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INDUSTRY: American Wine Comes of Age

21 minute read
TIME

RISING starkly from the dusty fields of California’s San Joaquin Valley are 100 huge metal cylinders that look like an array of petrochemical tanks. Alongside them are rows of mostly windowless industrial buildings that sprawl over an area as large as six city blocks. This symbol of technological power is not a pulsing refinery; it is the E. & J. Gallo Winery of Modesto, Calif. Inside the cylinders, millions of gallons of California Burgundy, Chablis and rosé age. Inside the buildings, squads of chemists pore over their latest oenological formulations, while viniculturists experiment with ways to improve soil and vines. Wine—the beverage that was prescribed as a medicine by Hippocrates and celebrated in poem or aphorism by Euripides, Shakespeare and Thomas Jefferson—has become a modern, fast-growing, competitive industry.

Americans will spend close to $2 billion on wine this year, twice as much as in 1968. The growth in wine consumption is outpacing that of hard liquor and beer, though Americans will spend ten times as much on those beverages combined as on wine. This year a U.S. adult will drink an average 2.4 gallons of wine; that is still quite a few sips behind such iron-livered veterans as the French (29 gallons) or the Italians (30 gallons), meaning that the U.S. industry still has plenty of room to grow. Last year alone, retail wine sales rose 59% in Wisconsin, 65% in Vermont and 98% in Rhode Island. Young people have become particularly avid imbibers. On campuses, wines are considered the best accompaniment to informal meals and exotic smokes. Consumption will reach an alltime peak this week because the biggest wine-drinking day of the year is traditionally Thanksgiving.

Wine clubs and college wine courses are multiplying as fast as yeast on freshly crushed grapes. Wine tastings are taking their place alongside cocktail parties in the repertory of folkways. Wine books—as many as 50 new ones this year—are flowing from the presses. At least a quarter of a million American homes have wine vats bubbling quietly in closets or basements. For less than $ 1 a bottle, one can buy all the necessary accouterments, including a can of grape concentrate, to make a few of the 200 gallons of wine a year that heads of households in the U.S. are allowed to produce without paying taxes. Physicians are prescribing wine to help lower blood cholesterol, ease glaucoma and lessen nervous tension. Some doctors are recommending wine in weight-reducing diets. A 4-oz. glass of red, white or rosé wine contains just under 100 calories. As St. Paul advised Timothy: “Use a little wine for thy stomach’s sake and thine often infirmities.”

The wine boom is evidence of a growing ease and worldliness in American lifestyles, as foreign travel and rising affluence open new horizons of taste. Says Philip Seldon, editor of Vintage, a highly successful new wine magazine: “I think America is coming of age. We are becoming conscious of our sense of taste. Perhaps we are becoming more European. We are discovering that there is nothing wrong with self-satisfaction.” Hugh Johnson, a British writer who belongs to that newly prominent group of taste arbiters, the professional wine critics, takes a less cosmic view: “Wine needs no apology. It is one of the good things of life. While hard liquor is drunk for its effect, wine is drunk patently for pleasure.”

The chief beneficiary of this ferment is the U.S. wine industry, the world’s sixth-largest producer (behind Italy, France, the Soviet Union, Spain and Argentina). Long considered to be pale imitations of their European cousins, American wines are rapidly gaining in quality and respect. Imports continue to rise, but more than 88% of all wine sold in the U.S. is homegrown. This year 43 new wineries have been opened. Thriving vineyards have grown up in some unlikely places: Maryland, Washington, Oregon, Illinois and Georgia. New York State produces one of every eleven bottles of wine made in the U.S. The state’s sizable producers—Taylor, Canandaigua, Gold Seal and Widmer—are having record sales. For years, only native East Coast grapes could survive the harsh winters, but some smaller New York wineries, notably Vinifera and Bully Hill, are concentrating on wines made from hybrids of American and European grapes.

