vintage 2012

PWA-191VintageReportRevisions4.qxd 9/19/07 3:34 PM Page 1 T H E PA W I N E & G R A P E I N D U S T RY VINTAGE 2012 AN INVESTMENT IN PENNSYLVANIA’S ECONOMY PWA-191VintageReportRevisions4.qxd 9/19/07 3:34 PM Page 2 Vintage 2012: An Investment in Pennsylvania’s Economy A Five-Year Plan to Double the Impact of Pennsylvania’s Vineyards & Wineries on: • AGRICULTURE • TRAVEL & TOURISM • COMMERCE • JOBS & TAXES • LAND PRESERVATION by investing $2 million/year as a Dedicated Revenue Stream to the Pennsylvania Wine & Grape Industry PWA-191VintageReportRevisions4.qxd 9/19/07 3:34 PM Page 3 CONTENTS: SUMMARY Page 2 OVERVIEW OF PENNSYLVANIA’S WINE COMMUNITY Page 4 THE PLAN: RESEARCH, EDUCATION AND MARKETING Page 6 STRUCTURE OF THE PA WINE & GRAPE FOUNDATION Page 9 APPENDICES A. A Model Bill Promoting the Growth of the Wine and Grape Industry in Pennsylvania Summary: USA Winegrape Industry Economics Page 10 Page 11 B. C. Summary of Grape Industry Impact on the Economy of Pennsylvania D. Comparison of State Support for Wine Industry in Neighboring and Similar-Sized States E. Summary of Expenses Page 13 Page 14 Page 19 PWA-191VintageReportRevisions4.qxd 9/19/07 3:34 PM Page 1 D I D Y O U K N OW. . . . • The Pennsylvania wine/grape industry contributes close to $700 million dollars to the Commonwealth’s economy every year. • The industry creates jobs and tax revenues, encourages rural development and tourism, and combats urban sprawl. • Our industry is recognized as producing some of the best wines on the East Coast…but is not growing as fast as its neighbors in New York, Maryland, New Jersey and Virginia. • We are proposing ten cents per gallon of all wine sold in Pennsylvania be allocated to a 501(c)(3) nonprofit organization created to promote the growth of the Pennsylvania wine and grape industry. • This modest amount of state funding will jump-start the industry to the point that within five years, its contribution to the state’s economy will more than double. 1 PWA-191VintageReportRevisions4.qxd 9/19/07 3:34 PM Page 2 A PLAN TO DOUBLE THE IMPACT OF THE PENNSYLVANIA WINE INDUSTRY ON THE COMMONWEALTH’S ECONOMY SUMMARY The Pennsylvania wine industry is a growing, vibrant industry that contributes in excess of a half a billion dollars to the Commonwealth’s economy every year. The industry benefits Pennsylvania by creating jobs and tax revenues, encouraging rural development and tourism, and combating urban sprawl. The industry is not growing as fast as its neighbors in New York, Maryland, New Jersey and Virginia, however, because of a lack of investment in research, education and marketing. In New York alone, for example, a recent study found the grape and wine industry contributes $3.3 billion annually to the state in total economic impact. The Pennsylvania wine industry leadership, represented by the Pennsylvania Winery Association and the Pennsylvania Association of Winegrowers, proposes ten cents per gallon of wine sold in Pennsylvania over the next five years (approximately $2 million per year) be allocated to the Pennsylvania Wine and Winegrape Development Foundation, a 501(c)(3) non-profit organization created to promote the growth of the wine industry in the Commonwealth. The industry anticipates this modest amount will jump-start the industry to the point that within five years, its contribution to the state’s economy will more than double. For the past fifteen years, Pennsylvania’s wineries have been missionaries to tens of thousands of wine consumers, promoting the value of wine that goes beyond the pleasure it provides at the dinner table. 2 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 3 Wineries and vineyards contribute to rural economic development by providing jobs and taxes. Only a high value-added product like wine can help valuable land at the rural-urban interface in agriculture. Agriculture and tourism are the state’s #1 and #2 economic sectors, and wineries and vineyards are the ideal form of agri-tourism. The example of Napa Valley, now the #1 tourist site in California (recently passing Disneyland), is an example we can follow. Pennsylvania’s wines are unique to our special soil and climate; they truly are Pennsylvania’s homegrown product. The Pennsylvania Liquor Control Board (PLCB), during the same fifteen-year period, has been helpful in nurturing our wine industry. Moreover, the PLCB has benefited greatly from the missionary