NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012...
-
Upload
sabina-tucker -
Category
Documents
-
view
213 -
download
0
Transcript of NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012...
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Challenges Facing Wineries in “Undiscovered” Wine Regions: Results from Michigan, Missouri
and NW New York R. Brent Ross, Michigan State University
Fabio R. Chaddad, University of Missouri-ColumbiaMiguel I. Gómez, Cornell University
NCRCRD WebinarFebruary 15, 2012
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Number of Wineries in the U.S.
19401945
19501955
19601965
19701975
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20100
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
YearSource: U.S. Tax and Trade Bureau and Wine Institute.
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
KEY DRIVING FORCES Food Curiosity
Growing Interest in Wines for Non-Traditional Regions
Local Food Movement Food Tourism
OPPORTUNITIES Vector of Regional Economic
Development Economic Clustering
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Agenda• NCRCRD Project Survey Results• Collect information about wineries• Identify challenges affecting “undiscovered” wine regions
• New Project• Funded by NIFA/AFRI• Research Objectives and Scope
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
NCRCRD ProjectObjectives and Scope• Identify the challenges faced by rural wine entrepreneurs in
“undiscovered” wine regions• Firm-level vs. Industry (region)-level
• Focus on: • Economics of Wineries • Business and Marketing Management Practices• Collective Action
• METHOD: exploratory comparative analysis• Literature review• Interviews• Industry Survey
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
New Business Ventures
Sources: U.S. Department of Agriculture, Alcohol and Tobacco Tax and Trade Bureau, Michigan Grape and Wine Industry Council, Missouri Wine and Grape Board, and New York Wine and Grape Foundation.
Michigan Missouri New York
Number of Wineries (2009)100 97 240
(up from 17 in 1995) (up from 31 in 2000) (up from 113 in 2000)
Wine Volume (2009, in million gallons) 1.4 1.1 28.7
Number of Grape Growers 711 393 1438
Wine Grape Acreage 2,100 1,600 11,000
Wine Grape Production (in tons) 5,300 4,400 172,000
Wine Industry Economic Impact
$790 million (in 2005) $1.6 billion $2.5 billion
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Michigan Wine Industry
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Missouri Wine Industry
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
NY-Penn Wine Industry
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Data Collection
• Joint mail survey conducted during May-June 2011.• Michigan• Missouri• New York (Lake Erie Region) and Pennsylvania• Target: winery owner
• Supported by interviews with winery owners, extension specialists, and industry experts
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Overview of ResultsWinery Characteristics
State Wineries RespondentsResponse
RateMichigan 80 26 33%Missouri 94 32 34%NY/PA 70 28 40%
TOTAL 244 86 35%
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
VARIABLE N MEAN MEDIAN MIN MAXWinery Age (Years)
ALL 85 11.9 7.0 0.0 47.0MICHIGAN 25 14.1 9.0 0.0 41.0MISSOURI 32 11.9 7.8 0.5 40.0NY-PENN 28 9.9 5.0 2.0 47.0
Wine Production (Cases) ALL 84 7,749 2,000 100 200,000 MICHIGAN 24 5,622 2,450 100 20,000 MISSOURI 32 12,596 1,500 100 200,000 NY-PENN 28 4,032 2,000 100 32,000
Wine Production Growth (%, 2008-2010) ALL 68 38% 20% -50% 408%MICHIGAN 26 17% 10% -50% 300%MISSOURI 21 63% 25% -25% 408%NY-PENN 21 38% 40% 10% 100%
Non-Vinifera Grapes (%) ALL 86 64% 80% 0% 100%MICHIGAN 26 38% 34% 0% 100%MISSOURI 32 84% 100% 0% 100%NY-PENN 28 64% 80% 0% 100%
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
0-2 3-5 6-10 11-15 16-20 21-30 31-50 >50 -
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Distribution of Wineries by Years in Business
ALLMIMONY_PENN
Years in Business
% Under 10 Years OldALL 65%MI 55%MO 65%NY_PENN 80%
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
0-500 501-1K 1K-2500 2501-5K 5K-10K 10K-25K 25K-50K 50K-100K >100K -
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Distribution of Wineries by Production (Cases/YR)
ALLMIMONY_PENN
Production (Cases/YR)
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
0 5 10 15 20 25 30 35 40 45 500
50,000
100,000
150,000
200,000
250,000
Wine Production by Years in Business(r = 0.42)
Wine Production Linear (Wine Production)
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
OverviewWine Owner/Manager Characteristics
0-25% 26-50% 51-75% 76-100%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% of Time Spent At The Winery
ALLMIMONY_PENN
Cum
ulati
ve %
ALL 76%MI 87%MO 75%NY_PENN 69%
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
OverviewWine Owner/Manager Characteristics
0-25% 26-50% 51-75% 76-100%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% of Net Worth Invested in the Winery
ALLMIMONY_PENN
Cum
ulati
ve %
ALL 53%MI 50%MO 58%NY_PENN 49%
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
OverviewWine Owner/Manager Characteristics
