The Scourge of Napa Valley

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Thanks to Two Buck Chuck, Bronco was named winery of the year at the 2003 United Wine and Grape Symposium. When the announcement was made, the Western Farm Press reported, "the ballroom literally erupted in disbelief and contempt."

Bronco, meanwhile, became embroiled in another dispute that went beyond taste. This time it centered on labeling laws.

During the years that Franzia was building his business in the San Joaquin Valley, Napa solidified a reputation as the mecca of American winemaking. It has almost 400 wineries, roughly one quarter of the total in California, and is by far the most recognized appellation in the USA. Napa Valley produces just 4 percent of California wine by volume but earns $2.3 billion in sales--about a quarter of the state total. On average, Napa labels are 61 percent more expensive than those with a generic California designation. The valley has become a magnet for business moguls and celebrities with aspirations--and money--for making great wine, including director Francis Ford Coppola, football star Joe Montana, and racecar driver Mario Andretti.

"They don't impress me one bit," Franzia says of the Napa winemakers. "You know, I've purchased a lot of wineries and products from people who pretended they were pretty rich. When they cash in their chips, we're there to buy them."

And therein lay the roots of the conflict. In 1993, Bronco bought the Napa Creek label. The following year, it acquired the Rutherford Vintners brand, named after a community in Napa Valley. In 2000, Bronco paid more than $40 million to buy Napa Ridge from Beringer Wine Estates.

Federal law requires that if a wine bears the name of a geographical place, at least 75 percent of the grapes in the wine must have been grown within that region--85 percent in the case of federally designated American viticultural areas. But a grandfather clause exempts labels that existed prior to 1986. This meant that Bronco could, and did, sell Napa-labeled wines using grapes grown elsewhere, a tactic already employed by Beringer. (Labels identify the source of the grapes in smaller print.) At the time, Napa Valley Cabernet Sauvignon grapes sold for about $2,600 a ton; grapes from the Central Valley sold for $600 a ton. According to court records, Bronco sold 300,000 cases of Rutherford, Napa Creek, and Napa Ridge wines--$17 million worth--per year.

Napa vintners saw this as an act of piracy. And they feared it was about to get worse. In the city of Napa, Bronco was building a massive bottling plant capable of churning out 216 million bottles a year--more than twice the output of all the Napa County wineries combined. The vintners lobbied state legislators to close the loophole, and in 2000, the California legislature passed a law requiring wines whose labels bore the name Napa or any federally recognized viticultural area within Napa County to contain at least 75 percent local grapes.

Bronco sued to stop the state from enforcing the law. The Napa Valley Vintners Association, which represents about 250 wineries, filed as an intervenor on behalf of the state. The case began a tortuous six-year legal odyssey through the state and federal courts.

"He's just an opportunist," says Tom Shelton, president and CEO of Joseph Phelps Vineyards. "I think he missed the ethics course in college--he was out that day. He doesn't understand what the hullabaloo is all about."

Shelton and Franzia first crossed in the 1990s when Shelton began getting calls from friends joking about Bronco buying the Phelps winery. Soon he found out why: Bronco had run an ad that mocked the idea of Napa terroir, and the picture in the ad showed the Phelps Vineyard in the heart of Napa Valley. (Bronco apparently didn't know that was the case when it bought the photo.) Shelton phoned Bronco. Franzia told him to buzz off.

Shelton recounts the story as he sits in his office at Phelps, in a beautiful building designed by a noted architect. On the shelf sit Phelps wines that sell for $45 to $200 per bottle. A hostess leads a wine tasting on the patio outside. Sheep graze in the vineyards below, part of biodynamic farming techniques to emulate the traditional European vineyard. "Fred Franzia and Joseph Phelps Vineyards are not even in the same industry," says Shelton. "The real danger of opportunists like Fred Franzia is that a lot of our brand strength is related to the association between place, style, and quality. If you misappropriate the name Napa and diminish that, then you are damaging my prospects in the marketplace."

Many of Franzia's loudest critics in Napa come from smaller wineries. The industry has undergone a wave of consolidation, and the 25 largest California wineries now ship 82 percent of the state's wine. Small wineries cannot compete with giants based on price, so they often seek niches as artisanal or boutique operations. The Napa address adds valuable cachet, and winemakers pay for it: Napa vineyards can exceed $350,000 per acre, versus an average of $10,000 in the Central Valley. The Napa Valley vintners--more than half of whom produce fewer than 10,000 cases per year--protect their name as one of their most prized assets and bolster it with PR, such as the slogan "To a wine grape, it's Eden."

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