What’s Changing in the Wine Business? Gallo’s Innovation Director Explains

By Scott Kirsner |  September 13, 2021

If you’ve sipped a High Noon vodka-and-soda on the beach this summer, or enjoyed an Apothic Red with a grilled steak, you’ve connected with one of 150 brands owned by E. & J. Gallo Winery, the largest family-owned winery in the United States. The Modesto, Calif.-based company produces everything from sangria in a glass jug to lemon drop shops to André sparkling wine.

Michele Sandoval, Director of Innovation at California-based E. & J. Gallo Winery, with a bottle of Orin Swift Cellars Papillon Red Blend.

Director of Innovation Michele Sandoval says the past 18 months have been a busy and challenging period for the wine and spirits industry, with consumers spending less time at social gatherings and in restaurants, more time at home, and unable to visit some of Gallo’s vineyards for in-person tastings of its higher-end brands. In January, Gallo closed on the acquisition of 32 wine brands from a competitor, Constellation Brands, paying more than $800 million. Those brands included Clos du Bois, Ravenswood, and Manischewitz.

We posed five questions to Sandoval in advance of this month’s Front End of Innovation conference in Boston, where she is among the speakers.

What are some of the dynamics you’ve been seeing — and responding to — during the pandemic?

More and more people have been introduced to the wine category. But the traditional ways in which people had historically tried new wines was through friends and family, and that was limited during the pandemic. Instead, folks were going to the store…and what they’re trying are things that are very familiar to them. We’ve also seen a big increase in what I’d call moderately-priced wines – wines that have some familiarity to them. As an example, Barefoot, [which we own and which is] the largest wine brand in the US, has a whole line of Fruitscato wines. That’s fruit-flavored Moscato. For a consumer who is new to the wine category, if they see something watermelon- or strawberry-flavored, and it’s selling for $4.99, it’s very approachable.

Fruitscato wines from the Barefoot Wines brand.

During the pandemic, Gallo closed probably one of the biggest acquisitions within the wine industry, of about 30 different brands from Constellation, our biggest competitor. The majority of the brands we acquired were in that under-$10 price point. If you think about the economy, and where we were last year, with so many people out of work, [consumers were] looking for ways to stretch their limited dollar, when their income flow may have been less-than-consistent.

How do you view your role at Gallo? How do you fit into the organization?

I lead the R&D innovation organization. I feel like I’m a venture capitalist. I’m looking to see where strategically we should be developing future capabilities and technologies that will inform innovation in 2026. What do we need to prepare to be ready to meet the needs of a consumer in the wine or spirits industry in five years. Then, we have a whole group looking at consumer opportunities, gaps within the current wine category, and how do we addresss some of those unmet consumer needs. We create new brands if our existing brand equities don’t fit those. And we have a group dedicated to line extensions.

I don’t oversee [all of that activity.] I think of myself as more like a portfolio manager of the innovation that’s happening enterprise-wide across the organization. Ideas are being driven in a myriad of ways: some are bottoms up, brought in from the brand team, and some are ideas that come out of consumer research.

What’s an example you can share of an opportunity you’re exploring, which isn’t a line extension?

We’re starting to look at more unique ways to deliver wines to consumers through means and vehicles that weren’t available pre-pandemic. In some states and counties, beer has always had growlers, and refillables. But with wine, those typically aren’t allowed. We’re starting to see the opportunity where you could [offer] a wine growler, or a wine keg, and be able to do a refillable option. Prior to Covid, it was illegal to do that. So we’ve continued to look at that as an opportunity or an option.

One of our brands, Louis M. Martini, started doing virtual tastings. If you spent $250 or $300 on their wine, as part of your purchase, you’d sit down with the winemaker on a Zoom call, set up for however many people you wanted to include, and have a half-hour private wine tasting. 

[Another example is that with the pandemic,] all the tasting rooms closed, and that was one of the major ways that you can truly reach a consumer – especially if you’re on the higher-end. One of our brands, Louis M. Martini, started doing virtual tastings. If you spent $250 or $300 on their wine, as part of your purchase, you’d sit down with the winemaker on a Zoom call, set up for however many people you wanted to include, and have a half-hour private wine tasting. You had to create those personal touchpoints where none existed.

From an innovation standpoint, you always have to be ready to react really quickly.

This past year or two has been huge for alcoholic spritzers and seltzers. How did Gallo get involved there?

We’d identified this consumer insight that wine “isn’t refreshing.” How could we [change that perception]? Our answer was by creating a wine spritzer. So we’d been doing testing on single-serve wine sprtizers, probably prior to the evolution or growth of the seltzer category. When that took off, we were well- poised to a Barefoot Wines line of spritzers and seltzers.

We’d also been doing development on a new brand, High Noon – test marketing that as a flavored vodka, to compete against Deep Eddy out of Austin. We quickly pivoted that brand, because [we felt it] could be a great way to get into the hard seltzer category. So we created High Noon Vodka & Soda, with flavors. It’s probably one of the top-selling seltzers in the category, and it has only been around since 2018. It got in at the front end of the seltzer trend.

From an innovation standpoint, you always have to be ready to react really quickly.

For a lot of people, working in the wine industry on innovation would be a dream job. What do you enjoy about it?

What I enjoy is probably the difficulty of it – the lack of stickiness to the brand. There are thousands of wine and spirits brands, and consumers tend to be very product-focused in this category, not very brand-centric. They like to try a bunch of new things, and one way is through new brands, not necessarily new products from brands they know.

If you ask somebody who is a wine drinker, they say, ‘I drink Chardonnay,’ and they’ll drink from a myrid of brands that sell Chardonnay. Chardonnay is the brand, not the company that makes it. And people don’t remember what they drank.

I lived and breathed Kraft Foods for almost a decade [earlier in my career], and when I think about the power that brands have, the meaning it has to an individual — we don’t have that in the wine category. It’s lacking. So the idea that we could create that, and nurture that in a category that really seems to lack that is something that really drives me.