But the U.S. wine business is still dominated by a single state: California. Its 267 wineries produce 85% of the wine made in the U.S., and Californians individually drink about twice as much wine as other Americans. Grapes represent the Golden State’s largest cash crop; in the past four years of heavy demand and rising labor costs, prices for premium Cabernet Sauvignon grapes have jumped from $305 a ton to about $ 1,000. They will rise still higher as a result of a tight supply. Because of a spring frost and August heat-wave damage, the 1972 California grape harvest, which was completed last month, was the smallest in 30 years. Those grapes are now fermenting, and when 1972 wines reach the market next year, some may carry price tags that are as much as 20% higher. In the Napa Valley, a prime growing region north of San Francisco, almost no land is left for new vineyards; enterprising home owners are planting grapevines on front lawns.

Just as one state dominates the industry, one company towers above the rest. The Gallo Winery sold 100 million gallons last year—almost half of all California wine and nearly twice as much as its nearest competitor, United Vintners. Family owned, the Gallo company is one of the nation’s largest privately held firms, and one of its most secretive. Until its top executives were interviewed by TIME Correspondent Patricia Delaney, they had avoided contact with the press for years. By best estimates, the company had revenues of $250 million last year and reaped profits of $35 million to $40 million before taxes.

The men who own Gallo lock, stock and wine barrel are the brothers whose names are signed on many Gallo bottles:

Julio, 62, is in charge of making the wine, and Ernest, 63, markets it. The two are about as similar as Burgundy and vodka. Julio is warm and affable. Ernest is intense, crusty and harddriving. “If you tell Ernest it’s a nice day, he’ll ask you why,” says Louis Gomberg, an industry consultant.

The Gallos’ impact on American wine making has been enormous. They were the nation’s first wine makers to hire research chemists. Years ago they abandoned wooden fermenting casks for stainless-steel tanks, and because wood casks can breed unwanted bacteria, most of the domestic industry has followed. The Gallos were the first to automate their wineries by, among other things, computerizing the blending process. They also pioneered in pop wines—the sweet and occasionally effervescent drinks that are washing over the country. Last year, producing six of the dozens of entries on the market, Gallo accounted for 90% of the 60 million gallons of pop wines sold in the U.S.

Makers of costlier premium California wines praise the Gallos for bringing new wine drinkers to the fold with their inexpensive wines, even though many drinkers damn the pop wines as an insult to cultivated taste. “Ernest Gallo has done more for the industry than any individual alive,” says Joe Heitz, whose small winery turns out some of the state’s most sophisticated wines. Though Gallo wines have long been something of a joke among wine snobs, lately oenophiles have been pleasantly surprised. Gallo’s Pink Chablis recently triumphed over ten costlier competitors in a blind tasting among a panel of wine-industry executives in Los Angeles. Says Robert Balzer, a wine critic for Holiday and the Los Angeles Times: “Gallo Hearty Burgundy is the best wine value in the country today” (see box, page 83).

The Gallos are the last major entrepreneurs in an industry that is being taken over by large, publicly held corporations. Heublein Inc., a big distiller and food processor, has bought United Vintners (which makes Italian Swiss Colony and Inglenook) and Beaulieu Vineyards. Seagrams controls Paul Masson and Browne Vintners. Brown-Forman Distillers, the Kentucky whisky maker, recently picked up the distributorship of F. Korbel and Bros., the big California champagne producer. National Distillers & Chemical has acquired Almadén. Two months ago the parent company made an offering of Almadén stock at $20 a share; it has since risen to $29.

Breweries are also adding wine lines: Schlitz and Seattle’s Rainier companies have moved into the wine business during the past few years. Food-processing companies are heeding the ancient Roman proverb, “A meal without wine is like a day without sunshine”: Pillsbury Co., Nestlé and the R.T. French & Co. of mustard fame have recently become vineyard owners. So have Lazard Frères, the Wall Street investment-banking firm; John Hancock, the insurer; and Southdown Inc., the Houston-based conglomerate. Takeover-ripe wineries have become rare, and the bids for them are enormous. The Gallo brothers have spurned an offer from Seagrams of reportedly $150 to $200 million.

