Scribd Logo
Upload

Welcome to Scribd!

  • 184 views

    Freemark Abbey Winery: Jaeger's Dilemma

    Uploaded by

    Faiza Soomro
    The document discusses a winemaker, Mr. Jaeger, who must decide whether to immediately harvest his Riesling grapes or wait for an approaching storm. Waiting could result in Botrytis mold which increases the grapes' sugar and profits, but carries risks. Harvesting now would net $34,200, while waiting has a 20% chance of $67,200 from Botrytis, but only a 30% chance of $12,000 without it. Overall, waiting has the potential for higher expected revenue of $35,640, so the conclusion is that Mr. Jaeger should wait for the storm.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Freemark Abbey Winery: Jaeger's Dilemma

    Uploaded by

    Faiza Soomro
    184 views8 pages
    The document discusses a winemaker, Mr. Jaeger, who must decide whether to immediately harvest his Riesling grapes or wait for an approaching storm. Waiting could result in Botrytis mold which increases the grapes' sugar and profits, but carries risks. Harvesting now would net $34,200, while waiting has a 20% chance of $67,200 from Botrytis, but only a 30% chance of $12,000 without it. Overall, waiting has the potential for higher expected revenue of $35,640, so the conclusion is that Mr. Jaeger should wait for the storm.

    Original Title

    Freemark_Abbey.pptx

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses a winemaker, Mr. Jaeger, who must decide whether to immediately harvest his Riesling grapes or wait for an approaching storm. Waiting could result in Botrytis mold which increases the grapes' sugar and profits, but carries risks. Harvesting now would net $34,200, while waiting has a 20% chance of $67,200 from Botrytis, but only a 30% chance of $12,000 without it. Overall, waiting has the potential for higher expected revenue of $35,640, so the conclusion is that Mr. Jaeger should wait for the storm.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    184 views8 pages

    Freemark Abbey Winery: Jaeger's Dilemma

    Uploaded by

    Faiza Soomro
    The document discusses a winemaker, Mr. Jaeger, who must decide whether to immediately harvest his Riesling grapes or wait for an approaching storm. Waiting could result in Botrytis mold which increases the grapes' sugar and profits, but carries risks. Harvesting now would net $34,200, while waiting has a 20% chance of $67,200 from Botrytis, but only a 30% chance of $12,000 without it. Overall, waiting has the potential for higher expected revenue of $35,640, so the conclusion is that Mr. Jaeger should wait for the storm.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    FREEMARK ABBEY

    WINERY
    Jaeger’s Dilemma
    Introduction
    • Premium winery in N. Napa Valley; 1976.
    • 25,000 cases | 4% Riesling | 1% Petite Syrah
    • A decision must be made. To harvest or to wait?
    • The wine making process explained…
    • Botrytis mold with bolstering profits! Likely?
    Introduction (cont’d)
    • Sell in Bulk?
    • Sell wholesale?
    • What would you do?
    • Wine is easy to drink. Hard to make…
    Quantity & Revenue Analysis

    Quantity Revenue
    $67,200

    $42,000
    $34,200 $36,000
    $30,000
    $24,000

    12,000 12,000 12,000 12,000 12,000 8,400

    $2.85 $2.00 $3.50 $3.00 $2.50 $8.00

    Harvest Grapes Thin Wine for 25% Sugar in 20% Sugar in Acidity drops Botrytis Mold
    Immediately Wholesale Riesling Riesling below 0.7% Grows
    Assuming Mr. Jaeger chooses to harvest the Riesling
    grapes before the storm arrives, how much money will
    he have?

    Early Harvest
    Revenue=$2.85 bottle x 12,000 bottles=

    Total revenue of $34,200


    Assuming Mr. Jaeger chooses to leave the grapes on the vine,
    what is the probability that the grapes will end up with
    botrytis and how much will he make if that occurs?

    • (50% chance of Storm) x (40% chance of botrytis) = 20% probability of occurrence


    • 1,000 cases x 12 bottles/case = 12,000 bottles, less 30% reduction in juice (-3,600
    bottles) = 8,400 bottles
    • 8,400 bottles x $8.00/bottle = $67,200
    Taking account all the various possibilities,
    what should Mr. Jaeger do? Total Revenue &
    Probability
    Botrytis
    (0.4) $67,200
    8,400 bottles 0.2
    $8.00/bottle
    Storm
    (0.5) No Botrytis
    (0.6) $12,000*
    12,000 bottles 0.3
    $2.00/bottle
    Weighted Average of
    Waiting for the Storm 25% Sugar
    $35,640 (0.4) $42,000
    12,000 bottles 0.2
    $3.50/bottle

    20% Sugar
    No Storm (0.4) $36,000
    (0.5) 12,000 bottles 0.2
    $3.00/bottle

    Acidity <0.7
    12,000 bottles $30,000
    Harvesting (0.2)
    $2.85/bottle
    Immediately 12,000 bottles 0.1
    $34,200
    $2.50/bottle

    *Sell wine wholesale without label, ½ the revenue


    Conclusion

    Wait for the storm to pass!


    There exists a better chance to make more money
    than if Mr. Jaeger harvested the Riesling grapes immediately.

    You might also like