FREQUENCYCHALLENGE ALL MI MO NY_PENNBusiness Opportunity (GW+diversify) 9 0 3 6Passion for Food/Wine/People (Wine+Other) 49 17 21 11Quality of Life (2) (qual+retire+adv) 38 12 16 10Hands in Dirt (2) (dirt+satisf) 32 13 12 7Family (Family Business + Fun) 6 2 3 1Community (Tourism, EcDev) 20 7 8 5Other 3 0 0 3
Motives for Entry into Wine Industry
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Challenges Faced in “Undiscovered” Wine Regions: At the WINERY
FREQUENCY
CHALLENGE ALL MI MO NY_PENNGrape Production 32 13 12 7Winemaking 27 7 12 8Marketing 46 15 16 15Finance 25 10 8 7Managing the Winery 24 7 13 4Labor Related Issues 19 4 8 7Environmental Issues 0 0 0 0Regulatory Issues 29 9 9 11Quality 11 3 5 3Access to Resources 10 1 5 4Competition 6 0 4 2Other 5 2 0 3
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Challenges Faced in “Undiscovered” Wine Regions: In the INDUSTRY
FREQUENCYCHALLENGE ALL MI MO NY_PENNGrape Production 24 5 8 11Winemaking 21 5 8 8Marketing 38 1 23 14Finance 11 1 8 2Managing the Winery 7 1 4 2Labor Related Issues 25 15 6 4Environmental Issues 0 0 0 0Regulatory Issues 25 8 8 9Quality 25 4 13 8Access to Resources 8 5 2 1Competition 10 2 4 4Other 21 17 1 3
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Specific ChallengesMarketing
FREQUENCYCHALLENGE ALL MI MO NY_PENNSetting Prices 29 11 12 6Developing new wines 4 2 1 1Branding wine 18 0 9 9Identifying the appropriate promotion strategy 0 0 0 0Managing distribution channels 45 14 17 14Dealing with competition 15 3 9 3Segmenting the market 9 1 3 5Understanding consumer needs/wants 19 0 12 7Other 8 3 2 3
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI/NIFA GRANT AWARDAward Number: 0031130
Description: 2011-68006-30815 Chaddad, Fabio
Goal: To increase the success rate of start-up wineries and thereby foster the development of wine-hospitality-tourism clusters in emerging cool climate regions in three states – Michigan, Missouri and New York.
Rural Entrepreneurship in the Wine Industry:Identifying Success Factors Among Start-Up Wineries in Emerging Cool Climate Regions
Situation Inputs
Knowledge
OutcomesOutputsActivities
Actions Conditions
Increased success rate of start-up wineries in cool climate regions
Development of wine-based clusters in cool climate regions
Growing number of new wineries in cool climate wine regions.
Start-up wineries face a complex set of challenges to survive and grow.
Start-up wineries need knowledge input and extension efforts to overcome challenges.
If successful, new wineries will be the basis for regional cluster development.
Wine industry stakeholder needs & assets
Research and extension staff with industry knowledge
Three graduate students in Agric. Econ.
Network of collaborators in three states
Integrated conceptual framework
Databases and expert modelers
Existing wine cluster analyses
AFRI Funding
Stakeholder input on conceptual framework
Lit. review on procurement and distribution strategies
Survey wineries and build panel data set
Econometric analyses of data across 3 states
Workshops with industry stakeholders
Study tour to developed wine region
Prepare educational materials
Hypothesis: we can identify strategies for wineries to overcome survival challenges and for industry leaders to develop wine-based regional clusters in cool climate regions.
External Factors: industry conditions that affect start-up winery survival and growth; willingness of industry participants to develop and engage in collective action strategies.
Statistical analysis of survey results
Econometric model results
Practical knowledge for wineries and industry leaders
Scientific and educational publications
eXtension CoP on Cool Climate Wine Regions
Strategic outreach plan for wine cluster development
Educational materials
Factors that affect winery survival and growth
Efficient grape procurement strategies
Marketing strategies to overcome lack of legitimacy
Extent and impacts of inter-firm collaboration
Effective collective action strategies for cluster development
Start-up wineries will:-Adopt more efficient grape procurement strategies-Develop marketing strategies to access non-local markets-Build more relationships with other wineries and related local industries
Industry leaders will adopt collective action strategies for wine cluster development
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectThe Team
Fabio R. Chaddad (University of Missouri)Michael LeonardelliRandy WestgrenGraduate students
R. Brent Ross (Michigan State University)Paul JenkinsGraduate students
Miguel I. Gomez (Cornell University)Nelson BillsGraduate students
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectConceptual Framework
Network-level Resources• Inter-winery
collaboration• Collaboration with
related industries
Business-level Resources• Human• Financial• Organizational• Entrepreneurial
orientation
Legitimacy• Regulative• Normative• Cognitive• Industry
Individual-level Resources• Human capital• Education• Experience• Skills
Survival• Cross
survival threshold
Growth• Sales• Members
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectIntegrated Project
Research Objective 1: Examine existing contractual mechanisms in buyer (winery) – supplier (grape) relationships and help the industry develop procurement strategies to reduce transaction costs, increase grape and wine quality, and winery performance.
