Marrison, D.L., Assistant Professor, The Ohio State University Extension

ABSTRACT

The grape and wine industry is a dynamic part of Ohio’s economy with 2,200 acres of grape vineyards and more than 100 wineries.  OSU Extension led a study to examine the land use, succession, and future operational concerns of this industry.  Thirty-two percent (32.0%) indicated vineyards had been removed or developed for housing within one mile of their operation.   The top three operational concerns for the future were costs, employees, and regulations.   Fifty-two percent (52.7%) indicated they did not know who would take over their operation in the future with 80.0% reporting they did not have a written estate plan.

Introduction

The grape and wine industry has been a dynamic part of Ohio’s agriculture industry for over a century.  During the past decade the industry has grown to include 2,200 acres of grape vineyards and more than 100 wineries.  This growth was aided in part by the Ohio vine grant program conducted in 2000 which encouraged the establishment of new wine grapes in Ohio (Brown, 2000).   Many of Ohio’s vineyards are located where unique microclimates exist.  These microclimates allow grape vines to develop their buds late in the spring to avoid frost while providing an extended growing season which allows for the maturation of the grapes.  Water course such as rivers and lakes are often key components of these unique microclimates.  Ohio’s largest grape growing region is located in the northeast community of Harpersfield divided by the Grand River and in close proximity to Lake Erie. This unique microclimate however is threatened by the Cleveland Ohio Metropolitan area sprawling eastward towards this unique microclimate.

Ohio is one of the United State’s most populated states.  This population provides a clientele base for grape and wine products with over 1.7 million people visiting Ohio grape and winery operations each year (Marrison, 2008).  However, this population can exert undue developmental pressure on vineyard operations.  A study conducted in Ohio (Evans-Cowley & Gough, 2006) asked township officials about the greatest land use issue facing them. Rural sprawl was identified as the most prominent land use issue confronting communities.  The 2000 Ashtabula County Farmland Preservation Plan (Marrison & Welker, 2000) cited the strong development pressure which exists on the grape and wine industry of northeast Ohio.   The Harpersfield grape growing region was listed as the highest priority by the plan due to its unique microclimate and proximity to urban pressure.  The 200 farmland preservation plan noted this grape growing region could be adversely affected by development. 

As the age of vineyard and winery operators increases, transferring the ownership and management of the family business to the next generation will also challenge the industry.  A comprehensive survey conducted of family wine businesses throughout California, Oregon and Washington (McMillan & Steinthal, 2008) showed the majority of survey respondents who desire to keep their winery family-controlled are unprepared for the successful transition of ownership. In this study, 51% of the respondents indicated the control of their business would change in the next ten years.  Of those planning to retire or semi-retire within ten years, only 28% had developed a succession plan for their business.  

Given the increasing land use and developmental pressures near the Ohio grape growing regions coupled with the limited research data about succession planning in the Ohio grape industry prompted OSU Extension to conduct this study. This article examines the results of this research study.

Procedures

This project was conducted in cooperation with the Ohio Wine Producers Association and the Lake County Soil & Water Conservation District.  A literature review was conducted in 2006-2007 of existing viticulture, wine, and land use surveys. A survey was the developed to examine vineyard planting and expansion projects, estate and succession planning, development pressures, and concerns for the future operation of Ohio grape and wine businesses.  The survey was pilot tested utilizing input from five members of the Ohio grape industry.  This project was reviewed by the Institutional Review Board at The Ohio State University.

One-hundred forty-nine (n=149) vineyard and winery operations were mailed a survey in July, 2007 with a second mailing in October to non-respondents.  Ninety-seven of the surveys were sent to winery operations and fifty-two were mailed to vineyard operations that do not have wineries.  These growers are described as “grower-only” in this summary data.  This group is predominantly grape juice growers, but includes a few producing wine grapes that are sold to neighboring wineries.  The surveys were coded for mailing purposes only.  All information was confidential and summarized in aggregate.

Seventy-seven total producers (51.6%) responded to the survey.   Sixty-one percent (n=32) of the grower-only group responded and forty-six percent (46.3%) of the winery operations (n=45) responded. A total of 842 acres of grapes were reported by survey respondents. Sixty-eight percent (68.0%) of the respondents were from operations located in northeast Ohio, nine percent (9.1%) from northwest Ohio, twelve percent (11.8%) from southeast Ohio and eleven percent (10.5%) from southwestern Ohio.  Data were analyzed using the statistical program Statistical Package for the Social Sciences (SPSS). Pearson Chi-Square tests were used to analyze the significant differences between the winery and grower respondents.

Ohio Vineyard Plantings

Almost forty-eight percent (n=35) reported planting a total of 146.55 new acres of grapes during the past five years.  There was a significant difference between the winery and grower-only group in regards to these new plantings (α = 0.01 level). Sixty-five percent (65.1%) of the winery respondents (n=28) reported they planted new acreage compared to only twenty-three percent (23.2%) of the grower-only group.

