Chalice Wines Case Essay

The Chalice vino Group (CWG) is a wine-colored producer has a prestigious study for producing consistently elegant wines. The CWG owns ii vinerys (Chalice and cimarron) and half of a third (Delta), and too owns three wineries (Chalice, bighorn sheep, and Alicia) and half of a quaternth (Opera Valley). Chalice winemaker is the flagship of the four wineries, and founded in 1969.In June 1993, Chalice was the scarce publicly-held companion in the coupled States whose principal business is the production and exchange of premium wines. The four atomic number 20 wineries are located in different place. Each of them has their own president, typically the wine haltr, and separate utility center separately.The Chalice Wine Group has want story with a prestigious reputation for producing with child(p) wine. From the information that from the article, I calculated the hurt that the retail merchant ordain sell to the end consumer is $141.88, which convey their target customer s are the people who has approximately purchasing power. So, the CWG is a muscular competitor in the mid-high end wine market. Because as we read from the article, CWG keeps have money from 1992, but the other market competitor named Lyford vintner has steady-going utility brink, and ROA proportion.According to the financial report of CWG, at 1992 and 1993, the group had a net loss of $741,000 and $700,000 separately. In aim to find bug out why the company is losing money, and where did this money lost, and how can the other similar industry companies make money, I depart trace the paths followed by the 1991 Cimarron Meritage White from the vinery, winery, allocator to retailor to analysis the numbers in this value chain and find out the reason why the company lost their money.The VineyardIn order to produce the Cimarron Meritage White, the Cimarron winery needs to vitiate two kinds of grapes for total 89.17 tonnages at $812.36/ton. Because these two kinds of grapes are gr own outside of the Cimarron Vineyard, so they need to pay the hauling appeal for $1,463. And the total live for the grape per case is $13.26.Assuming the Cimarron winery allow for buy a 30 acrevineyard in Sonoma County where can grow the need quality grapes to produce Cimarron Meritage White, the price for the land is $525,000, and once the vineyard matured, normally needs more than 5 years, the operating speak to will be $9.59/case, and the selling price will be $12.99/case. And the assets allocated into the case is $94.71/case. ground on the data, I got the almost numbers in the Vineyard step. The profit allowance account in this process is 26.17%, the Assets swage symmetry is 13.7%, and the ROA is 3.59%. The profit is O.K., and the Assets employee turnover ratio is too low, and the ROA even lower. So I do not recommend the Cimarron Winery to invest new land. In addition, this data is not including the other be such as price of the land, clear and replanted fee for p hylloxeral which 30-acre land has, and the operating costs that happens before the vineyard mature. If we hold those costs into calculation, the ratios will be lower.The WineryIn the Winery process, the price is $76/case for sell, the carried cost is $25.73, the SG&A expenses is $19.31/case, and the assets allocate cost is $263. So, we got nearly numbers of the profit is $3.98/case, which is very(prenominal) low, the profit border is 5.24%, the assets turnover ratio is 29.23%, and the ROA is 1.53%. From these numbers and ratios, I knew that even though for every $1 assets investment, the company generates $0.29 revenue and only $0.0153 profit.In other words, in this process, the CWG is not utilizing their assets well, or they invest much more in the assets than necessary, or the cost discipline is poor. When analysis wines carry cost, we see the winemaking cost is 40% of the total carry costs, and this is cost too much. The profit margin tells us that for every $1 sale, the com pany only gets profit at $0.054. So CWG can either reduce its costs, or subjoin its selling prices.All the numbers shows us that in this Winery process, the performance is poor. The Cimarron spends too much in its assets investment. Because the boilersuit utilization of the depreciable assets less than 10% annual capacity, the CWG can learn from the Lyford winery to lease the equipment and spacesto reduce its assets usage costs.The distributorIn this process, the sale cost is $79.81/case, the operating cost is $15.08, and the assets cost is $41.06/case. In order to get through a vernacular margin of 25%, the distributor has a 1/3 mark-up over cost, and the net price is $106.41/case. In this process, the distributor got the profit margin at 10.83%. And for every $1 assets investment, the company gets $2.59 revenue, but only $0.28 profit. The problem here is still the sale cost control. Its looks resembling the distributor has great sales revenue, but the actual profit is very lo w. The difference is a big number of sale costs.The RetailThe retailer marks up the wine to achieve a 25% gross margin at the process too, and make the price of the wine is $141.88/case. The cost of sales is $106.41/case, the operating cost is $5.82/case, and the assets cost is $48.68/case. So, we get the profit margin ratio at 4.1%, which is the lowest ration among four process, the assets turnover ratio is $291.45%, and the ROA is 11.9%. The issue in this process is even worse than the distributor process. The assets turnover ratio looks great at 2.9145, however, the ROA only at 0.119. The cost of wine, which is $106.41, is acting a big role in this process, so the profit will not be very high.The LyfordCollecting all the information in the case, I got the numbers of the Lyfords are the revenue is $45/case, the costs of sales is $25.41, the marketing expenses and the leasing space and equipment fee is $6.09, and the assets cost is $13.50/case. And the profit margin ratio is 30%, the assets turnover ratio is 333.33%, and the ROA is 100%.For every $1 invest in assets, the Lyford get $1 profit , and the cost in assets only 30% of the sales, because the Lyford leased all of its equipment and spaces, and purchased the services of bring the wine from the bulk wine market to the distribution from wineries with pointless capacity, which they will direction for less, or from the custom winemaking operations. In other words, the Lyford winery will not spend large resources into some depreciable assets that idling mostof the year. And the Lyford may more flexible plan to bring the product from the bulk to the distributor, which overly means they spend much less than Cimarron do.All supra all, comparing the ratios among the 4 processes of the Cimarron Meritage White and the Lyford winery, I recommend the Cimarron that 1) skip the distributor process. So there will not be two times 1/3 mark-up over cost, then the final price of the Cimarron Meritage White will be low er and some potential customers might be turn to CWG, and the sales will sum up 2) rent the assets to other wineries when the equipment or spaces set aside for nothing to do 3) stop invest in assets/land 4) learn from the Lyford.Outsourcing the services that compulsory brining the wine to the distributor. The last, even though the Lyfords financial number looks great in this industry, but they still need to be careful more or less their risk-cost, because all the assets are rented, and the process that bringing the wine to the final customers are more like depending on the others, so if there is really something happens, such as the leaser stop their lease unexpected, or no more wineries with surplus capacity available, the Lyford might have some problem at some extent.