Discount Dynasty

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

In 2002, Fred Franzia began marketing a new line of wines. They looked like vintage wines -- they were sold in 750-milliliter bottles with corks, and sported classy labels -- but the price was just $1.99 a bottle. Sold at Trader Joe's stores under the Charles Shaw brand, the wines were a quick and enormous hit. After a Trader Joe's employee referred to the wines as "Two Buck Chuck" in an Internet chat room, a Franzia promotions consultant shared the moniker with newspaper reporters.

It took hold -- with a vengeance.

"It was like proverbial wildfire," the consultant recalls. It didn't hurt that a couple of months earlier, Wines & Vines, a trade journal, had reported a staff tasting in which Charles Shaw won out over a $67 bottle of chardonnay.

Fred Franzia in His Office: "If anyone should 
be worried it's the Napa vintners, because 
we sure as hell aren't going away."
Gabriela Hasbun
Fred Franzia in His Office: "If anyone should be worried it's the Napa vintners, because we sure as hell aren't going away."
Trucks bring grapes to (and "juice" away 
from) Bronco Wine Co.'s sprawling Ceres 
plant around the clock.
Gabriela Hasbun
Trucks bring grapes to (and "juice" away from) Bronco Wine Co.'s sprawling Ceres plant around the clock.
Grapes arrive for the "crush."
Gabriela Hasbun
Grapes arrive for the "crush."
Bronco's storage tanks hold 80 million 
gallons of juice.
Gabriela Hasbun
Bronco's storage tanks hold 80 million gallons of juice.
Nonstop Fred: Franzia works seven days a 
week. "Work is my pleasure."
Gabriela Hasbun
Nonstop Fred: Franzia works seven days a week. "Work is my pleasure."
The Bronco empire included 35,000 acres 
of grapes under cultivation in the Central 
Valley.
Gabriela Hasbun
The Bronco empire included 35,000 acres of grapes under cultivation in the Central Valley.

Nowadays, Franzia bristles at the use of the word "cheap" in connection with his flagship wine, which, he says, sold 72 million bottles last year. "It's inexpensively made," he declares with a slight glower.

But that attitude hasn't kept him from jealously guarding the "Two Buck Chuck" nickname -- which he didn't create and hasn't spent a dime to promote. In 2002, Sonoma vintner David Coleman used surplus grapes to produce a few thousand bottles of $1.99 wine for the Beverages & More chain, choosing to call it "Two Buck Chuck" and featuring a woodchuck on the label. The sometimes pugnacious Franzia threatened to sue.

Pugnaciously.

"I told him, 'Fred, just calm down. I'll sell you whatever claim I have to the name, and if it makes you feel better, you can even pay me a little something to make it official,'" Coleman recalls. "He sent me a signed $2 bill. I still have it."


At first glance the imposing building on the outskirts of Napa appears to be a winery like any other in California's premier wine-producing region. But behind the faux-Tuscan facade of Bronco Wine Co.'s sprawling facility no grapes are being crushed, and no juice is being fermented. Instead, its tile roofline and trellised gardens disguise a high-speed bottling plant capable of churning out 18 million cases of wine a year, double the annual production of all the rest of Napa Valley.

Each day tanker trucks filled with wine made from grapes grown in the considerably less prestigious Central Valley rumble into Napa to empty their liquid cargo into the Bronco plant's huge stainless-steel holding tanks. Within hours -- and sometimes minutes -- the wine is squirted into bottles bearing the label of whichever of Bronco's two dozen brands is being produced, the most famous being Charles Shaw, the ubiquitous "Two Buck Chuck."

With few exceptions, the grapes used to make the wine in those bottles have no connection to Napa Valley's heralded grape-growing soil. Yet Bronco's decidedly less expensive wines are imbued with the coveted Napa cachet -- unfairly so, many of the region's vintners say. That's because its bottles are either stamped with one of several Napa Valley-associated labels that Bronco has managed to acquire from distressed wineries over the years, or, at the very least, because the plant's carefully chosen location makes it possible for the labels to proclaim that the wine is "bottled" in Napa.

