5:24pm

Mon June 16, 2014
Economy/Labor/Biz

The True Cost of a Bottle of Cheap Wine


In 2013 for the first time, Americans surpassed the French as the number one consumers of wine in the world. Wine is certainly more accessible, and cheaper, than ever.

You can’t talk about cheap wine without talking about Charles Shaw, famously known as "Two-Buck Chuck." The wine is now "“Two-Dollars-and-Forty-Nine-Cents Chuck" here in the Bay Area, but despite the price hike, it is still the standard-bearer of cheap wine. In this story from our archives, Artjoms Konohovs explores how wine can be priced so low-- and at bottom barrel prices, he asks, can it really taste good?

This story first aired on March 14, 2012.

For the last ten years, the supermarket chain Trader Joe's has been selling its Charles Shaw Wines – better known as Two-Buck Chuck – for two bucks. It's been a great success.

In fact, a recent editions of Trader Joe's “Fearless Flyer” newspaper says: “We do think we know why these wines have struck a chord – they've proven that wine doesn't need to be expensive to be good, drinkable wine. These are not expensive, they are good, and they're very drinkable.”

Charles Shaw Wines are made by the Bronco Wine Company based in Ceres, California, near Modesto. The brand in its present form was born just over a decade ago, when Bronco and other producers found themselves harvesting too many grapes. One of the company's founders, Fred Franzia, came up with the idea to undercut the competition: he'd make a two-dollar bottle. “He was able to kind of go in and name his price, and come up with this ridiculously inexpensive wine. And over time he just had to figure out how to keep supplying it. Not the least of which is, frankly, planting his own vineyards,” says San Francisco Chronicle wine editor Jon Bonne.

Now Bronco owns a lot of land in California – more than 40,000 acres of vineyards – mostly in the San Joaquin Valley. And Charles Shaw wine is just one of more than 90 different Bronco brands, most of which sell for less than ten dollars per bottle.

“Fred [Franzia] is very adamant that no one should pay more than ten dollars for a bottle of wine ever,” says Bonne. “Although, even he has broken that by offering some reserves. But he simply believes in cheap wine.”  Cheap wine is not something new for California. In fact, there is a long tradition of making cheap wine that is sold just as table wine, Bonne adds.

But economies have changed, and after ten years and 600 million bottles, how is Two-Buck Chuck still just two bucks? I went to Bronco's bottling facility to find out.

Charles Shaw Wine is produced in Napa, at an average speed of 245 bottles per minute. Fred Franzia's son Joe runs this recently built factory. He gave me a tour, and says he’s really proud of how it's changing the industry.

Franzia says that Bronco was one of the first to pioneer lightweight glass. That's big. Here is why: a typical case of wine weighs about 36 pounds, while a case of lightweight bottles weighs 30 pounds. Which means Bronco can ship more at a time. “Basically in a truckload of wine, instead of shipping 1200 cases, you are shipping close to 1440 cases. So, basically one in every five trucks is paying for itself, reducing carbon footprint,” says Franzia, adding that it's a win-win – good for environment and the profit margin. “It's really starting to become a standard in the industry because the fuel is going up and when you are dealing with products under ten dollar a bottle, you are very sensitive to gas prices affecting your bottle of wine,” he continues.

Another example is cork. Bronco prefers not to use plastic cork for any of its wines. Some have screw caps, known in the industry as “Stelvin closures”. But for Charles Shaw, Bronco uses one of the cheapest forms of natural cork. It's a mold of small pieces with a real cork veneer at the bottom.  “We believe cork to be the primary closure method for wine, so we want to maintain the high quality of cork with a natural tip as a barrier between the composite and a wine itself,” says Franzia.

The San Francisco Chronicle's Jon Bonne says such production details are important to understand, particularly when it comes to cheap wine: “Quite honestly, the bigger part of the cost is glass, cork, and distribution. It's one of the reasons that anywhere else outside California, Two-Buck Chuck is actually $3.” Bonne explains that the cost of shipping Two-Buck Chuck anywhere out of California becomes too high to support it. “In terms of the actual wine, the wine is not terribly expensive. I would say, it's probably 30 to 40 percent of the cost, if that,” Bonne adds.