Twenty-eight respondents (39.4%) anticipate planting a total of 234.7 new acres of grapes in the next five years.  Again, there was a significant difference between the winery and grower-only group in regards to new plantings (α = 0.01 level).  Fifty-nine percent (59.5%) of the winery respondents (n=25) reported they would plant new vines compared to ten percent (10.3%) of the grower-only group.

Over fifty-one percent (51.9%) of the respondents indicated they would consider renovating, expanding or establishing a vineyard if a statewide vine grant program was offered again by the Ohio Department of Agriculture with an additional twenty-two percent (22.1%) of the respondents uncertain.  A significant difference existed between the two groups on this question as well (α = 0.01 level).  Seventy-one percent (n=32) of the winery respondents answered they would be interested in a vine grant program in comparison with twenty-five percent (25%) of the grower-only group.

Estate and Succession Planning

Only nine percent of winery (8.9%) and of vineyard (9.1%) respondents indicated they planned on selling or transferring their business in the next five years.  A significant difference (α = 0.05) did exist between the number of winery and the grower-only group who may be interested in transferring their vineyard operation.  Thirty-four (34.4%) of the grower-only group responded they may transfer versus thirteen percent (13.3%) of winery respondents.  

Fifty-two percent (52.7%) of the respondents indicated they did not know who would take over their operation in the future with sixty-six percent (65.6%) of the grower-only group not knowing who will take over their operation (Table 1).

Table 1.

Business Transfer

Is there a plan in place to transfer your business upon your retirement or death?	All Respondents (n=75)	Grower-Only Group (n=32)	Winery Respondents (n=45)
Yes, a family member will be taking over	36.5%	31.2%	40.5%
Yes, a non-family member will be taking over	2.7%	0%	4.8%
No, I do not know who will take over my operation	52.7%	65.6%	42.9%
Other	8.2%	3.1%	11.9%

While thirty-nine percent (39.2%) of all respondents indicated a family or non-family member would take over their operation, many had not formalized their intentions through a written estate plan.  Eighty percent (80%) reported they did not have a written estate plan.  This number was higher for the grower-only group as eighty-nine percent (89.3%) of this group (n=25) did not have a written plan whereas seventy-four percent (73.8%) of the winery group did not have an estate plan. 

Utility Services & Land Use Changes

Producers were asked to indicate which public utility services were adjacent to their winery or vineyards.  Ninety-four percent (93.5%) reported electric, seventy-four percent (74%) cable, forty-three percent (42.9%) public water, fifteen percent (14.5%) sewer, and five percent (5.2%) reported no public services adjacent to their property. 

Producers were also asked six questions with regards to land use changes near their operations (Table 2).  Only five percent (5.2%) of the respondents had sold any of their land for development during the past five years.  Forty-one percent (41.6%) reported abandoned vineyards within one mile of their vineyards.  There was a significant difference between the grower-only and winery groups (α = 0.01 level) with regards to this question as seventy-five percent (75%) of the grower-only group responded there were abandoned vineyards within proximity compared to eighteen percent (17.7%) for winery operations.  

Table 2.

Local Land Use Impact on Vineyard and Winery Operations

Land Use Impact on Vineyard & Winery Operations	All Respondents (n=75)	Grower Only (n=32)	Winery Operations (n=45)
Have you sold any of your land for development during the past five years?	5.2%	6.3%	4.4%
Are there any abandoned vineyards within one mile of your vineyards?	41.6%	75.6%z	17.7%z
Have any vineyards been removed or developed for housing within one mile of your operation in the past five years?	32.0%	56.7%z	15.6%z
Have you experienced any negative impact due to housing construction near your vineyard?	13.2%	15.6%	11.4%
Have you had problems with zoning or other state and/or local regulations which have affected the achievement of your business goals?	26.3%	9.4%z	38.6%z
Would you consider compensation for preserving and protecting your vineyard property from development?	42.7%	43.8%

^z Responses for grower-only & winery were significantly different at the α = 0.01 level.

Thirty-two percent (32.0%) reported vineyards had been removed for construction within one mile of their operation.  Fifty-six percent (56.7%) of the grower-only group reported vineyards had been removed for housing.  This was significantly greater (α = 0.01 level) then the winery operations at sixteen percent (15.6%). Only thirteen percent (13.2%) of all respondents indicated they had experienced negative impact due to construction near their vineyards. 

Only twenty-six percent (26.3%) reported having any problems with zoning or other state and/or local regulations which affected the achievement of their business goals.  However, winery operations indicated greater problems (α = 0.01 level) with local or state regulations (38.6%) than the grower-only group (9.4%).  Forty-two percent (n=32) of all respondents reported they would consider compensation for preserving and protecting their vineyard property from development.  

