Sonoma County, Banana Republic of Wine-Grapes
by Will Parrish, December 1, 2010
In 1993, American wine industry goliath E&J Gallo (annual revenue: $2 billion) founded its first subsidiary dedicated solely to producing high-end, “premium” vintages: Gallo of Sonoma. The move reflected a dramatic shift for the Gallo empire, which accounts for one in four bottles sold in the US wine market.
For several decades, Gallo's forte was cheap, fortified jug wines such as Thunderbird and Night Train — each at least 18 percent alcohol by volume. The company initially cornered this dubious market in the '50s and '60s, via clever ad campaigns complemented by aggressive promotions in so-called inner-city “colored bars” (a process described by journalist Ellen Hawkes in her book Blood and Wine) and off-reservation American Indian communities. The dislocation, poverty, and alienation endemic to many of these areas provided fertile grounds for alcoholism, which the Gallo patriarchs Ernest and Julio shamelessly bred and profited from.
By the early-'90s, the American wine market was moving increasingly upscale. With its wide variety of favorable microclimates and soils, as well as relatively low land prices vis-a-vis Napa County to the east, Sonoma County emerged as the epicenter of the “premium grape rush,” a finance-driven speculative bubble that has accompanied the shift in consumer taste. In keeping with the prevailing market trend toward high-end varietal wines — that is, those made from a single named grape variety — Gallo moved its center of gravity out of the urban ghettos once and for all, and into the sleepy north county town of Healdsburg, a 17 mile drive up Route 101 from Santa Rosa.
Before long, Gallo of Sonoma had amassed a collection of sprawling estates in the verdant hills ranging north to south from Cloverdale to Sonoma — 6,000 acres in all. The Gallo clan aimed not only to remake their company's image; they were intent on remaking Sonoma County's physical terrain in that image. Shortly after establishing its new rural headquarters, Gallo purchased a set of D-9 excavators out of surplus, ironically, from one of the most environmentally destructive industrial projects of the 1970s: the trans-Alaska oil pipeline.
Throughout much of the 1990s, Gallo's Big Yellow Machines rumbled across the company's vast tracts, steel mandibles akimbo, cleaving oaks and pines and doug firs from their root systems. After scraping the ridgetops and hillsides of every bit of vegetation they could, the machines literally resculpted them — often removing as much as 80% of the soil to make way for end-to-end trellises and vines on the flattened out expanses. Pesticides were applied to depths of 12 feet, feeder streams and creeks diverted for irrigation and frost protection.
The keystone in Gallo's effort to squeeze the greatest possible profit out of the gonzo market for high-end booze sprawls out across the mountains above Healdsburg, about two miles up Dry Creek Road from Highway 101. In terms of general appearance, the Gallo of Sonoma Winery resembles not so much a wine factory as that more common symbol of full-speed-ahead capitalistic ecocide: the oil refinery. Erected in the mid-1990s, the facility consists not of one wine production factory, but eight. It features not merely a large aging cellar, but one that spans the length of a football field. It is capable of producing not simply an enormous volume of wine, but 4.7 million cases of it annually — enough pinot noir, sauvignon blanc, chardonnay, and merlot to fill 17 Olympic-sized swimming pools.
One San Francisco Chronicle writer who visited the Gallo of Sonoma Winery described “loading docks, mammoth stainless steel tanks, grape presses, pipes and hoses and conveyor belts flying off in all directions.” At a cost of more than $100 million, the facility was one of the largest construction projects in the history of the California North Coast, a veritable Taj Majal to the premium wine boom.
While Gallo of Sonoma has been among the most expansive industrial viticulture firms to exploit Sonoma County's wholesale subservience to the American wine enterprise, it is only a symbol of a far larger, spectacularly destructive trend.
