N O V E M B E R 2 0 1 8 • W W W . S A N D I E G O W I N E R I E S . O R G

2018San Diego County Economic Impact of Wineries

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Thisstudywasunderwritten,inpart,bytheSanDiegoCountyVintnersAssociation(SDCVA).

Allconclusions,errorsandomissionsarethesoleresponsibilityoftheauthor.WethankSDCVAfortheirsupport.

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ExecutiveSummary

In2017,wedevelopedacomprehensiveprofileoftheSanDiegoCountywineindustry.Inanefforttobuildonthisbodyofresearchandbringgreaterpublicawarenessandinsightintothegrowingindustry,wehaveupdatedouranalysisfor2018,usingsurveydata,economicmodelingsoftware,andlocal,stateandfederaldatasources.

Overall,wefoundthat:

• Usingeconomicmodelingsoftware,wefoundthatSanDiegowineriesgenerateda$50millioneconomicimpactintheregionin2017,asignificantincreasefrom2016figures($30.4million).

• Overall,weestimatethatcountywineriesgeneratedmorethan$26,134,100ingrosssalesin2017,a9.4%increasefrom2016sales($23,873,100).

• FromevaluatinghistoricalwinegrowerlicensedatafromtheCaliforniaDepartmentofAlcoholicBeverageControl(ABC),SanDiegoCountyiscurrentlyexperiencingsevenyearsofrecordgrowth.2016wasanall-timehighfornewwineriesopeninginSanDiego(26),followedcloselybehindby2017(23).Preliminary2018datashowsthisgrowthstreakwillbeextendedanotheryear.

• Surveyresponsesandcountyagriculturaldataidentifythe2017harvestseasonasmeasurablyproductive.MoreacreswereharvestedforwinegrapesinSanDiegoCountylastyear(1,210acres)thaneverbefore.Inall,2,783tonsofwinegrapeswereproducedintheregion,generatingatotalvalueof$3.85million,anacross-the-boardincreasecomparedto2016.

• Moresurveyrespondentsgavehighsatisfactionmarksforthe2017harvestyieldandqualitycomparedtothe2016harvest.Alargenumberof“average”yieldresponses(72%)givenin2016shiftedthisyearto“aboveaverage”,increasingtheresponseratefrom8%to46%,respectively.“Good”harvestqualityresponses(57%in2016)shiftedpartlyto“excellent”responses,increasingitssharefrom2016(30%to38%,respectively).

• SimilartoourpriorsurveyfindingsinSanDiegoCounty,wefoundthatmorethanforty-fivewinevarietalsweregrown,cultivated,and/orsoldin2017.Amongthetoptenwinevarietalsreportedbyrespondents,CabernetSauvignonandSyrahagaintieforfirstplace,withMerlotandSangiovesefollowingclosebehind.NewvarietalswhichemergedthisyearinthetoptenlistwereGrenache,Tempranillo,andMourvèdre,replacingViognier,PetitSyrah&SauvignonBlanc.

• Overall,wineryjobsandwagesgrewinSanDiegoCountyin2017.Basedonsurveyresponses,weprojectthattotalindustryjobsintheregionincreasedfrom519in2016,to557in2017.Mostofthegrowthisduetoasignificantincrease(26%)inhospitalityandtastingroomjobs.Wealsofoundthatindustryjobssupport222additionalnon-industryjobsintheregion.

• ComparingregionalindustrywagestobenchmarkregionsinCalifornia,wefindthatSanDiegowinerywageshavegrownsignificantly(35%)since2016,surpassingwagesinRiversideCounty,andnowmatchingaveragewagesinSantaBarbara($27,823in2016to$37,544inQ12018).Weseethisasagoodsignofcontinuedindustrydevelopment,aswellasgrowth.

• Onceagain,weaskedsurveyrespondentstorankthetopfiveissuesthatareimpedimentstogrowthfortheirbusiness.Identicaltolastyear’sresponses,thetop#1and#2choicesbyrespondentsthisyearwere“Permits/localregulation”and“laborcosts,”respectively.Itisworthwhiletonotethat“Permits/localregulation”receivedboththehighestnumberof#1rankingsand#2rankingsfromrespondents.

