Economic Opportunities For Profitable Winery Operations In North Carolina

The purpose of this report is to present information useful to grape growers and potential investors interested in constructing and operating wineries in North Carolina. The specific information relates to construction and operating costs and the profitability of processing grapes into wine in selected winery sizes. Data required to estimate costs and profitability were obtained from existing wineries, equipment manufacturers and published reports. Three basic winery operations were selected for detailed analysis. Output and product mix are varied for each of the three wineries. The three basic output levels of the three wineries are 20, 100 and 500 thousand gallons. Blending of bulk wines is used to generate three operating options. Actual costs of producing wines under assumed conditions ranged from $1.05 per fifth of pure scuppernong wine for the small winery to 88 cents per fifth for the medium and large wineries. Blending with bulk wines to double output lowered costs by 26 cents per fifth in the small winery but only 13 cents per fifth in the large winery. The medium winery operated at lower costs resulting from economies of size relative to the small winery and from tax advantages relative to the large winery. The out-of-state tax schedule was important in determining the costs and profitability of the three wineries. Internal rates of return were calculated at alternative wine prices. Rates of return above 10 percent (current cost of capital) were obtained for very selected operating conditions and the higher wine prices. It was not possible to determine if these wines could be marketed at the higher wine prices. Further analysis is needed in this area.