Progress 10/01/02 to 09/30/08
Outputs
OUTPUTS: AES Project 7096 examined the economics of the wine industry. Project outputs included a survey of winegrape growers regarding contract use, an international conference regarding the economics of the world wine and winegrape industry, and an outreach presentation to industry members. An important project focus was disseminating research results through outreach publications targeted to industry members and policymakers. The survey of winegrape growers was the first survey of contract use in the California winegrape industry, which providee the industry with its first overview of contract use and design. Findings from the survey are reported in the Outcomews/Impacts section of the final report. The "Competitive Forces Affecting the Wine and Winegrape Industries: An International Conference on World Wide Markets" was held August 8-11, 2007, at the University of California, Davis, and focused on the economics of trade and globalization, in addition to marketing issues. Could global warming change regional advantages for wine grape production Does expert opinion really influence consumers' wine purchases How do Chinese consumers respond to U.S. wine These questions and more were discussed. UC Davis research presented at the conference included experimental work regarding consumer wine preferences, optimal wine aging, and a comparison of wine regulation in the U.S. and E.U. The conference program and presentations are available online. The conference was attended by industry members and covered in the trade press. A presentation by Phillip Martin at the 2007 Unified Wine and Grape Symposium addressed issues regarding labor in the wine industry. An important component of the project was to evaluate overall trends in the California wine and winegrape industry and world wine market and to disseminate the results to a broad audience.. Several publications addressed these trends, including one in California Agriculture, which is targeted for a general audience of laypeople and researchers from a wide variety of disciplines. California Agriculture has one of the largest circulations for an agricultural research journal of this kind: approximately 15,000 domestic and 1,700 international subscribers for the printed journal, in addition to free Web access. Multiple articles were published in ARE Update, including a special issue regarding the California wine industry. ARE Update is an agricultural and resource economics outreach newsletter published by the Giannini Foundation of Agricultural Economics at the University of California. It is mailed to over 2,000 policymakers and industry members. It is also posted online, so it is widely accessible. Another project outlet was the online Rural Migration News outreach newsletter, which is widely accessible. These publication outlets provided current information regarding marketing, production, and policy issues associated with the wine industry to a wide set of stakeholders. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Not relevant to this project.
Impacts
A substantial share of project effort and publications focused on analyzing industry trends and disseminating the findings to a broad audience. California accounted for roughly 90% of the value of U.S. wine production in 2006. The largest California wineries have long accounted for most California wine shipments and continue to expand with respect to volume and number of labels. While small wineries sell most of their wine directly to end-users, many mid-sized wineries face challenges in an increasingly crowded marketplace. The California wine industry's adoption of technology, emphasis on making varietal wines with a consistent taste, and emphasis on a portfolio of labels and price points sets the stage for a dynamic industry able to compete globally. Interactions with wine industry leaders suggested that a range of economic factors, from exchange rates to immigration policy, affect the competitiveness of the industry and require ongoing monitoring and analysis. A second project component analyzed the use of agricultural contracts between winegrape growers and winemakers. Growers in the premium coastal growing regions was more likely to use written contracts than growers in the Central Valley are. The longer a grower had been with a specific buyer the more likely he was to use a written contract. Written contracts for high-quality grapes are more likely to include provisions regarding the production process, while written contracts for low-quality grapes are more likely to include explicit financial incentives for sugar content and other product attributes. A third focus of this project was on labor in the California wine industry. A number of research and outreach publications addressed this area. The articles were well received and often reprinted in farm publications to explain a topic of great importance to vineyard and winery operators. The wine industry considers itself to be different from other farm commodities, but hires the same workers as other farm producers. All labor markets deal with recruitment (hiring workers), remuneration (motivating workers), and retention (getting workers to return to work next season). Recruitment in the farm labor market is typically handled informally via word of mouth by intermediaries - independent contractors or crew leaders/foremen/supervisors. Remuneration is the compensation system. Hourly wages are usually paid when quality is important and/or the pace of work is easily set/monitored. When quality is less important or monitoring is more difficult, piece rate wages can provide an incentive to work faster. Piece rate wages keep grower per unit costs constant regardless of variation in worker productivity and minimize the need for close supervision of worker speed, but require monitoring of the quality of work. Retention means getting seasonal workers to return to work day after day and season after season. Farmers have traditionally worked collectively to ensure that there would be an adequate supply of seasonal farm workers, generally by getting government to open border gates, or at least not closing them to unauthorized workers.
