Chapter 6: Indicting Schloss Cellars
Jeremy had rolled over his epic tale many times within himself, but this was the first time he had spoken of his revenge to anyone. With Bobby having confessed his darkest secret, Jeremy now felt a need to reciprocate. He resumed his tale. Jeremy told Bobby that next he had talked with Stan Bergen, winemaker at The Winery, the buyer of all of Jeremy’s chardonnay grapes. He had wanted to verify if the sort of thing Gregor’s kid had described was a common occurrence at the big wineries. Over a series of Australian stouts at General Hooker’s Red Light Pub, Stan revealed the dark side of The Valley’s moon.
“Jeremy, I’m sorry to say that it’s true,” Bergen had told him. “You wouldn’t catch us bringing in bulk finished wine around here. Our reputation couldn’t afford it. All of our wines come from grapes we crushed and fermented here. Even our inexpensive white table wine is really ours. It’s the heavy press and rackings from your chardonnay and our riesling and sauvignon blanc.”
“So why do the big boys do it?” Jeremy asked Stan.
“It’s simple, Jeremy. The money. Don’t you remember the scandal a few years ago, when they found that bunch of Chevy engines in Oldsmobiles? And the whole time they were working that scam there were ads on TV extolling the uniqueness, the virtues, of driving an Olds. It’s the same situation here. Schloss is the epitome of the royal scam. They haul up cheap desert wine and process and bottle it and try to somehow connect it with wine from our valley. I’ve got a few old classmates from Davis who were caught in the revolving door at Schloss, so I’m familiar with the situation there.”
“Tell me everything you know about it.”
Bergen told Jeremy the tale of Schloss, a winery that had found itself gravely ill of late. Management mishandling had turned what once was a small premium winery into a present-day decaying monolith.
Bergen told Jeremy how Schloss had been founded during the great wine boom of the late 1960s, when demand for premium wine – especially red premium wine – far outstripped supply. Several large corporations joined in the exploitation of the boom. They either acquired existing family wineries or created new ones on large patches of virgin brush-covered hills of the North Coast Valleys. Schloss was purchased from an old German family by a large, Texas-based tampon manufacturer. They had retained the name of the old family’s enterprise, “Schloss,” which meant castle in German. In 1969 the world was not yet prepared for a wine called “Feminique.” The corporation had torn down the old barn that had served as the family winery, but kept the family home as a retreat for its executives. In the barn’s stead, the corporation had constructed a large, ultra-modern winery in a small canyon on The Valley’s western slope. An adjoining restaurant and tasting room looked out over The Valley, an expanse of vineyards that resembled a patchwork quilt each fall. It was one of the most beautiful scenes in America.
But within five years, the corporate-powers-that-be had lost their faith in hip agricultural-oriented acquisitions. They had spent a fortune on red grape plantings and the construction of their grape refinery only to see the market go soft in the recession and wine glut of the mid-seventies. Plus their short-range planners refused to pour money down a dry hole; they needed the capital for advertising their new line of feminine deodorant sprays that for the first time could be advertised over the public airwaves. In the boardroom the corporate officers had sat in Solomon-like soberness as they heard of the difficulties of creating a market for their wine in the fickle world of wine drinkers. That world was filled with second-guessing the consumer. Often the consumers led the wineries around to their evolving tastes. That kind of talk terrified these men who had spent their lives developing a total system for “a woman’s special problems.” These men were used to creating a product – such as a feminine deodorant spray. Then they had their marketing and advertising departments create a ‘woman’s problem’ for it.
So they sold off the vineyards at a tidy profit and put the huge winery quietly up for sale. The purchasers were Tom Delaney, whom Jeremy knew, and a large group of grape growers, most of whom owned ranches in the warm, inferior valley in the county north of the winery. And Delaney had brought in as minor shareholders – and strange bedfellows – a credit union for employees of a string of fundamentalist colleges. The new owners had a noble concept: To turn Schloss into a quasi-co-op of grape grower-owners who would have a place to bring their grapes for crushing year after year. They no longer would have to rely on the big Central Valley producers who bought grapes for bulk crushing and eventual shipment to their distant wineries.
“We all know about the connection,” Bergen had said. “They always need some of the North Coast’s strong grapes to blend in with that Algerian swill they grow out in the desert.”
Jeremy was already aware of what Bergen told him. For several years Jeremy had taken his red charbono grapes to a local bulk-fermenting plant controlled from afar by a huge desert producer. But he had become so perturbed with their slow payment and the seemingly arbitrary penalty-point system they imposed on his grapes that he had let them rot on the vine rather than having to face the hassle – until Delaney talked him into joining Schloss.
Bergen told Jeremy more about the early days of Schloss as a co-op.
To join the co-op, member-growers had to pay $5,000 up front before they dropped off their first load of grapes at Schloss. A portion of the grape juice pooled together from the growers’ grapes was purchased by Schloss for bottling under its label. But Schloss wasn’t receiving the best fruit because it wasn’t willing to pay a fair price to its captive members. The member-growers sold their best grapes to the small premium wineries willing to pay the price; they sent the junk to Schloss. As a result, Schloss was forced to buy grapes from non-members for what it labeled its best wines.
At the same time, Delaney and several of the wealthiest grape growers of the co-op, whose family members purchased shares to insure that there was a power elite composing the board of directors, formed a separate entity. They created a leasing company that bought stainless-steel storage tanks and leased them back to the under-capitalized Schloss for storing its ever-increasing inventory of mediocre red wine.
