If you think of the latest report on the economic impact of Napa County’s wine industry as a check-up at the doctor’s office, the findings indicate a clean bill of health.
The report, issued Thursday by the Napa Valley Vintners, states the industry has a local economic impact of $13 billion annually, employs two-thirds of the county’s workers, and accounts for one out of every five bottles of wine produced in California.
When most visitors look at a glass of Napa Valley wine, they think of the farmworkers that picked the grapes, the winemakers who crushed them, and the people who serve it at a restaurant or hotel.
But that misses a wider economic impact that ripples out from Napa Valley — the truck drivers, warehouse workers, barrel-makers, cork finishers, label designers, among a litany of workers in other trades, that all work toward producing a bottle of wine, said the report’s author, Barbara Insel of the Stonebridge Research Group.
“A lot of people just assume that wine is just grapes in a glass,” Insel said. “I didn’t realize how large a share of California’s wine industry Napa really was. Every time I go through this I’m always amazed at another layer I find.”
Insel said she was able to capture this impact better in her newest report due to cooperation from some of Napa County’s largest producers, who predate the Winery Definition Ordinance and are able to bring in large quantities of grapes from other areas of California to produce wine locally. These products complements wines made with Napa Valley grapes.
“That brought in that larger group of older wineries who are able to bring in grapes from outside,” Insel said. “That gives us the economies of scale.”
Insel notes that the Central Valley accounts for a huge volume of California wines, but Napa possesses both large-scale production and high-quality winemaking.
Her report notes that Napa County produced 49.7 million cases of wine in 2011, which is 20 percent of the 248.1 million cases of wine bottled in California that year. About 283.5 million cases were bottled in the U.S. in 2011.
There’s a difference, however, between Napa County’s production and the Napa Valley appellation’s production. Either by tradition, preference, or the requirements of the Winery Definition Ordinance’s 75-percent rule, appellation production is almost exclusively Napa grapes, and only amounted to 8.4 million cases, or 3 percent of the U.S. total.
Those wines are higher quality and command higher prices. Appellation wine sales accounted for 17 percent of the value of all U.S. sales in 2011, according to the report.
“Napa really should have clout on the issue in the state,” Insel said. “There aren’t many places that have scale and have quality.”
Napa wineries weren’t bulletproof to the economic plunge and slow recovery California and the U.S. have experienced in the last several years, as many saw drastic reductions in sales, said Vic Motto, chairman and CEO of Global Wine Partners, a financial advisory firm and investment bank for the wine industry.
Insel said consumers were choosing cheaper wines in the tougher economic climate, which led sales to drop locally.
“People kept drinking wine through the recession — they just drank cheaper,” Insel said. “People traded down.”
But as the economy has improved, so did the market performance of Napa’s more expensive wines because consumers trusted the Napa brand, she said.
“Consumers began gradually reaching out for more expensive wines,” Insel said. “As consumers trade up they’re looking for something safe. Napa itself is a very strong brand.”
Motto said that overall, Napa’s wine industry withstood the recession better than other U.S. industries, and has come out of it faster and with better prospects for the future.
“The industry as a whole did withstand the recession,” Motto said. “I’d say wine was one of the first things to recover. Since 2011, Napa has recovered and is growing again.”
Motto said Napa will need to continue to produce quality while fostering innovation in winemaking, including one of its most notable varieties, cabernet sauvignon.
Napa led the charge in California in transforming the market for wine bottles priced at more than $15, and Motto said he’s looking for smaller, local producers to help innovate to give Napa an even greater edge among other competitive wine regions.
“Napa, being a quality leader, can’t rest on its laurels,” Motto said. “The one thing that Napa has to its benefit is its expertise when it comes to cabernet sauvignon. That’s a niche that Napa has. Today, that’s being done by a very large number of very small producers.”
Insel’s report relied on data from the U.S. Alcohol, Tobacco Tax and Trade Bureau, the California Department of Forestry and Agriculture, federal and state excise tax data, Bureau of Labor Statistics, and numerous interviews with industry representatives and primary research of industry activities.
George Schofield, a wine industry financial planner, said he was skeptical of the report’s conclusions of a $13 billion local impact, a $25.8 billion impact in California, and a $50.2 billion impact in the U.S.
The report relied on a long list of facets of the wine industry, from winery direct sales, grape sales, tourism, suppliers, charitable contributions and tax revenues, to determine the $11.2 billion in revenue generated locally. It also added another $2.07 billion in local wages, for a total of $13.2 billion.
Schofield said he would be more conservative in his estimates, and bring down the economic impact to $4 billion locally. He believed that the report was adding up figures two to three times, inflating the total, he said.
“I don’t think it’s a rigorous analysis,” Schofield said. “I don’t think we’re close to $13 billion.”
On the national level, Schofield said his estimate is an $8 billion impact, or twice what it is locally.
Still, Schofield said it was important for Napa County residents to recognize the significance of the wine industry.
“It’s still a great impact,” Schofield said. “They’re quick to complain about grape gondolas on the highway. It’s a small consolation for all the wine industry does for the local economy.”
Insel said she hopes her report demonstrates how central Napa Valley is in the U.S. wine industry.
“The extent to which Napa is really a center for the wine industry is really quite fascinating,” Insel said.