Tuesday, August 12, 2014

The romantic mystery of Charles Shaw wines

Yesterday I answered the question "Why are Trader Joe's wines so cheap?" Today I want to explore why people care.

The most famous Trader Joe's wine is Charles Shaw, once known as Two Buck Chuck, but now $2.49 in most stores. Throughout my wine-writing career, I have been asked about Charles Shaw far more than any other wine. Screaming Eagle is a distant second. I have done stories about Barefoot and Yellow Tail, but I never get asked about them.

The most popular question is, "What do you think of Charles Shaw?" People ask this for a lot of reasons, including validation of their purchase decision. Some ask because they want to expose me as a wine snob.

People ask other questions about Charles Shaw too, like, "Is it consistent?" (answer: There's a lot of variation because they do several batches of each variety per year). Some ask which varietal I would drink if I had to pick one. (In tastings, I've had the best luck with the Shiraz.)

Many ask the question I answered yesterday, "Why is it so cheap?" This question is at the heart of the romantic mystery of Charles Shaw wines. Not only that, this question about Charles Shaw wines is central to wine appreciation for all of us.

When Two Buck Chuck first appeared in Trader Joe's, there was a popular myth that Charles Shaw lost a nasty divorce, and wanted to sell off his assets as cheaply as possible out of spite. (The truth about the name is that Charles Shaw went bankrupt trying to make Beaujolais-type wines in California and Bronco Wine Co. president Fred Franzia bought the brand name at auction.)

Even among savvy wine industry people, nobody believed Bronco Wine Co. was just making wine as cheaply and efficiently as possible. 30-year industry veterans would tell me, "He's buying bulk wine from wineries that are overextended. It's not sustainable." But they were wrong. Every facet of Charles Shaw is as cheap as possible: the bottle, the label, the ink, you name it. They farm some of their own grapes for high volume, and contract others. Bronco sells the wine to only one store, so it doesn't need a marketing and sales staff for it. And Bronco is privately held, so Franzia doesn't have to reach profit ratio targets. He's happy to sell millions of cases for a very small profit on each one.

Nobody, even industry folks, likes that answer. It's the truth and I've given it dozens of times, and nobody likes to hear it. That's why Huffington Post embarrassed itself recently: the truth wasn't as interesting as libelous hyperbole. And the truth wasn't romantic.

At $2.50 for 750 ml, Charles Shaw wine is not that cheap. As I pointed out yesterday, you can pay about $1.50 per 750 ml of wine if you buy it in a 5-liter box.

What makes Charles Shaw such a romantic mystery is that a bottle of wine can be that cheap. That's a big distinction, something Franzia understands.

There's nothing romantic about a box of wine. It might be an efficient way to buy wine, especially if you regularly buy a case of something to have as a house wine. Box wines can be very good. (That story -- "Box wines can be very good!" -- perpetually catches the interest of newspaper food editors.) But romantic comedies never show a couple having a candlelight dinner with a box of wine.

The fascination people have with Charles Shaw is all about the romance of a bottle of wine. They don't want to be told that wine is an agricultural product like cheese or muffins, and that it can be made cheaply or expensively. A bottle of wine is special for people in a way that cheese and muffins are not. They don't want to be disabused. It's like saying there's no such thing as love at first sight.

I mentioned above that a lot of people ask about Screaming Eagle. The two questions are, "What does it taste like?" (Answer: Dark cherry) and "Is it worth the money?" The second question comes from the same impulse as the Charles Shaw question, even if most people want the answer to be "No." The real answer is, "People buy it because it's expensive. It doesn't matter what it tastes like. It's worth it if you want to show somebody that you have a $2000 bottle of wine." But that's unsatisfying. People don't want either Screaming Eagle or Charles Shaw to be a commodity. Because that means that wine itself is a commodity.

The disdain that some wine lovers -- especially those with a dangerous midrange level of knowledge -- have for Charles Shaw comes from the same impulse. "You can't lump that crap in with the lovingly made products I drink!" Translated: I don't drink a commodity. I drink a magical elixir harvested by elves in moonlight! It's not enough that my wine is better; I want it to be fundamentally different.

Maybe Charles Shaw Shiraz and Guigal La Landonne Côte-Rôtie are fundamentally different products and maybe they aren't; it's an unwinnable argument that boils down to definitions. Many wine lovers will heatedly pursue that argument. People aren't this passionate about muffins, or pie. Have you ever heard anybody rant about supermarket brand apple pie? It's industrially made, the filling is gooey. I won't eat it; I'm a pie snob. But nobody asks, how is supermarket pie so cheap? We don't ask, is that $15 pie by Christine's Upper Crust worth the extra money? (Answer: Yes.)

Whether we drink Charles Shaw, Screaming Eagle or a wine from the coldest Syrah vineyard in the world, we want it to be more than an agricultural product; more than a muffin. We want a romantic mystery. This is the source of Charles Shaw's greatness and popularity. You can get drunk cheaper. You can even get wine cheaper. But it's hard to get romantic mystery any cheaper than $2.50. That really is good value.