Publications
- Heien DM, Martin PL. 2002. Inside the bottle: The wine business. Choices. Fall. Pp 30-33. http://www.choicesmagazine.org/
- Heien DM, Martin PL. 2005. California's wine industry enters new era. Cal Ag. 57(3):71-75. http://CaliforniaAgriculture.ucop.edu/0303JAS/toc.html
- Goodhue RE, Martin PL. 2008. Introduction to the issue. Special issue: Issues in the California wine and grape industry. ARE Update. 11(4).
- Martin PL. 2004. Wine. Rural Migration News. 10(4). September, 2004. http://migration.ucdavis.edu/rmn/more.phpid=920_0_5_0
- Martin PL. 2005. AgJOBS. New solution or new problem. UC Davis Law Review. 38(3):973-991.
- Martin PL, Heien DM. 2004. The California wine industry: entering a new era ARE Update. 7(4):5-8.
- Goodhue RE, Green RD, Heien DM, Martin PL. 2008a. California wine industry evolving to compete in 21st century. Cal Ag. 62(1):12-18. http://repositories.cdlib.org/anrcs/californiaagriculture/v62/n1/p12.
- Goodhue RE, Green RD, Heien DM, Martin PL. 2008b. Current economic trends in the California wine industry. ARE Update. 11(4).
- Goodhue RE, Groves K, Roush RT. 2005. Pesticide use and air quality in the San Joaquin Valley. ARE Update. 8(4)
- Goodhue RE, Heien DM, Lee H, Sumner DA. 2003. Contracts and quality in the California winegrape industry. Rev of Industrial Org. (3-4):267-282.
- Martin PL. 2005. Economic costs and benefits of international labor migration in World Migration 2005. International Organization for Migration. pp. 185-197.
- Martin PL. 2006a. The economics of migration. Harvard International Review, July 17 issue.
- Martin, PL. 2006b. Immigration reform: Implications for agriculture. ARE Update. 9(4).
- Martin, PL. 2006c. Immigration reform: Implications for agriculture. West Econ Forum. 5(1):1-9.
|
Progress 01/01/07 to 12/31/07
Outputs
In 2007, this project resulted in one refereed journal article (forthcoming) and one international research conference held at UC Davis. The California wine industry is growing and changing amidst a global revolution in grape growing, wine production, wine marketing and consumer tastes. California accounted for roughly 90% of the value of U.S. wine production in 2006. U.S. per capita wine consumption and the quality of wine consumed continue to rise. The largest California wineries have long accounted for most California wine shipments and continue to expand with respect to volume and number of labels. While small wineries sell most of their wine directly to end-users, many mid-sized wineries face challenges in an increasingly crowded marketplace. The "Competitive Forces Affecting the Wine and Winegrape Industries: An International Conference on World Wide Markets" was held August 8-11, 2007, at the University of California, Davis, and focused on the economics of trade
and globalization, in addition to marketing issues. Could global warming change regional advantages for wine grape production? Does expert opinion really influence consumers' wine purchases? How do Chinese consumers respond to U.S. wine? These questions and more were discussed. The keynote speaker, Princeton professor Orley Ashenfelter, discussed how global warming might help some regions, such as Germany, produce higher quality wines while hurting other wine producing regions. The conference was attended by economists and industry members from the U.S., Australia, Brazil, China, and Europe.
Impacts
The forthcoming journal article will appear in California Agriculture, which is widely read by stakeholders. The conference was attended by industry members and covered in the trade press.
Publications
- "The California Wine Industry in the 21st Century." Rachael E. Goodhue, Richard Green, Dale M. Heien and Phillip Martin forthcoming in 2008 in California Agriculture.
|
Progress 01/01/06 to 12/31/06
Outputs
Wine is a unique farm commodity, with much of its appeal to consumers based on the evaluations of others. One issue of great importance to the premium wine industry is labor, especially the prospects that immigration reform could increase its cost and availability or that exposes could affect wine's image. The articles produced under this project dealt with immigration and farm labor, explaining their economic impacts, the policy options being debated, and their likely consequences.
Impacts
The articles were well received and often reprinted in farm publications to explain a topic of great importance to vineyard and winery operators.
Publications
- Martin, Philip L. 2006. The Economics of Migration. Harvard International Review, July 17 issue.