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2018IndustryOverview

AsofJune2018,thereare174totalactivewinegrowerlicensesinSanDiegoCounty,anincreaseoftensinceJune2017(164).Amongthefivebenchmarkcountieswearetracking,SanDiegoCountywinegrowersmaintaintheirpositionfrom2016,steadilyaheadofRiversideCounty,butsignificantlybehindNapa,Sonoma,andCentralCoastcounties(Chart1).

Chart1:TotalActiveType2Licenses,byCounty,June2018

EvaluatinghistoricalwinegrowerlicensedatafromtheCaliforniaDepartmentofAlcoholicBeverageControl(ABC),SanDiegoCountyiscurrentlyexperiencingsevenyearsofrecordgrowth(Chart2).2016wasanall-timehighfornewwineriesopeninginSanDiego(26),followedcloselybehindby2017(23).AsofOctober2018,14newlicenseshavebeenissuedthisyear,matchingthe2012tally,butwithanumberofpendinglicenseapprovals,weprojectnewlicensesissuedin2018willcontinuetogrow,extendingthegrowthstreak.

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Chart2:FirstYearofIssuanceforType2ABCWinegrowerLicensesinSanDiegoCounty,1982-2018

WenextusedABClicenserecordstodevelopaprofileofactivewineryowners.Weverifiedwhetheralicenseholderwasanactive,operatingwineryopentothepublicthroughInternetresearch,theSDCVAmemberdirectory,andbycontactingindividualbusinesses.Wealsoeliminatedinactiveestablishmentsandnon-wineriesfromourlist.Overall,weidentified115activewineriesinSanDiegoCounty.1

SanDiegoCountyishometothreedistinctwinegrowingregionsthatarefederallyrecognizedasAmericanViticulturalAreas(AVA)–SanPasqualValley,RamonaValley,andtheSouthCoast,whichstretchesfromSanBernardinototheUS-Mexicanborder.Forillustrationpurposes,wemappedall115activewineries,includingtheirsatellitetastingrooms,andallthreeAVAs(Figure1).

1ThisfigureisdifferentfromthetotalType2licensecount(174)forSanDiegoCounty,asthelicensecountincludesduplicatelicenses,wineriesthatarenolongeroperating,andwineriesthatarelicensedbuthavenotbeguntooperate,orhavenotestablishatastingroomopentothepublic.Italsoincludesciderandmeadproducers.

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Figure1:WineriesinSanDiegoCounty,2018

2018Survey

Similarto2017,thisyearweagainpartneredwiththeSanDiegoCountyVintnersAssociationtoelectronicallydistributean18-questionsurveytowineryownersintheregion.SurveyresponseswerecollectedAugust15thto28th.Intotal,wereceived39responses,generatinga34%responserate.Thisrateisslightlyhigherthantheresponseratewereceivedforthe2017survey(32%).

ToverifythequalityandrepresentationofoursampletotheoverallwinesectorinSanDiegoCounty,welookedatthreefactors:1)thetypeofwineryoperated(urbanwinery,majorusepermit,underthecountyagriculturalzoneordinance);2)thegeographiclocationofthewinery;3)thefirstyearwhenthewinegrowerlicensewasissued.Inallthreecases,wefoundoursampleandtotalwineriesintheregiontobehighlysimilarincomposition.ThissuggeststhatthesurveysamplehasastrongdegreeofrepresentationoftheviewsandexperiencesoftheoverallSanDiegowinerysector.

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Sales&EconomicImpact

Similarto2017,weaskedsurveyrespondentsthisyeartoindicatetheirtotalestimatedgrosssalesfor2017,andtheyear-to-yearchangerateinsalesfrom2016to2017.Wetooksalesdataandextrapolatedwithconservativeestimatestodeterminethetotalsalesforwineriescountywide.Overall,weestimatethatcountywineriesgeneratedmorethan$26,134,100ingrosssalesin2017,a9.4%increasefrom2016sales($23,873,100).

