business development needs of the wine industry in the yadkin valley, swan creek, and haw river...

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BUSINESS DEVELOPMENT NEEDS OF THE WINE INDUSTRY IN THE YADKIN VALLEY, SWAN CREEK, AND HAW RIVER VITICULTURAL AREAS A RESEARCH REPORT (#) Research Team (*)  Kathryn Dobie, Ph.D. (NC A&T State University) Victor Ofori-Boadu (NC A&T State University) Nicholas Williamson, Ph.D. (UNC Greensboro) Osei Yeboah, Ph.D. (NC A&T State University) Project Coordinator s (*)  Joy Bhadury, Ph.D. (UNC Greensboro) Samuel P. Troy (UNC Greensboro) (*) Names are listed in alphabeti cal order.  (#) A copy of this report is available online at http://www.uncg.edu/bae/or  

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Page 1: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 137

BUSINESS DEVELOPMENT NEEDS OF THE WINE

INDUSTRY IN THE YADKIN VALLEY SWAN CREEK

AND HAW RIVER VITICULTURAL AREAS

A RESEARCH REPORT()

Research Team()

Kathryn Dobie PhD (NC AampT State University)Victor Ofori-Boadu (NC AampT State University)Nicholas Williamson PhD (UNC Greensboro)Osei Yeboah PhD (NC AampT State University)

Project Coordinators()

Joy Bhadury PhD (UNC Greensboro)

Samuel P Troy (UNC Greensboro)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 237

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This study was made possible by the support of several organizations and their representativesIn particular the research team expresses its gratitude to

Queister Craig PhDDean ndash School of Business and Economics NC AampT State University

Vance DaltonSenior Vice-President Carolina Farm Credit

D Tom MayAssistant to the Dean for Economic Development Bryan School of Business andEconomics UNC Greensboro

Margo Knight MetzgerExecutive Director NC Wine and Grape Council

Kim MyersPresident ndash NC Wine Growers Association

Alton Thompson PhD

Interim Provost and ex-Dean ndash School of Agriculture and Environmental Sciences NCAampT State University

James K Weeks PhDDean Bryan School of Business and Economics UNC Greensboro

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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Executive Summary

Key Findings 1

Key Recommendations 2

Main Report

1 Background 1

2 Research Methodology 2

3 Survey Findings (Wineries) 3

31 A Demographic Overview 3 32 Sources of Financing 6

33 Constraints on Profitability 7

34 Scarcity of Time Analysis and Recommendations 8

35 Self-Distribution vs Using Distributors 10

4 Survey Findings (Grape Growers) 11

41 General Demographic Issues 11

42 Sources of Financing 13

43 Constraints on Profitability 14

5 A Business Development Center for the Wine Industry 15

51 Usage of the Business Development Center 15

52 Characteristics of Wineries that are most likely to use a Resource Center 16

53 SubjectsTopics of Interest to Wineries 16

54 Response from Grape Growers 17 55 Recommendations for NC Center for Viticulture and Enology 17

6 Personal Interviews Findings and Recommendations 18

6 1 Recommendations 19

Additional Issues 22

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 437

EXEC-SUMMARY hellip 1

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 537

EXEC-SUMMARY hellip 2

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6 983127983145983156983144983145983150 983118983151983154983156983144 C983137983154983151983148983145983150983137 983156983144983141983154983141 983145983155 983137 983139983154983145983156983145983139983137983148 983150983141983141983140 983142983151983154 983159983145983140983141983155983152983154983141983137983140 983141983140983157983139983137983156983145983151983150 983137983150983140 983149983137983154983147983141983156983145983150983143 983151983142 983118C 983159983145983150983141983155

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7 983124983144983141983154983141 983145983155 983137 983150983141983141983140 983142983151983154 983137983150 983141983142983142983141983139983156983145983158983141 983138983157983155983145983150983141983155983155 983140983141983158983141983148983151983152983149983141983150983156 983139983141983150983156983141983154 983140983141983140983145983139983137983156983141983140 983156983151 983156983144983141 983159983145983150983141 983145983150983140983157983155983156983154983161 983145983150 983118C

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8 983124983144983141 983143983154983137983152983141 983143983154983151983159983145983150983143 983145983150983140983157983155983156983154983161 983145983150 983156983144983141983155983141 983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137983155 983145983155 983137983148983155983151 983145983150 983145983156983155 983141983150983156983154983141983152983154983141983150983141983157983154983145983137983148 983155983156983137983143983141 983138983157983156 983155983149983137983148983148983141983154983137983150983140 983150983141983159983141983154 983156983144983137983150 983156983144983141 983159983145983150983141983154983161 983145983150983140983157983155983156983154983161 A 983158983145983156983137983148 983151983152983152983151983154983156983157983150983145983156983161 983141983160983145983155983156983155 983142983151983154 983137983150 983141983150983144983137983150983139983141983140 983155983157983152983152983148983161983085983139983144983137983145983150

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983115 983122 983140 983156983145

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 637

EXEC-SUMMARY hellip 3

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983145983149983152983151983154983156983137983150983156 983156983151983151983148 983145983150 983145983149983152983141983140983145983150983143 983156983144983141 983139983151983150983155983156983154983137983145983150983156983155 983151983150 983152983154983151983142983145983156983137983138983145983148983145983156983161 983152983148983137983139983141983140 983138983161 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983137983150983140 983139983137983155983144 983142983148983151983159

983152983154983151983138983148983141983149983155

3 983120983154983151983149983151983156983141 983137983150983140 983140983141983158983141983148983151983152 983137983150 983141983150983144983137983150983139983141983140 983139983151983148983148983137983138983151983154983137983156983145983158983141 983154983141983148983137983156983145983151983150983155983144983145983152 983138983141983156983159983141983141983150 983143983154983151983157983152983155 983151983142 983141983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155

983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 E983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155 983155983144983151983157983148983140 983148983151983151983147 983145983150983156983151 983142983151983154983149983145983150983143 983139983151983148983148983141983139983156983145983158983141 983138983157983155983145983150983141983155983155

983137983148983148983145983137983150983139983141983155983152983137983154983156983150983141983154983155983144983145983152983155 983159983145983156983144 983143983154983137983152983141 983143983154983151983159983141983154983155 983141983155983152983141983139983145983137983148983148983161 983156983144983151983155983141 983148983151983139983137983156983141983140 983159983145983156983144983145983150 983156983144983141983145983154 983154983141983155983152983141983139983156983145983158983141

983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137 983149983157983139983144 983137983155 983148983137983154983143983141 983139983151983154983152983151983154983137983156983145983151983150983155 983140983151 983159983145983156983144 983156983144983141983145983154 983155983157983152983152983148983161983085983139983144983137983145983150 983152983137983154983156983150983141983154983155 E983142983142983141983139983156983145983158983141 983155983157983152983152983148983161

983139983144983137983145983150 983152983137983154983156983150983141983154983155983144983145983152983155 983144983137983158983141 983156983144983141 983152983151983156983141983150983156983145983137983148 983156983151 983137983148983148983151983159 983159983145983150983141983154983145983141983155 983156983151 983145983150983139983154983141983137983155983141 983156983144983141983145983154 983152983154983151983140983157983139983156983145983151983150 983159983145983156983144983151983157983156

983137983142983142983141983139983156983145983150983143 983153983157983137983148983145983156983161 983123983157983139983144 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150 983138983141 983140983151983150983141 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148

983137983150983140 983118C D983141983152983137983154983156983149983141983150983156 983151983142 A983143983154983145983139983157983148983156983157983154983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155 983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137

983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141

4 A983140983140983154983141983155983155 983156983144983141 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983145983155983155983157983141 983142983137983139983141983140 983138983161 983159983145983150983141983154983161 983151983159983150983141983154983155 983156983144983154983151983157983143983144 983156983144983141 983151983157983156983155983151983157983154983139983145983150983143 983151983142 983150983151983150983085983139983151983154983141

983137983139983156983145983158983145983156983145983141983155 983137983150983140 983156983144983141 983157983155983137983143983141 983151983142 983156983141983139983144983150983151983148983151983143983161 983156983151983151983148983155 983156983144983137983156 983141983142983142983145983139983145983141983150983156983148983161 983142983137983139983145983148983145983156983137983156983141 983156983145983149983141 983137983150983140 983139983151983155983156 983149983137983150983137983143983141983149983141983150983156 983137983155

983159983141983148983148 983137983155 983152983154983151983140983157983139983156 983149983137983150983137983143983141983149983141983150983156

5 D 983148 983145 983145983148 983156983144 983144 983156983144 983118C C 983156 983142 983126983145983156983145 983148983156 983140 E 983148 983156 983123 C 983145983156 C 983148983148

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 2: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 237

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This study was made possible by the support of several organizations and their representativesIn particular the research team expresses its gratitude to

Queister Craig PhDDean ndash School of Business and Economics NC AampT State University

Vance DaltonSenior Vice-President Carolina Farm Credit

D Tom MayAssistant to the Dean for Economic Development Bryan School of Business andEconomics UNC Greensboro

Margo Knight MetzgerExecutive Director NC Wine and Grape Council

Kim MyersPresident ndash NC Wine Growers Association

Alton Thompson PhD

Interim Provost and ex-Dean ndash School of Agriculture and Environmental Sciences NCAampT State University

James K Weeks PhDDean Bryan School of Business and Economics UNC Greensboro

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 337

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Executive Summary

Key Findings 1

Key Recommendations 2

Main Report

1 Background 1

2 Research Methodology 2

3 Survey Findings (Wineries) 3

31 A Demographic Overview 3 32 Sources of Financing 6

33 Constraints on Profitability 7

34 Scarcity of Time Analysis and Recommendations 8

35 Self-Distribution vs Using Distributors 10

4 Survey Findings (Grape Growers) 11

41 General Demographic Issues 11

42 Sources of Financing 13

43 Constraints on Profitability 14

5 A Business Development Center for the Wine Industry 15

51 Usage of the Business Development Center 15

52 Characteristics of Wineries that are most likely to use a Resource Center 16

53 SubjectsTopics of Interest to Wineries 16

54 Response from Grape Growers 17 55 Recommendations for NC Center for Viticulture and Enology 17

6 Personal Interviews Findings and Recommendations 18

6 1 Recommendations 19

Additional Issues 22

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 437

EXEC-SUMMARY hellip 1

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 537

EXEC-SUMMARY hellip 2

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6 983127983145983156983144983145983150 983118983151983154983156983144 C983137983154983151983148983145983150983137 983156983144983141983154983141 983145983155 983137 983139983154983145983156983145983139983137983148 983150983141983141983140 983142983151983154 983159983145983140983141983155983152983154983141983137983140 983141983140983157983139983137983156983145983151983150 983137983150983140 983149983137983154983147983141983156983145983150983143 983151983142 983118C 983159983145983150983141983155

