The California wine industry has an annual impact of US$45.4 bn on the state's economy, growing nearly 40% from 1998 to 2002, and producing the number one finished agricultural product in the state, according to a report released yesterday by the Wine Institute and California Association of Winegrape Growers in San Francisco.

The two organisations commissioned the wine business consulting firm, MKF Research, to prepare the comprehensive study entitled, "Economic Impact of California Wine 2004," which updates the original economic impact report published in 2000.

In a statement, Wine Institute president and CEO Robert P. Koch said: "Our great California wine industry creates more than 200,000 jobs, billions in economic activity, and preserves agricultural land and the family farm. It is very generous in charitable giving and brings joy and pleasure to millions of people."

"Despite the challenges of intense global competition, trade barriers, agricultural pests and the constant threat of increased taxes and regulations, the state's wine industry is strong and a major contributor to the economic vitality of California."

The MKF research indicates that the California wine industry and its affiliated businesses provided 207,550 full-time equivalent jobs, with a total of $7.6 bn in gross wages. More than 62,500 jobs were added at a compound annual rate of more than 9% during a period of rising unemployment in California.

California received $1.9 bn in taxes and other business licenses and fees in 2002, compared to $1 bn in 1998. The federal government, other states and local municipalities collect an additional $3.7 bn in tax revenues a year from the California wine industry. The report shows that wine generates higher taxes than most industries because, as a regulated industry, it pays excise taxes to state and federal governments.

California is the fourth largest wine producer in the world after France, Italy and Spain. It accounted for $643 m in wine exports in 2003, a rise from $537 m in 1998.

The MKF report points out that the achievements of California's wine industry are particularly impressive because growth occurred during a weak economy and an increasingly competitive environment stemming from aggressive pricing of imports, grape production outpacing consumption, and wholesaler/retailer consolidation, among other reasons. Ongoing challenges continue as many industry members make capital investments to transition their operations for the production of the growing category of premium wines.