The Economic Contribution of the Colorado Wine Industry Dawn Thilmany, PhD Doug Caskey, Exec. director CSU Dept. of Ag and CO Wine Industry Resource Economics Development Board and CSU Extension Contributions from Allison Bauman, Eyosiyas Tegegne, Brett Hines, Horst Caspari and Marco Costanigro and Colorado wineries!
These are highlights, but let’s look at what factors are driving these changes? CO Wine Econ Impact, CO Wine Econ Impact, VinCO 2014 nCO 2014
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 Annual Wine • Colorado’s wine drinkers Consumption per capita consume more than the (gals) average U.S. citizen 4 – 3.1 gallons vs. 2.5 gallons per 3.1 2.5 capita annually 3 • Colorado retailers sold 61.1 2 million liters of wine in 2012. • 5% Market Share, or 1 $1 out of every $20 0 spent on wine in CO goes to a Colorado winery. US CO CO Wine Econ Impact, VinCO 2014
Increase in CO Sales: all wine vs. CO wine All Wine sold in Volume Trends Comparison CO Wine in Liters CO in liters 70,000,000 1,350,000 60,000,000 1,150,000 50,000,000 950,000 40,000,000 750,000 30,000,000 550,000 20,000,000 350,000 10,000,000 0 150,000 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 Fiscal Year CO Wine Econ Impact, VinCO 2014
CO Wine price increase • The average bottle price for all wines sold in the U.S. is approx. $6.22 Average Bottle $ – according to Nielson, March $17 2011 (winecurmudgeon.com). $15 $13 $11 • Wine made in Colorado $9 averages $16.68 per bottle, $7 per 2012 CSU study $5 – Up 30 percent from $12.86 in US CO 05 CO 12 2005. CO Wine Econ Impact, VinCO 2014
CO Wine Market Share 6% 5% 4% 3% 2% 1% 0% % Mkt share of CO wine by vol. % Mkt share of CO wine by $ CO Wine Econ Impact, VinCO 2014
CO Winery Economic Survey 31 out of 108 wineries shared data, 45,512 cs. of 123,904 total sold (37%) 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 Wine Econ Impact, VinCO 2014
CO Winery Economic Survey $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 CO Wine Econ Impact, VinCO 2014
CO Wine CO Wine Econ Impact, Econ Impact, VinCO 2014 nCO 2014
Colorado’s wine industry expenditures translate to other 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
IMPLAN Multipliers • Impact Analysis for Planning software was used and provided key economic INDIRECT results and relationships as CONTRIBUTION outlined in the figure above. (RIPPLE) : $ SPENT ON The data in an IMPLAN D IRECT INPUTS FROM model is a combination of C ONTRIBUTION : SUPPLIERS govt data and information W INERIES INDIRECT SELLING CO WINE provided by wineries CONTRIBUTION (RIPPLE) : $ SPENT ON • For IMPLAN analyses, the LABOR contributions are laid out as direct, indirect and induced INDUCED CONTRIBUTION (SPILLOVER) : contributions expressed as a EMPLOYEE HOUSEHOLD SPENDING multiplier CO Wine Econ Impact, VinCO 2014
CO Wine’s Contribution from Sales: $41,040,612 Multipliers $40,000,000 expand direct $4,856,574 wine sales from $11,789,376 $20,000,000 $24,000,000 to more than $41 million $24,394,661 $0 Direct Effect Indirect Effect Induced Effect CO Wine Econ Impact, VinCO 2014
Using Economic Contribution Study Numbers for your Firm Size and Visitors Key Elements
Mgmt Choices Matter.. Scale –Dependent Multipliers 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 All Large Wineries 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 CO Wine Econ Impact, CO Wine Econ Impact, VinCO nCO 2014 014
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? In-state Multiplier: 1.71 172,000 visitors Approx. $153 each Out-of-State Multiplier: 1.7 93,000 visitors Approx. $283 each CO Wine Econ Impact, VinCO 2014
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 Contribution from Wine Tourism: $103,029,669 Tourism Multipliers Direct Effect Indirect Effect Induced Effect $100,000,000 higher than $24,441,074 $80,000,000 wine sales as it is labor $18,168,379 $60,000,000 intensive: $40,000,000 $4,856,574 $60,420,000 $20,000,000 $11,789,376 to more than $60,420,284 $103 million $0 $24,394,661 Wine Sales Total Wine Tourism CO Wine Econ Impact, VinCO 2014
Jobs and Totals CO Wine CO Wine Econ Impact, Econ Impact, VinCO 2014 nCO 2014
Tourism in Sonoma County is less than 10% of Economic Contribution vs. 72% in Colorado CO Wine Econ CO Wine Econ Impact, Impact, VinCO nCO 2014 014
A CLOSER LOOK AT COLORADO WINE CONSUMERS What can you learn from your customers? CO Wine Econ CO Wine Econ Impact, Impact, VinCO nCO 2014 014
• 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 CO Wine Econ Impact, VinCO 2014
• 29% of CO Core Buyers drink more than once a week; • More Non-CO buyers drink more than once a week CO Wine Econ Impact, VinCO 2014
• 82% CO Core Buyers spend $11-25, but fewer spend more • 59% Non-CO Buyers spend $11-25, but 5x spend more CO Wine Econ Impact, VinCO 2014
Where CO Consumers Buy Wine CO Wine Econ Impact, VinCO 2014
Where CO wineries sell wine CO Wine CO Wine Econ Impact, Econ Impact, VinCO 2014 nCO 2014
Where CO Wineries sell vs. CO Consumers Buy 84.6% 90% 80% 59.0% 70% Consumer Buying Source 60% 36.0% Winery Sales Channel 50% 40% 30% 20% 9.9% 1.0% 3.0% 10% 1.0% 0.2% 0% 1.2% 4.0% CO Wine Econ Impact, VinCO 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 CO Wine CO Wine Econ Impact, Econ Impact, VinCO 2014 nCO 2014
The Three Tier System carries 84% of wine purchased #1: Manufacturer Winery, Brewery, Distillery, Importer vs. 36% #2: Wholesaler (Distributor) CO wine #3: Retailer Off-premise : Only one license in CO sold On-premise : multiple licenses Consumer CO Wine Econ Impact, VinCO 2014
Only 10% of consumers’ purchases vs. Manufacturer Winery 59% of winery Brewery Distillery sales happen in Tasting Rooms Wholesaler (Distributor) Retailer Consumer On and Off premise CO Wine Econ Impact, VinCO 2014
Wine Festivals If only 1.2% Manufacturer of consumers Winery shop there, Brewery Distillery are festivals Wholesaler worth the effort (Distributor) ? Retailer Consumer On and Off premise CO Wine Econ Impact, VinCO 2014
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