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By October 4, 2017 0 Comments Read More →

Wine Impact Study Designed to Impact Policy

By Paul Vigna

The $220 billion economic impact of the U.S. wine industry revealed in WineAmerica’s recent study has grabbed headlines in the media, but the target audience for the information is much narrower, it’s the lawmakers in Congress and state legislatures across the nation who preside over the arcane and fragmented regulations of the alcohol industry.

Kevin Atticks sits in a unique spot among U.S. wine industry leaders, his Grow & Fortify LLC representing not only Maryland’s wineries but its breweries and distilleries as well. He read with much interest the results of WineAmerica’s first economic impact study released Sept. 27 following six months of work by John Dunham & Associates, an economic research firm based in Brooklyn.

“It was eye-opening to me to see the breadth of the impact of the wine industry, and the job numbers were exciting to see,” he said. “Obviously, the economic numbers, revenue and tax numbers were stunning, and I think they do make a case to a legislator or regulator that this is an industry that you probably want to get behind and clear the path for expansion.”

Maryland’s growth in many ways represents what’s happening in many states nationally, starting with a winery count that’s approaching 90. There were fewer than 15 in 2000. Atticks, whose state has produced one impact study and is aiming to publish another in January 2018, noted that the proposed Craft Modernization and Tax Reform Act that’s log-jammed in Congress would enable the industry in his state and others across the country to continue that expansion, at a small cost (a reduction in taxes) to the American taxpayer.

“They’re not asking for anything other than the ability to grow and continue their businesses,” he said. “I think the argument for [the Act] from my standpoint is quite simple. The taxes are high. Lower the taxes and you’ll make more money by new entrants coming in and the expansion of the existing wineries. It’s true on all three of the industries, but definitely on wine where it’s a very expensive industry to get in because it’s agriculturally-based. So every penny helps.”

Jim Trezise

Jim Trezise

Credit Jim Trezise, who joined WineAmerica in January 2017 as president after serving 31 years as head of the New York Wine & Grape Foundation (NYWGF), for replicating in his new position in Washington D.C. what he did 15 years ago in his previous job: using numbers to prove value. In a phone interview, he said he would travel to Albany, N.Y., to beg for money to use for marketing and research. “Why should we pay attention?” legislators would ask. “Well, we contribute a lot,” he would respond. How much? He couldn’t answer them. When the first one was produced in 2003, “it was magic,” he said. “Once we had those numbers – when I went to legislative offices now, people totally paid attention.”

Trezise noted that even a day after the WineAmerica study was released, Rep. Mike Thompson, a Democrat serving California’s 5th District that includes the Napa Valley and also founder and co-chair of the Congressional Wine Caucus, said he would send personal letters to every member of Congress to raise awareness of the industry’s impact on all their states.

Said Thompson to Wine Industry Advisor in an email: “WineAmerica’s new study has finally put numbers to what we already knew: The wine community is a large and important part of the American economy. Across the county, the wine community operates more than 10,000 wineries in all 50 states, supports nearly 1,800,000 jobs, and has a total impact of almost $220 billion on our economy. This study gives us the data we need to accurately identify and analyze all aspects of this important industry.”

Added another wine industry supporter across the country, Rep. Paul Costa, Democratic chairman for Pennsylvania’s House Liquor Control Committee: “Pennsylvania’s wine industry has created over 27,000 jobs and had an economic impact of over $1.6 billion in 2017. This is why we must continue to make efforts to support this thriving industry.”   

Michael Kaiser

Michael Kaiser

That’s a sampling of the kind of reaction that Trezise and WineAmerica VP Michael Kaiser were counting on when they began working with Dunham in early April, had a framework by August and then spent another 45 days cleaning up.

“We always end up tweaking a lot because our clients react to the data we put together,” Dunham said. “There are always these ‘rules of thumb’ and numbers that I like to call magic numbers in every industry, and reality does not always match, so you have to go back and forth some with the people who know an industry best in order to ensure that your data are as accurate as possible.” Some of the heaviest lifting was identifying the number, size and type of vineyards across the country, he added, because there was no easy data available on them.

Added up, the study provided this food for thought:

  • More than 10,000 wine producers in all 50 states.
  • More than 677,000 acres of grapes planted in every state but Alaska
  • 1.7 American jobs in the wine industry, paying wages exceeding $75.7 billion
  • Tourist dollars that contribute more than $17.6 billion to local communities
  • A tax generator of more than $19 billion to the feds and $17.4 billion to states and municipalities.

