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.