As wineries and wine regions struggle to attract valuable consumers across California wine country, a controversial marketing funding model is emerging: the wine improvement district (WID), also known as a wine heritage district (WHD). Currently, four California wine regions fund their regional marketing associations via WIDs—Livermore, Temecula, Amador County, and Santa Barbara—with several more considering the funding structure. (Editor’s note: The writer’s husband owns and operates a winery that is in Amador County and therefore has been subject to its WHD assessment.)
Shrouded in complex language and legally binding requirements for producers and their direct-to-consumer (DTC) sales, it’s no surprise WIDs are causing a stir, especially in large and well-established regions like Sonoma County, where a WID proposal made headlines in the San Francisco Chronicle and Press Democrat this summer. The nearly simultaneous dissolution of the Monterey County Vintners and Growers Association, which was not a WID and closed due to a lack of funding, has added even more pressure for small producers who depend largely on regional marketing efforts to reach new consumers. The outpouring of press, divisive comments in public meetings, and a petition with 850 signatures led Sonoma County to pause its WID development process.
Proponents tout WIDs as stable funding solutions for the nonprofit regional associations that promote wine country tourism, while opponents decry the measures as unnecessary “taxes” that penalize wine country regulars without proven benefits for producers.
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“Wineries are finding themselves in dire shape, as are vintner and grape-grower organizations because acreage is being pulled out and winery revenues are down,” says Adam Lee, the owner of Clarice Wine Company and a consulting winemaker based in Sonoma. “WIDs are incredibly successful at raising funds—there’s no denying that, but unless the ideas that [the organizations] have are new, it doesn’t matter how much money you throw at marketing because it’s not effective.”
What Is a Wine Improvement District?
“I think people don’t understand that the wine heritage district is not an entity. It’s not a second association. It is a funding stream,” explains Livermore Valley Winegrowers Association executive director Brandi Lombardi, who led Livermore to establish its WID in 2021.
The structure of WIDs is based on the long-existing state legislation that created business improvement districts and tourism improvement districts across the United States. Simply put, this legislation allows a group of businesses—united by geography and sometimes industry—to band together to raise funds for marketing purposes. These are commonly the “downtown improvement districts” or revitalization projects that pop up in underutilized neighborhoods.
“These districts offer a sustainable, significant, and competitive edge, ensuring that these businesses can thrive and grow,” says John Lambeth, the founder and CEO of Civitas, which assists groups founding these districts, including California WIDs. “We see more districts being created because they are working.”
WIDs are established by a vote of prospective members, after which point the group agrees on an assessment fee—generally one to two percent of DTC sales—and begins developing a district management plan which outlines how the collected fees will promote the region. The assessment (which is an ongoing fee rather than a one-time cost) is generally passed on to customers, who will see the fee on their receipt along with any city or state sales taxes.
Because WIDs are tied to DTC sales, rather than production volumes or voluntary membership dues, they offer organizations an opportunity to raise significantly more funding without the volatility inherent in events-based funding models. For instance, the Temecula Valley Winegrowers Association tripled their annual income after establishing their WID in 2020, according to Civitas. Similarly, the Livermore Valley Winegrowers Association increased their annual budget from $45,000 to over $200,000 by implementing a two percent assessment under their WID. Sonoma County estimated that a WID would produce a $4 million source of annual revenue.
Opponents resent the mandatory and legally binding nature of assessment fees, which are a stark departure from the voluntary, dues-based memberships that have historically supported local wine marketing organizations.
“If the organization is doing a great job people will willingly come in, and if not I can walk away from the organization and focus on projects that are effective for my brand and our customers,” says Mark McWilliams, the owner of Arista Winery in Sonoma. “I want Sonoma to be as creative, innovative, and successful as possible—I don’t think legally mandating a dues structure for these agencies is the creative solution we all need right now.”
Opponents of WIDs often position the fees paid as just another tax on the customers currently supporting wine country operations. Proponents, meanwhile, point out that one percent of a $60 purchase is a mere $0.60.
“Our experience is that such a slight increase has not negatively impacted consumer purchases nor visits to tasting rooms,” says Lambeth. “Because these assessments are self-imposed, funds are allocated for programs approved by those businesses paying the assessment and must be used for their benefit. Unlike a tax, the government may not divert the assessment funds.”
