3/4 of the harvest is just sold

Question

Hi,

I am wondering why the information that 3/4 of the harvest is just sold is not addressed later in the case. We are not given margins for the two different "products". Instead, the case turns towards focusing on improving 25% of the business rather than focusing on their core product - an idea that would be welcomed with an owner that has not capabilities within wine-making.

A suggestion to merely stop selling bottled wine could end being a solid recommendation if the margins were higher for the grapes (one could assume that the marketing costs are no longer relevant). I am not saying this is what I could imagine but the problem is that one does not know based on the case.

Answer 1

Hi Anonymous!

The second parapgraph of your question also points to a great lesson on how to impress your interviewer in a case interview:

Good candidates know how to approach and solve a case meticuously wiht the information provided. Great candidates are able to add some additional hypotheses based on their own experience and business judgement - of course always phrased in a careful way. This behavior will help you capture conclusions that are purely based on the limited information you get from the case, but don't make much sense in a real business environment.

To give you an example: If you're missing the margin of bottling, relative to the grape harvest, you could confirm an assumption with the interviewer, e.g with this question:

Can we assume that the margin of bottling of the wine and slapping our label on it has a higher margin that the grape harvest? I base this on two factors:

The added marketing value that labelling the wine would unlock, allows us to charge a premium of bulk wine sales. This also resonates with an article that I read the other day on a growing trend of large supermarket chains to buy containered wine and bottle it themselves.

In addition, the bulk of the invested assets (the land) is needed for the grape harvest, exposing a business with a high weather-driven, seasonal volatility to a high operating leverage. Unless your location allows you to charge a high premium for your grapes (Bordeaux!), this should reduce margins in the long run.

Such hypotheses show great business judgement, while allowing the interviewer to interfere if you are dealing with some sort of special case. Of course your business accumen needs to be spot on for this tactic. Unfortunately, there is no silver bullet to practice this, but you can sharpen gradually by making it a habit to read the FT or Economist conciously.

Answer 2

Hello,

Your point is fair but you have to get used to the idea of not having all the information you would like to have. In these cases you should structure your approach and then ask the interviewer if you have those data or if you can make some assumptions.
It's far more easier when you have an interviewer in front of you that can drive the discussion, rather then reading the case. In this specific situation, the interviewer would make you to understand that you have to focus your effort on that 25%.
I would like to give you two recommendations regarding this:

Always listen carefully to the interviewer: he's there to help and even more important, he's the one that will evaluate you. Do not insist in proposing a solution that could make sense to you but that he's suggesting to ignore
Be careful on proposing to shut down a business/activity. In some cases it could sound like a solid recommendation but if you are called by a client to improve and boost the business, it's the last thing that you should consider as solution. There could be dozens of reasons why you should not stop an activity.

Hope it helps,
Luca