Case Name :      Michael Shaps Winery: Evaluating the “Custom Crush” Opportunity

Authors :           Raggio Randle, Ben Eubanks

Source :             Ivey Publishing

Case ID :            W13488

Discipline :        Entrepreneurship

Case Length :    13 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

By 2010, Virginia had become the fifth-largest wine-producing state in the United States and Michael Shaps had developed a reputation as one of Virginia’s premier winemakers. He had recently doubled his annual production capacity and was considering whether to increase production of his own “Michael Shaps”-label wines (MS), or accept offers to produce private-label wines (PL) for customers – a service he dubbed “custom crush.” He could increase his profits by selling PL wines at higher margins. However, it would take time to grow this new business, and any capacity reserved for a “custom crush” operation would reduce the number of cases of his own MS wines that he could produce. The financials of custom crush looked very promising, because in addition to higher margins, revenue from PL would be guaranteed by contracts prior to harvest – a situation of unusual security in the volatile wine business. Although his MS wines were of high quality and regionally popular, producing his own labeled wines was more of a speculative business, subject to myriad factors. Beyond the short-term financial impact, he also had to consider how a PL business would affect his own MS brand. Finally, Shaps had the opportunity to package wine in a box at significant savings over bottles and had to decide whether or how to introduce MS or PL wine in a box.