Ernest Gallo

American vintner

• Born: March 18, 1909
• Birthplace: Jackson, California
• Died: March 6, 2007
• Place of death: Modesto, California

The son of Italian immigrants, Gallo was the driving force and business genius behind the wine company that he founded with his brother Julio. From the cheap Thunderbird to wine coolers to expensive imports, the E. & J. Gallo Winery shaped wine tastes in contemporary America.

Sources of wealth: Manufacturing; sale of products

Bequeathal of wealth: Children; medical research

Early Life

Ernest Gallo (EHR-nehst GAL-loh) was born in 1909 in Jackson, California, the first of three sons of Italian immigrants Giuseppe “Joe” Gallo and Assunta “Susie” Biano Gallo, whose parents ran a family winery. After a five-year separation provoked by Joe’s violence, Susie and Joe reconciled and the family moved to Oakland, where Joe ran a small wine company, a retail liquor business, a saloon, and a hotel. When Prohibition neared, Joe sold his businesses and bought vineyard property in Antioch, California, anticipating that raising and selling wine grapes would remain a legal activity. Ernest and his younger brother Julio were forced to work from sunrise to after dark in the vineyards, attending public schools in the middle of the day. During Prohibition, Joe became involved in various bootlegging schemes with his brother, Michelo (Mike), a flamboyant hustler who served several prison sentences.

In 1925, after purchasing forty acres in Modesto, California, that would become the enduring home base of the Gallo family, Joe went into the grape shipping business. Ernest accompanied his father and the wine shipments to the Chicago exchange. The teenager immediately plunged into selling and demonstrated his abilities as a shrewd businessman. He returned to high school, graduated with honors, and enrolled in agricultural courses at Modesto Junior College. In 1927, Ernest went to Chicago alone, delighted with his new responsibilities and independence, for his father still bullied him at home.

First Ventures

In 1929, Joe built underground tanks to save his harvest, essentially starting a winery, which was illegal. He shipped wine under the legal “juice” label. Ernest wanted to partner with his father but was rejected. Another source of tension was Joe’s treatment of his youngest son. Born in 1919, Joe, Jr., was his father’s favorite and suffered none of the abuse leveled at the two older boys.

In 1930, Ernest announced his plans to enter the wine business after Prohibition was repealed and to marry Amelia Franzia, the daughter of a wealthy winery owner. The couple spent their honeymoon at the 1931 grape market in Chicago. Anticipating the December, 1933, repeal of Prohibition, Ernest filed an application to open a bonded wine storeroom, but the petition was denied because he did not own a bonded winery. That same month, Joe and Sallie were found dead of gunshot wounds at the run-down home in Fresno to which they had moved suddenly and secretly months before. Officially the deaths were recorded as murder-suicide, but there was speculation then and later that the Gallos had been ordered killed by the syndicate. The older brothers became guardians of young Joe, Jr., and Ernest imposed a code of silence on the family regarding the shocking deaths.

Twenty-four-year-old Ernest was granted permission to continue his father’s business. He and his brother Julio formed a partnership, the E. & J. Gallo Winery, excluding Joe, Jr. During an interview with an inspector from the Bureau of Alcohol, Tobacco, and Firearms, Ernest claimed he did not know Mike Gallo, an uncle who was serving a prison sentence for bootlegging, later amending his statements to say that Mike “had been removed from us as a relative.” With a craving for respectability and a knack for revisionist history, Ernest moved forward with his grandiose plans to build Gallo into the largest winery in the state and then the nation.

By 1935, the Gallo winery was producing an annual yield of 350,000 gallons. Ernest sometimes traveled five months at a time, working grueling hours and expecting others to do likewise. In the winter of 1936, he was hospitalized for exhaustion; his six-month hospital stay became one of many Gallo secrets. After his convalescence, Ernest returned with his typical vigor, adding a distillery, expanding production to a full array of sweet, fortified wines and table wines, and purchasing a distribution company in New Orleans, making it the first Gallo-controlled distributor. The entrepreneur was determined to learn how to build, market, and sell a brand. He spent the winter of 1940-1941 interviewing businessmen; from these contacts Ernest devised an intensive and carefully structured sales program that broke new ground in marketing strategies. In March, 1942, Ernest applied for the first trademark Gallo name and claimed it had been used continuously by his family since 1909. Company restructuring papers filed in 1944 listed the winery’s capital stock at $500,000, with the home and vineyards valued at $760,000. A division of labor had been set, with Ernest in charge of sales and marketing and Julio supervising the vineyards, the laboratory, and wine production. Their oft-repeated boasts that Julio would “make all the wine you can sell” and Ernest would “sell all the wine you can make” made the arrangement public.

Mature Wealth

After World War II, the brothers developed lighter wines sold with aluminum screw-tops to ensure consistent taste. In the 1950’s and 1960’s, the Gallos used a huge blending vat to create a uniform blend, making the wine’s vintage irrelevant. By the early 1950’s, the Gallo winery was America’s largest winemaking facility. A light, mellow, red table wine called Vino Paisano di Gallo, sold in a rounded jug bottle, was Gallo’s signature product. A bottling plant built in Modesto added to the company’s vertical integration pattern.

