|Economic Impact Study
Grapes, wine, grape juice, table grapes, raisins…
U. S. Wine, Grapes and Grape Products Contribute $162 Billion to Economy
WASHINGTON, D.C., JANUARY 17 (excerpt from MKF press release) —The United States wine, grape and grape products industries contribute more than $162 billion annually to the American economy, according to a comprehensive study by MKF Research LLC of Napa Valley unveiled on Capitol Hill by the Congressional Wine Caucus on January 17. The Congressional Wine Caucus is a bipartisan, bicameral coalition of U.S. Representatives and Senators with an interest in the grape and wine industry, and currently includes 182 members.
This study uses a standard and widely used methodology which includes direct, indirect, and induced economic impact in order to present the full picture. The IMPLAN model developed by the U.S. Forest Service and University of Minnesota is used by many companies around the world as well as government agencies such as the Agricultural Statistics Service, Economic Research Services, and Federal Reserve Bank.
The comprehensive study, titled “The Impact of Wine, Grapes and Grape Products on the American Economy: Family Businesses Building Value”, measures the full economic impact of the grape, wine, grape juice, table grape and raisin industries in terms of employment, agricultural statistics, product revenues, taxes, and many other indices. Included in the study are impacts from the grape, wine, grape juice, table grape and raisin industries, the first time all grape products have been measured in the same study.
Among the key findings:
- Employment: 1.1 million full-time equivalent jobs.
- Agriculture: 23,856 grape growers, 934,750 grape bearing acres, $3.5 billion in farm gate grape sales.
- Wine Industry Direct Impact: 4,929 wineries in 2005, up from 2,904 in 2000, a 70% increase in five years; wineries now in all 50 states; $11.4 billion in winery sales revenues.
- Wine Industry Value Added: $2.7 billion in distributor share of American wine revenue; $9.8 billion in retail and restaurant share of American wine revenue; 27.3 million wine-related tourist visits; $3 billion estimated wine-related tourism expenditures.
- Other Grape Products: $1.669 billion retail value of grape juice and grape product sales; $3 billion retail value of table grape sales; $560 million retail value of raisin sales.
- Total Taxes Paid: $17.1 billion, including $9.1 billion federal and $8 billion state and local.
Wine in particular has an enormous value-added component as a capital-intensive and labor-intensive industry which also generates “wine country” tourism with its economic multiplier effect around the country. The infrastructure, employees, and tourism expenditures are just three examples of why wine sales are only part of the picture in terms of total economic impact.
The 30-page report also identifies challenges and opportunities for the grape, wine, and grape products industries, including:
- Insufficient federal funding of research and education to ensure long-term growth.
- A scarcity of skilled labor in all areas of the industry.
- The inherent climatic risks of any agricultural industry.
- Soft demand for grapes grown for grape juice.
- Increasing competitive pressures in the grape juice market.
- A volatile and ever-changing market for wine grapes.
- A shortage of certain types of wine grapes.
- Lack of access to affordable capital for start-up or expansion.
- Highly competitive market for wine, due to increasing pressure from imports, severe price-value pressure, and the impacts of consolidation in distribution and retailing.
- Continuing restrictions on market access reflecting the legacy of Prohibition.
Bridging the challenges and opportunities are several emerging trends which bode well for the industry’s future. These include the grape and wine industry’s leadership in proposing and adopting sustainable agricultural practices; the wine industry’s increased professionalism and efficiency; and rapidly improving grape and wine quality.
Key opportunities include:
- A growing market for wine in the U.S. driven by demographics, consumer values, retail and restaurant promotions, and widespread awareness of the health effects of moderate wine consumption.
- Research documenting many positive health benefits associated with the consumption of grapes and grape products has the potential to greatly increase the market share for these products, as national trends indicate strong consumer interest in nutrition and foods for health as a way to contain health care costs and enhance quality of life.
- Growth of wine tourism in rural areas of virtually every state, producing a powerful multiplier effect on local economies .
- Community support and charitable giving, including over $128 million contributed in 2005.
- Direct-to-market wine shipments within and between many states, allowing greater consumer access as well as enhanced market opportunities for wineries.
- Increasing cooperation among industry organizations and businesses nationwide.
The report itself is an excellent example of the last point. The study was made possible by the collaborative support of WineAmerica, Wine Institute, Winegrape Growers of America, and the National Grape and Wine Initiative, as well as cooperation from vintner and grower organizations in Illinois, New York, Pennsylvania, Tennessee, Texas and Virginia, and the states of Missouri, North Carolina, and Michigan and Texas Tech University, with overall coordination of industry groups by the New York Wine & Grape Foundation.
The U.S. grape and grape products industries are largely concentrated in California, which accounts for virtually all table grapes and raisins, and roughly 90% of the nation’s wine production, with New York and Washington State each at about 3% and the rest of the states at 4% combined. Grape juice production is concentrated primarily in Washington State, New York, Pennsylvania and Michigan. The wine industry’s explosive growth nationwide, extraordinary value-added benefits, and existence in all 50 states provide great potential for working with federal and state officials to further enhance growth through research and promotion.
MKF Research LLC of St. Helena, CA is the leading research source on the U.S. wine industry, and is jointly owned by Global Wine Partners and Frank, Rimerman & Co, CPAs. Located in Napa Valley, the firm conducts original research on the business of wine and wine market trends, publishes a number of industry studies, provides business advisory services and custom business research for individual companies and investors, and conducts a number of industry seminars including the invitation-only MKF Research Executive Wine Summit. More information about MKF Research LLC, and access to the national economic impact study, is available at www.mkfresearch.com.