please help me on the case! provide step by step explainations!
the goal of this assignment is for you to help frank better understand the risks he is taking with
his calambra venture and help him figure out how many gallons of olive oil he should order in
1994.
you should use the spreadsheet model and ranges provided by frank to develop a tornado chart
that identifies the important uncertainties in the problem. please explain any surprising findings
in this analysis and include a recommendation about which uncertainties to focus on. build a
tornado chart along with a brief executive summary about your findings.
Frank Lockfeld pushed his chair back from the table and surveyed the remains of the meal he
had spent the afternoon preparing. After an appetizer of roasted peppers with caramelized garlic
accompanied by a crisp 1982 Roederer champagne, he and his guests sat down to a main course
of his own devising, designed to take advantage of the light, yet intense, flavor of Calambra olive
oil. In Chicken Breasts Calambra, he used fresh lemons, thyme, garlic, shallots, cherry tomatoes,
and parsley (all from his garden), 16 green and 16 black olives, and five tablespoons of Calambra
olive oil. (A collection of Lockfeld's Calambra recipes is presented in Exhibit 1.) With the
chicken, Lockfeld served fresh zucchini (also from his garden) and a shiitake mushroom risotto,
complemented by a superb 1986 Chalone Chardonnay Reserve. This course was followed by an
endive salad with his own special vinaigrette-balsamic vinegar, fresh lime juice (from the tree in
his garden), freshly ground pepper, and the 1993 vintage Calambra olive oil. Lockfeld took
another sip of the Chalone and gazed into its rich amber depths while strains of Mozart's Piano
Concerto no. 20 in D Minor played in the background. Turning to his wife, B. J., and friends
Marv and Linda White, he said, How am I supposed to decide how many gallons of olive oil to
order for next year? It s only the beginning of August, and we've just begun the first selling
season. It was only three months ago, late last April, that we bottled the first crop of Calambra
olive oil. This was supposed to be our test year. That's why we bought only 800 gallons of the
1993 vintage oil; if we can't sell that much, we probably don't have a business. Now it seems we
have to make the decision about the 1994 crop before we have any real idea about how this
experiment is going to turn out. What's more, sales so far have been disappointing. But it's been
only three months. We're hoping for a big jump in sales when the retail shops stock up in
anticipation of holiday buying. What's more, there's the possibility we'll sign contracts with
Neiman Marcus and Williams-Sonoma for inclusion in their holiday catalogs. Inclusion in either
would provide a real boost to sales. But the fact remains: so far, we've shipped only 24 cases.
This case is a revision of "Calambra Olive Oil (A)" (UVA-QA-0440), originally written by
Professors D.
please help me on the case! provide step by step explainations!.pdf
1. please help me on the case! provide step by step explainations!
the goal of this assignment is for you to help frank better understand the risks he is taking with
his calambra venture and help him figure out how many gallons of olive oil he should order in
1994.
you should use the spreadsheet model and ranges provided by frank to develop a tornado chart
that identifies the important uncertainties in the problem. please explain any surprising findings
in this analysis and include a recommendation about which uncertainties to focus on. build a
tornado chart along with a brief executive summary about your findings.
Frank Lockfeld pushed his chair back from the table and surveyed the remains of the meal he
had spent the afternoon preparing. After an appetizer of roasted peppers with caramelized garlic
accompanied by a crisp 1982 Roederer champagne, he and his guests sat down to a main course
of his own devising, designed to take advantage of the light, yet intense, flavor of Calambra olive
oil. In Chicken Breasts Calambra, he used fresh lemons, thyme, garlic, shallots, cherry tomatoes,
and parsley (all from his garden), 16 green and 16 black olives, and five tablespoons of Calambra
olive oil. (A collection of Lockfeld's Calambra recipes is presented in Exhibit 1.) With the
chicken, Lockfeld served fresh zucchini (also from his garden) and a shiitake mushroom risotto,
complemented by a superb 1986 Chalone Chardonnay Reserve. This course was followed by an
endive salad with his own special vinaigrette-balsamic vinegar, fresh lime juice (from the tree in
his garden), freshly ground pepper, and the 1993 vintage Calambra olive oil. Lockfeld took
another sip of the Chalone and gazed into its rich amber depths while strains of Mozart's Piano
Concerto no. 20 in D Minor played in the background. Turning to his wife, B. J., and friends
Marv and Linda White, he said, How am I supposed to decide how many gallons of olive oil to
order for next year? It s only the beginning of August, and we've just begun the first selling
season. It was only three months ago, late last April, that we bottled the first crop of Calambra
olive oil. This was supposed to be our test year. That's why we bought only 800 gallons of the
1993 vintage oil; if we can't sell that much, we probably don't have a business. Now it seems we
have to make the decision about the 1994 crop before we have any real idea about how this
experiment is going to turn out. What's more, sales so far have been disappointing. But it's been
only three months. We're hoping for a big jump in sales when the retail shops stock up in
anticipation of holiday buying. What's more, there's the possibility we'll sign contracts with
2. Neiman Marcus and Williams-Sonoma for inclusion in their holiday catalogs. Inclusion in either
would provide a real boost to sales. But the fact remains: so far, we've shipped only 24 cases.