"If it says Napa on the label, it should be Napa in the bottle," complains Linda Reiff, executive director of the Napa Valley Vintners Association, uttering what has become a familiar refrain.

By most standard business measures, privately held Bronco, headquartered in the town of Ceres (near Modesto), is an unqualified success story, racking up an estimated $300 million in sales last year, which makes it the fifth largest player in California's wine industry. But to Napa Valley's elite wine producers, the company's presence in their midst is a sacrilege, and Fred Franzia, 61, the renegade vintner most responsible for Bronco's success, the devil incarnate. "He's using a Napa address to sell wine from non-Napa grapes, and I think anyone has to question the ethics of that," says Tom Shelton, chief executive of Joseph Phelps Vineyards.

Others see another kind of opportunism. "His being able to sell a $2 bottle of wine is only possible by taking advantage of the misfortunes of others," says wine consultant Vic Motto, referring to Bronco's propensity for buying surplus grapes at deep discount. At a gathering of wine industry luminaries in Sacramento in 2003, when Bronco was named Winery of the Year, the announcement was met with gasps and hisses. "A lot of people in the Napa Valley wine community detest Fred," says veteran winemaker Richard Peterson. "And they really don't know what to do about him."

That's especially true in view of Franzia's latest parlay. In July, to the doubtless consternation of some of those same vintners, Bronco rolled out a merlot and a chardonnay under its Napa Creek label. Both are made from Napa Valley grapes to sell exclusively at Trader Joe's for the nearly unheard-of price of $3.99 a bottle. And they, too, have quickly absorbed a nickname: "Four-Buck Fred."


"They're a bunch of whiners," declares Franzia, who doesn't conceal his disdain for the Napa vintner group, even though he insists that some of its 275 members are his friends. For someone who rarely talks to the press, he's on a roll, extolling his quality-at-a-reasonable-price mantra from his unpretentious Ceres office, which, despite Bronco's prosperity and Franzia's considerable personal wealth, is little more than a desk, a phone, and a couple of chairs. "Grapes aren't like gold. They have to move. And if they don't sell for the high prices that the Napa folks think they ought to demand, then they'll sell for whatever they'll bring, and that's when we like to buy them."

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.

In 2000, Franzia piqued Napa wine growers again by filing "NVVA Ridge" -- as in Napa Valley Vintners Association -- as a Bronco trademark. He withdrew it after the vintner group protested to the federal government.

That same year, Franzia spent $42 million to acquire the Napa Ridge brand from Berringer Vineyards, triggering alarm bells among Napa's wine mavens that he would flood the market with Napa Ridge wine made from non-Napa grapes (something that, to some extent, Berringer was already doing). In 2001 their fears were realized when Bronco opened its Napa bottling plant.

Even now, in view of Franzia's recent court setbacks, some of his detractors are convinced that he's producing his new "Four-Buck Fred" for spite. "No one can use Napa grapes and sustain that kind of price," says Vic Motto, the wine consultant and longtime Franzia critic. Franzia, meanwhile, clearly relishes the speculation. "Let 'em say what they want," he says, not quite concealing a grin. "We don't lose money."


While outrageous at times, Franzia's lobs at Napa Valley's wine elite are rarely uncalibrated. When he insists, for example, that "there's not a wine anywhere worth more than $10 a bottle," he speaks not as a connoisseur, but as a businessman who takes delight in knowing the precise cost of juice, glass, cork, and label. "I probably spend more time buying corks than anything else," he confides, recounting how shaving a penny from the cost of each specially designed cork used in Charles Shaw bottles saved Bronco $720,000 last year. "I don't always agree with him, but when it comes to the minutiae of the wine business, Fred knows his stuff," says vintner Michael Mondavi, son of the legendary Robert Mondavi.

Michael Mondavi has known Franzia since their days at Bellermine College Preparatory in San Jose, the Jesuit high school long favored by families of prominent Central Valley wine growers. There, they played together on the football team. (A better-than-average placekicker, Franzia once booted a 42-yard field goal in a game at Kezar Stadium.) Like Mondavi, Franzia went on to Santa Clara University, where he graduated in 1965 with a triple major in finance, marketing, and accounting.

