What’s Inside Isn’t on the Outside

As the federal and state governments seek labels that will tell you more about what’s in a bottle of wine, a new wine has just hit store shelves that will tell you less.

The winery that made this wine wants desperately to tell you more, but the federal government, falling back on archaic laws, doesn’t want you to know more.

The wine is a 1987 Chardonnay made entirely from Washington state grapes and produced by Bel Arbres Vineyards, the affiliate winery of Fetzer Vineyards in Mendocino County. This is Fetzer’s first foray into the so-called pop-premium category of wine--cork-finished varietal wines with suggested retail prices of less than $5 a bottle.

It’s All Chardonnay

Fetzer is proud of the fact that this wine is 100% Chardonnay (at a time when some of its competitors in the pop-premium field are making wine with less than 100% of the named variety). And Fetzer is proud of the fact that the wine is of high quality (at a time when some competitors’ wines are not as good because of a shortage of premium-quality grapes).

Yet under a strange law on the books of the Treasury Department’s Bureau of Alcohol, Tobacco and Firearms, Fetzer can’t tell you this wine is from Washington. The law says that if a winery produces wine from a non-contiguous state, it can’t name the state.

Thus if Fetzer had made this wine from Oregon grapes, the wine could carry an Oregon appellation, but because Washington does not touch California, the appellation for this new Bel Arbres wine must say American. That tells you only that the grapes came from somewhere in the United States, which could mean Key West or Minnetonka.

And the vintage date? Even though the wine is entirely made of 1987 harvest grapes, the vintage date is not on the label either because the bureau law says that if a winery uses an appellation as large as a country (in this case the appellation is American), then the wine can’t have a vintage date.

“We’d like to use Washington and the vintage date on the label,” said David Hansmith, director of communications for Fetzer, “but we’re prohibited.”

Richard Mascolo, chief of the bureau’s wine and beer branch in Washington, D.C., said the regulation has been on the books for decades, probably since Prohibition, and that his office has already received three complaints about it in recent months--from Chateau Thomas Winery in Indiana, La Reve Winery in New York, and from Peter Brehm, a grape broker from Albany, Calif.

Mascolo said his office is looking into the legislative history of the rule and may accelerate changing it if his office receives further complaints.

He said he suspected that the law was instituted years ago “when it wasn’t feasible to ship grapes long distances” and the regulation may have been supported by the California wine industry to protect the state’s image if grapes shipped to the East Coast produced poor quality wine.

Why, you might ask, would Fetzer be willing to buy Washington state grapes and make wine from it (80,000 cases of Chardonnay and 5,000 cases of Cabernet Sauvignon) when it faced being saddled with this ancient labeling law?

The answer lies in the incredible shortage of premium grapes in California in the last year, quite a change from 1983 when there was a huge surplus. The story of this shortage is in itself fascinating.

One winery can claim credit for creating the great demand for premium-image wines throughout the nation. That winery is tiny Glen Ellen on a historic ranch on a mountainside in the Sonoma Valley.

With clever pricing and brilliant marketing, Glen Ellen’s Proprietor’s Reserve wines became very popular about 1985, and by 1986 demand was so great that competitors started appearing.

Glen Ellen’s cheaper Chardonnay and Cabernet were good wines, and they sold for far less than true premium wines. Thus was born the pop-premium segment of the wine market. Many buyers of pop-premium Chardonnay and Cabernet Sauvignon had recently been drinking jug wine, a segment of the wine industry that has slumped badly for three consecutive years.

In 1985, Glen Ellen sold an estimated 350,000 cases of wine. That figure rose to an estimated 850,000 cases of wine in 1986, and the winery hit 1.5 million cases last year, with a target of more than 2.3 million cases this year. All but a fraction are designated either Proprietor’s Reserve or M.G. Vallejo, a parallel brand.

Some of this wine was Chardonnay and Cabernet with a suggested retail price of $4.99, but which, with volume discounts, could be sold for $2.49. And Glen Ellen, with the lion’s share of the pop-premium market, has vowed to hold the line on its pricing, putting the heat on its competitors.

