Case Analysis Report on Freemark Abbey Winery

COMMUNICATION FOR MANAGERS

CASE ASSIGNMENT NO.: 1

CASE ANALYSIS REPORT ON

‘FREEMARK ABBEY WINERY’

Submitted By:

Name:  SUNNY HARSODA

Roll No: 171356

Section: C

Batch: MBA - FT (2018-20)

Institute Of Management, Nirma University

Date Of Submission: 17th July, 2018

Situation Analysis

Freemark Abbey was located in California, in northern Napa Valley involved in the business of premium wines such as cabernet sauvignon and chardonnay.

By the process of fermentation the sugar which is naturally present in the grapes juice is converted in to wine by the enzyme called yeast. The carbon dioxide is allowed to dissipate and bubble up and then wine is aged in to the barrels for more than one or more years until it is ready for bottling.

The process and type of aging done on the basis of the winemaker which influences the style of production of wine which depends on the preference of the owner. The process of ripening depends on the weather condition which affects the sugar and acidity level of the grapes. If the grapes are ripen more the sugar level increases and acidity level decreases. So it is necessary to maintain the proper balance of both acidity and sugar for the style of wine sought.

Many types of Riesling available in the market due to which the grapes which are harvested at 20% sugar, all sugar is converted in to alcohol by fermentation. If harvested grapes contains 25% sugar, the wine is produced with 10% alcohol with 5% residual sugar which sweet and full bodied. Third is when grapes are fully ripen, they are attacked by botrytis mold in which grapes became porous and water is evaporated only sugar will remain in it.  Due to this reason wine contains 11% alcohol and 13% residual sugar. So botrytis Riesling adds high value to the wine.

Problem statement

Mr. Jaeger has to decide whether to harvest the grapes now or let the grapes caught in rainstorm. Each of this decision has some certain level of risk. If he harvests the grapes now he will get good return. However, if he allows the grapes to remain in the storm he has the opportunity to triple the return if the storm produce certain type of mold which allows the grapes to retain more sugar, thereby producing much higher quality wine. If the mold is not present then he has a risk of over saturating the grapes which would result in thin and lower quality of wine.

Following are the possible outcomes for each scenario:

Harvest Now

There is little to consider with this choice. This is the easy money option. The earnings are calculated at $34,200 if the harvest is performed now. Due to higher concentration in sugar if the mold forms earnings would be potentially less.

Harvest Later

• Storm/Mold Forms

 The Botrytis scenario adds a unique element to the wine produced that is highly valued by connoisseurs. Bottles of wine will sell for a premium more than double the wholesale price of the standard bottle of Riesling produced by the vineyard. The yield of juice reduces by 30% due to formation of mold in grapes.

• Storm/No Mold

 The harvest will not be a complete loss and the grapes can still be harvested. The grapes would almost certainly be sold discount to an alternate vineyard keeping in mind the end goal to abstain from harming Freemark Abbey's notoriety by creating a second rate item. The extra water from the rain will basically swell the grapes. The outcome will be a thin wine that offers at a general lower discount cost. While not a terrible choice, this is the only option that represents a significant loss when compared to harvesting the grapes ahead of the storm.