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University of California • Berkeley
REGIONAL ORAL HISTORY OFFICE

Regional Oral History Office University of California

The Bancroft Library Berkeley, California

The Wine Spectator California Winemen Oral History Series

Morris Katz
PAUL MASSON WINERY OPERATIONS AND MANAGEMENT, 1944-1988

With an Introduction by
Otto E. Meyer

An Interview Conducted by

Ruth Teiser

in 1990

MORRIS KATZ

Since 1954 the Regional Oral History Office has been interviewing
leading participants in or well -placed witnesses to major events in the
development of Northern California, the West, and the Nation. Oral history is
a modern research technique involving an interviewee and an informed
interviewer in spontaneous conversation. The taped record is transcribed,
lightly edited for continuity and clarity, and reviewed by the interviewee.
The resulting manuscript is typed in final form, indexed, bound with
photographs and illustrative materials, and placed in The Bancroft Library at
the University of California, Berkeley, and other research collections for
scholarly use. Because it is primary material, oral history is not intended
to present the final, verified, or complete narrative of events. It is a
spoken account, offered by the interviewee in response to questioning, and as
such it is reflective, partisan, deeply involved, and irreplaceable.

************************************

All uses of this manuscript are covered by a legal
agreement between the University of California and
Morris Katz dated March 19, 1990. The manuscript is
thereby made available for research purposes. All
literary rights in the manuscript, including the right
to publish, are reserved to The Bancroft Library of the
University of California, Berkeley. No part of the
manuscript may be quoted for publication without the
written permission of the Director of The Bancroft
Library of the University of California, Berkeley.

Requests for permission to quote for publication
should be addressed to the Regional Oral History Office,
486 Library, University of California, Berkeley 94720,
and should include identification of the specific
passages to be quoted, anticipated use of the passages,
and identification of the user. The legal agreement
with Morris Katz requires that he be notified of the
request and allowed thirty days in which to respond.

It is recommended that this oral history be cited as
follows:

Morris Katz, "Paul Masson Winery
Operations and Management , 1944-1988,"
an oral history conducted in 1990 by
Ruth Teiser, Regional Oral History
Office, The Bancroft Library, University
of California, Berkeley, 1990.

Copy no.

Cataloging Information

KATZ, Morris H. [b. 1923] Winery Manager

Paul Masson Winery Operations and Management. 1944-1988 .1990. vii, 75 pp.

Fromm & Sichel, 1946-1955; Paul Masson Vineyards, 1955-1986: winery
management, Seagram's interest, expansion of vineyards, and sale; the Wine
Institute and wine industry matters; grower -vintner conflicts in California;
the California Wine Commission.

Introduction by Otto E. Meyer, former chairman, Paul Masson Vineyards.

Interviewed in 1990 by Ruth Teiser for the Wine Spectator California Winemen
Series. The Regional Oral History Office, The Bancroft Library, University of
California, Berkeley.

TABLE OF CONTENTS -- Morris H. Katz

PREFACE

INTRODUCTION, by Otto E. Meyer v

INTERVIEW HISTORY vi

BRIEF BIOGRAPHY vii

EARLY YEARS

Introduction to Wine
Working for Picker -Linz
Army Service

WORKING FOR FROMM & SICHEL, 1946-1955
The Development of the Organization
Duties and Sources of Work Ethic
Lessons Learned Growing Up in the Bronx
Experiences with Anti-Semitism
Jews in the Liquor Industries

PAUL MASSON, CHRISTIAN BROTHERS, AND FROMM & SICHEL,
1944-1955

Relationships |°

Spinning Off Paul Masson

PAUL MASSON VINEYARDS, 1955-1971
John F. O'Connell as President
Otto Meyer Becomes President, 1959

Seagrams 's Position 20

Becoming Assistant Secretary 21

Masson' s Severance from Fromm & Sichel

Facilities and Operations in 1957 22

The Cellars at Saratoga 26

Extending Scope, 1959-1971

THE SALINAS VALLEY ;*2

Creating Vineyards, 1960s and 1970s

PAUL MASSON VINEYARDS, 1971-1986 40

L.O
Problems ™

California Vineyard Overplanting

The Madera Facility ^

Problems , Continued

Seagrams Takes Over

Serving as President, 1983-1986 52

THE WINE INSTITUTE

Director of Government Relations, 1986-1988

Chairman and Committee Member, 1957-1985 57

Adverse Factors in the Wine Industry 59

The Wine Advisory Board, 1938-1975 61

Gallo Support for the Wine Institute 62

PARTICIPATION IN GROWER-VINTNER CONFLICTS 63

THE CALIFORNIA WINE COMMISSION 68
TAPE GUIDE

INDEX 73

PREFACE

The California wine industry oral history series, a project of the
Regional Oral History Office, was initiated in 1969 through the action
and with the financing of the Wine Advisory Board, a state marketing
order organization which ceased operation in 1975. In 1983 it was
reinstituted as The Wine Spectator California Winemen Oral History Series
with donations from The Wine Spectator Scholarship Foundation. The
selection of those to be interviewed is made by a committee consisting of
James D. Hart, director of The Bancroft Library, University of
California, Berkeley; John A. De Luca, president of the Wine Institute,
the statewide winery organization; Maynard A. Amerine, Emeritus Professor
of Viticulture and Enology, University of California, Davis; the current
chairman of the board of directors of the Wine Institute; Ruth Teiser,
series project director; and Marvin R. Shanken, trustee of The Wine
Spectator Scholarship Foundation.

The purpose of the series is to record and preserve information on
California grape growing and wine making that has existed only in the
memories of wine men. In some cases their recollections go back to the
early years of this century, before Prohibition. These recollections are
of particular value because the Prohibition period saw the disruption of
not only the industry itself but also the orderly recording and
preservation of records of its activities. Little has been written about
the industry from late in the last century until Repeal. There is a real
paucity of information on the Prohibition years (1920-1933), although
some commercial wine making did continue under supervision of the
Prohibition Department. The material in this series on that period, as
well as the discussion of the remarkable development of the wine industry
in subsequent years (as yet treated analytically in few writings) will be
of aid to historians. Of particular value is the fact that frequently
several individuals have discussed the same subjects and events or
expressed opinions on the same ideas, each from his own point of view.

Research underlying the interviews has been conducted principally in
the University libraries at Berkeley and Davis, the California State
Library, and in the library of the Wine Institute, which has made its
collection of in many cases unique materials readily available for the
purpose .

The Regional Oral History Office was established to tape record
autobiographical interviews with persons who have contributed
significantly to recent California history. The office is headed by
Willa K. Baum and is under the administrative supervision of James D.
Hart, the director of The Bancroft Library.

Ruth Teiser
Project Director

The Wine Spectator California Winemen
Oral History Series

June 1990

Regional Oral History Office

486 The Bancroft Library

University of California, Berkeley

iii

CALIFORNIA WINE INDUSTRY INTERVIEWS

Interviews Completed by 1990
Leon D. Adams, Revitalizing the California Wine Industry. 1974

Leon D. Adams, California Wine Industry Affairs: Recollections and Opinions.
1990

Maynard A. Amerine , The University of California and the State's Wine
Industry. 1971

Maynard A. Amerine, Wine Bibliographies and Taste Perception Studies. 1988

Philo Biane, Wine Making in Southern California and Recollections of Fruit
Industries . Inc. . 1972

John B. Cella, The Cella Family in the California Wine Industry. 1986

Charles Crawford, Recollections of a Career with the Gallo Winery and the
Development of the California Wine Industry. 1942-1989. 1990

Burke H. Critchfield, Carl F. Wente , and Andrew G. Frericks, The California
Wine Industry During the Depression. 1972

William V. Cruess , A Half Century of Food and Wine Technology. 1967

Jack and Jamie Peterman Davies, Rebuilding Schramsberg: The Creation of a
California Champagne House. 1990

William A. Dieppe, Almaden is Mv Life. 1985

Alfred Fromm, Marketing California Wine and Brandy. 1984

Louis Gomberg, Analytical Perspectives on the California Wine Industry. 1935-
1990. 1990

Joseph E. Heitz, Creating a Winery in the Napa Valley. 1986

Maynard A. Joslyn, A Technologist Views the California Wine Industry. 1974

Amandus N. Kasimatis, A Career in California Viticulture. 1988

Morris Katz , Paul Masson Winery Operations and Management. 1944-1988. 1990

Legh F. Knowles, Jr., Beaulieu Vineyards from Family to Corporate Ownership.
1990

Horace 0. Lanza and Harry Baccigaluppi , California Grape Products and Other
Wine Enterprises. 1971

Louis M. Martini and Louis P. Martini, Wine Making in the Napa Valley. 1973
Louis P. Martini, A Family Winery and the California Wine Industry. 1984

Eleanor McCrea, Stony Hill Vineyards: The Creation of a Napa Valley Estate
Winery. 1990

Otto E. Meyer, California Premium Wines and Brandy. 1973

Norbert C. Mirassou and Edmund A. Mirassou, The Evolution of a Santa Clara
Vallev Winery. 1986

Peter Mondavi, Advances in Technology and Production at Charles Krug Winery.
1946-1988. 1990

Robert Mondavi, Creativity in the Wine Industry. 1985

Michael Moone , Management and Marketing at Beringer Vineyards and Wine World.
Inc. . 1990

Myron S. Nightingale, Making Wine in California. 1944-1987. 1988
Harold P. Olmo, Plant Genetics and New Grape Varieties. 1976

Cornelius Ough, Researches of an Enologist. University of California. Davis.
1950-1990. 1990

Antonio Perelli-Minetti , A Life in Wine Making. 1975

Louis A. Petri, The Petri Family in the Wine Industry. 1971

Jefferson E. Peyser, The Law and the California Wine Industry. 1974

Lucius Powers, The Fresno Area and the California Wine Industry. 1974

Victor Repetto and Sydney J. Block, Perspectives on California Wines. 1976

Edmund A. Rossi, Italian Swiss Colony and the Wine Industry. 1971

Edmund A. Rossi, Jr., Italian Swiss Colony. 1949-1989: Recollections of a
Third-Generation California Winemaker. 1990

Arpaxat Setrakian, A. Setrakian. a Leader of the San Joaquin Valley Grape
Industry. 1977

Elie Skofis, California Wine and Brandy Maker. 1988

Andre Tchelistcheff , Grapes. Wine, and Ecology. 1983

Brother Timothy, The Christian Brothers as Wine Makers. 1974

Ernest A. Wente , Wine Making in the Livermore Vallev. 1971

Albert J. Winkler, Viticultural Research at UC Davis (1921-1971). 1973

INTRODUCTION -- Morris H. Katz

As a young man, Morris Katz joined the office of Picker Linz
Importers, which later became Fromm & Sichel, the sales organization for
Christian Brothers wine and brandy. He proved that he could learn
quickly. This talent and his experience became very valuable after
Fromm & Sichel acquired Paul Masson in 1943.

Leaving the New York office for California, Morris played an
important part in the development of a small winery which had
practically no organization or control system. As new production
facilities and vineyards had to be developed, Morris moved from San
Francisco to Saratoga to organize and give guidance to a new staff. The
great variety of products, still wines, champagne, sweet wine, vermouth,
and brandy made this a difficult task. His ability to analyze and
develop cost controls could always be relied on.

As the company grew and conditions changed, new facilities and
vineyards for better grape varieties had to be developed. Morris was
able to keep costs under control.

After Seagram took over the company he became the logical choice
for president. Paul Masson had to be integrated into a large
organization. He showed his ability again as administrator. He had the
confidence of everyone he dealt with. When Seagram sold the company
Morris retired- -almost.

Many members of the wine industry were fully aware of his abilities
and his broad knowledge of the industry's problems. He was asked to
join the Wine Institute to help the Trade Organization deal with its
problems. Morris had gained the respect of his colleagues and the many
people with whom he had dealings. His accomplishments speak for
themselves.

Otto E. Meyer

Former partner and chair

Paul Masson Vineyards

August 1990
San Francisco

INTERVIEW HISTORY -- Morris H. Katz

This interview was held at the Wine Institute in San Francisco on
March 16, 1990, in one almost non-stop session. It began in the morning
and concluded, with a brief break for a sent- in sandwich, that same
afternoon. It is a wide-ranging interview, for Mr. Katz discussed with
candor the details of his career in the wine industry and many factors
and problems that he had encountered. He displayed at the interview the
affability and tempered outlook that made him so valuable to the Paul
Masson winery. His account of its rise under the guidance of Fromm &
Sichel, its move into Monterey County, and its history up to its
absorption into the Seagram organization is a significant contribution
to the post-World War II history of California grape growing and
winemaking.

Mr. Katz gave fully focused attention to the interview, and spoke
with few notes. He reviewed the transcript thoughtfully, answered a few
added questions as to specific dates, and clarified several passages.

Ruth Teiser
Interviewer -Editor

August 1990

Regional Oral History Office

The Bancroft Library

University of California, Berkeley

vii

Regional Oral History Office University of California

Room 486 The Bancroft Library Berkeley, California 94720

BIOGRAPHICAL INFORMATION
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EARLY YEARS, 1923-1945

Introduction to Wine

[Interview 1: March 16, 1990 ]##

Teiser: I'll begin by asking where you were born.

Katz: Born in New York City in the Borough of the Bronx, on June 16,
1923. In the old-fashioned way, I was born at home.

Teiser: I'll ask you to briefly go over your early life- -anything in it,
especially, that might have predisposed you for the career that
you made .

Katz: [laughs] I've always been faced with the question, "How did a
Jewish boy from the Bronx ever get involved in the wine
business?" and what was my first remembrance of wine. In answer
to that, I always tell the story that my first remembrance of
wine was when my father used to make wines for the Passover. In
those days they used to buy grapes by the box, and they were
generally of the Concord variety. My earliest recollection is
standing on the kitchen table with a hand press, and I remember a
kitchen just completely splattered with the purple juice of the
grapes. That's my earliest recollection, and I was wondering if
that had any bearing on [my career] .

Actually, the basis of my entering the wine business was
quite accidental, because when I graduated from high school in
'41 --in a Jewish home, you either go to school or you go to work.
So I was to continue my education at the New York City College.

symbol (##) indicates that a tape has begun or ended.
to the tapes, see p. 72.

For a guide

I started, and about two weeks into the semester I came down with
a very serious case of measles. When I finally returned to
school, I couldn't keep up with the pace of the course, so I left
the school, with the expectation that I would return to it.

I went out into the business world. I first started working
as a counter clerk at a Union City newsstand at the Hoboken Ferry
terminal, which was the terminal that connected Manhattan with
Hoboken, New Jersey. I didn't particularly care for that type of
job; it was one of these menial situations, just standing in a
newsstand, and the throngs of people passed through in the
afternoon, buying papers. It was papers, chewing gum,
cigarettes, and so forth.

Working for Picker-Linz

Katz : I became disenchanted with that and figured I had best go to an
agency and try to get some other job. I landed this job with
Picker-Linz Importers, as an office boy, particularly in view of
the fact that during my high school years I had taken what were
called at that time "commercial" courses. That was basic
bookkeeping, typing, steno, which subsequently proved to be an
asset. Picker-Linz' s primary business was importing scotches
from England, Cognac from France. They had some ports and
sherries from Portugal. Secondarily, they were the first selling
agent for Christian Brothers.

Teiser: Who were the principals at Picker-Linz when you went there?

Katz: The principals were the Picker brothers, Harry and Jerry Picker.
And there was another gentleman, who's name I always forget. He
sort of was the financial backing to the company, so I never had
much to do with him. The Picker brothers themselves were quite
active in the operation. It was during that period of time that
I also became acquainted with Alfred Fromm, who subsequently
became a principal in the company that succeeded them.

Teiser: Was he working for them?

Katz: He was a salesman on the street. He had immigrated from Germany
about 1938. He came over just before the exodus of Jews from
Germany. He was a salesman on the street, selling Christian
Brothers wines. I have a very, very clear impression of the man
because he was an impeccable dresser, wore a derby and a cane. I

think to this day he uses a cane, not so much as an affectation,
but I believe he has always had a problem of some sort with a leg
or a foot.

My job was a typical office boy job. I did errands. I
believe I started at seventeen dollars a week. It was a six-day
a week job, and Saturdays the salesmen would come in and bring in
all their returns that they had picked up from the trade --
unsalable wines, broken bottles- -and it was my primary function
to see to it that on the following or subsequent Saturday they
had replacements for what they brought in on the previous
Saturday. I think the Saturdays were more significant for the
fact that they had a hot poker game going in the afternoon.

The primary function that I had stood me in good stead.
Teiser: What was there about broken bottles?

Katz : In the course of transportation from California or from England--
this covered a wide range of products. Particularly insofar as
Scotch is concerned, I remember they were having a problem with
pilferage on the other side, before the cases got boarded. I
understand it was a problem with longshoremen. They would remove
bottles and replace them with bricks to maintain shipping weight
equivalents. I wasn't so much concerned with that, but
subsequently I did become involved with that when I started
handling claims at a later date.