You can get a sense of the extent to which Sonoma County's bioregions have been sacrificed on the grape dollar's altar by logging onto that popular source of topographic voyeurism, Google Earth, and surveying the landscape just outside of Sonoma County towns like Healdsburg, Cloverdale, Sebastopol, and Windsor. As you scroll around in all directions, you will be sure to notice the persistence of large swaths of pale green, separated only by long rows of darker green shade that are invariably contiguous to roadways. In other words, the monolithic spread of vineyards is transected by narrow bands of trees — so-called “beauty strips” — which present the appearance to the uninitiated automobile traveler of a largely intact forest ecosystem.
Look closely enough and you will detect a large number of ponds and water storage basins. The vineyards are almost always located in close proximity to various waterways. Perhaps the most salient characteristic of Sonoma County's adoption of industrial alcohol production as its staple industry is that the array of vineyards and wine production factories has sucked dry and polluted the regional watersheds, destroying the area's last remaining salmonids and other fish habitat — a process I detailed in last week's Anderson Valley Advertiser article “Booze, a Banker, and the Bailout” (and as is reflected in the Sonoma (and Mendocino) County's ongoing effort to preempt new federal or state regulations on frost protection, a story being touted with typical pro-corporate winery aplomb on the front page of the Santa Rosa Press Democrat).
Over the years, the wine industry's dutiful press corps, including reporters for the Press Democrat and San Francisco Chronicle, have framed the premium wine boom in terms of American viticulture's ascendant quality, a dream long deferred by Prohibition and the Great Depression. The wine industry's enhanced social acceptability, heralded by an early-1990s American Heart Association trial study of red wine consumption's health benefits, is also singled out as a psycho-cultural explanation for the industry's rapid ascension.
There is, however, a far more compelling, socio-economic reason for the present popularity of premium wines. The wine boom, like the larger real estate and high-tech booms, is a bubble fueled by enormous amounts of speculative capital — a product of economic neo-liberalism. Napa County-based vintner William Hill described the moment around 1990 when the premium wine industry's fortunes changed, as a result of newly freed up investment capital — stemming ultimately from changes in American economic policy — flowing into it.
“All of the sudden, instead of thinking about selling wine to North America, you could start thinking about selling wine to at least the affluent portions of Japan and, eventually, China, and every place else, because the world is becoming one big marketplace,” Hill told a University of California historian in 1998. “So this affluent entrepreneur in Bangkok wears Italian suits and drives German cars and drinks French and California wine.”
As Hill's remarks reflect, the premium wine market has followed precisely the same trend lines as American patterns of upward wealth redistribution generally. Only the very wealthy drink premium wine. And it is the very wealthy who are benefiting the most, by far, from the present structure of Sonoma County's economy — a tenuous financial architecture designed to supply conspicuous consumption on behalf of distant markets. The vast majority of Sonoma County vineyards are owned by monolithic corporate entities.
By 1996, of the top 14 Sonoma County wineries in revenue, just one remained owned by a historic local wine family, Sebastiani. In 2009, the ax finally fell on Sebastiani as well, fittingly, when financier William P. Foley purchased the company for $50 million. Foley is the founder and CEO of Santa Barbara-based Fidelity National Financial Corporation, a Fortune 500 firm partly responsible for precipitating the current financial crisis, having made hundreds of millions of predatory (“sub-prime”) loans to predominantly black and Latino families in southern California, knowing full well they would have trouble making payments down the line as rates increased.
Meanwhile, an overwhelming portion of the remaining “family”-owned wineries have been bought up by the battalions of bankers, lawyers, and business magnates who presided over the boom-time economy in the San Francisco Bay Area (and elsewhere), of whom the greatest symbol is Kendall-Jackson patriarch Jess Jackson, a prominent San Francisco trial attorney before he became the kingpin of the regional wine enterprise.
The economic consequences of Sonoma County's dependence on the market fluctuations attending this single luxury crop are mainly seen as unfit for public conversation. Yet, it is not without its salient critics. That has particularly been so in the wake of Gallo's hillside planting binge in the 1990s, which briefly served as a lightning rod for local wine industry criticism. As Brock Dolman of the Water Institute, based in the small western Sonoma County town of Occidental, has stated, “I'm not sure we should allow venture capitalists, corporate entities to speculate on our lands, impact our commons, and leave us the disaster when they're gone. That is what happens in the Third World. Talk about a banana republic — at this point, Sonoma County is a grape republic.”