Follow me on Twitter: @wblakegray and like The Gray Report on Facebook.


Bob Henry (Los Angeles wine industry professional) said...


When I was enrolled in Los Angeles Times wine editor Robert Lawrence Balzer's wine appreciation course, I joined one of his three-day weekend guided tours of Sonoma and Napa.

One itinerary stop was to Charles Shaw winery, where we met him and sampled his Gamay Beaujolais. I still have a photograph of us all posing on the porch of his home.

In response to Part One of this two-part blog, I shared The Times article costing out Dennis Groth’s Napa Valley wines.

Citing another Times article – this one on Fred Franzia and Two Buck Chuck:

“The Secret to This Wine's Popularity Is the Grapevine”

Link: http://articles.latimes.com/print/2002/dec/07/food/fo-wine7

“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.”

(Aside: the article also alludes to the budget-priced wines formula of dividing the cost per ton of fruit by 100. Quote: “To make money on a $2 bottle . . . a vintner would have to buy grapes for around $200 a ton . . .”

I recall hearing a rumor (never corroborated) a decade ago that Franzia earned a profit of 5 cents for each case of Two Buck Chuck sold to Trader Joe's.

If true, then 5 cents per case on a projected wholesale cost of $19 a case would represent a 0.3% profit margin.

If the formula is 5 cents per bottle on a projected wholesale cost of $19 a case, then the profit margin would be 3.2%.)

Let me share this excerpt from The Atlantic magazine’s profile of Robert Parker, on the surprisingly low comparative cost of producing “even the [world’s] best wines . . .”

Excerpt from The Atlantic Magazine
(December 2000, Page Unknown):

“The Million-Dollar Nose”

Link: http://www.theatlantic.com/past/docs/issues/2000/12/langewiesche3.htm

By William Langewiesche

. . . For those in the business, maintaining that [elite drink] image is important not only for commercial reasons but also for reasons of personal prestige. Every stage of the trade is involved in establishing the high prices, but ultimately those prices can be sustained only through the retailers and their sales efforts. The problem for the retailers is that wine -- unlike luxurious hotel rooms and other hyperinflated products generally covered as business expenses -- is usually paid for directly out of the consumer's pocket. This makes for a scary business, especially toward the high end, where The Wine Advocate roams.

The truth is that even the best wines cost only about $10 A BOTTLE TO PRODUCE, and they are not inherently rare. If the initial cost is tripled to allow for profits along the path of distribution, one can reasonably conclude that retail prices above $30 are based on speculation, image, and hype. . . .

[CAPITALIZATION used for emphasis.]

~~ Bob

jason Carey said...

I think you are being completly disengenuous. Many millions of people do care what goes into their food and what makes it worse about wine is that they don't have to put anything that goes into it on the label. There is a fundemental difference between a product made by a person and what is in that bottle is known to you and a product that is made from who knows what. I don't believe you don't care about the difference and are trying to be a devil's advocate or just a contrarian as opposed to putting in any real serious thought or rigour in this particular post.

Big Valley WM said...

Very well said Blake!
Fred Franzia is most definitely making a profit; otherwise he wouldn't be doing it.
They don't come any smarter than Fred in this business!

And Bob... interesting you should mention Robert Lawrence Balzer. The first time I met Mr. Balzer was at Fred's winery.

yoka koch said...

I had the opportunity to visit Bronco Wines a couple of years ago and even visit with Fred Franzia. Aside from being amazed at the huge operation with 3,000,000 liter tanks and endless warehouses, his one comment to me made it clear how the wine is made so cheaply. "I don't know s... about making wine, but I know how to buy things". His office at that time was by himself in a small single wide trailer, where he sat at a couple of plastic folding tables. Not very luxurious for the owner of one of the largest wineries in the country.
Also, if he feels he is not getting the very best deal from a supplier, he is not shy about buying up that supplier or going into competition with them.

Bob Henry (Los Angeles wine industry professional) said...

Big Valley MW,

Balzer was best friends with California's troika of winery owners: Ernest and Julio Gallo, and Robert Mondavi.

(Aside: Balzer and Mondavi were fellow students at Stanford University in the 1930s. Became acquainted after graduation when both pursued careers in the wine industry.)

Since Fred Franzia is a distant relation to the Gallos, it does not surprise me that Balzer knew him.

~~ Bob

Paul A. Rainbow said...

To answer the question what we think of Charles Shaw wines we should take into account the purpose for which they’re made. Fred Franzia has gone on record saying he’d like to put wine on every American table. Bronco churns out wines that are solid, clean, and food-friendly. So yes, in that frame of reference they’re good. They’re also simple, generic, and not designed to appeal to those who appreciate the more nuanced intellectual and sensory aspects of wine.

Fred Franzia’s entrepreneurial spirit asked whether wine in America need remain a luxury for afficionados. In Mediterranean lands with high wine consumption per capita, it’s not the finest wines that the populace consume. At a time when many wondered whether economical boxed wines are truly wines—or should rather be honestly marked as “wine products”—Franzia realized that by bottling his products he would enhance their perception as wines. Of course, wines that are, maybe, 10% better can be had for ten times their price. Whether the price is worth it will be an individual decision.

