Management Consulting Case Study-Wine in Boxes

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  • Our client is the CEO of an Australia-based winemaker that is the market leader in its country.
  • Recently, profits have been decreasing, and the CEO believes that this is due to losses in the boxed wine division.

Factors to Consider

  • Assessing the profitability of each division
  • The types of costs associated with each product
  • The pricing and target customer for each product
  • The use of the same grapes for both products

Background Information

  • The company is currently losing money
  • Sales are split evenly between the two divisions
  • Bottled wine sells for AUS$5 per unit, Boxed wine sells for AUS$10 per unit
  • Bottled wine contains 750ml, Boxed wine contains 3 litres
  • Both products have an overhead of AUS$0.50 per unit
  • Raw material costs for bottled wine are AUS$2 and AUS$8 for boxed wine
  • Packaging costs AUS$1 for both products, while other variables (distribution and labour) are AUS$1 per bottle and AUS$2 per box.


  • If the grape cost for bottles is AUS$2, for boxes it is AUS$8 (1:4 ratio)
  • Profit for bottles is AUS$1.5; boxes have a loss of AUS$0.5


  • The company should try to source grapes of lower cost for its boxed wine product line.
  • The current raw material cost ratio is 1:4 when comparing bottled wine against boxed wine, but the price ratio is only 1:2.
  • Boxed wine targets a different market segment and may not require the same quality (and cost) of grapes as bottled wine.
  • Lowering the raw material cost for boxed wine could make the line profitable.

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By Vandana Gaur


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