Certainly, there’s data emerging from the study that consumers will have a passing interest in. But the primary target is legislators, to use as support for bills and funding now and in the future.

Kaiser couldn’t say when Congress might vote on the Craft Beverage Modernization and Tax Reform Act, something he has lived with for two and a half years. There’s support, he said, including from 50 senators and almost 300 congressmen. If it’s going to pass this year, he noted, it probably will be hooked to something other than tax reform legislation. Beyond that, he said, “we can use it as a tool for any issue for the wine industry, just to show what it brings to each particular state.”

The release of the study comes at an interesting intersection for a national industry that ranks fourth in global production and is located in the country that ranks first in wine consumption. Already entrenched and thriving on the West Coast, and in Virginia and New York, there are other states where the inventory of wineries is booming, including Texas, Pennsylvania, Ohio and Michigan.

So, it’s a bit surprising that the profile, at least among legislators, isn’t higher. Tresize said that’s not much different than it was in New York, where for years wine was a regional industry that focused on the Finger Lakes, parts of the Hudson Valley and Long Island. Now, he said, you look at a county map of New York and there are wineries in 59 of the state’s 62 counties. He credits the impact studies there for raising awareness and turning wine into a statewide industry there. He said, “Whatever the level of awareness is right now federally, it’s going to multiply, because of what we did and because of what people like Mike Thompson are doing to get the word out.”

So what’s next? Trezise said from his perspective, WineAmerica needs to continue to educate the wine industry “about the critical importance of the business climate for making their operations successful, the fact that the business climate is shaped by legislators, and the need for them to get involved in the process by supporting trade associations like WineAmerica and engaging with legislators.” At the same time, the organization must “permanently educate legislators about the importance of our industry to the economy [on whatever level]. This may seem unrealistic, and it is indeed a lofty goal, but I proved in New York that it could be done.”

Tom Cosentino

Tom Cosentino

Some of those goals overlap with how the directors of state wine associations view their objectives, at least in the short term. Like Maryland, both Pennsylvania and New Jersey are working on economic impact studies. Tom Cosentino, executive director of Garden State Wine Growers Association (GSWGA), said he’s most interested to see how many jobs the industry produces at our wineries and tasting rooms and sales outlets and the revenue that and tourism are producing. “When you look at the national figures it shows the massive challenge we have of competing as a small producing state,” he said. “We cannot compete on price with wine being imported into this country or with high producing states.” For the industry to develop, customers need to visit the wineries. That requires legislation that allows the wineries to grow, a concerted effort to tie in tourism, and a broadening of their marketing efforts.

Added Larry Sharrott, former head of the GSWGA and owner and winemaker at a successful winery in Hammonton, Camden County: “The GSWGA has been tracking the impact of the New Jersey industry and found it had significant impact on both jobs and tourism. Every dollar spent at a winery creates more than a dollar spent in related tourism businesses. Our hurdles are the same. Change the perception of New Jersey wine one customer at a time. The best way to do this get them in the door and have them taste the wine. No sales pitch can beat that experience.”

Atticks views his hurdles in Maryland similarly in terms of needing to meet the customer, and is hopeful both this WineAmerica data and what his forthcoming state economic impact study helps persuade legislators that the industry is doing a lot, and can do a lot more. “Our industry is changing, the market is changing so fast, and the rules of the game are built on a very different model that exists now. We’ve seen some of our neighbor states like Pennsylvania take great leaps to support the industry through law and regulatory reform.” Those include the opportunity to open multiple offsite tasting rooms, sell Pennsylvania-made beer and spirits, and add grocery and convenience stores to their distribution network. “Those are light years ahead of where we are in Maryland,” he said.

Trezise believes that this study will have an impact in persuading legislators and moving forward the policy goals of the wine industry nationally and locally. “In New York, we didn’t wait for an issue to come up before we educated people on economic impact,” Trezise said. “As soon as we had the numbers, we just papered the halls of Albany with them. We wanted everyone in legislative offices to know we gave them $4.8 billion a year [in tax dollars], so when an issue did come up we didn’t have to hand anything out. They already knew we were important.”

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