Itisimportanttonotethatwhilemostbusinessesexperiencedhighsingledigitordouble-digityear-over-yearsalesincreases,somerespondentsreportedflatornegativesales.Asaresult,theaverageyear-over-yearsalesratewas26%,adownwardshiftfromrecordsalesgrowthinthepriorcycle(88%).Moredataisneededtomakebroaderconclusions,butitislikelythat,giventhehighnumberofnewwineriessince2010,thatthe2015-2016recordsalesgrowthwasaone-timephenomenon,temperingastheindustrybecomesmoreestablished.

InordertoevaluatetheeconomicimpactofSanDiegoCountywineriesin2017,weusedIMPLAN,aleadingregional“input/output”economicmodelingsoftwaretool.Input/outputmodelsareaneconometrictechniquethatexploreeconomicrelationshipswithinadesignatedgeography;inthiscase,SanDiegoCounty.

An“economicimpact”or“multipliereffect”iscreatedwhennewdollarsarerecirculatedinaneconomy,indirectlysupportingmorejobsandadditionalbusinessactivities.Intheeconomicworld,“indirecteffects”refertothoseimpactsthatresultasbusinessesprocuregoodsandservicesfromotherbusinesses(and,inturn,thesebusinessesbuygoodsandservicesfromothers).“Inducedeffects”refertotheimpactsassociatedwhenworkersspendtheirwagesongoodsandservices(and,inturn,theassociatedimpactsastheseexpenditurescontinuetocirculatethroughalocaleconomy).

UsingIMPLAN,wecalculatedtheeconomicimpactofindustrysalesandworkforceintheSanDiegoregion.Overall,wefoundthatSanDiegowineriesgenerateda$50millioneconomicimpactintheregionin2017,asignificantincreasefrom2016($30.4million).Wealsofoundthatindustryjobssupport222additionaljobsintheregion(Table1).

Toputthesefiguresincontext,in2016,thewineryindustryinTemeculaValleygenerateda$78millionregionaleconomicimpactforRiversideCounty.2

2TemeculaValleySouthernCaliforniaWineCountry.PressRelease.January8,2017.AccessedOctober20,2018..

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Table1:EconomicDynamicsofSanDiegoCountyWineries,2017

ImpactType Employment Wages($) EconomicImpact($)

Sales($)

DirectEffect 557 19,569,478 31,969,839 26,134,100IndirectEffect 96 4,666,268 7,178,001 12,245,171InducedEffect

126 5,958,491 10,937,394 17,713,789

TotalEffect 779 30,194,237 50,085,233 56,093,061

Harvest

SurveyresponsesanddatafromtheSanDiegoCountyAgriculture,WeightsandMeasuresDepartmentidentifythe2017harvestseasonasmeasurablyproductive.MoreacreswereharvestedforwinegrapesinSanDiegoCountylastyear(1,210acres)thaneverbefore.Inall,2,783tonsofwinegrapeswereproducedintheregion,generatingatotalvalueof$3.85million,anacross-the-boardincreasecomparedto2016seasonlevels(Chart3).

Tobesure,priorseasonshaveyieldedagreatertonnage,andgreatercropvaluethan2017,butwebenchmarkindustrygrowthfromacresharvested(valueandproductionlevelsvarybaseduponweather,rainfall,andmarketconditions).Consideringthat,in2009,only489acreswereharvestedforwinegrapes,the2017harvestisaclearindicationthatthe2010passageofthetieredcountywineryordinanceisfacilitatingcontinuedindustryinvestmentandgrowth.

Chart3:WineGrapeAcresHarvestedandTonsProducedinSanDiegoCounty,2014-2017

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Toputthe2017regionalwinegrapeharvestinperspective,moretonsofwinegrapeswereproduced(2,783tons)lastyearinSanDiegoCountythanpeppers(2,704),limes(1,046),andLamb-Hassavocados(1,600).3

Moresurveyrespondentsgavehighsatisfactionmarksforthe2017harvestyieldandqualitycomparedtothe2016harvest.Alargeshareof“average”yieldresponses(72%)givenin2016shiftedthisyearto“aboveaverage”,increasingtheresponseratefrom8%to46%,respectively(Chart4).“Good”harvestqualityresponses(57%in2016)shiftedpartlyto“excellent”responses,increasingitssharefrom2016(30%to38%,respectively)(Table2).

