Chalice Wine

Chalice Wine Group is a publicly traded company that, through numerous partnerships, owns and/or operates a number of vineyards and wine manufacturing companies in California’s Sonoma valley. Previously, they enjoyed a time of profitability. Yet in recent years, expansion has saw a decrease in their level of profitability, followed by a repeating period of net income losses. The goal of the case is to determine whether the operation of a small winery can be a profitable venture.

Upon reading the Chalice Wine Case, the primary issue that I have identified, is that the management of the company has not crafted a clear and identifiable mission.

• As currently structured, Chalice Wine Group is attempting to be a “vertically” integrated company. In this they are attempting to accomplish ever step in the wine business. They are making their own grapes, processing their own grapes, bottling, and lastly shipping them to various distribution outlets. This is fine, as long as they are able to create an extremely efficient model to do so. But unfortunately, as their results indicate, they are not efficient enough to make this current model work. There are a number of possible avenues that Chalice Wine Group needs to explore, among those are:

- Why are they paying a price for grapes(from themselves!) that is so in excess of the market rate? There are currently some transfer issues in place, management needs to explore these costs.

- Pressing and manufacturing of the wine: The costs of the machinery involved, is extremely expensive. What is Chalice doing with their equipment during the time periods in which there is no production? How are they utilizing this excess capacity? They can either outsource this to another company, or utilize this capacity to process wine for others.

- Shipping and distribution: Why are they handling this process