The broken bottles were actually breakages that occurred in
transit. The salesman would visit a retailer, and the retailer
would say he opened up a carton and found a broken bottle. The
only way you were permitted or authorized in the state of New
York to either credit a retailer or replace a bottle was provided
that you had a sealed bottle neck to justify your giving of
credit or a replacement, because the New York State Liquor
authority in those days- -in fact, even what was then known as the
alcohol and tobacco division of what we know now as the BATF
[Bureau of Alcohol, Tobacco, and Firearms] - -was a very, very
police-oriented organization. It came on the heels of
Prohibition, with the racketeering perception of the industry at
the time. In those days the industry wasn't viewed with too much
sophistication, as it is today. It was viewed as merely a step
up for the racketeers, and in some ways I guess it was true.

It was just a basis for giving me a feel for wine products
and alcoholic products, which, while it wasn't with serious
depth, proved to be of help to me after I had left the company,

gone into the service, and then returned to continue with my
career, which continued in the wine business.

Army Service

Teiser: Did you have any experiences in the service that related to the
wine business?

Katz: No, nothing at all. [laughs] About the only connection is that I
was in France, probably traveled through the outskirts of
vineyard properties. I don't remember actually going through a
vineyard property. When I was drafted I went into training for
anti-aircraft. That was in 1943. In anticipation of the
invasion, the organization I was with got our basic training in
Camp Stewart, Georgia. It was some distance from Savannah. By
the time the invasion of France came about, they reoriented anti
aircraft from a defensive posture to more of an offensive
posture, so all of the outfits in our camp were sent up to
infantry training camps in Virginia. Subsequently, I went over
as an infantry replacement, and was assigned to the Fifth
Infantry Division, which was a part of Patton's Third Army. At
the time that I came over, they had just broken through the
German defenses at Sainte Lo in France. I was on a truck trying
to catch up with some outfit, because they were moving so fast.

Eventually I was assigned to the Fifth Infantry Division,
and we moved through Paris. We were moving so fast- -everyone
uses as a high point all the troops marching through Paris to the
hail and welcoming of the French populace- -that most of the
troops went around Paris and didn't have that experience. I got
involved in ground fighting up until Patton's Third Army and our
division ran out of gas. We settled in at the Moselle River
until the next move, when they resumed the offensive preceding
the Battle of the Bulge.

I picked up a so-called "million dollar" wound on the
perimeter of the airport at Metz. Metz was characterized as a
fortified area. The Germans had built their large artillery into
the hillsides, and they were underground. While I didn't see any
personally, I knew the effects of them when I got as far as Metz.
I didn't know I was wounded at the time, but in the course of
battle you don't always know what's really happening to you. I
had picked up a piece of shrapnel in the calf muscle of my right
leg, thought that I had been struck by a rock or something, and

managed to crawl to a safe place, and under cover of nightfall
went to the command post. A medic got around to me in time,
opened up my leggings , and a flood of blood was the evidence that
I had more than just a rock hitting me.

I ended up in the hospital, but nothing serious. The extent
of the wound was such that I wasn't very mobile, because they
took out a good part of a muscle in my calf. Subsequently, while
I was in the hospital, the Battle of the Bulge broke out.
Because of my limitations, I was classified as "limited service,"
which saved me from returning to the front lines.

I was assigned to a replacement depot, and that's where
fellows who left the hospitals went, and from there you were
redistributed to your outfit or to other assignments. I'm
relating it because it's a critical turning point. While I was
at the replacement depot, and although I had been put on limited
assignment because of my wound, they looked at my record and saw
that I had typing skills, so they assigned me to the payroll
office in the replacement depot. I was working sort of
administratively as a clerk, making notations in the records of
each individual soldier for payroll and whatever.

In the course of that job, I became aware of communications
that were coming in from the field to the commander of that
operation, seeking- -it was like an employment agency. I noticed
that they were looking for stenographer-secretaries. Having had
shorthand in high school , I wrote home and asked them to send me
my steno books, which they did, and then I started practicing my
shorthand. When I felt that I had reached a level of some
competence, I approached the captain who ran the replacement
depot and told him that the next time they had a request for a
stenographer, he should consider me.

By that time the war effort had moved to the point where
Eisenhower re-established his headquarters in Frankfurt on the
Main in Germany, and that's where I was sent- -to the Eisenhower
headquarters, assigned to a colonel in the headquarters division,
called G-4, which was a supply division. This was Colonel Howard
Philips, who was connected with a family who was very prominent
in the orange business in Florida. In fact, I think they had a
town or city named after them- -Philips. There used to be Philips
oranges. He was a very strict, rigid, hard-working taskmaster.
I worked there as his secretary, and I attribute a lot of my
administrative and management skills to what I learned from him.

I had always been a pretty good worker. I usually followed
the principle that you get your job done and then see what other
people were doing and see if you could learn more from what they
were doing. Because when you're in a menial job, you really
don't learn that much. So I always used to get my work done,
even as an office boy, and then go over to the fellows who were
handling transportation, traffic distribution, laws and
regulations, and sit down with them and see what they were doing,
and see if I could help them. I picked up bits of information
and sort of pieced together the administrative structure of an
organization.

As I said, my working for this colonel, who was a real
taskmaster, gave me some very valuable administrative and
management insights. People ask, "Where did you pick it up?" I
attribute most of it to that experience I had in the Army.

Teiser: Was his skill in designating tasks, or dealing with people, or--

Katz: He was the type of person who was a delegator. He was a hard
worker, and very strict. You had to be impeccably dressed.
You'd come in, and he'd check you out to be sure your shoes were
shined and your tie was just right and everything. Of course,
just starting from scratch as his secretary, I wasn't familiar
with the military procedures, and they had very precise and exact
procedures for filing, labelling, how you determined the subject
matter of an item. So I picked up some very valuable
administrative skills while I was working for him. Some of them
were very demanding, because as a young kid, it wasn't easy
working for somebody who was an experienced businessman. You
come in pretty raw and pretty much a virgin in that area. I
always felt that that gave me a very sound base from which I then
moved on in my career.

Teiser: Then you took that back to Picker-Linz?

Katz: Because of the battles that I had been in- -of course, I'd been in
a very short period of time and was one of the first ones out
when they started discharging people. I had the advantage of
having been in the infantry, and you got so many points for being
a combat infantryman, you got so many points for the battles that
you were in. I had sufficient number of points to bring me home
in December of 1945, and I was discharged on December 30 of '45.

WORKING FOR FROMM & SICHEL, 1946-1955

Development of the Organization

Katz : I allowed myself a respite of two weeks of doing nothing and

luxuriating in the freedoms. It was exactly two weeks to the day
that I went back to the old firm, and found that the old firm,
Picker-Linz Importers, was no longer in existence, and had been
succeeded by Fromm & Sichel.

Teiser: Do you know when that happened?

Katz: It happened in April of 1943. Actually, the incorporation date
of Fromm & Sichel is the same date as Paul Masson. I believe
they had coordinated everything at the time of the formation of
Fromm & Sichel to include their holdings in Paul Masson. Because
it was always April 1, 1943, on all of the federal papers, the
basic permits, and so forth, for Paul Masson, as well as for
Fromm & Sichel.

Teiser: I guess Seagrams was behind the arrangement?

Katz: I subsequently learned that it went something like this: both

Alfred Fromm and Franz Sichel came out of wine merchant families
in Germany. Alfred Fromm left Germany and went directly to the
United States. Franz Sichel, on the other hand, went to France.
He was part of the family that today is a carryover by Peter
Sichel. He subsequently left France and went to London. It was
during his time in London that, I understand, he met Sam
Bronfman, the founder of Seagrams. They developed a friendship,
so much so that when Fromm & Sichel got together--! can't give
you the basis of their getting together because I never heard it;
my entry in the company at that time was just as a menial office

worker, and what I'm telling you is what I learned subsequently.

Sam Bronfman was a co-signer for the financial credit that
Fromm & Sichel needed to get started. I understand that Alfred
Fromm went into the company with very, very little money; it was
just a token amount of money that he had. Franz Sichel, on the
other hand, I believe brought in more of the money into the firm.
I originally thought it was Sam Bronfman who provided the
immediate financing, but I subsequently found out he was just a
co-signer and had no interest until Fromm & Sichel had developed
the Christian Brothers brandy business to the point that they
were very successful and couldn't expand the brand without
financing. The Christian Brothers had very limited production
facilities for the brandy, and most of the brandy was being
purchased from producers on the outside. What the Brothers were
really doing was a bottling operation.

It's my understanding that some time in the early fifties
they approached Sam Bronfman again. He was, from my analysis of
the man, an intuitive investor. He invested money where he saw
opportunities of someone else managing that money for his
benefit. And it turned out that way, by his subsequent success
with Fromm & Sichel. I understand that they needed funds to
enlarge their brandy inventories, and they needed funds to have a
distillery built by the Brothers, which became known as the Mount
Tivy facilities. ^ Seagrams advanced the funds for the
construction of that. Being a businessman, Sam Bronfman at that
time probably said, "Well, you want that much money, now I want
to have a little interest in the business."

Seagrams had the majority interest of 70 percent, and the
two minority partners, Alfred Fromm and Franz Sichel, each had 15
percent of the business. It was the two minority interests,
Fromm & Sichel, who ran the business. All that they did was
report to Seagrams their operations and the dividends that went
to Seagrams for the profitability of the company, when the

*See also the account of the formation of Fromm & Sichel by Samuel
Bronfman, pages 72-73, Distillers Corporation- Seagrams Limited, Annual Report
for the Year Endin Jul 31. 1970.

the early history of the Mount Tivy Winery, see pages 14-21, Lucius
Powers, The Fresno Area and the California Wine Industry, an oral history
interview conducted 1969 and 1972, Regional Oral History Office, The Bancroft
Library, University of California, Berkeley, 1974.

company became profitable. It was, I understand, a very
profitable arrangement for all three. Fromm & Sichel was a very
profitable company- -in fact, so much so that I remember they had
such large cash reserves that Fromm & Sichel used to lend money
back to Seagrams. They would turn out to be that successful in
those days. A lot happened since then.

That was the financial structure that got Fromm & Sichel
started. When I went back in January of '46, I went back to the
offices of what I thought was the old company, and it turned out
to be Fromm & Sichel. But it had the management the same as when
I had left Picker-Linz. I was asked whether or not I was
interested in a job. I said, "Yes, I'll be looking for one."

Duties and Sources of Work Ethictf#

Katz: They offered me a job as a claims clerk at thirty- five dollars a
week. I accepted, because my perception of leaving the company
to go into the service at twenty-one dollars a week- -and I had
advanced from seventeen to twenty -one- -and advancing to thirty-
five seemed to be a giant leap, until I learned about inflation.
But I accepted it, and went back working for them. I handled
all their losses and damage claims.

Teiser: How did you know how to do that?

Katz: I just learned. I have an aptitude for picking things up

quickly, and applying myself. There was a gentleman who was my
mentor during that stage of my career at Fromm & Sichel, a man by
the name of Frank Bonino. He was responsible, at Fromm & Sichel,
for pricing, price postings, liaison with the government
agencies --he was what we would call today a government relations
person. He had that responsibility. He was responsible for
insurance coverages of the wide range of all types of business
coverages.

Subsequent to my assignment to claims, I gradually started
working into these other administrative areas, and became quite
expert in pricing, brand registration, fair trade, government
relations- -over the years; it didn't all happen immediately. As
I had indicated earlier, I always was one who did my job to the
fullest and always asked for more. If more wasn't forthcoming
from my immediate supervisor, I'd drift around the office and sit
down with the people in the other areas, like in the traffic
department or the accounting department, and ask if I could help.

Teiser:

Of course, in a small organization with a small number of people,
people were always happy to have somebody wanting to do some
work.

Did you inherit a love of work, or an interest in really applying
yourself?

Katz : I always had a good work ethic.

Teiser: Was that due to your father or your mother?

Katz: My father came over from Russia as a tailor, and he worked in the
ladies' garment industry- -that is, when he had work. In the
1930s, the Depression years, my family went through very, very
hard times. In fact, there was a period there when they were on
welfare. I was the youngest of five children, so much of the
hardships really passed me by because I was too young at the time
to be that aware of it. But I guess, aware or not, indirectly,
or subliminally, you pick these things up through what you hear
in discussions of your parents, and you know how tight money is.
In those days a penny was a penny. If you were fortunate enough
you'd get a couple of cents. It wasn't like today, when kids get
their allowances and so forth.

Being the youngest of five --the three eldest were girls, and
they got married. I have a brother who is seven years my senior,
and I think it just became a natural work ethic, observing my
father and my brother, who was a hard worker. In those days it
wasn't anything special to pick up a work ethic, because it was a
question of whether you ate [laughs], slept, clothed yourself. I
think it was just a natural, evolutionary thing for a person to
develop a work ethic if he was to get anything.

Lessons Learned Growing Up in The Bronx

Katz: Having been the youngest, I was pretty much on my own growing up.
I think that part of my character was developed pretty much
attending to my own needs , because my father was busy trying to
make a living for the family, and my mother was always involved
with her daughters and the grandchildren. I was pretty much a
street kid, very sports-oriented. In those days you had radio,
but the radio was only something you listened to in the evening,
late at night. Otherwise, during the day you were out on the
street. Most of the time, when you weren't in school, you were

out participating in some sports activity. So sports has been a
big part of my life. Even up to today I consider myself a
"jock." I'm always involved in sports in some way or other. And
I think it also contributes to the makeup of an individual. I
think that participating in sports you learn a great deal about
negotiation, you learn a lot about the eccentricities of people,
the vagaries of people and competitiveness.

You know, to get along in the world in those days you had to
be a pretty good negotiator, and you had to know when and how to
either further your own ends or to avoid conflicts with others.
They were days when you lived in a neighborhood that was pretty
much like a ghetto. I lived in a Jewish neighborhood, and the
neighborhood may have extended the length of two subway stations.
If you went beyond those bounds--! spent most of my years growing
up in the Bronx Park area of the Bronx—you'd get into the
Italian neighborhood, or into the Irish neighborhood, or into a
German neighborhood. As it was in those days, I'd say there was
a certain amount of anti-Semitism, and the Jewish kids venturing
out had to be very careful what neighborhoods they went into.

Teiser: How could they tell you were Jewish?

Katz: Oh, because they would- -you really can't identify it, but when
you encounter these situations, either by looks, by clothes, or
by mannerisms, and so forth. I can remember many times we'd go
into the park and go beyond the boundary line. In the Bronx,
Gunhill Road sort of started an Italian neighborhood.
Invariably, whenever we'd get beyond that, we'd always have a
run-in with the kids there. I can't relate the specifics, but
these are the impressions you pick up.

Experiences with Anti-Semitism

Katz: Then there was a period which I overlooked, before I was drafted
into the service. There was a break in time when the shipyards
on the East Coast were desperately looking for skilled people.
Of course, most of the fellows were going into the service. I
was at an age that was below that which they were reaching into
for drafting, so I thought it might be to my benefit to get a job
in a shipyard and get a deferment. I wasn't the hero-type to
enlist, and so if I could have got a deferment, for whatever
reason, I would have enjoyed it at the time.

Morris Katz at 17 or 18, standing on a
bridge in Bronx Park.

So I went to a school, while I was with Picker -Linz, and
learned welding. A brother-in-law of mine was down in Bethlehem
shipyards in Baltimore, and he told me there were openings for
welders down there. I told the people at Picker-Linz that, in
the interest of doing something for the war effort, and the fact
that they were paying good money, I thought that for whatever
time I had available before I would be drafted, I would go into
the war effort.

I left them on good terms, and I went into welding in the
Bethlehem shipyard at Baltimore. I think it lasted about nine
months at the most. It was during that time that I also had my
brush with anti-Semitism, not in a very direct way; it was an
indirect way, but nevertheless it made me aware of the existence
of anti-Semitism. My first experience was when I was part of a
welding team on a boat under construction. During a break, we'd
have a snack or lunch or whatever, and these fellows started
talking about the Jews. Apparently they knew so much about it
that they didn't even recognize that the name Katz was a Jewish
name, and they started saying all kinds of unkind things about
Jews. After they finished I said, "I want you guys to know that
I'm Jewish." "Oh, you can't be!" It ended up with the typical,
"Well, you're different."

What I learned about that experience was that generally
people who speak anti-Semitically really don't know Jews; they're
told as a child, or they pick it up from their parents or other
friends, without having had any experience with Jews. It's funny
to relate that some of them really thought that Jews had horns.
I'm getting off track, but it's nothing more than that you pick
these things up- -a sort of sense of how others feel.

That was my first experience with anti-Semitism. I was
nineteen at the time.

Jews in the Liquor Industries

Teiser: Were Picker and Linz Jews?

Katz: Yes. It was basically a Jewish firm. The office manager was a
fellow by the name of Sol Young- -Jewish. In the office there
were many non-Jews. In fact, Frank Bonino was non- Jewish. Oh, a
host of people- -the secretaries and all- -but the management

people [were Jewish] . In the sales force there was a mixture of
ethnic groups.

Teiser: I don't know if this is an accurate observation or not, but it

seems to me that a lot of successful liquor salesmen- -of spirits,
as well as wine --have been Jewish. Is that right?

Katz: Well, look at the Bronfmans; look at Schenley--Schenley was a
Jewish firm. [Lewis R.] Rosenstiel. When you go back in time,
Rosenstiel and Bronfman were partners- -you might say partners in
crime, too. I only jest. But they were two of a kind, and they
couldn't tolerate each other. That's when they pretty much split
off, Rosenstiel, going his way, developed the Schenley dynasty,
and Bronfman, going the other way, developed Seagram. Generally,
within their management team there was a high ratio of Jews in
there. It's hard to account for. It's like my joining the firm--
I was not hired by a Jew; I was hired by a non-Jew. Frank Bonino
was the fellow who interviewed me. Because I had worked with
them. The agency sent me up the first time, and I don't know
whether Sol Young, the manager, was involved in my joining the
company. I think there was an underling involved.

