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Cold-climate grape regions look for wine industry traction

What factors increase the survival and growth of wineries in their first five years? One of the main challenges is the relative isolation faced by a small group of wineries in a rural area. Cool climates restrict grape varieties that can be grown.

What gives an upstart wine region the traction to develop into a world-renowned producer of wine? Miguel Gómez, assistant professor at the Charles H. Dyson School of Applied Economics and Management, is working to identify the keys to success for the newest cool-climate wine regions in the eastern United States.

"Small- and medium-sized wineries are important for rural development because of their multiplier effect -- they draw tourists who patronize other businesses, such as hotels, restaurants, gas stations and farm markets," said Gómez. "Our goal is to figure out what factors increase the survival and growth of wineries in their first five years and then translate them into business practices and plans for regional development."

The four-year project, funded by a $498,000 grant from the Agriculture and Food Research Initiative of the USDA National Institute for Food and Agriculture, is a joint effort among Gómez, Michigan State University professor Brent Ross and project director Fabio Chaddad from the University of Missouri.

New York, Michigan and Missouri are all home to emerging clusters of wineries in nontraditional wine regions.

"These states' wine regions feature new wineries that are small and face common challenges to survive and grow," said Chaddad. "They are not direct competitors and can learn a lot from each other."

New York's Finger Lakes region and Oregon's Willamette Valley are their role models for success. In New York, the team will focus on three of New York's newest wine regions -- the Niagara Escarpment, Lake Champlain and the Thousand Islands -- where the number of wineries ranges from five to 15.

According to Gomez, one of the main challenges is the relative isolation faced by a small group of wineries in a rural area. Most rely on tourist traffic visiting their tasting rooms for the majority of their wine sales. For this reason, the success of any individual winery may depend not just on its business practices but on partnerships with local businesses, home municipalities and other attractions in the area.

"By the study's end, we will be able to offer collective action strategies that foster regional development and help the young wineries," said Gómez. "This can include actions as diverse as working with municipalities to provide better roads for tourist traffic and working with festival organizers to develop links between the wineries."

Variety restriction

New wineries may also be inexperienced in marketing, which can be tricky because cool climates restrict grape varieties that can be grown.

"Many of these regions are growing grape varieties that may be less familiar to consumers, such as the cold-hardy Frontenac," said Gómez. "It would be very difficult for a single winery to promote the legitimacy of a new wine region with new types of wine, but a regional branding effort which emphasizes the new varieties can turn that novelty into an advantage."

The economists will use surveys and interviews to analyze which business practices reduce transaction costs, increase grape and wine quality and promote winery success, including the terms of contracts between grape growers and wineries. They will also take the on the challenges of wine distribution, evaluating tasting-room sales and options for diversification into nonlocal markets, local festivals and restaurants.

"Wineries currently share quite a bit of information about the methods they use in grape growing and winemaking, much of which is facilitated by Cornell Cooperative Extension," noted Gómez. "We'd like to see the same level of information exchange about business practices as well, to help these wineries move from the startup phase of their lifecycle into the growth phase."

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