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

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 



Copyright 1990 by The Regents of the University of California 




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 . 



ii 



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 



iv 



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 



vi 



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 
(Please write clearly. Use black ink.) 

Your full name J/e/trf/Z //, 



Date of birth & ' /- " ^ "^ Birthplace x^/ yC/i'x , xV / . 

Father's full name 

Occupation /jC$' 

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Occupation ///f/Z/s?,'/(7i's/: /<- Birthplace /\ ' 

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Your spouse /J/LL/ fc \SQ /\ rr * 



Your children y/v 



Where did you grow up? / \)f3esj *~ t Xwfyc/ 

Present community 

Education 



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Occupation(s) 



Areas of expert ise y 



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Other interests or activities TT'/PtS-i-'/c'C J /fl (?- "i~S ^\V> S> ^ A< 



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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, 



4 



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: 



10 



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 



11 



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 Bronxyou'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. 



12 



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 



13 



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. 



14 



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. 



15 



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. 



16 



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 



17 



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; 



ln Noted 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. 



18 



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



19 



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) . 



20 



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. 



21 



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 & 



22 



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: 



23 



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 



25 



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, 



26 



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 



27 



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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28 



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 



29 



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 



30 



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 



31 



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. 



32 



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-- 



33 



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 



34 



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 



35 



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. 



36 



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. 



37 



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? 



In 



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. 



38 



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? 



39 



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. 



40 



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. 



41 



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. 



42 



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 



44 



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? 



45 



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 



46 



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. 



47 



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-- 



48 



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 



49 



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 



50 



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 



51 



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 



52 



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 



53 



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 



54 



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: 



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? 






55 



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. 



56 



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. 



57 



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- - 



58 



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. 



59 



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. 



60 



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 



61 



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 



62 



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. 



63 



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. 



64 



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, 



65 



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 



66 



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. 



67 



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. 



68 



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. 



69 



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. 



70 



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 



71 



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 



72 



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 



73 



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

67 

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- 

70 

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 



74 



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, 

48 

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 



75 



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. 



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