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Freemark Abbey Winery

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on 4 October 2013

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Transcript of Freemark Abbey Winery

Freemark Abbey Winery
Freemark Abbey Winery
Established in 1886
Producer of Quality wines
25.000 cases of wine
1.000 cases of Riesling
Only 4% of production
There is more value in waiting
There is no added value in paying for weather information

Harvest the grapes
Leave them on the vines
Storm can ruin the crop
A warm, light rain can cause a beneficial mold (botrytis cinerea) > luscious sweet wine
No storm
25% sugar
Sweet wine
Relatively full bodied
Wholesale price around
$3.50 per bottle
20% sugar
Light bodied wine
Wholesale price around $3.00 per bottle
A weather report
How much should Mr. Jaeger pay to learn whether the storm will hit or not?
All wine Bottled
EV of Storm or not > than EV harvesting
Don't pay for a weather report
Bulked Low Quality Wine
EV's also > EV harvest now
Don't pay of a weather report
Decision tree
Below 0.7% Acidity
Harvest grapes whatever the sugar level
Wholesale price around $2.50 per bottle
40% chance the storm leads to mold
Extraordinary sugar concentration > 30% reduction of juice
highly valued wine
Wholesale price around $8.00 per bottle
Forming of mold
Rainwater swells the berries > decreased concentration
Cheap, thin wine
Wholesale price around $2.00 per bottle
Ruined crop
Grapes ripen fully
Acidity levels to be monitored > harvest if below 0.7%
20% a possibility
25% with luck
Freemark's elasticity
Premium brand in the wine market > more elastic in demand
Supply elasticity like in the wine market
Grapes not-quite-ripe
Eliminates the risk of storm ruining the crop
Wholesale price around $2.85 per bottle
Harvest the grapes
50/50 chance of a storm
Leave the grapes on the vines
Bulk instead of a bottle
Sell the grapes directly
Options for wine not up to standards
Group 6
Brynjar Þór Hreinsson
Hans Gústafsson
Joana de Matos
Jón Þorgeir Kristjánsson
María Elísabet Ástudóttir
Óli Ásgeir Hermannsson

But why bulk?
Maintain and protect reputation
Only 4% of the whole production
Opportunity cost
Maximize profit in the long run
A competitive place
Low, medium and high quality brands
Income elastic demand
Inelastic supply in the short run
Elastic supply in the long run
Nature of the wine market

There is no added value for
Mr Jaeger
Thank you
Full transcript