Discount Dynasty

After scoring big with "Two Buck Chuck," renegade vintner Fred Franzia once again has Napa Valley's wine burghers in an uproar

Franzia is offering his perspective on the wine industry's "back door," a point of entry he has come to master while transforming Bronco from industry featherweight to major force. "See this," he says, holding up some slips of paper. "Here's a Napa cabernet '04; 25,000 cases. Here's some chardonnay from Sonoma; 100,000 cases." Each, he says, represents surplus stock that well-known wineries -- sometimes even including ones whose owners are among his critics -- are discreetly trying to liquidate to large bulk vintners. "We get this stuff every day. So when the price is right and someone is ready to sell out the back door, we're there."

It isn't as if the wine industry's most outspoken black sheep needs to beg.

Franzia, his brother, and a cousin co-own Bronco and control at least 35,000 acres of vineyards under cultivation in the Central Valley, more than any other entity, including the E&J Gallo Wine Co., the industry behemoth co-founded by Franzia's famous uncle, Ernest, and his brother, the late Julio Gallo. Bronco also controls its own distribution company, Classic Wines of California, which gives Franzia and his relatives a leg up on the competition when it comes to getting their products onto store shelves. Theirs is an empire that stretches from near Sacramento to the edge of the Tehachapi Mountains an hour north of Los Angeles, where Bronco is busy planting at least one new "section" -- which is to say, 640 acres, or a square mile -- each year.

The pace has scarcely slackened since 2002, when Franzia teamed up with Trader Joe's to roll out the Charles Shaw line. After years of industry overplanting, and with other producers sacrificing grapes and vineyards at fire-sale prices, Franzia -- buoyed by the near cultlike acceptance of "Two Buck Chuck" -- began buying grapes and planting new vineyards like there was no tomorrow. Famously sold for $1.99 in California (and only marginally higher in the 18 other states where the specialty grocer has stores), Charles Shaw became the fastest-growing wine brand in history and remains something of a consumer icon.

The phenomenal success of the Shaw line -- whose label Franzia acquired from a bankrupt vintner in a Napa Valley court proceeding a dozen years ago -- not only put Bronco on the map; it helped introduce wine to a larger clientele, industry experts say. (Recent surveys show that, for the first time, Americans are consuming as much wine as beer.) Not coincidentally, it has also helped to ease the glut of California grapes on the wholesale market. "That's a factor that I think sometimes goes underappreciated," says John De Luca, the longtime former president and CEO of the Wine Institute, an industry advocacy group based in San Francisco, who has tried to mediate Franzia's spats with the Napa growers.

But Franzia's bold move with "Two Buck Chuck" was also a major irritant to premium vintners such as those of the Napa Valley. As more people "traded down" to buy Charles Shaw and its so-called "extreme value" imitators, more expensive wines lost sales.

Yet, when it comes to Franzia, "Two Buck Chuck" is hardly all that Napa Valley winemakers complain about.

For years, they've battled him in the courts over what they see as his unfair attempt to piggyback on the vaunted Napa Valley appellation -- where vineyard land typically fetches $100,000 an acre and where Franzia grows no grapes of his own. Federal regulations adopted in 1986 prohibit brands from using a specific geographic location unless 85 percent of the grapes in the wine are from that appellation, or 75 percent in the case of a county-specific brand name. But more than 100 labels were grandfathered into (that is, excepted from) the law, including three -- Napa Ridge, Napa Creek, and Rutherford Vintners -- scooped up by Franzia.

In 2000, Napa's influential vintners persuaded the California Legislature to enact a law specifically with Franzia in mind, prohibiting Bronco from marketing those labels using non-Napa grapes. Bronco challenged the law in court, preventing it from taking effect. The company has lost several rounds on appeal and this spring the U.S. Supreme Court refused to hear the case. It could wind up before the high court again, however, pending the outcome of a new set of arguments Bronco has before a state appeals court.

If he loses, Franzia will have to either change the names of the three brands or use the requisite amount of Napa grapes to produce them. "We believe his days of using the Napa name to deceive consumers are numbered," says Tom Shelton, the Joseph Phelps Vineyards executive whose dealings with Franzia have sometimes gotten personal. In 1996, Franzia infuriated the Phelps winery when he used a picture of one of Phelps' Napa vineyards in ads for his own Rutherford Vintners. As it turns out, the photo, which Franzia ceased using after a nasty exchange with Shelton, had been shot off the back of the Phelps winery's terrace.

Franzia had acquired the Rutherford Vintners label in 1994, just a year after the coveted Rutherford AVA -- or American Viticultural Area -- was established by the Bureau of Alcohol, Tobacco, and Firearms, giving vintners near the tiny Napa Valley town the prestige boost they had long been after.

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