Indeed, some of the same companies that speculate in Third World economies are dominant players in Sonoma Wine Country. The multi-billion dollar San Francisco-based investment firm Texas Pacific Group owns one of Sonoma County's historically most prominent wineries, Beringer Estates, among other area vineyard estates and wine production estates. Texas Pacific's greatest forte has been the investment of billions in overseas markets, with a particular focus on East Asia, where it played a tangible role in the meltdown of the so-called “Asian Tiger” economies in the late-'90s. The company's principals include David Bonderman and James G. Coulter — both former business associates of the North Coast's greatest forest liquidator of yesteryear, Maxaam's Charles Hurwitz.
Hurwitz, of course, also speculated on a large segment of the North Coast economy and consequently cast hundreds of people out of work.
Some of the economic problems related to Sonoma County's alarming dependence on wine-grapes are already manifest. The industry has sent land prices skyrocketing, which has gradually sent small local farmers packing. Meanwhile, the average price of an acre of prime County farmland went from around $20,000 in 1990 to slightly less than $80,000 ten years later. The corresponding uptick in residential property values has been nearly as dramatic. Sonoma County has performed worse than the national average in regard to home and land foreclosures as a result.
But the speculative gold rush is best reflected in the expansion of hillside and ridgetop vineyards ala Gallo of Sonoma. Whereas only 6% of Sonoma County vineyards prior to 1990 were slopes greater than 10 degrees and 18% were planed above 328 feet in elevation, 25% of vineyards developed since 1990 were on slopes greater than 10 degrees and 42 were above 328 feet in elevation. No data is available for the period post-1997, although it is widely assumed that the trend has accelerated.
The high-elevation planting binge has modest enough origins. Sprawled out amidst the fog line in the Maycamas range that curls around the Alexander Valley is Gauer Estate, where rancher Ed Gauer first planted 50 acres of Cabernet Sauvignon on his 5,400 acre property in 1972. Until quite recently, this was the largest hillside vineyard in the region, if not in all of California.
Times are not nearly so modest now, and in 1989 Chevron Corporation's land development subsidiary, Chevron Development Corporation, secured funding from California's largest agribusiness lender, Bank of America, to purchase Gauer Estate and greatly expand the wine-grape spread. Before long, 350 acres of fine varietal grapes were figuratively spilling off the estate ridge-tops with individual vineyard blocks planted between 400 and 2,300 feet in elevation. The winery established itself as the largest custom wine production operation on the North Coast, the forerunner of Gallo and other mountain-top premium wine prospectors.
Today, Gauer Estate is owned by that kingpin of rapacious hillside vineyard plantings, Kendall-Jackson. Since Jackson purchased the property, it has planted more than 800 acres of additional wine-grapes — at last count. Even so, in attempting to bolster his environmental credentials, Jess Jackson has bragged that his company “preserved” nearly 80% of the land on this incredibly steep property, which is uniquely unfit for additional grape plantings.
As Jackson has also stated, by way of rationalizing his company's predation of smaller outfits, “Everything on earth eats something else! I love Bambi as much as the next one, but the coyote and cougar need Bambi as food.”
The corporations that control banana republics invariably depend on proxy governments to do their bidding. In next week's Advertiser, I will look at how the regional political structure — from Rep. Mike Thompson to the Sonoma County Board of Supervisors — has enabled the worst abuses by the corporate wine industry, with a focus on the ongoing dispute about regulating the wine industry's water use in both Sonoma and Mendocino Counties. In the final installment of this series (part 6), I will explore the socio-economic reasons for the corporate wine industry's economic dominance in southern Mendocino County — and the human and ecological consequences of it.
Not coincidentally, the largest donor to local politicians is Gallo of Sonoma: the company whose reckless recontouring of Sonoma County's landscape in the 1990s so much embodies the sterile dominance of the wine industry and the private equity groups behind them. ¥¥
Contact Will Parrish at email@example.com.