"No one who knew him ever doubted that Fred would do well in the wine business," says vintner Don Sebastiani, the son of another wine legend, August Sebastiani. The younger Sebastiani recalls the many times his father dragged "Freddy" home to lunch when Franzia was in his 20s, and the elder Sebastiani's marveling "at how someone that young could go toe-to-toe with him in discussing almost any facet of the business."

As a third-generation member of a venerable Italian-American wine-producing family, Franzia came by his acumen naturally. His grandfather, Giuseppe Franzia, arrived in the Central Valley from Genoa in 1893 and staked a claim on 80 acres near Stockton. He and his wife, Teresa, who came over from Italy to marry him sight unseen, made wine on a modest scale until Prohibition in 1917. (One of their three daughters, Amelia, married Ernest Gallo.)

After the repeal of Prohibition in 1933, the couple's five sons established the Franzia Brothers Winery near the town of Ripon. But unlike those of Gallo, Mondavi, and Sebastiani -- names that became synonymous with California wine -- the Franzia legacy suffered a painful breach, one that friends say profoundly influenced Fred Franzia's relentless drive to become perhaps the single most influential player in the California wine industry.

Turning a deaf ear to other family members, three of his uncles sold their shares of the Franzia winery to investment bankers in 1971 in a deal that netted them a relatively paltry $1 million apiece. In 1973, after taking the company public, the new majority owners -- over objections from the two remaining brothers, including Fred's father, Joe -- sold the winery to the Coca-Cola Bottling Company of New York for just under $50 million. As part of the arrangement, the Franzias were barred from using their name in new winemaking ventures.

The bottling company didn't last long in the wine business. In 1981, Coke of New York sold the Franzia operation and its other wine interests to the Wine Group, a privately held producer of bulk wines based in San Francisco. Today -- to Fred Franzia's chagrin, although he doesn't like talking about it -- the Franzia legacy is extolled on boxes of the Wine Group's bargain-basement "bag in a box" wines. Printed on each "Franzia" box is a warm and fuzzy retelling of Giuseppe and Teresa's story above the signature of Carlyse Franzia, Fred's cousin and the offspring of one of the brothers who sold out in 1971. She is married to Arthur Ciocca, the Wine Group's publicity-averse principal owner.

"People use the tools available to them. Let's just leave it at that," Franzia says when asked about his family's name and legacy being in the hands of a competitor. Neither is he eager to talk about what happened in the '70s. "That's over and done with. It's a nonissue," he says. "It doesn't really bother me." Others, however, offer another view. "There's no question that there was a lot of hurt and sadness with the loss [of Franzia Brothers]," Mondavi says. "It's a large part of what drives Fred. If you love this business as much as he does, you don't lose your family's century-old winemaking name without it having an impact."


In stark contrast to the exquisitely done-up Napa facility, Bronco's sprawling operation on the edge of Ceres has all of the charm of an oil refinery. Its rows of white storage tanks, which tower above the flat countryside like giant toadstools, are capable of holding up to 80 million gallons of "juice." (That doesn't include the former Titan ICBM missile fuel tanks that Franzia acquired from military surplus and that he intends to use someday in the production of champagne.)

During harvest, trucks laden with grapes arrive at Ceres around the clock from the far reaches of Bronco's domain, strategically spaced over a distance of 200 miles, north to south, so as to stagger and prolong the ripening of grapes for harvest and enable Bronco to squeeze the most efficiency from workers and facilities. The grapes are crushed and processed and their liquid treasure placed in the tanks according to wine type, almost all of it destined for bottling in Napa.

Beneath the tanks are two climate-controlled warehouses -- one stacked with traditional oak barrels for aging wines bearing Bronco's brands, many of which sell in the $7 to $12 range; another for finished goods, including however much Charles Shaw doesn't get shipped directly from Napa to Trader Joe's stores. Joseph Franzia, Fred's brother, directs Classic Wines of California, the distribution arm, from an annex of one of the warehouses. John Franzia, their cousin, oversees production.

