The Secret to This Wine’s Popularity Is the Grapevine

The morning after a friend served Anna McNeal a glass of Charles Shaw Merlot, she made a beeline to the Mid-Wilshire Trader Joe’s to stock up on the wine selling at an astonishing $1.99 a bottle. “I had to come and get a case,” she said in a checkout line with half a dozen other shoppers who had somehow heard of the mysterious “Napa” wine.

Since it was introduced in February, Charles Shaw wine has gained a cult-like following in Southern California, with wine drinkers backing their cars up to the loading dock of the Los Angeles-based discounter to lay in a supply of the Trader Joe’s exclusive.

It is selling furiously, said Jon Fredrikson, a wine consultant based in San Mateo County. “A great story for consumers.”

As its fame has grown, so have the tales about the wine’s origin. One persistent urban legend holds that the wine is being dumped on the market by an airline that, post-Sept. 11, could no longer use corkscrews. Others say financially strapped United Airlines is selling its food service wine stocks to raise cash. Then there’s the theory that it’s a fire sale sparked by “the Shaws’ ” nasty divorce.

Trader Joe’s chief wine buyer, Chris Condit, rather likes the rumors -- he refuses to reveal who is actually bottling his wine -- but he acknowledges that the myths are far from true. The fact is there is a worldwide glut of wine, and Charles Shaw is just an extreme example of a swelling wave of impossibly cheap, plentiful bottles.

But what exactly is in those bottles, how can they be so cheap and who is Charles Shaw, anyway?

It turns out Shaw -- Chuck, to his friends -- was a Stanford business school grad who caught the wine bug while working as a banker in Paris. He moved to the Napa Valley in 1974 to fulfill his dream of producing award-winning Gamay Beaujolais.

Instead, Americans turned their noses up at his light red wine, and old friends in Napa say he moved back East in the mid-1990s, just missing the meteoric rise in the value of vineyards.

Still, his $8 wine had a good reputation within the industry, said Harvey Posert, a veteran wine industry publicist. And so Bronco Wine Co., a giant Central Valley wine conglomerate, bought the Napa label in a distress sale, said Posert, who has worked for Bronco.

Fred Franzia, the head of Bronco, is one of the world’s leading growers of varietal grapes and one of the state’s largest winemakers, with headquarters in the Central Valley town of Ceres.

Like Condit, he refuses to discuss Charles Shaw.

But wine industry experts say that despite the classy Napa label, there probably isn’t a hint of those pricey grapes in a bottle of Charles Shaw Merlot, Chardonnay or Cabernet Sauvignon.

Even with the depressed market, grapes from Napa sell for around $2,000 a ton, said Brian Sudano of Beverage Marketing Corp. To make money on a $2 bottle, he added, a vintner would have to buy grapes for around $200 a ton -- the price of less desirable Central Valley grapes.

This summer the market price for those grapes hit a low of $60 a ton. Swimming in excess wine, Franzia revived the Charles Shaw label, believing it would be more cost-effective to dump his wine on the consumer market than to pour it on the ground. Taking advantage of the depressed wine grape market, he also bought up excess stock from other Central Valley vintners, according to several wine industry sources.

“Franzia was able to take advantage of distress sales by other vineyards,” said Fredrikson. “And he’s got the high-speed production lines to do it and still make money.”

Franzia’s bottom-fishing approach is working, in part, because the state’s overall wine quality is improving, even wine from Central Valley grapes, according to Jim Wolpert, chair of the department of viticulture and enology at UC Davis. For the last decade, the California wine industry has been investing heavily in new technology and facilities.

Franzia, for one, built a new Bronco winery in Napa last year, which could process Charles Shaw wine -- and allow the company to put Napa on the label, even though the grapes are being trucked in from all across the state, said Posert.

In a blind taste test by the trade magazine Wine & Vine, Charles Shaw’s 2000 Chardonnay beat out a $67 Chardonnay that -- par for the course -- the publication declined to name.

