Things Not to Do, Part XXVI

Exclaim loudly, while looking at the wine bottle, "Why! It's Two-Buck Chuck!"

Other dinner guests are not as interested in the economics of low-margin distribution of Charles Shaw wines as you are.

Comments

[No Preference]

Heh. I had a friend who, arriving late to a dinner party at his own house, commented that they usually served a better wine than this, not realizing that the guests had brought it.

[Anonymous Cheapskate]

I'm always afraid that when I go to a dinner party and bring wine, somebody will say, "Hey...I see you choose the bottles with the biggest markdowns at Safeway!"

I do try to only buy from vintners where I've had potable wine before, so that narrows the range. And I never buy from vintners with cutesy or overly cliched names, like "Redwood Creek", or "Napa Valley Vineyards".

[wcw]

Well, you could shop the Grocery Outlet's risky
(but sometimes rewarding) $2-5 range. They even
guarantee their product, so you can taste a dozen
bad bottles, stopper and return them, and try try
again. You will eventually find something decent
and occasionally even quite tasty. Plus, it is
not a retail establishment that generally attracts
the dinner-party crowd, so your risk of discovery
is much lower.

[calmo]

Maybe that's it: AQ is a little miffed at the wine selectors..

[Ereshkigal]

At least you didn't exclaim loudly, while looking at the hostess,"Why! It's Two-Bit Kate!"

A similar low-margin issue, a different market.

[lfs]

Brad shops at Trader Joe's.

[Tim Walters]

I always have to suppress an urge to call it "Two-Buck Upchuck." Not so much because it's lousy (although it is), but because I can't resist elementary-school humor.

[trotsky]

Buying the bottles with the biggest markdown at Safeway is my mantra -- though it's a bit long to be useful in mediation.

[PaulC]

When I lived in Switzerland, I noticed they sold amazingly inexpensive 1 liter bottles of wine with crown caps (like beer). I never bought one, though I saw enough customers doing so. The 750ml bottles with corks were also somewhat cheaper than I'd expect in the US, and I couldn't imagine why I'd want to go any lower.

[Jonathan W. King]

> Other dinner guests are not as interested in the economics
> of low-margin distribution of Charles Shaw wines as you are.

Why not? To me it sounds like you're hanging around with the wrong sort of people. Plus, isn't the great thing about two-buck chuck is that you can afford to enjoy so much of it while you're discussing the economics of low-margin distribution?

So the question I have is: why is two-buck chuck actually three-buck chuck in the St. Louis and Chicago markets? The shipping cost can't be close to the difference, so I'm presuming either that the two buck California version is a loss leader, or (maybe more plausibly) the wine market there is now ludicrously competitive. I guess the interesting question is why and how the cachet of the thing requires a conventional bottle rather than a jug or a box, which would definitely be way cheaper as far as shipping goes

[jenson]

This is interesting. Someone just wrote to me the other day asking if two buck chuck was even made from grapes, suggesting that that's why it was so cheap. It was a serious question. Rumors have always flown about as to how this wine can be this cheap. I think it lies in the volume sold, TJ couldn't keep the stuff in stock when it came out, people were buying cases and cases of it.

J.W. King said:
"I guess the interesting question is why and how the cachet of the thing requires a conventional bottle rather than a jug or a box."

Well that's the whole thing...(and I don't claim expertise here but..) "Bronco Wines", a label that in my opinion lowers the "cachet" a notch or two, titles the wines with "Napa" brands, a marketing move the courts have upheld. Interesting story, see link below for overview. So the "Napa" brand lends cachet, although the grapes are really from anywhere in California. Grapes in Napa Valley cost thousands of dollars per ton, vs. grapes in Central Valley, which cost hundreds per ton. Napa wineries have long protested this practice.

It says something about the wine that the hostess with the mostest would even serve it. (I generally wait 'til the guests can't read before breaking it out:)). Actually I got a bad bottle once, and haven't served it since. Those who take keen interest in wine and specific appellations have utter disdain for this "swill" that has been pooled together from grapes scraped from "anywhere", California. Others insist on it's good value.