Among Jews there is, I think, sort of an ethnic tendency, if
there's an opening and a possibility of a choice. Knowing the
conditions that existed in those days, where there was a strong--
not in an obviously anti-Semitic, virulent way. The banks didn't
hire them, other companies didn't hire them. There was nothing
public about it, but obviously there was some sort of an
underlying policy for it. I think Jews, on the other hand,
knowing how difficult it was for Jews to make a place for
themselves in a company, if they were in a company and had an
opportunity to hire a Jew, they gave them that opportunity. I
think if the choice was between a Jew and a non-Jew, my personal
feeling is that they would have given the Jew the opportunity.
It's sort of like a fraternity, knowing it's so difficult for
anybody to get anything on the outside. If there is an
opportunity, you give it to them, and let them prove themselves.

I guess I've had those feelings myself, in the course of the
years of interviewing people. [laughs] I feel that way about it,
that at that time it was so difficult for a Jew to get into an
executive or management job, or supervisory job. I think that if
one was in that level and had an opportunity to hire somebody, he
would look favorably. I think, on the other side, the alcoholic
beverage industry in those days was not looked upon too kindly as
what a good Christian boy would get involved in. The absence of
that interest opened up opportunities for Jews to move in.

Teiser: You said those shipyard workers were obviously anti-Semitic, out
of ignorance. On a managerial level, however, was it noticeable?

Katz: I didn't really find that. Again, you have to understand that my
career has been so closely tied to the Seagram organization, even
though I never worked for Seagrams . I never worked for Seagrams ,
per se, but I was closely associated with them, and I never
really had that- -I've met people of all faiths who are not the
nicest people. Some are anti-Semitic, but I wouldn't say that as
a whole there was this spirit of anti-Semitism. I only brought
it up in connection with [the idea that] what makes a person tick
later on are these little exposures. As you go through a career,
especially at an executive level, and encounter so many
situations, that you rely mostly on that gut feeling.

I've been asked so many times why I hold a particular view,
whether it be in assessing or evaluating a person or a project or
a business opportunity. I always tell them that I really don't
know, but it's just my gut feeling. Somewhere in my makeup, as
it must be with other people, in the course of developing in a
career, all these inputs that you have go to make up the whole.
Many times you can't explain it. I've given people business
advice that has proven to be so profitable for them, and they
always come back and ask how did I know. I have no answer for
them. I can't say that I sat down and I analyzed everything.
It's just a sense, and I guess my whole career has been based on
that, because I've gotten into very highly technical areas of
management on the production side. People have asked me, "How
did you succeed at that, because you don't have, by education or
otherwise, any technical background?" And I have to go back: I
don't know.

I've applied myself to whatever responsibility I've
undertaken. What I didn't know, I would make it my business to
learn, by reading, by talking to people, asking questions, and
never being ashamed to tell people, "I don't have any background.
Help me." That's been my formula, really. As I say, I never
completed a formal education with a degree, although, in the
course of my career I left City College and went to work, and
after I returned from the Army and joined Fromm & Sichel, I went
to night school. I enjoyed what I was doing. In fact, I had to,
because I got married, which I haven't covered.

While I was in the service, I was twenty when I returned on
a furlough, and I married a high school sweetheart.

Teiser: What's her name?

Katz: That was Rita. Subsequently, after thirty- two years of marriage
we divorced. That's another side of my life. At that time, when
I came out, I was married. I had my first child in '48, so it
was a choice: what do you do? When you have a family, it's not
easy to go back to school on a full-time basis. So I worked, and
I went to Pace College in New York in the evenings. I went there
for about five years. I took up accounting and business
administration. It was an eight-year course to get a degree, and
somewhere in the fifth or sixth year I dropped it, because I felt
I had gotten all my accounting courses, I had gotten all the
courses that were valuable to me; they were tools. I felt I
didn't need to put that time in, because I'd had three kids by
that time.

PAUL MASSON, CHRISTIAN BROTHERS, AND FROMM & SICHEL, 1944-1955

Relationships^/

Teiser: I see that in 1944, which was just before you returned, Alfred
Fromm had become president of Paul Masson.

Katz: As far as the management structure of Paul Masson, for all

intents and purposes Paul Masson was being managed and run here
in San Francisco by Alfred Fromm. He was the one who was
instrumental in finding the property, negotiating the property- -
really buying the property. Alfred, in the overall structure of
Fromm & Sichel, was the marketing genius. He was located in San
Francisco. In New York it was Franz Sichel who was the money man
[and] administrator. At the time that I'm covering, all the
administrative and financial affairs of the company were handled
in New York. Alfred was really the marketing- -we used to call it
sales, but it became sophisticated later on- -and sales brains
behind the Fromm & Sichel and the Paul Masson operations. He was
the president.

It's hard to jump, but to position Fromm & Sichel, and
position Christian Brothers and Paul Masson- -as I mentioned
before, they were very successful in marketing Christian Brothers
brandy. The philosophy at the time was that they were so
successful with the brandy that they didn't feel that they had to
spend much money in the advertising and the marketing at point of
sale for their wines, because they were looking for a free ride--
that the one would carry the other. And that's where I learned
my first real business insight in our industry, and that is that
the brandy business is a spirits business and has no relationship
to the wine business, and vice-versa. Wine is distinctly a
business unto itself, and there is no correlation between brandy
and wine. You have to sell brandy as a spirit, and wine as a
wine, regardless of what the brand name is. Whether it was

intentional or not, I don't know; I believe it was a
misperception that the management had about how to handle
Christian Brothers wine.

Now, the Brothers, in early '50, started becoming aware that
gradually Paul Masson wines were starting to advance in the
marketplace. Paul Masson was pretty much a dead brand in the
forties. I think at the time they acquired the property there
was a distribution of 25,000 to 30,000 cases. The company was
owned by Martin Ray, and he was just milking it, because the
brand was situated in basically on-premise [sales] - -hotels and
restaurants --and primarily in California.

When Fromm & Sichel took it over, they really started moving
and developing the brand, noticeably so in California.

Teiser: I came across a statement that Seagrams bought Masson from Martin
Ray in '43,* and then subsequently sold an interest to Fromm &
Sichel.

Katz: Maybe that's the way it's been. These are what I perceive to be
the order of things. It's very possible that Seagrams may have
bought or advanced the funds and made that change , for whatever
reason I don't know. The perception that I had was that the
initial interest of Sam Bronfman was basically one of a co
signer. Whether funds were transferred, I don't know; or who was
on papers, or who negotiated it, or what. In principle, my
perception is that Fromm & Sichel owned the stock 100 percent in
Paul Masson, up until August 1, 1955. Because it was August 1,
1955, when I got my first management break, when they spun off
Paul Masson from Fromm & Sichel.

Spinnine off Paul Masson

Katz: What I was leading up to was the reason that it spun off --because
the Brothers thought there was a conflict of interest. They saw
Paul Masson starting to make inroads in the marketplace, and the
Christian Brothers wines were going nowhere. So the Brothers
insisted that they sever their management of Paul Masson.
Basically, on paper, it was severed. But Alfred continued;

lnNoted Saratoga Winery Bought by Seagrams Co.," Los Gatos , Cal. Mail-
News. April 15, 1943.

Morris Katz at Fronnn & Sichel in 1955, the year the
Paul Masson winery was split off.

Alfred was the marketing- sales brains even when Otto Meyer was in
the job.

PAUL MASSON VINEYARDS, 1955-1974

John F. O'Connell as President. 1955-1959

Katz: August 1, 1955, the president of Paul Masson was John F.

O'Connell, who was formerly the state liquor control commissioner
for the New York State Liquor Authority. Otto didn't become the
president until 1959. John F. O'Connell was, by profession, an
attorney who was the New York State Liquor Authority
administrator under the Republican regime in New York. I think
it was when [Governor Herbert] Lehman came in, a Democrat, that
O'Connell was succeeded by another appointee.

O'Connell was a first-class administrator, but when it came
to business, he didn't know what was up and what was down. So he
was a figurehead; they made him president of Paul Masson as a
figurehead. He came out, and was here in California with the
company for about two years , and then he was replaced by Otto .
Because then Alfred had full control. See, O'Connell was an
administrator; he was good at detail, but he knew nothing about
the business.

Otto Meyer Becomes President. 1959

Katz: So Alfred put Otto in, and Otto was only a technical person at
the time. This is nothing derogatory in any way, but this is
basically how it was structured: Otto became the president, and
Alfred Fromm was very influential in directing Paul Masson' s
marketing and sales through Otto.

Otto Meyer was an expert who came out of a family with an
expertise in brandy, or schnapps, in Germany. It was Otto Meyer

At the Paul Masson Saratoga Mountain Winery residence,
a planning meeting in 1957. Left to right: Otto Meyer,
Richard Fromm (Alfred Fromm's nephew, Central Division
manager), Morris Katz, Alfred Fromm, Jack Schlotman
(Southern California Division manager) , and Harry
Herting (Northern California Division manager) .

Teiser :
Katz:

who was responsible for having developed the Christian Brothers
brandy blends. And he was a production man. Otto used to have
the responsibility of overseeing the very earliest Paul Masson
production at the same time that he oversaw the blending of the
brandies. Then he became the president of Paul Masson in '59,
and I don't know to what extent he was active any more with the
Christian Brothers brandy blends, although I have a feeling there
was still a connection of sorts.

He and Alfred Fromm are brothers-in-law, aren't they?

Right. In fact, I had lunch yesterday- -one of the things I
included in this trip was having lunch yesterday with my former
associates. Otto was driven down by his son, Tom, and we had a
nice luncheon. There were about ten of us.

Seagrams 's Position

Teiser: Was Seagrams pulling strings, or directing at that time?

Katz: No, Seagram, in that time frame, was always involved on a

financial basis. It was strictly Seagrams and Alfred Fromm and
the financial man and Franz Sichel. Franz Sichel was really the
Seagram contact, and he was in New York. Alfred was out here; he
was taking care of the marketing sales. All of the contact was
generally limited to financial matters, and that was handled by
Franz Sichel. Then there was a gentleman who was their chief
financial officer, Bernie (Bernard) Reiner (who is having a
fiftieth wedding anniversary on Saturday, that I'm going to).
When he retired, which was some years ago, he retired as a senior
vice president, a very capable accountant- -financial man. He was
the guy who had the most contact with Seagrams, and it was
limited to borrowing money, transferring money.

Up until the time Edgar Bronfman got involved, Seagrams was
hands-off. Whatever Alfred wanted to do, he pretty well did.
All that they were looking for was whether or not he was
producing profits for them. That was Sam Bronfman's method of
operation- -what we call joint ventures now. He advanced the
money, and he relied upon the minority interest to make money for
him. And it was a very successful arrangement. He had that

Northern California from his home in Southern California.

arrangement with many, many people until Edgar got into the
picture; he blew everything.

Becoming Assistant Secretary

Teiser: You said you got a break on August 1, 1955.

Katz : Yes, I became the assistant secretary of Paul Masson.

Teiser: Previously, you'd been dealing with Paul Masson affairs?

Katz: Oh, I had been working with Paul Masson from the first day that I
started working, January 14, 1946 --the first day they offered me
the claims clerk job, that was the date of my employment.

Teiser: So you were very familiar with the Paul Masson operation?

Katz: Yes, really from the ground up. As I say, while Alfred, on the
West Coast, handled all of the production and Jim- -I don't know
if in any of your previous histories the name of Jim McGinnis
ever came up- -was the right-hand man to Alfred Fromm on the
administrative side here in San Francisco. He sort of handled
everything administratively for Alfred. Jim McGinnis used to
order their supplies from the Fromm & Sichel office. Even when
the company had been severed, they still were doing things; it
was severed on paper, but not necessarily in the internal
workings of the personalities involved.

Masson 's Severance from Fromm & Sichel

Katz: Really, the severance of Paul Masson from Fromm & Sichel,

administratively, didn't occur until we came out to California in
'56. The first one to come out was Al [Albert] Haft, who had
been assistant to Bernie Reiner in New York. He came out as the
chief financial officer for Paul Masson in 1956, and established
an office here- -really , the first separate office. Up until that
time, it was just a door that had the Paul Masson name on it. I
followed the following year.

In 1955, my responsibility was to separate all of the
administrative and sales functions in New York from Fromm &

Sichel. I had five or six people, we moved into separate
quarters, and the New York City Metropolitan sales division of
Paul Masson was under Ernest G. Mittelberger , the manager. The
sales volume for Paul Masson during that time frame, as I
remember, was about 30,000-32,000 cases.

You had to understand the Fromm & Sichel structure. In New
York, Fromm & Sichel warehoused and actually distributed
Christian Brothers and Paul Masson. It was a direct selling
operation. When we were severed from Fromm & Sichel, they could
no longer provide that service, so they appointed a distributor,
Blue Crest Distributors, who are now Chalmer Industries in New
York. At that time I think the name was Blue Crest Wine and
Liquor Distributors.

As I said, in New York the volume was only in the low
thirties. We couldn't justify maintaining a principal office in
New York, because that's how small we were. So it was decided
that we would give the brand to an exclusive distributorship,
Blue Crest, and then move the principal office to San Francisco,
which is what brought me out here in 1957, and brought Al Haft
out to establish an office and an accounting force.

Facilities and Operations in 1957

Teiser: In 1957, when you came out here, what did Paul Masson consist of?
What were the holdings?

Katz: Paul Masson consisted of a bottling plant in Mountain View.

[laughs] There was a winery, but it was like a barn. It was a
very small facility in Mountain View that was leased, and it was
run by a gentleman by the name of David Weinberg. David
Weinberg--we're like brothers now- -came over here after the
Holocaust; he was in a concentration camp. As events proved, the
time that I was in Frankfurt, working at Eisenhower's
headquarters, he was a displaced person at the same facility that
I was living in. We both at one time were having Passover
dinner, and we were talking, and that's how we zeroed in. We
both had pictures of the same place. That's how our lives have
sort of been entwined. He lost his entire family in the
concentration camp.

He came over here as a displaced person and was befriended
by the Paul Masson winemaker, Kurt Opper. He ran the whole

Teiser:
Katz:

bottling operation; he was the bottling supervisor, the bottling
man, he was the warehouse, he shipped the merchandise. He wore
all these hats. The other facility was the champagne cellars,
[laughs] which in effect was a quonset hut building in San Jose,
and that was run by Hans Hyba. Hans Hyba came to them from
Cook's Champagne in St. Louis, another German escapee, as was
Kurt Opper.

Starting August 1, 1955, another gentleman who comes on the
scene is Leo Berti, who was the production manager. I had
suggested that Leo be interviewed, because he would be a wealth
of information. He goes back to CWA [California Wine
Association] and the real, real early evolution of winery
production operations in the industry. He's going to be eighty
this year. For the development of the wine production techniques
and so forth, he'd be a wealth of information.

So Leo took over the production as a production manager,
Kurt Opper was the wine master or winemaker, Hans Hyba was the
champagne master. This was in '57, the same time that the
champagne cellars and bottling facility in Saratoga was
conceived, was on the drawing board, and was in the process of
being built. It wasn't so in 1955, when we first broke off,
because in 1955 all it consisted of was that they bought bulk
wines through custom contracts; that's where Mirassou comes in,
and Martini [&] Prati comes in. I'm giving you names of the
principal wine suppliers to them at that time. The Mirassous
made a lot of table wines for them. In fact, it was with Seagram
money that most of the Mirassou facilities were built, and then
they amortized it over time --you know, so much a case.

Put in tanks and --?

Yes. They financed the enlargement of Mirassou' s facilities.
Martini & Prati was another supplier from the North Coast, and
Pete [Eugene] Seghesio* was another major supplier at that time.

Teiser: Did Paul Masson have any acreage?

See also Norbert C. and Edmund A. Mirassou, The Evolution of a Santa
Clara Valley Winery, an oral history interview conducted 1985, Regional Oral
History Office, The Bancroft Library, University of California, Berkeley,
1986.

Eugene Seghesio, known as Pete, was a member of the family that
owned the Seghesio Wineries.

Katz: The only acreage they had was the sparse fifty acres up at the

mountain winery in Saratoga that only produced maybe twenty tons
of grapes. It was just nominal. That was all their holdings
until they went over into the Salinas valley, into Monterey,
which is a whole new chapter.

Teiser: Did Paul Masson buy grapes, or did they just buy wine?

Katz: At that time they just bought wine. They really only went into
buying grapes when the Soledad facility came on stream. Now,
whether they bought any grapes, I can't say for sure. I'm almost
sure that it was more that they bought bulk wine. They might
have been instrumental in selecting grapes --

Katz: --and directing them to grapes, but I really don't believe there
was any substantial grape purchases involved at that time. We're
looking at table wines, but Paul Masson had a complete line of
champagne, table wines, dessert wines, vermouth, and brandy. All
of the wines were contracted. Vie-Del was a big supplier. Vie-
Del was also partly owned by Seagram, and very closely associated
with Fromm & Sichel and their brandy operation, because Vie-Del
was a principal supplier of brandy until Christian Brothers came
on stream to produce all of it.