Many individuals have been drawn into the fields because they savor living close to the soil while creating a product of pleasure. Jack Davies left his job as vice president of a Los Angeles metals company in 1965 in order to try reviving a then defunct champagne cellar. His Schramsberg champagne is now acknowledged to be the best produced in the nation, and last February President Nixon brought 14 cases to Peking to toast Chou Enlai. Russell Green abandoned his post as president of Signal Oil Co. to take over the Simi winery. Today it is one of the many small wineries that tend to make some of the most interesting of the California premium wines. Donn Chappellet chucked his job as president of a lucrative food-vending firm in Los Angeles in order to work on 320 acres of vineyards. He is producing about 6,000 cases but does not expect to reach the break-even point until he sells at least 10,000 cases. Rod Strong left Broadway, where he was a choreographer, and became the owner of a Windsor vineyard. Last year his Tiburon Vintners grossed $3,500,000. One of Strong’s most successful innovations was mail-order marketing of gift wines with personalized labels. Some of the best California wines—Heitz, Ridge, Hanzell, Oakville—are in such short supply that they cannot be bought by out-of-staters unless they place a special order well in advance and take delivery at a local liquor store.

The wine makers lead a hard but hearty life, alternating between fields and office and frequent trips abroad to see what the foreign competition is doing. August Sebastiani’s life-style is typical. He has a collection of rare birds, and his house is packed with many fine wines. In the evenings he and his frequent guests dine royally; one recent meal was wild boar served with a 15-year-old California wine. Yet at 5:30 a.m., Sebastiani breakfasts in simple style with workers at a roadside inn, pausing on a drive to the vineyard. “All day long I drive around in a pickup truck and wear overalls, but I’ve got a reason for living that the guys who try to buy me out just don’t understand,” he says. “I could make more money elsewhere, but I would always come back to wine.”

European Kinship. Yet there is undoubtedly gold in grapes, and not just for the wine manufacturers or retailers. Expecting that wine prices will continue to rise, more and more ordinary consumers are buying and storing wine. A select California Cabernet Sauvignon worth $3.25 in 1966 now commands about $6. Major wine merchants will accept orders for future delivery of just about any premium wine that has a long bottle life. U.S. citizens technically cannot sell their wine hoardings publicly without a retailer’s license, but they can sell them privately to friends or back to retailers.

Wine is hardly a new phenomenon in the U.S. The Spanish missionaries who brought European civilization to the New World also brought European grapes. Before the U.S. was a nation, Franciscan Padre Junipero Serra, founder of nine Spanish missions in California, was making wine in San Diego. After the Gold Rush in 1849, a Hungarian adventurer named Agoston Haraszthy brought 200,000 premium European grapevines to California. In the 1880s an epidemic of the root disease, phylloxera, wiped out nearly all of Europe’s vineyards. Thousands of American rootstocks, with their phylloxera-resistant native roots, were shipped over to Europe. Thus most European wine is made from transplanted U.S. vines, and most California wine is made from vines that originated in Europe—a kinship that Californians never tire of pointing out to Francophile wine snobs.

California had its own cataclysm in the 1920s: Prohibition. Many of Haraszthy’s precious vines were ripped up. By the time of repeal in 1933, only a handful of vintners were left, turning out spirits supposedly for sacramental or pharmaceutical purposes. Against this dismal backdrop, Ernest and Julio Gallo entered the business.

Born near Modesto, the brothers grew up working the small vineyard owned by their father, an immigrant from Italy’s northern Piedmont. “We had a tractor in the barn, but we didn’t have enough money to buy gas,” recalls Ernest. “Instead, we used four mules and worked the vineyards seven days a week from daylight to dusk.” With the first stirrings of repeal, they dug up $5,900.23 in capital and set out to produce their own wine. They rented a railroad shed for $60 a month, bought a $2,000 grape crusher and redwood tanks on 90-to 180-day terms.

There was one nettlesome problem: though they had plenty of experience growing grapes, they did not know how to make wine. In the Modesto public library, Ernest found a pair of two-page pamphlets, one on fermentation and the other on the care of wine. Thus enlightened, he made the rounds of local grape growers and soon had enough grapes to make all the wine that the tanks could hold—but no customers for it. A few days before Prohibition ended, the brothers received a form letter from a would-be wine distributor in Chicago. Ernest Gallo immediately hopped a plane for Chicago and sold the distributor 6,000 gallons at 50¢ each. Emboldened, he continued East and found enough customers to take his entire production. The Gallos’ first-year profit was $34,000, all of which was plowed back into the company.