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7 983124983144983141983154983141 983145983155 983137 983150983141983141983140 983142983151983154 983137983150 983141983142983142983141983139983156983145983158983141 983138983157983155983145983150983141983155983155 983140983141983158983141983148983151983152983149983141983150983156 983139983141983150983156983141983154 983140983141983140983145983139983137983156983141983140 983156983151 983156983144983141 983159983145983150983141 983145983150983140983157983155983156983154983161 983145983150 983118C

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8 983124983144983141 983143983154983137983152983141 983143983154983151983159983145983150983143 983145983150983140983157983155983156983154983161 983145983150 983156983144983141983155983141 983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137983155 983145983155 983137983148983155983151 983145983150 983145983156983155 983141983150983156983154983141983152983154983141983150983141983157983154983145983137983148 983155983156983137983143983141 983138983157983156 983155983149983137983148983148983141983154983137983150983140 983150983141983159983141983154 983156983144983137983150 983156983144983141 983159983145983150983141983154983161 983145983150983140983157983155983156983154983161 A 983158983145983156983137983148 983151983152983152983151983154983156983157983150983145983156983161 983141983160983145983155983156983155 983142983151983154 983137983150 983141983150983144983137983150983139983141983140 983155983157983152983152983148983161983085983139983144983137983145983150

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983115 983122 983140 983156983145

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 637

EXEC-SUMMARY hellip 3

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2 D983141983158983141983148983151983152 983137983150 983151983154983143983137983150983145983162983137983156983145983151983150983137983148 983155983156983154983157983139983156983157983154983141 983156983144983137983156 983142983137983139983145983148983145983156983137983156983141983155 983156983144983141 983137983138983145983148983145983156983161 983151983142 983155983149983137983148983148983141983154 983159983145983150983141983154983145983141983155 983156983151 983157983156983145983148983145983162983141 983156983144983141

983155983141983154983158983145983139983141983155 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983159983144983151 983137983154983141 983139983151983149983149983145983156983156983141983140 983156983151 983152983154983151983149983151983156983145983150983143 983118983151983154983156983144 C983137983154983151983148983145983150983137 983159983145983150983141 983124983144983145983155 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150

983138983141 983137983139983144983145983141983158983141983140 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C D983141983152983137983154983156983149983141983150983156 983151983142 C983151983149983149983141983154983139983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155

983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137 983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141 E983142983142983141983139983156983145983158983141 983157983155983141 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983145983155 983137983150

983145983149983152983151983154983156983137983150983156 983156983151983151983148 983145983150 983145983149983152983141983140983145983150983143 983156983144983141 983139983151983150983155983156983154983137983145983150983156983155 983151983150 983152983154983151983142983145983156983137983138983145983148983145983156983161 983152983148983137983139983141983140 983138983161 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983137983150983140 983139983137983155983144 983142983148983151983159

983152983154983151983138983148983141983149983155

3 983120983154983151983149983151983156983141 983137983150983140 983140983141983158983141983148983151983152 983137983150 983141983150983144983137983150983139983141983140 983139983151983148983148983137983138983151983154983137983156983145983158983141 983154983141983148983137983156983145983151983150983155983144983145983152 983138983141983156983159983141983141983150 983143983154983151983157983152983155 983151983142 983141983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155

983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 E983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155 983155983144983151983157983148983140 983148983151983151983147 983145983150983156983151 983142983151983154983149983145983150983143 983139983151983148983148983141983139983156983145983158983141 983138983157983155983145983150983141983155983155

983137983148983148983145983137983150983139983141983155983152983137983154983156983150983141983154983155983144983145983152983155 983159983145983156983144 983143983154983137983152983141 983143983154983151983159983141983154983155 983141983155983152983141983139983145983137983148983148983161 983156983144983151983155983141 983148983151983139983137983156983141983140 983159983145983156983144983145983150 983156983144983141983145983154 983154983141983155983152983141983139983156983145983158983141

983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137 983149983157983139983144 983137983155 983148983137983154983143983141 983139983151983154983152983151983154983137983156983145983151983150983155 983140983151 983159983145983156983144 983156983144983141983145983154 983155983157983152983152983148983161983085983139983144983137983145983150 983152983137983154983156983150983141983154983155 E983142983142983141983139983156983145983158983141 983155983157983152983152983148983161

983139983144983137983145983150 983152983137983154983156983150983141983154983155983144983145983152983155 983144983137983158983141 983156983144983141 983152983151983156983141983150983156983145983137983148 983156983151 983137983148983148983151983159 983159983145983150983141983154983145983141983155 983156983151 983145983150983139983154983141983137983155983141 983156983144983141983145983154 983152983154983151983140983157983139983156983145983151983150 983159983145983156983144983151983157983156

983137983142983142983141983139983156983145983150983143 983153983157983137983148983145983156983161 983123983157983139983144 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150 983138983141 983140983151983150983141 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148

983137983150983140 983118C D983141983152983137983154983156983149983141983150983156 983151983142 A983143983154983145983139983157983148983156983157983154983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155 983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137

983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141

4 A983140983140983154983141983155983155 983156983144983141 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983145983155983155983157983141 983142983137983139983141983140 983138983161 983159983145983150983141983154983161 983151983159983150983141983154983155 983156983144983154983151983157983143983144 983156983144983141 983151983157983156983155983151983157983154983139983145983150983143 983151983142 983150983151983150983085983139983151983154983141

983137983139983156983145983158983145983156983145983141983155 983137983150983140 983156983144983141 983157983155983137983143983141 983151983142 983156983141983139983144983150983151983148983151983143983161 983156983151983151983148983155 983156983144983137983156 983141983142983142983145983139983145983141983150983156983148983161 983142983137983139983145983148983145983156983137983156983141 983156983145983149983141 983137983150983140 983139983151983155983156 983149983137983150983137983143983141983149983141983150983156 983137983155

983159983141983148983148 983137983155 983152983154983151983140983157983139983156 983149983137983150983137983143983141983149983141983150983156

5 D 983148 983145 983145983148 983156983144 983144 983156983144 983118C C 983156 983142 983126983145983156983145 983148983156 983140 E 983148 983156 983123 C 983145983156 C 983148983148

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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Executive Summary

Key Findings 1

Key Recommendations 2

Main Report

1 Background 1

2 Research Methodology 2

3 Survey Findings (Wineries) 3

31 A Demographic Overview 3 32 Sources of Financing 6

33 Constraints on Profitability 7

34 Scarcity of Time Analysis and Recommendations 8

35 Self-Distribution vs Using Distributors 10

4 Survey Findings (Grape Growers) 11

41 General Demographic Issues 11

42 Sources of Financing 13

43 Constraints on Profitability 14

5 A Business Development Center for the Wine Industry 15

51 Usage of the Business Development Center 15

52 Characteristics of Wineries that are most likely to use a Resource Center 16

53 SubjectsTopics of Interest to Wineries 16

54 Response from Grape Growers 17 55 Recommendations for NC Center for Viticulture and Enology 17

6 Personal Interviews Findings and Recommendations 18

6 1 Recommendations 19

Additional Issues 22

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 437

EXEC-SUMMARY hellip 1

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 537

EXEC-SUMMARY hellip 2

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4 983118983151983156983159983145983156983144983155983156983137983150983140983145983150983143 983156983144983141 983138983141983150983141983142983145983139983145983137983148 983141983142983142983141983139983156 983151983142 983157983155983145983150983143 983140983145983155983156983154983145983138983157983156983151983154983155 983156983151 983149983137983154983147983141983156 983156983144983141983145983154 983159983145983150983141983155 (983155983141983141 983142983145983150983140983145983150983143 3

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5 983127983145983150983141983154983161 983151983159983150983141983154983155 983142983141983141983148 983156983144983137983156 983156983144983141983154983141 983137983154983141 983141983160983139983141983155983155983145983158983141 983143983151983158983141983154983150983149983141983150983156 983154983141983143983157983148983137983156983145983151983150983155 983156983144983137983156 983138983157983154983140983141983150 983156983144983141983145983154 983151983152983141983154983137983156983145983151983150983155

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6 983127983145983156983144983145983150 983118983151983154983156983144 C983137983154983151983148983145983150983137 983156983144983141983154983141 983145983155 983137 983139983154983145983156983145983139983137983148 983150983141983141983140 983142983151983154 983159983145983140983141983155983152983154983141983137983140 983141983140983157983139983137983156983145983151983150 983137983150983140 983149983137983154983147983141983156983145983150983143 983151983142 983118C 983159983145983150983141983155

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7 983124983144983141983154983141 983145983155 983137 983150983141983141983140 983142983151983154 983137983150 983141983142983142983141983139983156983145983158983141 983138983157983155983145983150983141983155983155 983140983141983158983141983148983151983152983149983141983150983156 983139983141983150983156983141983154 983140983141983140983145983139983137983156983141983140 983156983151 983156983144983141 983159983145983150983141 983145983150983140983157983155983156983154983161 983145983150 983118C

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8 983124983144983141 983143983154983137983152983141 983143983154983151983159983145983150983143 983145983150983140983157983155983156983154983161 983145983150 983156983144983141983155983141 983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137983155 983145983155 983137983148983155983151 983145983150 983145983156983155 983141983150983156983154983141983152983154983141983150983141983157983154983145983137983148 983155983156983137983143983141 983138983157983156 983155983149983137983148983148983141983154983137983150983140 983150983141983159983141983154 983156983144983137983150 983156983144983141 983159983145983150983141983154983161 983145983150983140983157983155983156983154983161 A 983158983145983156983137983148 983151983152983152983151983154983156983157983150983145983156983161 983141983160983145983155983156983155 983142983151983154 983137983150 983141983150983144983137983150983139983141983140 983155983157983152983152983148983161983085983139983144983137983145983150

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 637

EXEC-SUMMARY hellip 3

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(983145983158) 983139983151983150983140983157983139983156983145983150983143 983158983145983156983145983139983157983148983156983157983154983141 983154983141983155983141983137983154983139983144 983148983141983137983140983145983150983143 983156983151 983143983154983151983159983145983150983143 983143983154983137983152983141983155 983156983144983137983156 983137983154983141 983149983151983154983141 983156983151983148983141983154983137983150983156

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2 D983141983158983141983148983151983152 983137983150 983151983154983143983137983150983145983162983137983156983145983151983150983137983148 983155983156983154983157983139983156983157983154983141 983156983144983137983156 983142983137983139983145983148983145983156983137983156983141983155 983156983144983141 983137983138983145983148983145983156983161 983151983142 983155983149983137983148983148983141983154 983159983145983150983141983154983145983141983155 983156983151 983157983156983145983148983145983162983141 983156983144983141

