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Chalice Wines Case

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Chalice Wines Case
The Chalice Wine Group (CWG) is a wine producer has a prestigious reputation for producing consistently elegant wines. The CWG owns two vineyards (Chalice and Cimarron) and half of a third (Delta), and also owns three wineries (Chalice, Cimarron, and Alicia) and half of a fourth (Opera Valley). Chalice winery is the flagship of the four wineries, and founded in 1969. In June 1993, Chalice was the only publicly-held company in the United States whose principal business is the production and sale of premium wines. The four California wineries are located in different place. Each of them has their own president, typically the winemaker, and separate profit center separately.

The Chalice Wine Group has long story with …show more content…

The profit margin tells us that for every $1 sale, the company only gets profit at $0.054. So CWG can either reduce it’s costs, or increase it’s selling prices.

All the numbers shows us that in this Winery process, the performance is poor. The Cimarron spends too much in it’s assets investment. Because the overall utilization of the depreciable assets less than 10% annual capacity, the CWG can learn from the Lyford winery to lease the equipment and spaces to reduce it’s assets usage costs.

The distributor
In 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 achieve a gross margin of 25%, the distributor has a 1/3 mark-up over cost, and the final 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. It’s looks like the distributor has great sales revenue, but the actual profit is very low. The difference is a big number of sale costs.

The Retail
The 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

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