Freemark Abbey Winery

 Case Study

Freemark Abbey Winery

Ebin Thomas Sunny

Dallas Baptist University

MANA: 6302

Freemark Abbey winery Case Study

Freemark Abbey is a reputed winery situated in St. Helena, California that is very well l known for producing premium wines like Chardonay,, petite Sirah ,Riesling etc. The process of making fine wine goes through a rigorous natural process of fermentation. The process of wine making is carried out with extreme care and caution keeping in mind that a single wrong decision can result in damage the overall quality and taste of the wine. The various decisions made to enhance the quality of wine is interconnected with each other.

Here the owner and partner of Freemark abbey, William jaeger has a plantation of Riesling grapes that are nearing to ripening with also having a heavy rainstorm approaching their way. Freemark winery produces nearly 1000 cases of Riesling wine per year which basically rounds up to 12000 bottles.

Decision Problem

Well Mr. jaeger is caught up in a dilemma where in if he would have to harvest the grapes right away or just wait and let the grapes get caught up in the rain. In each of the decision that Mr. jaeger will have to make he would face a certain amount of risk. Well if he goes ahead and harvests the grapes right away he surely will get away with the severe damage possibilities of rainstorm and end up having the type of grape that his company is known and are looking for thereby giving him excellent returns on his decision. However, if the grapes are allowed to get caught up in the rainstorm there is a high chance that the company can triple their returns if the rainstorms produces a specific type of mold that allows the grapes to retain more sugar, thereby producing a much higher fine quality wine.

Alternatives Available

1. Harvest grapes with a guaranteed return on investments.
2. Wait for the rainstorm to pass by hoping that the particular type of mold would be present in the rain there by generating high revenue
3. Selling the wine in bulk
4. Sell grapes directly in the market
5. Make thin wine and sell it under label

Evaluation of Alternatives

At the outset, there are two alternatives: (1) wait (W) for the storm to hit, if it will; (2) Harvest (H) now. If waited, the storm may or may not hit. If it hits, the mold may or may not form, greatly affecting the revenue. If the storm hits and no mold forms, the eventual sugar level, which determines the quality of the wine and hence the revenue, is uncertain. Likewise the uncertainty about the mold is quite important as it determines the difference between an exquisite wine versus a thin wine that the winery may be unwilling to risk their reputation by selling it under company label.  This calls for another decision (if storm hits and the mold does not form): whether to sell the grapes in bulk (B) or make the thin wine and sell it under label (T). This decision however is different in that, the EV criterion will always favor making the wine since EV maximizes the current returns but cannot consider the long term marketing impact of selling the thin wine now. Thus this decision must be made outside the framework of the sequential decision based on monetary EV.