983155983141983154983158983145983139983141983155 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983159983144983151 983137983154983141 983139983151983149983149983145983156983156983141983140 983156983151 983152983154983151983149983151983156983145983150983143 983118983151983154983156983144 C983137983154983151983148983145983150983137 983159983145983150983141 983124983144983145983155 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150

983138983141 983137983139983144983145983141983158983141983140 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C D983141983152983137983154983156983149983141983150983156 983151983142 C983151983149983149983141983154983139983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155

983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137 983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141 E983142983142983141983139983156983145983158983141 983157983155983141 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983145983155 983137983150

983145983149983152983151983154983156983137983150983156 983156983151983151983148 983145983150 983145983149983152983141983140983145983150983143 983156983144983141 983139983151983150983155983156983154983137983145983150983156983155 983151983150 983152983154983151983142983145983156983137983138983145983148983145983156983161 983152983148983137983139983141983140 983138983161 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983137983150983140 983139983137983155983144 983142983148983151983159

983152983154983151983138983148983141983149983155

3 983120983154983151983149983151983156983141 983137983150983140 983140983141983158983141983148983151983152 983137983150 983141983150983144983137983150983139983141983140 983139983151983148983148983137983138983151983154983137983156983145983158983141 983154983141983148983137983156983145983151983150983155983144983145983152 983138983141983156983159983141983141983150 983143983154983151983157983152983155 983151983142 983141983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155

983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 E983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155 983155983144983151983157983148983140 983148983151983151983147 983145983150983156983151 983142983151983154983149983145983150983143 983139983151983148983148983141983139983156983145983158983141 983138983157983155983145983150983141983155983155

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983139983144983137983145983150 983152983137983154983156983150983141983154983155983144983145983152983155 983144983137983158983141 983156983144983141 983152983151983156983141983150983156983145983137983148 983156983151 983137983148983148983151983159 983159983145983150983141983154983145983141983155 983156983151 983145983150983139983154983141983137983155983141 983156983144983141983145983154 983152983154983151983140983157983139983156983145983151983150 983159983145983156983144983151983157983156

983137983142983142983141983139983156983145983150983143 983153983157983137983148983145983156983161 983123983157983139983144 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150 983138983141 983140983151983150983141 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148

983137983150983140 983118C D983141983152983137983154983156983149983141983150983156 983151983142 A983143983154983145983139983157983148983156983157983154983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155 983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137

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4 A983140983140983154983141983155983155 983156983144983141 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983145983155983155983157983141 983142983137983139983141983140 983138983161 983159983145983150983141983154983161 983151983159983150983141983154983155 983156983144983154983151983157983143983144 983156983144983141 983151983157983156983155983151983157983154983139983145983150983143 983151983142 983150983151983150983085983139983151983154983141

983137983139983156983145983158983145983156983145983141983155 983137983150983140 983156983144983141 983157983155983137983143983141 983151983142 983156983141983139983144983150983151983148983151983143983161 983156983151983151983148983155 983156983144983137983156 983141983142983142983145983139983145983141983150983156983148983161 983142983137983139983145983148983145983156983137983156983141 983156983145983149983141 983137983150983140 983139983151983155983156 983149983137983150983137983143983141983149983141983150983156 983137983155

983159983141983148983148 983137983155 983152983154983151983140983157983139983156 983149983137983150983137983143983141983149983141983150983156

5 D 983148 983145 983145983148 983156983144 983144 983156983144 983118C C 983156 983142 983126983145983156983145 983148983156 983140 E 983148 983156 983123 C 983145983156 C 983148983148

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 4: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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EXEC-SUMMARY hellip 1

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 537

EXEC-SUMMARY hellip 2

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4 983118983151983156983159983145983156983144983155983156983137983150983140983145983150983143 983156983144983141 983138983141983150983141983142983145983139983145983137983148 983141983142983142983141983139983156 983151983142 983157983155983145983150983143 983140983145983155983156983154983145983138983157983156983151983154983155 983156983151 983149983137983154983147983141983156 983156983144983141983145983154 983159983145983150983141983155 (983155983141983141 983142983145983150983140983145983150983143 3

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5 983127983145983150983141983154983161 983151983159983150983141983154983155 983142983141983141983148 983156983144983137983156 983156983144983141983154983141 983137983154983141 983141983160983139983141983155983155983145983158983141 983143983151983158983141983154983150983149983141983150983156 983154983141983143983157983148983137983156983145983151983150983155 983156983144983137983156 983138983157983154983140983141983150 983156983144983141983145983154 983151983152983141983154983137983156983145983151983150983155

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6 983127983145983156983144983145983150 983118983151983154983156983144 C983137983154983151983148983145983150983137 983156983144983141983154983141 983145983155 983137 983139983154983145983156983145983139983137983148 983150983141983141983140 983142983151983154 983159983145983140983141983155983152983154983141983137983140 983141983140983157983139983137983156983145983151983150 983137983150983140 983149983137983154983147983141983156983145983150983143 983151983142 983118C 983159983145983150983141983155

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7 983124983144983141983154983141 983145983155 983137 983150983141983141983140 983142983151983154 983137983150 983141983142983142983141983139983156983145983158983141 983138983157983155983145983150983141983155983155 983140983141983158983141983148983151983152983149983141983150983156 983139983141983150983156983141983154 983140983141983140983145983139983137983156983141983140 983156983151 983156983144983141 983159983145983150983141 983145983150983140983157983155983156983154983161 983145983150 983118C

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8 983124983144983141 983143983154983137983152983141 983143983154983151983159983145983150983143 983145983150983140983157983155983156983154983161 983145983150 983156983144983141983155983141 983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137983155 983145983155 983137983148983155983151 983145983150 983145983156983155 983141983150983156983154983141983152983154983141983150983141983157983154983145983137983148 983155983156983137983143983141 983138983157983156 983155983149983137983148983148983141983154983137983150983140 983150983141983159983141983154 983156983144983137983150 983156983144983141 983159983145983150983141983154983161 983145983150983140983157983155983156983154983161 A 983158983145983156983137983148 983151983152983152983151983154983156983157983150983145983156983161 983141983160983145983155983156983155 983142983151983154 983137983150 983141983150983144983137983150983139983141983140 983155983157983152983152983148983161983085983139983144983137983145983150

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 637

EXEC-SUMMARY hellip 3

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(c) D983141983158983141983148983151983152 983145983150983139983141983150983156983145983158983141983155 983137983150983140 983152983154983151983143983154983137983149983155 983156983144983137983156 983155983157983152983152983151983154983156 983140983151983149983141983155983156983145983139 983137983150983140 983145983150983156983141983154983150983137983156983145983151983150983137983148 983149983137983154983147983141983156

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(d) 983124983144983141 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148 983155983144983151983157983148983140 983139983151983150983155983145983140983141983154 (983141983150983144983137983150983139983145983150983143) 983145983150983158983141983155983156983149983141983150983156 983145983150 983156983144983141

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(983145983158) 983139983151983150983140983157983139983156983145983150983143 983158983145983156983145983139983157983148983156983157983154983141 983154983141983155983141983137983154983139983144 983148983141983137983140983145983150983143 983156983151 983143983154983151983159983145983150983143 983143983154983137983152983141983155 983156983144983137983156 983137983154983141 983149983151983154983141 983156983151983148983141983154983137983150983156

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2 D983141983158983141983148983151983152 983137983150 983151983154983143983137983150983145983162983137983156983145983151983150983137983148 983155983156983154983157983139983156983157983154983141 983156983144983137983156 983142983137983139983145983148983145983156983137983156983141983155 983156983144983141 983137983138983145983148983145983156983161 983151983142 983155983149983137983148983148983141983154 983159983145983150983141983154983145983141983155 983156983151 983157983156983145983148983145983162983141 983156983144983141

983155983141983154983158983145983139983141983155 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983159983144983151 983137983154983141 983139983151983149983149983145983156983156983141983140 983156983151 983152983154983151983149983151983156983145983150983143 983118983151983154983156983144 C983137983154983151983148983145983150983137 983159983145983150983141 983124983144983145983155 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150

983138983141 983137983139983144983145983141983158983141983140 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C D983141983152983137983154983156983149983141983150983156 983151983142 C983151983149983149983141983154983139983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155

983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137 983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141 E983142983142983141983139983156983145983158983141 983157983155983141 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983145983155 983137983150

983145983149983152983151983154983156983137983150983156 983156983151983151983148 983145983150 983145983149983152983141983140983145983150983143 983156983144983141 983139983151983150983155983156983154983137983145983150983156983155 983151983150 983152983154983151983142983145983156983137983138983145983148983145983156983161 983152983148983137983139983141983140 983138983161 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983137983150983140 983139983137983155983144 983142983148983151983159

983152983154983151983138983148983141983149983155

3 983120983154983151983149983151983156983141 983137983150983140 983140983141983158983141983148983151983152 983137983150 983141983150983144983137983150983139983141983140 983139983151983148983148983137983138983151983154983137983156983145983158983141 983154983141983148983137983156983145983151983150983155983144983145983152 983138983141983156983159983141983141983150 983143983154983151983157983152983155 983151983142 983141983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155

983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 E983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155 983155983144983151983157983148983140 983148983151983151983147 983145983150983156983151 983142983151983154983149983145983150983143 983139983151983148983148983141983139983156983145983158983141 983138983157983155983145983150983141983155983155

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983139983144983137983145983150 983152983137983154983156983150983141983154983155983144983145983152983155 983144983137983158983141 983156983144983141 983152983151983156983141983150983156983145983137983148 983156983151 983137983148983148983151983159 983159983145983150983141983154983145983141983155 983156983151 983145983150983139983154983141983137983155983141 983156983144983141983145983154 983152983154983151983140983157983139983156983145983151983150 983159983145983156983144983151983157983156

983137983142983142983141983139983156983145983150983143 983153983157983137983148983145983156983161 983123983157983139983144 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150 983138983141 983140983151983150983141 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148

983137983150983140 983118C D983141983152983137983154983156983149983141983150983156 983151983142 A983143983154983145983139983157983148983156983157983154983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155 983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137

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4 A983140983140983154983141983155983155 983156983144983141 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983145983155983155983157983141 983142983137983139983141983140 983138983161 983159983145983150983141983154983161 983151983159983150983141983154983155 983156983144983154983151983157983143983144 983156983144983141 983151983157983156983155983151983157983154983139983145983150983143 983151983142 983150983151983150983085983139983151983154983141