efforts of Pennsylvania’s wineries to introduce the public to wine. Since the passage of the Limited Winery Act of 1968, Pennsylvania wineries have been a source of wine education. The tasting rooms of Pennsylvania wineries give visitors the opportunity to sample a variety of wines and further their wine knowledge. The Pennsylvania winery and winegrape industry believes, without reservation, that an allocation of ten cents per gallon of wine sold in Pennsylvania for research, education and marketing (see Appendix E) will pay for itself several fold over the next five years. At the end of five years, the industry will happily stand for review in order to justify further funding. A draft bill is attached to this document as Appendix A. 3 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 4 O V E R V I E W O F P E N N S Y LVA N I A’ S WINE COMMUNITY Pennsylvania once was, and can be again, a major wine-producing region in the Eastern United States. Wine has been grown in the Commonwealth since William Penn arrived in the 1680s and the first commercial vineyard in the U.S. was founded along the Schuylkill River in what is now Fairmont Park. That early tradition of growing wine has spread across the Commonwealth. Pennsylvania’s climate and soils are able to support grape varieties ranging from fruity natives Concord and Niagara to lively Vidal to fine vinifera grapes like Chardonnay and Merlot. If variety is the spice of life, Pennsylvania has a wine to satisfy every taste. The Pennsylvania wine industry has a dramatic impact on the quality of life in the Commonwealth. Here are just a few examples: • In 2005, 111 bonded wineries (up from 57 in 1998) and more than 50 independent vineyards produced 800,000 gallons of wine from more than 1,800 acres of vines grown all over the state. • Chaddsford Winery, the state’s largest, employs over 50 people in well-paying jobs. • Clover Hill Vineyards in Lehigh County recently opened a $1,300,000 winery and hospitality center. • Crossing Vineyards in Bucks County and Paradocx Vineyard in Chester County have kept more than 150 acres of great agricultural land from becoming part of the urban sprawl of housing developments. • Benigna’s Creek Vineyard (Schuylkill County) and Winery at Wilcox (Elk County) have helped the economies of their rural communities with increased taxes and tourism. • Agri-tourism has blossomed around the eight wine trails across the state, offering those regions the benefits of both in-state and out-of-state tourists who visit wineries, shops, restaurants and hotels. • Pennsylvania’s wineries and vineyards help themselves. One example is the self-imposed charge of $.15/gallon on all wines produced in the state, which funds a commodity 4 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 5 marketing and research council at the Pennsylvania Department of Agriculture. • Mazza Vineyards and Presque Isle Wine Cellars (Erie County) have helped juice grape growers in Northwest Pennsylvania explore the value of winegrape growing. • Pennsylvania’s wine growers have a natural and serious concern about the environment, and often farm with sustainable methods minimizing the use of pesticides. • Programs offered by Penn State University are instrumental in the industry’s growth, and have enhanced PSU’s reputation throughout the Mid-Atlantic region. The wine industry in Pennsylvania is on the move. A Penn State survey of agriculture revealed it to be one of two agricultural commodities that are currently expanding (the other is the nursery industry). With a modest investment in research, education and marketing of Pennsylvania wines, the Commonwealth can enjoy the economic and reputation benefits of other great wine regions like the Finger Lakes in New York, the Willamette Valley in Oregon, and even Napa Valley in California. It is within our grasp if we have the vision and courage to make that investment. A summary of the economic impact of the wine industry on Pennsylvania and the United States is included in Appendices B and C. 5 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 6 T H E P L A N : R E S E A R C H , E D U C AT I O N AND MARKETING To grow, we must expand our research in grape growing and winemaking techniques suited to Pennsylvania’s diverse regions, expand our education efforts to all who are or want to be involved with the industry, and expand our marketing and promotional efforts to