I don't know exactly where the breaking point was, but
basically the Christian Brothers only bottled brandy, and they
got a fee for bottling brandy. Fromm & Sichel owned the brandy,
maintained the age stocks. Everything was owned- -even to the
extent of the brandy that was produced by the Christian Brothers
at Mount Tivy, because Vie - Del 's function in this whole structure
was providing the facilities at their Fresno facility for storing
and aging brandies. That was Mike [Massud S.] Nury's principal
f unc t i on the re .

Teiser: What Fromm & Sichel had bought when it bought Paul Masson was a
name?

Katz: Basically, that's all it really was. The winery was nothing.

You have to visit the Paul Masson mountain facility to see there
was very little they could bottle up there; I think it was before
they really got the Mountain View plant going that they had a
very primitive bottling operation up at the mountain winery, but
it was all on the basis of pre-purchased bulk wines that they
brought up. And they bought their dessert wines --ports and
sherries, muscats and all- -on the same basis: bulk wines from

valley suppliers, including Vie -Del, who was a big supplier of
the desserts and so forth.

Teiser: Martin Ray had a little wine facility.

Katz: After Martin Ray sold Paul Masson, he went into his own, and it
was very small --very small volume, very small production, and
very high-priced (and I never felt justified for the poor quality
that was being sold). But it was strictly an ego type of thing.

[interruption]

Where were we?
Teiser: We were back at Masson' s operations, when you came in in '57.

Katz: The earliest Paul Masson brandy was bottled by Seagrams in their
Relay plant in Baltimore (they also refer to it as Dundalk; they
are plants that are divided by railroad tracks) . The first Paul
Masson apothecary container that came out was produced at the
Relay facility. It was a promotional piece to get Paul Masson
started. Then we built an extension in the Saratoga facilities
for a rectifying plant, and it was principally for bottling Paul
Masson brandy.

Teiser: Let me take you back. The brandy was bottled at the Seagram
plant- -where was it made?

Katz: In California.
Teiser: At Vie-Del?

Katz: Well, it was not all Vie-Del. We used to buy brandies from other
producers. We used to get brandy from Guild [Wineries &
Distilleries], Bear Mountain [winery], [Marko] Zaninovich--! 'm
going back a long time, to the earliest suppliers. We also used
to get brandy from Calgro [California Growers Winery]; Calgro
used to be a big brandy producer for us. That goes back to Bob
Setrakian's time. We also got some brandies, not in any great
amounts, from Perelli-Minetti [A. Perelli-Minetti & Sons]. These
are the brandies that Otto used to blend from.

Then most of these small ones were discontinued. Bear
Mountain went downhill, Perelli-Minetti pretty well went
downhill. Calgro used to produce a very substantial amount of
brandy for us, even when Seagram got more involved. We had
larger volumes produced by Calgro at the same time as Vie-Del,

because Vie-Del only had a certain limit of production. But if
Vie -Del could have made all of our brandy, they would have been
the only one, because they were a Seagram company. And Mike Nury
sold a lot of brandy outside; he had his own independent business
besides the [Seagram] family business.

Teiser: So it was shipped from here to--

Katz : From California it went by tanker [truck] back east, where it was
blended, rectified, and bottled. Most of it came back to
California. Some of it went up to New York, directly to
distributors; it didn't all come back, but we're talking about a
very, very small volume. It was a new brand in the marketplace,
trying to compete against a goliath, Christian Brothers. And
that was another sore point in these interrelationships, even in
the marketing field. Subsequently it became a problem when
Arthur Palombo came in from Seagrams in '71, when this whole
radical change in management took place. There were always
accusations that they didn't do a job on the brandy because of
Christian Brothers, and for obvious reasons there was no point- -
the brandy market was such a competitive market, heavily
discounted, that it didn't make sense for them to really promote
Paul Masson brandy and discount it heavily, and compete against
Christian Brothers, because it was all basically the same pocket.

Obviously, the marketing plan for Paul Masson brandy was
really to position it and to maintain a high-quality level and
the integrity of price, and not to sell it on a discount basis.
There was no sense having Christian Brothers chasing after Paul
Masson and losing the profitability on that end, which made
business sense. But when Seagrams took over the management and
brought their own people in- -Arthur Palombo always had this thing
going against Alfred for having positioned the brands and not
wanting to do anything with it because it would have impacted the
Christian Brothers. So along came Gallo and settled the whole
situation.

The Cellars at Saratoga

Teiser:

Katz:

your construction

The next period was a period of expansion with
of the Saratoga cellars, wasn't it?

Yes. I had nothing to do with that. That was something that Leo
Berti--! think he was, by profession, a chemical engineer, a very

capable guy in many fields. He was the one responsible for the
planning and the building of the facility.

Teiser: That was a beautiful building. What's happened to it?

Katz: They just tore it down. In fact, a week ago Saturday they had a
big shindig put on by the chamber of commerce in Saratoga. The
proceeds went to local organizations, but there was the last
hurrah for the facility that's being demolished. They asked me
to come, and I said that to me it would be like going to a
funeral; I would get no pleasure out of that.

So Leo Berti was really the one responsible for the
conception, the planning, and the construction of the Saratoga
facility. The management and personnel at that time, as I
indicated- -the president of the company was Otto Meyer, the sales
manager was Sanford J. Wolf, the finance manager was Al Haft,
public relations and that field was handled by Ernest
Mittelberger , the wine master was Kurt Opper, the champagne
master was Hans Hyba. My role was administrative, basically, in
the areas of government relations --laws and regulations. I did
the transportation committee work at the Wine Institute to keep
transportation costs down.

The principal office was in San Francisco, and the winery
operation was Leo Berti. Leo Berti had a very strong military
backing from the war, and operated very militaristic --very, very
strong-willed, very strong person, technically very, very
competent because of his past experience in the wine business.
He at one time ran a laboratory, and he worked for the California
Wine Association, which, other than Gallo, was the daddy of the
wine business. He was a very competent and technical person, and
a good administrator, also, except that when the Soledad winery
came on stream in the late sixties, it became too much for him to
handle alone, himself. He had people working in different
departments, but from a management standpoint it was getting
beyond his reach.

In San Francisco, where I was situated at the time, the
question came up: Somebody has to go down there [to Saratoga]
and organize the distribution end of it. The production was
pretty well handled, but they were having problems with
shipments- -wholesalers complaining. The distribution part of it
was a mess. So the question came up of who should go down and do
it. Nobody wanted to go down to that hick farm town, and so
forth. Again, my instincts for taking on challenges arose, and I
said, "Sounds like a good challenge. I'll take it on." Among

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all the other things that I was doing, which was basically
administrative and government relations, working very closely
with the sales department in fair trade, brand registration,
price filings, insurance- -in that area. All the garbage used to
drift my way, and I would just take it under my umbrella, so I
wore maybe fifteen or twenty different hats. Because we were a
small company, and anything that came up: "Who's going to take
care of it?" Everybody tended to dodge because they were too
busy. But I said it was okay, I would handle it.

In the course of doing that I also developed some very keen
insights into the operation of the business in its totality,
because I was involved with everybody at all levels. I was like
a jack of all trades and a master of none.

It was in 1962 that I moved down to the Saratoga facilities.

Teiser: Let me take you back before you come to that. If you were doing
all right without owning more facilities, why did it seem worth
building an expensive new facility?

Katz: Because there was no one around who had the facilities to do--
well, I guess we could have found somebody. You have to
understand that during those days we didn't have this surplus
bottling and winery crushing capacity that we are confronted with
for the last fifteen years or so. I have to also say that at the
time the wine business was not a profitable business, no matter
what the size of your facility was; it just wasn't profitable.
The only reason we were able to buy from everybody was because
they already had the facilities; they already had the capability,
but the one thing they couldn't give Paul Masson was the ability
to label- -from a marketing strategy, they wanted to build on the
historical prestige of Paul Masson, situated in Saratoga; they
wanted to have a label [that said] produced and bottled in
Saratoga. Because, if you remember at that time, if you had a
principal place of business which was in San Francisco, you could
show another address --the address where you actually did the
bottling- -if you showed the bonded winery number, but you had to
put your principal place of business on the label and then show
BW so-and-so, which could have been Mirassou or any one of a
dozen different companies. But the marketing strategy was to
focus on the quality image of Paul Masson and the history of Paul
Masson, all in Saratoga.

Besides which, the technology in the industry was changing.
We were moving to table wines. All the facilities were dessert
wine facilities. It's something that is overlooked by many

Teiser :
Katz:

people when they view the industry at a given time, like in the
seventies when we had this big boom. Well, who was producing all
the wines? It was basically dessert wine facilities that were
producing very poor quality wines, because, you know, a dessert
wine facility is not a table wine facility. Here we had the
opportunity- -

I would say the most profound impact in the global wine
industry occurred in the fifties and sixties when advanced
technology of refrigeration and stainless steel came into play.
If anybody ever asked the question, "What was the most profound
change in wine production?" I would say it came at that time when
refrigeration and stainless steel were welded together in a new
winemaking technology. The facility in Saratoga was a product of
that. We had stainless steel tanks, we had redwood tanks; we had
a whole cellar of redwood, but that was for red wines.

You put redwood in that late?

We have to understand, again, what the industry consisted of in
that time frame. The industry table wine ratio was two to one
red; we sold twice as much red wine as we sold white wine. That
factor alone [laughs] goes forward into one of the problems that
the industry ran into in the seventies, when everybody and his
brother and sister decided to come in and start planting
vineyards. What did they base their plantings on? They based
their plantings on what they perceived were the successful
companies. Paul Masson was then a successful company. By that
time we had vineyards. What did they do? They ran out- -it
didn't take them long to find out what we had planted in the
vineyards. That's another part of this, further on in the
development of Monterey.

Extending Scope. 1959-1971M

Teiser: At the time you were building a fine, modern plant, were you

thinking about expanding into vineyards? When did the idea of
expanding- -

Katz: I believe it all came to more of a realization after the Saratoga
facility was built. The urbanization of existing vineyard
properties was becoming a very serious factor, because in the
wine business, I would say probably the leading factor or element
in reducing the industry to a very poor profitable industry is

the necessity to have vineyards, wineries- -the tremendous capital
investment that's necessary. Usually, you found in the past that
successful wine merchants- -and this was true of the successful
wine merchants, I believe, in the European theater- -didn' t own
anything. They were successful; they just bought bottled wines.
They bought, really, on others' miseries, and that's what's
happening in California. It's reducing itself to the point that
if you don't own anything, you're more apt to be profitable than
if you do own something.

In California, my experience has demonstrated that the only
people who really came out smelling like a rose were those who
were able to survive those hectic periods of depression and poor
economy through the appreciation in value of their vineyards,
which ultimately became real estate. The Mirassous , for example --
as a typical example of the prosperity of vineyard holdings.
Because if you look at the other side of the coin, at their wine
company- -the fifth generation- -they're struggling. And you know
why? Ed Mirassou and Norbert skimmed off all --and I don't mean
this in a derogatory sense, but financially they were the
beneficiaries of the appreciation in value of their vineyard
properties, which is now practically all in real estate- -tracts
of homes- -and even become more so. And they transferred the
winery properties and the sales company to the fifth generation,
who really don't have the capitalization to do anything with it.
So I think it speaks for itself.

Going back in time, I can say this, that it wasn't until the
sixties that Paul Masson became profitable. And I think it's
true of most wine companies, that it takes about fifteen to
twenty years before you can turn a profit because of this
characteristic of these high capital costs to maintain a
business. It's a question of what point in time you get in. I
think it was after the Saratoga facility came on stream that the
realization came that they couldn't depend upon a source of
supply, and they had to start looking somewhere else. Because
Paul Masson was basically profitable in two areas: it was a
major varietal wine marketing company, and also a major champagne
producer and marketer in that time frame.

Unfortunately, when the Seagram management took over in
1971, because they were more interested in boxes [number of cases
sold] than they were in profitability as they perceived it, they
changed the whole profile of the company's marketing. At the
time that we've covered here, the marketing strategy was to
develop the Paul Masson table wines and champagne, because they
were the two most profitable items. Dessert wines --you carried

dessert wines, you carried vermouth, more or less like loss
leaders. Dessert wine volume was going down, vermouth was
strictly a competitive item; it was more a product to use up
residuals of production facilities- -grapes and so forth. So the
major focus and the profitability of Paul Masson was in the
champagne and the varietal wines.

I would venture to say that by the early seventies Paul
Masson was selling more varietal wine than anyone else. I
remember a time when I took over, when Leo Berti retired in '72,
as the vice president of production. At that time I was buying
grapes, buying bulk wines, and so forth. I remember a year (I
think it was 1974) when Paul Masson out-purchased Gallo in the
North Coast- -Gallo, up to that point, had been the largest
purchaser of grapes and wines from the North Coast region- -the
reason being that we were selling so much Cabernet and so much
Chardonnay that my purchases that were made on future
expectations were such that I had major contracts for wines to be
produced up there with Martini & Prati, Seghesio, and Windsor
Vineyards. Paul Masson was one of the companies that really
helped Windsor Vineyards get on its feet in the early years when
they had the production capability, but they didn't have the
market for their production capability. They used to make wines
for us. And Martini & Prati was always basically a bulk wine
producer. It's only in recent years that Seghesio now has become
somewhat of an active brand, particularly with Zinfandel and
White Zinfandel.

But they were major suppliers to us in that time frame,
because of our marketing projections. Then, when Seagrams took
over, the whole thing just changed.

THE SALINAS VALLEY

Creating Vineyards. 1960s and 1970s##

Teiser: Let's go on to going into the Salinas Valley.

Katz : Because of the urbanization of premium grape-growing areas- -
namely, Santa Clara County, and it was also happening in Napa
and Sonoma- -the management was concerned that, if nothing else
happened, the cost of grapes and subsequently the cost of wines
would become prohibitive if we had to rely upon our source in
grapes from these limited areas. That's when it came to the
attention of the management that the University had done some
studies on the feasibility of grape growing in the Salinas
Valley. They had done some work in the thirties, and
subsequently in the sixties they did more work on it. They
found that the Salinas Valley would be a prime opportunity for
development as a premium grape growing region by virtue of the
fact that, first of all, most of the area had been farmed for
vegetable crops. Most of the gentle, sloping areas above the
valley hadn't even been farmed; they had been used for raising
cattle, the reason being that there was no water up in the
higher elevations. It lent itself to development for growing
something on it by virtue of another advance in technology at
that time, the overhead sprinkler systems. That's another item
to be added to refrigeration and stainless steel; it falls into
that category, because usual irrigation was done by flooding,
if you had a very large source of water supply and if you had
very level ground so that you didn't get a runoff, but good
penetration.

There was very sparse rainfall in the area- -somewhere
between ten or twelve inches of rain for a whole year on
average. We had what was known as the upside down river there--

the Salinas River, which was really underground aquifers.
There was a more than adequate supply of underground water
through these aquifers, the levels of which were kept high by
virtue of the dams that were downstream and the conservation
programs and so forth.

There were large parcels of continuous sloping land that
had good drainage, by virtue of the fact that the soils were
light and granitic- -had a lot of granite in it. In view of the
fact that there had been no previous major agriculture in
grapes, the area was virtually phylloxera- free, which was a
very important factor. The reason for looking at it, and one
of the benefits of looking there, was the fact that the land
was far away from urbanization. It was basically an
agricultural area.

Land costs were cheap relative to established grape -
growing areas. The University found that the degree days of
heat, which basically determines the feasibility of ripening
fruit- -the amount of heat in the area- -were comparable to other
fine wine-grape growing areas in the world. It was decided
that they fell into what we refer to as Regions I, II, and III.
The northernmost Region I was in the Chualar area, and as you
moved south you got closer to the Region II in the Greenfield
area. Then when you got down in the southernmost part, south
of King City, you started getting into a Region III, because it
was much warmer. Experience bore that out later on, as I'll
probably refer to later on.

Another plus factor was that, by virtue of the fact that
most of the vineyards would be planted on higher elevated
slopes, rather than in the bottom of the valley, it presented
frost- free protection. Then we found that as we moved further
south, and the elevations started getting lower and lower into
the bottom of the valley, we were more susceptible to frost.
We found that out when we planted a vineyard on a joint venture
between Seagrams and Goldman Sachs in the San Lucas area. We
referred to that vineyard as Las Colinas, and that's a whole
story in itself.

By virtue of the fact that Monterey was basically a
frost-free area, it presented an opportunity for a longer
growing season, as contrasted with other premium grape areas
that have a shorter growing season. Like in France: in the
Pinot noir and Burgundy districts, and Champagne districts, and
so forth, they have early maturing grapes, and they're usually

low in sugar because there isn't sufficient heat in the season
to ripen the fruit for producing better wines. That's why you
find that the Pinot noirs and the Chardonnays constituted the
basic Champagne material in the Champagne district.

So we had the prospect of having a longer growing season,
with a sparse rainfall with less damaging effect that would
rush the harvesting of grapes. That doesn't mean that we
didn't have seasons in which we had early rains and had to
harvest early, but going into the area this was the reasoning
behind why we felt that it could be a good fine wine -grape
growing area.

And obviously, because the area was phylloxera- free, it
also presented an opportunity of planting and establishing
vineyards at a lower cost, because when compared with the North
Coast areas, which is prevalent with phylloxera, the natural
rootstock is grafted onto phylloxera-resistant stock, and the
cost for that is quite substantial per vine.

