Freemark Abbey Winery

Freemark Abbey Winery

Sara Anderson

Charles McManus

Morgan Perkins

Dr. Jones

Dallas Baptist University

Executive Summary

The storm is coming. Harvest Riesling grapes immediately or not, Mr. Jaeger needs to evaluate the risk and the expected revenue related to different options. Our recommendation is that to maximize the sales revenue, Mr. Jaeger should not harvest Riesling grapes right now but wait for a better profit given by rainstorm.

We recognized that the selling price of the wines made by three grapes, Cabernet Sauvignon, Chardonnay and Riesling might be different, but after considering the huge different in sales volumes, 25,000 cases vs. 1000 cases, we think that any decision on Riesling has little impact on company’s revenue as a whole. So we only evaluate the expected revenue which is associated to different options and assume that the risk is not our primary concern. We also ignore the factor of vinification costs because not enough information is provided in the case. (Bodily, 1998)

The decision tree (see Exhibit A) offers two options for Mr. Jaeger. One option is to harvest immediately. It will bring $2.85 per bottle to Freemark Abbey Winery. The winery will need to review all scenarios (see Exhibit B) and recognize that each is more complicated since we need to consider the probabilities of several events. For example, the probability of whether the rainstorm comes. The comparison we looked at, we calculated EMVs to analyze the outcomes of different events. Generally speaking, there are two events, rainstorm or no rainstorm. For rainstorm, there is a