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Hard times at the winery? Not for everyone

While some in Napa fume, Fred Franzia -- the reclusive creator of the Charles Shaw wine craze -- exploits bad times and builds an empire.

February 26, 2003|Corie Brown | Times Staff Writer

Just south of the town of Napa sits a simple stucco building with quaint Italian touches -- red tile roofline, distressed oak doors, trellised patios. It appears to be a winery like any other in California's premier wine region.

Napa vintners, however, describe this place as far more threatening than it appears because its owner, Fred Franzia, isn't one of their own. Franzia is a Central Valley outsider who sends shivers of anxiety down the spines of many among Napa Valley's elite.

Franzia is one of the wine industry's wealthiest men, building his fortune by pushing the rules to the limit -- and, at times, beyond. "He sees what he wants and does it," says Michael Mondavi, scion of the storied Mondavi clan.

And what Franzia wants these days, his competitors say, is to stake his claim on the Napa Valley name while exploiting the hard times of others to expand his empire.

Behind the faux-Tuscan facade of his Napa winery, Franzia does not crush grapes or ferment juice. Instead, he has built a high-speed bottling plant licensed to process 18 million cases of wine a year, roughly twice the annual production of the entire Napa Valley. And yet, Franzia doesn't own a square foot of Napa vineyard land.

"There is only one reason he built it in Napa," says Tom Shelton, chief executive of Joseph Phelps Winery. "He wanted a Napa address for his labels. Consumers don't want to buy [Central Valley] wine. They want to buy Napa."

A sudden folk hero to those lining up at Trader Joe's stores to buy cases of his $1.99 Charles Shaw wine, Franzia is the rare vintner capitalizing on the current glut of grapes, outsmarting and outselling his competitors by making higher-quality, cheap wine just as the industry struggles through an economic downturn. In fact, Charles Shaw is the fastest-growing brand in the history of American wine, according to the Wine Market Report.

At the Napa facility, Franzia can process Charles Shaw, and any other wine from any other place in California, with labels that proclaim: "Cellared and bottled in Napa."

It's not a crime, says his spokesman. But the clubby Napa wine industry talks about him as if it is criminal to do what no other vintner has dared.

"He's out there to shatter the icons of wine," says Jack Stuart, general manager and wine master at Silverado Vineyards. "He has the wherewithal to flood the market with non-Napa wine carrying the Napa name. I don't think he has any qualms about it."

As for Franzia, he isn't saying. The 59-year-old native of the San Joaquin Valley keeps his name off his labels and avoids the glamorous events that are so much a part of the wine business. He has never given an in-depth interview and declined to be interviewed for this story, although he did allow a tour of his Napa plant.

In January, he didn't attend the annual Unified Wine and Grape Symposium, where industry analyst Jon Fredrikson named Franzia's Bronco Wine Co. the "Winery of the Year," the 20th annual award presented for outstanding wine sales. It's the People's Choice Award for wineries, and giving it to Bronco signals a dramatic downscale shift for an industry that has enjoyed its greatest recent growth in the sales of higher-priced wines.

"There were no boos, some groans, but it was pretty quiet," Fredrikson recalls.

'Wine people detest Fred'

In an industry fueled by elitism, the specter of a mass marketer expanding his empire in wine's high-rent neighborhood makes for sour grapes.

"Wine people detest Fred," says Richard Peterson, a veteran winemaker who now works for Franzia. "I mean they really hate him. Kind of taken on a life of its own at dinner parties all across the valley. Most of these people haven't even ever met him."

It's mostly envy, says Mondavi, one of the rare Napa vintners willing to break ranks and call Franzia a friend. "Every time the industry has a down cycle, Fred comes out stronger, with more vineyards and less debt," he says, noting that it wasn't until the last wine recession in the late 1980s and early 1990s that Franzia built his Central Valley empire, picking up vineyards and wine labels at fire-sale prices.

More worrisome to the vintners than his Napa bottling plant are three of the wine brands Franzia bought during those years, labels bearing Napa appellations -- Napa Ridge, Napa Creek and Rutherford Vintners.

Because these labels were in use before July 1986, when federal law dictated that wine brand names not conflict with the regional origin of the wine in the bottle, they are exempt from the law. Franzia can and does use the labels on wine from grapes grown anywhere in California. It's a loophole that no one else in the industry has used, despite the 30-some Napa labels grandfathered out of the federal law, according to the Napa Valley Vintners Assn.

"Wine is a product of place," says Richard Mendelson, a lawyer for the association, and a place's name can be destroyed. "Tarnish it, dilute it, and you lose it and never get it back."

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