Role: You are a cousin from the East Coast visiting for a family barbeque.

Question: Do we run the experiment?

Answer: Yes.

Centered Argument: Mirassou should embrace technology that others in the wine industry are reluctant to use.[1]


Supporting Case Observations:

  1. Mirassou is an established winery that has participated in ventures that were unusual for the wine industry in the past.
    1. The founder of Mirassou established the company during the Gold Rush when he couldn’t find any gold (p. 3, ¶ 6).
    2. Mirassou continued operations even during prohibition (p. 3, ¶ 6).
    3. The generation before the current owners started Mirassou Sales. (p. 3, ¶ 9).
    4. Embracing the UpRight Harvester is the opportunity for this generation of owners to distinguish themselves from the rest of the wine production industry because few, if any, other wineries will consider using a mechanical harvester.
  2. Using a mechanical harvester could be less expensive in the long run.
    1. Despite using more space, the trellis planting pattern could actually increase harvests by about 50% (p. 7, ¶ 7).
    2. The costs for labor will go up in the future.
      1. The price of hand labor goes up over time, bringing the total cost per acre of cultural and harvesting costs together close to the initial cost of $400 per acre (Exhibit 2).
      2. Cesar Chavez[2],[3] is organizing a 340-mile march from Delano to Sacramento calling on the California state government to allow farm workers to collectively negotiate wages and organize unions for better working conditions.
        1. Chavez has been known to use nonviolent means of protest, and may continue these efforts in the future.
        2. If Chavez is successful, the price of agricultural labor is going to skyrocket.
  • By using a mechanical harvester, we limit the need for unskilled workers
  1. If Johnson agrees to subsidize $38,100 of the initial cost of an UpRight Harvester, then the huge costs will be more manageable for Mirassou.
    1. Worker pay per acre is about $195 (Exhibit 2)
    2. The experiment will take 20 acres (p. 7, ¶ 8)
  • Mirassou would pay $3,900 anyway, so Johnson should subsidize the rest
  1. This would limit Mirassou’s risk when it comes to the cost of getting access to the mechanical harvester.
  1. Demand for wine is expected to rise in the future (See Chart 1 for more detailed information), and expediting the harvesting process (the mechanical harvester takes only an hour to harvest grapes from an entire acre) (p. 7, ¶ 6).
  1. The future of the wine industry is promising, and having high yields of high quality wine will be lucrative.
    1. It is expected that the current boom in the wine industry will lead into the early 1970s[4]. It is also expected that due to increased consumption, the quality of California wine is going to increase.
    2. The UpRight Harvester only picks ripe grapes, whereas workers will pick anything to fill the boxes that are the current basis for payment (p. 7, ¶ 6).
    3. Because Mirassou is generally in Central and South California, they are in a warmer climate and should grow these types of grapes for the best quality of varietal table wines[5]:
      1. Malvasia Bianca
      2. Tinta Madeira
  • Zinfandel (can grow in many conditions (See Chart 2))
  1. Ruby Cabernet (especially lucrative wine, selling at $110 per ton and producing 10 tons of wine per acre at 5 years of production (Exhibit 2))
  1. For the best results, Mirassou should use wooden barrels, particularly those made of oak or chestnut.
    1. Oak is the gold standard and provides a “spice-based aroma, adding notes of cinnamon and nutmeg to a wine’s scent.”[6]
    2. Chestnut can provide a flavor that will distinguish Mirassou wines from other wines. These are generally used for quicker aging times[7], and could be used to increase the rate at which Mirassou produces wine.
  2. My Proposition
    1. Measuring the efficacy of the experiment
      1. Set up a control group of vines that will be harvested with the current methods, with the same amount of vines per grape variety as the experiment:
        1. Plant 5 rows each of 10 varieties (50 rows) (p. 7, ¶ 8)
        2. 20 acres required for harvester (p. 7, ¶ 8)
        3. Because trellis pattern requires twice as much space, 10 acres allotted for control group
      2. Count and compare the amount of ripe grapes picked from the mechanical harvester.
  • Go through the winemaking process for each grape, using chestnut barrels to speed up the process
  1. Have an experienced, well-respected, third-party wine taster determine if there is a marked difference.
  2. If the mechanically harvested wine is just as good or better than the hand-picked wine, then go ahead and use the mechanical harvester.
  1. Proposed plan if mechanical harvester is to be used
    1. Scale up the use of the mechanical harvester; use it only in newly planted fields due to the special planting pattern
    2. Send mechanically harvested wine to other wineries as Mirassou is a supplier to other wineries
  • When Mirassou is the primary distributor:
    1. Sell mechanically harvested wine at the current standard price for Mirassou
    2. Sell hand-picked wine at a premium price, about 20-25% higher than mechanically harvested wine.
    3. Label hand-picked wine as a higher quality product regardless of the results of the experiment