A micromanager, Ernest demanded full loyalty from his employees, and all middle management reported directly to him. The “three Rs” of Gallo salesmanship, described by one writer as “rigorousness, relentlessness, and ruthlessness,” summarized Ernest’s approach. In the summer of 1957, Gallo introduced a flavored, fortified wine called Thunderbird that sold for sixty cents a quart. It became an instant hit, especially in poor, urban neighborhoods, and its success pushed production levels to thirty-two million gallons that year. Several years later, Gallo developed Ripple, another low-end product popular with college students.

Although hugely profitable, these street wines undercut Ernest’s desire to be seen as a respectable, discerning vintner. He launched a “Beautiful Wines” campaign, featuring Gallo’s first champagne, Eden Roc, in 1966, as well as “Gallo’s Gourmet Trio”: Hearty Burgundy, Chablis Blanc, and Pink Chablis. Delighted to be featured with his brother on the cover of Time in 1972, Ernest was dismayed by the story’s emphasis on Gallo’s “pop wine.” In an effort to change the company’s image, Ernest also began hiring executives with master’s degrees in business administration and experience in consumer sales.

The 1970’s began with enormous expansion and a stream of successful new products. However, the company suffered from the national boycott against Gallo wine that César Chávez, leader of the United Farm Workers, began in 1973 because of Gallo’s support of the International Brotherhood of Teamsters. In February, 1974, 100,000 people marched on the Gallo “temple” in Modesto to protest the company’s policies. Chávez finally terminated the boycott in 1978. During this same period the winery was investigated by the Federal Trade Commission (FTC) for alleged intrusion into distributors’ business and alleged illegal practices by its sales force. The FTC ordered monthly inspections of Gallo records in order to monitor company activities. Sales leveled during the tumultuous 1970’s, but by 1981 Gallo led nationally in wine sales, shipping 131 million gallons.

Ernest increased his involvement in politics. During 1989 and 1990, the Gallo family contributed more to federal candidates ($294,110) than any other American family. While his sons attended Norte Dame and Stanford Universities, Ernest gave large gifts to each school. He also provided a $3 million endowment to establish a clinic and research center in his name at the University of California at San Francisco.

In 1983, Ernest and Julio’s younger brother, rancher Joe Gallo, Jr., launched Joseph Gallo Cheese Company. After a series of unresolved negotiations regarding the use of the Gallo name on these cheese products, Ernest and Julio filed a complaint against Joe and his son Mark, who was co-owner of the company. Joe and Mark countersued to obtain one-third of the winery’s ownership, which was valued at more than $200 million. Litigation continued for several years until a final injunction enjoined Joe and Mark from using the Gallo name as a trademark. The brothers remained estranged for the rest of their lives.

In the early 1990’s, the winery expanded its vineyard properties, which would eventually encompass ten thousand acres, and continued its pattern of buying grapes from independent growers. New Gallo vintage-dated varietals and premium wines were introduced, increasing the Gallo share of the premium market. The company ranked number one in sales, with an estimated 4.3 million cases sold in 1991, but the majority of Gallo profit continued to come from street wines. In the next decade the company shifted its emphasis, importing wine and also exporting millions of cases of wine to scores of countries each year.

In 2006, Forbes magazine estimated Ernest’s net worth at $1.2 billion. The next year Ernest died at his home in Modesto, just days before his ninety-eighth birthday.

Legacy

Along with his brother Julio, Ernest Gallo created a wine empire during seven decades. Known for his somber dedication to work and his often ruthless practices, Ernest was a skilled entrepreneur and a master of marketing strategies. However, this single-minded ambition resulted in bitter litigation against his youngest brother and tore the family apart.

Bibliography

Conaway, James. Napa: The Story of an American Eden. 2d ed. Boston: Houghton Mifflin, 2002. Provides good background on the history of California wineries.

Hawkes, Ellen. Blood and Wine: The Unauthorized Story of the Gallo Wine Empire. New York: Simon & Schuster, 1993. A detailed family biography with fifty-three pages of endnotes, as well as photographs. Sympathetic to Joe, Jr.’s, side in the litigation with his older brothers.

Henderson, Bruce, with Ernest Gallo and Julio Gallo. Ernest & Julio: Our Story. New York: Times Books, 1994. A rags-to-riches story, substantially embellished, mostly told by Ernest.

Time. “American Wine: There’s Gold in Them Thar Grapes.” November 27, 1972. Cover story on the success of the Gallo winery. Claims that six Gallo brands accounted for 90 percent of the sixty million gallons of “pop wine” sold in 1971.

Tucille, James. Gallo Be Thy Name: The Inside Story of How One Family Rose to Dominate the U.S. Wine Market. Beverly Hills, Calif.: Phoenix Books, 2009. Written by an American business authority, this social history pictures Ernest as a thug and a genius. Considers the parents’ death a mob hit.