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Selling In Year 5

Oliver Wyman case: Setting up a Wine Cellar
New answer on Mar 19, 2023
3 Answers
349 Views
Anonymous A asked on Mar 18, 2023

Why is he only selling the “investment” bottles from year 1 in year 5? Isn't he suppose to sell initial kick (120 bottles) + 72 per year * 5 years? Thanks! 

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Anonymous replied on Mar 19, 2023

Given that the investment strategy is to hold each bottle of wine for exactly 5 years before selling, they will not sell everything in the inventory immediately at year 5. 

If we assume that any wine bought is at the end of the year, then the wine bought in year 1 will be sold in year 6, and so on. Conversely, if we assume that any wine bought is at start of the year, then the wine bought in year 1 and the initial kick-start will be sold in year 5, those bought in year 2 will be sold in year 6, and so on.  

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Anonymous A on Mar 20, 2023

Thank you so much for this explanation! I must have missed confusion the word "always" in the Background info, which has also led me to miss accounting for the fact that the wine needs to stay for 5 years before it gets sold.

Hagen
Expert
Content Creator
replied on Mar 19, 2023
#1 Bain coach | >95% success rate | interviewer for 8+ years | mentor and coach for 7+ years

Hi there,

I think this is an interesting question that may be relevant for many people. I would be happy to share my thoughts on it:

  • Based on the additional information "How / when do I sell the investment wine? Always after exactly 5 years, no cost of sale, always a buyer, no discounting" in the section "I. Background", it is indicated that only 5-year-old wine bottles will be sold.
  • As such, in year 5, only the initial investment of wine bottles will be sold.

If you would like a more detailed discussion on how to address your specific situation, please don't hesitate to contact me directly.

Best,

Hagen

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Anonymous A on Mar 20, 2023

Thank you so much! I guess my confusion came from the fact that I have missed the word "always," which suggests that the wine needs to stay for 5 years before it gets sold (assumedly, to enhance its quality).

Hagen on Mar 20, 2023

My pleasure. While it seems logical that a wine must mature, I understand that the case study lacks clarity.

Ian
Expert
Content Creator
replied on Mar 19, 2023
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

Completely agree with the other coaches. 5 year inestment horizon means that extra batch will be sold in year 6

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Anonymous A on Mar 20, 2023

Thank you!

Ian on Mar 20, 2023

My pleasure!

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