That means the actual wine inside a bottle of Charles Shaw has a retail value of about $0.75. Bonne says that Bronco is using really cheap grapes that are almost entirely grown in the San Joaquin Valley, where land is cheaper than in Napa or Sonoma. Moreover, he adds that “Fred Franzia, who runs Bronco, is an absolute master of leveraging the bulk wine system to kind of pick up bulk wine where it's available.”

Which means a bottle of Two Buck Chuck could come from almost anywhere. “This was sort of the genius of it. They made it feel like it was a real bottle of wine. They made it looks like this was a real bottle of wine. And what was in it was sort of incidental. And honestly, no one has much complained,” says Bonne.

While, Joe Franzia believes that's because his wine tastes good: “You don't sell on average 5.5 to 6 million cases a year for ten years if you are selling a product that people didn't enjoy.”

Many people like it, indeed. But of course, not everyone is a huge fan of Two-Buck Chuck. One of the most common complaints that I've heard from the Trader Joe's customers in San Francisco's SOMA district was the inconsistency of flavor.

For those people of course there are other fairly inexpensive wines with a more consistent flavor, like Bonterra, a wine made by the large California winemaker Fetzer. Bonterra sells for about 12 dollars a bottle – still ten bucks more than Two-Buck Chuck.

Ann Thrupp is manager of sustainability and organic development at Fetzer and Bonterra vineyards. She says that the price point depends on a lot of different factors. According to company literature, Bonterra is the top selling wine made of organic grapes in the U.S. “Many people really love what that means and feel confident of what's behind it,” Thrupp says.

Bonterra grapes come from sustainably farmed vineyards in Mendocino and Lake Counties. The company practices water and energy conservation, it composts, and even uses sheep instead of tractors to control weeds in the vineyards.

Thrupp says that such practices involve “a little bit more manual labor for doing things like pulling leaves and additional monitoring that goes on for pest management.” And in Mendocino County, that means slightly higher production costs. Other additional costs have to do with certification of organic practices, which involve additional time and labor. And then there is the labor itself.

“In order to do farming for grapes that are that cheap, you need to find labor that is as cheap as you can get,” says Bonne, adding that it's “not a surprise that most of vineyard work in California is done by migrant workers, often undocumented.”

Fetzer Vineyards offers a program for its workers to learn English. They also reimburse tuition fees and do various in-house trainings. But for less expensive wines “the cheaper your grape farming is, the more you are going to run into the possibility of labor violations,” Bonne says.

Records show at least one public scandal around working conditions at vineyards owned by one of Bronco's subdivisions, West Coast Grape Farming. In 2008, a pregnant 17-year-old undocumented worker named Maria Isabel Vasquez Jimenez, was working for one of West Coast Grape’s labor contractors. On a hot day, she collapsed on a field and later died of heat exhaustion. Bronco's spokeswoman Lisa Adams Walters said she could not comment when asked about the labor practices of the company.

So production, quality, land, labor. The other thing determining the cost of wine in California is prestige. I joined wine consultant Fred Daniels in the aisles of the San Francisco Wine Trading Company. I asked him to explain the difference between two bottles of Pinot Noir ­– one $12 the other $46.

“For something like Poppy, it could be a wine that is very well made, but it's made from Monterey county so the vineyards don't have that prestige,” Daniels explains. While the $46 bottle comes from the Russian River Valley. “The wines there are typically run in this price range. If I go to Russian River and buy grapes from that area, the wines automatically will be priced in this price range,” he adds.

None of that applies to brands like Charles Shaw. The label only says the wine comes from California, which is one reason why critics like Bonne say that it almost doesn't make sense to discuss the quality of such lower shelf bottles that cost less than $15.

“Probably, a great chunk of what you are tasting there could be a grape concentrate:  could be sugar, could be a sort of residual flavor from oak products. So, part of what you are doing when you are making wine at that level is simply to come out with something that tastes okay,” Bonne says. Which, for millions of wine drinkers, is good enough.

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