Weakness of Position

  • Using the UpRight Harvester requires a unique planting pattern that would require extensive replanting if the experiment went wrong; the trellis planting pattern would essentially halve the amount of usable acreage. (p. 7, ¶ 5)
  • The cost of a new UpRight Harvester is $42,000 (p. 7, ¶ 6) and can be operated by one or two people. However, the current standard cost of harvesting labor per acre is $195 at the highest. Mirassou would have to harvest more than 216 acres for this purchase to pay off. The experiment calls for 20 (p. 7, ¶ 8), which is about 10% of the amount required for the investment to break even.[8] To put the cost in retrospect, $42,000 in 1966 is now worth $308,689.63 in 2016, and the cost of labor ($195 in 1966) is now worth $1,433.20.[9]
  • Past mechanical harvesters have failed (p. 7, ¶ 3), which has caused reluctance among wine growers to accept new mechanical harvesters. Past mechanical harvesters have destroyed vines and included leaves in the juice, which made the wine taste like alfalfa (p. 4, ¶ 9).
  • There is some doubt whether or not the UpRight Harvester could actually be able to pick all varieties of grapes equally well, as there are growing variations between grape varieties (p. 7, ¶ 5) and there is substantial opportunity loss associated with a two-year delay in developing new fields (p. 7, ¶ 9)[10].
  • The percentage of wine consumed in the United States that was produced in California dropped between 1950 and 1960, and may decrease further in the coming decades.[11] (Counter to this weakness: The sheer volume of wine sold may cancel out the possible profit loss from this trend.)
  • Removing workers from the harvesting process could lead to more protests against the wine industry, mainly due to the fact that workers will get paid even less than they currently do.

Chart 1: Types of Wine Produced with Shipment Predictions

Chart 2: Geographical Considerations for Growing Grapes in California

[1] I worked with [teammates] on this case study.

[2] The case study spelled Cesar Chavez’s name wrong. They spelled it “Caesar,” as in the salad or the ruler.

[3] Cesar E. Chavez, the Farm Workers Leader, honored with a California Legal Holiday, http://cesarchavezholiday.org/aboutcesarchavez.html/

[4] An Economic Survey of the Wine and Winegrape Industry in the United States and Canada, UC Davis, http://aic.ucdavis.edu/research1/Winegrape.pdf/

[5] See Chart 2 for more detailed information

[6] Staring Down the Barrel: Types of Wine Barrels and How They Affect Your Wine, Okanagan Wine Club, http://okanaganwine.club/staring-down-the-barrel-types-of-wine-barrels-and-how-they-affect-your-wine/

[7] See above source

[8] I shared this weakness of position with my fellow Ad Valorem team members

[9] U.S. Inflation Calculator, http://www.usinflationcalculator.com

[10] [Teammate] shared this weakness of position with [the rest of us]

[11] An Economic Survey of the Wine and Winegrape Industry in the United States and Canada, UC Davis, http://aic.ucdavis.edu/research1/Winegrape.pdf/