Overall, there were all these factors that made it good
sense to try to develop the area. That's what basically
influenced Paul Masson to go into a joint venture with the
Mirassous. Paul Masson really didn't have any farming
expertise, you know. We basically bought wines, bottled them
off, and marketed them. We were not an agriculturally oriented
company, and neither were our people agriculturally oriented.
So they got into a joint venture with Mirassou. Peter Mirassou
was one of the people primarily responsible for supervising the
first planting of Paul Masson' s vineyards in the Salinas
Valley, besides their own planting, and then subsequently Wente
did some planting before we got the early seventies onslaught
when Almaden came in and planted all the mesas down around King
City. I think they put in something like two thousand acres.

Then we had a commercial agri- group that was known as
McCarthy- Southdown. This was a joint venture between a Fresno
grower [McCarthy Land Co.] and a Texas--oh, what would you call
it? It was just a corporate monolith in agriculture. They
were accustomed to planting huge acreage in just any crop.
They planted the McCarthy -Southdown [vineyard] , and that was
somewhere in the neighborhood of about three thousand or more
acres .

Then we had the McFarlands [M. B. McFarland & Sons] , a
well-established agri-company after whom the town of McFarland

in the Central Valley was named. They came on like bulls and
planted approximately- -they had plans originally of some twelve
or thirteen thousand acres, and they reduced it to only about
ten thousand acres in the Gonzales-Chualar area. I remember
them very clearly. In fact, I've always felt like I was a part
of their operation because before they planted, the people who
conceived the Monterey Vineyards put a plan together which was
based on the McKesson family of companies, who were into
Pharmaceuticals and also distribution of wine and liquor. The
concept was that Monterey Vineyards would produce the wines
that would be distributed by this family of McKesson companies
throughout the United States.

Like so many other people , they came to me . At the time ,
the president of Paul Masson was Stanford J. Wolf, and at that
time I was the executive vice-president. My responsibility was
basically everything but marketing; it was in the whole
production area- -managing the vineyards, the wineries, the
purchase of grapes and bulk wine, et cetera. They came to us
and outlined their plan- -what they had in mind- -and, by virtue
of the fact that they did not have the marketing muscle to
absorb all that these vineyards and the winery would produce,
they were looking to us for a grape contract to absorb the
grapes at the early stages of the development of their company,
and to carry them over the period when they would have more
grapes than their marketing requirements would be.

Of course, we had our own vineyards, and we were obliged
to tell them that we couldn't enter into any contracts with
them . 1

Teiser: When was that? Wolf was president from '72 to '75.

Katz: Around '72. The relationship with Otto Meyer terminated
January 1, 1971, if I'm not mistaken. That's when Arthur
Palombo came on the scene and the marketing for Paul Masson was
taken over by Browne Vintners. We had this strange marketing
situation of Arthur Palombo and Browne Vintners marketing, and
we still had Stan Wolf, who was the president of Paul Masson,
who himself was a strong marketing salesperson who only had the

See also pages 43-44.

Morris Katz (left), newly named vice president of Paul Masson, and
Stanford J. Wolf, newly named president, at a luncheon honoring
them in 1972.

responsibility for the production end. That bred a lot of
philosophic disagreements for direction.

Teiser: Could I take you back and ask about the initial plantings in
the Salinas Valley? What were your duties in connection with
that?

Katz: At the time that the vineyards were originally planted, I was
busy in Saratoga. I wasn't personally involved or had any
responsibility in the planting of those vineyards. That was
Leo Berti's. It started in '62, and it was timed to coincide
with the construction of what we called the Soledad winery that
came on stream in 1968. For obvious reasons, we planted in
'62, and you hopefully will achieve a level of full maturity in
'68 of those vineyards planted in '62. Up until that time, the
grapes that were grown in Soledad were shipped to other
wineries. In fact, I think Mirassou did some of the crushing.
I don't know exactly who it was at the time, but we had several
companies we dealt with who crushed the grapes for us until
Soledad came on stream in '68.

[referring to notes] In '62 there were some 800-odd acres
in the first site in Soledad, of which 782 acres were devoted
to vineyards, of which 717 were bearing. There were 38 acres
of that parcel which were reserved for the winery site itself.
That was in 1962. In 1969 and '70, we planted what we referred
to as the Baker Ranch. Generally, these names I refer to are
the name of the farmer who farmed those lands before.
Pinnacles was what we called the first planting. There was no
name associated with that, because it was just basically
grazing lands; they went up into the foothills of the Pinnacles
park.

I'll give you just bearing acreage, rather than gross
acreage. The difference between gross and bearing acreage is
the elimination of roadways and service areas. The Baker Ranch
was 579 acres, and was planted in '69 and '70. In 1968 and
1969 we planted vineyards in Greenfield on properties that we
basically leased from other owners, because at that point it
was economically more feasible to lease the property, because
interest rates were so low at that time it just didn't pay--
well, actually, the interest rates were starting to go up at
that time, so it didn't pay. You could lease property at a

pages 47-52.

Teiser :
Katz:

Teiser:
Katz:

rental that was less than what the interest would cost you if
you bought it at that time.

How much did you lease in Greenfield?

It was a total of 240 acres. That was in- '68 and '69. In
1970, we planted a property that we referred to as Marks --a
farming family by the name of Marks- -again, on leased property.
That was 287 acres.

We then moved to the Bundgard Ranch, which was 362 acres,
planted in 1971. In 1971 we planted Marks II; we distinguished
between Marks I and Marks II. And in '71 we also planted a
ranch known as Homen. On those leased properties- -between the
Marks II and the Homen- -was 500 acres [planted], all leased.
And in '71 we planted the Hansen Ranch, 441 acres, and it was
owned property; we bought that property. It was getting to the
point where you didn't have the same good deal leasing, so you
were better off buying and owning the land for the long term,
as we saw at that time .

In 1974, we picked up a small property, 60 acres, from a
gentleman by the name of Woods , who I think was in the
California assembly. We wanted to plant some Chardonnay, so we
planted some 60 acres. At that point in time we had under our
own control 3,187 bearing acres.

Additional to that, in the period 1974-1975, when we had
that very severe recession, we planted for a joint venture
between Seagrams and the investment firm, Goldman Sachs [&
Co.]. We planted the Las Colinas vineyards in San Lucas, which
is south of King City, which has since proven to be one of the
better of all the areas to grow grapes.

Where was the Tresconi ranch?

It was just down the road. Almaden got to planting those,
fact, if we had had our "druthers" --we negotiated with the
Tresconis for years and years, and we couldn't get them,
because Spreckles had the call on that land. So we could never
come to terms with Tresconi because of the situation with
Spreckles. It wasn't until subsequently, after everybody had
planted, and if anything we wanted to get out of grapes, that
Almaden planted the Tresconi property.

In a Paul Masson Salinas Valley vineyard, Morris Katz
was interviewed by a local television station in 1983.

Teiser :
Katz:

Las Colinas vineyards was 1,280 acres. Paul Masson had
advised the Seagram management not to proceed with that joint
venture, because by that time we had seen that the area had
been overplanted. You know, we had planted up until 1971
because we felt that nobody else was planting vineyards, and we
wanted to assure ourselves a source of grapes to satisfy our
varietal market. That was our principal goal in this whole
Salinas Valley venture. Because when you really take a look at
the industry in the sixties, nobody in the industry was really
doing any major vineyard planting. Since we had such a strong
market in varietals and champagne, we wanted to be sure that we
had a source of supply. That was basically the reason Paul
Masson got into its own vineyards, and the Salinas Valley by
virtue of the reasons that I've given: because of urbanization
and the high cost of land in Napa/Sonoma, and we felt that we
could produce comparable quality grapes in the Monterey area.

What varieties were you especially interested in then?

We probably had one of the most diverse plantings of varieties-

Teiser:

[interruption; tape off]

--we had Cabernet Sauvignon, Camay Beaujolais, Pinot noir,
Pinot St. George, Petite Sirah, Zinfandel, Merlot, Suzao, Early
Burgundy, mixed blacks (meaning that it really wasn't of any
consequence). In the white grapes we had the French Colombard,
Pinot blanc, Chenin blanc, Sauvignon blanc, Emerald Riesling,
Semillon, Johannisberg Riesling, Gewurztraminer , Sylvaner,
Pinot Chardonnay, Flora, and mixed whites. So we had twenty-
one varieties. [laughs]

As I indicated before, when we planted the vineyards
these varieties represented the breadth and the range of what
we were marketing. In fact, to this day Paul Masson markets
what I consider one of the best ports made in California, their
Rare Suzao Port. It's marketed in the heart-shaped bottle.
They're still selling it and marketing it on a much smaller
scale. That was the basis of the genesis of our planting, to
ensure that we had enough source of supply of our own grapes to
meet our marketing profile.

At the height of it, what percentage of your own grapes could
you supply?

Katz: Twenty- two percent.

Well, the grapes that are covered here are those
varieties that went into our premium wines --the Cabernets, the
Chardonnays , and so forth. We had a large block planted to
Emerald Riesling because we had marketed Emerald Dry. The
Emerald Dry, as it evolved, was made more from grapes from the
Central Valley than from the premium area, by virtue of cost.
We started out with the expectation that we would put a large
percentage of premium coastal grapes in the Emerald Dry
package, but we also had expected to sell it at much higher
prices. When we found that we could only sell it a few cents
above the generic category, we had to scale back. So we used
more of the Emerald Riesling from the Central Valley, and we
used our coastal grapes, really, to give it the quality boost.

PAUL MASSON VINEYARDS, 1971-1986

Problems

Katz : Paul Masson eventually hit a level of some eight to nine million
cases, so we were looking at close to twenty million gallons.
The ratio of our sales was basically in generics, and that's what
really led to the dismemberment of the company. The marketing
people used to refer to them as "boxes." They were selling
boxes; they weren't selling anything more. As the volume
increased, the more we sold, the more the company lost. It was
one of those situations, which went contrary to this Mary
Cunningham's later involvement, when she produced what was known
as the Delta Project for Seagrams, which really was based on
creating a critical mass- -very large volume.

Teiser: You said that Mary Cunningham came up with the premise that--

Katz : In order to be successful on a large scale, similar to Gallo--
and I always felt that back in the mind of Edgar Bronfman, he
fantasized a wine company with the volume of Gallo--that he would
go into the marketplace and become a Gallo, as a Seagrams. The
fantasy was a fantasy, and Mary Cunningham produced a marketing
design for him which was as much of a fantasy as his original
objective. She was saying that, to be that big, you have to have
a critical mass of volume for economy of scale, so that in order
to be profitable, to make all of your investment- -your
facilities- -prof itable , you have to have such a large volume that
you could buy so much cheaper, do everything so much cheaper.

Mary Cunningham became vice president for strategic planning of wine
products, a newly created Seagrams position, in 1981.

Well, basically, she's right. But she was only right in theory.
In practice, it generally doesn't always work that way.

And then it's a question of where you set your sights at.
It had always been known and recognized in the wine industry that
if you could produce your own glass it could become very much
cheaper for you from the standpoint of profitability. But you
would have to achieve a level of at least twenty million cases to
justify a glass plant, and that is what United Vintners' volume
was at the time that they built their Madera glass plant. Of
course, Gallo has had a glass facility much longer than that,
because they reached that level long before.

It really goes to the heart of these very large operations
like Gallo. In talking to some people in the industry, I told
them, "Gallo doesn't make money selling wine. They make their
money selling packaging material. Wine is only the medium by
which they make money selling packaging material." I tried to
get that across to a Seagram task force when they were
considering whether to stay in or out of the industry, after the
Coca Cola fiasco. Basically, what I'm saying is that Gallo is
vertically integrated, so that in effect they produce practically
all of their own glass, they produce all their own machinery, and
caps. They even sell to the industry their excess supply of
plastic corks, metal caps, and so on and so forth.

That's what Mary Cunningham was strategizing. The only
thing is, they went so far out of a range with reality, because
the people she was working with didn't even understand wine.
I'll give you one illustration, and give you a sense of who it
was that was developing these programs. They were these
consultants back east- -large consulting firms. They conceived a
strategy where, because of the surpluses of wine worldwide- -in
Argentina, to give you one illustration of surpluses; there were
surplus areas of wine produced throughout the world- -wines would
be purchased in all of these foreign places where it's excess,
and they would be concentrated. They would be brought over in a
concentrated form to regional plants in the United States. One
plant would service the East Coast, another one the Northeast- -
like an orange juice company. They would reconstitute the wine
at these plants and eliminate the need for having to have this
big investment in California.

^Coca Cola Bottling Company of Atlanta sold all of its wine business,
including the Monterey vineyard and Taylor California Cellars, to Joseph E.
Seagram & Sons, Inc., of New York, in 1983, apparently dissatisfied with
profit margins.

They so totally misunderstood the industry- -you know,
labeling requirements and so forth. Just to show you how
juvenile the thinking was. Her plan just wasn't a workable plan.
But she was convincing enough during the time frame to influence
Edgar Bronfman's decision for critical mass: instead of making
this tremendous investment, go out and buy a company.

It was just at that time that Coca Cola was ready to get out
of the wine industry, because they blew it. They came in in
1979, and within, I think, a four-year period they were at the
six million case level of distribution, which they achieved by
buying into the marketplace- -heavy discounting, promoting;
basically, heavy discounting. What it took Paul Masson fifteen
or twenty years to achieve, they achieved in four years- -at a
very heavy cost.

They saw that there was no money in the wine business, and
they were bailed out by Edgar Bronfman. That's a story in
itself. I don't know whether you want to hear about it. In
effect, Paul Masson was very close to eight million cases at the
time this buyout came about. Taylor California- -the whole Taylor
operation was pretty much at the same level. They projected that
by putting these two companies together they already had fifteen
or sixteen million cases. On the drawing board they had
projected that they would get into the twenty, the twenty- five,
and the thirty-million case- -just as is typical of so many of
these big corporate financial planners who don't understand the
industry. They merely take figures that exist and extrapolate
them into the future without any real basis, and basically that's
what happened.

Bronfman had let word out that nobody was to queer his deal
with Coca Cola, so nobody- -Paul Masson or anybody, even in New
York- -could speak up against Seagrams consummating that deal.
During the early period, when Seagrams was going to buy Coca
Cola, they had given Seagrams basic information on their
marketing and inventories and all. They admitted to having an
excess inventory of some nine or ten million gallons of wine at
this period in time.

A week had gone by, when various people from Seagrams
finance department and some people from Vie-Del- -Mike Nury--some
people from Paul Masson, my right-hand man- -went around to all
the facilities to evaluate them for Seagrams and so forth. At
week's end we had a meeting to discuss it all. Included in what
they brought back were about four or five big black binders,

which they had gotten, but nobody had looked at. They turned out
to be all of the --they called themselves the Wine Spectrum at the
time- -Wine Spectrum's grape purchase and bulk wine purchase
contracts .

I took them home over the weekend, and I took a look at
them. It came to my realization that it was no nine or ten
million gallons; it was more like twenty or twenty-one million
gallons. When I got back to the office on Monday, I immediately
contacted the financial analyst in Seagrams, New York, to give it
to him, because he had been putting together a whole package to
consider the feasibility, the economics, and so forth. What it
showed was that they were really looking at about a $38 to $40
million loss factor, by virtue of these excess inventories. The
Wine Spectrum couldn't even read their own inventories. Even if
they felt they were telling the truth, and say they were
innocent, it was because they maintained everything in such a
poor fashion.

When this financial analyst passed this information along,
it never got anywhere. In fact, the young man lost his job
shortly after that. What came back to me was that Edgar Bronfman
had gotten the word out that he didn't want anybody to queer that
deal. So they paid $237 million, sort of book value, for the
company. Ultimately, when the companies were sold, Seagrams sold
the companies to Vintners International for $200 million in cash,
that was put up by Citicorp Bank, Seagrams carried $40 million in
paper, and the stockholders of Vintners International came up
with $10 million.

There were two companies whose book value, for all practical
purposes, was in the neighborhood of about $500 million, that
they sold for $200 million. That has to tell you something.

California Vineyard Overplanting

Katz: It was the very success that Paul Masson had in its own marketing
profile that led in some measure to the overplanting of grapes in
California in general. Because Paul Masson' s marketing profile
was that we were selling reds at a rate of two to one to whites.
If you analyze our plantings, you would see that we were heavily
skewed to blacks on that ratio. Well, during the time that
everybody was planting vineyards in California- -small companies
like Monterey Vineyards, for example, used the profile of our

vineyards to plan their own. People would come to my office and
tell me that they were planning to establish vineyards and a
winery, and would I give them recommendations for what to plant.
I could give you instances of at least a half dozen, but I'll
leave them nameless because it wouldn't serve any purpose to rub
it in.

I told them, first of all, that I never recommended
varieties to plant for anybody, because history has proven that
we don't even plant the right varieties for own selves. You make
the best intelligent analysis, and you plant. I would finish up
by saying, "But my best recommendation to you is not to even
plant the vineyards or go into the wine business, because we are
already in an overplanted and overbuilt stage."

