Issue link: http://winesandvines.uberflip.com/i/987926
June 2018 WINES&VINES 59 WINE BUSINESS INTERVIEW Q Is Gallo observing the market and giving people what they want or leading the market? Nabedian: I think we are early adopters, and we are good at am- plifying the market. We weren't the first with Pinot Grigio but it was starting to become popular, and we created a brand called Ecco Domani in 1996 that I think helped define the Pinot Grigio cat- egory in the United States. An- other example is the red-blend phenomenon that occurred a little less than 10 years ago. We weren't the first to launch a California red blend and market it uniquely, but A p o t h i c h e l p e d d e f i n e t h e category. Q What recent acquisitions are you especially pleased with? Nabedian: In acquisitions we try to be focused on wherever we think our biggest opportunity is, whether it's a different appella- tion or area, or focused on a dif- ferent varietal. As an example, we sought to acquire William Hill because we saw it as a credible vehicle to sell Chardonnay. It was a bigger acquisition for us than some of the others we had done prior, so just acquiring it and hav- ing success and demonstrating to ourselves that we could do this well began to shift the company's paradigm on how we think about acquisitions. I think in five years I'm going to say the same thing about two other acquisitions. One is Orin Swift, a very different acquisition for us, not only because of the personality of the brand and how it fits into the marketplace but our ability to work close with its founder and leader, Dave Phinney. Part of the acquisition is being able to develop a partnership with him, and that has changed the way we think about evolving in the wine business. And that led us to Stagecoach Vineyard in Napa Valley. Look, we've been investing in vineyards for a long time. The family has been very aggressive about trying to find the best vineyard land pos- sible and investing in it for the long term. I don't want to suggest Stagecoach is unique in that way but its size, scale, and the price point in which the wines that are grown there play, is a very differ- ent step forward for us. Q What will happen with Stagecoach? Nabedian: We have 90 custom- ers, and we value them. We re- spect their commitment to the wines that they make from that vineyard. My expectation is that we will continue to do business with many of them. Obviously, we see it also as a great source for us to build our existing businesses like Louis M. Martini, like Orin Swift, even potentially William Hill. We will innovate from that vineyard. As a result, we expect to sell a fair amount of [Gallo- brand] wine made from the grapes grown on that vineyard, but I am sure we will continue to sell grapes to customers from there. Monte Rosso is an exam- ple. The Gallo family bought it in 2002, and so here we are 15 vin- tages later and we still sell grapes off of that vineyard to a handful of customers. My sense is that 20 years from now we will still do b u s i n e s s w i t h p e o p l e f r o m Stagecoach. Q How do you see the wine market in general? Is it on a strong foundation so that it could still grow through the next recession? Nabedian: For the first time in my memory global demand will be higher than global production in 2017. It will be interesting to see what the effect will be on a global basis of a slowing wine market and a short 2017 vintage. Prices are probably going to elevate and as those wines come to market we'll see how the market is able to absorb that. The wine market continues to grow, particularly above $10, and I think there's reason to feel con- fident that growth will continue. I think the greater question is at what rate will it grow. Will it grow by volume at 1% or by volume at 3 or 4%? And what is the value to volume ratio? The U.S. is still one of the fast- est growing wine markets in the world even though it's the largest wine market in the world now.