- Martin, Philip L. 2006. Immigration Reform: Implications for Agriculture. Western Economics Forum, Vol. 5, no. 1, pp. 1-9.
- Martin, Philip L. 2006. Immigration Reform: Implications for Agriculture. Dept. of Ag. & Resource Economics, University of California, Davis, ARE Update, Vol. 9, no. 4.
- Martin, Philip. 2005. AgJOBS. New Solution or New Problem. UC Davis Law Review. Vol. 38, no. 3, pp. 973-991.
|
Progress 01/01/05 to 12/31/05
Outputs
The project resulted in one research paper accepted at a peer-reviewed journal. The paper analyzed the determinants of contract choice and contract provisions for California winegrape contracts between growers and vintners. The analysis used data from a 1999 survey of California winegrape growers. Growers in the premium coastal growing regions are more likely to use formal written contracts than are growers in the Central Valley. Written contracts for high-quality grapes are more likely to include provisions regarding the production process, while written contracts for low-quality grapes are more likely to include financial incentives for sugar content and other product attributes. Wine production and consumption remain concentrated in France, Italy, and Spain, which have 3% of the world's population, but produce 52% of the world's wine, and consume 43%-an average 22 gallons per adult/year (there are 5 750-ml bottles in a gallon). Most Americans do not drink wine
regularly, and US wine consumption fell in the 1990s; Americans average 2.2 gallons or 12 bottles of wine/year. The 30 million Americans who drink wine regularly drink 90% of the wine consumed in the US, an average 12 gallons or 60 bottles/year. There is a battle fermenting in the wine business between Old World European producers and New World producers in Argentina, Australia, California, Chile, New Zealand, and South Africa. Do consumers prefer the Old World approach to making wine, to mix varieties of grapes and make wine that reflects the local terroir (soil and climate), which means the wine varies from year to year, or the New World approach of using one variety of grapes, aiming to produce wine with a consistent taste year after year, such as Mondavi Chardonnay? During the 1990s, the price gaps between the major types of wine widened, even though quality gaps narrowed. Americans and Western Europeans drank less but better and more expensive wine. In California, falling jug
wine sales put downward pressure on land and winery prices in California's Central Valley, where 70% of the state's wine grapes are produced. Growers received an average $462/ton in 2002 or 23cents/pound for wine grapes, but Napa grapes were worth an average $2,942/ton ($1.50/pound), while Fresno-area wine grapes were worth $136/ton ($.07/pound). It takes 2.7 pounds or about 600 grapes to make a 750 ml bottle of wine, so the average value of the grapes in a bottle of California wine was $.62 in 2002-and ranged from less than $.02 for Fresno grapes to $4 for Napa grapes. Pesticides and labor are two very important inputs for winegrape production. International labor migration and government policies regarding migration are important determinants of the costs of winegrape production. In a globalizing wine economy, differences in labor costs can have significant impacts upon the competitiveness of specific production regions. In order to improve air quality in the San Joaquin Valley,
California pesticide regulators are considering new rules that will affect the set of pesticides available to winegrape growers statewide. Affected pesticides are used on a substantial share of California winegrape acreage.
Impacts
This analysis provides the wine industry with its first overview of contract design and use, and helps growers and vintners understand the value of grape quality, which plays a key role in decisions on whether or not to use a contract. The market analysis papers explain how the wine industry could evolve to operate at very different levels of profitability, depending on market segment. Information regarding the importance of labor and pesticides to winegrape production will aid policymakers and stakeholders in understanding the impacts of proposed policies on the industry. In a globalizing wine economy, differential impacts of regulation can affect the competitiveness of specific production regions, such as California.
Publications
- Heien, Dale and Philip Martin. 2002. Inside the Bottle. The Wine Business. Choices. Fall. Pp 30-33. http://www.choicesmagazine.org/ similar article: 2003.
- California's wine industry enters new era. California Agriculture. July-September. 2005 Vol 57, No 3. 71-75. http://CaliforniaAgriculture.ucop.edu/0303JAS/toc.html
- Martin, Philip. 2005. Economic Costs and Benefits of International Labor Migration pp185-197 in World Migration 2005. International Organization for Migration.
