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Washington Wine's Economic Impact

State targets growth with study showing $8.6 billion

by Peter Mitham
washington state wine commission
Barbara Insel of Stonebridge Research presents a study created for the Washington State Wine Commission to gauge the economic impact of the state's wine industry.
Seattle, Wash.—A new study of the Washington state wine industry’s economic impact sets the stage for ambitious growth plans in the nation’s second largest wine-producing state.

Touting the potential to double, if not triple, the size of the industry in the future, Washington State Wine Commission executive director Steve Warner said the study sets the stage for a new five-year plan he expects the commission to adopt in May.

The study
“I look at it as a baseline for moving forward,” Warner said at a press conference unveiling the study at the wine commission’s offices in Seattle on Tuesday. The study by Barbara Insel of Stonebridge Research in Napa, Calif., documents the industry’s growth to date, and Warner said it will help the commission allocate funding for the most growth in the future, as well as underpin arguments for new funding.

Based largely on data from 2010, the study pegs the economic impact of the Washington state wine industry on the state at $8.6 billion. Nationally, the impact is $14.9 billion. Those numbers include wine and grape revenues; mark-ups by distributors, retailers and restaurants; tourism and supplier revenues; contributions by government and tax revenues flowing back to government; charitable contributions and indirect and induced revenues as well as wages.

“It was only by going to this extent that we could get a really top-notch look at the industry,” said commission chair Kent Waliser, noting that the study acknowledges the accomplishments of the past 40 years and looks at the industry’s potential.

Taken at face value, the economic impact of the industry today is more than double the amount estimated in the study released in February 2008 and based on 2006 numbers. At that time, the in-state impact was pegged at $3 billion, with a slightly larger national impact of $4.7 billion.

Direct comparisons difficult
However, the scope of the study means that a direct comparison between the impact of the industry today and the impact it had four years ago is virtually impossible.

The new study taps a greater volume of information for a more accurate picture of the industry’s impact, Insel said, making the increase in vineyards and wineries the best measure of industry growth.

“It’s both the growth of the industry and a deeper understanding of the wine industry,” Insel said of the overall impact numbers. “We spent a lot of this year tracking down supplier by supplier, industry, sub-industry, related sector, so that ($8.6 billion) is both growth of the industry and a much more determined search for employment.”

The biggest shift came in the numbers regarding suppliers, which demonstrated that the state’s wine industry has a greater economic than previously thought, Insel said.

Within the state, suppliers to the industry register annual revenues of $324.9 million in the current survey and pay wages of $55.8 million to a workforce of 994 people. Nationally, supplier revenues total $457.5 million annually.

By comparison, the 2006 study estimated revenues of suppliers (including nurseries) at just $75.3 million, wages at $13.5 million and the workforce at 138 people. Nationally, revenues totalled $121.8 million.

These shifts in turn contributed to doubling induced and indirect employment within the state and more than tripling these categories nationally. The national impact in terms of wages quintupled.

More suppliers in state
“Washington wine has gotten to be a larger industry. More and more of the suppliers and service providers to the industry were here—they’re not brought in from California any more—and I think that shows up a lot in the data,” Insel said.

Nationally, the growth of the state’s wine industry has allowed suppliers to set up shop and finish imported goods, increasing the direct and indirect impact of the state’s industry across the country.

“They’re selling into Washington, that’s part of the national impact of Washington wine,” Insel said. “There’s a lot more national impact that used to be imported, because a lot more of that processing is also done in the U.S.”

The baseline for the growth of the industry remains vines in the ground and wine on the table, however.

“The wine sales, and the winery employment, the vineyard sales and vineyard employment is pure Washington, and that’s pure growth.”

Wine production peaked at 25 million gallons in 2009 (dropping with the short 2010 crop), up from 19 million gallons in 2006, while winery revenues topped $1 billion in 2010, up from $437.6 million in 2006.

The study was funded by the Washington State Wine Commission, while Ste. Michelle Wine Estates contributed in-kind assistance in the form of workers who helped contact growers, wineries and more than 200 industry suppliers.

With two previous studies having been conducted at approximately five-year intervals, Waliser said he expects a fourth economic impact study to occur within five to seven years.

Washington’s Growing Wine Industry

  2006 2010
Wineries (state licenses) 437 686
Winery revenue $437.6 million $1.0 billion
Wine production 19 million gallons 20.1 million gallons
Harvested tonnage 120,000 160,000
Price per ton $942 $1,040
Winery employment 1,555 3,630
Vineyard employment 2,500 2,888
Total sector employment (in-state) 18,865 29,672
Total sector impact (in-state) $2.9 billion $8.6 billion
  Source: MKF Research (2006); Stonebridge Research (2010)
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