Morris Valley Estate Winery – Case 1 Analysis

March 11, 2012

There are three major competitive strategies available for businesses to pursue: cost leadership, differentiation and niche. For obvious reasons small independent wineries cannot compete on the cost, because they inevitably will lose to bigger mass wine producers who can leverage the economies of scale with much better efficiencies.

Therefore, Jim Morris has selected to differentiate Morris Valley Estate Winery on producing high quality wines within well-known types of wine such as Sauvignon Blanc, Chardonnay and Cabernet. These wines are sold in the premium market only and targeted at wine connoisseurs   Additionally, his winery is producing their signature wine Fume Blanc which is regularly recognized as one of the outstanding products of the area.

Regardless of the fact that Morris Valley Estate Winery is aimed at the premium market, they need to be concerned with the cost of production. Therefore Jim Morris is constantly looking at the opportunities to improve the operational processes both in vine farming and wine producing. However as was stated by Jim, “quality is the most important aspect of the business, and every change to the farming or wine-making operations has to at least maintain the same quality of product, if not improve it.”

This strategic focus on the quality has determined all of the innovative initiatives undertaken in the winery in the last years, such as installing buried irrigation system, acquiring their own bottling line, building bunk house for the winery workers or introducing new pruning technique. While all these initiatives are tied in with improving the quality they are also improving the productivity of the winery at the same time.
Analysis of the new pruning technique is based on the fact that all 300 acres of the land where Sauvignon Blanc was cultivated had been converted to the more efficient buried irrigation system.

Based on the information from Jim Morris’ observations about the yield of various vigor types of vine we know that before the new pruning technique was introduced an acre of vine produced about 4 tons of fruit. This total yield comprised the yield from type A and C, which produced 3 tons per acre each, and type B, which produced about 4.5 tons of fruit per acre. Given the fact that on average for the whole wine yard had approximately 10% of type A, 15% of type C, and 75% of type B vines, we can confirm that number by making independent calculations for an exemplary acre as follows:

Table 1.

Vigor Type % Area, acres Yield, tons/acre Total Yield, tons/acre
A 10 .1 3 .3
B 75 .75 4.5 3.375
C 15 .15 3 .45
Total 100 1 4.125

The calculated number of 4.125 is in line with Jim’s statement that an acre produced about 4 tons of fruit per acre with just about 3 percent variation which is negligible in our case.

Now that we have confirmed information about the yield of different types of vine under old pruning technique, we can calculate how much fruit should have been produced on the experimental plot of 20 acres under old pruning technique. Calculation in Table 2 shows that we could have expected 82.5 tons of fruit.

Table 2.

Vigor Type Old Pruning Yield/Acre, tons Experimental acreage Total fruit estimate under old pruning, tons Type A&B combined vs. Type C
A 3 10% = 2 6 73.5
B 4.5 75% = 15 67.5
C 3 15% = 3 9 9
Total 20 acres 82.5 82.5

As we know from Jim’s report the experimental plot produced 82 tons of fruit. These numbers confirm the fact that the yield was less than that under old pruning technique, if only by .5 ton. Within these 82 tons type C vines produced 7.5 tons, whereas under the old technique it should have produced 9 tons of fruit. The decrease in yield is very significant – about 17%. However, since the total yield was 82 tons, it means that type A and B vines combined produced a little bit more than under old technique – 74.5 vs. 73.5 tons. Specifically it was yield increase of about 1.4%  for types A and B combined. And the total decrease in yield from 82.5 to 82 tons was about 0.7%  . Calculations are presented in Table 3 below.

Table 3.

Vigor Type Old Pruning Yield/Acre, tons Experimental acreage Total fruit yield under new pruning, tons
A 3 10% = 2 74.5
B 4.5 75% = 15
C 3 15% = 3 7.5
Total 20 acres 82

If we extrapolate these numbers to the total of 300 acres we could estimate that total yield under old pruning technique is 1,237.5 tons and the new technique would produce 1,230 tons of fruit.

Overall, it seems the total yield under these two techniques is approximately the same and a slight decrease on experimental plot could be attributed to other less tangible factors which are not under control of the vine farmers. As was presented in the case, even if the variables, such as soil type, climate, watering, pruning, type of vine, terrain, the type of root stock are the same, two different plots of land may produce quite different fruit in the same year.

One of the basic principles in wine-making is that every change made to the process or operations has to at least maintain the same quality of product if not improve it. The same approach could be reasonably applied to the quantity. From the experiment we cannot conclusively decide that the total yield significantly decreased, given the typical proportion of different types of vines.

Our recommendation is to continue experimenting with the new technique in the next year and possibly allocate additional acreage for it. Since the decrease is very insignificant, but the benefits of the new technique (easier to teach migrant workers who are often new each season, and it provides less room for error) are very important according to Jim, it is worth continuing to experiment and see if the next year brings better results.

Even if the results stay about the same, that is a slight yield decrease of under 1%, it still makes sense to stick with new pruning technique vs. old based on the characteristics of the labor force involved in the farming. Additionally, Jim might look into other pruning techniques, since there are at least about a dozen of them known.

Morris Valley Estate Winery – Case 2 Analysis

Morris Valley Estate Winery – Case 3 Analysis