Winemakers boost state, local economy
When Colorado economists talk about the “ripple effect” of wine sales, they’re not talking about the cheap, low-quality alcohol favored by some recreational drinkers known as “ripple.”
The economic ripple made by the sale of Colorado wine in 2012 added about $16 million to the state’s economy, over and above the roughly $25 million of domestic wine that consumers actually bought off the shelf.
In other words, 2012 wine sales of $25 million had an impact on the Colorado economy equal to $41 million, according to a study commissioned by the Colorado Wine Industry Development Board.
Dawn Thilmany, the Colorado State University agricultural economist who led the study, presented her findings to a gathering of winemakers and other industry professionals on the second day of the three-day VinCO Conference and Trade Show at Two Rivers Convention Center on Jan. 15.
Thilmany urged winemakers to educate policymakers about the economic impact of their business when seeking financial and in-kind support for their local industry.
The study shows how money flows to related local businesses that trade on goods and services winemakers need to make their product.
“You’re probably not the only customers of those businesses, but you’re increasing their economic activity,” Thilmany said. “The most important one is related to those of you who are getting big enough to have staff on payroll.”
Winemaker staff take their pay and spend it in local businesses.
“You’re a very sticky industry,” Thilmany said. “You’re sticky in the fact that the dollars stay here, whereas if someone goes to a movie, 75 or 80 percent of that ticket price goes immediately out of the area.”
The multiplier of 1.68 that Thilmany and her staff of economists calculated applies across all sales classes.
“So every dollar you’re doing in sales, you could go to your community leaders and say, my economic activity in your community is probably 1.68 times my sales,” she said.
Quantifying a multiplier that accurately reflects the economic impact of Two Rivers Winery in Grand Junction is a project owner Bob Witham decided to undertake with Thilmany’s help starting as soon as next week.
Because Witham’s business incorporates winemaking with special events like weddings and a bed and breakfast, the economic activity Two Rivers contributes to Grand Junction and the state probably justifies a multiplier greater than 1.68, Witham said.
Accurate data about the winery’s economic impact makes for good community relations, but could also help Witham build mutually beneficial relationships with other entertainment-related businesses like ski resorts.
Thilmany said local wineries could use the data to induce policymakers to erect prominent signage that supports the industry or modify roadways to make wineries more accessible to consumers.
Since the last industry study in 2005, Colorado wineries have tripled sales, Thilmany said.
The study included much good news for local winemakers.
For example, Colorado’s wine drinkers consume slightly more than 3.1 gallons of wine per year. That’s 0.6 gallon more than the average U.S. consumer.
The average bottle price for all wines sold in the U.S. is between $6 and $9, but wine made in Colorado averages $16.68 per bottle, up 30 percent from $12.86 in 2005.
“The higher bottle cost pushed the total market share of Colorado wines above five percent when estimated by sales, though it was only two percent when measured by volume,” Thilmany said.
About 20 percent of Colorado wine consumers devoted 25 percent of the money they spent on wine to Colorado brands. However, 63 percent of consumers did not buy local wines.
In 2010, an estimated 1,800 to 2,000 tons of wine grapes were harvested in Colorado, worth $2.2 million to $2.8 million. In 2012, wineries reported that the value of the grapes they harvested exceeded $3 million.
Considering both wine-based events and visits to Colorado wineries by out-of-state visitors, the industry contributed an additional $27 million of economic activity related to tourism in 2012 over and above wine sales, Thilmany said.