The funds raised by WID fees do not enter government coffers; rather, the WID structure creates a legally binding requirement that wineries pay the assessments into the organizational funds. The exact voting approval rate required to pass a WID varies by county, but votes are generally weighted based on winery revenue.
Determining the Functions of WIDs
Each WID’s actual functions are generally built into each WID via a central document known as a district management plan, which details exactly how the funds raised can be disbursed. In general, the funds are used for “marketing,” but the broad definition can include professional development and safety training for winery and tasting room staff, traditional marketing, public relations, and administration. Importantly, each group creates their own distinct district management plan—meaning metrics for success and ways to use WID-generated dollars can vary widely from one region to another.
“Your district management plan is really your blueprint for this,” says Lombardi, noting Livermore’s plan includes conventional marketing efforts plus quality-focused educational seminars and state-mandated trainings for member wineries and their staffs.
The inherent flexibility of WIDs concerns many hesitant producers, who question whether or not the funds collected will truly impact local producers.
“We need to have new ideas, and we need to have definite measures of success as well,” says Lee, who opposed Sonoma’s WID and led grassroots meetings to generate marketing ideas across the county. “Those all needed to be established before you come up with a funding mechanism.”
Approved WIDs remain in effect for five years, at which point members can vote to renew or dissolve the WID. So far, California’s debut WIDs are inching toward their initial renewals but according to Civitas, BIDs and TIDs are rarely dissolved—a factor that proponents use to inspire “yes” votes, but gives pause to WID opponents.
“These [districts] are rarely disbanded. Instead, the organizations ask to increase the assessments, and then what? The overall slowdown we’re in is very nuanced, and collecting more marketing money isn’t a creative solution,” says McWilliams. “There are a lot of wineries going out of business in regions where WIDs exist.”
Evaluating the Impact
WIDs emerged in part as interest and participation in traditional wine events—ticketed passport-style weekends, auctions, sit-down dinners, and festivals—have fallen off in recent years, thanks in part to the COVID-19 pandemic, but also likely due to emerging consumer and producer preferences.
In Livermore, Lombardi points to WID funding as the reason why the region was able to reach the six million people who live within 30 miles of Livermore with geo-targeted digital and direct-mail campaigns, leading to a 200 percent increase in ticket sales for regional events. “We’ve seen a slight dip in visitation, but our revenue is staying the same, which means the right kind of customer is still visiting our wineries and still purchasing wine,” she says.
At the Temecula Valley Winegrowers Association, executive director Krista Chaich led a full rebranding effort, expanded paid advertising and hired more regional staff, including a director of marketing and PR and a digital marketing manager. “We [previously] relied heavily on fundraising events, which placed pressure on wineries to participate, and not all were able—or willing—to do so,” Chaich says of Temecula’s pre-WID years. “Continuously raising membership dues also wasn’t a sustainable path forward, as it risked burdening the very businesses we aimed to support.”
Opponents of WIDs point out that those marketing dollars don’t necessarily translate into more sales for individual wineries, but merely provide steadier revenues for nonprofit marketing organizations. “In Livermore and in Temecula, [WIDs] have not been shown to do what the goal was, and they did not have a well-defined set of goals … they had more generics,” says Lee.
Currently Lodi and the San Luis Obispo Coast are actively pursuing the creation of WIDs, while Sonoma is likely to resume discussions later this year. With continued interest in the funding model—and its vast potential to raise revenues—WIDs are unlikely to disappear, offering more opportunities to evaluate their success (or lack thereof) going forward.
“My deepest belief is that if this is a good idea today, it will still be a good idea tomorrow,” says McWilliams. “The last thing any of us need to do right now is rush through a legally binding funding mechanism. Let’s take our time here.”
Dispatch
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Laura Burgess is a writer based in California’s Sierra Foothills. Her work has been featured in Real Simple, Christie’s Luxury Real Estate Magazine, Vinepair, The Kitchn, and more. She writes about wine, spirits, and the intersection of luxury and the great outdoors. Find her @laurauncorked.
