What’s in Store for Gallo Empire? : Wine: Sudden death of one brother could result in a management struggle, but E&J; followers doubt it.

The sudden death of 82-year-old Julio Gallo in an auto accident will not radically change the landscape at the world’s largest winery, which will continue to be dominated by his iron-fisted older brother, Ernest, according to followers of the E&J; Gallo Winery.

But if history is any guide, the passing of Julio Gallo hastens the prospect of management turmoil as the children of the two brothers--who already reportedly have their differences--prepare to step into the shoes set out for them.

Julio Gallo, who built and ran the vast winemaking arm of the secretive billion-dollar family enterprise, was killed Sunday afternoon when the Jeep he was driving plunged down an embankment on the rugged terrain of his son’s ranch 65 miles east of San Francisco.

Gallo, who wasn’t wearing a seat belt, was thrown from the brand-new vehicle as it rolled over. He died of a broken neck, police said. Routine alcohol and other tests were being conducted, authorities said.

Also injured were Gallo’s wife, Aileen, 80, and granddaughter, Gina Gallo, 26. Both were released Monday from Eden Hospital Medical Center in Castro Valley. A second granddaughter in the Jeep, Aime Gallo, who like her grandmother wore a seat belt, was unhurt.

Shaped largely by the sales and marketing expertise of Ernest Gallo, the remarkable empire built by the two Gallo brothers already sells about one out of every three bottles of wine sold in the United States and is moving aggressively into new upscale markets.

The two men groomed their children--Julio’s son, Robert, 58, and son-in-law James Coleman, and Ernest’s sons, David, 53, and Joe, 52, known as “Joey”--to fill their respective roles. Robert had already assumed a major role overseeing the Gallo vineyards and winemaking operations, and is highly regarded in wine circles.

“Their hope is that the sons would continue as the fathers had established the divisions of authority,” said Ellen Hawkes, author of “Blood and Wine,” a just-released book on the colorful Gallo saga.

John Fisher, managing director of the consumer group at Hambrecht & Quist, an investment firm in San Francisco, said: “Our experience is that the Gallo organization is entirely professional and thoughtful about what they do. I would be surprised if they don’t have a very thoughtful succession plan well worked out.”

The family had little to say Monday about the tragedy or what it portends for the future. In a statement, Ernest Gallo, 83, praised Julio as “a great brother, a great partner and a great human being. His passing is a great personal loss to me and both of our families.”

But the uncertainties that surround transitions of power in any family-run operation seem magnified in the Gallo case because of a tradition of feuds, tragedy and occasional violence woven through the successes.

The parents of the Gallo brothers died in a murder-suicide in 1933, leaving a wine business whose scope was later bitterly argued in the 1980s when a third son, Joseph, tried unsuccessfully to claim one-third interest in E&J; Gallo.

Joseph, who owns a cheese company forbidden to use the “Gallo” name because of Ernest’s opposition, remains estranged from the family and learned of Julio’s death from news accounts, according to Hawkes.

Already, said Hawkes, there are “power conflicts between Robert and Joey,” in which case his father’s death would logically undercut Robert’s future.

Hawkes’ book tells of executives who left the company because their accustomed access to Ernest was cut off by Joey--considered “a pale imitation” of his father, the author said. David, meanwhile, is portrayed as an eccentric.

The company’s credentials for introducing common wines to Americans are well-known. But while some early wines were rejected by elitists or attacked as exploitative, the company developed a respected winemaking infrastructure and has a tradition of smart business decisions.

Determined to shed their cheap-wine image and go where the profit margins are, E&J; Gallo spent much of the 1980s preparing for a big move upscale. Under Julio Gallo’s supervision, the company bought much of the earth-moving equipment used to build the Alaskan oil pipeline and has been literally moving mountains in Sonoma County to achieve optimum conditions for producing Chardonnay, Cabernet Sauvignon and other premium wines.

The company is also notable for its vertical integration, presumably a source of the efficiencies that are believed to have left it with little debt. The company has its own bottle-making plant and its own trucking company and makes such incidentals as its own labels, all proprietary to Gallo.

Meanwhile, the company built its own brewery to produce a grain-based alcohol for use in its well-known Bartles & James “wine coolers.” The grain-alcohol taste is buried in the heavily flavored drinks, and there are both tax and cost advantages to using a brewed product rather than a wine-based product.

Little detail about profit is available, but E&J; Gallo was the “prime beneficiary” of last year’s surge in red wine sales after a report from France on the health benefits of wine, said Jon Fredrikson, president of Gomberg, Fredrikson and Associates, wine industry economists in San Francisco.

Gallo in 1991 became the leader in the $3-to-$7 market for varietal wines, a market that has been dominated by such brands as Blossom Hill, Sutter Home, Glen Ellen and Sebastiani.

And rather than shed the Gallo name with its presumed low-brow baggage, the company has been nudging the hallowed family name upscale by renaming its less-expensive products “Livingston.”

“Gallo is the only one on TV advertising yuppies drinking varietal wines, and they have the strongest distribution system,” Fredrikson said. “They’re making major inroads.”

Times staff writers Dan Berger and Martha Groves also contributed to this report.