Chart4:HarvestYield

Table2:HarvestQuality

AnswerChoice 2016 2017Excellent 30% 38%Good 57% 38%Average 13% 13%BelowAverage 0% 5%Poor 0% 5%

3Source:2017CropReport,SanDiegoCounty.

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Lookingatwineproduction,themajority(55%)ofrespondentsindicatedtheyproducedlessthan1,000casesofwinein2017.4Inaddition,roughlyaquarter(26%)produced1,000-2,500cases,13%produced2,501-5,000cases,and5%produced7,501casesormore.

Similartoourpriorsurveyfindings,wefoundthatmorethanforty-fivewinevarietalsweregrown,cultivated,and/orsoldin2017.Amongthetoptenwinevarietalsreportedbyrespondents,CabernetSauvignonandSyrahagaintieforfirstplace,withMerlotandSangiovesefollowingclosebehind(Table4).NewvarietalswhichemergedthisyearinthetoptenlistwereGrenache,Tempranillo,andMourvèdre,whichreplacedViognier,PetitSyrahandSauvignonBlanc.Itistoosoontoknowwhetherthisisamarketplaceshift,orduetoparticipationvarianceinthesamplepopulation.

Table3:Top10WineGrapeVarietalsGrown,Cultivatedand/orSoldin2017

Varietal %Response

CabernetSauvignon

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Syrah 39%Merlot 36%Sangiovese 31%Zinfandel 31%CabernetFranc 28%Grenache 28%Malbec 28%Tempranillo 25%Mourvèdre 22%

Workforce,Wages&Training

Overall,wineryjobsandwagesgrewinSanDiegoCountyin2017.Basedonsurveyresponses,weprojectthattotalindustryjobsintheregionincreasedfrom519in2016,to557in2017(Chart5).Mostofthegrowthisduetoasignificantincrease(26%)inhospitalityandtastingroomjobs.Whilewedididentifymarginalreductionsinthreeoccupationalcategories,thesechangesaremorelikelycausedbyvariancesinsurveyparticipationmorethanchangesintheoverallworkforce.Moredataisrequiredtomakefurtherdeterminations.

4Case=2.4gallons.Theproductionincludesallcasesofwine,regardlessofwhetherornotyetbottled.

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Chart5:SanDiegoCountyWineIndustryWorkforce,byOccupation,2016-2017

TocompareregionalindustrywagestobenchmarkregionsinCalifornia(Napa,Sonoma,SanLuisObispo,SantaBarbara,Riverside,SantaClaraCounty),weobtainedcounty-leveloccupationalemploymentandwagedatafromtheU.S.DepartmentofLabor’sBureauofLaborStatistics.IndicatedindarkblueinChart5,wefindthatSanDiegowinerywageshavegrownsignificantly(35%)since2016,surpassingwagesinRiversideCounty,andnowmatchingaveragewagesinSantaBarbara($27,823in2016to$37,544inQ12018).Weseethisasagoodsignofcontinuedindustrydevelopment,aswellasgrowth.

Chart6:IndustryWages,byCounty,2014-2018(Q1)

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Inour2017report,wenotedthat,inpartnershipwiththeSanDiegoCountyVintnersAssociation,CuyamacaCollegeoffersafive-courseviticultureapprenticeshipprogram,tohelplocalwineryownersfillagrowingneedforskilledindustrylabor.KnownastheSanDiegoViticultureTechnicianApprenticeProgram(SDVTAP),theprogramteachesskillsinareassuchasvineyardmaintenance,grapeprocessing,winechemistry,andwinerymaintenance.5Studentsarerequiredtocomplete1,500hoursannuallyinapaidtwo-yearapprenticeshipposition.