983137983139983156983145983158983145983156983145983141983155 983137983150983140 983156983144983141 983157983155983137983143983141 983151983142 983156983141983139983144983150983151983148983151983143983161 983156983151983151983148983155 983156983144983137983156 983141983142983142983145983139983145983141983150983156983148983161 983142983137983139983145983148983145983156983137983156983141 983156983145983149983141 983137983150983140 983139983151983155983156 983149983137983150983137983143983141983149983141983150983156 983137983155

983159983141983148983148 983137983155 983152983154983151983140983157983139983156 983149983137983150983137983143983141983149983141983150983156

5 D 983148 983145 983145983148 983156983144 983144 983156983144 983118C C 983156 983142 983126983145983156983145 983148983156 983140 E 983148 983156 983123 C 983145983156 C 983148983148

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 5: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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EXEC-SUMMARY hellip 2

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 637

EXEC-SUMMARY hellip 3

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8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 737

MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 837

MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 937

MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 6: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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EXEC-SUMMARY hellip 3

983159983145983148983148 983138983141983156983156983141983154 983145983150983142983151983154983149 983137983150983140 983137983140983158983145983155983141 983155983156983137983156983141 983148983141983143983145983155983148983137983156983151983154983155 983151983150 983144983151983159 983156983151 983138983141983155983156 983154983141983143983157983148983137983156983141 983156983144983145983155 983150983137983155983139983141983150983156

983145983150983140983157983155983156983154983161 983159983144983145983148983141 983141983150983139983151983157983154983137983143983145983150983143 983145983156983155 983155983157983155983156983137983145983150983141983140 983143983154983151983159983156983144

(c) D983141983158983141983148983151983152 983145983150983139983141983150983156983145983158983141983155 983137983150983140 983152983154983151983143983154983137983149983155 983156983144983137983156 983155983157983152983152983151983154983156 983140983151983149983141983155983156983145983139 983137983150983140 983145983150983156983141983154983150983137983156983145983151983150983137983148 983149983137983154983147983141983156

983140983141983158983141983148983151983152983149983141983150983156 983141983142983142983151983154983156983155 983151983142 983118C 983159983145983150983141983155

(d) 983124983144983141 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148 983155983144983151983157983148983140 983139983151983150983155983145983140983141983154 (983141983150983144983137983150983139983145983150983143) 983145983150983158983141983155983156983149983141983150983156 983145983150 983156983144983141

983142983151983148983148983151983159983145983150983143(983145) 983141983140983157983139983137983156983145983150983143 983155983156983137983156983141 983139983145983156983145983162983141983150983155 983141983155983152983141983139983145983137983148983148983161 983148983141983143983145983155983148983137983156983151983154983155 983137983150983140 983148983151983139983137983148983148983161 983141983148983141983139983156983141983140 983151983142983142983145983139983145983137983148983155 983151983150 983118C

983159983145983150983141 983145983156983155 983145983149983152983151983154983156983137983150983139983141 983145983150 983141983139983151983150983151983149983145983139 983156983154983137983150983155983142983151983154983149983137983156983145983151983150 983151983142 983156983144983141 983155983156983137983156983141 983137983150983140 983145983156983155 983141983139983151983150983151983149983145983139

983145983149983152983137983139983156

(983145983145) 983138983154983137983150983140983145983150983143 983137983150983140 983149983137983154983147983141983156983145983150983143 983118C 983159983145983150983141 983137983155 983137 991260983148983151983139983137983148983148983161 983152983154983151983140983157983139983141983140983084 983144983137983150983140983085983139983154983137983142983156983141983140 991261 983152983154983151983140983157983139983156

(983145983145983145) 983138983157983145983148983140983145983150983143 983137983150 983137983139983139983141983155983155983145983138983148983141 983140983137983156983137983138983137983155983141 983156983144983137983156 983139983151983150983156983137983145983150983155 983156983144983141 991260983138983141983155983156 983152983154983137983139983156983145983139983141983155991261 983145983150 983158983145983156983145983139983157983148983156983157983154983141

983137983150983140 983141983150983151983148983151983143983161 983156983144983137983156 983139983137983150 983138983141 983157983155983141983140 983138983161 983159983145983150983141983149983137983147983141983154983155 983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 983155983156983137983156983141983159983145983140983141

(983145983158) 983139983151983150983140983157983139983156983145983150983143 983158983145983156983145983139983157983148983156983157983154983141 983154983141983155983141983137983154983139983144 983148983141983137983140983145983150983143 983156983151 983143983154983151983159983145983150983143 983143983154983137983152983141983155 983156983144983137983156 983137983154983141 983149983151983154983141 983156983151983148983141983154983137983150983156

983151983142 983144983145983143983144 983144983157983149983145983140983145983156983161 983137983150983140 983154983141983155983145983155983156983137983150983156 983156983151 983149983145983148983140983141983159

2 D983141983158983141983148983151983152 983137983150 983151983154983143983137983150983145983162983137983156983145983151983150983137983148 983155983156983154983157983139983156983157983154983141 983156983144983137983156 983142983137983139983145983148983145983156983137983156983141983155 983156983144983141 983137983138983145983148983145983156983161 983151983142 983155983149983137983148983148983141983154 983159983145983150983141983154983145983141983155 983156983151 983157983156983145983148983145983162983141 983156983144983141

983155983141983154983158983145983139983141983155 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983159983144983151 983137983154983141 983139983151983149983149983145983156983156983141983140 983156983151 983152983154983151983149983151983156983145983150983143 983118983151983154983156983144 C983137983154983151983148983145983150983137 983159983145983150983141 983124983144983145983155 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150

983138983141 983137983139983144983145983141983158983141983140 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C D983141983152983137983154983156983149983141983150983156 983151983142 C983151983149983149983141983154983139983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155

983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137 983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141 E983142983142983141983139983156983145983158983141 983157983155983141 983151983142 983140983145983155983156983154983145983138983157983156983151983154983155 983145983155 983137983150

983145983149983152983151983154983156983137983150983156 983156983151983151983148 983145983150 983145983149983152983141983140983145983150983143 983156983144983141 983139983151983150983155983156983154983137983145983150983156983155 983151983150 983152983154983151983142983145983156983137983138983145983148983145983156983161 983152983148983137983139983141983140 983138983161 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983137983150983140 983139983137983155983144 983142983148983151983159

983152983154983151983138983148983141983149983155

3 983120983154983151983149983151983156983141 983137983150983140 983140983141983158983141983148983151983152 983137983150 983141983150983144983137983150983139983141983140 983139983151983148983148983137983138983151983154983137983156983145983158983141 983154983141983148983137983156983145983151983150983155983144983145983152 983138983141983156983159983141983141983150 983143983154983151983157983152983155 983151983142 983141983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155

983137983150983140 983143983154983137983152983141 983143983154983151983159983141983154983155 E983155983156983137983138983148983145983155983144983141983140 983159983145983150983141983154983145983141983155 983155983144983151983157983148983140 983148983151983151983147 983145983150983156983151 983142983151983154983149983145983150983143 983139983151983148983148983141983139983156983145983158983141 983138983157983155983145983150983141983155983155

983137983148983148983145983137983150983139983141983155983152983137983154983156983150983141983154983155983144983145983152983155 983159983145983156983144 983143983154983137983152983141 983143983154983151983159983141983154983155 983141983155983152983141983139983145983137983148983148983161 983156983144983151983155983141 983148983151983139983137983156983141983140 983159983145983156983144983145983150 983156983144983141983145983154 983154983141983155983152983141983139983156983145983158983141

983158983145983156983145983139983157983148983156983157983154983137983148 983137983154983141983137 983149983157983139983144 983137983155 983148983137983154983143983141 983139983151983154983152983151983154983137983156983145983151983150983155 983140983151 983159983145983156983144 983156983144983141983145983154 983155983157983152983152983148983161983085983139983144983137983145983150 983152983137983154983156983150983141983154983155 E983142983142983141983139983156983145983158983141 983155983157983152983152983148983161

983139983144983137983145983150 983152983137983154983156983150983141983154983155983144983145983152983155 983144983137983158983141 983156983144983141 983152983151983156983141983150983156983145983137983148 983156983151 983137983148983148983151983159 983159983145983150983141983154983145983141983155 983156983151 983145983150983139983154983141983137983155983141 983156983144983141983145983154 983152983154983151983140983157983139983156983145983151983150 983159983145983156983144983151983157983156

983137983142983142983141983139983156983145983150983143 983153983157983137983148983145983156983161 983123983157983139983144 983142983137983139983145983148983145983156983137983156983145983151983150 983139983137983150 983138983141 983140983151983150983141 983138983161 983155983156983137983156983141 983137983143983141983150983139983145983141983155 (983141983143 983118C 983127983145983150983141 983137983150983140 G983154983137983152983141 C983151983157983150983139983145983148

983137983150983140 983118C D983141983152983137983154983156983149983141983150983156 983151983142 A983143983154983145983139983157983148983156983157983154983141) 983141983139983151983150983151983149983145983139 983140983141983158983141983148983151983152983149983141983150983156 983151983142983142983145983139983141983155 983137983148983148983145983137983150983139983141983155 983151983142 983155983149983137983148983148 983159983145983150983141983154983145983141983155 983151983154 983137

983139983151983149983138983145983150983137983156983145983151983150 983151983142 983156983144983141 983137983138983151983158983141

4 A983140983140983154983141983155983155 983156983144983141 983155983139983137983154983139983145983156983161 983151983142 983156983145983149983141 983145983155983155983157983141 983142983137983139983141983140 983138983161 983159983145983150983141983154983161 983151983159983150983141983154983155 983156983144983154983151983157983143983144 983156983144983141 983151983157983156983155983151983157983154983139983145983150983143 983151983142 983150983151983150983085983139983151983154983141

983137983139983156983145983158983145983156983145983141983155 983137983150983140 983156983144983141 983157983155983137983143983141 983151983142 983156983141983139983144983150983151983148983151983143983161 983156983151983151983148983155 983156983144983137983156 983141983142983142983145983139983145983141983150983156983148983161 983142983137983139983145983148983145983156983137983156983141 983156983145983149983141 983137983150983140 983139983151983155983156 983149983137983150983137983143983141983149983141983150983156 983137983155

983159983141983148983148 983137983155 983152983154983151983140983157983139983156 983149983137983150983137983143983141983149983141983150983156

5 D 983148 983145 983145983148 983156983144 983144 983156983144 983118C C 983156 983142 983126983145983156983145 983148983156 983140 E 983148 983156 983123 C 983145983156 C 983148983148

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 7: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 1