And the competition is there, notably from such industry giants as Beringer (under its Napa Ridge brand); Sebastiani (with its Country line); Guild (with its new Mendocino Vineyards brand); Heublein (with its new Sylvan Springs brand) and others.

Fetzer, which sold an estimated 1.2 million cases of wine in 1987 (up from 890,000 in 1986) has plans to sell some 350,000 cases of its Bel Arbres wines this year, a considerable portion of it Chardonnay and Cabernet Sauvignon with pop-premium prices.

Obvious Shortage

The shortage of Chardonnay and Cabernet in California became obvious a year ago after a heat wave in the spring reduced the size of the grape crop in Napa and Sonoma counties. So some wineries began to look elsewhere for grapes.

One of the first was Chateau Diana in Healdsburg in northern Sonoma County, which bought Washington state wine for its private label brands. And the price was right, too, because of a bumper crop in Washington’s southeastern valleys where the state’s best wine grapes grow.

Washington is an emerging wine-growing state. I toured the Yakima and Columbia valleys in August and tasted some marvelous wines--lean, delicate, fragrant Rieslings; marvelously complex Cabernets; rich Chardonnays of grand potential.

At the time California was experiencing a short grape crop (tonnage was off 11% statewide), Washington was having a record harvest of 40,000 tons of grapes. But the entire state of Washington has tank and barrel storage capacity to house only 28,000 tons.

This meant that grape and bulk wine prices for Washington wine plummeted, and made them attractive to wine makers in California who were facing rapidly increasing prices and diminishing supply. Washington grapes were a solution in spite of the bureau’s regulation that limits the appellation to American--a designation that is less prestigious than Washington, which now is known as a premium wine growing area.

“Our goal was to produce something in that price range (pop-premium) that’s very good wine, and one way to do that was with Washington grapes,” said Hansmith of Fetzer. He said the Bel Arbres wine was 100% Chardonnay, which he said wasn’t true of many competitors in the field.

The Glen Ellen wines, for example, are blended from grapes and wine purchased from all over California, so the wine carries a California appellation, but because of the high cost of California Chardonnay grapes, the Proprietor’s Reserve wines are usually not much more than the minimum varietal content of 75%. Other, less expensive grape varieties are blended in.

Making inroads into the pop-premium segment isn’t easy these days because of the high price of grapes and the virtual absence of bulk wine.

In years past, wine brokers could locate and bottle bulk wine (often wine made from unsold grapes at “custom crushing” locations that rented out space to growers). They bought the wine by the gallon, bottled it in 750-milliliter bottles and sold it under a private label.

Through 1986, wholesale prices for Chardonnay and Cabernet in bulk ranged from $3 per gallon (for barely drinkable stuff) up to $10 per gallon for top-quality.

All that began to change in 1986, and in the last six months changed drastically. The first wine to disappear from the bulk market, for all intents and purposes, was Chardonnay. First the price rose to $15 a gallon and then it simply was bought up, at virtually any price the owner wanted. (In one case I heard about two weeks ago, a small lot of oxidized Chardonnay, undrinkable by itself, sold for $10 a gallon.)

Short Supply

Then Cabernet Sauvignon began to get in short supply. Craig Scarborough, who heads up the wine buying program for the Belvedere Winery’s Discovery wines, said recently that bulk Cabernet now sells for $14 a gallon and “that’s for stuff that’s not particularly great, just drinkable.”

At that price, the wine in a single bottle costs $2.80, and when you add in the cost of bottles, corks, labels, capsules, freight, handling, bookkeeping, taxes, and storage, it’s pretty hard to keep the price of the wine under $5.

One way to compete in the pop-premium field is to make a wine other than Chardonnay as the primary white varietal wine, and two key players in that niche are the Robert Mondavi Winery, with its table wine program from Woodbridge, near Lodi, and Barefoot Bynum, a Sonoma County operation. Both feature Sauvignon Blanc as their top white-wine varietal.

But the market is getting tougher, and soon the only players in this pop-premium game will be large, well-financed wineries who can use economies of scale and their buying power to offer a varietal wine at $2.49.