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J Vineyards acquisition brings Gallo another premium brand

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Global wine giant E&J Gallo Winery, which has North Coast vineyards, brands and production facilities, on Tuesday said it has reached an agreement to purchase J Vineyards & Winery, a Russian River Valley producer best-known for its sparkling wines.

Terms of the deal were not disclosed. The sale was scheduled to close late Friday, March 27.

“The brand’s contemporary elegance has a unique position in the marketplace,” said Roger Nabedian, senior vice president and general manager of Gallo’s Premium Wine Division, in a statement. “J Vineyards & Winery is well-known for their award-winning sparkling wines, and we look forward to carrying on the winery’s reputation of making elegant, luxurious wines.”

Founded in 1986 by Judy Jordan, J also makes pinot noir and pinot gris table wines.

“Over the last 30 years, I have created and built J Vineyards & Winery from a small sparkling wine house to an iconic luxury brand producing not only sparkling wines but also award-winning pinot noir and pinot gris,” Jordan said in a statement.

She said Gallo is a “perfect fit to take this beautiful company to even greater heights.”

“E&J Gallo is also privately owned and shares similar core values as both companies are dedicated to a balance of quality, community, and financial sustainability,” Jordan said. “I look forward to my new chapter of building a mentorship platform as I honor and salute the outstanding new stewards of J Vineyards & Winery.”

The acquisition included the winery just south of Healdsburg and more than 300 acres spread over nine vineyards within the Sonoma Coast and Russian River Valley appellations, expanding Gallo’s presence and properties in California’s North Coast Wine Country. J produces 80,000–90,000 cases of wine annually, while Gallo produces roughly 80 million worldwide.

The Modesto-based family company already owns nine wineries in California and Washington wine regions. Those include the Gallo Family Vineyards brand based out of a large facility northwest of Healdsburg and Napa Valley wineries Louis Martini and William Hill.

Last year, Gallo acquired the Ledgewood Creek and Winterhawk wineries and vineyards in Solano County’s Suisun Valley appellation, but Gallo shut down both wineries and their tasting rooms to focus on the vineyards as sources for existing brands.

“The M&A market is red-hot right now, and that has been the case for two-plus years,” said Mario Zepponi, whose Santa Rosa-based Zepponi & Company also brokers a number of West Coast winery and vineyard deals. Demeter Group, a San Francisco-based investment bank for beverage alcohol companies, was J’s financial adviser in the transaction. “And I don’t see that abating anytime soon.”

This activity is connected to sales activity for higher-end wines, according to Robert Nicholson, whose Healdsburg based International Wine Associates brokers wine industry mergers-and-acquisitions deals in California, Washington and Oregon. Zepponi, Nicholson and other deal brokers have mentioned wine sales and a dwindling supply of choice vineyards in the North Coast as what’s behind the sales velocity for what properties do become available in the North Coast and increasing interest in up-and-coming regions in Washington and Oregon.

Gallo, Jackson Family Wines, Foley Family Wines and Vintage Wine Estates have been chief players among the handful of active buyers of North Coast wine properties in recent years, he said.

The value of the J acquisition likely sits apart from the string of North Coast wine-related deals recently, Nicholson said.

“There has been a lot of asset transactions recently, but this is branded transaction,” he said.

Though some sales continue to be because of money troubles, the local wine business is healthy overall, Zepponi said. Examples of recent transactions involving financial distress are the auction of Winterhawk and the sale of Tin Cross Vineyards near the Sonoma–Mendocino border.

“Transactions, going forward, will be more about interest in growing the brand and succession than distress and financial hardship,” he said.

Gallo’s move to buy J makes sense, based on the “premiumization” trajectory of Gallo in the past decade, particularly in the past few years, to move its portfolio into the $15-plus-per-bottle range, Zepponi said. From its tradition of building brands in house, the company has grown the top end of its portfolio by acquisition, including Louis Martini and William Hill in Napa Valley.

The J play also could launch Gallo into the premium pinot gris, Zepponi said.

“The pinot gris category is really attractive to them,” he said.

Though Gallo has considerable Sonoma County vineyard acreage, the company may work with J’s grape sourcing to move its brands upscale.

“I don’t mean to suggest that they could switch grape sourcing for $10 to $15 wine to $20 to $30 wine,” Zepponi said. “You can gain efficiencies if you have vineyard infrastructure, and you can use some of that to source fruit for higher-price-point products.”

Jordan is the daughter of Denver energy entrepreneur Tom Jordan and sister of John Jordan, an attorney who has been running the father’s winery near Healdsburg for the past several years. A geologist by training, she worked in that field in Denver, including a stint at the family company before starting what became J.

A decade after starting launching the wine business, she purchased the Piper Sonoma sparkling wine house and opened the tasting room in 1999.

This story was originally published online March 24.

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