{"id":24499,"date":"2017-11-15T18:09:29","date_gmt":"2017-11-15T23:09:29","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-grape-depression\/"},"modified":"2017-11-15T18:09:29","modified_gmt":"2017-11-15T23:09:29","slug":"the-grape-depression","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/","title":{"rendered":"The Grape Depression"},"content":{"rendered":"

The effects of climate change\u2014particularly the warming of the planet, water scarcity, and extreme weather\u2014are already beginning to impact agriculture. Compared to other agricultural products, wine is especially sensitive to variations in climate. Even by conservative estimates, the area suitable for wine production is projected to decrease by 19-62% in major wine producing regions by 2050 [6]. A key driver of this decline is the water intensity of wine production, requiring nearly 1,000 liters of water per liter of wine produced [6,8]. As the climate shifts, water management will likely become increasingly important to offset its destructive effects: a warmer growing season and more frequent droughts.<\/p>\n

With global operations in wine, beer, and spirits, Constellation Brands (CB) is one of the largest alcoholic beverages companies in the world. While shrinking as a percentage of its portfolio (from 42% of net sales in 2015 to 37% in 2017), wine production remains a significant portion of CB\u2019s volume [1]. Estimates indicate that the magnitude of climate-related changes will vary highly by geography, and researchers believe that California vineyards, particularly \u201cregions known for fine wine, like Napa and Sonoma\u2026 [may be] too hot to produce premium wines in the future\u201d [6, 3].\u00a0CB is particularly exposed to climate risk in that its facilities are highly concentrated in risky geographies [1]. CB owns or operates 13,600 acres of vineyards in California, where all but two of its 18 wineries are located [1].<\/p>\n

In terms of climate risk management, CB already operates a somewhat flexible and diversified supply chain\u2014many of the grapes used for production are purchased from approximately 950 independent growers [1]. Additionally, CB has implemented recent changes to become more water efficient. CB has invested in a wide range of projects, including glycol heat exchangers, landscape irrigation projects, and wastewater recovery and reuse lines [9]. CB collaborates with peers in the Beverage Industry Environmental Roundtable (BIER) to better evaluate and manage water risk. Partnering with the EPA and conservation groups, CB has invested in projects to maintain and protect rivers and water sources near production sites [9]. The company has also launched internal water conservation awards to its wineries that achieve or exceed conservation targets [4]. In the medium term, CB\u2019s Water Policy outlines seven strategies: increase water efficiency, ensure water source availability and quality, raise awareness, engaging supply chain, maintain alignment with strategic goals, and ensure transparency and reporting [5]. Furthermore, CB seems to be diversifying its portfolio by growing acquisitions in beer, spirits, and even marijuana [7].<\/p>\n

Still, CB\u2019s efforts appear to fall short. According to company reports, CB\u2019s production is significantly more water intensive than the industry average [9,2]. This metric excludes water usage related to irrigation, which may be increasingly necessary to combat extreme weather patterns like droughts. Given that an effective response to water concerns will be highly localized, CB should begin a thorough evaluation of each winery to identify short- and medium-term strategies. In the next two years, CB should look to identify and implement best practices in water management across its vineyards and wineries, particularly in its recent acquisitions. In addition, CB should partner with its many independent grape suppliers to improve water efficiency up the supply chain. Hiring specialized personnel or enhancing training programs may support these efforts. CB may also consider financial incentives at its vineyards and wineries to tie water conservation to performance evaluation or compensation. Establishing new strategic partnerships, like the water source initiative with the EPA, will be essential.<\/p>\n

\"\"<\/a><\/p>\n

[Source: Company documents, BIER, author’s analysis]<\/p>\n

In the medium term, CB may be able to transition some of its production to less water intensive and more resilient varietals by building new supplier relationships or replanting vineyards under CB management. Nevertheless, while varietal and region play a large role in the water intensity of operations, strong consumer preferences may limit the feasibility of pulling these levers. CB should consider investing in cutting edge technologies, such as precision irrigation systems and integrated water management systems. In addition, as CB continues to grow, the company should look for acquisition targets and suppliers in geographic areas that are less at risk, including the Pacific Northwest and Northern Europe [1].<\/p>\n

Nevertheless, the path ahead for CB is not fully clear. How should the company think about largescale investment in water initiatives, which may not be NPV positive in the short or medium term?<\/strong>\u00a0Also, effective investments in water management may not replace the need for contingency plans in the case of climate-induced complications. CB must consider: What are the essential elements and tradeoffs of a comprehensive contingency plan? <\/strong>For example,\u00a0CB may be able to offset shortfalls in grape supply with new suppliers from less impacted regions, but margins will likely suffer due to 1) higher market rates reflecting decreased supply, and 2) transportation costs to its California-based wineries.<\/p>\n