“Jeremy, when I first heard about that leasing company and who was behind it, it all sounded like some sort of juicy Ponzi scheme,” Bergen had said to his friend.
He explained that there were two basic kinds of member-growers at Schloss: the big guys who used the co-op as a tax write-off – and then received their check each month as partners in the leasing company – and the little guys who were joining all the time; they hoped for a profit, but weren’t in on the lease-back deal.
“Have you been there during crush, Jeremy? I was up there for a luncheon, and I saw a dozen trucks in line at the crusher. A third were new semi’s of the big boys, and the rest were old stake-bed Fords. What a contrast. And it’s the idealistic little guys with those old rattletraps and tiny vineyards who’ve had to scrape up five grand that they didn’t have to join the ‘co-op.’ They’re the ones who get the letter every month from Delaney that includes the crushing, processing and storage fees that Schloss charges them for bringing their grapes to the winery, along with the line in the letter that says, ‘Due to the saturation of red wine on the market, the needs for the Schloss line do not include your wine at this time.’ It says they have the wine listed with brokers in the bulk wine market, and that they’ll hold out for a favorable price. I’ve seen one of those letters.
“Jeremy, why should that son-of-a-bitch Delaney make any effort to sell that pool wine?” Bergen had asked. “He and his buddies are making a killing off those small guys. I hate to see that happen. He’s got plenty of room out behind the winery for 25 more tanks – Schloss has added 200,000 gallons to their capacity in the past three years by leasing tanks from Delaney’s company.”
Jeremy was dumbfounded by his friend’s revelations. He was unaware of the tank-leasing deal, even though he was a member of the co-op.
“Stan, what I don’t understand is why they haul up that Central Valley swill if they already have all that wine in storage at Schloss.”
“Most of what the co-op members have brought to the winery is red wine,” Stan had explained. “And there has been such a demand these past few years for white – look at our percentages of production here. Schloss has had to buy white wine just so they’d have something to sell. And you wouldn’t believe how much red wine they’ve got sitting in stainless steel tanks up there. I’ve heard they had to move out three-quarters of a million gallons of cheap red wine just to free up the tanks for last year’s crush. And you know where they moved it? To some old bacteria-invested redwood tanks at an abandoned winery in Healdsburg.”
“Unbelievable.”
Stan continued. “This is a bit off the subject, but let me tell you how they sell what little wine they can. It’s based on a marketing scheme – I guess that’s what you’d call it – that borders on deceit. That friend of mine who spent a short time at Schloss said they have more than 75 second or ‘private’ labels being cranked out of there. Seventy-five! Almost five out of every six bottles leaving Schloss have phony labels on them.”
“I don’t follow you, Stan.”
“A little background. Back when it was owned by the corporation, Schloss hired a national distributor to market their wine. The distributor and Schloss had a contract that was automatically renewable as long as the distributor, as Schloss’ exclusive agent, sold a certain number of cases each year. The deal was still on when the co-op took over. When the membership pyramid began, inventory increased but sales didn’t keep up – the agent was just barely meeting the minimum quota – and Delaney and friends were in a quandary.
“So first they tried ‘direct marketing.’ They have a phone bank of solicitors – a bunch of old copy-supply salesmen – who call every business in Southern California and New York. They try to push that crap ‘winery direct’ on some poor, unknowing suckers in LA who think the wine they’re buying at full retail is a real bargain. What ‘winery direct’ has done is take the Schloss label that a network of distributors and retailers have developed over the years and it slaps them in the face with it. But that whole scheme didn’t really help sales. Their other ploy has been second labels or ‘dba’s.’
“Dba’s?”
“It means ‘doing business as.’ You put the name of someone or something else on your product for whatever reason. When you use several ‘dba’s’ it’s usually as a method of deception or –“
“Stan, I think I know what you’re talking about,” Jeremy said. “When Bobby worked for a criminal attorney in Houston a couple of summers back, he said that a few bail bondsmen used dozens of phony names in the phone book – all names for the same company. He said it didn’t matter what name was chosen from the yellow pages because, when the prisoner made that one desperate call, he got one of those same six bondsmen.”
“Exactly, Jeremy. Only here it’s the consumer at a wine store in Denver or Miami who’s being taken for the ride. They see a tiny stone winery on a label with a beautiful valley such as ours as the backdrop, and all sorts of catchy words that make them think the wine came from within a mile of right here. Only the consumers don’t know that it came from that big vat at Schloss. That wine is two-thirds cheap chenin blanc grown and fermented in the desert, and it probably has a little Thompson Seedless to boot. Schloss adds some high-sulfur, high sugar juice to sweeten it up a bit – maybe they’ll add a little of their press wine – and they bottle the stuff under that phony label and a couple dozen others for some marketing or distribution company. Those bastards call themselves ‘negotiants’ – but that’s nothing but another California perversion of a French word. They’re really nothing but damn-the-consumers entrepreneurs.”
Stan paused, reluctant to reveal the obvious, but eventually he spoke. “Those custom labels at Scholl helped kill your son, Jeremy. The truck that hit him was loaded with hot desert swill they were sneaking in for some phony-label Chablis.”
As the meaning of Stan’s words hit home, Jeremy silently added yet another incriminating piece of evidence in his case against Schloss. He was surprised to find himself calm, quite the contrary to his friend. Stan’s face was flush, and he grabbed his pint mug tightly, as if he were about to use it as a weapon on someone’s head.
