Shaking up the Wine Establishment

A 4,500 word article on Fred Franzia, the US winemaker responsible for inventing the ‘two buck Chuck”. It outlines the history of his business life and his adverse relationship with high end wine makers.

“Two buck Chuck” is the term used for wines sold under the Charles Shaw brand for $1.99. In 2002, the wine market was in a glut and premium wineries were slashing prices to reduce inventory. Franzia’s business is in the bulk wine catergory, which was suffering because premium wines could now be bought for the same price as his own cheap wines. So Franzia cut his margins to allow his wines to undercut the discounted wines. These cheap wines made a sensational impact on the public because wine had never been available for such a low price before.

In general, however, his strategy is to buy vineyards and labels when those assets are in distress, gradually adding economies of scale to his business.

Although innovative, his way of doing business has caused hostility among his fellow winemakers and he has crossed into legal gray areas (at one time paying a $500,000 fine for mislabeling cheap wine as premium). He criticizes the premium wineries and the appelation system, yet he uses their names and brands to sell his product.

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