Tuesday, April 18, 2017

Booming Wine Industry Boosts Virginia Economy

Story Highlights:
  • Virginia's history of winemaking goes back to Revolutionary times.
  • A 2015 market report from the Virginia Wine Board reveals a thriving and robust industry.
  • Tourism revenue and real estate values are rising as a result of exploding wine sales.

Harvesting Grapes in Loudoun County
Virginia's wineries have become a flourishing part of the state's economy.  And, it's been a long time coming.

In 1619, the Jamestown settlers signed into law a requirement for each male landowner to plant and tend at least ten grape vines.  The vision for Virginia wine dates back four centuries.  It even includes Thomas Jefferson, who grew grapes on the famous Monticello estate. 

However, it has only been as recent as the past the past three decades that have seen those early settler's vision for Virginia wine come to life as a thriving industry.

In the early 1970's, some industrious grape growers identified specific varietals that matched the unique growing conditions of the Virginia countryside.  The resultant increase in Chardonnay, Viognier, Cabernet Franc, and Merlot grapes started an escalation in wine production that has not slowed since.

The opening of several new wineries followed in 1975.  Thus began a 30-year transition of Virginia viniculture, evolving from a local farmer's hobby to a statewide industry that is creating job growth, tax revenue, and an opportunity to extend the agricultural roots of the Commonwealth. 

The growth has been explosive.  In 1979, there were only 6 wineries in the state.  By 1995, that number had risen to 46.  There were 97 wine-producing vineyards at the end of 2005.  Now, Virginia boasts over 260 wineries, the fifth largest number of producing facilities in the United States.

An economic impact study commissioned by the Virginia Wine Board in 2005, 2010, and again in 2015 revealed not only an increase in production and rise in international recognition, but a significant, positive impact on the state's economy that has been recognized publicly by Governor Terry McAuliffe.

In the fiscal year 2016, the Virginia wine industry had another reason to toast itself - wine sales reached its highest point ever in history.  Nearly 556,500 cases - each case representing 12 bottles - were sold.

 That is a 6% increase from the previous year's record high of 524,800 cases.

"Virginia wine is about the experience, the adventure, excitement, and story of visiting a winery and tasting the 'fruits' of a grape grower's and winemaker's labor in the midst of a vineyard and beautiful Virginia countryside, " says Mark Malick, co-owner and grape farmer of Maggie Malick Wine Caves in Purcellville, VA.

The experienced winemaker appears to be correct.  The number of people visiting Virginia wineries has grown by 39-percent, from 1.6 million visitors in 2010 to 2.25 million visitors in 2015.  During the same period, wine-related tourism expenditures have grown dramatically from $131 million to $188 million, a significant 43-percent increase.

Many in the industry attribute the growth of tourism to these two factors: 
  • the sharp increase in the number of wineries
  • the steadily improving quality of Virginia wines
Tourism is not the only segment of the economy that is benefiting.  "Due to the increase in demand, winemakers are purchasing more and more land, which in turn is raising property values, " stated Scott Buzzelli of Middleburg Real Estate during an interview with me in March of this year.

There has been a 22-percent increase of grape-bearing acreage since 2010, as well as a 188-percent increase in property tax revenue for state and local governments.

"Working the land is a challenge, but the rewards are well worth it," says Howard O'Brien.

The state's overall wine sales and production are not concentrated within a few large wineries.  On the contrary, most of the state consists of small wineries, each with the production of under 10,000 cases.  

Across all winery sizes, there has been a significant increase in the expansion of related product
Wine tasting events have become big business in Virginia
offerings and events, private parties, weddings, and festivals held on winery properties. As you can see, the nature of Virginia wine business has continued to evolve past simple production.

Some existing wineries have expanded their facilities to incorporate these additional revenue streams, resulting in increased local employment and support services and a rise in rural economic development.

The Virginia Department of Commerce estimates there was over $53 million in revenue generated from these wine-related events in 2016.

Over the last several years, government and townships have recognized the importance of the wine industry to the Virginia economy.  At the state level, they have worked to set up tax credits for winery and vineyard start-ups and expansion.  Furthermore, funding for the Virginia Wine Promotion Fund's research, education, and marketing programs has nearly tripled.
Tasting Room at Fabioli Cellars in Purcellville, VA
If this positive growth trend continues, the grape-laden hills of Virginia are on their way to becoming the nation's Napa Valley East.

2015 Report on Economic Impact of Wine and Wine Grapes on the State of Virginia
My March 2017 interview with Scott Buzzelli of Middleburg Real Estate