- 'Pesticide Use and Air Quality in the San Joaquin Valley.' Rachael E. Goodhue, Kiara Groves and Rick T. Roush. Agricultural and Resource Economics Update, University of California, Giannini Foundation. 8(4). March-April, 2005.
|
Progress 01/01/04 to 12/31/04
Outputs
In 2003, this project resulted in two outreach publications: one regarding the California wine industry and one regarding current events in the world wine industry. The California wine industry is fragmenting into larger and smaller units to reflect the evolving consumer market in which sales of relatively expensive and relatively cheap wine are growing fastest. The future may be one of large wineries with many labels and small wineries that sell most of their wine to retail consumers. The pattern of consumption, production and trade is changing in the world wine industry. Australia is rapidly increasing its share of world production and trade. Consumption is declining in some traditional production areas, such as France. The sale of Robert Mondavi winery is an example of the trend for wine producers to either become very large, or remain very small
Impacts
The California wine industry article was published in ARE Update, an agricultural and resource economics outreach newsletter that is mailed to over 2,000 policymakers and industry members. It is also posted online, so it is widely accessible. It enhances our understanding of structural changes in the California wine industry. The world wine industry article was published online in the Rural Migration News outreach newsletter, so it is widely accessible. It provides current information regarding marketing, production, and policy issues associated with the wine industry.
Publications
- Martin, Phillip. 'Wine 2004.' Rural Migration News. 10(4). September, 2004. http://migration.ucdavis.edu/rmn/more.php?id=920_0_5_0
- Martin, Phillip and Dale Heien. 'The California Wine Industry: Entering a New Era?' ARE Update. 7(4):5-8. March, 2004.
|
Progress 01/01/03 to 12/31/03
Outputs
During 2003, the project resulted in one research paper accepted at a peer-reviewed journal. The paper analyzed the determinants of contract choice and contract provisions for California winegrape contracts between growers and vintners. The analysis used data from a 1999 survey of California winegrape growers. Growers in the premium coastal growing regions are more likely to use formal written contracts than are growers in the Central Valley. The longer a grower had been with a specific buyer the more likely he was to use a formal written contract. Written contracts for high-quality grapes are more likely to include provisions regarding the production process, while written contracts for low-quality grapes are more likely to include explicit financial incentives for sugar content and other product attributes. Wine is one of the world's oldest drinks, but production and consumption remain concentrated in France, Italy, and Spain, which have 3 percent of the world's
population, produce 52 percent of the world's wine, and consume 43 percent-an average 22 gallons per adult per year (there are five 750-ml bottles in a gallon). Most Americans do not drink wine regularly, and US wine consumption fell in the 1990s; Americans average 2.2 gallons or 12 bottles of wine a year. The 30 million Americans who drink wine regularly drink 90 percent of the wine consumed in the US, an average 12 gallons or 60 bottles a year. There is a battle fermenting in the wine business between Old World European producers and New World producers in Argentina, Australia, California, Chile, New Zealand, and South Africa. Do consumers prefer the Old World approach to making wine; to mix varieties of grapes and make wine that reflects the local terroir (soil and climate), meaning the wine varies from year to year; or the New World approach of using one variety of grapes and aiming to produce wine with a consistent taste year after year, such as Mondavi Chardonnay? During the
1990s, the price gaps between the major types of wine widened, even though quality gaps narrowed, and Americans and Western Europeans drank less but better and more expensive wine. In California, falling jug wine sales put downward pressure on land and winery prices in California's Central Valley, where 70 percent of the state's wine grapes are produced. Growers received an average $462 a ton in 2002, or 23 cents a pound for wine grapes, but Napa grapes were worth an average $2,942 a ton ($1.50 a pound), while Fresno-area wine grapes were worth $136 a ton (7 cents a pound). It takes 2.7 pounds or about 600 grapes to make a 750 ml bottle of wine, so the average value of the grapes in a bottle of California wine was 62 cents in 2002, and ranged from less than 20 cents for Fresno grapes to $4 for Napa grapes.
Impacts
This analysis provides the wine industry with its first overview of contract design and use, and helps growers and vintners understand the value of grape quality, which plays a key role in decisions about whether or not to use a contract. The market analysis papers explain how the wine industry could evolve to operate at very different levels of profitability, depending on market segment.
Publications
- Heien, Dale and PL Martin. 2002. Inside the Bottle. The Wine Business. Choices. Fall. pp 30-33. http://www.choicesmagazine.org/ similar article: 2003. California's wine industry enters new era. California Agriculture. July-September. Vol 57, No 3, pp71-75. http://CaliforniaAgriculture.ucop.edu/0303JAS/toc.html
|
|