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!
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.
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. 4 3 2 1 0 Annual Wine Consumption per capita (gals) 2.5 US 3.1 CO
Increase in CO Sales: all wine vs. CO wine All Wine sold in CO in liters Volume Trends Comparison CO Wine in Liters 70,000,000 1,350,000 60,000,000 1,150,000 50,000,000 40,000,000 30,000,000 20,000,000 950,000 750,000 550,000 10,000,000 350,000 0 150,000 Fiscal Year 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
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. $17 $15 $13 $11 $9 $7 $5 Average Bottle $ US CO 05 CO 12
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 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 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
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
IMPLAN Multipliers Impact Analysis for Planning software was used and provided key economic results and relationships as outlined 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 s Contribution from Sales: Multipliers expand direct wine sales from $24,000,000 to more than $41 million $41,040,612 $4,856,574 $11,789,376 $24,394,661 $40,000,000 $20,000,000 $0 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 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
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
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
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
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
Tourism Multipliers higher than wine sales as it is labor intensive: $60,420,000 to more than $103 million CO Contribution from Wine Tourism: $103,029,669 $4,856,574 $11,789,376 $24,394,661 Direct Effect Indirect Effect Induced Effect $24,441,074 $18,168,379 $60,420,284 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 Wine Sales Total Wine Tourism
Jobs and Totals
Tourism in Sonoma County is less than 10% of Economic Contribution vs. 72% in Colorado
A CLOSER LOOK AT COLORADO WINE CONSUMERS What can you learn from your customers?
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
29% of CO Core Buyers drink more than once a week; More Non-CO buyers drink more than once a week
82% CO Core Buyers spend $11-25, but fewer spend more 59% Non-CO Buyers spend $11-25, but 5x spend more
Where CO Consumers Buy Wine
Where CO wineries sell wine
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Where CO Wineries sell vs. 84.6% 36.0% CO Consumers Buy 59.0% Consumer Buying Source Winery Sales Channel 9.9% 1.0% 3.0% 1.0% 0.2% 1.2% 4.0%
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
The Three Tier System carries 84% of wine purchased #1: Manufacturer Winery, Brewery, Distillery, Importer #2: Wholesaler (Distributor) #3: Retailer Off-premise: Only one license in CO On-premise: multiple licenses vs. 36% CO wine sold Consumer
Only 10% of consumers purchases vs. Manufacturer Winery Brewery Distillery Wholesaler (Distributor) 59% of winery sales happen in Tasting Rooms Retailer On and Off premise Consumer
Wine Festivals Manufacturer Winery Brewery Distillery Wholesaler (Distributor) If only 1.2% of consumers shop there, are festivals worth the effort? Retailer On and Off premise Consumer
Internet Sales Manufacturer Winery Brewery Distillery Wholesaler (Distributor) Retailer On and Off premise Internet Sales opening new paths through the 3-tier system Approximately 5-10% of wine sales from tasting rooms now on-line 38% of core wine drinkers use social media to discuss wine 39% use wine/food/restaurant mobile apps to discover and purchase Consumer
Upcoming Opportunity! Dawn Thilmany 970-491-7220 Dawn.thilmany@colostate.edu
Thank you Doug Caskey, Colorado Dept. of Agriculture dcaskey@coloradowine.com 720.304.3406