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Detailed ResultsProcurement Strategies
Grapes Juice Bulk Wine0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
ALLMICHIGANMISSOURINY-PENN
Source of Raw Product
% o
f Win
erie
s
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Detailed ResultsProcurement Strategies
Vertical Integration Spot Market Contractual Arrangement Other0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
ALLMICHIGANMISSOURINY-PENN
Procurement Strategy
% o
f Win
erie
s U
sing
Str
ateg
y
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Determinants of Vertical Integration
Vertical Integration
Transaction Attributes
Asset specificity Uncertainty
Collaboration
To produce grapes Relationship with
grape growers
Quality
Grape quality Wine quality
Winery Characteristics
Experience Time commitment
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Determinants of Vertical Integration:Logit Model Estimates
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectIntegrated Project
Research Objective 2: Identify strategies to overcome distribution challenges of start-up wineries and increase their access to non-local markets.
*Legitimacy: distributors and consumers.
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
% of WineriesCHANNEL ALL MICHIGAN MISSOURI NY_PENN
At the Winery 100% 100% 100% 100%Liquor Store 41% 57% 45% 25%
Restaurant 52% 61% 35% 64%Farmers Markets 10% 4% 0% 25%Direct Shipments 56% 83% 35% 57%
Through Distributors 29% 65% 26% 4%Festivals or Community
Events 48% 35% 35% 71%Other 13% 22% 16% 4%
Detailed ResultsDistribution Channel Strategies
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Detailed ResultsDistribution Channel Strategies
At th
e W
i...
Liqu
or S
tore
Rest
aura
nt
Farm
ers .
..
Dire
ct S
h...
Thro
ugh
Di..
.
Festi
vals.
..
Oth
er
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0% % of Wine Volume by Distribution ChannelALL=82MI=23MO=31NY_PENN=28
% O
f Win
e Vo
lum
e
Other Channels:• Wine Clubs• Own Retail• Custom Wine
and CoPacking• Direct Retail
(SM + Gift Shop)
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
ALL MI MO NY_PENNArrangements with Bus Tour Co. 36% 46% 16% 50%Promotions for Returning Customers 60% 54% 66% 57%Customer Database 86% 88% 78% 93%Club Promotions 38% 54% 41% 21%Website 100% 100% 100% 100%Newsletter 68% 75% 66% 64%Social Media (Facebook, Twitter, Groupon, etc.) 95% 100% 94% 93%Price Discounts 94% 96% 94% 93%Other 4% 0% 9% 0%
Detailed ResultsOther Marketing Strategies
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Channel Choice Determinants
Distribution ChannelChoice
Horizontal Integration
Inter-winery collaboration
Vertical Integration
Share of own grape in the production
Marketing Efforts
Promotion intensity Marketing challenges
Winery Characteristics
Size Years in business
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Channel Choice Determinants:Fractional Logit Estimates
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectIntegrated Project
Research Objective 3: Examine the extent of inter-firm collaboration in emerging wine regions and develop collective action strategies to foster the development of regional clusters, including inter-winery collaboration and collaboration with supporting and related industries.
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Wine Trails
N
Member of a Wine
Association
Member of Chamber of Commerce
Is there a Food/Wine Trail in Your
Region?
Member of Food/Wine
TrailALL 82 69 65 64 54MI 22 19 18 18 16MO 32 25 25 24 19NY_PENN 28 25 22 22 19
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
Detailed ResultsCollective Action Strategies
Produce Grapes
Produce Wine
Market Wine
Promote Wine
Region
Share Information
and Resources
ALL 46 35 37 68 71MI 16 16 9 19 21MO 17 11 16 27 27NY_PENN 13 8 12 22 23
Reasons to Collaborate with Other Wineries
No Interest
View Others as
Competitors
Different Business
PhilosophyNot a
Priority Lack of Trust Distance OtherALL 3 6 35 19 6 17 16MI 1 2 7 6 0 2 7MO 1 2 14 8 5 9 5NY_PENN 1 2 14 5 1 6 4
Challenges to Collaborate with Other Wineries
Time 5None 5Lack of motivation of others 2No equal wineries in region 1"Rising Tide Floats All Boats" 1
NCRCRD Webinar: Challenges Facing Wineries in “Undiscovered” Wine Regions February 15, 2012
AFRI / NIFA ProjectIntegrated Project
Extension Objectives: Disseminate knowledge and research insights generated to engage winery owners and managers, wine industry leaders, wine grape producers, policy-makers and other wine industry stakeholders.
Approaches: Workshops with industry participants, and educational materials.