Case adapted from Krasker, W. (1980). Freemark Abbey Winery, HBS Case studies.

Case - Winery
In the summer of 2016 the owner of Secchi Winery faced a decision making problem:
The weather forecast has announced some rain, potentially a heavier storm, to come in. Should
the grapes be harvested now or after the storm?

Considerations:
On the one hand, a storm may ruin the crop. On the other hand, a warm light rain, tends to
generate a beneficial mold called botrytis cinerea, to form on the grape skins. The result is a
rare, complex wine which can be sold at a higher price. Secchi winery does have experience
producing botrytised wines as it did so in 2012.

Background information:
Secchi Winery is situated in Tuscany, a sunny region of Italy, well-known for its vineyards. It
has built a reputation for producing quality wines (“premium”) from many different types of
grapes. It bottles normally 30.000 cases (i.e. a case holds 12 bottles) of wine annually, most of
them Chianti and Pinot Noir. It also produces some other types of wine in much smaller
quantities.
A crucial ingredient for wine production is the fruit sugar contained in the grapes which needs
to be balanced with acidity levels. Depending on the wine sought the producer needs to harvest
the grapes at the point in time that delivers the required balance of these ingredients. In
unfavourable weather conditions the right balance may not occur.

The owner’s thoughts

• There is a 50/50 chance of for rainstorm
• Since the storm originated over the warm waters of the Mediterranean Sea there is a
40% chance of botrytis development in case the storm strikes
• Should this not happen, but the storm still comes in, grapes would simply swell by 5-
10% decreasing their quality; in this case only wholesale wine selling at EUR 4 per
bottle could be produced (whereas if immediately harvesting grapes the resulting wine
would sell at EUR 4.70)
• If grapes are left they could ripe more fully and the storm does not come in, the
resulting wine could sell at EUR 5.20 per bottle. Even with less favourable weather he
may be able to produce wine selling for around EUR 5 (and he deems those scenarios
equally likely)
• A number of other scenarios could occur resulting in low priced wines (between EUR
2 and EUR 3) but he judges these to be low probability scenarios (20% or less
probability of occurrence)
• Botrytised wine can be sold at EUR 9 per bottle, but the procedure also reduces the
quantity produced by 30%. But the high price compensates for the loss in quantity.
• Production costs are the same for all styles of wines
Case adapted from Krasker, W. (1980). Freemark Abbey Winery, HBS Case studies.

Task:
You have been hired by the owner of the winery as a consultant on this situation.
Give advice to the owner indicating clear options for action.
Explain your rationale and justify your recommendation(s)!