The trio formed Bronco (a contraction of "brothers 'n' cousin") in 1974, the year after Coke of New York's takeover of the family's namesake Ripon winery. Starting from scratch on a 40-acre site that has since mushroomed to 420 acres, the Franzias, with Fred at the helm, have built a 1,000-employee juggernaut that dwarfs anything their parents could have imagined.

But one might never guess at the scope of the operation, judging from Fred Franzia's office in a converted portable building next to the guard shack. It is separated from his cousin John's similarly austere work space by a small conference room lined with shelves on which rest bottles of the company's wines. "Nice offices don't make you money," says Franzia. "Besides, this isn't where the real action is."

Indeed, the action appears to be wherever Franzia is. Often that means tooling around vineyards in his perpetually dusty Grand Cherokee and pausing for hearty lunches at places like the Red Steer, a roast beef joint in the town of Turlock, where employees and customers alike greet him by his first name. He works seven days a week, most days arriving at the office by 5:30 a.m. and seldom finishing before 10 at night. He spends at least a day a week in Napa, although he doesn't bother keeping an office there, preferring instead to encamp in a well-appointed conference room.

It's a routine that most people would consider grueling except that Franzia makes no distinction between work and pleasure. "Work is my pleasure," he declares. "I consider myself a very lucky guy in that respect." Yet, there's been a price. He is twice divorced, once after 14 years of marriage to the mother of his five grown children (two of whom work for Bronco). A second marriage lasted five years. By his acknowledgment, he seldom socializes outside his circle of wine friends, has no time for golf, and only rarely sneaks a peek at the Giants, his favorite baseball team.

Franzia takes a break twice a year. He gathers his children and their families for a ritual beach reunion in Hawaii, and he hosts a deer-hunting camp on the Russian River for his wine-producing pals, including members of the Gallo and Mondavi clans.

He euphemistically refers to the deer camp as his "eating trip," since, legally, he can't own a firearm.

"The felony," he volunteers. "I can't vote, either."

Of the things the intensely private Franzia prefers not to talk about, no subject rankles him more than his 1993 federal indictment on a conspiracy-to-defraud charge in which he and Bronco were accused of passing off crushed grapes costing between $100 and $200 a ton as zinfandel grapes worth a dozen times as much. According to the indictment, Franzia scattered zinfandel leaves on top of nonzinfandel grapes as they lay in bins waiting to be crushed.

The result of a yearlong surveillance operation in which 17 Central Valley grape growers and their employees were ensnared (five were sent to jail), the charges alleged that the "victims" of the crime were unsuspecting consumers, who the government contended paid some $55 million for wine that was not as it was advertised.

Franzia pleaded guilty and paid a $500,000 fine (the company pleaded no contest and was fined $2.5 million). As part of the plea arrangement, he was banned from Bronco's stewardship for five years, unable to participate directly in grape-growing or winemaking operations. He was, however, allowed a reduced role as the company's chief financial officer. "I was the big guy, and somebody had to take the fall," he says, dismissing his guilty plea as "just another business decision" to protect Bronco from further harm.

The man who prosecuted Franzia, Assistant U.S. Attorney Steven Lapham of Sacramento, says the government didn't press for a trial after having problems getting potential witnesses to cooperate. "People were taking the Fifth Amendment all over the place on even the simplest questions, such as, 'Do you work at Bronco?'" he says. "We did the best we could." Jack Hart, 78 and retired, who got to know Franzia well as a banker to the wine industry with Bank of America in San Francisco, and who professes to like him personally, has a different take. "Freddy was able to buy his way out of jail, but he's been punished in other ways," he says. "The indictment damaged his credibility, and it'll always give his critics something to hurl at him."


In 2002, when Trader Joe's patrons began hauling away Charles Shaw wine by the case, no one was more surprised than Charles Shaw.

A Chicago software developer, Shaw, 61, long ago owned a small winery beside the Napa River near the town of St. Helena. After attending business school at Stanford in the 1960s, he went to France as an investment banker and became enamored of vineyards. In 1974 he and his wife, Lucy, settled in Napa Valley. They built a Nantucket-style house for themselves and their five children among rows of newly planted gamay Beaujolais grapes and converted an old hay barn into the Charles Shaw Winery.

