The purchase last year of Louis Martini by the wine giant E&J Gallo surprised a number in the Napa Valley community. But a clearer picture of the company's plans for its future in the region is emerging as Larry Walker reports.

For the past several years, E&J Gallo has been polishing the image of its Sonoma County wines in a somewhat successful effort to distance itself from the bad old jug wine days in Modesto. Decades ago, Gallo purchased a lot of grapes in Napa County as well, but those grapes were blended into existing Gallo brands with no Napa identity.

When Gallo bought the Napa winery of Louis M. Martini last year, a few eyebrows were raised in the California wine trade.  Gallo has almost always preferred to grow brands internally, rather than pick up existing brands. The question was, what is Gallo up to?

The answers are started to come in. Since buying the Martini winery Gallo has spent in excess of US$1m on new equipment, including the construction of a micro-winery within the existing winery which can be used for the production of small lots of wine from selected vineyards.

"Not everything has been finalised," said Jon Holman, a Gallo spokesman in Modesto. "We are still in the planning and research stages."  However, according to other sources, Gallo plans to refocus Martini production on red wine and especially on Cabernet Sauvignon. The Martini winery, founded in 1933, made its reputation on Cabernet Sauvignon. In the 1950s, 1960s and into the 1970s, Louis Martini Cabernet was regarded as among the finest in California.

Michael Martini, senior winemaker and grandson of the winery's founder, has confirmed that making world class Cabernet Sauvignon is the Gallo goal, but noted that grape availability was the key to reaching that goal. 

There will be at least three new Cabernets bearing the Martini name, one from Napa Valley, one from the Alexander Valley in Sonoma and a Cabernet from the historic Monte Rosso Vineyard in Sonoma. Monte Rosso is one of California's prime pieces of dirt and it is good news that Gallo apparently plans to treat it with some respect.

Over the past few decades, the winery has appeared to drift, with a proliferation of varietals and brand extensions and, seemingly, an image 'makeover' every other year.  Production peaked at about 350,000 cases in the late 1970s but had fallen to 150,000 cases in 2002. Of that, some 80,000 cases were California appellation wines, rather than Napa. This was a value line, selling for US$10 or under and doing little to enhance the winery's reputation.

That line has been dropped and a new brand - still officially nameless - featuring only Napa and Sonoma wines will be introduced early in 2004. The new line will not carry the Gallo name and will sell in the US$10-to-$15 range. Sources say that grapes, purchased from new growers and old growers who were given new contracts, poured into the winery during harvest. One source said Gallo bought grapes from as many as 65 growers this year compared to fewer than a dozen in 2002.  Of course, with the current glut of wine grapes in California, it can be assumed that Gallo got the grapes at a bargain price, no doubt well below the Napa average.

Expert Analysis

Company Watch - E & J Gallo
This unique company report provides comprehensive information on world-wide activities and brands, together with an analysis of company strategy and brand portfolio. Find out more here.


There were reports that Gallo was buying grapes on the spot market in Napa for this year's crush but just-drinks sources said all purchases were on contract, signalling a long term strategy. One industry source said Gallo has been buying Napa Cabernet Sauvignon, Merlot and Chardonnay in the bulk wine market for the past year, leaving little doubt about plans to increase production at Martini long term. 

Another source said the Gallo goal was to produce 800,000 cases of wine by 2007. The original Louis M. Martini permit issued in 1933 would allow that level of production. Whether production will go that high that soon would seem to depend more on grape availability than production goals.

A published report said that if Gallo reached that level of production, it would be the largest producer by far of Napa Valley wines, however, with the Monte Rosso vineyard and other Sonoma county grape sources, not all of the new Martini production will be from Napa grapes.

In fact, putting the emphasis on increased production might be a headline-grabber, but the real story at Martini is that Gallo seems to be planning to restore one of Napa's jewels and bring Louis M. Martini back into serious contention as a top producer of Cabernet Sauvignon.

Gallo, a privately-held company, controls a third of the state's wine production and has estimated annual sales of about $1.7 billion.  Gallo is second to Constellation in production volume but is the leader in sales.