the economic role and outlook for oregon’s craft industries · 12.09.2014 · breweries,...
TRANSCRIPT
OFFICE OF ECONOMIC ANALYSIS
The Economic Role and Outlook for Oregon’s Craft Industries
OLCC Commission Task Force Meeting
September 12th, 2014
Mark McMullen
State Economist
OFFICE OF ECONOMIC ANALYSIS
The Role of the Craft Alcohol Cluster in Oregon’s Regional Economy
2
OFFICE OF ECONOMIC ANALYSIS
Craft Industries In the Jobs Data
3
- 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Drinking Places
Brewpubs
Wholesalers
Wineries
Liquor Stores
Breweries
Distilleries
Oregon Employment
Missing Industries Include: Hops, Barley and Grain Producers, Equipment Manufacturers, Specialized Industry Consultants and Business Services
OFFICE OF ECONOMIC ANALYSIS
-10%
0%
10%
20%
30%
40%
50%
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Alcohol Cluster Employment Breweries, Wineries, Distilleries, Beer/Wine/Alcohol Wholesalers, Beer/Wine/Liquor Stores, Drinking Places
United States Oregon
+4,500 Jobs
+54,700 Jobs
What Great Recession?
4
OFFICE OF ECONOMIC ANALYSIS
Oregon’s Comparative Advantage
5
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2.2%
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Oregon Employment, Share of U.S.
Alcohol Cluster
Total Nonfarm
OFFICE OF ECONOMIC ANALYSIS
Broad Regional Footprint
6
0.0% 0.5% 1.0% 1.5% 2.0% 2.5%
SE Oregon
South Coast
Willamette Valley
Southern Oregon
Statewide
Portland MSA
NE Oregon
Central Oregon
Columbia Gorge
North Coast
Alcohol Cluster as Share of Employment, 2013
OFFICE OF ECONOMIC ANALYSIS
Alcohol Cluster Employment by County
7
2013
Oregon Office of Economic Analysis
>75%
15-75%
+/- 15%
-15-75%
<-75%
OFFICE OF ECONOMIC ANALYSIS
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Food Services &Drinking Places
CropProduction
Wineries FoodManufacturing
Breweries Distilleries Wood ProductsManufacturing
Average Pay Per Oregon Worker, 2013
Craft Industry Jobs Pay Better than Many Consumer Industries
OFFICE OF ECONOMIC ANALYSIS
Brewing: New Breweries Spread In Oregon, While Mature Firms Look to Other Products and Markets
-
10,000
20,000
30,000
40,000
50,000
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
Barrels of Beer for Oregon Consumption 12 Month Average
Legacy Breweries
Other Existing, Pre-2005
Big Start-Ups
Other Start-Ups
Legacy: Bridgeport, CBA, Deschutes, Full Sail, Portland, McMenamins, Rogue Big Start-Ups: 10 Barrel, Boneyard, Burnside, Crux, Double Mountain, Fort George, Gigantic, Good Life, Hop Valley, Hopworks, Ninkasi, Pfriem, Worthy
54%
10%
27%
9%
22%
6%
53%
19%
Brewing Gains Share of Total Statewide Gain
from 2006 to 2014
Legacy Breweries Other Pre-2005
Big Start-Ups Other Start-Ups
OFFICE OF ECONOMIC ANALYSIS
Exports Have Doubled During the Recovery
$0
$2
$4
$6
$8
$10
$12
$14
$16
1996 1999 2002 2005 2008 2011 2014YTD
Mill
ions
Oregon Alcohol Exports
Beer Liquor Wine
OFFICE OF ECONOMIC ANALYSIS
Brewing: A Lot of Little Guys, but the Big Brewers Still Dominate Oregon Sales
0.8% 4.2%
12.1%
26.2%
66.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cum
ulat
ive
% o
f Pro
duct
ion
Cumulative % of Breweries
OFFICE OF ECONOMIC ANALYSIS
Brewing: Little Evidence that Craft Beer Market Has Become Saturated
0%
1%
2%
3%
4%
5%
6%
0
1
2
3
4
5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Oregon Breweries Going out of Business
Number, lhs Rate, rhs
OFFICE OF ECONOMIC ANALYSIS
Demand Backdrop: Determinants of Alcohol Sales
13
OFFICE OF ECONOMIC ANALYSIS
Income Growth Fuels Sales—Particularly Among Middle-Wage Households
14 0.5%
0.6%
0.7%
0.8%
0.9%
1.0%
1.1%
0
200
400
600
800
1000
1200
Allconsumer
units
Lessthan
$5,000
$5,000to
$9,999
$10,000to
$14,999
$15,000to
$19,999
$20,000to
$29,999
$30,000to
$39,999
$40,000to
$49,999
$50,000to
