The making of wine country
Bank of America was instrumental in the financing and supporting of California’s wine industry in its early modernization and commercial history.
Northern California has long been famous for its Wine Country, the historical epicenter of wine production that today makes 90 percent of all U.S. wine. In 1911, Bank of America made the first recorded loan to the California Wine Association. By the 1920s, our heritage bank, The Bank of Italy, was the only bank in California to offer statewide services and could support the wine industry across the state. This began a long-lasting relationship that still exists today, and one that we are proud to continue.
Nationwide Prohibition began in the United States in 1920, when the 18th Amendment to the U.S. Constitution went into effect. Prohibition focused on the manufacture, transportation, and sale of alcoholic beverages. Prohibition was repealed in 1933, with the ratification of the 21st Amendment.
During Prohibition, vintners were still permitted to make wine for medicinal use. This production created enough demand that prices for grapes increased by 400 percent ($15 to $20 per ton to more than $80 per ton) in 1921. Aside from financing grape-growing, one of the most successful relationships our bank had during the 1920s was with Secondo Guasti, president of the Italian Vineyard Company, a U.S. company. At the time, it was the largest vineyard in the world, with 5,000 acres of grapevines that produced five million gallons of wine a year. Its vintages were sent all over the world.
Following the repeal of Prohibition in 1933, the wine industry grew rapidly and a market glut resulted. When federal aid for the industry did not come through, our bank stepped in again to help wineries get the capital they needed to go forward with production. Because of the political ties to the ongoing success of the wine industry, Bank of America President, A.P. Giannini, personally had wines from California sent to the White House during President Franklin Delano Roosevelt’s administration.
In 1938, the bank created a marketing advisory board to fund research in developing new grape varieties and improved production techniques. As a part of the loan requirements, the bank asked the industry to broaden the market for wine through advertising. The following year, the wine industry began its first advertising campaign for $3 million. In the following year, U.S. wine sales increased by 20 percent.
Also in 1938, another surplus of grapes was on the market threatening the collapse of the industry again. Bank of America and 19 other financial partners came up with a solution based on California’s Agriculture Prorate Act and required that 45 percent of all grape crop be turned into commercial brandy, effectively holding the product off the market for several years. This decision became known as the Brandy Pool of 1938. In the end, only five of the original 20 financial partners decided to see the effort through. Out of the $7.4 million originally conceived to underwrite the Brandy Pool, Bank of America contributed nearly $6 million. The government and other banks made up the remainder.
In 1967, Bank of America was approached by E. & J. Gallo Winery to finance their effort to convince growers to replant or regraft their vineyards with varieties of grapes the winery wanted for production. The winery would enter into contracts with growers for guaranteed payment and they, in turn, came to us to secure the financing to either replant or regraft. After these many years, the E. & J. Gallo Winery and Bank of America still enjoy a long-standing relationship. With products available in more than 90 countries, E. & J. Gallo Winery is the largest exporter of California wine and the largest winery in the world.
Visit one of our Heritage Centers for an up close look at this and other stories from our bank’s history. Learn more