Wednesday, May. 04, 2005

Gallo Says Bonjour

By Mitch Frank, Liz Keenan/Sydney, Mimi Murphy/Rome, Grant Rosenberg/Paris

The biggest new wine out of France last year was born in the mind of an American: Joe Gallo. That's Gallo, as in E&J Gallo Winery, America's biggest wine producer and a company many people still associate with California jug wines like Carlo Rossi. Three years ago, Joe, co-president of the company and son of legendary co-founder Ernest, returned from a trip to Europe and asked his consumer-research team to explain his French paradox: that most Americans still rated French wines as the best in the world but the French were rapidly losing market share to Australia and Italy. Why? The answer had less to do with anti-French sentiment than with France's wine-classification system, which Americans find too intimidating with its hard-to-decipher appellations, châteaux and mis en bouteille à la propriété. If the wines could be made more approachable, Joe concluded, Americans just might snap them up.

French wine couldn't be considered a smart investment at the time. Sales had been shrinking for years, and by 2003 Americans were asking for freedom fries--hold the steak au poivre. But Joe devoted Gallo's huge resources to the challenge. First, the Modesto, Calif., company found a French partner--wine cooperative Sieur d'Arques, in the southern Languedoc area, the region that produces much of France's lower-priced vin ordinaire. Sieur would harvest the grapes and make the wine; Gallo would handle marketing and distribution. Then, after sending a crew of Gallo researchers and Grey Advertising executives to southern France, Gallo coined an evocative name--Red Bicyclette--and devised a friendly label with a fun cartoon of a Frenchman in a beret riding a red bike with a dog trailing behind him, a baguette in its mouth. Voilà: French charm with none of the intimidation factor. (Compare that label with, say, the one for Domaine de Montcalmès Coteaux du Languedoc AOC, a wine from the same area.) The back label was just as friendly: "Bonjour! Welcome to Red Bicyclette, from a little corner of the very best place in France." Three types of Red Bicyclette (Syrah, Chardonnay and Merlot) hit stores in the summer of 2004 and sold 140,000 12-bottle cases in six months, single-handedly slowing an eight-year decline in French-wine sales in the U.S.

After coping with a post-9/11 slowdown and an oversupply of grapes, the global wine market is regaining the tremendous growth it enjoyed in the '90s, and one leading reason is Gallo. The world's second largest wine company, with estimated sales of $3 billion (after publicly held Constellation Brands, whose series of acquisitions brought sales to $4.1 billion), family-run Gallo has the industry's top research and marketing staff and has become legendary for seizing on consumer trends--whether they were jug wines in the '70s, Bartles & Jaymes wine coolers in the '80s or development of new premium wines like Gallo of Sonoma ($10 to $65 a bottle) in the '90s. Since 1996, Gallo has quietly launched foreign ventures, most notably Black Swan, produced with Australia's Brian McGuigan winery. The brand sold 1.2 million cases last year, second in Aussie wines only to Casella Wines' Yellow Tail.

But Gallo's success with the French Red Bicyclette has terrified some wine aficionados, who are worried that the globalizing wine market will become defined by dumbed-down wines, homogenized for simple American taste buds. To purists, a wine's flavors should be determined by terroir--the taste of the land where the grapes grow, the minerals in the soil, the amount of sun, wind and rain to which the grapes are exposed. "Authenticity is important," says Italian enologist Stefano Chioccioli. "We already have China invading us with products with no history. Wine is the fruit of man, but it is connected to the terroir. It is important to maintain that sense of differentiation." It's not that the best French Burgundies and California Cabernets are losing their terroir. Instead the critics are crying foul over mass-produced wines that hog the grocery-store shelves. A new documentary has poured gasoline on the debate: Jonathan Nossiter's Mondovino is the wine world's Fahrenheit 9/11, an indictment of big corporate wineries that Nossiter claims are killing wine's soul. To such critics, Gallo's international brands are as scary as McDonald's Golden Arches.

