North Bay Business Journal

Monday, August 27, 2012, 6:33 am

Economist sees three paths for Napa economy

They are: Status quo, stepped up wine and tourism, and building new base of industry


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    NAPA — The Napa Valley can take three paths for its economic future, options that Los Angeles-based Beacon Economics Founding Principal Chris Thornberg said should have a common starting point for policy makers: early planning and clear vision to build on the strength that wine and tourism have brought to the region.

    Chris Thornberg

    Chris Thornberg

    “My perspective is that there are three paths that political forces in Napa can choose. One is — maintain the status quo, keep it a high-end area and ride on its historic reputation,” he said. “Alternatively, there are two other ways they can go — How do we step up our game in combination with tourism, and what about ultimately developing our industrial base in the way that Sonoma has?’”

    In the days leading to his keynote speech at the North Bay Business Journal’s annual “Impact Napa” economic conference Thursday, Mr. Thornberg said that he saw a number of pressures encroaching on Napa’s dominance among other wine-making regions in the United States.

    Chris Thornberg’s presentation at Impact Napa

    Download the PDF (2.23 MB)

    Those pressures include the increasing profile of regions like Sonoma County and the Northwestern United States among savvy wine consumers. While the Napa Valley enjoys broad international recognition, maintaining the current strong economic position may require a decisive effort among policy makers in the next five to 15 years.

    “The short run data is very good for Napa,” he said. “The question is — is the region starting to think ahead again?”

    In noting potential opportunities for the region, Mr. Thornberg said that Napa could enhance its position as a destination by developing large-capacity conference spaces, particularly ones that are coupled with existing wineries.

    Other opportunities could include the development of an industrial zone to encourage the geographic spread of high-tech industry from Silicon Valley in the direction of Napa.

    Yet attracting new industry to Napa would be a long-term effort, with excess capacity for high-tech companies enduring in Sonoma County and the East Bay Area.

    As one of Napa’s core industries, wine, particularly the high-end products, has enjoyed a surge in international demand.

    “Tourism has made a very strong bounce-back across California,” he said.

    Mr. Thornberg will join a number of other voices to discuss the Napa County economy at the Napa Valley Marriott Hotel & Spa on the morning of Thursday, Aug. 30. Tickets are $45 per person, and $450 for a table of 10. Visit www.northbaybusinessjournal.com for more information.

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    1. August 30, 2012, 3:05 pm

      by Giles Beeker

      I agree with much of what Mr. Thornberg says and I believe that there are many factors that will influence how the Napa Valley will evolve. There are decisions that could be made today that to help propel the valley towards sustainable, positive growth- growth that respects our agricultural traditions and produces economic expansion.

      One of the biggest factors I see in this evolution is the emergence of direct to consumer (DTC) sales and the substantial increase in profit for this type of sale over sales through the traditional three tier system. Wine sold directly to the consumer typically nets the winery 2 – 3 time the profit of a bottle sold through the producer-distributor- retailer- consumer protocol. DTC sales are most easily made through winery visits and direct engagement between the consumer and the winery. From a pure profit perspective, Napa Valley wineries have a strong motivation to attract more visitors to the valley and make it easy for them to visit their tasting rooms and join their wine clubs. An essential part of any plan for improved growth and employment has to begin with delivering guests to tasting rooms and facilitating their purchase of wine and enrollment in wine clubs.

      The Napa Valley, despite many representations to the contrary, is a mono-economy; without the premium wine industry much of valley’s other business activity would wither and die. Economic success seems predicated on making Napa Valley wineries accessible, profitable, enjoyable, safe and appealing and realizing the concomitant benefits of their success to businesses that directly and indirectly support wine tourism

      We already see innovation and expansion in this direction; soon Charles Krug will look much more like V. Sattui (large deli, picnic area and event space); the old St. Helena Marketplace will house a tasting room, restaurant and picnic area; Ma(i)sonry has built a great following as a “lifestyle” venue that supports its owner’s wine brands as well as other small producers in a unique design and art gallery setting- and the list continues. This type of business programming seems squarely focused on driving DTC sales- yet; these are not solutions available to all wineries. Krug’s expansion was enabled by its age; it predates the legislation and therefore is exempt from many of the most restrictive rules. The St. Helena Marketplace shares ownership with an adjoining winery and its zoning allows for a broad range of uses (although it does not seem to allow for meetings and events.) Ma(i)sonry is part of a well-reasoned, long term strategy to develop a multi-layered “lifestyle” business that includes wine as the cornerstone of its product mix.

      I agree with Mr. Thornberg’s premise that the availability of meeting and event space will be a factor in the growth of tourism. The limitations imposed by the “Winery Definition” and restrictions within the Ag Preserve make it almost impossible to expand the range of activities and business lines at most wineries. Creating meeting and event space at more wineries will be nearly impossible- and perhaps unnecessary. A perfect venue for the size and type of meetings- especially corporate meetings- already exists, the former Copia space. And with a hotel development planned for the vacant land to its northeast, it could function as a “right-sized” convention center for the Napa Valley.

      With lodging becoming more concentrated in Napa and American Canyon, movement between lodging and wineries becomes vitally important. Travelers, and especially corporate travelers, come to the Napa Valley to enjoy the wineries- many of which are located up-valley. The only option for public transportation between the areas of lodging concentration and the wineries with the highest recognition (mostly, but certainly not only, located along Rt. 29 between Yountville and St. Helena) is the VINE bus- and few business travelers would use this mode of transportation. A local group headed by a notable Napa Valley vintner, Chuck McMinn (Vineyard 29), conducted a series of presentations last year- exploring the possibility of creating and operating a scheduled light rail service following the Wine Train right of way and operating between southern Napa and St. Helena. The presentation was compelling and at least on the surface the business plan looked impressive and realistic. In addition to providing an excellent way to link lodging areas to wineries, the light rail program would also deliver workers to up-valley employers and reduce both the total number of cars and the number of impaired drivers that continue to make up-valley roads congested and at times unsafe.

      Sonoma County and its wine region is expansive and charming; it offers many different options for travelers to enjoy- but it cannot be compared to the compact beauty and rustic elegance of the Napa Valley. The work to communicate and market the appeal of the Napa Valley to leisure and group travelers is impressive; Clay Gregory and the team at Visit Napa Valley have been effective evangelists and their efforts have played a large part in sustaining tourism growth through this downturn. They can be even more effective with a few more tools to work with- like scheduled light rail and a top quality convening and assembly venue.

      As a Napa Valley resident I am hopeful that our future adapts to the new realities of the marketplace, takes advantage of the tremendous assets at our disposal, creates durable and full employment opportunities for all our neighbors- and that we continue to lead by example as thoughtful stewards of the land and protectors of the environment.

    2. March 18, 2013, 11:43 am

      by Albert Portney

      I fully support what Mr Beeker has put forth. His amazing academic record at Oxford University combined with his exemplary management of the entire 96 Olympics hospitality initiative give me faith that his vision is spot on.

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