1 983106983137983139983147983143983154983151983157983150983140

The North Carolina (NC) wine industry has grown rapidly over the past decade and as isexpected to grow as the worldwide wine consumption and export of wine rises In fact theoverall growth potential for the wine and grape industry in North Carolina (NC) appearssubstantial and the state wine and grape industry is one of the fastest growing industries in thestate There are presently about 80 wineries and 350 vineyards covering about 1350 acres ofland across the state and currently North Carolina has become the 10 th largest wine and grapeproducing state in the US Over the years the industry has focused on growing muscadinegrapes and vinifera grapes Muscadine grapes also known as Scuppernongs are relatively pestresistant and thrive in the hot sandy conditions of the Coastal region In contrast severalvarieties of vinifera grapes are mainly planted in the Western and Piedmont regions of the state

The economic impact of this sector is also substantial In a study performed by MKF Research

LLC and commissioned by the North Carolina Department of Commerce and otherorganizational entities it was determined that there were $48 million in North Carolina winesales in 2005 However when one accounts for the lsquoripplersquo effects of these sales throughoutvarious related industries in the NC economy the net economic effect on North Carolina for2005 was $813 million

The Piedmont Triad Region is uniquely positioned to increase its presence in this industry Ofthe 80 wineries in North Carolina that are currently open to the public nearly half are located in

the Piedmont Triad Region The Region is also home to the only American Viticultural Areas(AVA) in North Carolina Yadkin Valley and Swan Creek Additionally within the next fewmonths the Haw River area is slated to become the next North Carolina AVA This nascentindustry however faces some challenging obstacles that will impede its growth if not addressedThese include the long gestation period before earning revenue from their cultivars theuncertainty of the yield due to weather conditions the complexity and multitude of activities thateach winery is responsible for and the lack of ability to achieve economies of scale due to smallsize

The Piedmont Triad Region is also the primary service area for the statersquos two largest regionaluniversities UNCG and NC AampT State University making them uniquely positioned to assistthe economic development of the region by helping to grow and enhance this nascent industryWith that as a background a team of researchers from UNCG and NC AampT State Universitycame together in January 2008 to conduct research on ways and means to help the nascent but

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 8: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 2

The objective is to better understand the business issues related to the wine and grape industry inthe Piedmont Triad region Once established resources can be identified to help the industrywith these needs making the industry financially stronger and more competitive While theresearch is primarily designed to assist the wineries and grape growers located in the YadkinSwan Creek and Haw River areas it should also benefit this fast growing industry throughoutNC

This report is the result of a yearlong research project to profile the wine sector in theseviticultural areas and assess the business development needs The remaining report is organizedas follows Section II describes the research methodology and Section III comprises the bulk ofthe report on survey findings about the wineries Section IV presents the results on the grapegrowers and Section V presents those about the business development center devoted to the wineindustry Finally Section VI summarizes our findings and recommendations from the personalinterviews conducted in this research

2 983122983141983155983141983137983154983139983144 983117983141983156983144983151983140983151983148983151983143983161

For background research to study the landscape of this sector a thorough literature survey wasdone from periodicals newspapers and specialty industry publications Industry officials alsoprovided additional sources of information Finally information was obtained by attending andparticipating in the 2008 annual meeting of the NC Winegrowerrsquos Association and the 2008

Wine Summit In addition the research team met with key stakeholders in the NC wine industryincluding representatives from The North Carolina Winegrowerrsquos Association North CarolinaWine and Grape Council North Carolina Department of Agriculture North Carolina MuscadineGrowers Surry Community College and economic development officials The research teamlearned about issues in government regulations distribution and sales education of the publicand government officials wine quality marketingbrand management financing and timemanagement

Based on the above the research team developed a draft questionnaire and then field-tested itwith owners of two different wineries Their comments were incorporated into the finalquestionnaire ndash see Appendix A for a copy of the survey administered to wineries and AppendixB for the one administered to grape growers3

Although it was more expensive the research team agreed upon conducting phone interviews

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 9: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 3

The actual survey for wine producers consisted of all the 34 wineries and 24 grape growerscurrently located in the Yadkin Swan Creek and the Haw River valley regions of NorthCarolina see Appendix C for the list Thirty out of the 34 wineries and 14 out of the 24 grapegrowers responded to the structured questionnaire through telephone interviews representing ahigh response rate of 88 percent for wineries and 58 percent for grape growers This lendsstrong validation to the research results of this report

The research team decided to analyze the survey dataset from different but complementarystandpoints As an example one member of the research team studied the profiling of wineriesand grape growers another examined marketingdistribution issues and yet another researchedthe needs of the wineries that would need a business development center

In addition to the telephone surveys the research team held face-to-face interviews with fiveparticipants including at least one key winery operator from each of the three viticultural areasunder study Overall questions asked were unstructured but did follow the general outline of the

written questionnaire One question however was consistently asked of all interviewees ldquoIfyou (the interviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you todo to enhance the growth and profitability of the NC wine industryrdquo This was done to providethe opportunity for a free-flowing discussion on the problems and opportunities confronting theNC wine industry Thereafter one group focused on the face-to-face interviews performing theldquoqualitative data analysisrdquo of the interview transcripts To ensure elimination of groupthink andbias it was ensured that that a person not involved in primary research reviewed the qualitativedata analysis

3 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983127983145983150983141983154983145983141983155)

31 983105 983108983141983149983151983143983154983137983152983144983145983139 983119983158983141983154983158983145983141983159

Thirty-three percent of the wineries have been in business for less than 6 years and exactly halfof the respondents have between 6 and 10 years of experience in the winery business Thus amajority of the respondents totaling 83 percent have less than ten years of business experienceOnly 7 representing two wineries out of the 30 have more than 15 years of relevant businessexperience Thus overall this points to a relatively young industry

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 10: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 4

Figure 1 No of Years Winery Has Been In Operation

0

5

10

15

20

25

30

35

40

45

50

lt6 6-10 11-15 16-20 gt20

33

50

10

3 3

P e r c e n t a g e R e s p

o n d e n t s

No of Years in Business

All of the wineries surveyed also own vineyards Four major varieties are grown by therespondents Seventy-seven percent of the wineries grow Vitis vinifera 20 percent areMuscadine growers 17 percent grow Vitis lambrusa and 7 percent cultivate Vitis aestivialis

A majority of these wineries own less than 10 acres of grape farms Fifty-seven percent of

respondents have 5 to 10 acres of grapes under cultivation eleven percent have less than 5 acresand 29 percent representing 8 out of the 28 wineries that responded to this item have more than30 acres of grapes under production (Figure 2) The results support our conclusion that most ofthese wineries are small relatively new with less experience and presently lack the ability toenhance profitability through economies of scale

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 11: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 5

Figure 2 No of Acres under Grape Production

0

100

200

300

400

500

600

lt5 5-10 11-15 16-30 gt30

11

57

04

29

P e r c e n t a g e R e s p

o n d e n t s

No Acres under Grape Production

The majority of wineries reported an annual production estimate of between 1000 and 3000cases of wine while twenty-four percent produces more than 5000 cases per year See Figure 3below for the estimated annual wine production levels

Figure 3 No of Wine Cases Produced Annually

150

200

250

300

350

400

450

17

41

17 17

n t a g e R e s p o n d

e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 12: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 6

The survey gathered data that looked at the proportion of grapes used in wine production that isobtained from the producerrsquos own vineyard The results show that the majority rely substantiallyon their own vineyards for grapes Thirty-eight percent of respondents produce wine solely fromgrapes grown on their farm Another 38 have between 76 and 99 of the grapes used intheir winery from their own vineyard Only 14 of the respondents use less than 50 of theirown grown grapes in their wine operations

In terms of capacity utilization 62 of the wineries surveyed produce at more than 80 of theirwine production capacity with none of the respondents producing at below 50 capacity Thisresult indicates that most of the wineries produce their own grapes and are presently utilizingmost of their production capacity

Figure 4 Percentage of Own Grown Grapes Used in Wine Production

73

3

10

39

38

0 1 - 25 26 - 50 51 - 75 76 - 99 100

32 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Sixteen representing 53 percent of respondents self finance their winery and 13 wineries finance

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 13: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 7

33 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

This was the most salient question in the survey as is evident from its relative length ascompared to the other questions in the survey To analyze their responses a 5-point Likert-typescale ranging from 1 (much below average importance) to 5 (much above average importance)was used to measure the opinion of respondents on the factors they perceive to be important inaffecting their profitability The mean score on the rating of factors that are barriers to the level

of profitability of wineries is shown below in Table 1 As is evident scarcity of time bottlingcosts cash flow and canopy management are the four most important constraints identified

This leads to a salient conclusion that time and financial management (including costmanagement) are the two most important issues to address if we hope to sustain a growth inprofitability in the wine industry

Table 1 Ratings of Barriers Enhancing Current Level of Profitability

Factors Opinion Rating (MeanScore)

The scarcity of your time 362Bottling costs 303Cash flow 300Canopy management Pesticide (materials

0

5

10

15

20

Current sources of financing

4 0 13 16 1

Carolina FarmCredit

Credit Union Bank Self-financedOther meansof financing

Figure 5 Funding Sources

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 14: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 8

Relationships with grape producers 186Availability of quality grapes 179Availability of information resources 159Wine Production Capacity 146Availability of managerial personnel 145Availability of labor 141(Un)availability of mobile bottling lines 141

Given this result above we next chose to answer the following question Is it possible for thewineries to ldquogrowrdquo their way out of cash flow problems In other words can the wineries expectthat the salience of cash flow as a constraint on increasing profitability will decrease as theygrow larger

In order to answer the question we conducted a statistical analysis with the overall aim of

determining the relationship between size (acreage or crates of winery) and cash flows ofwineries The specific objectives were

(a) To establish correlation between acreage under production and number of crates ofwine produced and(b) To determine the association between cash flow and the size years of experience andthe percent of own- grape used in wine production

For (a) we found that there is a significant positive correlation between acreage of grapes underproduction and number of crates of wine produced by the wineries and the two variables to bestatistically correlated This implies that as NC wineries plant more grapes their wineproduction has grown proportionately

However on (b) we also found that none of the explanatory variables delineated in the secondobjective has an effect on the cash flow problem faced by the wineries In other words beinglarger did not necessarily imply a reduction in perception of a cash flow as a problem This leadsus to conclude that the smaller wineries cannot hope to reduce cash flow problems by simplyldquogrowingrdquo their way out of the problem see section IIIV for another possible solution

3983092 983123983139983137983154983139983145983156983161 983151983142 983124983145983149983141983098 983105983150983137983148983161983155983145983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 15: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 9

