Napa the prize as Gallo rides to Martini’s rescue
The idealists would have us believe Gallo has helped out an old compatriot by acquiring the struggling Napa winery Louis M Martini. However, the world's largest winemaker has made an astute buy as well, as Larry Walker explains.
The Louis M. Martini Winery in Napa is now part of the E&J Gallo empire, a far-flung wine fiefdom that extends from Modesto in California's Central Valley to the super-premium vineyards of the North Coast. The sale was really no surprise. Martini has been on the market for years, the victim of a distribution and image squeeze that saw the winery change distributors a number of times, looking for the right one. It never found it.
The Gallo and Martini families have been close since the early 1930s. Both wineries were established following the repeal of prohibition and the older and younger generations have maintained a warm relationship.
"The Gallos sat down and worked it out with us," Carolyn Martini, president and chief executive officer and granddaughter of founder Louis M. Martini told just-drinks. "If I had to pick a buyer, I would have picked them a long time ago." Gallo is keeping the entire winery staff on the payroll and has promised a high degree of autonomy, she said.
The sale is just the latest in the big-fish-eating-smaller-fish scenario that is being played out in the global wine business. The variation here is that Gallo is family-owned, not a publicly-owned corporation.
Carolyn Martini said it was simply impossible for a winery the size of Martini (80,000 cases) to compete in today's market. "You have to be either really small or really big," she said. "In 1975, when I joined the winery, there were 45 wholesalers, now there are only three major players."
Martini was one of the original 'Napa Five' that helped set the stage for Napa's recognition as a major premium wine region in the 1940s and 1950s. (The others were Beaulieu, Beringer, Charles Krug and Inglenook, now all except Krug are owned by global corporations.) But as new stars were born, such as Robert Mondavi, Martini was never able to keep in step.
The wines have always been first rate. Indeed, Louis M. Martini Cabernets from the 1950s and 1960s were superb and are still drinking quite well. However, Martini wines never caught the public's attention, even though quality remains high, perhaps because no one in the family had the razzle-dazzle quality of Mondavi and others.
Some marketers say that the public didn't tune in to Martini simply because the wines were priced too low. "How can it be a good Cabernet if it only costs $10 a bottle?" was a typical consumer question.
On the other hand, the purchase of Martini gives Gallo an entry into Napa Valley, an established if not solid gold brand, and about 650 acres of vineyards in Napa and Sonoma as well as the Napa production facility. The prize plum of the vineyards is Monte Rosso in Sonoma. It is planted with century-old Zinfandel and Cabernet (among other vines) and is highly regarded by serious Zinfandel producers.
You could read this script as Gallo being the knight on a white horse, charging in too save an old friend's property. That is putting a happy face on the sale, but however you look at it, Gallo appears to be serious about producing good wine and they certainly have the skills and muscle to give the Martini brand a stronger place in the market.
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