consumers throughout the state and region. As part of this effort, we must create and implement measurable quality standards for both grapes and wines, in order to provide consumers with high-quality wines. GRAPE GROWING (VITICULTURE) Our goal is to carry out research on grape cultivation, clone selection and disease management, and to provide information designed to help both established and start-up grape growers produce higher quality grapes. Viticulture Objectives: • Expand grape research, teaching, and extension/education efforts • Perform expanded basic research and trials on vine decline, cultivars, clones, rootstocks, trellis systems, vine density and any future research areas, to be performed at PSU-University Park, PSU-FREC, Lake Erie Grape Research Station, and other entities • Deliver and gather timely information to cooperatively foster viticultural best practices for winegrape growers • Develop distance-learning courses for viticulture technical certificate programs • Establish a position of professor of enology at Penn State University to guide the research of projects 6 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 7 • Develop and maintain a foundation plant service that will provide certified, disease-free vine materials to the grape industry • Develop quantifiable grape quality standards, needed for production of high-quality wine Cost: $500,000 per year WINE MAKING (ENOLOGY) Our goal is to carry out research on wine production techniques and wine sensory characteristics, and to deliver timely and effective education and information that helps both established and start-up wineries produce higher quality wines. Wine Quality (Enology) Objectives: • Develop and implement quantifiable wine quality standards • Maintain and expand enology research, teaching, and extension capabilities • Perform basic research and trials on grape quality standards for wine quality, wine sensory characteristics, yeast and bacteria physiology, effective production technology, wine industry economics and marketing, and any future research areas, to be performed at PSU-University Park, PSU-FREC, Lake Erie Grape Research Station, and other entities • Gather and deliver timely information to foster winemaking and marketing best practices for wineries • Develop distance-learning courses for enology technical certificate programs • Establish a position of professor of enology at Penn State University to guide the research of projects Cost: $500,000 per year 7 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 8 WINE MARKETING AND PROMOTION Our goal is to dramatically increase Pennsylvanians’ awareness of the quality and variety of Pennsylvania wines available throughout the state, and to deliver high-quality wine products and wine education to our consumers. Wine Marketing and Promotion Objectives: • Establish a full-time, three-person office dedicated specifically to the development and implementation of marketing and promotion efforts • Expand existing initiatives for marketing and promotion with the PLCB, state agencies and tourism industry by: • Expanding promotions for wineries within the PLCB marketing programs • Expanding on the existing wine festivals and wine trails in the state • Working with local press (electronic and print) to promote PA wines • Enhancing the PWA website Create New Promotion and Marketing Activities: • Establish tourism packages with lodging establishments, B&B inns, restaurants, and local cultural and business attractions, including shared deals and discounts • Establish relationships and programs with PA restaurants that will spotlight Pennsylvania wines Cost: $1,000,000 per year. Approximately one third of this amount would be used to establish the office (personnel, rent, supplies); one third would be used to expand existing functions (PLCB, press, wine festivals, wine trails); and one third would help to develop new promotional and marketing programs for the state. A summary of the proposed expenses is included as Appendix D 8 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 9 STRUCTURE OF THE PA W I N E & G R A P E F O U N D AT I O N Having studied equivalent organizations in other states (see Appendix D), we have concluded that a stand-alone non-profit foundation is the most effective way to distribute the research, education and marketing funds. We propose that the foundation be modeled on the New York Wine and Grape