$69,999
$70,000to
$79,999
$80,000to
$99,999
$100,000to
$119,999
$120,000to
$149,999
$150,000and
more
Average annual spending on alcoholic beverages (Dollars, Left)
Share of total spending (right)
OFFICE OF ECONOMIC ANALYSIS
Alcohol Sales Are Very Sensitive to the Business Cycle
15
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1970 1975 1980 1985 1990 1995 2000 2005 2010
Alcohol Spending GDP
OFFICE OF ECONOMIC ANALYSIS
Demographics: Millenials vs Boomers
16
0.50%
0.60%
0.70%
0.80%
0.90%
1.00%
1.10%
1.20%
0
100
200
300
400
500
600
Allconsumer
units
Under25
years
25-34years
35-44years
45-54years
55-64years
65-74years
75 yearsand older
Average Annual Spending on Alcohol (Left)
Share of total spending
OFFICE OF ECONOMIC ANALYSIS
Demographics: Age-Based Alcohol Sales Forecast
17
0.82%
0.84%
0.86%
0.88%
0.90%
0.92%
0.94%
345
350
355
360
365
370
375
380
385
390
395
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Estimated Average Annual Volume of Alcohol SalesBased on Oregon Age Mix
Estimated Share of Spending on Alcohol Based onAge Mix
OFFICE OF ECONOMIC ANALYSIS
Demand Backdrop: Composition of Alcohol Sales
18
OFFICE OF ECONOMIC ANALYSIS
Hitting the Town: The Kids Have Grown Up
19
32%
33%
34%
35%
36%
37%
38%
39%
40%
41%
42%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Share of Alcohol Consumed at Eating and Drinking Places
OFFICE OF ECONOMIC ANALYSIS
Hitting the Town: Preferences Over Time
20
OFFICE OF ECONOMIC ANALYSIS
21
For More Information
Standard Contact: 155 Cottage Street NE Salem, OR 97301 (503) 378-3405 [email protected] www.oregon.gov/das/oea
Social Media: www.OregonEconomicAnalysis.com @OR_EconAnalysis
Department of Food Science and Technology
Oregon State University
Bill Boggess Executive Associate Dean
OLCC Meeting, Bend OR
September 12, 2013
Department of Food Science and Technology
Program Breadth
Fermentation Sciences
Agricultural Inputs Grapes Milk Barley, malt, hops Barley Wheat
Products Wine Cheese Beer Bread Bread
Department of Food Science and Technology
Fermentation Sciences TECHNICAL UNDERPINNINGS: Applied Economics Business, marketing Animal & Rangeland Sciences Dairy research, operations Biological & Ecological Engineering Bioenergy and biomaterials Crop & Soil Science Breeding: hops, barley, wheat Food Science & Technology Enology, brewing, cheese, bread Horticulture Viticulture, small fruits Oregon Wine Research Institute Microbiology Fermentation microbiology
Food Science & Technology
OSU Seafood Laboratory - Astoria
Wiegand Hall - Corvallis
Food Innovation Center - Portland
Department of Food Science and Technology
Second-oldest U. S. Food Science program (1918) One of only two national programs in Fermentation Science Launched in 1996 with major gift from Nor’Wester Brewing Breadth: Enology, brewing, artisan cheese, artisan bread
In-depth expertise: Flavor chemistry, sensory science, food processing, food safety, bio-fermentates
Expanding into distilled beverages and ciders
Rapid 10-year growth of OSU’s Fermentation Science program parallels that of the Oregon’s fermentation industries
OSU Food Science - Fast Facts -
Department of Food Science and Technology
FST Undergraduate enrollment
0
20
40
60
80
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120
140
160
180
200
220
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Enro
llmen
t
Academic year (beginning in Fall)
*
Department of Food Science and Technology
B.S. Degree in Food Science and Technology Food Science 29% Fermentation Science 58% Enology & Viticulture 13%
OSU Food Science Undergraduate Degree Programs*
* Approved programs by Institute of Food Technologists
Department of Food Science and Technology
Graduate Research 37 Graduate students: 24 M.S. 13 Ph.D. Fermentation students: 9 M.S. 3 Ph.D.
