The Creators of Thunderbird
Brian Trumbore
President/Editor, StocksandNews.com

In the past few weeks, two of the three Gallo brothers of winery fame passed away; Ernest, 97, and kid brother Joseph, 87. The third, Julio, died in a car crash back in 1993. Oh, what an interesting story this family was.

The three boys were the sons of Joseph and Susie Gallo who lived in the Modesto, Calif., area. The elder Joseph, along with his brother Michael, purchased wine from smaller wineries and then resold it in bars in Oakland and San Francisco, operating as the Gallo Wine Company by 1906. Susie's family, the Biancos, were already successful winemakers.

In the 1920s, Joseph and Susie bought a farm near Modesto and like everyone else in the area began growing grapes. As the New York Times' Frank Prial writes:

"Their fruit was loaded on railcars and shipped east (private winemaking was still allowed during Prohibition). The railheads in Eastern cities, from Boston to the Carolinas, from Pittsburgh to Cleveland and Buffalo, were dominated by thugs who took a cut of whatever was sold. By the time he was 17, Ernest was traveling with the grapes to ensure the family received top dollar."

But the Depression slammed the Gallos and the debt piled up. On June 21, 1933, Joseph Gallo shot and killed his wife and then himself, leaving Ernest, now 24, Julio, 23, and Joseph, 13.

Two months later, Ernest and Julio started their own winery with $5,900; $5,000 of which was a loan from Ernest's mother-in-law. But while they had a rudimentary knowledge of the business, they didn't know how to grow grapes so they studied pre- Prohibition pamphlets on the topic that they found in the Modesto Public Library. Soon the two were making ordinary wine for 50 cents per gallon, half the market price at that time. In just their first year, working 18 hours a day, they made 177,847 gallons and $30,000 in profits.

The Gallos focused on making a quality product at a good price, starting with everyday wines such as Hearty Burgundy and Carlo Rossi. They then evolved into specialty and fortified beverages like Night Train Express, Thunderbird and Ripple.

Ah yes, Thunderbird. For years Gallo wines were known for their screw-caps and marketed to the bottom end of the American market. But what they began to notice was that folks in the minority communities were dumping concentrated lemon juice in a bottle of Gallo's wine port. So the Gallos, who long had the goal of becoming the "Campbell's Soup Company of the wine industry," decided to fortify and sweeten an existing product and came up with the name "Thunderbird." Launched in the mid- 1950s, the Gallos blitzed the country with one of the more famous ad campaigns.

"What's the word?" "Thunderbird!" "What's the price?" "A dollar twice."

Thunderbird had an alcohol content of 21% and it became the brand for America's slums, as it turned out; forging an unsavory image in the consumer psyche ever since.

The Gallos sold other downmarket wines including Spanada, Boone's Farm and Bartles & Jaymes. And the brothers, particularly Ernest, the brains behind the operation (Julio was the wine expert), were aggressive, with early salesmen for the company being taught the "three Rs": rigorousness, relentlessness and ruthlessness. It was said, "If you turn your back on a Gallo salesman, he'll turn the place into a Gallo outlet," one liquor store manager told Time magazine in 1986.

But while the lower quality brands were big sellers, the Gallos did branch out into more upscale fare such as Turning Leaf and Gossamer Bay and even into the $30 market.

Ernest wasn't afraid of a fight, such as his battle with Cesar Chavez's United Farm Workers who launched a national boycott that lasted around five years in the 1970s. The UFW was upset they lost out to the Teamsters and as Ernest said, "We believe we have turned the other cheek too long," even as his sales temporarily declined 30%. Chavez called off the boycott in 1978.

Ernest Gallo was very tough on his own employees as well. In 1986, he learned two longtime executives were secretly planning on buying a winery of their own. Gallo fired them on the spot.

Ernest and his brother put California on the map for wine growing, and then the world through their aggressive exporting. By most estimates, today E. & J. Gallo Winery is one of the largest privately owned businesses in the country, producing anywhere from 70-80 million cases a year, or in excess of 2.5 million bottles per day. Ernest's own net worth was last judged by Forbes to be in the neighborhood of $1.3 billion. The company employs 4,600 with Ernest's son, Joseph, CEO. It's now up to him to protect his father's wish that the company continue to remain private.

The Gallo brothers were very secretive but one thing they did was foster some rather key political relationships with the likes of Senators Alan Cranston and Bob Dole. Thanks to pressure from Ernest and Julio, wealthy families today can spread their estate-tax payments over a decade (dubbed the "Gallo amendment").

But what of brother Joseph, who died in February, you might be asking? It was said that Ernest and Julio were always jealous of little bro Joseph because their father never forced him to do the hard labor the older brothers had to.

When the father killed their mother and himself in '33, Joseph was just 13 but he did help his brothers establish the winery during high school and while attending Modesto Junior College (it's not known for sure whether Ernest and Julio even graduated from high school, at least from everything I read). Then when World War II hit, Joseph served in the Philippines and Korea. [One of his three sons would later die while serving in Vietnam.]

Upon his return Joseph became ranch manager for Ernest and Julio, but began acquiring raw land on his own for some grape- growing and a dairy business. Joseph ended up splitting from his brothers totally by 1967 and developed his own dairy empire with some 37,000 cows by 1995.

But it was in 1982, after launching Joseph Gallo Cheese, that his brothers went ballistic and sued him, claiming trademark infringement and complaining that such an inferior product employing the family name was damaging the winery's reputation.

"I have only got one name," Joseph said at the time. "I don't know how I'm supposed to look for another one."

A federal judge ruled against him, saying it was confusing customers who'd connect the cheese to the wine operation. [The cheese today is sold under the Joseph Farms label and is the largest-selling retail brand in California.] Later, Joseph sued for one-third of Ernest and Julio's business, arguing the two had used their parents' estate to launch E. & J. Gallo Winery and he was thus entitled to a slice. But a judge dismissed this one.

Doesn't the above give you a craving for some Joseph Farms cheese, washed down by a quart of Thunderbird? I thought it did.

Sources:

Julia Flynn Siler / Wall Street Journal
Mark Bridge / London Times
Frank Prial / New York Times
Valerie J. Nelson / Los Angeles Times
Claudia Luther and Jerry Hirsch / Los Angeles Times

Wall Street History returns next week.

Brian Trumbore