Foundation, the umbrella organization in New York State that is widely credited with building that state’s grape industry over the past decades to the point where, a recent study shows, it now contributes in excess of $3 billion of benefit to the New York economy each year. 9 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 10 APPENDICES APPENDIX A A MODEL BILL PROMOTING THE GROWTH OF THE WINE AND GRAPE I N D U S T R Y I N P E N N S Y LVA N I A Recognizing a) that the PA wine industry contributes in excess of half a billion dollars to the Commonwealth each year by providing jobs and tax revenue, by promoting rural development and tourism, and by combating urban sprawl; b) that the PA wine industry is one of the two fastest growing agricultural industries in the state today, that the wine industries in neighboring states, including New York and Virginia, are growing faster than ours, that in order for our industry to continue to grow, to contribute to the economy of PA, and to compete with our neighbors, we need to increase our investment in research, education and marketing, and c) that the return on that investment will far exceed the investment itself: be it resolved that ten cents for each gallon of wine sold in Pennsylvania be dedicated to wine and grape research, education and marketing in Pennsylvania, and that those funds be administered by the Pennsylvania Wine and Winegrape Development Foundation. 10 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 11 APPENDIX B S U M M A RY: U S A W I N E G R A P E INDUSTRY ECONOMICS ECONOMIC IMPACT: CALIFORNIA: ALL OTHER STATES: PENNSYLVANIA: $50 billion estimate $12 billion estimate $661 million SUMMARY STATE WINE INDUSTRY DEVELOPMENT BODIES: • Most common type of state wine industry development body: Council, commission, or board, under Agriculture, with wine excise tax funding • Best funded type of wine industry development body: Council, commission, or board, under Agriculture, with wine excise tax funding, and an independent foundation • States with wineries: • Category 1: States w/50-500 acres grapes and/or 25-500K gallons farm wine: • Category 2: States w/>500 acres grapes and/or 500,000-2,000,000 gal farm wine: (including PA) • Category 3: States w/>500 acres grapes and/or >2,000,000 gal farm wine: 50 37 9 4 11 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 12 • States with wine industry development bodies: • States moving from Category 1 to 2 or 3 after creation of wine development bodies; • States moving from Category 1 to 2 or 3 without wine development bodies: • Average development funds available/year Category 1 states: $80,000 Category 2 states: $700,000 (PA $100,000, lowest in category) Category 3 states: $1,500,000 (excluding CA) 25 11 0 IMPORTANT COMPARISONS • Pennsylvania has the lowest average output/farm winery of all states in Category 2 above (7,000 gallons/winery) • Pennsylvania has lowest increase in average farm winery size over the last decade of any Category 2 state (3,000 gallons/winery increase) • Pennsylvania spends less on farm wine industry development bodies than any other state in Category 2 (Pennsylvania $100,000 vs. $700,000 average) • Washington had the most aggressive farm wine industry development spending over the last decade, and it increased its farm wine industry output by close to 200%, far more that any state with a similar farm wine industry 12 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 13 APPENDIX C SUMMARY OF GRAPE INDUSTRY I M PA C T O N T H E E C O N O M Y O F P E N N S Y LVA N I A The following information has been taken from a report issued in October 2006 by MKF Research, entitled “Economic Impact of Pennsylvania Wine and Winegrapes 2005.” This study was commissioned by the Pennsylvania Wine Marketing and Research Program. Full copies of this report are available from the Marketing and Research Board or the Pennsylvania Wine Association. FULL ECONOMIC IMPACT OF WINE GRAPES AND WINE ON THE PENNSYLVANIA ECONOMY: $661 MILLION Pennsylvania Statistics Full-time Equivalent Jobs Wages Paid Pennsylvania Wine Retail Value Pennsylvania Winegrape Value Number of Wineries Number of Winegrape Growers Winegrape Bearing Acres Tourism Expenditures Number of Visitors Taxes Paid (State and Local) 13 Economic Impact 5,200 $161 million $28 million $6.7 million 104 150 1,800 $167 million 877,000 $37.5 million PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 