Freemark Abbey Winery
What would you recommend to Mr. Jaeger?
Mr. has three acceptable choices:
1) Mr. Jaeger must review the risk of harvesting his grapes
2) Holding off and taking the chance of grapes became thin
3) Sell at a lower price.
If Mr. Jaeger is not harvesting the grapes but wait for better return that is given by the possibility of an impending rainstorm that may produce high revenue in future.
As per the case Jaeger concluded that not to harvest the grapes means there is a 50-50 chance that storm would appear or beat the Napa Valley. If storm will not appear then, Mr. Jaeger still has chance or giving them better quality to make better wine.
Another option is to harvest: in my opinion, this option is less risky than other two because he know the return what he will get after harvesting the grapes.
If Jaeger harvested grapes right now:
Then wine that sells wholesale for only $2 per bottle and $0.85 Jaeger could obtain by harvesting the grapes immediately and also minimize or eliminate the risk.
Mr. Jaeger produces 1000 cases per year of wine equivalent to 12000 bottles
Per bottle price: $2.85
Bottles: 12000
2.85*12000= $34200
It means Mr. Jaeger can get the profit of $34200 by harvesting the grapes immediately.
Harvesting quickly is the less risky option than other two because not to harvest the grapes have 50-50 percent chances of that storm will appear that means 50 percent risk. But in the case of harvesting there are fewer chances of loss but according to calculation as per the given data: Mr. Jaeger will earn a profit of $34200.
Freemark Abbey Winery Harvard Case Solution & Analysis
If Jaeger go with the solution of not to harvest grapes and wait for better opportunity that will happen in future not for current time period than Jaeger will face losses in current time period. 50 percent chance rainstorm will appear, and grapes would reach 25% sugar and ensuing in wine selling for $3.50. If weather is less favorable then sugar level top at 20% and a lighter wine selling at $3........................
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