Freemark Abbey Winery

Executive Summary

The case deals with the study of the Freemark Abbey Winery's decision making problem whether to harvest or not the grapes in view of the approaching storm.

Analysing the case gives us few objectives as to maximise the profit and keep the reputation of the firm intact. Keeping these objectives in mind, the alternatives can be that the crop should not be harvested and wait for the storm to arrive. This would help maximize profit making objective.

The final decision based on the evaluation is that they should not harvest the crop immediately as a knee-jerk reaction to storm.

Situation Analysis:

William Jaeger, one of the partners that owned Freemark Abbey Winery (FAW), needs to decide whether he should harvest Riesling Grapes immediately or later, as the storm is approaching. Storms just before harvesting the crop is detrimental to the crop, however light, warm rain results in the formation of fungus, botrytis cinerea, on the grape's skin which produces high quality wine. FAW is known for its premium wines produced from best grades of grapes. It bottles 25000 cases each year, mostly Cabernet Sauvignon and Chardonnay, 1000 cases of Riesling and 500 cases of Petite Syrah.

Wine's quality depends on barrel used, sugar and acidity levels. Thus the harvesting time is very critical for the proper balance of sugar and acid.

For Riesling type of wine, if the grapes are harvested at 20% sugar-level, the wine produced is light bodied. Grapes harvested at 25% sugar-level, the wine produced is full bodied. Wine that results when grapes are attacked by botrytis cinerea, has sugar-level of 35% which is considered to be one of the finest wines.

Jaeger infers from the weather reports that there are 50% chances of storm. He further observed that the storm had originated from Mexico, thus if the storm strikes, there are 40% chance of development of botrytis mold. However, if the botrytis didn't form, resulting grapes will be with 5-10% less concentration. Jaeger here is in a dilemma whether to go for harvesting of the grapes immediately and eliminate the risks or let them ripe naturally despite the approaching storm. The other option with him is of not selling wine, if not upto the standards and hence avoid damaging the winery's reputation. If he harvests immediately, he can cut down the risks as he would still manage $34200 (see Exhibit 1) from selling the wine, however if he does not goes for the harvesting then there are 20% chances that the botrytis mold may form.

Problem Definition:

* The main problem that William Jaeger faces is whether he should harvest the crop immediately to averse the consequences of a bad storm.

Objectives:

* Maximizing the profit.

* Continue the legacy of the winery of making premium wines & thus preserving the reputation.

* Harvesting at the right time as to produce at least wine making grapes.

Alternatives:

* Do not harvest and wait for the storm to come with the chances of botrytis mold formation.

* Do not harvest, even it storm did not come, let the grapes ripe normally.

* Harvest immediately and eliminate the risk completely.

* Sell not upto standard wine in bulk to some other winery & thus saving the reputation & also earn some revenues for the company.

Evaluation:

Weather reports suggest that there are 50% chances of storm hitting the Napa Valley. Furthermore, 40% chances are that if the storm strikes, botrytis mold will be formed, as the storm has originated over the warm waters off Mexico. The wine so prepared can be sold at the price of $8/bottle. Although, during this process, the juices of the grapes reduces by 30% hence,