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09.18.2012  
 

Gallo Purchase Could Boost Grape Prices

Lake County growers could benefit if company uses Snow's Lake Cabernet for its own labels

 
by Paul Franson
 
 
snows lake vineyard county
 
E. & J. Gallo purchased Snows Lake Vineyard in Lake County, Calif.
Lower Lake, Calif.—Capping an aggressive acquisition streak for the past year, giant E. & J. Gallo Winery has bought Snows Lake Vineyard in the Red Hills AVA in Lake County.

“The purchase of Snows Lake Vineyard continues Gallo’s commitment to having vineyards in the premier winegrowing appellations in California,” said Susan Hensley, spokesperson for E. & J. Gallo Winery.

Hensley declined to disclose the price Gallo paid for the 2,000-acre purchase, though other sources reported it at $42 million, for an average price of $21,000 per acre. Only 800 acres are planted to grapevines, however, for an adjusted value of $52,500 per planted acre, which would be a record in Lake County.

Peter Molnar, co-owner of adjacent Obsidian Ridge Vineyard and chairman of the Lake County Winegrape Commission, says previous top prices in the county have been $30,000 to $35,000 per vineyard acre.

Gallo acquired the property from the Myers family, including George Myers who is married to Kathleen Heitz of Heitz Cellar in Napa County.

The growing area
The area is considered a top spot to grow Cabernet Sauvignon due to its climate and soils. The rolling acreage consists of three-quarters in Cabernet, but also Zinfandel, Syrah, Cabernet Franc, Merlot, Petite Sirah and some Barbera planted by Louis Martini in 1982.

Sources estimate that about 50 more acres have been prepared for planting.

Snows Lake has sold to many labels including Rosenblum, Cakebread, Stag’s Leap Wine Cellars’ Hawkcrest brand and Diageo.

The property had been on the market, reports Molnar, who believes it would be ideal for a hillside Cabernet to sell in the mid-$20s per bottle.

The property is home to about 20% of Lake County’s 3,500 acres of Cabernet, Molnar estimates. (The county has 8,500 total acres of grapes.) “That could take 20% of Lake’s Cabernet off the market, eventually,” he noted, which is good news for other growers like him.

Molnar believes about half of the Snows Lake fruit is contracted, however, and it will take a few years to work through those contracts. He expects Gallo to take the rest of the grapes.

Gallo’s Susan Hensley said, “Gallo looks forward to working with the customers who have been buying grapes from Snows Lake Vineyards.”

David Beckstoffer, whose family owns 1,300 acres of property nearby in the Red Hills, said, “We’re hoping that Gallo will take advantage of their purchase to further promote the Red Hills appellation. That would be good for everyone. I think they have the potential to grow some excellent fruit on that vineyard and make some nice wines. I guess we’ll have to wait to see what they have in mind.”

Beckstoffer’s father, Andy Beckstoffer, has been promoting their property to wineries as a source for Cabernets that sell at $20 and slightly above (significantly lower than most prices in nearby Napa County.)

San Francisco-based Demeter Group investment bank acted as the exclusive financial advisor to Snows Lake Vineyard.

Recent Gallo acquisitions
E. & J. Gallo Winery bought Washington state’s Columbia Winery and Covey Run Winery brands from Ascentia Wine Estates in June. Covey Run sells around 200,000 cases (down from 310,000 in 2005), and Columbia sells around 100,000 cases (down from 180,000 in 2008.)

In August, Gallo bought the 300,000-square-foot Courtside Cellars with the intent to produce up to 2 million cases per year of its own wine there. The 12-year-old winery will support the company’s continued growth in California’s Central Coast region. The purchase includes 34 acres of land and a winery capable of crushing 60,000 tons of grapes.

Gallo bought the 377-acre Force Canyon vineyard in Monterey County early this year for a record $18 million ($47,745 per acre) from Silverado Premium Properties. Gallo already owned vineyards adjacent to Force Canyon.

Gallo bought Edna Valley Vineyard, a winery south of San Luis Obispo in June 2011.

Already a major supplier of brandy, Gallo has also been moving aggressively into selling Tequila including Familia Camarena. It also sells New Amsterdam Gin.

All told, E. & J. Gallo owns about eight wineries and more than 16,000 acres of vineyards in California and imports wines from around the world. It has built or acquired wineries in Napa, Sonoma and Santa Barbara counties as well as its home facilities in the Central Valley.

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