The actual production of wine as a saleable product is dependent on the cultivation andharvesting of the grapes transport if necessary to the winery wine production and the bottlingand transport of the finished product These processes in themselves require substantial time andfinancial resources

The marketing element entails an entirely different set of capabilities and demands on time andfinancial resources The specific activities addressed included the operation of gift shops use of

advertising self-distribution of the wine and the sale of wine to restaurants Respondents whoengaged in these marketing activities indicated that they considered the time spent on marketingactivities to be a constraint to increasing their profitability Closely related are the conclusionsfrom the data analysis that cash-flow issues constituted an impediment to profitability by thosewineries that participated in festivals and fairs and self-distributed their wine products

The very essence of the issue appears to be the assumption by winery owners that all tasks mustbe performed by the wineries themselves It is common practice in business to identify those

activities that are considered to be core competencies upon which the success and identity of thefirm are based Contributing activities which are necessary for the financial success of the firmbut are not a core competency can and should be considered for outsourcing Engaging anotherentity to perform selected contributing activities constitutes a trade-off between the time andfinancial resources spent performing non-core activities in-house and the financial resourcesspent to have those activities performed by an entity for which these activities are a corecompetency The objective is to reclaim time that can then be focused on the core or essentialactivities of the winery operation

Restaurants and gift shops consume a number of the wineryrsquos resources One might try to makethe case that financial and property resources do not consume time However the operation andmaintenance of restaurants and gift shops does consume time resources Tours and wine tastingopportunities which are often offered in conjunction with gift shops require a significant timeinvestment by one or more individuals

Advertising efforts require managementrsquos time to ensure that the message is conveyed correctlyEven though the actual media being used may not be owned or operated by the winerymanagement must devote time to the administration of the total promotional effort including paidand non-paid advertising brochures presence at festivals and fairs and spotlight features invarious trade tourism and other outlets

Eff b i i i di ib i i i i l id ifi d ib i h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 16: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 10

RecommendationsThe identification of scarcity of time as an obstacle to achieving the level of financial successsought by winery management indicates that wineries have a need to focus more on coreactivities such as wine-making and less on non-core activities Non-core activities such asmarketing and distribution are perceived to be hindering the ability of the winery to engage in themore ldquoimportantrdquo activities that contribute to profit

The results of this survey indicate that winery management recognizes that time has value Inorder to make the most of the time available management must make decisions as to whether toperform functions in house or to engage another person or entity to perform selected functionsSurvey results showed that twice as many wineries with 10 or fewer acres considered the scarcityof time to be a significant barrier to profitability Three and a half times more wineries of 16acres or more indicated that scarcity of time was a significant barrier to profitability Thechallenge facing wineries is to determine what functions to perform and who should performthem The obvious answer is to hire an outside entity or to engage additional personnel to

perform those functions There are possibly more creative solutions that individual wineries maychose to implement No matter what the choice the time is a valuable resource that must to beoptimized in order to increase profitability

Identifying the essential activities that should be performed internally is a first step in theclassical makebuy decision process In order to properly identify these activities there must bea clear understanding of the financial and time resource ldquocostsrdquo profit contribution and theimpact of these activities on consumer perceptions of the quality and uniqueness of the wineryrsquos

offerings After these activities have been identified winery management can examine otherwinery activities to determine the current financial and time investment being expended in-houseand compare that to the costs involved in hiring another entity either an individual or anotherfirm to perform those activities

3983093 983123983141983148983142983085983108983145983155983156983154983145983138983157983156983145983151983150 983158983155 983125983155983145983150983143 983108983145983155983156983154983145983138983157983156983151983154983155

The next step in the analysis was to look for factors that best served to distinguish the wineries interms of their marketing distribution and identified barriers to constraints on profitability Inthat regard we found that an important differentiator for grouping wineries was whether theyself-distributed or used a distributor Note that while some wineries used both channels todistribute their product there was a tendency for wineries to use either one channel or the other

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 17: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 11

likely to sell product in grocery stores use advertising as a promotional medium promoteproduct using festivals and fairs and to promote product using wine clubs

However from the standpoint of identified barriers to profitability we found an importantdistinguishing factor between these two groups of wineries Owners of wineries that self-distribute are distinguished from owners of wineries that self-distribute with regards to theconstraints to profitability that they feel are important Wineries that use distributors indicate

cash flow and financing to be a less important constraint to increased profitability that those thatself-distribute In fact wineries using distributors indicate price competition for their product inretail stores as a more important constraint on increasing their profitability This difference leadsus to conclude from our study that the only factor that makes a difference in the salience of cashflow and financing as an impediment to increased profitability is whether a winery uses adistributor those that do fell these two factors to be less of a burden than those that self-distribute Logically then this would lead us to recommend that all wineries should favor theusage of distributors over self-distribution However as indicated in Section VI our personal

interviews with a broad cross-section of industry principals indicate that substantial impedimentsexist to a widespread adoption of distributors by the winery industry in Yadkin Valley SwanCreek and Haw River Valley

983092 983123983157983154983158983141983161 983110983145983150983140983145983150983143983155 (983111983154983137983152983141 983111983154983151983159983141983154983155)

As mentioned in the introduction along with surveying wineries this study also interviewedgrape growers defined as farmers that grew grapes but did not make wine Unlike informationon wineries comprehensive information on grape growers was not readily available Theresearch team assembled the list through contacts available at the Viticulture and Enologyprogram of Surry Community College and a list available at the website of NC Department ofAgriculture Based on this list it was determined that there are 24 grape growers located in thelocated in the Yadkin Swan Creek and the Haw River valley region and all were contacted witha variant of the survey that was developed just for them (see Appendix B for a copy) A total of

14 grape growers responded to the survey representing a rate of participation of 58 percent Asis evident the sample size here was too small to do meaningful statistical analysis (as was donefor the wineries) Hence we present below a descriptive overview of the findings

983092 1 983111983141983150983141983154983137983148 983108983141983149983151983143983154983137983152983144983145983139 983113983155983155983157983141983155

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 18: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 12

Figure 6 No of Years in Business

43

36

7 7 7

5

10

15

20

25

30

35

40

45

P e r c e n t a g e R e s p o

n d e n t s

lt6 6 - 15 16 - 30 31 - 45 gt45

No of Years

The survey results shows that 71 percent of the growers operate less than 5 acres of grape farmand only 7 percent which represent one grower has more than 10 acres of grapes (figure 7)Forty-three percent of the grape growers reported growing Muscadines (Vitis rotundifolia) 29

grow Vitis lambrusa (Niagara Concord) 36 grow Vitis vinifera (Cabernet Chardonnay etc)and 7 reported growing Vitis aestivialis (Norton) Further 43 of the growers sell theirgrapes to wine producers while another 43 percent sell their grapes on-farm where buyers areallowed to ldquopick your ownrdquo grapes Only one grower sells on the fresh market Majority ofthese farms are small family operations managed by husband and wife Furthermore a couple ofthese small-scale producers grow grapes as hobbies and for personal use Eighty-five percent ofthese grape farmers have never been members of any WineGrape Cooperative or similarorganization None of the growers interviewed use migrant workers in their operations Five out

of the 14 growers representing 36 percent stated that they provide the necessary training theirworkers Twenty-one percent train their workers through programs offered at the localcommunity college

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 19: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 13

Figure 7 No of Acres Devoted To Grape Production

0

10

20

30

40

50

60

70

80

lt5 5-10 11-15

71

21

7

P

e r c e n t a g e o f R e s p o n

d e n t s

Acreage

9830922 983123983151983157983154983139983141983155 983151983142 983110983145983150983137983150983139983145983150983143

Similar to results from the wine producers majority of grape growers self-finance theiroperations Eighty-six percent of growers contacted through this survey self-finance theiroperations an additional 14 are financed through a bank and the remaining 7 by CarolinaFarm Credit (see figure 8)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 20: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 14

Figure 8 Sources of Financing

0

10

20

30

40

50

60

70

80

90

Carolina FarmCredit

Credit Union Bank Self Finance

7

0

14

86

P e r c e n t a g e R e s p o n d

n e t s

9830923 983107983151983150983155983156983154983137983145983150983156983155 983151983150 983120983154983151983142983145983156983137983138983145983148983145983156983161

Cash flow financing grape cultivation equipment costs canopy management and scarcity oftime were identified as important factors of constraint to profitability of grape growers Theresults match the ones obtained for wine producers (Table 1) and that time and financialmanagement remain the two top perceived constraints on increasing profitability Table 2 liststhe top 5 factors rated as important by grape growers and reproduces for comparison the top 5factors identified by wine produces in Table 1

Table 2 Constraints to Current Level of ProfitabilityGrape Growers Wine Producers

Factor MeanScore

Factor MeanScore

The scarcity of your time 300 The scarcity of your time 362Cash flow 279 Bottling costs 303

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 21: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 15

983093 983105 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154 983142983151983154 983156983144983141 983127983145983150983141 983113983150983140983157983155983156983154983161

As mentioned in the introduction a strategic research question in our study was to ask thefollowing If a ldquobusiness development centerrdquo for the wine industry were to be established howwould it be perceived and used by the winery industry and what would the center need to knowin designing its services The question is far from hypothetical in fact such a center is alreadybeing established as the NC Center of Viticulture and Enology at Surry Community College inDobson NC

9830931 983125983155983137983143983141 983151983142 983156983144983141 983106983157983155983145983150983141983155983155 983108983141983158983141983148983151983152983149983141983150983156 983107983141983150983156983141983154

Among the wineries 64 of the respondents recognize the need for a Business DevelopmentCenter and are willing to regularly use resources from the Center to improve their marketingefforts Thirty-two percent will use it occasionally while 4 percent of the respondents will notuse the facility at all see results in Figure 9

However respondents also commented that a definite decision on the use of the Center woulddepend on the associated costs to them There are major concerns with the location of thefacility since this will determine the costs of transportation and the hours of travel time whichwill in turn take producers away from their daily operations Several of these operations arefamily run businesses mainly managed by husband and wife with occasional help As indicatedfrom the survey results scarcity of time is already a major concern and therefore it will bedifficult for most of them to be away from their operations for any considerable length of time

Finally the wineries expressed concern about the amount of user fees to be charged and largerand more experienced wineries expressed concern about the level of expertise of the center staff

Figure 9 Willingness to use a Business Development Center

40

50

60

70

32

64

e s p o n d e n t s

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

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MAIN REPORT hellip 16

9830932 983107983144983137983154983137983139983156983141983154983145983155983156983145983139983155 983151983142 983127983145983150983141983154983145983141983155 983156983144983137983156 983137983154983141 983149983151983155983156 983148983145983147983141983148983161 983156983151 983157983155983141 983137 983122983141983155983151983157983154983139983141 983107983141983150983156983141983154

