MEMORANDUM
To: Mr. William Jaeger
From: Consulting Group
Date: January 19, 2013
Subject: Options and Best Practices for Winery
From my research, word of mouth and your product itself, I am aware that Freemark Abbey Winery’s reputation is one of its greatest strengths. However, I understand that the weather plays as both a threat and opportunity for the wine industry as a whole. There are reports of a rainstorm in route to Napa Valley with a 50% chance of striking your winery; this is why you have reached out to my firm, Consulting Group. We have carefully analyzed all options and are ready to offer our recommendation.
Problem
Freemark Abbey Winery is known for producing premium wines; nevertheless, not choosing the best action to take in anticipation of this rainstorm may hinder your ability to even produce a premium wine for sale this quarter. A decision tree was constructed to weigh out Freemark Abbey Winery’s options. The winery has two alternatives: 1. do nothing and wait for the storm to greet the winery or 2. harvest the grapes immediately to avoid the rainstorm’s effects. Both options yield vastly different alternatives that we deem critical to your winery’s profit, revenue and reputation.
Evaluation
If Freemark Abbey immediately harvests its grapes, it incurs little risk and no further worry at first glance. Conversely, this option allows the winery to harvest “not quite-ripe grapes” resulting in weak revenues. This option contributes $2.85 of profit per bottle for a total of $34,000. This alternative eliminates the possibility of providing a premium wine and forces the winery to choose to either bottle the substandard wine for weak revenue of wholesale, forego any profit and not bottle the premature grapes for wine at all or lastly, bottle the wine for regular sale and tarnish its premium reputation.
