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The Economic Impact of North Carolina Wine and Wine Grapes – 2013

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The Economic Impact of North Carolina Wine and Wine Grapes – 2013 THE ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES – 2013 A Frank, Rimerman + Co. LLP Report May 2015 This study was commissioned by North Carolina Department of Agriculture and Consumer Services Frank, Rimerman + Co. LLP The Wine Business Center, 899 Adams St., Suite E St. Helena, California 94574 / (707) 963-9222 www.frankrimerman.com/industries/wine-industry-research.asp ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES TABLE OF CONTENTS Highlights ......................................................................................................... 2 Executive Summary ......................................................................................... 4 Methodology................................................................................................... 12 About Frank, Rimerman + Co. LLP ............................................................... 14 Frank, Rimerman + Co. LLP 1 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES FULL ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES 2013 $1.71 Billion NORTH CAROLINA 2013 2009 WINE AND WINE ECONOMIC ECONOMIC % CHANGE GRAPES IMPACT IMPACT Full-time Equivalent Jobs 7,709 7,575 +2% Wages Paid $260 million $237 million +10% Wine Produced (Cases) 569,000 529,000 +8% Retail Value of $91 million $79 million +15% North Carolina Wine Sold Number of Wineries 130 89 +46% Grape-Bearing Acres 2,300 1,800 +28% Number of Grape Growers 525 400 +31% Wine-Related Tourism $257 million $156 million +65% Expenditures Number of Wine-Related 1,711,000 1,255,000 +36% Tourists Taxes Paid: Federal / State $73 million / $65 million / +21% & Local $67 million $51 million Frank, Rimerman + Co. LLP 2 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES Table 1 – Total Economic Impact of Wine and Vineyards in North Carolina Revenue 2013 2009 2005 Winery Sales $54,951,000 $44,508,900 $48,174,000 Retail and Restaurant Sales of NC wine $27,095,900 $25,764,400 $18,685,000 Distributors Sales $9,340,000 $8,579,600 $5,480,000 Non-Wine Revenue (Weddings, Events, etc.) $17,582,100 $9,319,100 -- Tourism $257,434,200 $155,806,000 $122,361,000 Wine Grape Sales $3,961,000 $3,927,000 $3,700,000 Federal Tax Revenue $73,267,000 $64,756,000 $56,249,000 State Tax Revenue $67,263,000 $51,175,000 $38,464,000 Vineyard Development (excluding vines) $2,150,000 $1,650,000 $0 Charitable Contributions $913,900 $788,500 $720,000 Allied Industries -- Glass/Closures/Chemicals $190,170,600 $176,915,000 $33,530,000 Wine Research/Education/Consulting $1,350,100 $1,080,000 $866,000 Indirect (IMPLAN) $574,570,000 $268,492,500 $219,859,000 Induced (IMPLAN) $173,871,700 $232,551,400 $106,867,000 Total Revenue $1,453,920,500 $1,045,313,400 $654,955,000 Wages 2013 2009 2005 Winery Employees $15,249,500 $12,109,300 $11,299,000 Vineyard Employees $17,749,900 $10,928,100 $9,890,000 Tourism $48,000,000 $39,000,000 $32,320,000 Vineyard Development and Materials - Labor $322,500 $247,500 $0 Distributors Employees $2,300,300 $1,782,600 $1,889,000 Retail/Liquor Stores - Wine Specific $587,400 $425,900 $745,000 Restaurant Sales of NC Wine $5,524,300 $4,949,300 $5,047,000 Allied Industries -- Glass/Closures/Chemicals $14,678,800 $13,655,700 $5,966,000 Wine Research/Education/Consulting $930,000 $930,000 $855,000 Indirect (IMPLAN) $98,445,400 $78,987,800 $55,425,000 Induced (IMPLAN) $55,814,900 $74,228,000 $34,889,000 Total Wages $259,603,000 $237,244,200 $158,325,000 Total $1,713,523,600 $1,282,557,600 $813,280,000 Frank, Rimerman + Co. LLP 3 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES EXECUTIVE SUMMARY IMPACT OF WINE AND VINEYARDS ON THE NORTH CAROLINA ECONOMY The North Carolina wine industry continues to grow as the number of wineries and cases produced both increased from 2009. The number of wineries in the state of North Carolina grew from 89 in 2009 to 130 in 2013, an increase of 46%, while the cases produced increased 7% from 529,000 cases to 569,000 cases in 2013. The majority of the industry’s growth is coming from increased tourism and increased consumer demand for North Carolina wine. According to the Alcohol Tax and Trade Bureau (TTB), North Carolina was the 11th largest wine producer in the United States in 2013. The wine and grape industry in North Carolina contributed greatly to the economic strength of the state in 2013. North Carolina’s wine, grape and related industries had a total economic value to the state of $1.71 billion in 2013. The continued increase in the wine industry’s economic impact to the state of North Carolina is based on increased tourism revenue, wages and jobs while production and the number of wineries in North Carolina also are on the rise. We estimate that roughly 1.7 million people visited North Carolina wineries in 2013. Wine, grapes and related