The Wine Institute

Jan 17, 2007

WASHINGTON, D.C. — 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.

"This landmark study confirms what we have known intuitively for a long time," said Congressman Mike Thompson of St. Helena, CA, co-chair of the Congressional Wine Caucus. "Grapes, wine, and other grape products are truly an economic catalyst with tremendous growth potential in all 50 states. Policymakers can maximize these economic benefits by supporting legislation that enhances the wine and grape-product industry. Our support will ensure that this all-American industry continues to produce superior products and provide a strong contribution to our economy."

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

"The numbers are really impressive, but there are many other benefits from grapes that should be considered," said Congressman George Radanovich of Mariposa, CA, who co-chairs the Congressional Wine Caucus. "By maintaining the vineyards that line my district in California and those throughout the nation, we help preserve our agricultural lands. Further, vineyards and wineries revitalize and support local economies in rural communities, and contribute over $129 million to charitable causes. As an added benefit, it is important to mention that grapes, grape juice and wine have been shown to be heart healthy."

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 large and growing economic impact of the grape and wine industry contrasts with the economic situation of many other American industries," said Barbara Insel, Managing Director for Research at MKF Research LLC, who oversaw the study. "Whether declining or growing, the economic impact of an industry extends well beyond the direct impact on its employees to indirect impact on suppliers and induced impact on local communities. This is the 'ripple effect' which can be negative or positive, and in the case of the grape and wine industry is very positive and spread among many sectors of the economy."

"The grape and wine industry has been a powerful economic engine in New York State, contributing $6 billion annually to the state's economy and supporting many other businesses while enriching our dinner tables and culture," said Senator Hillary Rodham Clinton. "This report shows what we in New York have known for a long time—that our wine and grape growers have a great deal to contribute to the national economy. I am thrilled that New York's wine and grape growers have been able to contribute to this ever-growing, world class industry."

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

"This report gives us a road map for partnering with the private sector to stimulate further industry growth," said Senator Debbie Stabenow of Michigan. "A recent study revealed that the grape, grape juice and wine industry contributes over $764 million to our state economy, so policies encouraging development benefit everyone."

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.

"As a grape grower, I am delighted by this study and very grateful to the Congressional Wine Caucus for unveiling it, "said Jim Bedient, a grower of wine grapes and juice grapes in New York's Finger Lakes region, and current President of Winegrape Growers of America. "As farmers, we are always talking about the climate—the weather outside—but we also recognize that the business climate is just as important for our industry's growth. We can't control the weather, but the business climate is largely shaped by public policy, so it's great that our elected officials now know the extent of our economic contribution and are eager to support our future growth. Immigration reform is an urgent priority for growers throughout the country, along with increased funding for research and promotion of specialty crops like grapes."

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.

Media Contacts:

Barbara Insel, MKF Research, 707-963-9222
Bill Nelson, WineAmerica, 202-783-2756
Nancy Light, Wine Institute, 415-356-7520
Jim Bedient, Winegrape Growers of America, 315-595-6674
Karen Ross, Winegrape Growers of America, 916-924-5370
Tom Davenport, National Grape and Wine Initiative, 716-326-5291
Jim Trezise, New York Wine & Grape Foundation, 585-394-3620

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