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THE ECONOMIC IMPACT AND IMPORTANCE OF GEORGIA WINERIES by TIMOTHY KYLE WATTS (Under the Direction of John McKissick) ABSTRACT Georgia’s wine industry has experienced growth in recent years. This thesis utilizes two surveys to provide an accurate estimate of the economic impact of Georgia’s wine industry and the associated agritourism. The results obtained from the surveys utilize IMPLAN to determine the impact of Georgia’s winery industry on a regional and state level. Georgia wineries generate $44.970 million and $16.971 million in output and total value added, respectively, while creating 430 jobs throughout the states economy. In addition to the economic impact results, this thesis provides a wealth of descriptive information pertaining to Georgia wineries and winery visitors. Up until now, a complete state impact study for Georgia wineries was unavailable. With significant growth in the industry, this thesis gives insight to output, labor income, employment, and taxes that are generated due to the existence of Georgia’s wineries. INDEX WORDS: Georgia, winery, input-output theory, economic impact analysis, IMPLAN, visitor profile, agritourism THE ECONOMIC IMPACT AND IMPORTANCE OF GEORGIA WINERIES by TIMOTHY KYLE WATTS B.S.A., The University of Georgia, 2005 A Thesis Submitted to the Graduate Faculty of The University of Georgia in Partial Fulfillment of the Requirements for the Degree MASTER OF SCIENCE ATHENS, GEORGIA 2008 © 2008 Timothy Kyle Watts All Rights Reserved THE ECONOMIC IMPACT AND IMPORTANCE OF GEORGIA WINERIES by TIMOTHY KYLE WATTS Major Professor: John C. McKissick Committee: Kent Wolfe Warren Kriesel Electronic Version Approved: Maureen Grasso Dean of the Graduate School The University of Georgia December 2008 ACKNOWLEDGEMENTS First I would like to thank my family and friends for the support they have provided me with throughout my college experience. I would like to thank my parents for the love and support that have provided me with. Everything from a source of encouragement and support to the countless meals they have prepared for me while away at school has helped me to get where I am now. My friends have also been an excellent source of encouragement through the tough times I faced while at school. Without my family and friends, my college experience would not be possible. I would like to thank Dr. John McKissick for his great help and support. He provided me with an assistantship which has been a tremendous source of support. In addition to financial support, the assistantship has provided me with several opportunities to help with agribusiness operations to further enhance my knowledge and background in agribusiness. Dr. McKissick’s experience and knowledge as a nationally recognized economist has been a tremendous asset for my research. His guidance, knowledge, and assistance has helped me through the obstacles and encounters I faced while writing my thesis. Next I would like to thank Dr. Kent Wolfe. He has been an incredible source of assistance and encouragement. Through the process, he has advised me through different situations that I faced while writing this thesis. Dr. Wolfe has been there from everything to helping me critique my paper to visiting wineries throughout the state. Over the course of the program, Dr. Wolfe has been an invaluable asset to helping me through the graduate program. iv I am grateful to have Dr. Warren Kriesel part of my committee. His experience and knowledge in economics has helped me throughout the course of this program. From the two courses he instructed me in, to the assistance he provided me with regarding my research, Dr. Kriesel has given me an appreciation for agricultural economics. I would also like to give special thanks to Dr. Archie Flanders. He has helped me throughout the entire process of my thesis. His expertise in impact analysis has allowed me to fine tune my research to provide the best impact analysis for Georgia’s wine industry. He has allowed me to make countless trips to his office and has provided step-by-step assistance in creating an input-output model to determine the impact. Finally, I would like to take the time to thank the Center for Agribusiness and Economic Development. In addition to providing my assistantship, the friendly help and support from the faculty and staff has been exceptional. I feel very fortunate to have the experience of working with such an incredible operation. v TABLE OF CONTENTS Page ACKNOWLEDGEMENTS........................................................................................................... iv CHAPTER 1 INTRODUCTION .........................................................................................................1 History of Georgia Wineries .....................................................................................2 Legislation.................................................................................................................4 Global Wine Trade Trends........................................................................................5 National Wine Consumption and Production Trends................................................6 Research Objectives ................................................................................................10 Format .....................................................................................................................12 2 LITERATURE REVIEW............................................................................................13 Georgia Winery Studies ..........................................................................................13 Input-Output Analysis .............................................................................................15 Tourism ...................................................................................................................18 Summary .................................................................................................................23 3 METHODOLOGY ......................................................................................................24 Survey Development Methodology.........................................................................24 Winery Sample and Surveying Methodology .........................................................27 Data Collection........................................................................................................29 Input-Output Theory................................................................................................30 vi IMPLAN Modeling .................................................................................................41 Objective One..........................................................................................................42 Objective Two .........................................................................................................43 Objective Three .......................................................................................................47 4 SURVEY RESULTS AND FINDINGS......................................................................49 Georgia Winery Responses .....................................................................................49 Georgia Winery Visitor Responses .........................................................................62 5 INPUT-OUTPUT RESULTS......................................................................................75 Survey Results for Visitor Spending.......................................................................76 Economic Impact of Georgia’s Wine Industry on the State of Georgia..................79 Economic Impact of North Georgia Wine Highway Counties................................84 6 SUMMARY AND CONCLUSIONS ..........................................................................91 Overview of Thesis .................................................................................................91 Suggestions for Future Research.............................................................................93 REFERENCES ..............................................................................................................................96 APPENDICES ...............................................................................................................................99 A Georgia Winery Survey ...............................................................................................99 B Georgia Winery Visitor Survey .................................................................................107 C Impacts by Sector Distribution ..................................................................................111 D Grape Varieties Produced by Georgia Wineries........................................................115 vii CHAPTER ONE INTRODUCTION Georgia’s wine industry did not begin until the late 1970’s and early 1980’s. During this time, several families began to invest in wineries which would eventually lay the groundwork for the grape and wine industry. Georgia currently has 24 wineries scattered throughout the state, many of them primarily located in the northeastern Georgia. This cluster of wineries in the northeastern part of the state is known as the North Georgia Wine Highway. These counties consist of Jackson, Hall, Lumpkin, Union, Towns, White, Habersham and Rabun. Both American and European wine varieties are grown throughout the state, as well as muscadine and fruit wines. With such a large agritourism based industry