Gallo and Mondavi Take On Kendall-Jackson

Consumers will see two new moderately priced lines of wines this summer as the Robert Mondavi and E&J; Gallo wineries launch brands that will hit store shelves at prices between $6 and $9 per bottle.

Analysts say both wineries are targeting Kendall-Jackson Winery’s dominance in affordable upscale wines, primarily its Vintner’s Reserve Chardonnay.

Mondavi, a well-regarded Napa Valley winery, said last week it would release a line of wines under the name “Robert Mondavi Coastal.” This week it was learned that Modesto-based Gallo, the world’s largest winery, will release a line of Sonoma County wines in the same price category--and at the same time the winery said it will buy grapes from Sonoma County growers at prices higher than Gallo traditionally has paid.

Both wineries seem to be taking dead aim at Kendall-Jackson, which, according to figures from Gomberg, Fredrikson & Associates of San Francisco, shipped 1,265,000 cases of wine last year. A huge percentage of it was the Vintner’s Reserve Chardonnay, which has a suggested retail price of $13 but is often seen discounted to $7.99.

Says one analyst, “K-J now has a grip on that (Chardonnay) niche, but Gallo and Mondavi are major players. This will be one hell of a battle.”

The Gallo program has wine industry analysts buzzing since the firm apparently intends to release more than 1 million cases of wine from four grape varieties, all with a Sonoma County designation. Gallo, which routinely declines to comment on any news story, wouldn’t confirm reports of a new line.

Analysts say they expect Gallo to support this launch with a major advertising campaign that will include print (magazines and newspapers), television and perhaps even a coupon offer, similar to the successful coupon offer Gallo used in the launch last year of its Peter Vella line of bag-in-box wines.

It was three years ago, at the Sonoma County Wine Auction, that Ernest Gallo, chairman of the winery, chatting with reporters, casually asked, “How would you improve the image of Sonoma County wines, which we all know are better than Napa Valley’s?”

The ensuing discussion showed Gallo’s strong commitment to Sonoma County, where the winery owns some 5,000 acres of land including more than 2,000 acres of vineyards, making Gallo by far the single largest grape grower in the county. In addition, Gallo has, over the last two years, bought huge amounts of grapes from other Sonoma County growers. Many such purchases in the past were at prices well above what Gallo usually paid.

Moreover, a Gallo spokesman confirms that the winery is offering top dollar for grapes from this year’s harvest, which starts in August. It is an earlier commitment than Gallo has ever given growers, and the prices Gallo says it will pay surprise experts--up to $1,150 per ton for Sonoma County Chardonnay grapes. Last year’s base price for Chardonnay in Sonoma County was $1,092 per ton.

One industry source said: “The price Ernest is paying does two things. It gives him better-quality fruit for his better wines, and it puts the squeeze on (other wineries that) need good-quality fruit.”

Ed Everett, a San Francisco wine industry consultant, says the huge amount of wine Gallo reportedly will release “is in keeping with Gallo’s style. They don’t do anything on a small scale.”

Everett also said the move by both Mondavi and Gallo into a more upscale price niche wasn’t unexpected. “It’s common wisdom in the industry that the most important price category now is the $5.99 to $8.99 range,” said Everett. “We know that many consumers feel they have to shop in that range to get anything good.”

Both Gallo and Mondavi (the latter using a Woodbridge designation) have wines in the so-called “Fighting Varietal” price niche ($4 to $6 per bottle), but it’s becoming increasingly difficult to make fine wine in that price range because of recent increases in the prices of bottles, corks, label printing and labor.

Neither winery had a product in the growing $10 to $12 area. (With the upcoming wines, each will be able to offer wines that discounters will carry for $6 to $9.)

One San Francisco wine industry financial analyst is skeptical of the impending Gallo release. “I’m surprised that the wines are that high in price,” he says. “The ‘action’ in the wine business today seems to be in a much lower price range. This is coming at a surprisingly high price range, especially considering the brand in question.”

He speculated that Gallo would initially discount the wines more deeply than Mondavi because of Gallo’s closer relationship with the wholesale trade.

Moreover, Gallo grows a lot of grapes from its own vineyards in Sonoma County--including 300 acres of Cabernet Sauvignon; 530 acres of Chardonnay, and 120 acres of Zinfandel. Those three varieties will be among the first releases in the Gallo-Sonoma line. A Sauvignon Blanc also is planned.

The first Mondavi wines in the new line will be a 1992 Robert Mondavi Coastal Chardonnay and a 1991 Robert Mondavi Coastal Cabernet Sauvignon.

A winery source said the reason for the line was to give the Mondavi winery entry into the under-$10 super-premium category, “so we can get the Napa Valley varietals back above the $10 price.” Discounters, said the source, had been selling some of Mondavi’s Napa Valley wines too cheaply.

Wine of the Week

1993 Canyon Road Sauvignon Blanc ($6) --Wonderful fresh fruit aroma of melons and citrus, a graceful fruitiness in the mouth and a soft/crisp balance in the aftertaste. Winemaker Mike Draxton did a masterful blending job to accent the fruit and not the grassy elements in this exceptional value. Usually found at less than $5 a bottle.