Did Two-Buck Chuck clock 1 million cases in December? Looks like it.
In case you missed it, Two-Buck Chuck is the nickname for the $1.99-a-bottle Charles F. Shaw line of California varietal wines. Introduced a year ago, Two-Buck Chuck caught fire in December, and Trader Joe's, the brand's exclusive retailer, blew through an estimated 1 million cases last month alone -- an astonishing feat for a new wine label with no marketing support.
For perspective, out of some 6,500 brands sold in the United States, 21 of them sold more than 2 million cases in 2001, and another 21 sold between 1 million and 2 million. But most of those brands were flat or had little growth. Two-Buck Chuck has sprinted through 1 million and is cruising toward 2 million.
The wines -- Cabernet, Chardonnay, Merlot and Sauvignon Blanc -- are nothing to write home about. But at that price, in this economy, most people aren't complaining. They're wheeling cases out the door of Trader Joe's and loading them into their SUVs.
The Two-Buck Chuck phenomenon provides a striking contrast to another blockbuster wine event late last year: the record price that Francis Ford Coppola paid for a Napa Valley vineyard. The film director and owner of Niebaum-Coppola winery in Napa spent $31.5 million for the prized J.J. Cohn property, 84 acres of land in the famous Rutherford appellation. Minus the value of a large house included in the deal, that amounts to roughly $350,000 an acre, according to those familiar with the deal.
Those who followed the two stories had to be shaking their heads wondering what on earth was going on. How could anyone make money by selling wine for $1.99 a bottle? Who in their right mind would pay $350,000 an acre for a Cabernet and Merlot vineyard, part of which needs replanting?
Good questions. Now for the answers.
Once upon a time, there was a Charles F. Shaw -- a person and a winery. Shaw was an investment banker who fell in love with Beaujolais and came to Napa Valley in the early 1980s with the belief that Americans might cotton to a Beaujolais-style wine. We didn't, Shaw struggled. He tried to rescue his winery by introducing other wines, but things never panned out.
In 1991, Shaw sold his winery and left the wine business. His 15 minutes of fame came 13 years too late.
While Shaw moved on, the brand name lived on and was later purchased by Fred Franzia, owner of Bronco Wine Co., who collects wine labels the way some people collect board games. Franzia owns a couple of large wineries in Napa and the Central Valley, and specializes in buying mostly cheap bulk wines that many other wineries don't want, blending them and selling them under multiple labels, including Forest Glen, Napa Ridge and Rutherford Vintners.
What made Two-Buck Chuck click is the huge wine glut in California. There was so much unsold bulk wine this past year that producers were almost giving it away. When the numbers are right -- enough volume at the right price (about $1 a gallon) -- Franzia is one of the key buyers, known in the business as bottom fishers.
Franzia also has a distribution company, which gives him added clout; he can ship directly to retailers in California, which he did, setting the $1.99 a bottle price. (It's closer to $3 outside California, due to higher distribution costs.)
No one knows how much Two-Buck Chuck will eventually pass through Trader Joe's, because there's still a sizable surplus of California wine, which could last several more years. A Bronco spokesman said they estimated that 1 million cases were sold in December, and the bottling line ran three shifts on New Year's Day to meet demand. It's entirely possible Two-Buck could eventually hit 3 million cases.
The Shaw frenzy adds a new twist to the old wine joke, "How do you make a small fortune in the wine business? You start with a large one." Now there's another rejoinder: You sell a million cases of $2 wine a month.
Coppola, in contrast, seems the perfect illustration of a shrinking fortune -- even if he does charge $100 a bottle for his top wine, Rubicon.
Most vintners were aghast at the price he paid for the Cohn Vineyard, outbidding Robert Mondavi Corp., Opus One and Beringer Blass along the way.
But the question is, how much would it cost to buy 60 acres in Rutherford on the open market and plant it to Cabernet?
Trying to answer that is an exercise in futility. You couldn't do it even if you wanted you, because there aren't any suitable plots like that left in the highly sought-after appellation.
That makes the Cohn property priceless and its purchase a once-in-a-lifetime deal that serves as the strongest example yet of vintners paying tomorrow's prices today.
Whether the vineyard will ever pan out financially is yet another question, one that is years away from being answered. Meantime, Two-Buck Chuck is riding high.