And this recently in --- Bronco Wines will be distributing a new four buck chuck -- http://www.sacunion.com/pages/california/articles/5237/

[hey]

why doesn't $2 chuck cost $2 everywhere?

its the regulation stupid. I know its heresy that a non-republican government can do anything wrong, but states extract so much in taxes that they drastically affect the wine (and other alcohol) markets. many states have minimum price restrictions, so charles shaw is sold at the minimum legal price. why are there minimum prices? to protect society. also, triple layer distribution system has rentiers who bribe legislators to maintain their monopolies. they've allied with MAAD and other anti-alcohol campaigners to hurt theior competitors and the vintners who need to use distributors. big business working with activists to pursue leftist or dirigiste policies against consumers and small producers to extract profits. such is the result of Democratic and leftist politics everywhere.

[Hedley Lamarr]

Two Buck Chuck is now about $3.40 in the D.C. area, still a best buy in my mind in red table wine.

[kett82]

Brad

I would like to see an economic analysis of Shaw’s operation. From what I have read he has completely changed the wine industry in the U.S. Now consumers expect a "drinkable" wine for under $5. And why not??

[jenson]

JW Wing asks:
"So the question I have is: why is two-buck chuck actually three-buck chuck in the St. Louis and Chicago markets?"

Interesting. Here's what I found. Simple - mandatory distributors (with fees) b/c of laws forbidding direct sales to retailers (from out of state wineries or all? Not sure). Being challenged now by Costco. Anyway here's more: http://www.latimes.com/business/la-fi-wholesale10apr10,0,7989682.story?coll=la-home-business

More info on Bronco Wines and the interesting history of the owner, Franzia, in WSJ Feb 22, 2005 "In Napa Valley, Winemaker's Brands Divide an Industry" this link might help:
http://66.102.7.104/search?q=cache:CfozyGL8Xn0J:online.wsj.com/article_email/0,,SB110902677306360253-IJjf4NilaB4oJ2pZnSIaKeDm4,00.html+distributor+%243+charles+shaw&hl=en

And as well, the Supreme Court Decision on branding that perhaps led to the $4 wine of my earlier post.
http://the.honoluluadvertiser.com/article/2005/May/27/bz/bz10p.html

cheers

[Jonathan W. King]

OK, so now that I know who bottles Charles Shaw, the basic facts are easy enough:

http://westernfarmpress.com/news/farming_broncos_twobuck_chuck/

So Trader Joe's gets (got?) the wine for $19 per case, and sells it in CA for $24. In Missouri, they sell it for $36. I am still unwilling to believe that shipping and other fees really add up to $12 more per case in costs, so I conclude that they do make a better margin on Charles Shaw in the Midwest (and DC) than in CA. This really makes some sense, since the Midwest really is strapped for decently affordable table wine. 2 buck chuck isn't great, but I've had wine that costs almost 10 times more not be any better. As far as I can tell, it dominates in the category of under $7 per bottle (at least stuff you can get around here). By this I mean that It's easy to find $10 bottles of wine that are consistently better than Charles Shaw, but pretty hard to find $5 bottles.

[Jonathan W. King]

Jensen writes:

> More info on Bronco Wines and the interesting history of the owner, Franzia, in WSJ Feb 22, 2005 "In
> Napa Valley, Winemaker's Brands Divide an Industry" this link might help:

Excellent; that link includes a graphic suggesting that more Charles Shaw (which is 80% of what is graphed) is going outside of California. Exactly what you would predict if the margins were higher there. The article on mandatory wholesaler agreement is interesting, but can't really explain the whole difference. If the wholesaler pays $19 per case and is forced by law to sell for at $25.33 per case, while TJs sells the wholesald wine at $36 per case, the gross profit per case is now over $10 (compared to $5 within CA). The shipping cost probably didn't double, though, so the margin is likely higher.