Why is Trader Joe's Wine Cheaper Than Bottled Water?

More than one secret lurks in the aisles of Trader Joe’s, the trendy, organic-loving grocery franchise that was spawned from a chain of convenience stores in the 1950s. Shoppers have tried to guess whether their store brand mac and cheese is actually made by a major food label going incognito. (Verdict: No one’s really sure, but the mac does taste a lot like Annie’s.) Managers are called “captains” instead of managers because founder Joe Coulombe really liked the oceanic motif.

But the biggest mystery of Trader Joe’s may be in their liquor section, where their store-endorsed line of Charles Shaw wine sells for as little as $1.99 a bottle in some markets.

How can wine cost as much or less than an equal quantity of bottled water? More than just getting slightly tipsy, will you go blind? Will it work in your car’s carburetor?

Mack Male via Flickr // CC BY-SA 2.0

To understand how Charles Shaw sells wine for pocket change, it helps to know who Charles Shaw is—and why he has absolutely nothing to do with this story.

According to Thrillist, Shaw used his wife's money to buy 20 acres of Napa Valley land to start a winery in 1974. Business was brisk, and Shaw knew his high-end wine from grape juice. The Charles Shaw label came to represent quality among wine aficionados, and his business grew to include 115 acres by the late 1980s.

Unfortunately, Shaw’s business acumen was not always as refined as his palate. A mistake in the kind of wax used for his wine barrels—petroleum-based instead of beeswax—tainted a massive supply, and Shaw was forced to discard 1400 barrels of vino and suffer hundreds of thousands of dollars in losses. He also erroneously anticipated a demand for Burgundy-style wines, stocking up just as demand was slowing. Root lice infested his crops, chewing at his grapes. By 1992, Shaw was more or less the Job of the winemaking trade.

With his business bankrupt, Shaw submitted to an auction of the winery’s assets. The trade name was purchased by Fred Fanzia, owner of the Bronco Wine Company. With Shaw off pursuing other opportunities, his name—and his former brand—was left in Fanzia’s hands.

Bronco sells more than 80 different wine labels at varying price points. For Trader Joe’s, Fanzia decided to aim for the kind of traffic-stopping signage that would get people talking. His line of Charles Shaw wines debuted in Trader Joe's stores in 2002 and sold for $1.99 a bottle in many markets, which quickly earned it the nickname “Two Buck Chuck.” Wine connoisseurs debated the practicality of offering quality wine at such a low price; college students filled up grocery carts with them.

Objectively speaking, it’s probably not very good wine. Reviewers have dubbed it “undrinkable” and “sugar water.” But Bronco is able to profit for a number of reasons. For one, many of their vineyards are located in California's San Joaquin Valley, which is comparatively cheaper real estate than the Napa or Sonoma territories. Two, the wine is often fermented with oak chips, a cheaper process than fermenting the wine in barrels. Most importantly, the grapes are machine-harvested, which keeps costs down but might result in a more sugar-laden wine. Bronco also keeps shipping costs low by using lightweight bottles.

Does Shaw, who is currently marketing software for cardiac surgery monitoring, have any issue with his name being associated with econo-booze? Yes, he does. In a 2013 interview with The Weekly Calistogan, he called the Two Buck Chuck label “embarrassing and demeaning.” Trader Joe’s would call it profitable. The store has moved more than 800 million bottles since 2002.

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