May 30 2007
I caught the recent article(s) on Charles Shaw wine celebrating its 5th birthday. This excerpt from the AP sums it up:
It’s been five years since the first of these amazingly cheap chardonnays and cut-price cabernets started rolling off the line, released by maverick vintner Fred Franzia under the formal label of Charles Shaw wines.
Three hundred million bottles later, Two Buck Chuck is still selling, and Franzia is still preaching his message of wine for the masses.
Last year, Two Buck Chuck, available only in the Trader Joe’s grocery chain and priced at $1.99 in California, hence its nickname, accounted for at least 8 percent of California wine sold in-state, said Jon Fredrikson, who tracks wine shipments through his Woodland-based company, Fredrikson, Gomberg & Associates. National market share figures are not available. A bottle can range as high as $3.49 elsewhere.
Can that be right? 8% of California wine sales. That is an astounding figure to me. California, the land of milk and honey in terms of wine and Charles Shaw represents eight out of every 100 bottles sold?
Wow. Color me shocked.
I did some back of napkin math on the 300M bottles sold in five years:
• Over 5 years Franzia has sold 25M cases of Charles Shaw, or
• Approximately 5M cases a year
• Charles Shaw alone, measured against the Wine Business Monthly list of Top Wine Companies, would be tied for the 9th largest wine company with Jackson Family Wines, makers of Kendall-Jackson
• Trader Joe’s has approximately 274 stores that sell wine and 5M annual cases works out to 18,248 cases per store, per year
• Each store averages 350 cases sold per week or 6.25 pallets of 56 cases
It gets a little complicated to do the math for mark-up and sales because transportation does come into effect and there is a discrepancy between California pricing at $1.99 a bottle and prices in the Midwest($2.99) and the East and Southeast (3.49), but suffice to say that Franzia is probably giving Trader Joe’s, by virtue of their profit rich private label business aesthetic, a margin much richer than the traditional 30 – 40% mark-up. If mark-up is 50% on a case of wine that has a wholesale case price of 10.50 than Trader Joe’s is making about $13.40 a case or $244,523 in profit per store!
If you compare that per store profit figure against SIC code 5921.0102 for wine retail shops it would tell you that wine shops in their first three years of operation average $182,927, $214,035, and $205, 085 respectively in gross sales.
So, yes, in sum, a single SKU in a single Trader Joe’s PROFITS more in a year than the average new wine shop grosses.
Unless you’re a small wine retailer, that should make you feel better about your lot in life. And, it’s a pretty good indicator why Fred Franzia, when his $2 wine wins blind tastings and he controls his own supply chain, doesn’t give a damn what other people think of him.
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