SDVTAPwasestablishedin2016andhasalreadyestablishedmeaningfulindustryinroads.Fifteenemployershaveparticipatedintheprogram,twelveofwhicharerecognizedastrainingsites.AsofOctober2018,theprogramhasenrolledfourteenapprentices,sixofwhicharecurrentlyactive.Intotal,apprenticeshavecompleted10,050hoursofonthejobtrainingthroughSDVTAP.Apprenticeshavebecomecertifiedinforkliftoperationandresponsiblealcoholservices.Theprogrammayexpandtoothercommunitycollegesintheregion.

PublicPriorities

Onceagain,weaskedsurveyrespondentstorankthetopfiveissuesthatareimpedimentstogrowthfortheirbusiness.Forcomparativepurposes,weusedthesamethirteenanswerchoiceswesurveyedonlastyear,whichwasgeneratedfrominterviewswithwineryownersandmarketresearch.Wetabulatedtheresponses,andcreatedahierarchicalindex,weightingtheresponsesbaseduponrankings(Table5).Thehighertheindexscore,themorepressingtheissueistobusinessgrowth.

Identicaltolastyear’sresponses,thetop#1and#2choicesbyrespondentsthisyearwere“Permits/localregulation”and“laborcosts,”respectively.Itisworthwhiletonotethat“Permits/local5MoreinformationisavailableattheSDVTAPwebsite,www.sdvtap.org.

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regulation”receivedboththehighestnumberof#1rankingsand#2rankingsfromrespondents.Interestingly,“Waterrates/supply”moveduptheindexfrom13thplaceto#5,and“groundwater/runoffrules”droppedfrom#3toninthplace.Itisinterestingtonotethatlocal,stateandfederalregulationnowcomprisethe1stand3rdspotsontheindex,suggestingagreaterneedforindustryadvocacyandafocusonregulatorychange.

Table4:ImpedimentstoIndustryGrowthIndex(TopFive)

Issue IndexScore

Sample

Permits/localregulation 83 22Laborcosts 61 21State/federalregulation 56 19Marketing 50 15Waterrates/supply 44 14Talent/laborsupply 42 15Accesstocapital 41 13Distribution 34 10Groundwater/runoffrules 32 10Availability/priceofinputs(viticulturesupplies/equipment)

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Land/space/availablerealestate 23 7Non-SanDiegomarketcompetition 15 6

Tourism

Finally,welookedattourism,anditsimpactonindustrysales.Overall,weestimatedfromsurveyresponsesthatanaverageof23%of2017saleswereattributedtotourisminSanDiegoCounty.Thisissimilartoourestimatedaveragefor2016.

Wealsoasked,“Inyouropinion,arewineriesandwinetourismwelcomedbylocals?”Overwhelmingly,theresponseswerepositive–nearlynineoutoften(89%)indicatedthattheyare“appreciatedandpubliclysupported,”and11%indicatedtheyare“welcomebutpubliclyopposed.”Nooneinoursampleindicatedtheyare“unwelcomeandactivelyopposed.”

Statewide,winetourisminCaliforniaisamajoreconomicactivity.Thereareanestimated23.6milliontouristvisitstostatewineregionsannually,halfofwhicharefromout-of-statemarkets.6

6Source:CaliforniaWineInstitute.

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AbouttheAuthor

VinceVasquezisanindependenteconomicdataanalystbasedinCarlsbad,California.Professionally,hehasworkedasapublicpolicyresearchformorethantwelveyears.Hehasauthoredmorethanfortypolicypapersonarangeofeconomicandworkforceissues,includingthewineindustry,craftbrewing,andsmallbusinessdistricts.Mr.Vasquezhasconductedhundredsofmediainterviews,includingABCNews,aswellasprint,radioandtelevisionoutlets.HehasaBachelorofArtsinPoliticalSciencefromtheUniversityofCalifornia,SanDiego,andaMaster’sinPublicAdministration.HehasusedGISsoftwareprofessionallyformorethannineyearsandhascompletedtrainingtouseTableausoftware.

The San Diego County VintnersAssociation (SDCVA) is a non-

profit member associationdedicated to supporting the San

Diego viticulture and winemakingcommunity, educating local wine

enthusiasts and embracingsustainable agricultural practices

in the county.