Most people who buy Black Swan or Red Bicyclette probably don't realize they are drinking a Gallo wine. The Gallo brand appears nowhere on the labels. But Gallo's partnerships with international wineries--in Italy, Australia, New Zealand and France--account for an estimated 10 million cases of the company's sales. (That's still a puddle compared with the ocean of California wine Gallo produces every year--65 million cases in 2004, or half of all grapes grown in California.) Gallo formed its first partnership 10 years ago when executives saw how Americans who had been guzzling Chardonnay were looking for other dry white varietals. Pinot Grigio, with its light, fruity style, was a natural choice, and much of the best came from Italy. Gallo struck a deal with Cavit, an Italian cooperative. The result was Ecco Domani, which sold 900,000 cases last year. Cavit now produces two other successful Italian brands for Gallo.

The purists are right that Gallo takes a nontraditional approach to selecting which wines to distribute. It asks consumers what they want--which is second nature in most industries but not the wine biz. Gallo interviews thousands of American wine drinkers every year, inquiring about the flavors they like and their buying habits. The company has used those data to craft flavor profiles for all major wine types. Each profile is a three-dimensional grid charting the possible flavors and consumers' reactions to them. Gallo's winemakers are then encouraged to craft wines that will get a favorable rating and be consistent year after year. (Among the unsurprising findings in Gallo's research: Americans like to drink their wine "young"--to buy it and have it that night at dinner--rather than store it for years to bring out the flavor.)

Gallo (like most other wineries) won't reveal its winemaking techniques but maintains that there are no additives in its wines and that its French and Italian wines meet those countries' strict production laws. But winemakers today have many techniques at their disposal: they can choose grapes carefully and blend grapes from several different vineyards. During fermentation, they make dozens of choices, such as what the temperature in the tank should be and what kind of yeast should be added. Reverse osmosis can also be used to remove excess water or alcohol; micro-oxygenation can soften a red wine's tannins so you can drink it now rather than wait a decade.

The Gallo family makes no apologies for insisting on certain qualities in its wines when it negotiates with its international partners. "We know that Americans want wines that are fruit forward," says Joe. "We know they want wines you can drink young." Some local winemakers resist the idea that Gallo tells them each step to take. But they acknowledge that Gallo looks for winemakers interested in crafting wines in a more modern style: Sieur d'Arques winemaker Alain Gayda admits his wines were more fruit forward than his rivals' even before he teamed up with Gallo.

Gallo executives say their imported wines, despite the tinkering, reflect the traditions of their local partners. "We need to develop wines of all styles from all areas, reflective of all terroirs if we are to give consumers what they want," says David Lane, senior marketing director. "They want wines that taste unique to the area." In other words, American consumers aren't looking for one mass-produced Wonder-bread wine, so why try to make, say, a French Chardonnay that tastes like one from California? That would defeat Gallo's whole purpose in pursuing international wines.

And Gallo is continuing the pursuit, critics notwithstanding. After Red Bicyclette's success, the company released a new French wine in April: Pont d'Avignon, a Côtes du Rhône from the Rhône Valley. It's about twice the price of Red Bicyclette but boasts flavors that are more complex and reflect the Rhône terroir. Da Vinci, a new Chianti that Gallo produced with Cantine de Leonardo Da Vinci's Alberto Antinoni, hit stores last year and is similarly higher priced. Like Pont d'Avignon, Da Vinci has the slick packaging of Gallo's other imports. Here too the taste is fruity, but with the tannins and acidity one should expect in an authentic Tuscan red.

Joe Gallo is already planning new international brands, from Chile and Germany. He thinks the company's New Zealand partnership has a lot of potential. "Our objective is to fill as many different niches as we can," says Gallo. It's wine on a global scale, a long way from California jug wine, but that's not necessarily a bad thing. --With reporting by Liz Keenan/Sydney, Mimi Murphy/Rome and Grant Rosenberg/Paris