14 APPENDIX D COMPARISON OF STATE SUPPORT FOR WINE INDUSTRY IN NEIGHBORING AND SIMILARSIZED STATES NEW YORK Winegrape Industry Development Body: New York Wine and Grape Foundation Current Legislative Funds Appropriated: $750,000 + $1,250,000 in grants and gifts Dedicated Funding Source: None Body and/or Fund Oversight: Self Enabling Statute Code: Unconsolidated OHIO Winegrape Industry Development Body: Ohio Grape Industries Committee Current Legislative Funds Appropriated: $700,000 Dedicated Funding Source: Wine Excise Taxes, $.05/gallon on all wines Body and/or Fund Oversight: Agriculture and Commerce Enabling Statute Code: 9254.51 to 55 14 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 15 VIRGINIA Winegrape Industry Development Bodies: Virginia Wine Board and Governor Current Legislative Funds Appropriated: $600,000 Dedicated Funding Source: Wine Excise Taxes, $.04/liter up to 4% of funds to VA Wine Board Body and/or Fund Oversight: Agriculture and Virginia Wine Board Enabling Statue Code: 3.1-1064.1 to .7 MISSOURI Winegrape Industry Development Bodies: Missouri Wine and Grape Program; Missouri Wine Marketing & Research Council Current Legislative Funds Appropriated: $1,000,000 Dedicated Funding Source: Wine Excise Tax, $.12/gallon on all wine Body and/or Fund Oversight: Agriculture Enabling Statue Code: A262.820 to 859; A275.462 to 478 NORTH CAROLINA Winegrape Industry Development Bodies: North Carolina Wine and Grape Council; State Viticulture Plan 15 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 16 Current Legislative Funds Appropriated: $500,000 Dedicated Funding Source: Wine Excise Taxes, up to $500,000 Body and/or Fund Oversight: Commerce Enabling Statue Code: 106-750; 105-113.81 A WASHINGTON Winegrape Industry Development Bodies: Washington Wine Commission; Washington Wine Industry Foundation Current Legislative Funds Appropriated: $1,200,000 & $1,000,000 Dedicated Funding Source: Wine Excise Taxes; $.04/cents gallon on all wine; grants & gifts Body and/or Fund Oversight: Agriculture; Self Enabling Statute Code: 15,88,010 to 920; 66.24.215 OREGON Winegrape Industry Development Bodies: Oregon Wine board; Oregon Wine Board Fund Current Legislative Funds Appropriated: $600,000 Dedicated Funding Source: $25/ton grapes Body and/or Fund Oversight: Governor Enabling Statute Code: 576.753; 473.045 16 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 17 ILLINOIS Winegrape Industry Development Bodies: Illinois Grape and Wine Resources Council; Grape and Wine Resources Fund Current Legislative Funds Appropriated: $550,000 Dedicated Funding Source: None Body and/or Fund Oversight: Economic Development Enabling Statute Code: 235-5/12-1 to 4 INDIANA Winegrape Industry Development Body: Wine Grape Market Development Council Current Legislative Funds Appropriated: $300,000 Dedicated Funding Source: Wine Excise Tax, $.05/gallon on all wine Body and/or Fund Oversight: Perdue, Agricultural College Enabling Statute Code: 74.1-13-0 to 7 NEW JERSEY Winegrape Industry Development Bodies: New Jersey Wine Industry Advisory Council; Wine Promotion Account Current Legislative Funds Appropriated: Estimate $120,000 17 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 18 Dedicated Funding Source: $.47/gallon on farm wineries Body and/or Fund Oversight: Agricultural Enabling Statute Code: 4-10-76 to 77 MARYLAND Winegrape Industry Development Body: Maryland Wine & Grape Promotion Council Fund Current Legislative Funds Appropriated: Unknown Dedicated Funding Source: None Body and/or Fund Oversight: Agriculture Enabling Statute Code: 2-1102 to 3 MICHIGAN Winegrape Industry Development Body: Grape and Wine Industry Council Current Legislative Funds Appropriated: $100,000 Dedicated Funding Source: Non-Retail Liquor License Fees Body and/or Fund Oversight: Agriculture Enabling Statute Code: 436.1303; 436.1543 18 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 19 APPENDIX E SUMMARY OF EXPENSES Viticulture Quality: 1) Research 2) Education and information dissemination $350,000 $150,000 Wine Quality 1) Research 2) Education and information dissemination $300,000 $200,000 Marketing and Promotion 1) Marketing Director’s office 2) Expansion of existing initiative 3) New promotional/marketing activities $350,000 $250,000 $400,000 TOTAL $2,000,000 19 PWA-191VintageReportRevisions4.qxd 9/19/07 3:35 PM Page 20 VINTAGE 2012 AN INVESTMENT IN THE FUTURE