This case is a revision of "Calambra Olive Oil (A)" (UVA-QA-0440), originally written by
Professors Danal R. Clyman and Philip E. Pfeifer of the Darden School, University of Virginia.
This version was prepared by Professors Laura Kornish and Jim Smith of the Fuqua School of
Business, Duke University, and Dana R. Clyman to support a different classroom exercise.
Copyright is 2002 by the University of Virginia Darden School Foundation, Charlottesville, VA.
All rights reserved. To order copies, send an e-mad to dardencases a virginia.edt. No part of this
publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means-electronic, mechanical, pholocopying, reconding, or otherwise-
withaut the pernission of the Darden School Foundation.
Sometimes, I'm very optimistic and tempted to order 3,000 gallons, as originally planned for year
two. This is, after all, the best-tasting olive oil on the market. But at other times, l'm concerned
that sales may never materialize. I have visions of standing in front of the warehouse filled to the
brim with leftover cases of 1993 bottles just as a big truck pulls up with this huge 1994 shipment.
Background Shortly after Frank Lockfeld moved to California from London in 1968 to work
with Wilbur Smith and Associates, a well-known transportation-planning and -consulting firm,
he planted two olive trees in the backyard of his house in Palo Alto. Several years later, after the
trees began to bear fruit, Lockfeld decided to try to make olive oil from his own olives. As
Lockfeld later explained, he was mostly "just curious" and intrigued by the idea of producing his
own olive oil. The first batch of olive oil was simply terrible, and Lockfeld set out to determine
why. The answer came in the form of one Gino Ambrano, a seventh-generation olive-oil presser
of Sicilian descent. Ambrano's family had relocated to Califomia in the early 1900 s, and
Ambrano, an independent businessman in Mountain View, California, continued the family
tradition by maintaining a small olive-oil press, on which he would press a small quantity of oil
that he sold in gallon jugs. Ambrano explained to Lockfeld that the olives the latter used were the
wrong kind for making high-quality olive oil. Most California olives, he explained, were the
wrong kindproducing oil that could only be used for such industrial purposes as making soap.
The popular hand soap. Palmolive, for example, was aptly named because one of its main
ingredients was olive oil. High-quality olive oil, Ambrano explained, required olives grown in
extremes of temperature-hot, dry summers and cold, crisp winters. Palo Alto's moderate climate
was neither hot enough, dry enough, nor cold enough. The only good California olives came
from the Central Valley in the area surrounding the town of Oroville. There, the high volcanic-
ash content of the soil, coupled with the temperature extremes, provided an ideal environment for
growing the kind of olives needed to make high-quality olive oil. To prove his point, Ambrano
3. offered Lockfeld a taste of his own hand-pressed, extravirgin' olive oil. Ambrano made this oil
with Oroville olives, using his family's extremely gentle, traditional pressing methods. Upon
tasting the latest vintage of Ambrano's olive oil, Lockfeld knew he had met a master. The oil was
light and delicate, yet intense. It had a medium-amber color, with a full, rich nose and brilliant,
fruity flavor. The taste was distinctly of 'Olive oil comes in several grades, which denote acidity
level. For the highest grade, extra virgin, the acidity level must be less than 1 percent.