You have to visualize my sitting behind a desk, and people
sitting on the other side with the perception that we're fat
cats, a very successful company- -look at this big facility. You
could just see them thinking, "They don't want anybody else
getting a piece of the action, so that's why they're trying to
discourage us." So what did people do? They went into the
vineyards, particularly Paul Masson's, and took a look at what we
had planted. They followed basically the same planting scheme.
The first rush of plantings in Monterey, I think, ultimately
culminated in some 37,000 acres being planted. If you broke them
down, they were basically two- to-one reds. That's what
contributed to the depression that we had in that area when the
market went two- to-one white. The white wine boom in the
seventies was a two -to -one white wine market. In the meantime,
we were planted two -to -one red. That in itself explains the
economic dilemma of the wine business that we have.

I wanted to make that point, because it's still happening
today- -people buying in, going in. Because the craze now is
Chardonnay and Cabernet [Sauvignon], everybody and his brother
and sister is going in and buying into Chardonnay and Cabernet.
It's recycling again. It's that old thing about history
repeating itself.

The Madera Facility

Teiser: Was there a point, before '71, at which, if you had been allowed
to go your own way, you would have gone on building straight up?

Katz: I formulated a policy for the company when I became in charge of
the production. My philosophy was that our facilities should
never be in excess of 65 to 75 percent of our market, and that we
should always build up to that plateau. As our market increased,
we should increase our own facilities and vineyards to the level
of anywhere between 65 and 75 percent, and we should use
evergreen contracts for grapes and for bulk wines to meet the
critical needs, so that we would have a flexible adjusting period
as our market went up or down. That's basically the formula we
used when we expanded into the Central Valley and built the
Madera facility in 1974. We saw that the market was moving, and
that our particular market was changing its focus towards
generics , and we needed a facility to produce generics because
our facility was geared to producing premium varietals--and more
so when the Seagram takeover occurred and we saw the direction it
was going.

In that facility, I was completely involved. I even went
out and bought the land in Madera. My recollection was that I
paid something like $725 an acre, and I chose that site because
the Santa Fe Railroad dissects the property --and, again, it was
away from urbanization. I had expected to plant vineyards. The
Madera site is nearly a section- -640 acres. Depending upon the
length of a harvest year, the plant had the capacity to produce
11 to 14 million gallons. The basic focus was to produce wines
for the generic jug wine market.

Teiser: Who has that now?

Katz: I understand Vintners International mortgaged it. They sold it
and leased it back, because cash flow is their biggest problem.
The trouble is, even if they want to sell something, they can't
sell it because they're mortgaged at such outrageous values.

But at the time, in the center of the property I set aside
seventy acres for the winery operation, and then I was going to
plant vineyards around it. I figured that instead of buying
grapes, I might as well grow my own.

Problems. Continued

Katz: But what evolved over the time when Seagrams took over, the
orientation was your bottom line. The person making the
decisions was a marketing man. Up until the time I became
president, I went through seven presidents. Every two years we

had a different president, and I had what I referred to as a
fictional presidents' manual; because every time somebody new
came in, I had to re -educate --to train- -so every time I was asked
a question, I said I would have to refer to my presidents'
manual. I had to teach each one that came in the production side
of the business.

The fallacy of that whole setup was that the same man who
was coming up with the marketing strategy had responsibility for
the purse strings. Rather than look long-term at an investment
opportunity, they only looked short-term at the bottom line for
that year.

Teiser: Who was that?

Katz : It started with Arthur Palombo. I'm going back a long time.
That was his focus --he was only concerned with bottom line.
After Arthur Palombo there was Elliott Fine. After Elliott Fine,
the other troops came in. Michael Cliff came in when the
marketing people in New York changed. There was [Philip E.]
Beekman, who brought in his own henchman, [William M. ] Wilbur.

Decisions were made on short-term bottom line rather than
long-term, as the wine business is long term. I even had made
proposals to the company to plant the vineyards up at the
mountain winery in Saratoga, recognizing that it could be
developed as a different brand and a premier- -because we had the
facility and the history and everything. La Cresta, you know--
there were so many things they could have done with it. I came
up with the figure that it would cost them about $2.1 million at
the time to do all of that, and that they would have a real super
premium brand- -not big volume, but I always saw that the larger
wine companies got, the more vulnerable they were to disaster.
The small wine company, when it reached the level of around
400,000 cases, had to make a decision about what it was going to
do. That was just like a unity level, and to go beyond that you
had to start a whole new company to expand it.

So I always preached that when you get to around 400,000
cases, you've got to make that decision of where you are going.
The smartest business decision is to keep that brand at the
400,000 case level, and just keep increasing prices- -increase
demand, increase profitability to the point that you could then
capitalize another brand, and then build that brand separately so
that if it doesn't go anywhere it doesn't impact negatively on
your bread and butter.

But the point I was trying to make is that nobody would ever
recommend doing anything to New York, because their $2 million
would become a negative on the bottom line of their cash flow for
the year. Now, who's going to recommend something when they're
already losing money?

Teiser: As you've described it, it looks as if you were fairly autonomous
earlier, and Seagram kept bearing down harder.

Katz : When the minority interests were running the company, the focus
was premium quality and profitability. The marketing strategy
was always restricted to expanding the brand without impacting
profitability. Under the influence of Otto Meyer and Alfred
Fromm, behind the scenes and all, the volumes were kept down in
the interest of maintaining premium quality and profitability.
The management saw that the profitability lay in expanding our
sales in varietal wines and in champagne. Using that as a base,
anything over and above that in the generics would be gravy.

Seagrams Takes Over

Katz: Well, in January of '71, Seagrams took over the total ownership
and the marketing. That's when Palombo came in.

Teiser: Why did Seagrams decide to do that?

Katz: That's where Edgar Bronfman comes in. Sam Bronfman, his father,
was basically concerned in a joint venturing profit: let
somebody run a business and make money. And they were making
money for him. Then he passed the reins to Edgar Bronfman, whose
whole makeup- -I'm characterizing it, now- -was one of, "Why should
I share my profits? We could do this better." You see, he
perceives Seagrams as the greatest marketing organization in the
world. He was sold a bill of goods that the minority interest
was holding the company back so that they wouldn't interfere with
Christian Brothers and their other successes.

When Palombo took over the marketing direction of Paul
Masson, the orientation went to chablis, burgundy, rose, Emerald
Dry, Rhinecastle- -all the generics. Varietal business and
champagne business in those days was primarily big in on-premise--

the hotels and restaurants. You know, we weren't into the
sophistication of the consumer buying varietals.

He took expense money away from the men in the field, and in
the course of it he killed the varietal business and killed the
champagne business.

I always say that if the original minority interest had
continued with Paul Masson, managing the marketing, Paul Masson
would probably have the volume in champagne that Korbel has.
Korbel has it because it was abdicated by others. When you go
back to the times of the forties and the fifties and early
sixties, Paul Masson was a highly regarded brand name in
champagne, and from '71 on both varietals and champagne just went
[gestures downward] .

Teiser: Those seven presidents whom you spoke of--

Katz: In fact, [Agustin] Huneeus was one of the presidents, too.

Teiser: Yes, I remember he was. I don't have all their names, but I have
Fromm, Meyer, Wolf, Huneeus --

Katz: You want O'Connell in there.

Teiser: And there was somebody before [Elliott A.] Fine?

Katz: Palombo.

Teiser: Palombo was actually president?

Katz: Yes.

Teiser: Then there was somebody between Fine and you?

Katz: It was Michael Cliff.

Teiser: And these were all put in by Seagrams?

Katz: Oh, yes. As a president, I operated as a puppet, basically, for
New York. I had pretty good leeway as far as production
[laughs]. I could spend whatever I wanted, as far as the act of
production was concerned, because nobody understood what was
going on. But when it came into the marketing, that's where
Seagrams was very active. Later on they got active also in the
production end and created all sorts of problems for us by making
us report directly to people in New York. When it came to

quality control, they made us report to their quality control
guy, Russell McLaughlin. And if it was human resources, our
human resources person had to report directly to their human
resources person.

Before New York decided to move out of the wine business,
they created a task force. I was called into the task force, and
they were tapping my brain. The orientation of the meeting was
how they could compete with Gallo; why can't they compete with
Gallo?

Teiser: When was this?

Katz : This was in the spring of '85. I retired on February 1, 1986,
because I saw the direction that it was going.

What it boiled down to was that in the Seagram organization,
it was so thickly layered that in order to satisfy all the
bureaucratic requirements of Seagrams, I've always thrown out an
estimate that it cost us at least 30 percent more to produce a
given product, compared to Gallo- -all things being equal, only
because of the Seagram bureaucracy.

They would have their safety people come in and require us
to do things that were just impossible. When somebody went into
a tank, we had to have somebody down at the bottom of the ladder,
and we had to have somebody at the top of the ladder to watch the
person who went into the tank. They did everything by the book.
I'm not saying you can't go that way; I'm just giving you one
example .

Everything was so heavily layered, and we had to respond to
everyone's demands, so that we had to carry an excessive overhead
of people merely to comply with what they wanted us to do. I
remember sitting there, and I told the task force, "Seagrams can
never compete with Gallo because they are so heavily layered."
To give you an example, Ernest and Julio Gallo sit down in the
morning over breakfast and coffee, something comes to their
attention that's a problem, [bang] they decide what needs to be
done, and [snap] somebody goes and does it.

I said, "If I go to New York and tell you you have a
problem, I don't hear back for a year." In effect, what I was
telling them was that the bureaucracy of their organization was
such that they could never compete with the Gallos . And then it
was surprising to find out that they decided ultimately to sell
the company. During that time, I was not only president of Paul

Masson, I was president of Seagrams West Coast wineries. I was
president of all of the companies except Sterling. That was all
Taylor California, Paul Masson, and everything else related.

Teiser: Why did each of the seven presidents serve so briefly?

Katz: Because nobody really told the truth. Nobody faced reality.
Everybody told New York what they believed New York wanted to
hear. We had a very sophisticated marketing structure. We had
some very talented young men in marketing who were professional
marketers, and the trouble was that they were professional
marketers. They knew how to put a plan together. They used to
come out with beautiful two-volume presentations. We would have
these meetings, and they would get up and make their marketing
presentation to the Seagram management in New York. I'm not
exaggerating; you couldn't ask for anything better. As we would
leave the meeting, the vice-president of marketing would lean
over to me and say, "We'll never make it."

What was happening was that the accountants in Seagrams --
the financial people- -started putting demands. In other words,
they set up Seagram projections of their own profit plan for the
year. They would put Paul Masson in, and then come and tell the
marketing president what they expected of him. He had to come up
with a plan to meet that. Jon Fredrikson, [now] with Gomberg,
was Arthur Palombo's right-hand financial man in preparing
marketing projections. He was a pro at it. He could twist and
turn the numbers any way you wanted them. I'm not being
critical, because that's what they wanted of him. That was his
forte.

When you come up with a projection and say, "You're doing
100 million now; we want you to do 125 million," they take the
100 million, they spread it all out--by variety, by size, by
region, by state, and so forth. And what do you do? You need 25
percent more, so you pump up 25 percent more. It became a
computerized exercise.

There were personalities involved, and I don't find fault
with them because they were doing a job. The fault lay in New
York, because every year I would go back with the marketing
group, where they would present the new year's forecast. Every
year they failed. Every year. They never made their forecast.
Never once, in every one of the meetings I attended, did anyone
from the Seagrams management say to the top man or otherwise,
"Why did your plan fail? What did you do? Why should we believe

this plan any more than last year's plan? Because each year
you've failed to make the--" Because it was embarrassing.

I always felt that if you really got down and peeled all the
b.s. away, everyone knew down deep in their own heart that,
number one, they were expecting too much from the man to begin
with. They didn't want to embarrass him because he might throw
it back and say, "Well, you're asking me for more, and I'm trying
to give you a plan to do it. Now, if you'll give me this and
give me that, and be willing to spend this and that--" So
everybody remained very quiet. Nobody wanted to face reality.

Over the years, we were running up excesses in wine. I
would sit down with them and show them on paper where they were
projecting volumes so that I would have to go out and buy more
wine or grapes or whatever to meet those projections. I would
tell them, "I'm out there buying, but you're not meeting your
projections, so your projections are going this way [up] and the
sales are going that way [down], and I'm building up excesses in
wine." I even made that presentation to Bill Wilbur, who was the
head marketing man under Beekman] , and nothing ever changed. I
made it to them because I wanted to cover my own behind, because
I was building up excesses. And they wanted me to carry the
inventories to be sure that I would meet their projections.

In 1982, when the industry hit the wall, and everybody found
out that we had a big crop, and everybody found that they weren't
meeting projections, I had to sit down with the then president,
who was Elliott Fine, and tell him, "Are you sure your
projections are okay, because I'm sitting with a desk full of
growers' contracts for grapes, and I'm hesitant to sign them with
them, because you tell me you're going to sell more, but you're
not hitting your last year's target." He'd give me something
about, "Don't worry about the figures," he's in touch with the
guys on the street, with the sales managers, and so forth, and he
"just knows." Well, I held those contracts in my desk, and I
didn't--! couldn't, in good conscience. And wouldn't you know, I
probably saved the company I don't know how many millions of
dollars by not having executed them, but nobody knows about it.

That's the same thing that happened with Coca Cola. The
people that came in really didn't understand the industry. They
didn't even know how to keep their inventories. The right hand
didn't know what the left hand was doing. They would just go out
there, gung ho, move boxes, sell- -whatever it takes to move them.
And then they found that they couldn't move them. I inherited
20 million gallons of surplus wine, and contracts that were so

bad- -it was just enormous. They were contracted to fill
requirements for 20 million gallons of wine a year. They weren't
selling that much. And when they bought them, sales were
declining. Ultimately, that led to all this disaster.

Serving as President. 1983-1986

Teiser: Why, under those circumstances, did you accept the responsibility
of being president in 1983?

Katz: I'll tell you a funny thing. Michael Cliff and I never hit it
off. I saw through him. He didn't have the background- -he
didn't have anything, really, to justify the prestige in which he
was being held by everybody in the industry because he is a
Master of Wine. If you would ever see his letterhead, it shows
"Michael (Something) Cliff, M.W." And it follows all the way
through. I saw through it. I guess it's true of all small -
statured men; they have a Napoleon ego, and he was a very, very
difficult person to work with. You don't tell him; he tells you.
He doesn't listen; he just tells you. He and I never got along.

I was told to come to New York, and he was then the
president of the company. Some changes were happening; the whole
regime had changed. I met him and the head of the Seagrams human
resources department in a restaurant. I think it was at the Four
Seasons, in the Seagram building. I left a Wine Institute
meeting--! think it was in Napa, in the Silverado resort- -to fly
to New York; I was called to come. I actually went there
expecting to be fired. They told me they had these problems, and
they were going to try to do this and try to do that, and there
was nobody who could handle the production end like I could, and
so forth, and would I be interested in being president? Well,
who doesn't want to be president, you know?

I'd been executive vice-president, really running the whole
thing all the time anyway, so I figured there was really no
change, and I figured I only had a couple more years before I
would go into retirement. Because, during that same meeting, I
laid down the blueprint to them for retirement. See, they
already had me scheduled for moving out.

They used me, okay? And I'll tell you how they used me.
There was no one who had a better relationship with everyone in
the Paul Masson organization than I . I knew everybody by first

name. I've always been a people -oriented manager. I'd go to
weddings, bar mitzvahs, christenings, and everything. I bowled
with the people! It sounds like I'm blowing my horn, but I had
that kind of a relationship.

They had already decided on closing the facility in
Saratoga, and who better to have at the helm of the company than
someone who has the rapport with the people who could take the
closing from me.

Katz: They were really setting me up to take advantage of the

relationship I had with the people, and plotting my retirement
from the company.

Teiser: That was good planning on their part.

Katz: And I let them go through with it because I knew what they were
doing. I was just trying to hold on a couple more years to
fatten up my retirement. You learn to play the game the way the
other guy plays. And it worked out that way. The two years that
I was on it, it enabled me to fatten up my pension to the point
that I at least could live in comfort, without worrying about- -

Teiser: I'm sure you felt some loyalty to the organization that you'd
been with all these years.

Katz: Exactly. I didn't like doing what I had to do, but I always felt
that if anybody had to do it, I would rather do it, because the
people would understand it coming from me, rather than have a
complete stranger come in and unload it on them. Basically,
that's what it came down to.

Teiser: You saw yourself, then, as presiding over the end--

Katz: The demise, yes. That was the Saratoga facility. Then, when I
saw the way it was moving, I even speeded up the process. Dick
[Richard] Maher was working for Seagrams. He was the president of
all Seagram wine operations, and I reported to him.

I felt, basically, that they weren't compensating me enough.
Seagrams had a payroll policy, and you had a grade, and in each
grade you had a low, a medium, and a high. I had been doing the
job, they made me the president of the Seagram wine operations
and all, and I told them I didn't think they were compensating me
for all this responsibility. I wasn't even at the top of my

grade. I didn't seem to get any satisfaction from him. They all
acknowledged I was doing a good job and so forth, but my salary--

that's that.

Teiser :
Katz:

Teiser:
Katz:

I told him I could make more money [in severance pay]
leaving than staying, and that's what I did. I made the right
move for myself.

You pulled the company out of Soledad, too?

