Paul Masson Dessert, Capri, Cribari Dessert, Primal Roots, Taylor NY Table, Paul Masson Table, Simply Naked, Cribari Table, and V.NO.

Also included in the deal were sparkling wine brands Cook’s and J. Roget and Paul Masson brandy. The deal adds about 700 employees to Gallo’s existing 6,500 worldwide, and six winemaking facilities. They are Mission Bell in Madera, Turner Road Vintners in Lodi, Clos du Bois in Geyserville and Wild Horse in Templeton, along with Washington state’s Hogue Cellars and New York’s Canandaigua.

Most of the newly acquired wines are around the $11 price point. New York-based Constellation retains all of its beer brands, SVEDKA Vodka and several other wine labels including the high-profile Robert Mondavi brand family. Late last year, Constellation made a $4 billion investment in Canopy Growth, a Canadian-based cannabis company.

Earlier this year, Wine Business Monthly named Gallo No. 1 and Constellation No. 3 for the U.S.’s largest wineries by volume. The Wine Group out of Livermore (with a large production facility near Ripon) came in at No. 2.

Gallo has long sold wine at a range of prices and should do well with the labels it is buying from Constellation, said Cyril Penn, editor of Wine Business Monthly, speaking by phone from his Sonoma office.

“I would not expect them to dumb down these brands,” he said. “If anything, it will rejuvenate them.”

Gallo has succeeded through “vertical integration” that has grape growing, bottle making, distribution and other functions under one ownership, Penn said.

Brothers Ernest and Julio Gallo founded the winery in Modesto in 1933. It concentrated on lower-priced wines from the San Joaquin Valley for most of its history but branched in the 1980s into premium vineyards near the California coast. Gallo later added Washington state and also imports wine and spirits from several countries.

The growth has come through Gallo’s own startup wineries and through purchases of established brands. Usually, the acquisition costs are disclosed because the companies are not publicly traded. Constellation is.

For Gallo, the addition brings some well-known brands into its portfolio.

“We are committed to remaining a family-owned company focused on growing the wine industry.,” said Gallo CEO Joseph E. Gallo in a press release about the acquisition. “While we continue to invest in our premium and luxury businesses, we see a tremendous opportunity with this acquisition to bring new consumers into the wine category. We will continue to provide our customers and consumers with quality products at every price point.”

The Gallo portfolio has over 100 brands, including wine labels Gallo Family Vineyards, Barefoot Cellars, Dark Horse, Apothic and Ecco Domani. Its spirits roster includes New Amsterdam vodka and gin, E&J brandy and Familia Camarena tequila.

The deal is one of the larger acquisitions for a Central Valley-based company in recent history. In 2002, Save Mart Supermarkets purchased Food 4 Less for $165 million. In 2007, Modesto-founded 5.11 Tactical owner Dan Costa sold the majority stake in his company for $305 million.

“This is a large deal; it’s a large acquisition for the Central Valley,” said Jeff Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton. “This makes Gallo a bigger player in the wine industry here, where they are already large and dominant.”

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