-3. UVAQA0587 ripe olives, sweet and pure, with a surprisingly mild aftertaste. Lockfeld had
never tasted anything like it, and thought that Ambrano's was probably the best-tasting olive oil
in America. Lockfeld was so impressed that he arranged to purchase a small quantity of
Ambrano's olive oil to give to his friends as Christmas presents. After funneling the bulk oil into
wine bottles, he designed and hand-inked personalized labels for cach of the bottles. These gifts
were a big hit; everyone who tried the oil thought its taste was remarkable, and not a few of them
suggested that Lockfeld try to find some way to bring it to market. The Calambra Concept
Lockfeld thought he could gain a distinctive marketing advantage by emphasizing that this oil
was from Califomia. Almost all high-cuality olive oil sold in the United States was imported
from Europe. Just as Califomia wines had won market acceptance in competition with French
wines, Lockfeld was convinced that a California olive oil could do the same by winning a
reputation for very high quality. He combined "Califomia" with "Ambrano" to come up with the
name of his new venture. To encourage consumers to make the connection between olive oil and
fine wine, Lockfeld decided to sell Calambra olive oil in 750 -milliliter, "dead-leaf" green wine
bottles, 2 In addition, Lockfeld decided to display the bottling year on each label. (Few people
know it, but the taste and quality of olive oil vary from year to year. Furthermore, like wine,
olive oil ages. If you prefer your olive oil intense, use it while it is fresh: if you prefer a
mellower, more understated taste, allow it to age in the bottle.)" Lockfeld believed that by dating
each bottle, he could encourage consumers to pay attention to both the year-to-year differences
and the effects of age, thereby differentiating Calambra from other olive oils and increasing the
connection between Calambra olive oil and fine wine. To complete the package, Lockfeld
designed a beautiful, high-quality label. The fourcolor label-a rising sun in gold foil, bicolored
olive branches, and the vintage date-was so well done that it later won several design awards. In
keeping with the highest-quality image, Lockfeld saw Calambra carrying a retail price higher
than any other olive oil on the market. He expected Calambra to be sold initially in specialty and
gourmet-food stores. Access to such stores was provided through "fancy-food" brokers,
individuals who sold an array of noncompeting gourmet-food products to retail outlets in return
for a fixed-percentage commission. Lockfeld planned to start in Northern California, "Lockfeld
chose the expensive "dead-leaf" green botles because they protected the oil from light. As with
4. fine wines, exposure to light could cause olive oil to break down. 3 When aging olive oil, it
should be stored in a cool, dark place of constant (or, at most, slowly changing) Icmperature. Just
as with wise, quick temperature changes could facilitate chemical reactions that might cause the
oil to break down.
especially in the Bay Area, and later move on to other major metropolitan areas. Department
stores and large supermarkets would follow a successful introduction in specialty stores.
Promotional plans for the introduction of Calambra were modest. Taste tests, magazine articles,
and newspaper coverage were the major vehicles Lockfeld would pursue. The primary costs of
these efforts were Lockfeld's time and whatever oil was used in marketing promotions, taste
tests, and giveaways. The 1993 Vintage In August 1992, Lockfeld contracted with Gino
Ambrano for delivery during the last week of April 1993 of 800 gallons of olive oil at $22 a
gallon. Although most oils were made from olives picked in December or January, Ambrano
used only handpicked, extraripe, lateharvest black olives from the April crop. This extraripe
fruit, which was restricted to black olives to avoid green-olive bitterness, had to be handled
gently to avoid damage and quickly, from picking to pressing, to avoid mold. As had his father-
and his father before him-Ambrano, immediately upon receipt of the olives, lightly crushed the
extraripe fruit. (This extremely gentle pressing avoided the bittemess of the pit because it
ensured that the pit itself was never crushed.) Ambrano then took the resulting mixture of oil and
skins and allowed gravity to filter it through cotton twice. This centuries-old process-using no
heat, pressure, or chemicals-produced the sweetest, purest olive oil imaginable. In preparation for
delivery, Lockfeld began exploring various ways to bottle the oil. His first surprise came when a
local bottler told him that he could expect to lose about 53 of his 800 gallons during the bottling
process. This loss comprised three components. The first was a fixed loss of about 25 gallons
that occurred during the set-up process as target fill-levels were set, spin speeds were established,
and fill apertures were chosen. The speed at which the machine filled the bottles and the
apertures from which the product was poured depended on a variety of factors, including the
shape, size, and mouth-width of the bottles, and the viscosity and consistency (chunkiness) of the
fluid. Next, there was a variable loss of about 3 percent due to spillage during the filling process.
Finally, there was a residual loss of about five gallons because emptying the machine fully
without degrading the product was impossible. t 'The bottler explained that his usual customers,
who were generally botting high-volume food products with low unit costs (e.g., soup, vinegar,
and chunky salsa), considered these losses minor. Unfortunately for Lockfeld, this loss meant
that his 800 gallons of olive oil would result in only about 314 12-bottle cases of 750 -milliliter
bottles of olive oil. (Without any loss, 800 gallons would result in about 336 cases, as there are
3.7853 liters per gallon.)
5. August 1993 The introduction of Calambra olive oil was an artistic success. Calambra ranked
number one in a tasting of 21 Italian, French, Spanish, Greek, and Califomia olive oils sponsored
by Narsai's Market, a well-known specialty-food store in Kensington, California (see Exhibit 4
for the judging criteria and a list of the oils tested). The Narsai victory received coverage in San
Francisco Focus, a slick, monthly magazine covering events in the Bay Area for upscale readers.
