Freemark Abbey Winery Case

Executive Summary

   William Jaeger part owner of Freemark Abbey Winery in St. Helena, CA was faced with a decision in anticipation of a threatening storm. If the storm produced a heavy rain, it could possibly ruin the crops. Nevertheless, if the storm produced a light rain, it could create a valuable mold that would increase the value of the wine. Jaeger must decide whether he should harvest the Riesling grapes immediately or leave them on the vines despite the approaching storm? Based on the local weather reports, Jaeger has a 50/50 chance of the rainstorm actually reaching his vineyard. Coincidentally if the rainstorm reaches the vineyard, he figured there would be a forty percent chance of a light rain, helping to create the botrytis mold. The Riesling wine accounts for approximately 1,000 of the 25,000 cases (1,000/25,000= .04 or 4%) that are bottled each year (1000 x 12bottles = 12,000 bottles); so this is one of the smallest portions of annual sales revenues.

   The production of wine gives way to several methods and conclusions; as a result there are various styles of Riesling wines on the market. This is accomplished by using different harvest times, vinification methods, or development of botrytis mold. A combination of any and all of the aforementioned practices effect the wholesale price of the Reisling wine; ranging from $2.00-$8.00. It is vital that each choice is made to optimize the overall quality of the wine, therefore increasing the market price.

Decision Problem

    Ultimately Jaeger must decide if he should harvest the Reisling grapes immediately or wait. In further detail, he has evaluated the other variables:

• 50% chance of storm

• No storm – this will produce a different sugar concentrate level in the grapes

• Storm – 40% possibility of botrytis mold (*increased market value)

Each scenario affects the wholesale price of the wine, so we must analyze them all and pick the option that optimizes profits for the company.

Decision Alternatives & Evaluation