(ChicagoBusiness) - Wine importer Terlato Wines is losing its flagship brand, Santa Margherita, to the new U.S. marketing arm owned by the winemaker, Santa Margherita USA, an executive confirmed this morning.

Vincent Chiaramonte, SM USA's Miami-based chief executive, said his firm will begin handling the brand in the U.S. effective Jan. 1.

The move marks a major loss for Lake Bluff-based Terlato, which built its wine business around Santa Margherita, the Italian pinot grigio it began importing 36 years ago.

Bill Terlato, Terlato Wines' chief executive, said in a morning note to employees that its contract to import Santa Margherita ends Dec. 31.

"We have been in negotiations for several years to extend our successful 36-year relationship with Santa Margherita," he wrote. "We have been flexible and accommodating and presented a series of fair and generous offers. The proposal we received from their group to extend our relationship is beyond the scope of an acceptable arrangement and not consistent with our family's long-term vision."

Terlato established the pinot grigio category stateside and built the brand into a powerhouse in the luxury-priced segment. The company said 2015 year-to-date sales are tracking ahead of 2014, a record year.

About 650,000 cases of the wine were sold in the U.S. last year, more than triple the amount 20 years ago, said Liz Barrett, a Terlato spokeswoman. Santa Margherita, which retails for between $27 and $28, is by far the best-selling bottle priced over $25—more than 100,000 cases ahead of any competitor in the U.S. market, according to Shanken News Daily, a trade publication that first reported the news.

In a statement released this morning, Gaetano Marzotto, Santa Margherita Wine Group's chairman, thanked Terlato Wines Chairman Anthony Terlato, calling him “a driving force in the development of Italian wine in the U.S.”

The Terlato family, he said, recognized pinot grigio's “potential as a stand-alone category, and 36 years of our successful partnership positioned Santa Margherita as the undisputed pioneer and market leader.”

Barrett said Terlato has been planning for the possibility of losing Santa Margherita for four years, building new partnerships with producers that account for 650,000 additional cases of wine annually. She said Terlato has a 20 percent share in the U.S. of all wines that retail for more than $20 a bottle.

In anticipation of losing the brand, Terlato cut about 9 percent of its workers in April but doesn’t expect any more job losses, Barrett said. The company now employs 101 in Lake Bluff and Bannockburn, and other 124 at its wineries in California.

"In a little more than a year, the Santa Margherita business will have been completely replaced in our portfolio," she said.

Terlato's remaining labels include more than 70 brands, including recent additions Seven Daughters, Federalist, Grace Lane, Greystone, Lapostolle and Piper-Heidsieck.

When Santa Margherita launched its U.S. importer with a portfolio of estate brands including labels by Torresella, Kettmeir, Lamole di Lamole, Sassoregale, Feudo Zirtari, and Fattoria Sardi, rumors swirled that it would eventually move its top-selling wine to its in-house shop.

But executives in Italy repeatedly batted down the rumors. Massimo Tonini, the Italian-based export director at Gruppo Vinicolo, Santa Margherita's parent company, told Crain's in May that "it's business as usual with Terlato. Until different announcements are made, that's all I can say."