Why did they estimate the yield considering that the whole harvest is converted into wine and not only 1/4 of it?

Question

Hello everyone,

I was wondering if any of you could clarify this question.

It is said the following in the case prompt: “only ¼ of the harvest is made into wine by the winery itself”. However, when estimating the yield, this is not considered and they assume that all the grapes are for wine making. In my opinion, the yield should consist of ¼ wine production and the remaining ¾ as grapes, because they are sold like grapes and are not processed into wine bottles by the “Old Winery”.

Do some of you agree? Or can someone explain to me why they considered that the whole harvest is converted into wine?

Thank you very much

Answer 1

Hi there,

The answer to your question lies in your intent as the character in this story.

You’ve just inherited the winery and you recognise that it’s underperforming. The first question you might ask yourself is what is the full potential for this winery, which would be the full productive volume of wine at the greatest margin possible.

In that context, you can consider the ¼ vs ¾ split irrelevant at this stage, unless further down the track you found that your margin was better from being a grape producer than a wine grower.

It’s not the best structured question, so don’t beat yourself up, and of course it’s a good illustration of one of the most overlooked parts of a case interview – defining, in your own words and understanding, what you’re being asked to do in this case.

Let me know if I can help further.

B.

Answer 2

Hi Sara,

Your observation is likely correct. Therefore, the calculation should have been divided into two parts, with 2.75 ha (i.e., ¼) allocated for wine production and 8.25 ha (i.e., ¾) allocated for reselling the grapes.

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Answer 3

Hi Sara,

Great question!

I see the others have answered well - always remember in cases to think through flow vs. absolute. Always keep track of units. And, importantly, learn how to ask confirming/clarifying questions in a way that sounds assertive (like a consultant would)

Answer 4

Hi Sara!

From my understanding of the case, ‘yield’ refers to the amount of grapes that are being produced.

Then, a quarter is turned into wine and the rest is sold as grapes.

So ‘yield’ doesn't mean the amount that's actually turned into wine.

Best,
Cristian