From a Lean Year, a Rich Vintage

Fred Franzia, maker of 'Two-Buck Chuck,' is on top of the bargain wine market. It's no wonder. He created it.

The recession has been painful for Napa Valley vintners, but it's been a boon for Fred Franzia, a pioneering wine entrepreneur and owner of the Charles Shaw label (that's "Two-Buck Chuck" to its fans). "Consumers are rejecting the claims that wine was worth the kind of money Napa vintners were charging," says Franzia, self-proclaimed champion of cheap wine. "People want a wine they can afford to drink."

Franzia, president of Bronco Wine Co. in the San Joaquin Valley, is the largest vineyard owner in the United States, with more than 40,000 acres of wine grapes in California. He crushed 350,000 tons in 2008. Last year, he crushed 500,000 tons--a company record and a volume second only to his cousins, the Gallo family. He's sold more than 400 million bottles of Charles Shaw, and demand is surging.

When he first released Charles Shaw seven years ago, a $1.99 price tag was unheard of for anything in a bottle with a cork. It ushered in a new super-value category that continues to exert a downward pull on wine prices. "If you want to survive in the wine business, you have to figure out how to compete with me at $2 a bottle, not $20," Franzia says. "Consumers are looking for bargains."

Until this year, wines selling for $20 or more constituted 10 percent of the volume of California's wine, but 35 percent of revenue--a healthy chunk of a $20-billion industry. For decades, that was the fastest-growing sector, and pricey Napa Valley wines flourished.

But today, Franzia tops the growth chart. In fact, as one of the largest buyers (and suppliers) of bulk wine, Franzia often gets the call when a Napa vintner needs cash fast. "They believed their own BS in Napa," he says, clearly delighted that he is their buyer of last resort. "They can't sell their wines, while we can't keep up with demand."

It's not the first time Franzia and Napa have been on opposite sides of the fence. In 2006, Franzia lost a bitter court battle with Napa vintners determined to stop him from selling low-rent Central Valley wine under brands with "Napa" in the label.

Neither side has ever forgiven the other.

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This article was originally published in the March 2010 print edition of Entrepreneur with the headline: From a Lean Year, a Rich Vintage.