The Economic Contribution of the Colorado Wine Industry Dawn - - PowerPoint PPT Presentation

The Economic Contribution of the Colorado Wine Industry

Doug Caskey,

• Exec. director

CO Wine Industry Development Board Dawn Thilmany, PhD CSU Dept. of Ag and Resource Economics and CSU Extension

Contributions from Allison Bauman, Eyosiyas Tegegne, Brett Hines, Horst Caspari and Marco Costanigro and Colorado wineries!

CO Wine Econ Impact, CO Wine Econ Impact, VinCO 2014 nCO 2014

These are highlights, but let’s look at what factors are driving these changes?

Colorado Wine Consumers

Outpace National Consumption

• In the U.S., the wine industry

reported $34.6 billion in retail value for 2012 (The Wine Institute) or approximately $110 per capita per year.

• Adults consumed 2.5 gallons of

wine per capita as of 2010, which comprised more than 10 percent of all beverage sales.

CO Wine Econ Impact, VinCO 2014

Colorado Wine Consumers

Outpace National Consumption

• Colorado’s wine drinkers

consume more than the average U.S. citizen

– 3.1 gallons vs. 2.5 gallons per capita annually

• Colorado retailers sold 61.1

million liters of wine in 2012.

• 5% Market Share, or

$1 out of every $20 spent on wine in CO goes to a Colorado winery.

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1 2 3 4

2.5 3.1

Annual Wine Consumption per capita (gals)

US CO

Increase in CO Sales: all wine vs. CO wine

CO Wine Econ Impact, VinCO 2014

10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 150,000 350,000 550,000 750,000 950,000 1,150,000 1,350,000

All Wine sold in CO in liters

Fiscal Year

CO Wine in Liters

Volume Trends Comparison

CO Wine price increase

• The average bottle price for

all wines sold in the U.S. is

• approx. $6.22

– according to Nielson, March 2011 (winecurmudgeon.com).

• Wine made in Colorado

averages $16.68 per bottle, per 2012 CSU study

– Up 30 percent from $12.86 in 2005.

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$5 $7 $9 $11 $13 $15 $17

US CO 05 CO 12

Average Bottle $

CO Wine Market Share

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0% 1% 2% 3% 4% 5% 6%

% Mkt share of CO wine by vol. % Mkt share of CO wine by $

CO Winery Economic Survey

31 out of 108 wineries shared data, 45,512 cs. of 123,904 total sold (37%)

CO Wine Econ Impact, VinCO 2014

Number of Cases Wineries Total Cases Sold 0-700 17 3,829 701-4800 11 16,491 Above 4800 3 25,192 Total 31 45,512

CO Winery Economic Survey

CO Wine Econ Impact, VinCO 2014

$24.8 million in wine sales for 2012 production year

• Wineries that responded reported the

average cost spent on all produce to make wine was 22% of winery sales or $5.5 million.

• In 2012, this study and Grower survey

suggest $2.5-3 million as value of CO grape crop

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Colorado’s wine industry expenditures translate to

• ther sectors
• Costs translated into…

– Business with allied irrigation and pipe supply, bottle and cork suppliers, utilities, shipping companies, etc. – Labor and payroll for wineries and these businesses also translate to economic activity

• This study found an economic multiplier of 1.68,

meaning that for every $1 in direct wine sales there is $1.68 worth of economic activity invested in nearby businesses

CO Wine Econ Impact, VinCO 2014

CO Wine Econ Impact, VinCO 2014

IMPLAN Multipliers

• Impact Analysis for

Planning software was used and provided key economic results and relationships as

• utlined in the figure above.

The data in an IMPLAN model is a combination of govt data and information provided by wineries

• For IMPLAN analyses, the

contributions are laid out as direct, indirect and induced contributions expressed as a multiplier

DIRECT CONTRIBUTION: WINERIES

SELLING CO WINE INDIRECT CONTRIBUTION (RIPPLE): $ SPENT ON INPUTS FROM SUPPLIERS INDIRECT CONTRIBUTION (RIPPLE): $ SPENT ON LABOR INDUCED CONTRIBUTION (SPILLOVER): EMPLOYEE HOUSEHOLD SPENDING

CO Wine Econ Impact, VinCO 2014

CO Wine’s Contribution from Sales: $41,040,612

Multipliers expand direct wine sales from $24,000,000 to more than $41 million

$0 $20,000,000 $40,000,000 $24,394,661 $11,789,376 $4,856,574

Direct Effect Indirect Effect Induced Effect

Using Economic Contribution Study Numbers for your Firm

Size and Visitors Key Elements

Mgmt Choices Matter..

