If you're going to talk about California Merlot there is one event that defines everything that went before and after. It's called the French Paradox and it happened in 1991.
Early History
Both Cabernet Sauvignon and Merlot have Cabernet Franc as a parent grape. Both showed up in Bordeaux around the 17th century. And, it seems, Merlot has taken a back seat to Cabernet Sauvignon in people's minds ever since. Funny thing, Merlot accounts for more than half of all the vineyards in Bordeaux.
Before the French Paradox
When California got into the premium wine varietal business not too many decades ago Cabernet Sauvignon started on top and has stayed there. Some Merlot was often blended into Cab Sauv to help soften and make it fruitier. Some Cab Sauv went into many Merlots to give it structure. I recall my favorite Merlots from those "old days" were usually blended with Cab as Merlot just seemed a little boring on its own.
About 1970 Louis Martini was one of the first to take a shot at a premium Merlot (his was 30% Cab Sauv). By the '80s a number of wineries were putting out high-quality Merlots. Clos du Val, Duckhorn, Gundlach-Bundschu, and Matanzas Creek were some.
The French Paradox
In 1991 a study at Bordeaux University showed while the French consumed more fat than Americans their rate of heart disease was lower. They decided it was because of the Mediterranean Diet that included moderate consumption of red wine.
Later than year the weekly news show, 60 Minutes, aired a report on this and rather than emphasizing the overall diet the show left viewers thinking that red wine was the magic potion. Within a year red wine sales in the U.S. increased over 40%.
After the French Paradox
As red wine hit new heights people had to discover what they wanted to drink. Cabs were too tannic to drink young, there was little Pinot Noir around, Zinfandel didn't catch on much outside of California. But there was Merlot and it was soft and fruity, but still had those big flavors many liked in their wines.
So where was all of this Merlot going to come from that was suddenly demanded by consumers? It's not like you can just suddenly ramp up production as that is a multi-year process for the wine business. Well, there was plenty of lower quality fruit grown that would have gone into jug blends or maybe a $4 bottle of Merlot. Plus up to 25% of the wine could be something other than Merlot and it could be any low- or high-quality wine. It was often low-quality as Merlot turned into a syrupy mess. Part of this was because of not enough supply; part maybe because folks who had been non-wine drinkers before didn't know better or didn't care.
The Sideways Effect
The movie Sideways came out in 2004. It was a wine-centric story centering around a theme that Pinot Noir was great and Merlot was crappy. You could say this wasn't entirely untrue though there were plenty of excellent Merlots around. The movie didn't help a wine that was already getting blasted by many for being mediocre. Merlot sales slowed down after the movie's release.
Today
Merlot is still a widely planted grape and is sometimes called the Cabernet for those on a budget as you can often find quality Merlot for half the price of Cab. From Sonoma County look for Longboard, Matanzas Creek, Merriam, Pride Mountain (a Sonoma & Napa blend), and St. Francis, plus there many others from both Sonoma and Napa. Yes, there are even what you'd call cult Merlots like Napa Valley's Jarvis that sells for about $150; from Sonoma County there's Vérité Merlot that earned the famous 100s point from Robert Parker one year and goes for nearly $400.
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