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Gallo Seizes Upscale California Opportunity

June 19, 2013

About 75% of E&J Gallo’s U.S. volume is comprised of below-$10 brands, according to Impact Databank. But the company is seeing strong success at the super-premium-and-above tier with a number of California offerings.

“We have several above-$15 California brands with a ‘lead’ varietal that are doing very well,” says Rich Kranzmann, Gallo’s vice president and general manager, premium wine business. “MacMurray Ranch with Pinot Noir, Louis M. Martini with Cabernet Sauvignon and Frei Brothers with Chardonnay are a few examples. In addition, Ghost Pines, with a blending of key AVAs from around the state, is exceeding our expectations.”

Ghost Pines was up 16% to 99,000 cases last year, while Frei Brothers increased 13% to 180,000 cases and Louis M. Martini rose 5% to 345,000 cases, according to Impact Databank estimates. MacMurray Ranch, meanwhile, is now above the 180,000-case mark.

Not to be overlooked are two $10-$15 Gallo brands that continue to show strong growth: Apothic and Mirassou. Apothic, an early driver of the red blend craze, sold just 20,000 cases in 2009. Two years later, the brand had surged to 430,000 cases before nearly doubling to 815,000 cases in 2012. Mirassou rose 4% to 915,000 cases last year, up from just 50,000 cases in 2003.

Gallo’s total wine depletions in the U.S. market for 2011 (the most recent year for which figures are available) were 67 million cases, according to Impact Databank.

“The California wine category at above-$15 is healthy and growing at double-digits,” notes Kranzmann. “Off-premise is growing faster than on-premise as consumers continue to use discretion on how they spend disposable income outside the home.”

One challenge that the industry will face looking ahead, Kranzmann adds, is that as more consumers enter the wine market, demand will continue to outstrip grape supply in certain categories. “While we’re in a relatively balanced situation today, demand on key varietal types will continue to put pressure on pricing,” he warns.

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