Still, that’s a result even Charles Shaw devotees may find hard to swallow.

“It’s a completely drinkable cheap house wine,” said Tracy Hackney of Los Angeles, who has gone through three cases of the stuff. “The Cabernet is sharp right out of the bottle, then gets thicker in the glass, but I’ve drunk so much that it’s hard to be objective.”

After quickly running through the initial release, the winery bought more bulk wine. In nine months, it released three batches of Charles Shaw wine, the 1999, 2000 and 2001 vintages. Expect a 2002 vintage to hit stores early next year, according to Trader Joe’s. “We’ll have more as long as the glut lasts,” said Condit.

To wine industry insiders, it comes as no surprise that Franzia is leading the price slashing. “He knows the market,” said one industry source. “In the last downturn 10 years ago, [Bronco] bought up land and brands and facilities when everyone else was selling.”

According to Fredrikson, Bronco could be paying as little as $7 a case for the glass bottles and corks he uses to bottle Charles Shaw wine.

With Trader Joe’s rumored to have bought the wine for $19 a case, Franzia would have to be making and bottling the wine for less than $1 a bottle to turn any profit.

Franzia, whose father was a California vintner, started Bronco in 1973 with his brothers John and Joe. With 20,000 acres of vineyards (almost all in the Central Valley), a wine storage capacity of 62 million gallons and the capability of crushing up to 60,000 tons of grapes a day, Bronco is one of the industry’s highest-volume producers.

The gambit of packaging up the Central Valley’s excess wine to siphon off at rock-bottom prices allowed Franzia to continue charging $5 to $10 a bottle for the wine it sells under its 31 other brands, including Forest Glen, Rutherford Vintners, Hacienda, Cedar Brook, Forestville, Estrella, Grand Cru, Montpellier, Silver Ridge, Laurier, Bear’s Lair, Douglas Hill, FoxHollow, Salmon Creek, Domaine Napa, Napa Creek, Napa Ridge, Gibson Winery, Antares Cellar, Albertoni Vineyards, JJJ, CC Vineyard, the California Winery, J.W. Morris, Black Mountain.

And its success with Charles Shaw is already being imitated by other vintners. The Benziger winery, for example, is doing the same thing. “They had 20,000 cases available, a label we could use, Wildwater Creek, and we took it all. It’s the same product as the rest of Benziger’s wine,” Condit said, noting he sells it for $4.99 a bottle.

Denying that this is the same quality wine, Benziger Family Winery President Tim Wallace said the wine he sold to Trader Joe’s was excess inventory that didn’t make the grade for Benziger’s regular labels.

Normally, the winery would have sold it on the commodity wine market, he said. But with the glut, those prices were so low that it made more sense to bottle it themselves and sell as a loss leader.

“We hoped to stimulate demand for wine by dropping the price,” said Wallace.

The glut is not just a boon for Trader Joe’s. Costco Wholesale Corp. is seeing the prices drop even on the brand-name wines it carries. “We’re seeing a lot of good premium $10 wines that would have sold for $15” a year ago, said Costco Chief Executive James Sinegal.

“We are just starting to see the downward push,” said Linda Bisson, a wine production professor at UC Davis, who, like others in the business, says the pressure that started at the bottom of the market has begun to creep up the price scale.

“Everyone in wine was making plenty of dough in the 1990s, and they plowed it back into producing more grapes,” Condit said. “Lo and behold, four years later, there are lots and lots of grapes. An ocean of wine.”

And it’s not just California. Australia, Chile, South Africa, as well as Italy, France and the rest of Europe over-planted.

“We’ve got a lot of wine to sell,” said Joe Ciatti, one of California’s leading wine grape brokers. “There will be excesses going into next year and a few more years after that.”

In the end, it’s great news for wine drinkers, said Karen Ross, president of the California Assn. of Winegrape Growers.

“The consumer,” she said, “is absolutely in the driver’s seat.”