No, the winery stopped production at Soledad- -well, it got to the
point that we had such excess grape supply contracts that came
over from the Wine Spectrum, and we had all these vineyards of
our own. I came up with proposals to New York of what the
options were --of pulling vineyards out. We just had too many
grapes coming in. I told them that I felt that premium grapes
would become more and more in demand at some later time, because
you could see- -we used to use a phrase: the varietals of today
will be the generics of tomorrow. I always felt that premium
varietals would come into demand, and we had too many of them. I
couldn't justify to the company holding on to them, because I
made up analyses and showed them that we were using coastal
grapes instead of cheaper Valley grapes for generics. You
couldn't make any money. There was about a two and a half dollar
differential in the cost of material.

So I suggested to them that they should mothball the
vineyards- -that we could operate the vineyards at pretty close to
40 percent of what they cost, without getting a crop- -and keep
them on stream until the demand rose. Well, they pooh-poohed
that, and eventually the decision was to stop farming all of our
vineyards. When I left the company, that was what happened.

Just left them?

We didn't farm them--just left them there to grow. We terminated
our contract with the union- -we were union. Subsequent to that,
they sold vineyards to Huneeus . He went in and picked them up
for a song.

Does he still own them?

He sold them at a good profit,
suggesting to Seagrams.

He did exactly what I was

Teiser: What about the plant?

Katz: The plant still is there. Oh, last year I think they crushed
something like 5,000 tons. We crushed as much as 35,000 to
40,000 tons at that facility. I used to piggy-back the facility,
because Soledad was built to handle all of the grapes coming out
of our vineyards. It was somewhere in the neighborhood of 25,000
to 28,000 tons. While the grapes were maturing on the coast, I
used the facility to crush the grapes we were buying or growing
in the Valley. So between the two, we used to end up crushing
about 35,000 tons there, but it was spread out over a long
period. I optimized the facility and the use of it.

Now they have Monterey Vineyards, and they just didn't have
the same need that existed then, so they stopped all crushing.
Only last year did they resume again; they were doing custom
crushing to earn a couple of bucks, because they're in a terrible
cash-flow situation.

Teiser: So in 1986 you gave it all up?

Katz: I retired February 1, 1986. I was called to a lunch by Ernest
Gallo. I couldn't imagine, because I knew the man only
cursorily. I figured, "Gee, that's nice. I've retired--" We go
to lunch, and we're in this big room where they have lunch. He
has all of his lieutenants there, and they start hitting me with
all sorts of questions: what's happening at Seagrams with
coolers? Why are they doing this? Why are they doing that? I
told them why I felt they were doing certain things --it was at
the height of the cooler rage. I kept on giving him some of my
philosophies and so forth and so on and so forth.

THE WINE INSTITUTE

Director of Government Relations. 1986-1988

Katz : Then we broke up the lunch, and Bob Gallo, whom I knew closer
and worked with at the Wine Institute, pulled me aside. We
walked out to my car, and he said they all had a lot of respect
for me, and would I work for Gallo in the government relations
area? I told him no, I couldn't do that. He said, "Well, if
you couldn't do that, how about working with the Wine
Institute? We hate to see you go. You would be such a
valuable asset, with all your background." So I agreed to it,
and that's when I joined the Wine Institute as the director of
government relations.

I started a lot of things that nobody had even started.
I saw that they were in the stone age when it came to
computerization and so forth. I went out and bought three
computers with my own money and gave them to different people
in the legal department. I even gave one to somebody in the
research- -economics . I showed John [De Luca] how much more
productive everybody could be, and eventually he reimbursed me
for it. I also put the squeeze on a couple of our members who
I did some special things for, while I was at the Wine
Institute, to save them from some embarrassing situations. I
wouldn't take payment because I was working for the Wine
Institute, so I said, "It would be nice if you donated a
computer and a monitor to the Wine Institute." Some of them
did, so that's how the Wine Institute got equipped with some of
their computers.

Teiser: I saw those computers appear, one by one.

Katz: I was helping them with administration, because I just felt I
was at odds. I would contact somebody in the field, and they

Morris Katz, incoming chairman of the Wine Institute,
John De Luca, president, and Richard Maher, outgoing
chairman, 198 A.

were already under instruction from Joe Gallo. I didn't feel
it was the right thing to do, and I understood John's
situation. I wasn't going to go rocking any boats and making
big scenes, so I quietly just went to the back. I focused in
on things--! was instrumental in getting the joint marketing
order with the growers passed. I did a lot of lobbying- -it
wasn't really lobbying, but I did a lot of footwork in
negotiations for John with the growers when the marketing order
came on stream. I was also directly involved in seeing to it
that the [California Wine] Commission succeeded the marketing
order. So I felt I made my contributions.

Chairman and Committee Member. 1957-1985

Teiser :

Katz :

Teiser:
Katz:

Let me go back, about the Wine Institute. You were chairman of
the Wine Institute in '84- '85, but you had done committee work
before that. What kind of committee work did you mainly do?

I did a lot of committee work, first of all, in the
transportation committee. This goes back many, many years,
when they were still transporting wine by boat- -when Bob
[Robert] Ivie was the chairman of the transportation committee.
When I came out in 1957, one of my assignments was to get
involved with the Wine Institute, so I got on the
transportation committee. There was also the committee that
Hugh Cook--

TAC- -Technical Advisory Committee.

Yes, I got involved with that. Then I got involved with the
laws and regulations. I helped quite a bit with that Wine
Equity Act. When it went through, I was the chairman. I
happened to be chairman at the time of the Wine Equity Act,
which was contrary to Seagrams' desire. I was in a very
awkward situation, because I was chairman, and I used to report
back to New York for instruction. I had to present Seagrams'
position on matters, which was contrary to my own, and oft
times I had to debate in favor of doing something, and then
vote against it. Everybody knew the situation that I was in.

Like the Wine Equity Act- -the genesis of that, when it
first started- -

Katz: The general counsel of Seagrams told me that Seagrams was all
for it; they didn't have any objections to it, so long as it
didn't promote protectionism. All I had to do was maintain
that posture and then keep New York informed, which I did.
After that, the people in Europe --the EEC wine people --started
pressuring Seagrams to be opposed to it, because they felt it
was not in their best interests; that, in effect, what we were
creating was a protectionist act, which it never was. They
just didn't understand it.

From that time on, we were at loggerheads. In fact, so
much so that M. Jaqueline McCurdy--she was an attorney by
profession- -headed up the DISCUS. Then she eventually became
the general counsel for Seagrams. We had a Wine Institute
board of directors meeting in Santa Barbara, and she came there
with the counsel for all the other large corporations- -Heublein
and everybody that was interested. We sat down, and in effect
she was delivering a message that the distilled spirits wanted
us to bow out of that Wine Equity Act because of the problems
it was creating with the whiskey people and everybody in
Europe .

The executive committee stood their ground and said,
"Thank you. We've listened to you, but no thanks." That was a
turning point at that time, with the relationship between
Seagrams and the Wine Institute, and that's when they started
coming out with the alcohol equivalency thing. The genesis of
that was that one of their general sales managers conceived the
idea that they could increase the consumption of whiskey- -
spirits --if they could convince the consumer of the alcohol
equivalence. It was his idea; that was the genesis, where it
was born.

Then it was seized upon by Edgar Bronfman, Jr. He saw
that he could promote it. Again, there was something they
wanted me to participate in, and I refused to. I just wouldn't
buy it. I told them I didn't believe in it. They wanted me to
go around and promote and advocate that position. I sat in the
meetings in New York, where it got to the point that they
didn't invite me to them [laughs], because they knew I was
opposed to it.

Adverse Factors in the Wine Industry

Katz: To me, there were two major things that hurt the wine industry
beyond measurement. One was Coca Cola's involvement in the
wine industry with Monterey Vineyards, with Wine Spectrum.
Number two was Seagram's alcohol equivalency.

The Coca Cola mistake was that they reduced the
price/value relationship in wine. If you remember at the time,
in the seventies, in the white wine boom, Taylor started coming
out on t.v. with, "They're better than this, they're better
than that" --the chablis and so forth. Then Paul Masson came
out with Orson Welles, and Almaden came out with network TV.
In effect, what all the companies were telling the public was
that it didn't make any difference whose chablis you drank;
they were all alike. Chablis is chablis, rose is rose. They
used to put such huge dumpers into the supermarkets- -one week
the supermarket would feature Paul Masson at reduced price, the
next week they'd have Taylor California, the next week they
would have Almaden, the next week they'd have Sebastiani, the
next week they'd have somebody else. I saw it even happening
to myself. I'd go through, and subliminally what came across
was that it didn't make any difference whose label you bought;
go for the price.

I remember the days when I first came out to California.
Paul Masson started taking the lead. Prices were depressed- -
grape prices were depressed; everything was depressed. Paul
Masson was getting into varietals and so forth, and we took the
lead and started raising prices. Then Gallo raised them. The
price level started edging up. Everybody started putting a
higher price- -and nobody was bucking anybody else. Everybody
raised at their level and kept on going up, so there was a
price-value relationship.

By the time Coca Cola went out of it, they had destroyed
it. What they destroyed was whatever profitability was in the
wine business, because everybody had to bring their prices
down. Everybody was trading at Gallo 's price, and then Gallo
found he had to go back. So what did he do? He developed the
Carlo Rossi brand, because everybody came down to him and he
had to go down another layer. Besides the neo-prohibitionists

Making comparisons with other companies' wines.

and the drunk driving and so forth- -all of these things, I
feel, had a very deleterious effect on it.

Teiser: When you were chairman of the Wine Institute, did you have a
particular thing that you did, or a particular interest?

Katz : There were so many things happening at the time. There were so
many controversies. That was a period in which the Italian
wines were flooding the market.

Teiser: In '84-'85.

Katz: It was the time of the Wine Equity Act, the marketing order- -
there were always these preoccupations. You didn't have time
to say, "As chairman, what could I champion?" Because I was so
busy. Not only that, I was limited as to what I could do or
what I could say, because I was really a puppet of Seagrams
when it came to being visible. I couldn't be visible as an
individual. I was always hampered. I didn't enjoy the freedom
and the liberty, like people who had a proprietary interest in
a company, who could stand up- -I held a lot of beliefs, but I
couldn't express them because they would not have been honored
and looked upon in New York. So I always had to be laid back.

Even in Seagrams I couldn't--! never went to New York,
because I felt the more presence you had in New York, the less
chance you have of surviving. In fact, people always asked,
"Who is this Morris Katz? We hear about him and we read about
him, but we don't know him." I only used to go back once or
twice a year. The marketing guys were always trying to be up
front with Edgar Bronfman; I tried to avoid him.

I had learned early that my best bet for surviving- -and I
was a survivor; I did it very well --was to stay in the
background, doing a thing, without anybody really knowing what
you were doing. You can speak to John. He knows the problems
that I had. As much as I wanted to speak out, I couldn't get
up and speak as an individual because it would be contrary to
my company's position, and it was just a no-no.

Teiser: You are a survivor.

Katz: Basically, that's what I am. I learned the art of surviving,
and I'm telling you, it goes back to childhood; that's part of
what goes to making up a person, and you never know when it's
going to come to the forefront or when it's going to be
something that's a positive part of your makeup or your

character. I recognize it. Some people used to ask, "Doesn't
it bother you?" I said, "I've accepted it." It's just like
with the presidents: "Doesn't it bother you if somebody's
president?" I said, "Look, I don't hold myself out to be a
marketing person. I probably could be a better president than
the marketing presidents, because my view of being a president
is not necessarily to be a marketer. My view of being a
president is being able to be a leader and to find somebody who
is good at marketing, somebody who is good at production, and
give them the direction and pull them all together."

I felt that's what I was doing when I took over the
responsibility for production. I didn't know anything--!
wasn't a technical person. And, yet, I was able to gain the
respect of everybody in running the big production thing. I
always asked myself, "What did I pull off? Did I really know
anything?" But my goal was not to do technical things; my goal
was, if I had a grape grower relations man, to delegate
responsibility to him. I had a winery operations man. Well,
he was the technical person. I respected that; I let him do
his job, or helped him do his job better than he could do it.
The plant manager in Saratoga--! delegated. That's been my
style.

Teiser: Maybe that's what you learned in the Army?

Katz : Basically. I've always been a delegator. I've never felt that
I wanted to be somebody who sat on somebody's shoulder and
second-guessed why he did something wrong, or how I could have
done it better. I always felt I should give them the
responsibility and the authority to do the job, and when they
weren't doing it right, try to help them, not to find fault
with them- -maximize the best talents of people.

I really enjoyed a very good relationship with all of my
staff and all the people at Paul Masson. Before Seagrams came
in, it really was like a little family. Everybody knew
everybody, everybody worked with everybody. Then the Seagram
influence that came in was very destructive.

The Wine Advisory Board. 1938-1975

Katz: The Wine Advisory Board, created by enabling marketing order
legislation, existed for the primary purpose of using the

police power of the state to assess and collect assessments
from all wineries in the state.

In 1975, when the administration of Governor Brown
[Edmund G., Jr.], decided to look upon the assessments as
"public funds" and frowned upon the manner in which the funds
were being contracted to the Wine Institute, the directors of
the Wine Institute decided to back termination of the WAB and
have industry members instead pay voluntary dues to the Wine
Institute. That is what led United Vintners to resign from the
Wine Institute- -followed by many other wineries who were
experiencing economic hardships.

Gallo Support for the Wine Institute

Teiser: You were telling me about factors in the mid seventies, when
things in the Wine Institute were going to hell--

Katz : I was saying that I felt that probably Gallo was more

responsible for the survival of the Wine Institute at a time
when all the rats were deserting the ship. Gallo held
steadfast and provided the support, and augmented that support
with their own staff and resources, probably without anyone
knowing that they did it, and without asking for any
recognition. They'd do those things; that's the nature of
Gallo. That's why I respect them. This was in the time frame
of '74 and '75. I think that's when John De Luca came on
stream. Everybody was deserting and running. Gallo could have
left it, and it would have destroyed the whole Institute. Not
only did they stay on and maintain a level of support, but they
augmented that on the outside by enabling the Wine Institute
trade barrier work to remain afloat. Because the money just
wasn't there.

Teiser: I had never heard that.

Katz: [laughs] Nobody likes to speak kindly of the Gallos. Most of
the time you will find people will strike out- -and I know of
many instances of how they manipulate the grape market and so
on, but that's part of the business. If people were in their
shoes, they probably would do the same thing.

PARTICIPATION IN GROWER-VINTNER CONFLICTS

Katz: Do you want to hear anything about my other activities? We had
the American Vineyard Foundation, the Lieutenant Governor's Task
Force on Wine . My involvement in the American Vineyard
Foundation, which I supported wholeheartedly, was one of being a
director. I was also a member of the Lieutenant Governor's Task
Force on Wine, which eventually led to the marketing order. I
couple both of them in my remarks , because they really evolved
out of necessity because of the poor relationship between the
growers' community and the vintners' community.

The American Vineyard Foundation was basically created to
provide some sort of a sounding board, a meeting place --an
organization where some cooperation could be engendered between
the growers and the vintners. Originally it provided for dues to
be paid by both, through a check-off by the wineries. When the
wineries paid the growers for their grapes, a certain percentage
of the total value of the grapes was the contribution that was
made into the organization, basically to provide for research and
development for the benefit of both the vintners and the growers.
It was money to fund work being done.

The American Vineyard Foundation was created to provide a
little more togetherness, because during that time what was
happening- -and it's also why the Governor's Task Force was
created to begin with- -was that there was such animosity between
the growers and the vintners that started to manifest itself
above and beyond long- felt hostilities. It came to the forefront
in 1982 when we had a bumper crop, and all hell broke loose.
That was the year in which Franzia- Bronco found themselves being
sued by many growers for not crushing their fruit when the fruit
should have been delivered, or rejecting fruit for quality
reasons- -for all sorts of reasons. That was the basis of what
started it.

I found myself caught up In the same basic situation. In
1982 there was a bumper crop out there, and the weather
conditions were such that you didn't have a long season to
harvest it. The fruit was ripening very quickly. I forget the
specif ics- -whether it was a short year because it hadn't rained--
but I think it was just a short year when the fruit had come to
maturity early. Everything came to maturity at the same time- -a
big crop.

When you size your winery facilities, you size them to
receive a certain given range of tonnage over a period of time.
The harvesting season runs differently, depending on the type of
grapes. In the Central Valley, you generally start harvesting
sometime about the beginning of August, and it reaches its peak
around September 15, when the Thompson Seedless come in. So
you've got about a 45-day period. On the premium side, on the
coast you start harvesting sometime around September, and you run
to about November 1. Give or take, it's about the same length of
time .

But when you start hitting a peculiar year, where the fruit
all matures at the same time, the growers want the wineries to
take their fruit all at the same time. You may be dealing, as I
was dealing, with about thirty- five to forty different growers.
You have a facility that can only handle on a daily basis 1,800
or 2,000 tons- -and that's basically what it amounts to. The Paul
Masson Madera facility had a capacity of 55,000 tons. We could
pretty well break it down. Well, if you have to spread that out
over 55,000 tons, and you've got 45 days, you can only handle
anywhere between 1,000 and 1,500 tons a day.

But if all the grapes are coming in at the same time, and
you're going to take in 55,000 tons, you can't take it in all at
one time. So there's some practical evaluation that has to be
taken into account. Generally, your grower relations man goes
out into the field and keeps tabs on the maturity and when the
grapes are ripe, and coordinates it with the winery. If there's
fruit that's on the vine that's already deteriorating, why should
you take that fruit in when there's other fruit that's clean and
not deteriorating? That's basically what we were all faced with.