Department of Food Science and Technology
Training students to be brewers
Photos courtesy of Lynn Ketchum
Department of Food Science and Technology
OSU Pilot Brewery 2-barrel brewhouse / 6 fermenters
Photo’s courtesy of Steve Werblow
Hops & Brewing Research Shellhammer Lab
• Investigating the sources of citrus aroma/flavor from hops
• Hop harvest maturity influences on oil quality
• Basic studies on dry hopping • How hops affect beer flavor stability • New methods for assessing beer
bitterness intensity • Foam stability, reduced iso’s
Bitt
erne
ss In
tens
ity
Time tmax
Imax Area
Duration
Department of Food Science and Technology
OSU Mini-malter
Photo’s courtesy of Lynn Ketchum
Department of Food Science and Technology
Enology & Viticulture Program
Department of Food Science and Technology
Enology & Viticulture Program E&V Undergraduate Option (Teaching)
– Focus: Developing strong understanding of foundational sciences – Scientific application to winemaking and hands-on training – Teaching winery (Withycombe Hall) and vineyard (Woodhall) – 50+ students in Enology and Viticulture – Graduates placed in wineries in OR, WA, and CA
Department of Food Science and Technology
Research Focus – Understanding factors impacting wine quality; precursors; closures – Positive and negative contributions from microorganisms – Chiral isomers related to wine flavor and aroma impact – Collaboration with Oregon Wine Research Institute team including
viticulturists, flavor chemists, sensory scientists – Influence of yeast on grapes and in the winery – Regional
differences? Winery differences? Commercial yeast vs. naturally present yeast? Role in producing unique, premium quality wines?
Department of Food Science and Technology
Enology Extension Program - Providing wine producers with new information and skills - Applying research results and identifying emerging problems
Department of Food Science and Technology
OSU’s first student venture product
Department of Food Science and Technology
Savor Education Beaver Classic™ Artisan-style cheese • Developed and produced by OSU
Food Science students • Milk from cows in OSU Dairy Center • Oregon characteristics / alpine
tradition • Nutty taste with creamy, buttery and caramelized flavors “Savor fine artisan cheese while supporting our students and preparing them for careers in the food and dairy industry.”
Department of Food Science and Technology
Employers of OSU Ferm. Sci. Grads
Anheuser-Busch MillerCoors Boston Beer Company Deschutes Brewery Full Sail Brewing McMenamins’ Rogue Ales Widmer Brothers Brewing
Willamette Valley Vineyards King Estate Winery Argyle Winery Adelsheim Winery E&J Gallo Chateau St. Michelle Hogue Cellars Tilamook County Creamery Rogue Creamery Tumalo Farms
Department of Food Science and Technology
The Future: Distilled Spirits
Department of Food Science and Technology
Oregon State University
Bill Boggess Executive Associate Dean
OLCC Meeting Bend, OR
September 12, 2014
OREGON’S CRAFT INDUSTRIES ECONOMIC BENEFIT IN THE AGRICULTURAL
SECTOR
Lindsay Eng Director, Market Access & Certification Programs
OREGON HOPS Hop production began in Oregon in 1932. • Oregon is 2nd largest producer in US. • 17% of the United States market share • 5% of hops grown in the world. The majority of hops in Oregon are grown in Marion County with some grown in Polk County. Oregon grows about ten varieties of hops on about 6183 acres. Quality Assured – all hops produced in Oregon are required to be inspected. • The Hop inspection services provided by the ODA provide an official independent analysis
of hop quality that facilitates transactions between hop growers and hop processors. • The presence of leaf, stems and especially hop seeds can alter the character/flavor of the
hops and ultimately the price paid to the grower or processor. • This ODA official inspection, authorized and licensed by FGIS, protects both the growers
who have invested large amounts of time and money to produce the hops and the processor who must guarantee its buyers and brewers they are receiving high quality hops whose flavor and aroma are vital and consistent.