The brothers prospered steadily but were small-time wine makers until 1940, when they acquired bottlers in Los Angeles and New Orleans and attempted nationwide marketing for their early sherries and muscatels. They recruited their own salesmen and instructed them to see that their product gained a prominent position on liquor-store shelves. The salesmen’s zeal gave the company a reputation for ruthlessness. Some oldtimers say that teams of Gallo men would stride into a store and tough-talk the proprietor into keeping competitors’ wine on less visible shelves. Others insist that Gallo salesmen merely used economic incentives, such as offering a month’s free supply if Gallo wine were given good display.

Sun Screen. The Gallos have a talent for sensing consumer trends and being first with new products, as they were with pop wines. Now that growth is leveling off in the pop field, the Gallos appear to be shifting their promotional efforts to more conventional wines—Chablis Blanc, Pink Chablis, Burgundy and Hearty Burgundy.

Another element of the Gallos’ success is technology. Their staff of 25 graduate oenologists is the nation’s largest. Automation has cut production costs to the stalk: Gallo Hearty Burgundy, for instance, is made from more expensive grapes than a number of comparable competing Burgundies, but mass production helps keep the price about the same. The Gallos have the industry’s first winery-owned bottlemaking plant, producing up to 1,500,000 bottles a day—all tinted in shades of green created by Gallo researchers to screen harmful ultraviolet rays. Though the Gallos’ oenologists have developed a number of new grape varieties, the company owns only 10,000 of the 75,000 acres of vineyards that it draws upon. The bulk of the grapes are supplied by growers throughout the state under long-term contracts. Much to their credit, the Gallos have persuaded growers to upgrade their crops, notably by planting such high-quality grapes as Chenin Blanc or Barbera instead of lower varieties like Mission or Thompson Seedless.

Unlike nearly every other California winery, Gallo officially discourages visitors. This secretive, all-business tone is set by Ernest Gallo. He often spends his Sundays inspecting the vineyards and his vacations checking up on retailers. In a Texas town four years ago, a policeman became suspicious of a stern-faced man who was intently surveying a liquor shop after closing hours; anticipating a burglary attempt, the cop stopped the man for questioning. The suspect protested: “But I’m Ernest Gallo.” Replied the cop: “Yeah, and I’m Lyndon B. Johnson.” In business transactions, Gallo’s way is the only way—or no deal. Southdown Corp. Chairman D. Doyle Mize recently negotiated with Gallo about selling him some grapes. A few days later, Mize recalls, Gallo walked into his office and said, “Here’s the contract. Here’s a pen. Don’t waste my time with any lawyers.”

Both Gallos live quietly in houses on the Modesto vineyard. They arrive at the office at precisely 8 a.m., spend the day in frequent communication with each other, and knock off at 7 p.m. When the Gallos entertain, usually for visiting company executives, they serve only their own wines—a white, a pink, a red and a champagne. Says Ernest: “Only when Mrs. Gallo and I are at home alone, which is not very frequently, will I drink my competitors’ wines in order to follow their progress.” Ernest and Julio are both at the age when many men retire, but they have given little indication of designating successors. Each has two grown children; so far none has emerged as an heir apparent.

Despite the modern vintners’ technical progress, wine is still basically the product of the grape and the airborne yeast that turns the C6H12O6 sugar present in grape juice into C2H5OH alcohol. “Nature on her own can make wine,” says Brother Timothy, cellar master of the Christian Brothers wineries. “Just crush some grapes into a glass and eventually wine is made. Of course, we do a little constructive babysitting.” Most wine makers do little more than take some grapes, crush them, add extra yeast, put them in big vats or tanks for a couple of months and—pow!—wine. Of course, there are some variations on that general theme. The amount and quality of yeast can be manipulated to produce different degrees of fermentation. The grape skins can be taken out part way through the process to reduce a wine’s eventual tannin content. After a wine is fermented, it requires patient aging in a wood or stainless-steel cask, and sometimes in the bottle, before it is drinkable. Premium wine makers often add egg whites to help remove sediment. Gallo wines are left more or less unattended during aging, except to remove sediment by filtration. Only after they are completely aged does Julio Gallo step into one of his tasting rooms for the final taste test.

