The Economic Impact of North Carolina Wine and Wine Grapes – 2016
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THE ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES – 2016 A Frank, Rimerman + Co. LLP Report August 2017 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 2016 $1.97 Billion NORTH CAROLINA 2016 2013 WINE AND WINE ECONOMIC ECONOMIC % CHANGE GRAPES IMPACT IMPACT Full-time Equivalent Jobs 10,296 7,709 +34% Wages Paid $375 million $260 million +44% Wine Produced (Cases) 1,115,000 569,000 +96% Retail Value of $130 million $91 million +43% North Carolina Wine Sold Number of Wineries 168 130 +29% Grape-Bearing Acres 2,300 2,300 0% Number of Grape Growers 525* 525 0%* Wine-Related Tourism $319 million $257 million +24% Expenditures Number of Wine-Related 1,917,000 1,711,000 +12% Tourists Taxes Paid: Federal / State $113 million / $73 million / +44% & Local $89 million $67 million * a current count of grape growers was not available for this report. 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 2016 2013 Winery Sales $89,781,000 $54,951,000 Retail and Restaurant Sales of NC wine $30,196,000 $27,095,900 Distributors Sales $10,300,000 $9,340,000 Non-Wine Revenue (Weddings, Events, etc.) $8,433,000 $17,582,100 Tourism $319,118,000 $257,434,200 Wine Grape Sales $4,386,000 $3,961,000 Federal Tax Revenue $112,585,000 $73,267,000 State Tax Revenue $88,677,000 $67,263,000 Vineyard Development (excluding vines) $1,150,000 $2,150,000 Charitable Contributions $1,303,000 $913,900 Allied Industries -- Glass/Closures/Chemicals $177,370,000 $190,170,600 Wine Research/Education/Consulting $1,265,000 $1,350,100 Indirect (IMPLAN) $319,550,000 $574,570,000 Induced (IMPLAN) $427,824,000 $173,871,700 Total Revenue $1,591,938,500 $1,453,920,600 Wages 2016 2013 Winery Employees $17,129,000 $15,249,500 Vineyard Employees $15,967,000 $17,749,900 Tourism $77,759,000 $48,000,000 Vineyard Development and Materials - Labor $173,000 $322,500 Distributors Employees $2,896,000 $2,300,300 Retail/Liquor Stores - Wine Specific $360,000 $587,400 Restaurant Sales of NC Wine $4,570,000 $5,524,300 Allied Industries -- Glass/Closures/Chemicals $16,222,000 $14,678,800 Wine Research/Education/Consulting $635,000 $930,000 Indirect (IMPLAN) $107,110,000 $98,445,400 Induced (IMPLAN) $132,658,000 $55,814,900 Total Wages $375,478,200 $259,603,000 Total $1,967,416,600 $1,713,523,600 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 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 2013. The number of wineries in the state of North Carolina grew from 130 in 2013 to 168 in 2016, an increase of 29%, while the cases produced increased 96% from 569,000 cases to 1,115,000 cases in 2016. 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 12th largest wine producer in the United States in 2016. The wine and grape industry in North Carolina contributed greatly to the economic strength of the state in 2016. North Carolina’s wine, grape and related industries had a total economic value to the state of $1.97 billion in 2016. 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 1.9 million people visited North Carolina wineries in 2016. Wine, grapes and related industries account for 10,296 jobs in North Carolina with an associated payroll of roughly $375 million. As shown below, most of these jobs were in the tourism industry. Table 2 – Total North Carolina Wine/Grape Industry Employment Employment 2016 2013 Winery 765 723 Vineyard 612 810 Distributors 57 48 Tourism 3,042 2,067 Vineyard Materials 5 9 Restaurants 317 384 Retail/Liquor Stores - Wine Specific 14 23 Allied Industries -- Glass/Closures/Chemicals 385 426 Wine Research/Education/Consulting 12 15 Indirect (IMPLAN) 1,961 1,797 Induced (IMPLAN) 3,126 1,408 Total Employment 10,296 7,709 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 $113 million in federal taxes and $89 million in state and local taxes in 2016, including nearly $12 million in total excise taxes. Table 3 – Estimated Tax Revenues Type of Tax Total Federal Tax Revenues Excise $9,144,000 Payroll $48,485,000 Income $51,633,000 Other (corporate profits, etc.) $3,322,000 Total Federal Tax Revenues $112,585,000 State Tax Revenues Excise $2,652,000 Sales $40,850,000 Payroll $506,000 Income $10,753,000 Property $24,293,000 Other (dividends, licenses, fines, fees, etc.) $9,623,000 Total State Tax Revenues $88,677,000 Total Tax Revenues $201,261,000 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 1.9 million tourists visited North Carolina wineries in 2016. Supporting these winery visitors is a diverse labor force of approximately 3,042 employees with total wages of $78 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 $8.4 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 2016, there were 168 wineries in North Carolina producing wine, up 29% from 130 wineries in 2003. Based on information from the TTB, total wine bottled in North Carolina in 2016 was 2.7 million gallons, or approximately 1,115,000 nine- liter equivalent cases. The majority of the state’s wineries made wine with grapes sourced from North Carolina vineyards, resulting in more than 72% 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 2016 168 2013 130 2009 89 2007 67 2005 55 2003 34 Source: Wine Institute, TTB Frank, Rimerman + Co. LLP 6 ECONOMIC IMPACT OF NORTH CAROLINA WINE AND WINE GRAPES While the majority of the state consists of small wineries with production of less than 5,000 nine-liter equivalent cases, the state’s overall wine sales are concentrated within a few larger winery producers.