Critics and connoisseurs have no doubt it is, and serve the industry by pointing toward how intense an experience wine can provide for the few who choose to make it a priority. Purveyors of lower-end wines make them accessible for many who want to elevate meals without committing themselves to much expense. Either aim enhances the common good and aids human flourishing, in different ways.

Wine Country Geographic said...
This comment has been removed by the author.
Wine Country Geographic said...

I've always been intrigued by the way everyone thinks Charles Shaw is the invention of Bronco/Fred Franzia. I often wonder if it isn't the creation of Trader Joe's.

Trader Joe's is not owned by happy Hawaiians. It IS owned by Aldi, giant German global supermarket chain, which pioneered $1 wines in its German stores.

(This is chronicled in the book Wine Wars by wine economist Mike Veseth).

I've always wondered if Aldi didn't go looking for a cheap wine supplier in the US to match its German budget wine program….does anyone know more about this?

Personally, I don't think anyone buys Trader Joe's for the romance of the bottle. (Does Trader Joe's even sell boxed wine?]. I think they buy it for the "thrill" of getting a bargain…of cheating, as one commenter on the NYTimes wine board said, "the California cartel" - the high priced brands. Because these drinkers can't tell the difference in taste. And because Trader Joe's doesn't offer much in the way of affordable, artisanal alternatives that are less than $20.

Wine Country Geographic said...

PS I am also always amazed by the number of my friends (with families) who shop for FOOD at Trader Joe's. When these friends also go to the farmer's markets. But people think Trader Joe's "gets them" and their need for convenience. If that's your point of view, it seems it would be better to shop at a locally owned food store, not an international conglomerate that specializes in cellophane or plastic wrappers on food from New Zealand, etc. - ironic in California, where we grow so much fresh, organic produce and SAY we want to support those growers.

haonusa said...

To Bob Henry. I can assure you that many of the best wines in the world (and quite a few others) cost far more than $10 a bottle to make. Ive heard this line before and I can tell you from the inside that there's just no truth to that statement.
Its actually pretty dang easy to get over $120/cs in COGS, especially in California. If you were to pay $10,000/ton for Napa Cab, the grapes in one bottle alone would cost more than $10. This excludes all production costs, winemaking, barrels, packaging, bottling, etc. Even at $5,000/ton for Sonoma Coast Pinot it's nearly impossible to hit $10/bottle in in COGS. 2-3X is much more on target.

I've crunched the numbers on this issue many times and it is remarkable that there can be bottles of wine as cheap as Charles Shaw. Kind of astounding really.

Noah Dorrance
Banshee Wines

Bill Dyer said...

The online version of the Weekly Calistogan has a side bar that shows the top ten most popular articles accessed by their readers. One titled "Meet the Real Two Buck Chuck--Charles Shaw" is consistently listed-currently in the 7th spot, and I think I have seen it as high as the 2nd spot recently. Why this is remarkable is that it was published in the Oct. 9 2003 issue. There is sufficient interest to keep it in the top 10, where it keeps drawing hits. Otherwise it would just disappear. It's not that the author keeps enough hits going to keep it there--I ran into him (Alan Goldfarb) a while back and he was shocked to here it is still appearing there over a decade after he wrote it. Not sure what this phenomena means--but right here in the middle of wine country there seem to be lots of readers drawn to the subject: http://napavalleyregister.com/calistogan/business/meet-the-real-two-buck-chuck-charles-shaw/article_f9fc0360-7b02-5bbf-b429-0acf507e6111.html

Bob Henry (Los Angeles wine industry professional) said...


I have no doubt that the COGS on wines can exceed $10.

William Langewiesche's article in The Atlantic is now 12 years old.

But your cited cost quotes are based on California winemaking. Perhaps brands that have only recently been founded and come to market.

For the arrivistes who paid $250,000 an acre for Napa Valley vineyards at the top of the real estate market (pre-Great Recession), hired an expensive "flying winemaker" and vineyard manager, built an architecturally distinctive winemaking and hospitality facility [dwarves not included], and packaged the wines in heavy bottles adorned with fancy labels . . . their business model dictates $100 retail selling prices just to break even.

As the saying goes: "Hey buddy, good luck with that . . ."

In Europe, vineyards have been handed down within the same family for generations. There is no B of A mortgage to pay off. Costs are largely variable, not fixed.

Producing a premier red Bordeaux is less expensive than producing a premier Napa Valley Cabernet.

Red Bordeaux prices only consistently crossed the $100 a bottle retail threshold within the last 15-to-10 years . . . driven in large part by Robert Parker's high scores for vintages 2000 and 2005 and 2009.

When California Cabs are priced higher than well-made red Bordeaux, when California Pinots are priced higher than well-made red Burgundies, that's a problem.

Astute consumers will ask: "Why not buy 'the real deal from the home country'?"

~~ Bob