But after a nasty divorce, his vintner's dream ended in bankruptcy. In 1994, the house and winery were auctioned off on the Napa courthouse steps for a pittance -- $1.6 million -- to a wealthy businessman and his wife. (They renamed the place Benessere Vineyards.)

The Charles Shaw trademark, however, wasn't part of the sale.

Amid little fanfare, it had been scooped up from bankruptcy court a few months earlier. "Considering that he had gone belly up, the Charles Shaw name seemed practically worthless," recalls vintner Tom Eddy, appointed by the bankruptcy trustee to help manage the property during the proceeding. Shaw's creditors were getting antsy, and Eddy says he suggested that the trustee sell the trademark "as a way of giving them a little something" while waiting for the disposition of the estate. "There was only one guy in the world I thought might be interested in buying a defunct Napa wine label, and that was Fred Franzia," he says.

For the relatively insignificant sum of $18,000, Franzia got the Charles Shaw name and about two dozen leftover cases of the failed winemaker's precious gamay, Eddy says. Franzia did nothing with the label for the next nine years; in fact, only a handful of people even knew he owned it. (Shaw and his ex-wife had no idea.) Then came the exclusive deal with Trader Joe's. California wines had long been sold for the equivalent of $2 a bottle or less in jugs and boxes, but Franzia's Charles Shaw wines appeared more upscale, packaged in conventional bottles with cork enclosures just like pricier wines.

The "new" Charles Shaw wine (bearing little resemblance to the premium vintage for which its namesake had attained respect, if not commercial success) hit the shelves in February 2002. At less than $24 for a case of 12 bottles, it sold as quickly as Bronco could bottle it, based almost entirely on word-of-mouth. There was no advertising campaign. Even Harvey Posert, a longtime marketing consultant to Franzia who is probably most responsible for the invaluable if seemingly unflattering "Two Buck Chuck" nickname, concedes that the wine "largely sold itself."

Urban myths soon sprang up around the wine. According to one tale, it was surplus from an airline that could no longer bring corkscrews on airplanes after the Sept. 11, 2001, terrorist attacks; another yarn held that Charles Shaw was a wealthy businessman willing to peddle the wine on the cheap as a way of teaching Americans about viticulture.

In Chicago, the real Charles Shaw got calls from friends who thought he had somehow gotten back into the wine business without telling them. "It felt strange, all the attention for something that bears my name but with which I had absolutely no connection," he says. His ex-wife recalls the "Two Buck Chuck" phenomenon with mixed feelings. "It brought back memories that are personal and painful," she says. For instance, the gazebo that adorns the label on every bottle evokes a real gazebo built next to the Shaws' former home by MGM for the 1982 movie Yes, Giorgio, starring Luciano Pavarotti, in which the Shaw winery served as a locale. "That's the kind of thing that no one would know," she says.


For someone who has spent huge amounts of money -- just how much he doesn't say -- battling Napa vintners in court, Franzia professes not to be overly concerned about the way things may turn out. "We've already won in the marketplace," he proclaims, asserting that even if the courts uphold the state law and rule that he can no longer sell wine from non-Napa grapes using his Napa Ridge, Napa Creek, and Rutherford Vintners labels, he'll still be able to do so in every state except California.

"That is, if I want to," he adds. "Or we could just put Napa grapes in there like we're already doing with [the] Napa Creek [label]. If anyone should be worried it's the Napa vintners, because we sure as hell aren't going away."

Franzia is wheeling his vehicle among seemingly endless rows of grapes on a 6,000-acre spread in the Montpelier wine-producing district, a half-hour northeast of Ceres. The scene is fit for a wine label, with the lush, grape-covered hills offering sweeping views of the Sierra Nevada.

There are few places that the grape titan would rather be; in fact, it is where he intends to build his dream home. The spot is picked out, and he has been planning it for 15 years, he says. But, as with the patiently opportunistic way he navigates the wine business, Franzia is in no hurry. "A person shouldn't rush to get everything they want," he says. "There has to be something to look forward to."

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