Scale –Dependent Multipliers All Large Wineries

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Impact Type Employment Labor Income Value Added Output Direct Effect 101.6 $1,157,298 $1,909,011 $13,502,950 Indirect Effect 33.9 $2,395,973 $3,696,268 $7,033,187 Induced Effect 21.4 $937,131 $1,697,962 $2,836,320 Total Effect 156.9 $4,490,402 $7,303,241 $23,372,456

Direct Effect Indirect Induced Total Effects Large 1 0.522259 0.209069 1.731328 Midsize 1 0.454403 0.188889 1.643293 Small 1 0.365748 0.166221 1.53197

An Example

• Top of the Hill Winery

– $108,000 from 500 cases of wine – Runs a tasting room where they estimate 120 visitors each season – 1/3 from out of state

• Contribution to Local Economy from Sales:
• 108,000*1.532=$165,500

CO Wine Econ Impact, VinCO 2014

What do you Know about Visitors?

CO Wine Econ Impact, VinCO 2014

In-state Multiplier: 1.71 172,000 visitors

• Approx. $153 each

Out-of-State Multiplier: 1.7 93,000 visitors

• Approx. $283 each

With Tourism Impacts

• Top of the Hill Winery

– Runs a tasting room where they estimate 120 visitors each season – 1/3 from out of state

• Total Contribution to Local Economy :
• 108,000*1.532=$165,500 PLUS
• $153*80*1.71=$20,930-in-state visitors
• $283*40*1.7=$19,244- out-of-state
• Could estimate $205,674 contribution

CO Wine Econ Impact, VinCO 2014

Another Example

• Front Range Winery

– $2 million from 13,000 cases of wine – Runs a tasting room where they estimate 10,000 visitors each season; 1/2 from out of state

• Total Contribution to Local Economy:
• 2,000,000*1.73=$3.46 million
• $153*5,000*1.71=$1.3 million
• $283*5,000*1.7=$2.4 million
• Estimate $7.16 million contribution

CO Wine Econ Impact, VinCO 2014

CO Wine Econ Impact, VinCO 2014

CO Contribution from Wine Tourism: $103,029,669

Tourism Multipliers higher than wine sales as it is labor intensive: $60,420,000 to more than $103 million

$0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000

Wine Sales Total Wine Tourism

$24,394,661 $60,420,284 $11,789,376 $18,168,379 $4,856,574 $24,441,074 Direct Effect Indirect Effect Induced Effect

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Jobs and Totals

Tourism in Sonoma County is less than 10% of Economic Contribution

• vs. 72% in Colorado

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A CLOSER LOOK AT COLORADO WINE CONSUMERS

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What can you learn from your customers?

CO Wine Econ Impact, VinCO 2014

• CO Core Buyers (20% of those surveyed) purchase at least

25% of their wine from Colorado brands;

• CO Moderate Buyers (18%) bought less than 25% of total

purchases);

• Non-CO buyers (63%) reported buying no Colorado wines,

and this group is shrinking

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• 29% of CO Core Buyers drink more than once a week;
• More Non-CO buyers drink more than once a week

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• 82% CO Core Buyers spend $11-25, but fewer spend more
• 59% Non-CO Buyers spend $11-25, but 5x spend more

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Where CO Consumers Buy Wine

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Where CO wineries sell wine

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

84.6% 9.9% 0.2% 1.2% 4.0% 36.0% 59.0% 1.0% 3.0% 1.0%

Consumer Buying Source Winery Sales Channel

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Where CO Wineries sell vs. CO Consumers Buy

CO Wine CO Wine Econ Impact, Econ Impact, VinCO 2014 nCO 2014

• Consumers habituated

to the 3-tier system

• Wineries have privileges to go

around the 3-tier system

• What’s your business model?
• Go with the flow
• Retrain consumers

• vs. 36%

CO wine sold

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#1: Manufacturer

Winery, Brewery, Distillery, Importer

#2: Wholesaler (Distributor) #3: Retailer

Off-premise: Only one license in CO On-premise: multiple licenses

Consumer

The Three Tier System carries 84% of wine purchased

Only 10% of consumers’ purchases vs.

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Manufacturer

Winery Brewery Distillery

Wholesaler (Distributor) Retailer

On and Off premise

Consumer

59% of winery sales happen in Tasting Rooms

Wine Festivals

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Manufacturer

Winery Brewery Distillery

Wholesaler (Distributor) Retailer

On and Off premise

Consumer

If only 1.2%

• f consumers

shop there, are festivals worth the effort ?

Internet Sales

CO Wine Econ Impact, VinCO 2014

Manufacturer

Winery Brewery Distillery

Wholesaler (Distributor) Retailer

On and Off premise

Consumer

Internet Sales opening new paths through the 3-tier system

• Approximately 5-10% of wine

sales from tasting rooms now

• n-line
• 38% of core wine drinkers use

social media to discuss wine

• 39% use wine/food/restaurant

mobile apps to discover and purchase

Upcoming Opportunity!

Dawn Thilmany 970-491-7220 Dawn.thilmany@colostate.edu

Thank you

CO Wine Econ Impact, VinCO 2014

Doug Caskey, Colorado Dept. of Agriculture

• dcaskey@coloradowine.com
• 720.304.3406