OREGON HOPS
Production by Variety 1000 lbs NASS data 2011 2012 2013 3-yr change
Cascade 425 623.5 627.1 48% Centennial 370 394.6 Fuggles 75.3 Golding 222.7 Liberty 143.2 126.7 Magnum 123.4 146.1 146.2 18% Mt. Hood 404.5 392.6 346.2 -14% Nugget 3332.1 3353.5 3422 3% Perle 159 64.8 Sterling 164.7 197.8 20% Super Galena 545.5 483.6 396.4 -27% Tettnanger 114.4 91.1 Willamette 1337 1504.7 824.7 -38% Experimental 60.7 Other 1270.6 1333.5 1770.6 39% 0
500
1000
1500
2000
2500
3000
3500
4000
NuggetWillametteOther
SPECIALTY CROP BLOCK GRANTS FY 2011 • Promoting US Grown Hops through creation of education and
promotional materials • Includes trade show signage and visit to Anheuser Busch HQ • Achieved goal to keep Oregon hop acreage over 3500
FY 2012 • Promote the use of Oregon grown public hop varieties to craft
breweries and home brewers • Hop Commission attended several brewers and beer festivals
throughout the state • Will develop a new website which will include a public hop variety
manual
SPECIALTY CROP BLOCK GRANTS FY 2014 (Pending) • Creation of an online database for promotion of public hop
varieties • Continuation of 2011 grant to educate brewers, but information will be
posted online and on mobile app • Varieties developed by the USDA Hop Breeding Program (public hops)
make up about 95% of Oregon-grown hops
OREGON WINEGRAPES
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0
5,000
10,000
15,000
20,000
25,000
2007 2008 2009 2010 2011 2012 2013
Acres
Tons
Varietals (by production tons) 2010 2011 2012
Pinot Noir 16,765 23,726 28,565
Pinot Gris 5,312 6,046 7,423
Chardonnay 1,503 1,923 2,605
Syrah 947 1,319 2,097
White Riesling 1,861 1,899 1,812
Tempranillo 235 387 631
All others 4,577 6,200 7,043
SPECIALTY CROP BLOCK GRANTS FY 2014 (Pending) • Building an “Oregon Wine Experience” Mobile Application
• Final development of an interactive, educational mobile application • Roll-out of an iPad app to small wineries vineyards throughout the state • Templates will allow for seamless storytelling for wine enthusiasts
visiting the state • Development of Value-Added Applications of Fruit and Wine
Grape Pomace • Research to develop value-added products from pomace • Solutions could include food ingredients and fiber for packaging
OREGON TREE FRUITS • Traditional apple and pear varieties
grown for commercial fresh market • Oregon is 2nd in US for pear
production • Large commercial apple industry
has decreased, but growing in specialty varieties
• Many burgeoning NW cider producers are growers first • Growing estate orchards of cider
apple and pear varieties • Existing industry provides expertise
in growing and producing tree fruit for cider production, infrastructure, and great land
OREGON TREE FRUITS
SPECIALTY CROP BLOCK GRANTS FY 2014 (Pending) • Creation of an organization to manage growth and promotion of
the Mid-Columbia River Gorge cider industry • Includes a collective marketing strategy, business development
classes, and two annual cider focused events • Formation of production standards for the Northwest cider
industry • Establishing production best practices, creating a certification process,
and standardizing definitions (such as craft, cider, and Northwest)
GRAINS • Barley 53,000 acres (2012)
• 3,816,000 bushels produced worth $23,850,000
• Bulk of production centered around the North Central and Northeast regions of the state
• Rye and oats are centered around the same areas of the state with small-scale production of other cereal grains occurring in other areas of Oregon.