[799 words]<\/p>\n

 <\/p>\n

Works cited<\/p>\n

    \n
  1. \u201cAnnual Report.\u201d Constellation Brands<\/em>. April 2017. http:\/\/www.cbrands.com\/sites\/default\/files\/2017-Annual-Report.pdf<\/a>, Accessed November 2017<\/li>\n
  2. \u201cBeverage Industry Continues to Drive Improvement in Water and Energy Use.\u201d Beverage Industry Environmental Roundtable.<\/em> December 2016. http:\/\/media.wix.com\/ugd\/49d7a0_fb6ab6f0359c45d89b6e0a72a42988d1.pdf<\/a>, Accessed November 2017.<\/li>\n
  3. Blaind, Alastair. \u201cAn Upside to Climate Change? Better French Wine.\u201d NPR<\/em>. March 21, 2016. https:\/\/www.npr.org\/sections\/thesalt\/2016\/03\/21\/470872883\/an-upside-to-climate-change-better-french-wine<\/a>, Accessed November 2017<\/li>\n
  4. \u201cConstellation Brands Announces Franciscan Estate Winery As Its 2016 Internal Sustainability Award Winner.\u201d Water Online<\/em>. January 16, 2017. https:\/\/www.wateronline.com\/doc\/constellation-brands-announces-winery-as-its-internal-sustainability-award-winner-0001<\/a>, Accessed November 2017 [5]<\/li>\n
  5. \u201cConstellation Brands: Water Policy.\u201d July 30, 2013. https:\/\/static1.squarespace.com\/static\/569fcae3e0327ce43da144e0\/t\/56d9b7534d088e73108ab7dc\/1457108819940\/CBI+Water+Policy.pdf<\/a>, Accessed November 2017 [6]<\/li>\n
  6. Hannah, Lee et al. \u201cClimate change, wine, and conservation.\u201d PNAS<\/em>. February 19, 2013. https:\/\/www.conservation.org\/publications\/Documents\/CI_PNAS_Climate-Change-Wine-Production-Conservation_Lee-Hannah_March-2013.pdf<\/a>, Accessed November 2017 \u00a0[1]<\/li>\n
  7. Kell, John. \u201cConstellation Brands Inks $900M in New Deals.\u201d October 17, 2016. http:\/\/fortune.com\/2016\/10\/17\/constellation-brands-deals\/<\/a>, Accessed November 2017 [7]<\/li>\n
  8. Veseth, Mike. \u201cTurning Water into Wine.\u201d The Wine Economist<\/em>. November 27, 2008. https:\/\/wineeconomist.com\/2008\/11\/27\/turning-water-into-wine\/<\/a>, Accessed November 2017<\/li>\n
  9. \u201c2017 Corporate Social Responsibility Report.\u201d Constellation Brands<\/em>. April 2017. https:\/\/static1.squarespace.com\/static\/569fcae3e0327ce43da144e0\/t\/59347571d1758ee8c2042237\/1496610172775\/CBI+2017+CSR+Report.pdf<\/a>, Accessed November 2017.<\/li>\n
  10. Image. Penn State Sites. http:\/\/sites.psu.edu\/siowfa15\/wp-content\/uploads\/sites\/29639\/2015\/12\/28curious-span-articleLarge.jpg, Accessed November 2017.<\/li>\n<\/ol>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    Why you may have to trade in your California Cab for an Oregon Pinot Noir — or be forced to pay the price<\/p>\n","protected":false},"author":9912,"featured_media":24543,"comment_status":"open","ping_status":"closed","template":"","categories":[1218],"class_list":["post-24499","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-climate-change","hck-taxonomy-organization-constellation-brands","hck-taxonomy-industry-food-and-beverage","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nThe Grape Depression - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Grape Depression - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Why you may have to trade in your California Cab for an Oregon Pinot Noir -- or be forced to pay the price\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOM-challenge-wine.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"600\" \/>\n\t<meta property=\"og:image:height\" content=\"367\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/\",\"name\":\"The Grape Depression - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/TOM-challenge-wine.jpg\",\"datePublished\":\"2017-11-15T23:09:29+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/TOM-challenge-wine.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2017\\\/11\\\/TOM-challenge-wine.jpg\",\"width\":600,\"height\":367},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/the-grape-depression\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"The Grape Depression\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The Grape Depression - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/","og_locale":"en_US","og_type":"article","og_title":"The Grape Depression - Technology and Operations Management","og_description":"Why you may have to trade in your California Cab for an Oregon Pinot Noir -- or be forced to pay the price","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/","og_site_name":"Technology and Operations Management","og_image":[{"width":600,"height":367,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOM-challenge-wine.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/","name":"The Grape Depression - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOM-challenge-wine.jpg","datePublished":"2017-11-15T23:09:29+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOM-challenge-wine.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2017\/11\/TOM-challenge-wine.jpg","width":600,"height":367},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-grape-depression\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"The Grape Depression"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/24499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/9912"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=24499"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/24499\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/24543"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=24499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=24499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}