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E&J Gallo Winery tips ever closer to the beer category with a product named Kypler's, aimed squarely at Coors Brewing Co.'s Zima ClearMalt.

The clear product, packaged in a green-tinged, Michelob-type bottle, begins testing this month in Buffalo, N.Y.; Grand Rapids, Mich.; Little Rock, Ark.; and Phoenix, retailers and wholesalers told Advertising Age.

Like Zima, Kypler's will be sold in six-packs at a premium price. Retailers who have seen the sale presentation say Kypler's (pronounced KIP-lures) is somewhat sweeter than Zima but tarter than Gallo's Bartles & Jaymes wine cooler. The bottle has a gold foil wrap around the top that serves as the label.

Gallo has promised retailers a market effort that will tower over recent support for Bartles & Jaymes. TV, radio and outdoor ads will be tagged "Think you've seen everything?"

Dailey & Associates, Los Angeles, handles most Gallo assignments, though several shops have done recent Bartles & Jaymes projects.

Hal Riney & Partners, San Francisco, which developed the Frank & Ed campaign for Bartles & Jaymes, last year was rehired by Gallo to look at new advertising for the cooler. But Gallo apparently decided to introduce Kypler's instead.

Gallo spent $16 million on Bartles & Jaymes in 1990, but spending has steadily declined since, falling to less than $1 million last year, according to Competitive Media Reporting.

Gallo wouldn't discuss Kypler's. The marketer doesn't advertise itself as a maker of beer products. But like other cooler marketers, Gallo's move into malt-based products has been a result of tax regulations and state laws that make such products easier and cheaper to sell. In some states, malt products can be sold at supermarkets, unlike wine.

The Bartles & Jaymes line still includes some wine coolers, but several malt-based products were added early this year, in margarita, pina colada, strawberry daiquiri and planters punch flavors.

Gallo's decision to test Kypler's may result more from a desire to look for growth categories than concern about Bartles & Jaymes. The No. 1 wine cooler line last year saw volume rise 4.8% to 15.2 million 9-liter cases, beverage trade publication Impact reported.

But out of nowhere, Zima jumped to No. 3 in the category Impact has dubbed "low-alcohol refreshers."

Coors officials said last week they continue to be very happy with Zima; they contended that the product, first tested in September 1992, has carved out a new and highly profitable niche market with growth potential for the future.

As a bonus, because Zima is marketed as an alternative to beers, Coors has been able to maintain profit margins while last year's price wars hurt regular beers.

According to Information Resources Inc.'s supermarket numbers for the 52 weeks ended Feb. 27, Zima achieved a 1.3% share of the beer and ale category in the original test market Nashville, Tenn.; 1.7% in the original test market Syracuse, N.Y.; and 1.4% in Los Angeles, where it has been available for a year.

And both Miller Brewing Co. and Stroh Brewery Co. are said to be looking at their own malt-based coolers.

Coors rolled out Zima nationally in March but is tinkering with the way the product is marketed, including a reduction in price in some markets. New advertising that started last month diminishes the role of the "zpokesman."

VP-New Products Bob Joanis said Coors believes it can counter problems Zima has experienced in California and Florida, where the product has been available for about a year. Zima in most markets is being priced about the same as premium beer but hasn't been discounted the way beer often is.

Coors is convinced enough of Zima's success to be planning to spend more than $50 million this year on the product, nearly as much as it spends on Coors Light, its No. 1 brand. Foote, Cone & Belding, San Francisco, handles Zima.

Mr. Joanis said he welcomes the competition from Gallo.

"It does nothing but help build the category, making it seem like less of a fad," he said. "They will be out there promoting the hell out of [Kypler's]; it won't disrupt Zima."

Kypler's appears to be only one of several major initiatives for Gallo this year. Besides having introduced the cocktail-flavor Bartles & Jaymes products in January, Gallo is set for a major launch of a superpremium-price wine line in August.

The new Gallo Premium Vineyards line aims to compete against wines from Kendall-Jackson Winery and other superpremium brands.

"Gallo is a very aggressive company. It's always looking for opportunities," said Frank Walters, Impact's director of research. "I don't think they are worried. But I think they will keep on testing new ideas and concepts."

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