Innovation and market growth in a new ‘New World’ wine region: the case of North Carolina

Abstract

Using a broad theoretical framework of informal network interactions, resource endowments and institutional analysis, this paper examines the cycles of failure and success in the effects to establish a wine industry in a region in the South Eastern USA. Early attempts to grow vinifera grapes persistently failed because until recent decades there was no information available about how to combat diseases. Muscadine-based wines, from a native grape, flourished but then fell foul of institutional pressures (prohibition) that eliminated the industry at the beginning of the twentieth century. The industry's rebirth since the 1970s, initially with muscadines but then in recent decades focused upon vinifera and hybrids, is a product of informal networks where crucial knowledge has been shared, resource-rich leader firms have established professional production methods and provided operational benchmarks, and institutional support that has encouraged new industry entrants.

Keywords:

• new world
• wine markets
• winery/ies
• USA
• viticulture
• small wineries
• winemaking
• boutique wine/s
• competition
• contractual relationships
• viognier
• decision procedures
• regional economy
• rural development

Acknowledgements

Thanks to R. Saylor Breckenridge for useful comments on an early draft of this paper.

Notes

See Giuliani (2006) whose study of Italian and Chilean wine clusters shows that firms with stronger knowledge bases are more likely to exchange information with other firms in the cluster.

According to Leon Adams, this grape variety is attributed to the Lieutenant Governor of Pennsylvania's gardener John Alexander, who found the vines growing near Philadelphia and planted them in the Lieutenants Governor John Penn's garden. It proved resistant to the cold winters and pests that killed the European vines and was plated elsewhere, including Thomas Jefferson's garden in Virginia. Adams, The Wines of America, p. 43.

Quoted in Adams, The Wines of America, p. 20.

See for example Records of the Moravians in North Carolina, (1926), April 23, pp. 1083, 1084 and 2392.

American Farmer, 6 April 1827.

Report of the Commissioner of Patents, 1853.

How much wine was actually made in the state during the late 1930s and 1940s is difficult to determine. Figures on grape harvests are imprecise because all too often they include table grapes. In the early part of 1935, vines were planted throughout the south, including North Carolina, but within a year interest in such a grand project apparently faded as farmers either failed to appreciate the potential benefits of viticulture or merely decided there might be other more viable crops. According to the 1940 census, only two licensed commercial wineries were listed in the state.

Issues such as labor use and revenue stream comparisons with tobacco, cotton and strawberries were evaluated, as well as potential yields per acre. See Mathia (1966), pp. 23–36 for details.

See for example Somers (1986) and Lawrence (1987).

Evidence of this can be found in numerous local newspaper articles in the region plus analyses in the newly formed local wine magazine/journal, On the Vine, published several times a year to highlight activities in the new industry.

See Oches (2005) for a further discussion of this program and its staff.

These include Trevor Phister who teaches and researches in enology (a 75% research appointment and 25% extension appointment) and the recent appointment of Sara Spayd who is the Extension Viticulturalist and teaches several courses in this area. She came from Washington State where she spent 26 years working as a Research/Extension enologist and thus brings a level of expertise hitherto lacking in this division.

For further details, see 2009 North Carolina Wine Summit report from the North Carolina Wine and Grape Council. Other topics are crop level management for certain varietals, clone and cultivar evaluations, analysis of phenolic compounds in NC grapes, nutrient response in vinifera grapes and soil erosion in steep slop vineyards. Also, the Wine and Grape Council issues periodic emails informing members of technical issues that should be addressed at key times of the year. Such details are a product of ongoing research reporting by various research agencies and evidence of the public/private partnership that has been developed.

For a fuller discussion of wine industry regulation since prohibition, see Beliveau and Rouse (2010).

Further discussion on the various laws and their impact can be found in McDavid (2005) and Corwin (2006).

Wine trails have been particularly successful in the Finger Lakes Region of New York. Area wineries promote their proximity to each other as well as ancillary features such as restaurants, hotels, etc., in order to attract visitors who otherwise might not visit a single winery. Sometimes transportation is provided in the form of a bus that shuttles visitors between wineries and other sites of interest in the area. In North Carolina, the Winton-Salem Visitors’ center provides a map, self-guided compact disc and information on a series of Yadkin Valley wineries close to the city.

See McRitchie's (2003) article about another first for North Carolina and what goes into appellation status.

AVA designations are defined by the Tax and Trade Bureau (formerly the Bureau of Alcohol, Tobacco and Firearms) and generally indicate distinct climatic and geographical features of an area. While not a guarantee of quality, the designation signifies that this is a good region to grow grapes and that there might be distinctive features associated with grapes that derive from the region. The latter is reinforced by the specification that 85 percent of appellation grapes must go into a wine that has such a designation.

The concept of club good refers to generally available information that is crucial to overall network efficiency and accessed by all actors within the network. See Giuliana (2007) for further elaboration of this concept.

There is considerable evidence of firms such as spray companies, trellis providers, harvest machinery makers, mobile bottling companies and even real estate agents specializing in vineyard sales. See the numerous advertisements for such services in local trade magazines such as On the Vine.