E. & J. Gallo Makes Big Washington State Wine Purchases

E. & J. Gallo Makes Big Washington State Wine Purchases

While rumors that E. & J. Gallo Winery purchased Washington’s Columbia Winery and Covey Run Winery brands from ASCeNTIA Wine Estates have swirled for some weeks, the official announcement of the deal was made public this morning, Monday, June 4, 2012. Along with the two wine brands, E. & J. Gallo will also take over the operation of their Woodinville and Sunnyside winemaking facilities. This purchase marks Gallo’s first property expansion outside of California.

Columbia Winery, known as Associated Vintners until 1984, is celebrating its 50th anniversary this year. Longtime winemaker, the late David Lake, was the first Master of Wine to make wine in the U.S. and was a pioneer in establishing many varieties now considered essential to Washington State. Covey Run Winery was founded as Quail Run in 1982. ASCeNTIA Wine Estates acquired both estates from Constellation Brands in 2009.

The purchase of these prominent Washington estates further expands E. & J. Gallo’s massive winery portfolio. As the world’s largest family-owned winery, E. & J. Gallo currently has seven winemaking facilities in California and dozens of Gallo brands (both domestic and imported), including Barefoot Cellars, Bridlewood Estate Winery, DaVinci, Don Miguel Gascon, Ecco Domani, Frei Brothers, Louis M. Martini, MacMurray Ranch, Martín Códax, McWilliam’s, Mirassou and William Hill Estate.

Wine Enthusiast caught up with Roger Nabedian, E. & J. Gallo Winery’s senior vice president and general manager of the premium wine division, who is handling all aspects of the much-anticipated acquisition.

Wine Enthusiast: You’ve had an eye on Washington State for more than a few years. Why these brands and why now?
Roger Nabedian:
We’ve been expanding our portfolio in an attempt to offer wines from the most prestigious viticultural areas in the world. We’ve had our eye on the Northwest for at least the past five years, and have looked at various opportunities. It was all about finding the right opportunity at the right time. We are particularly excited about the purchase of Columbia [Winery], which comes with a pedigree tradition built by [the late] David Lake over a long period of time. Quite frankly, we looked at Columbia several years ago and weren’t able to put it together. We saw this as a unique opportunity for Gallo.

W.E.: What was actually purchased in terms of brands, inventory, leases, equipment, vineyard contracts and land?
We’ve purchased brands and inventory, and assumed the operations for the winery tasting room in Woodinville, and worked out a lease agreement with the owners of the facility, the Baty family.

We’ll also operate the primary facility in Sunnyside. We have assumed a number of grape contracts and have been developing relationships with growers over the past several years as we looked for the right opportunity in Washington.

W.E.: Are there plans to purchase or develop any vineyards?
That opportunity is there, but nothing specific is in the works at this time. In California, we own a lot of vineyard land, but we also rely on longterm relationships with growers. Our first choice will be to try to develop relationships with premier growers in the region.

W.E.: Can you comment on the price paid for these acquisitions?
We do not release that information. But I can confirm that it’s a clean deal.

W.E.: What are current and future proposed production levels?
Over the last couple of years, the two brands have sold about 250,000 cases. As we focus on bringing Columbia back to its pedigreed position, we will, at first, produce less wine. Time will tell. My hope is that it can be a big business for us—maybe upwards of a million cases of Washington State wine. That’s a long-term view. In vintage 2012, we’ll produce less than 250,000.

W.E.: Will you bring in your own winemaking team?
We will be putting in a new winemaker team. We want to try to keep whatever relationships we can and keep the foundation of the brand consistent, but because the Northwest is a remote location for us, we want to bring our own philosophy of winemaking to the winery. We’ll be putting in a new winemaking team and making that announcement in a couple of weeks. It will be a team of three people covering both brands. There will probably be a winemaker from California, and the other individuals will come from the Northwest.

W.E.: How will Washington wines be positioned in the vast E. & J. Gallo portfolio?
I think Columbia fits well for us. A lot of the growth in the wine business today is the $10–$15 price point, and Columbia will play there. There is a lot of restaurant interest and consumer energy at those prices. I think Washington State has something unique to offer versus our other wineries around the world. We see Washington wines very much augmenting, not competing with, our California portfolio. We’ll be looking to use Columbia to promote wines from Washington State more generally.

W.E.: Will you take an active role in Washington Wine Commission?
RN: Certainly we’ll look to support the Commission’s activities. We’ll be starting from scratch in terms of our relationship with the Commission. It will be a matter of what the Commission thinks we can do to help.

Published on June 4, 2012
Topics: WashingtonWine Enthusiast Q+A