industries account for 7,709 jobs in North Carolina with an associated payroll of roughly $260 million. As shown below, most of these jobs were in the tourism industry. Table 2 – Total North Carolina Wine/Grape Industry Employment Employment 2013 2009 2005 Winery 723 551 470 Vineyard 810 605 530 Distributors 48 42 46 Tourism 2,067 1,838 1,596 Vineyard Materials 9 8 0 Restaurants 384 356 324 Retail/Liquor Stores - Wine Specific 23 16 25 Allied Industries -- Glass/Closures/Chemicals 426 396 215 Wine Research/Education/Consulting 15 18 11 Indirect (IMPLAN) 1,797 1,699 1,373 Induced (IMPLAN) 1,408 2,046 1,137 Total Employment 7,709 7,575 5,727 Sources: Frank, Rimerman + Co. Research, IMPLAN, NC State University, NC Department of Commerce, Bureau of Labor Statistics and various North Carolina wineries, consultants and suppliers surveyed. Frank, Rimerman + Co. LLP 4 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES TOTAL TAXES COLLECTED The wine and wine grape industry generates significant tax dollars, benefiting federal, state and local governments. Tax dollars are raised through sales taxes, excise taxes, income taxes, estate and gift taxes, payroll taxes, property taxes and other business taxes and fees. North Carolina’s wine, wine grape and allied industries generate $73 million in federal taxes and $67 million in state and local taxes in 2013, including $1.4 million in total excise taxes. Table 3 – Estimated Tax Revenues Type of Tax Total Federal Tax Revenues Excise $6,487,000 Payroll $33,067,000 Income $17,529,000 Other (corporate profits, etc.) $16,184,000 Total Federal Tax Revenues $73,267,000 State Tax Revenues Excise $1,352,000 Sales $31,518,000 Payroll $469,000 Property $19,699,000 Other (dividends, licenses, fines, fees, etc.) $13,723,000 Total State Tax Revenues $66,760,000 Total Tax Revenues $140,027,000 TOURISM Tourism continues to be a material factor in the North Carolina wine and wine grape industry’s overall impact on the broader state economy. Our survey of North Carolina wineries estimates that approximately 1.7 million tourists visited North Carolina wineries in 2013. Supporting these winery visitors is a diverse labor force of approximately 7,709 employees with total wages of $260 million. The continued increase of tourist visits over the past several years can be attributed to the increase in the number of North Carolina wineries and continued improvement in wine quality, providing more destinations and opportunities for visitors to experience North Carolina wine country. Additionally, the continued improvement in the broader U.S. and local North Carolina economies also contributed to the impressive tourism impact. Frank, Rimerman + Co. LLP 5 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES Wine tasting tours are being widely promoted with positive sales results. In order for the industry to continue growing and attracting new visitors, wineries not only need to continue focusing on improving wine quality, but consider expanding into more wine-related events like private parties, weddings, and festivals held on winery properties. Some existing wineries have expanded their facilities to incorporate these additional revenue streams, resulting in increased winery revenue, employment and support services. Some wineries we surveyed in North Carolina incorporated these new functions with traditional facilities to take full advantage of these profitable ancillary activities. By our estimation, based on direct feedback from the wineries we surveyed, there was nearly $17.6 million in revenue generated from these wine-related events and facilities. WINE PRODUCTION AND SALES Growing grapes and making wine is a long-term commitment to a community, both financially and physically. New vineyard plantings require three to five years before yielding a full crop, with another one to three years of aging for wine to be ready for sale. Unlike many industries, once vineyards and wineries are established they are effectively rooted and tied in place – a North Carolina vineyard cannot simply be relocated to another region or outsourced to another country. Wine and grapes are inextricably tied to the soil from which they are grown. Moreover, wine and their products and allied industries diversify local economies and create employment and new market opportunities. In 2013, there were 130 wineries in North Carolina producing wine, up 46% from 89 wineries in 2009. Based on information from the TTB, total wine produced in North Carolina in 2013 was 1.35 million gallons, or approximately 569,000 nine- liter equivalent cases. The majority of the state’s wineries made wine with grapes sourced from North Carolina vineyards, resulting in more than 77% of all wine produced in North Carolina being made from North Carolina grapes. Table 4 – Trend of Growth in North Carolina Wineries Year # of Wineries 2013 130 2009 89 2007 67 2005 55 2003 34 2000 25 Source: Wine Institute, TTB Frank, Rimerman + Co.
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