"Two-Buck Chuck"
Father, Fred Franzia, CEO of Bronco Wine Shakes Up
Wine Industry
Since
the first bottle of 'Two-Buck Chuck' sold four years ago,
Vintner
Fred Franzia's company has shaken up the industry by
driving down prices
By
Jerry Hirsch
Times Staff Writer
On a wind-swept vineyard south of
Prunings from last year's cabernet sauvignon crop lie
in piles next to Jose Antonio Gonzalez and his crew as they make their way down
the long rows of this 3,000-acre vineyard.
Gonzalez pauses, then deftly uses his long knife to strip bark from a section
of the woody vine. Sap wells forth like tears. Gonzalez slices deeper into the
plant. He angles two pinot noir cuttings into the opening and then secures the
graft with white plastic tape. Another worker seals the wound with tar.
"You are seeing the creation of Charles Shaw Pinot Noir," Fred Franzia, chief executive of Bronco Wine Co. and father of
the popular "Two-Buck Chuck," tells a visitor as they watch Gonzalez
and his crew work.
On! ce thought a transient artifact of a recent grape
glut, Bronco's $2 wine has grown into a permanent fixture in the marketplace,
now accounting for about 12% of the domestic wine shipped within
Since the first bottle of Charles Shaw sold at a Trader Joe's market a little
more than four years ago, Franzia's company has
perfected the low-end wine business by whittling expenses in everything from vineyard
management to cork purchasing.
In the process, Bronco has become the Wal-Mart of wine — driving down
costs and prices in a way that is shaking up the entire industry.
"Until recently the wine business as a whole has focused on competing on
quality and has not focused as much on cost," said Bill Turrentine, president of Turrentine
Brokerage, a Novato-based grape and bulk wine broker. "But that's what Franzia has shown the industry. He exacts maximum efficien! cy out of the entire supply chain to produce
inexpensive, quality wine."
For $2.99, consumers can have Bronco's J.W. Morris Chardonnay. A couple bucks
more will buy a bottle of the company's Black Mountain Pinot Noir. Last year,
Bronco offered a $3.99 Napa Creek Merlot made by a
"I think this level of wine fills a real niche in the market," Cory
Merchant said as he shopped the wine aisle at a Trader Joe's in
Merchant said he could serve Shaw, Morris or any other Bronco budget wine to
most of his friends and few would be able to discern any difference from more
expensive labels.
Others say there is a difference, but that the price can't be beat.
"Charles Shaw is a great bargain," Malcomb
Davis said as he purchased two bottles from the
Whether they're buying it for the taste or the price, wine lovers are drinking
about 6 million cases of Two-Buck Chuck annually.
And Shaw's volume is likely to grow this year as Bronco adds new varietals to
the lineup and Trader Joe's, the brand's exclusive retailer, continues a
nationwide expansion, Fredrikson said.
The company can exploit this segment of the market — where the profit
margins are so thin that few other companies are willing to compete —
because of the massive vineyard and winery infrastructure it has built since
its founding in 1973.
"It is a big competitive advantage," said Walt Klenz,
the former global managing director of Beringer Blass
Wine Estates. "Franzia bought a lot [of land and
facilities] at the right time and at the right prices."
Bronco controls 35,000 acres of
Bronco's main winery and headquarters in the
As production of Two-Buck Chuck outgrew the operations in Ceres, Bronco snapped
up a winery in nearby Escalon for about $6 million in 2003; it is spending
millions more to upgrade machinery and filtering equipment and expand wine
storage capacity there.
Bronco also has built a high-speed bottling plant in
A tour of Ceres reveals a sophisticated operation capable of processing huge
loads of grapes in a short period of time.
At the front of the winery, nine large grape! presses, each able to handle a
50-ton truckload of fruit, can process 2,400 tons of grapes a day at harvest
time. Another bank of presses farther back has the same capacity.
So many trucks come through during the grape harvest that there's a 10-acre
staging area to handle them all.
Automation allows Bronco to reduce the number of workers per shift to about a
fifth of what some other wineries use, said Ed Moody, Bronco's director of
winemaking, who has worked at other winemakers.
"Efficiency is the name of the game," Moody said. "That's how
you can get down to $1.99 a bottle."
Bronco collected about $500 million in revenue last year and is profitable, Franzia said. He declined to disclose more details about
the company, which he owns with brother Joseph Franzia
and cousin John Franzia Jr.
"The strength of our company is cash flow. We are sitting with great
facilities and vineyards and have no debt," Franzia
said. "We have control of our inf! rastructure from supply to bottling to distribution, and we
have shrunk most of the middlemen out of the process."
In
That relationship with Trader Joe's is a big piece of Bronco's success. Its
largest retail customer, the chain sells about $120 million in Bronco wine
annually.
Trader Joe's declined to discuss its relationship with Bronco except to say
that at any given time it is selling Shaw and two or three additional labels
from the vintner.
"Trader Joe's moves the product, pays us in 10 days and is not greedy
about the margins," Moody said. "We don't want to see big markups in
our wine. Our business plan is to provide value to the customer. This is a
volume business."
To cut expenses on the Shaw brand, Bronco uses its own grapes for most of the
product. A! nd instead of aging the wine in oak
barrels like more expensive vintages, it uses oak wood chips to flavor the
wine.
When it gets ready to bottle Shaw, Bronco prepares for a two- to three-day run,
filling 60,000 cases at a time, more than the annual output of most
Before Charles Shaw, Bronco was best known as a supplier to Beringer
and other large wineries of bulk wine to use for blending into their respective
labels. The launch of Charles Shaw wine roiled the industry at a time when it
was suffering from a surplus of grapes and falling prices.
Franzia used the surplus to his advantage, snapping
up higher-quality vintages to blend with his own wine to create a product far
better than what the typical consumer expected for $2, said Michaela Rodeno, CEO of St. Supery
Vineyards & Winery in
Other vintners tried to jump into the market, but only Bronco has been able to
make! $2 bottled wine work, Klenz observed, in part
because it appealed to the budget gourmet consumers who flock to Trader Joe's.
Rival brands sold by supermarket chains never gained the same cachet.
Franzia was fortunate, Fredrikson
said, to hit the market during "a reverse snobbery trend" that made
it "OK to bring Two-Buck Chuck to a dinner party."
Already the fourth-largest producer of
The Franzias are considering building a $50-million
facility to make red wine on land adjacent to the cooling towers of the
shuttered Rancho Seco nuclear power plant southeast
of
And having conquered
Voluble and humorous one minute and cagey the next, Franzia
is one of the most controversial figures in
A long-running fight between Franzia, the California
Department of Alcoholic Beverage Control and the Napa Valley Vintners trade
group over the use of Napa-oriented place names in the labels of some Bronco
wine was settled last week.
Bronco has lost numerous appeals to the California Supreme Court and the U.S.
Supreme Court seeking the right to market wine such as Napa Ridge, Napa Creek
and Rutherford Vineyards even though the wine was made with grapes from other
regions. Lacking legal options, Franzia has agreed to
adhere to
Despite the legal setbacks, Franzia has earned the
grudging respect of many in the industry, in part because of his efforts to
improve the quality of
Last year his company made a 10-year pledge to establish the Bronco Wine Co.
Chair of Viticulture at Cal State Fresno. The post places an emphasis on
researching and teaching to improve vineyard mechanization and management in
the
And only E. & J. Gallo Winery,
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