Chateau Pontet-Canet Calcs./

I thought i'd do some quick calculations for the Chateau Pontet-Canet case. In determining which solution to pursue, I did some rough math on their net profit, which was driven by three primary factors: 1) # of cases sold, 2) price of the case, and 3) any extra costs.

Major assumptions:

• For simplicity, i've abstracted from Grand vin and Second wine, and averaged their production cases and prices. 
• Critic scores are correlated with prices, and for every 1-pt increase in the average critic score, there is an assumed 7% increase in prices. 
• There is no boost from reducing variability in critic scores
• Biodynamism costs $2k/hectare, and 2% of revenues
• All other operating expenses, except for bottling costs, are kept constant 

Based on the above, and ignoring other unknowns / intangibles, it appears that their current approach maximizes their profits. A few thoughts:

• perhaps the increase in price is nonlinear relative to critic scores, 
• decrease in variability in critic scores increase the prestige and hence prices might also increase
• lower case production creates scarcity value 

Looking forward to discussing more in class! (happy to share the excel if you'd like to take a look)