Case Facts And Inferences
1. William Jaeger is the co-partner at Freemark Abbey Winery. Winery is located in St. Helena, California, in the northern Napa valley. This area has the best climate for grapes production. The Winery produces premium quality of wines from the best varieties of grapes. They bottled 25000 cases of wines every year with each case having 12 bottles.
• Since, the winery produces premium quality of wines, it can be inferred that Freemark Abbey is a good reputed company in the wine market.
2. Grapes harvested at sugar level 20% result in a light bodied wine with 10% alcohol. However, with 25% sugar, the wine has 10 % alcohol and 5 % residual sugar. This makes the wine sweet and relatively full bodied. The latter variant of wine is sold at the rate of $3.5 per bottle.
• From this, it can be understood that with higher levels of sugar present in the grapes during harvesting results in a more sweet wine with good overall taste. Also, higher the sugar level in grapes, higher will be its selling price.
3. A warm, light rain leads to the formation of botrytis cinerea mold on the almost ripe grapes. The presence of botrytis mold increases the sugar concentration level to 35% or more. The resulting wine has 11% alcohol and 13% residual sugar. This improves the flavor of wine to a great extent. This wine is sold for $8 per bottle.
• Sale of botrytis wine is more profitable for the winery as compared to the other types of wines as cost of production of all possible types of wine was same.
4. According to the weather reports, there is a 50% probability of storm approaching the winery. A Storm just before harvesting of grapes damages the crop. The storm had originated from the warm waters of Mexico. This has led to a dilemma for Mr. Jaeger of whether to harvest the crop now or wait for the storm to strike.
i. If the storm strikes, there was 40% chance of botrytis mold formation due to the upcoming storm. This would result in production of one of the best quality of wine.
? Advantages: This wine would be sold at price which is double the wholesale price of standard wine.
? Disadvantages: The total juice concentration would reduce by 30%.
ii. If the storm strikes and botrytis does not form, the grapes would swell due to rain water thereby reducing their concentration by 10%. It produces a very thin wine which is sold at $2 per bottle, whereas wine harvested before the storm would be sold at $2.85 per bottle.
? Advantages: The crop would not be destroyed and some different type of wine could be produced and sold in the market at lower price.
? Disadvantages: The wine being sold would be of inferior quality and would harm its reputation significantly.
iii. If the storm did not strike, there was chance of sugar ripening and reaching 25% sugar level, thereby resulting wine would be sold at $3.50 per bottle. Wine produced with sugar level up to 20% would be sold at $3.00 at the most.
? Advantages: This would be the standard quality of wine produced naturally by the winery without any external agents helping in ripening and increasing sugar levels. This would not harm the reputation of the company.
? Disadvantages: The winery would be disappointed as the expected storm would have helped in producing the premium quality of wine.
iv. If storm does not strike and acidity level of sugar reduces to 0.7% or below, then it has to be harvested irrespective of the sugar concentration level. The probability of occurrence of this scenario was 0.20 . In case of such an event, the wine produced would be sold at the rate of $2.5 per bottle.
? This would lead to a loss for the winery and also lower the quality of wine being sold.
? The only positive would be that the crop is not destroyed completely.
? Advantages: The crop would not be damaged and a different quality of wine could be produced. The winery also has the option of not producing the wine instead sell the grapes in the market. They can also sell the wine in bulk
? Disadvantages: The revenue obtained from selling wine produced from incompletely ripped grapes is half of the actual revenue from standard wines.
It can be seen that Mr. Jaeger was facing a difficult situation of whether to harvest the Reisling grapes before the storm strikes or to wait for the storm to strike and hope that botrytis mold is formed on the almost ripe grapes.
Short Term Problems
? Deciding the right and exact time of harvesting the crop.
? The revenue of the company would also be reduced by taking a wrong decisions.
Long Term Problems
? The reputation of the company could be damaged due to the production of lower or inferior quality of wines in case of harvesting right now as well as if the botrytis mold does not develop.
? To have proper forecast of the upcoming weather.
? To produce the same quality of wines as produced by the winery earlier.
? To avoid lower revenues from the sale of wines despite the prevailing situation.
? Maintain the reputation of the company.