California wine men finally have products that compete cork to cork in quality with prestigious imports. Inexpensive California jug wines are of much higher quality than the vin ordinaire consumed prodigiously by working-class Frenchmen. The great Château wines of France outshine the New World’s best, but the grape gap is closing. Says Vintner Robert Mondavi: “Compared with the best of Europe, we have a long way to go yet to get the maximum out of the grape. But we are learning fast.”

California wines are getting better every year as new types of grapes are planted. In the past decade, California oenologists have developed a thousand varieties, learned how to rid the old ones of deadly viruses, and increased the per-acre yields on many kinds of grapes. California wines tend to be milder, softer, fruitier and sometimes less watery than their European counterparts. There are two basic reasons for the difference. First, California’s warmer, more uniform climate produces wines with a lower acidity than their European counterparts. Because grape sugar content tends to be higher, California wines often have a higher alcohol content (up to 14%, compared with French wines’ usual 12%). The second reason is that man interferes with nature more in California than in France. “There is no ceiling to quality improvement,” argues Julio Gallo. “No wine in the world is so good that it couldn’t be better.” California grapes are usually fermented in refrigerated vats—a chill that yields the lighter, fruitier wine. California wines are filtered more than French wines to remove sediment.

French experts often politely describe U.S. wine as pleasant but not great. Baron Philippe de Rothschild, millionaire oenophile and vintner (Château Mouton Rothschild), says: “To develop character, great wines must go through hardship. Snow. Drought. Storms. There must be suffering to produce it. In California everything is much too perfect. The soil is too rich. The weather is too good. The wine all comes out industrially uniform, like Coca-Cola.” In 1966, the Paris chain store Prisunic put three lines of California wines on sale. Some 60,000 bottles gathered dust and derision for several months before being shipped to the provinces, where they bombed again. Only one French retailer, Paris’ prestigious Fauchon, now stocks them.

But France is taking no chances that the fast-rising California vintners will post a new American challenge. France imposes the Common Market’s 25¢-a-bottle tax on U.S. wine, and bars entry of California wines with French place names, like Burgundy or Pinot de la Loire. By contrast, U.S. tariffs on wine imports are only about 7½¢ a bottle, and nontariff restrictions are practically nonexistent. California lobbyists are trying to persuade the Treasury to require that imports be sold in standard American-sized wine bottles of 4/5 quart (25.6 oz.). European wines usually come in 24-oz. containers or, as Ernest Gallo calls them, “cheater bottles.” The French complain that to adopt different bottles for the U.S. than for the rest of the world would raise costs and make French wine less competitive in the U.S. The label and bottle disputes are likely to be the focus of an international debate in next year’s meeting of the General Agreement on Tariffs and Trade.

Grape Rush. The future of California wine is clouded by much more than international disputes. The far greater problem: success breeds grapes. Twice as many new wine-grape vines are being planted in California this year as last. Because of overplanting, the wine supply may catch up with demand within the next three or four years. “By 1974 the amount of Cabernet Sauvignon alone will triple,” predicts Jack Welch, vice president of Christian Brothers. “Just where is all that Cabernet going to find a home?”

One possible consequence is that grape prices—and wine prices—may eventually fall to the levels of the mid-1960s. If so, some growers, winery owners and over-bullish investors will be clobbered, but consumers will benefit. Retail prices of the best California wines could be brought within the reach of more Americans. The French might even have to drop their prices in response; right now, French prices are rising so fast (Medocs and St. Emilions have tripled in the past two years) that many Americans are turning to California wines out of economic necessity. And surplus premium grapes could be bought up cheaply and blended into lower-priced wines, making America’s vin ordinaire rather extraordinaire.

Whatever the outcome, it is almost inevitable that more Americans will become wine drinkers. Some converts to the grape will come seeking a change from the burning toughness of gin and bourbon. Others will move up from pop wine to drier, more complex wines. Americans seem to be shedding the nation’s raw, hard-drinking past for a new, more subtle way of indulging themselves. As Thomas Jefferson said: “No nation is drunken where wine is cheap; and none sober where the dearness of wine substitutes ardent spirits as the common beverage.”

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