Another focus of our study was to identify those features that help identify wineries that haveneeds for specific resources of a resource center dedicated to helping the wine industry in thisregion

To begin with the study results indicate that management at wineries who self-distribute wine

are relatively more interested in Center resources that concern domestic and export marketdevelopment This contrasts with managements of wineries who use distributors who arerelatively less interested in using the resources of the Center and who tend to experience fewerpressures related to financing

Of all the eighteen factors that were tested for being possible constraints to profitabilitymanagementsrsquo scarcity of time was the one that was associated with managementsrsquo need for thegreatest number of resources offered by the prospective Center

Additionally (a) the greater the percentage of grapes that are grown in-house and (b) thegreater the extent that winery owners train their own employees the greater is the wineryrsquos needfor a wide variety of services to be offered by the prospective Center

Finally the greater winery managementrsquos perceived importance of financing as a constraint toincreased profitability the greater is the likelihood that management would be a regular user ofthe resources of the Center

9830933 983123983157983138983146983141983139983156983155983124983151983152983145983139983155 983151983142 983113983150983156983141983154983141983155983156 983156983151 983127983145983150983141983154983145983141983155

The interested wineries were also asked that if they used the center whatsubjectsareasissuestopics they would like the center staff to develop and offer see figure 10 fora summary of the results As is evident domestic distribution and marketing and records

keeping received the highest ranking from winery representatives on the type of assistance theywill like the proposed business development center to offer The second highest ranked need ismanagement skills and identification of cost Price setting and profitability analysis is the nexton the scale The last two identified needs are assistance on brand management and export

distribution and market

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 23: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 17

Figure 10 Ranking of Desired SubjectsIssuesTopics

983093983092 983122983141983155983152983151983150983155983141 983142983154983151983149 983111983154983137983152983141 983111983154983151983159983141983154983155

Unlike the wineries only 30 percent of grape growers expressed a willingness to use resources

available from the Business Development Center Forty percent responded that they will use thefacility occasionally and 30 percent responded in the negative When growers were asked of thetype of resources they would like the proposed business center to offer 71 percent proposedassistance in distribution and market development Price setting and identification of costs wererecommended by 50 percent each Management skills were checked by 36 percent andrecordkeeping by 29 percent of the respondents The low response to the use of the businesscenter shows that grape growers may rather have critical needs in the area of production cashflow and financing rather than marketing

983093983093 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155 983142983151983154 983118983107 983107983141983150983156983141983154 983142983151983154 983126983145983156983145983139983157983148983156983157983154983141 983137983150983140 983109983150983151983148983151983143983161

The above results lead the research team to make several conclusions about issues that should

84

84

86

90

90

91

91

Export distribution and marketdevelopment

Brand management skills

Price setting and profitabilityanalysis

Management skills

Identification of costs

Record keeping

Domestic distribution andmarket development

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

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GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 24: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

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MAIN REPORT hellip 18

1 Time management techniques and strategies including possibilitiesopportunities foroutsourcing

2 Cash flow management including accounting (book-keeping) cost identification andmanagement)

3 Marketing and distribution including market development price setting and profitabilityanalysis brand management

983094 983120983141983154983155983151983150983137983148 983113983150983156983141983154983158983145983141983159983155983098 983110983145983150983140983145983150983143983155 983137983150983140 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

In addition to the telephone surveys summarized above the research team held detailed face-to-face interviews with five participants including at least one key winery operator from each of thethree viticultural areas under study and a key economic development official in the regionBesides being chosen to represent each of the three viticultural areas we also ensured that thewineries selected for these interviews were well-established and poised for growth

Overall questions asked were unstructured but did follow the general outline of the writtenquestionnaire One question however was consistently asked of all interviewees ldquoIf you (theinterviewee) were made lsquokingrsquo or lsquoqueenrsquo for a day what specific things would you to do toenhance the growth and profitability of the NC wine industryrdquo This was done to provide theopportunity for a free-flowing discussion on the problems and opportunities confronting the NCwine industry

As a result of the survey and interviews two primary issues surfaced that overwhelminglyrepresent the salient business needs of the industry both of which validate our findings from thedata analysis as we have previously summarized in Table 1

1 Financial Management ndash Grape farming and wine making are capital-intensive long-term investments that are subject to extraordinary risk presented by climatic factorsInitial investment ranges from $10000 to $11000 per acre for vines trellises fertilizer

pest management etc Once the grapes are planted it takes from three to five yearsbefore the vines produce a good quality marketable crop Once the grapes are picked andthe wine making process begins it takes from several months to several years before thewine is ready to sell All of this translates into a significant cash-flow problem for grapegrowers and wine makers

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MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

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MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

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MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

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1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

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APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 25: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2537

MAIN REPORT hellip 19

business and streamline business operations but also find new resources than can helpthem become more productive

983094 1 983122983141983139983151983149983149983141983150983140983137983156983145983151983150983155

After performing a qualitative data analysis of the interview transcripts several consistentthemes and issues could be identified that were common to most interviews Each issue needsfurther study research and exploration However for purposes of this report we have framedthese themes and issues into recommendations Each theme pertains to a business impedimentpreventing the wine and grape industry from thriving and becoming more financially stableHowever these business issues are not insurmountable and if addressed will help the wine andindustry grow and prosper

1 Rules and Government Regulations ndash As one interviewee said ldquoGovernment does not

understand the wine industry therefore they regulate the heck out of itrdquo Some of theagencies cited include the following DOT NC Department of Agriculture ABC Boardsenvironmental agencies health agencies OSHA and out of state agencies regulating theshipment of wines The overall concern is that conflicting rules and too many governmentregulations are a hindrance to growing the wine industry in NC North Carolina needs toreview what other progressive wine growing states are doing and implement their bestpractices For example North Carolina should review how other states dispose of the by-products of making wine including wastewater and production residue NC should also

review their signage policy for directing tourists to wineries There is at least the perceptionthat NC charges far more for signs than other states and provides too many restrictions formaintaining the signs

Interestingly there was one consistent area where interviewees want more regulationInterviewees repeatedly stated that they want NC wine served at events sponsored or

held by state agencies If North Carolina is serious about the wine industry according towine industry principals this is one clear way to demonstrate their commitment Therefore

governing rules and regulations should be reviewed and revised to facilitate this suggestion

2 DistributionRetail Sales Issues ndash All interviewed are almost unanimous in having strongmisgivings about the commitment of wine distributors and wine retailers in furthering andadvancing the sales of NC wine especially wines from the smaller wineries Wine industry

i i l i i d b li di ib h li l i i ll i d d b

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2637

MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2737

MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2837

MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 26: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

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MAIN REPORT hellip 20

primarily ldquopushrdquo wines with a high margin andor high mark-ups bypassing NC wines andmay in fact discourage purchasing NC produced wines

Overall with regard to distribution and sales issues we recommend the following

1 A project should be undertaken (possibly by NC Wine and Grape Council) to help thewinery owners better understand the wine distribution system in NC and make the mostof distribution agreements

2 Another recommendation is to study the possibility of allowing distributors to invest inNC wineries or partner with them thus providing them with an incentive to sell NCwines

3 As will be discussed in more detail in Recommendation 3 we recommend retailersreceive further education about NC wine so that they understand they are selling aldquolocally produced hand-craftedrdquo product

3 Education ndash Education is needed to better inform citizens and elected officials in NorthCarolina that NC wineries are producing quality ldquohand-craftedrdquo wines at reasonable pricesthat have a significant impact on the statersquos economy All interviewees were consistent inthis belief that there is a strong need for more education regarding NC wine

As evident from the interviews the education needed can be classified as being needed onthree distinct levels

bull Wine Makers and Grape Growers -- Easily accessible educational programs should beavailable for winemakers at different stages of their careers Prospective winemakersneed training in viticulture enology and the ldquobusinessrdquo of the wine industry Currentwine makers need to be able to access a database of ldquobest practicesrdquo in growing andharvesting grapes and enology Both groups should have available programs in brand

management and marketing

bull General PublicCitizens ndash Consumers both inside and outside of North Carolina need

education to learn North Carolina produces more than ldquosweetrdquo red wine While sweetwines predominantly produced from native Muscadine grapes are very important to theNC Carolina wine industry the public needs to learn that NC locally produces world-class handcrafted vinifera wines among others People also need education to help thembecome less intimidated by wine and the wine tasting experience in order to learn that

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2737

MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2837

MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3037

APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 27: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2737

MAIN REPORT hellip 21

officials within North Carolina are better educated about the wine industry Manyofficials do not understand the current impact let alone the future potential of the wineindustry on the NC economy As was pointed out by some of the interviewees theeconomic impact of the industry extends far beyond wineries themselves While someofficials do recognize the importance of the new industry rules regulations and laws arestill enacted that frequently inhibit further growth of the industry and place further burdenupon the entrepreneurs that are the backbone of this emerging industry Hopefully if theelected officials are better educated about the industry they may begin to understand boththe economic potential of the wine industry in NC and also the burden of regulationsplaced upon the industry that inhibit its growth

4 MarketingBrand ManagementTourism ndash As was mentioned in ldquoRecommendationNumber 3- Educationrdquo there is an absolute need to overcome the perception that all NC wineis sweet wine While most of the interviewees were quick to point out that they producedone or more sweet wines to enhance salability they went on to point out for the sake of the

industry the industry must rise above the ldquosweetrdquo wine reputation The interviewees feel thatthis reputation discourages non-sweet wine consumers from trying NC wine thus limitingmarket potential

With this in mind the NC wine industry as a whole and the individual winery owners need toldquosellrdquo the idea that NC produces a wide variety of ldquolocally produced hand-crafted rdquo qualitywine

In addition more resources are needed to further develop the tourism segment of businessWineries and tourism are unequivocally tied together and need to be promoted togetherWine trails seem to be an important key to enhancing this marketing approach Four suchtrails are already marked and three of those are primarily within the area covered in thisreport A way to enhance the ldquotrailsrdquo experience may be to combine the wine experiencewith heritage trailshellipan idea that is already underway Additional ldquocombination trailsrdquo couldinclude recreational opportunities local produced foods and the arts for example Overallart music locally produced food and wines are tied together ndash marketing these products

together will not only grow all of these businesses but also NC tourism as well

Other pertinent suggestions were

1 Creating a mobile tasting room that could be taken to high profile NC events such asL rsquo M S d h Hi h P i M k A i d h

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2837

MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3037

APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 28: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2837