Then it was a question of degrees. We rejected a lot of
fruit, too, but we recognized it early. I had my grower
relations man go to the respective growers, walk the fields with
him, and tell him what not to pick, and that they should just
drop it on the ground because it was beyond the quality level
that we wanted, particularly with mechanically harvested fruit,

which is the principal way of picking in the Valley. That's what
I meant by dropping: you walk through, and wherever fruit is bad
you just cut it off and drop it to the ground, so that when the
mechanical harvester goes in, it's only going to harvest your
good fruit.

But what happens? Some of the growers didn't wait until
they were told to bring them in, because the fruit was rotting on
the vine and they wanted to optimize their revenue. We had to
turn back and reject a lot of trucks that came in, because, first
of all, we didn't authorize the grower to pick, and the fruit was
poor quality. Bronco did some other things. I'm not here to
judge whether he was right or wrong. It was only in the last two
years, I think, that they finally resolved it out of court and
settled it- -at great expense to Bronco and all concerned.

The point I was really trying to get back to was that there
was a tremendous, tremendous animosity created that year with
growers in general. They felt that they were handled improperly
by the wineries, that the wineries deliberately refused to take
their fruit because it was a bumper crop and they couldn't sell
it all. In other words, if you contracted with a grower, let's
say for 1,000 tons, and he had 1,500, they said, "The winery
didn't want to take the 1,500 because they would have to pay the
grower and would just be sitting with more wine." So instead
they rejected the grower, and the grower had to take the whole
beating on it. I'm giving you my side of the basis on which I
accepted grapes, and why a winery is limited on how many grapes
they can handle. There's nothing deliberate; these are business
decisions, and you try to do the best, particularly when you're
working with growers over a long period of time. You're not out
to financially destroy a grower just on a whim that you're not
going to take his grapes.

There were some 6,000 or more grape growers in California.
CAWG, the California Association of Wine Growers, claims they
represent the growers, but they probably represent- -they would
never publish a list of their membership, but I would say it's in
the hundreds, out of 6,000. But they claim representation of all
grape growers .

Well, CAWG is a trade organization, just like the Wine
Institute. In that time frame they went to the legislature and
had the legislators in their district sponsor legislation which,
in effect, would have made it practically impossible for wineries
to live with. They were putting restrictions on how a contract
should be written, guarantees to the grower, that would have made

it impossible for a winery to operate. You've got to have some
flexibility.

The vintners had to work through the Wine Institute to kill
whatever the growers were trying to get through the legislature.
The legislators were getting caught in the middle of it. Most
legislators represent both growers and wineries in the same
districts, and they're trying to respond to both of them, but
they're caught betwixt and between. The growers make political
contributions to them, the vintners make political contributions.
The two of them are at odds, and they're caught in the middle.

That's what basically created the formation of the
Lieutenant Governor's Task Force. It was a means of getting the
governor and the legislators out from between the growers and the
vintners .

Katz: That's what basically led to the establishment of the marketing
order, which is a legislative act. It was a joint marketing
order, and that is that there was co-equal membership of growers
and wineries. It would have been fine, except that within the
grower community over the years, particularly in this period of
1982, there were a handful of growers who really represented
these very large agri-corp growers. They were taking some very,
very substantial losses. They got involved with CAWG, and were
using it to try to more or less reduce the problems that they
were having, so they weren't really so much concerned about the
little grower. I'm talking about big growers.

They were really the brain trust, moving everything in CAWG.
I have always held that the only reason that the joint marketing
order- -growers and vintners- -failed, which it eventually did, was
the fact that they always had a hidden agenda. They wanted
everything to change in order to suit their own needs, and they
wanted the legislature to promulgate regulations that would
protect them. But it was all being done in the name of the
grower community. In fact, it was exactly these type of
operations that created this big surplus of grapes, because these
were agri-businesses; they weren't the small fifty acres, hundred
acres, of the typical grower in the Valley. You know a spread of
five hundred acres is big for a small grower.

created the Winegrowers of California.

These antagonisms really led to the American Vineyard
Foundation, the Lieutenant Governor's Task Force, which
eventually led to the marketing order, and then the termination
of the marketing order [in 1987] because the two factions just
couldn't work it out.

THE CALIFORNIA WINE COMMISSION

Katz : We then created a wine commission [the California Wine

Commission] . The growers had an opportunity to vote for their
own commission at the same time, and they couldn't pass it.
Since that time, you find now a resurgence of "Let's work
together, let's cooperate." It was very manifest at the Santa
Barbara meeting, because CAWG has now become an associate member
of the Wine Institute. Everybody is now sort of working together
because there's this common threat, instead of the self-interest
situation. The common threat is the reduction in the consumption
of wine; the common threat is this Connelly tax initiative, which
would raise taxes on all alcoholic beverages, and particularly
wine. The wine tax increase represents an increase of 12,800
percent, because it raises taxes from a penny a gallon to $1.29 a
gallon on wine.

It's got to have a negative impact on the consumption of
wine, because it's been demonstrated that we don't have what you
call price elasticity in wines. In other words, you can't just
raise prices of wine and sell the same amount. There's a rule of
thumb that when you raise prices on wines , for every 1 percent
increase in the price of wine (although this pretty well goes for
alcoholic beverages in general), there's a likelihood that you
will suffer a decline in sales close to a half of a percent. So
if you increase prices 10 percent, you'll have a 5 percent
decline .

When they increased taxes on distilled spirits some years
back, distilled spirits declined that year 6 percent. And the
increase was somewhere in the neighborhood of 10 percent, so
there is some relevance to it. Unfortunately, that's what the
industry is confronted with today- -the negativism of this neo-

Wine Institute directors' meeting, March 11-12, 1990.

prohibitionism, by the anti-alcohol advocates- -all of which is
contributing to the consumer cutting back on consumption.

My wife and I used to go to a restaurant, and we could knock
off a fifth of wine very easily, and not be drunk because we were
eating food. Now we go in, and we just have a glass of wine,
because we're afraid to travel anywhere, particularly since the
blood-alcohol level has been reduced to .08. You can have a
glass of wine, and if you were analyzed at that moment, you would
be under the influence of alcohol.

That's why I say when I go to a meeting and see a large
group like that, and the resources being wasted because of one
guy or a group of really unimportant people filing suit against
the commission, what do they stand to gain? It doesn't make
sense .

Another thing that bothered me was that the California Wine
Commission collects assessments on the basis of a percentage of
the total value of grapes. It's like 1.1 percent. So there's a
big hue and cry raised by some of these small premium wineries in
Napa and Sonoma that they are paying an inordinate assessment
compared to the big wineries.

I always like to reduce everything to reality: what does it
really amount to? So I analyzed the figures, and allowing for
the fact that you get so many gallons of wine out of a ton of
grapes- -and I gave them the full measure of benefit of the doubt--
they were decrying the fact that they were paying something like
$15 a ton as an assessment. When I broke it down, the range of
the cost per case from the major wineries who were buying cheap
grapes, it was on a scale- -and these are on the average prices
that were in the assessment- -from 3, or say 4 cents a case
(twelve bottles), down to the highest average assessment paid of
21 cents a case- -less than 2 cents a bottle. Do you see the
point I'm trying to make? People have lost perspective.

Now, the people who are complaining about paying that
assessment, their selling price is probably disproportionately
higher for what they're paying in assessment than the bulk wine
producer who is paying 4 cents a case and getting so much less
per bottle in his wholesale price. Some of these wineries that

l()n March 9, 1990, a group of ten small wineries filed a class action
suit against the California Wine Commission, charging that they were barred
from equal representation.

have complained about paying this 2 cents a bottle (I rounded it
up on the up side), in the store they charge $14, $15, $18, $25 a
bottle. In a restaurant it's not uncommon for a premium wine to
be around $28 a bottle.

The point I'm trying to make is that that is what the
industry has become. You have so many people involved in it who
really don't understand; they have no perspective. It's the same
people who I heard complaining to John De Luca, "Why are you
making such a big fuss about this tax increase? At the price my
wine sells for, it's negligible." There's something inherently
wrong in an industry where such a lack of perspective and lack of
understanding exist.

Being an outsider, I have no proprietary interest, and it
just bugs and bothers me to see this happening. Because I
remember the early days in the development of the industry when
people didn't have time to waste on things like that. They were
too busy trying to promote their wines --their brands, and so
forth. The rest of it --the dues that were paid- -was so
negligible. Nobody even thought of what they were paying because
they knew intuitively that whatever the Wine Institute was doing
was right; it was right for the industry.

That's where we go back to Gallo, and that's been Gallo's
involvement. I've seen it happen many, many times, where, if
something comes up, they're not really for it, but they go along
with it because they know it's in the best interests of the
industry. Then you get a couple of maverick guys who are just
tearing it apart.

Teiser: I must say that you've seen a tremendous lot--

Katz : As I said, I know where all the skeletons are. But I've tried to
look at it on a macro basis to give a feeling as to the
evolvement of a situation, and the background, to have a better
understanding. So when you start putting pieces together, you'll
have a broader insight as to why this happened, why were things
like the California Wine Commission necessary? The industry,
when it was on a voluntary basis, would never have any problem
with a marketing order. They never wanted it for the very reason
that there are so many of these problems.

But when United Vintners walked out of the Wine Institute,
it set that mood. The real reason they walked out was because
the new management at that time in United Vintners did not like
the Gallo presence. They felt that they were of equal stature

but were not receiving the respect that they perceived was due
them, and didn't have any way of bucking Gallo. That's the only
reason United Vintners pulled out. Now Heublein's back in. They
just recently rejoined.

Teiser: They haven't shown Gallo much of anything.

Katz: And Gallo knows there's nothing to fear, because they really

haven't proven their ability to be a threat to them. The only
reason that they've increased their wines is that they bought
Almaden.

Transcriber and Final Typist: Judy Smith

TAPE GUIDE -- Morris R. Katz

Date of Interview: March 16, 1990
tape 1, side a
tape 1, side b

tape 2, side a 16

tape 2, side b 24

tape 3, side a 29

tape 3, side b not recorded
tape 4, side a

tape 4, side b 40

tape 5, side a 47

tape 5, side b 53

tape 6, side a
tape 6, side b 66

INDEX -- Morris R. Katz

Almaden Vineyards, 34, 37, 59, 71
American Vineyard Foundation, 63,

anti-alcohol movement, 68-69
anti-Semitism, 11-14

Baker Ranch vineyard, 36

Bear Mountain winery, 25

Beekman, Philip E., 46, 51

Berti, Leo, 23, 26-27, 31, 36

Blue Crest Wine and Liquor

Distributors, 22

Bonino, Frank, 9, 13

brandy, 16-17, 26

Bronfman, Edgar, 20-21, 40, 42, 43,

47, 60

Bronfman, Edgar, Jr., 58
Bronfman, Samuel, 7, 8, 13, 17, 47
Brown, Edmund G. , Jr., 62
Browne Vintners, 35-36
Bundgard Ranch vineyard, 37

California Association of Wine
Growers, 65-66, 68
California Growers Winery, 25
California vineyard overplanting,

43-44
California Wine Commission, 57, 68-

Chalmer Industries, 22
Christian Brothers, 2, 8, 16-17,

20, 22, 24, 26, 47
Cliff, Michael, 46, 48, 52
Coca Cola Bottling Company, Atlanta,

41, 42, 51-52, 59
Connelly tax initiative, 68
Cook, Hugh, 57
Cunningham, Mary, 40-42

De Luca, John A., 56, 57, 60, 62,

70
Delta Project, 40-41

Fine, Elliott A., 46, 48, 51
Franz ia- Bronco, 63, 65
Fredrikson, Jon, 50
Fromm, Alfred, 2-3, 7, 8, 16, 17-

18, 19, 20, 21, 47, 48
Fromm & Sichel, 7-9, 16, 17, 21-

22, 24

Gallo, E. & J., Winery, 26, 31, 40,

41, 49, 56, 59, 62, 70-71
Gallo, Ernest, 49, 55
Gallo, Joseph (Joe), 56
Gallo, Julio, 49
Gallo, Robert, 56
Goldman Sachs & Co. , 33, 37
Greenfield vineyards, 36-37
grower -vintner conflicts, 63-67
Guild Wineries & Distilleries, 25

Haft, Albert, 21, 22, 27
Hansen Ranch vineyard, 37
Heublein, Inc., 58, 71
Homen vineyard, 37
Huneeus, Augustin, 48, 54
Hyba, Hans, 23

Ivie, Robert, 57

Jews, presence in liquor industry,
12-15

Katz, Morris,

army service, 4-6

early duties at Fromm & Sichel,

9-10

education, 2-3, 14-15
experiences with anti-Semitism,

11-12

growing up in the Bronx, 10-11
marriage and family, 14-15

participation in grower-vintner

conflicts, 63-67
president of Paul Masson, 52-55,

60-61

work ethic, 6, 9-10, 14
work for Picker-Linz, 2-4
work for Wine Institute, 56-
58, 60
Korbel & Bros, winery, 48

Las Colinas vineyards, 37, 38
Lieutenant Governor's Task Force on
Wine, 63, 66, 67

Maher, Richard, 53

Marks vineyards, 37

Martini & Prati, 23, 31

McCarthy Land Co., 34

McCarthy- Southdown vineyard, 34

McCurdy, M. Jaqueline, 58

McFarland, M. B. , & Sons, 34-35

McGinnis, James (Jim), 21

McKesson companies, 35

McLaughlin, Russell, 49

Meyer, Otto, 18, 19-20, 27, 35, 47,

Mirassou, Edmund A. , 30
Mirassou, Norbert, 30
Mirassou, Peter, 34
Mirassou Vineyards, 23, 34, 36
Mittelberger, Ernest G., 22 , 27
Monterey Vineyards, 35, 43, 55, 59

New York State Liquor Authority, 3
Nury, Massud S. (Mike), 24, 26, 42

O'Connell, John F. , 19
Opper, Kurt, 22-23, 27

Palombo, Arthur, 26, 35, 46, 47-
48, 50

Paul Masson Vineyards, 7, 16-31,
34, 35, 38, 40-55, 59, 61
creating vineyards in Salinas
Valley, 32-39

facilities and operations in late

fifties, 22-26
Madera facility, 44-45, 64
planting scheme, 43-44
problems under Seagrams, 40-43,

45-52

Saratoga cellars, 26-29
Soledad winery, 36, 54-55

Philips, Howard, 5, 6

Perelli-Minetti, A., & Sons, 25

phylloxera, 33, 34

Picker, Harry, 2, 12

Picker, Jerry, 2, 12

Picker-Linz Importers, 2-3, 7

Pinnacles vineyard, 36

Ray, Martin, 17, 25
Reiner, Bernard, 20, 21
Rosenstiel, Lewis R. , 13

Salinas Valley, creating vineyards
in, 32-39

Schenley Distillers, 13

Seagrams, 7, 8, 9, 14, 17, 20-21,
25, 26, 30, 31. 33, 37, 38, 40-
43, 45-55, 58-59, 60, 61

Seagrams alcohol equivalency

campaign, 58-59

Seghesio, Pio Eugene (Pete), 23

Seghesio Winery, 31

Setrakian, Robert, 25

Sichel, Franz, 7, 8, 16, 20

Sichel, Peter, 7

Spreckles Sugar Company, 37

Taylor California Cellars, 42, 49
Tresconi vineyards, 37

United Vintners, 41, 62, 70-71
University of California, Davis,
32, 33

Vie-Del Company, 24, 25-26, 42
Vintners International, 43, 45

Weinberg, David, 22

Wilbur, William M. , 46, 51

Windsor Vineyards, 31

Wine Advisory Board, 61-62

Wine Equity Act, 57-58, 60

wine industry, critical problems,

59-61, 68-70
Wine Institute, 56-58, 60, 62, 66,

68, 70-71

Wine Spectrum, 43, 54, 59
Winegrowers of California, 66-67
Wolf, Stanford J., 27, 35, 48
Woods vineyard, 37

Young, Sol, 12, 13
Zaninovich, Marko, 25

Grapes Mentioned in the Interview:

Cabernet Sauvignon, 38
Chardonnay, 37
Chenin blanc, 38
Early Burgundy, 38
Emerald Riesling, 38, 39
Flora, 38

French Colombard, 38
Camay Beaujolais, 38
Gewvirztraminer, 38
Johannisberg Riesling, 38
Merlot, 38
Petite Sirah, 38
Pinot Chardonnay, 38
Pinot noir, 38
Pinot St. George, 38
Sauvingnon blanc, 38
Semillon, 38
Suzao, 38
Sylvaner, 38
Zinfandel, 38

Wines Mentioned in the Interview:

Cabernet Sauvignon, 39, 44
Chardonnay, 39, 44
Emerald Dry, 39
Rare Suzao Port, 38

Ruth Teiser

Born in Portland, Oregon; came to the Bay

Area in 1932 and has lived here ever since.
Stanford University, B.A., M.A. in English;

further graduate work in Western history.
Newspaper and magazine writer in San Francisco

since 1943, writing on local history and

business and social life of the Bay Area.
Book reviewer for the San Francisco Chronicle,

1943-1974.
Co-author of Winemaking in California, a

history, 1982.
An interviewer-editor in the Regional Oral

History Office since 1965.

184163

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Full text of "Paul Masson Winery operations and management, 1944-1988 : oral history transcript / 1990"

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