Eric Risberg  /  AP
Napa Creek Winery merlot wine is shown at the Bistro Don Giovanni restaurant in Napa, Calif. Within days of losing a battle in the U.S. Supreme Court, Fred Franzia, head of Bronco Wine Co. and creator of "Two-buck Chuck" wine, launched the Napa Creek label which is made 85 percent from grapes grown in the Napa Valley.
updated 7/6/2005 5:40:34 PM ET 2005-07-06T21:40:34

First came Two Buck Chuck. Now, there's Four Buck Fred.

Central California vintner Fred Franzia, who has been fighting a state law requiring that wines with "Napa" on the label be made from grapes grown in that exclusive region, is releasing two new wines under his Napa Creek label, both going for $3.99 a bottle.

The twist: This time the wines are actually made with grapes from Napa.

"This shows that you can put Napa Valley wine in there for the price that we're doing," says Franzia. "People want to buy things at a reasonable price that are good value. It's not new. It's America."

In Napa, where wine is more likely to cost $40 than $4 a bottle, the release was a chardonnay shocker.

"Fred Franzia's chucked another volley our way," was the headline of a column on the St. Helena Star's Web site.

Some vintners wondered how Franzia could possibly be making a profit on the new wines. (He'll say only, "I don't do anything unless I make money.")

Others couldn't help but smile.

"I'm glad to see Freddy using Napa Valley grapes in Napa Valley wine," Mike Moone, founder of the boutique winery Luna Vineyards, said with a chuckle.

Moone thinks Franzia is doing Napa Valley a service by buying up surplus inventory. He notes that a large company like Franzia's Bronco Wine — which controls everything from vineyards to delivery trucks — is in a unique position to cut costs.

But most wineries can't make those economies of scale, says Karen MacNeil, author of "The Wine Bible" and chair of the wine department of the Culinary Institute of America's California branch.

"When people buy wine they have this romantic picture of a husband and wife and he's out on the tractor and then later that day they come in and make the wine and hand label the bottle," she says. "You think to yourself, 'It really ought to cost $4.' But in point of fact, it's like the restaurant business in that it's enormously costly."

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The price of an acre of Napa Valley vineyard land can easily reach six figures. The average price for cabernet sauvignon grapes here is $4,000 a ton, compared to a statewide red grape average of about $600.

Then there's planting, harvesting, bottling and paying people to keep up the myriad regulations. Vintners also have to keep at least three years worth of inventory on hand, often in expensive oak barrels.

"There's a good reason why there's that popular quote, 'The way to make a small fortune in the wine business is to lose a big one,'" says MacNeil.

Costs aren't the only factor in pricing a wine. There's also supply and demand.

"If you are a top producer and you only make 1,000 cases of a given wine and you know that there are 20,000 people who want that wine, why not charge $70 a bottle as opposed to $50 or $40 a bottle?" says MacNeil.

Franzia's fight with Napa revolves around a California law, staunchly supported by valley vintners, requiring that wines with "Napa" on the label be made with Napa grapes.

Bronco has argued that state law doesn't trump federal regulations, which are similar to the state law but exempt brands established before 1986. Over the years, Bronco has purchased three such brands — Napa Ridge, Napa Creek Winery and Rutherford Vintners.

The California Supreme Court has upheld the labeling law and the U.S. Supreme Court declined to hear an appeal. Meanwhile, a state appellate court in May ruled against arguments that the law impinges on Bronco's free speech rights, hampers interstate commerce and unconstitutionally deprives Bronco of income without compensation. Bronco may ask a higher court to review that ruling.

It was days after the appellate court ruling in May that Franzia announced the new Napa Creek wines.

Franzia says the timing was a coincidence and Bronco spokesman Harvey Posert points out it takes months to make all the arrangements to get a new wine in stores.

The new wines stem from Bronco's practice of buying some Napa Valley wine to blend into various brands. This year, Franzia found himself with enough for a separate release.

(Their court battles notwithstanding, Franzia and Napa vintners frequently do business together, from bulk wine sales to bottling.)

The new wines, a chardonnay and merlot, sell only at Trader Joe's, as does Two Buck Chuck, officially called Charles Shaw, which sells for $1.99 in California.

The Napa Creek wines carry the Napa Valley appellation, which means they must be made 85 percent from grapes grown in that region.

So far, Napa vintners aren't rushing to beat Franzia's prices.

At Luna, Moone wants wine to stay the way it is, more about mystique than markdowns.

Prices at Luna aren't in the stratosphere. The winery's highest priced wine, a widely praised red blend called Canto, is $50, but other wines, including a pinot grigio and sangiovese, go for $18. The winery has some high-profile investors, including singer Huey Lewis, and golfer Arnold Palmer, who is partnering with Luna on Arnold Palmer Wines, which go for $15.

Moone doesn't see the sense of pinching pennies on wine.

Wine, he says, "will never be beer. People don't like to drink it out of the container. They like to pour it. They like corks. If you do it right, it's not a cheap product to produce."

MacNeil sees the question in terms of buying a cheap coat versus a designer version. "Both of them are going to keep you dry. In the same sense the $10 wine is serviceable. You can drink it. Is the $100 wine 10 times better? If you're discriminating, it absolutely is."

Franzia disagrees.

"We challenge anyone to have a blind tasting and see where our wines come out," he says. "We think we can run with the top dogs at $100-plus. There's no wine worth more than 10 bucks a bottle."

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