MAIN REPORT hellip 22

5 Conduct More Research ndash Interviews with winery owners and operators along with localofficials demonstrated there are no limits to the number of ideas that exist to help grow thewine industry in North Carolina However it is also evident there is a need for additionalresearch to help develop the ideas Several ideas are mentioned throughout this qualitativereport that all merit additional research Three other research possibilities are outlinedbelow

1 Develop an easily accessible ldquobest practicesrdquo database that maintains agricultural tips forgrowing grapes making wine and starting and operating a winery

2 Conduct research on how to develop vines that are not as susceptible to humidity thusminimizing the problem related to mildew In other words find ways to overcomemildew issues caused by NCrsquos high humidity

3 Develop an easily accessible checklist of regularly updated government requirements for

starting owning and operating a winery While the NC Wine and Grape Councilrsquoswebsite offers considerable information and includes most of the information needed itmight be enhanced and further developed to make it more user-friendly One suggestionis to reorganize the information and display it along the lines of a wine industry flowchart The Council might also want to investigate how to better and more frequentlypromote the fact the information exists on their site as some interviewees were unawareof the availability of the information

Additional IssuesIn addition to the recommendations made above two underlying issues merit mention in thisreport

bull With regard to the NC Wine and Grape Council some of the small wineries feelunderrepresented They would like to see more small wineries represented on theCouncil and would like a process developed possibly including term limits that wouldallow more turn-over on the Council encouraging new and differing opinions to emerge

bull Another issue albeit implicitly implied in the interviews related to overall qualityassurance of NC wines Most interviewees want to assure that North Carolina continuesto develop a wine industry that embraces a reputation for high quality wine therefore theindustry should continue exploring best practices in other states and then develop a

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3037

APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 29: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 2937

1

983105983152983152983141983150983140983145983160 983105 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983124983151 983127983145983150983141983154983145983141983155

Wine Industry Needs SurveyThis set of questions concerns general demographic issues related to your firm

1 How many years has your business been in operation__________ years

2 Regarding your business which most accurately reflects your situation____I operate a vineyard selling my grapes to a third party____I operate a winery purchasing the majority of grapes and juice____I operate a winery and vineyard and grow the majority of grapes used at the winery

site____I hold a wine producer permit where I operate a vineyard and tasting room and the

wine is produced off site

3 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

4 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

5 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre

____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

6 If you grow grapes please indicate your estimated TOTAL number of acres underproduction

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3037

APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 30: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3037

APPENDICES hellip 2

___ 5001 ndash 10000 cases___ more than 10000 cases

8 If you produce wine what percent of the grapes used do you grow___0___1-25___26-50___51-75___76-99___100

9 What percent of your wine production capacity are you currently using __________(Note ldquowine production capacityrdquo refers to the plant and equipment that you have on handand ldquoin houserdquo to produce the wine)

The next set of questions is intended to identify issues that impact your ability to operate to your full potential

10 Concerning the availability of training for your labor force - check all that apply___I provide the necessary training for my workers___Workers have been trained through a program at the local community college___Workers have been trained through a program that is not connected with the localcommunity college

___Training is not available

11 Are you currently using the H2A (migrant worker) labor program ____ Yes ____No

12 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank

____Self-financed____Other means of financing

13 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 31: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3137

APPENDICES hellip 3

Cash flowFinancing

Skilled labor costs

Grape cultivationequipment costs

Vine costs

Canopy management

Pesticide (materials +application) costs

Wine productionequipment costs

Bottling costs

Relationships withgrape producers

The scarcity of your

timeAvailability of qualitygrapes

Price competition foryour product in retailstores

Limited opportunitiesto distribute your

wineWine ProductionCapacity

(Un)availability ofmobile bottling lines

These questions relate to your marketing efforts

14 Where do you sell your product Check all that apply___ own winery___ grocery stores___ restaurants___ specialty wine stores

out of state

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 32: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3237

APPENDICES hellip 4

___ Internet sales___ advertising___ festivalsfairs___ wine clubs

17 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ domestic distribution and market development___ export distribution and market development___ brand management skills

18 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

J d J Bh d Ph D

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 33: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3337

APPENDICES hellip 5

983105983152983152983141983150983140983145983160 983106 991251 983123983157983154983158983141983161 983108983145983155983156983154983145983138983157983156983141983140 983156983151 983111983154983137983152983141 983111983154983151983159983141983154983155

Grape Growers Needs SurveyThis set of questions concerns general demographic issues related to your firm1 How many years has your business been in operation__________ years

2 Are you a member of the___ NC Wine Growers Association___ NC Muscadine Growers Association___Another wine industry association If so please specify_______________________

3 Have you ever belonged to a winegrape Co-op or similar organization in the past___Yes if yes please identify___________________________________________ No

4 In this question please place a check mark beside each type of grape that you grow and thenwrite in the number of tons per acre that you produce for that type of grape____Muscadines (Vitis rotundifolia) ______tons per acre____Vitis lambrusa (Niagara Concord) _____tons per acre____Vitis vinifera (Cabernet Chardonnay etc) _____tons per acre____Vitis aestivialis (Norton) _____tons per acre

5 If you grow grapes please indicate your estimated TOTAL number of acres underproduction___ less than 5 acres___ 5-10 acres___11-15 acres___16-30 acres___ more than 30 acres

6 Do you process the grapes on-site for juice to be sold to wineries ____ Yes ____No

The next set of questions is intended to identify issues that impact your ability to operate to

your full potential

7 C i h il bili f i i f l b f h k ll th t l

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 34: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3437

APPENDICES hellip 6

9 Currently what are your sources of financing Check all that apply ____Carolina Farm Credit____Credit Union____Bank____Self-financed____Other means of financing

10 Please indicate the degree to which the following factors represent barriers to enhancing

your current level of profitability (Please check the box that best reflects your opinion)

Factor MUCH

BELOW

AVERAGE

Importance

BELOW

AVERAGE

Importance

AVERAGE

Importance

ABOVE

AVERAGE

Importance

MUCH

ABOVE

AVERAGE

Importance

Availability of labor

Availability ofmanagerial personnel

Availability ofinformation resources

Cash flow

Financing

Skilled labor costs

Grape cultivation

equipment costsVine costs

Canopy managementPesticide (materials +application) costs

Relationships withwine producers

The scarcity of yourtime

Price competition foryour product in freshmarket

Price competition for

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 35: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3537

APPENDICES hellip 7

___ fresh market___ wine producers___ brokers___ Other (Please specify) ______________________________

12 If a business development center dedicated to the Grape and Wine Industry was establishedwhat resources would you like to see offered Check all that apply

___ management skills

___ identification of costs [eg marketing production]___ record keeping___ price setting and profitability analysis___ distribution and market development

13 If a business development center dedicated to the Grape and Wine Industry was establishedwould you use it___ Yes regularly___ On occasion___ No

YOUR COMMENTS

(a) On the quality of NC wines and or grapes including your suggestions if any_______________________________________________________________

______________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

(b) Other comments_____________________________________________________________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________

Contact Information

Joyendu Joy Bhadury PhDBryan School of Business and EconomicsU i i f N h C li G b

Appendices hellip 8

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 36: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3637

983105983152983152983141983150983140983145983160 983107 991251 983116983145983155983156 983119983142 983127983145983150983141983154983145983141983155 983137983150983140 983111983154983137983152983141 983111983154983151983159983141983154983155

WINERY NAME WEB ADDRESS COUNTY

Allison Oaks Vineyards wwwallisonoaksvineyardscom Yadkin

Autumn Creek Vineyards wwwautumncreekvineyardscom Rockingham

Benjamin Vineyards amp Winery wwwbenjaminvineyardscom Alamance

Benny Parsons Rendezvous Ridge wwwrendezvousridgecom Wilkes

Black Wolf Vineyards wwwblackwolfvineyardscom Surry

Brushy Mountain Winery wwwbrushymountainwinecom Surry

Buck Shoals Vineyard wwwbuckshoalsvineyardcom Yadkin

Chateau Laurinda wwwchateaulaurindawinerycom Alleghany

Childress Vineyards wwwchildressvineyardscom Davidson

Elkin Creek Vineyard wwwelkincreekvineyardcom Wilkes

Flint Hill Vineyards wwwflinthillvineyardscom Yadkin

Garden Gate Vineyards wwwgardengatevineyardscom Davie

Germanton Vineyard and Winery wwwgermantongallerycom Stokes

Glen Marie Vineyards amp Winery wwwglenmariewinerycom Alamance

Grassy Creek Vineyard and Winery wwwgrassycreekvineyardcom Surry

Grove Winery wwwgrovewinerycom Guilford

Hanover Park Vineyard wwwhanoverparkwinescom Yadkin

Iron Gate Vineyards wwwirongatevineyardscom Alamance

Junius Lindsay Vineyard wwwjuniuslindsaycom DavidsonLaurel Gray Vineyards wwwlaurelgraycom Yadkin

McRitchie Winery amp Ciderworks wwwmcritchiewinecom Wilkes

Old North State Winery wwwoldnorthstatewinerycom Surry

Raffaldini Vineyards and Winery wwwraffaldinicom Wilkes

RagApple Lassie Vineyards wwwragapplelassiecom Yadkin

RayLen Vineyards wwwraylenvineyardscom Davie

Round Peak Vineyards wwwroundpeakcom Surry

Shelton Vineyards wwwsheltonvineyardscom Surry

Stonefield Cellars wwwstonefieldcellarscom Guilford

Stony Knoll Vineyards wwwstonyknollvineyardscom Surry

Surry Community College Winery httpwwwsurryedudeptsviticulturetastinghtml Surry

Thistle Meadow Winery wwwthistlemeadowwinerycom Alleghany

Weathervane Winery wwwweathervanewinerycom Davidson

Westbend Vineyards wwwwestbendvineyardscom Forsyth

Zimmerman Vineyards wwwzimmermanvineyardsnet Randolph

APPENDICES hellip 9

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region

Page 37: Business Development Needs of the Wine Industry in the Yadkin Valley, Swan Creek, And Haw River Viticultural Areas

8182019 Business Development Needs of the Wine Industry in the Yadkin Valley Swan Creek And Haw River Viticultural Areas

httpslidepdfcomreaderfullbusiness-development-needs-of-the-wine-industry-in-the-yadkin-valley-swan 3737

GRAPE GROWER COUNTYJerry Bell Alamance

Kieffer Farms YadkinOakwood Vineyards Yadkin

Parkers Orchard Wilkes

Cabin Creek Berry Farm Davidson

Bettini Farm Inc Guilford

Garretts Vineyard Guilford

Birchcreek Vineyard Guilford

Windy Knoll Farm Guilford

Hills Orchard amp Vineyard Randolph

14 Additional Individual Grape Growers Identified By Name

(names withheld in this report)Counties In Piedmont Triad Region