Respondents were asked if you ever wanted to sell your vineyard operation, which statement or statements would best describe themselves or their family (Table 3).  Forty percent would prefer to keep it a vineyard but would sell to the highest bidder if they could get more money from a housing developer than a grape grower.  The groups differed significantly (α = 0.01) on this statement as sixty-one percent (61.3%) of the grower-only group would prefer it to remain as vineyard but would sell to the highest bidder compared to twenty-five percent (25%) of the winery group. Seventeen percent (17.3%) reported they would sell to the highest bidder and twenty-four percent (24%) indicated they would sell it someone who would keep it a vineyard.

Table 3.

Selling Your Vineyard Operation

If sell vineyard, what statement would best describe you?	All respondents (n=75)	Grower-Only (n=31)	Winery operations (n=44)
May the highest Bidder win	17.3%	20.6%	13.6%
Sell to someone who will keep as a vineyard	24.0%	16.1%	29.5%
Prefer to keep vineyard but sell to highest bidder	40.1%	61.3%z	25.0%z
Other	8.0%	3.1%	11.4%
Not Applicable	12.0%	0%	20.5

^z Responses for winery & grower-only were significantly different at the α = 0.01 level.

Future Operational Concerns

Producers were asked to review ten operational concerns and check their top three concerns for the future (Table 4).  The top three concerns for all respondents were costs (80.5%), employees (57.1%), and regulations (55.3%).  The top three concerns for the grower-only group and winery group were similar in order.  However, two variables showed significant differences between the groups. The grower-only group rated costs as more significant concern (α = 0.05 level) than their winery counterparts while the winery respondents viewed employees as a higher concern (α = 0.05 level) than their counterparts.

Table 4.

Operational Concerns for the Future

Concern Area	All Respondents (n=75)	Grower-Only (n=32)	Winery Operations (n=43)
Costs	80.5%	93.8%y	71.1%y
Employees	57.1%	43.8%y	66.7%y
Regulations	55.3%	43.8%	63.6%
Taxes	42.1%	40.6%	43.2%
Management	17.3%	21.9%	14.0%
Finance	17.1%	15.6%	18.2%
Information	8.0%	6.2%	9.3%
Competition	6.5%	3.1%	8.9%
Technology	4.0%	3.1%	4.7%
Public Service	2.7%	0%	4

^y Responses for winery & grower-only were significantly different at the α = 0.05 level.

Summary

Respondents indicated they plan to plant 235 new acres of grapes during the next five years.  Over fifty-one percent (51.9%) of the respondents indicated they would consider renovating, expanding or establishing a vineyard if a statewide vine grant program was offered with an additional twenty-two percent (22.1%) of the respondents uncertain. Seventy-one percent (71.0%) of the winery operations would be interested in a statewide vine grant program.  Forty-three percent (42.7%) of all respondents reported they would consider compensation for preserving and protecting their vineyard property from development. 

There has been concerned expressed with the future of the industry due to housing and development pressure.   Thirty-two percent (32.0%) of all respondents indicated vineyards had been removed or developed for housing within one mile of their operation.  This number increases significantly to fifty-seven percent (56.7%) for the grower-only group. However, only thirteen percent (13.2%) reported having experience any negative impact due to this construction

The top three operational concerns for the future were costs, employees, and regulations.   Another potential threat to the Ohio and grape wine industry is the lack of planning for the transition of their business. Fifty-two percent (52.7%) of all respondents indicated they did not know who would take over their operation in the future. Eighty percent (80.0%) reported they did not have a written estate plan.  This number was higher for the grower-only at eighty-nine percent (89.3%).

As a result of this study, OSU Extension has shared the survey results with township and county officials in the grape growing regions so they may be better aware of the land use and future concerns of the Ohio grape community.  There is a clear need for succession and estate planning education with this industry especially with the grower-only group.  A greater emphasis on estate and succession planning has been placed on regional and state Extension programs to help address the lack of planning by producers in these areas.  As a beginning, estate and succession planning topics were highlighted at the 2009 Ohio Grape & Wine conference and the Northeast Ohio winter grape school.

References

Brown, M. (2000). Grant program to increase wine grape production in Ohio.Journal of Extension [On-line],38(1).  Article 1IAW3.  Available at:http://www.joe.org/joe/2000february/iw3.php

Marrison, D.L. (2008). Ohio wine lover’s survey. Retrieved March 1, 2009, from: http://ashtabula.osu.edu

Evans-Cowley, J. & Gough, M (2006). Land use planning and zoning in Ohio townships. Journal of Extension [On-line],44(4).  Article 4RIB5.  Available at: http://www.joe.org/joe/2006august/rb5.php

Marrison, D.L. & Welker, J. (2000). Ashtabula county farmland preservation plan. Retrieved July, 2008 from: http://www2.suite224.net/~ashtswcd/farmland_preservation.htm

McMillan, R. & Steinthal (2008). Ownership transitions in the wine industry. Retrieved March 5, 2009 from:www.svb.com/pdfs/wine/WineTransitionReportJan2008.pdf

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