• Not a significant amount of malting facilities/infrastructure in Oregon for malted barley
Oregon Beer, Wine, and Spirits
Bill Schuette, Economist Oregon Liquor Control Commission
OLCC’s Role With Craft Industries • License
o Brew Pubs, Breweries, Wineries, Distilleries • Tax (Privilege Tax)
o Collect and audit o Distribution of $0.02/gallon to OR Wine Board o Collect and audit $25 per ton tax for grapes for
the OR Wine Board • Distribute Spirits
o Contract with Distillery Agents to Sell Spirits o 248 Liquor Stores plus 61 Distillery Agents
Oregon Winery Licensees • 954 Winery Licenses (622 Locations) in 2014
o Import, bottle, produce, blend store, transport, and export wines. o Most allow wholesale and retail sales o Multiple licenses may be housed at one location
Oregon Winery Licenses
Oregon Winery Licenses
0200400600800
10001200
Lice
nses
Year
Oregon Winery Licenses
Who Pays Wine Tax In Oregon $9.5 Million in FY 2013 License Type Percent of Tax Collections
Out of State Direct Shippers and Wine Self Distributors
4%
Warehouse 4%
Distributor (WMBW)
89%
Winery 3%
Wine Tax • Table Wine Privilege tax $0.67
per gallon o Less than 14 % ABV o Collected $8.8 Million in 2013
• Dessert Wine Taxed at $0.77 per gallon o Greater than 14.01% ABV o Collected $0.7 Million in Fiscal Year 2013
More on Oregon Wine Tax • Small Winery Exemption
o If winery produces less than 100,000 gallons in calendar year then they can exempt 40,000 gallons from wine tax
o 37 Oregon Wineries paid wine tax in 2013 (out of about 954)
o Applies to In-state and Out-of-State Wineries
o Can be moved between licenses
Oregon Wine Movement From 2013 Tax Records (in and out of state production)
• Table Wine – 27.9 million gallons o 20.5 million gallons sold o 5.0 million gallons exported o 2.4 million gallons exempted
• Dessert Wine – 2.9 million gallons o 1.9 million sold o 0.5 million exported o 0.5 million exempted
Oregon Brew Pubs & Brewery Licenses
0
50
100
150
200
250
300
Oregon Breweries & Brew Pubs
Who Pays Beer Tax in Oregon $6.9 million in FY 2013
License Type Percent of Tax Payments
Brew Pubs /Breweries 15%
Warehouse 34%
Distributor (WMBW) 49%
Wineries (Cider) 2%
Oregon Malt Beverage Production
• Malt Beverage is defined as alcohol under 7% ABV
• Taxed At $0.08 per gallon o No production exemptions
• 43.1 Million Gallons Sold in 2013 from Oregon Brew Pubs and Breweries
Oregon Malt Beverage Production From 2013 Tax Filings
• 84.4 million gallons taxed in FY 2013
• 43.1 Million gallons from Oregon Brewers o 15.9 Million Gallons Sold in Oregon
• 19% of state consumption o 27.2 Million Gallons Exported
• 63% of total production exported
Cider Production • Produced under a Winery License • Taxed as Malt beverage unless over 7% ABV • Estimated to be 30 cider producers in
Oregon in 2014
Cider Producers in Oregon* *estimated
0
5
10
15
20
25
30
35
Oregon Distilleries • 72 Distilleries in July 2014
o Includes 61 distillery agents that can sell retail
• $66 million in Gross Sales in Oregon o 12.5% of total sales o $3.9 million from distillery locations in
2014 • $2.6 million in FY 2013 (49%
Increase)
• OLCC does not track exports from Oregon Distilleries
Oregon Distilleries
Questions?