California's wine country is divided into American Viticultural Areas (AVAs). The term is a legal designation. In practical terms, they tell us where the grapes were grown. Most of us refer to AVAs as "appellations," and the words are more or less interchangeable.
California is itself an AVA. But it is also broken into smaller AVAs (like the North Coast) which in turn are divided into even smaller AVAs (like Napa Valley). The slicing and dicing doesn't stop there. Even within Napa Valley, places with unique climate and geology can have their own AVAs (Stag's Leap, for example).
The AVA is featured prominently on every label. If the AVA designated on the label reads "California," we know the grapes came from California vineyards--possibly from numerous places within the state. But a wine labeled North Coast will contain grapes from the North Coast. A Napa Valley label indicates grapes from Napa Valley. When you reach the Stag's Leap level, you are talking about grapes taken from a much more specific spot.
A wine with a more specific AVA designation does not necessarily guarantee superior quality, but it does indicate that conditions were unique enough in that given area to warrant special consideration.
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