It also got Lockfeld invited back to conduct an in-store tasting on July 24. On that Saturday,
Lockfeld sold 20 bottles. Calambra also received a very favorable review in the article "Liquid
Gold: The True Meaning of 'Extra Virgin' and Other Secrets of the Controversial Oil from the
Little Black Fruit," which appeared in the "Califormia Living" section of the Los Angeles
Herald. A list of the selling points and accolades for Calambra olive oil are presented in Exhibit
5.
Unfortunately, these successes had yet to translate into shipments. As of July 30 , Lockfeld had
shipped 24 cases to 17 different customers in the Bay Area, each of whom had initially ordered a
single trial case and only four of whom had as yet placed a second order. This was a far cry from
the 20 to 30 cases that Lockfeld hoped the average store would sell each year. Nonetheless,
Lockfeld was hopeful that many of these stores would soon be placing orders in anticipation of
holiday buying. In addition, Lockfeld was currently in negotiations with Neiman Marcus and
WilliamsSonoma for inclusion in their Christmas catalogs. Neiman Marcus was thinking of
including a bottle of Calambra olive oil in each of its Christmas baskets, and was talking about a
purchase of 100 cases of oil; Williams-Sonoma was thinking of listing Calambra directly in its
catalog and was considering buying 30 cases. Lockfeld believed that either deal would be a great
boon for Calambra, more for the enhancement of Calambra's reputation than for the sale of oil.
Ambrano's Proposal Although it was only August, Gino Ambrano was pressing Lockfeld, in his
own skillful and gentle way, to decide how many gallons of oil he wanted in 1994. Although this
urgency seemed premature, Lockfeld realized that producing Calambra-quality oil required that
the olives be left to ripen on the trees far longer than if the olives were to be used for any other
purpose. Lockfeld therefore was asking Ambrano to contract with the olive growers to "reserve"
some portion of their crop for a late-April harvest so that it could be made into Calambra olive
oil As a result, Ambrano sent Lockfeld the agreement reproduced in Exhibit 6. After several
weeks of discussion, Lockfeld came to realize that the proposed price schedule was not
negotiable. Lockfeld knew that this agreement was truly a take-it-or-leave-it offer, and that he
would have to make up his mind by the end of the month. This situation disturbed Lockfeld
because he did not believe he was getting much of a break from Ambrano for committing to buy
the oil in advance and in quantity. Nonetheless, he had no other choice. Although low-grade oil
6. was available commercially in 55 -gallon drums for about $5 a gallon-and there was some extra-
virgin oil available in drums for sale to restaurants at $15 to $17 a gallon-none of it tasted like
Ambrano's. Lockfeld's Dilemma While Marv White and Frank Lockfeld cleared the table after
dinner, Lockfeld continued to consider the question of how much olive oil to order. Lockfeld
knew that he had to think about where the business might be in April 1994, when the new order
would be delivered. Clearly, the events of the next few months would go a long way to help
determine just how many gallons he would need next April. But he had to order now.
UVA-QA=0587 As B. J. brought out her famous Linzer torte (a raspberry-and-almond torte
made from her own secret recipe in the style and tradition of the great bakers of the city of Linz,
Austria), she asked her husband what would happen should sales fail to materialize in either
1993 or 1994 and the business had to be abandoned. "What do we do with all that oil?" Lockfeld
thought about her question while he finished making the cappuccino and then responded. "If
we're not in business, we'll simply have to find a way to dispose of it. There's always Trader
Joe's." (Trader Joe's was a discount chain of fancy-food stores in the West and Southwest that
bought warehouse-sized lots of fancy-food products at distress prices, usually about 10 cents on
the dollar, and then resold them in their own stores at deep discounts.) "Painful as it might be, we
could always sell the oil to them. Or maybe we should just eat it." "I think that's the best idea,"
Marv White piped up. "Over pasta would be nice; we'll come help." When everyone settled
down, White continued, "Seriously, though, there is a new MBA at the office who is a whiz at
developing spreadsheet models and modeling uncertainties. She is doing great things for us.
Maybe she can help you figure out how much oil to order." "That sounds interesting," Lockfeld
said. "Send her over. What does she like to eat?" The Risk Analysis Intrigued by White's
description of Lockfeld's dilemma-not to mention the wonderful dinners-you agree to help
Lockfeld. After an initial telephone conversation with Lockfeld, you agree to meet in a few days.
In the interim, you spend some time thinking about Lockfeld's problem, studying the profit-and-
loss statement (Exhibit 3) that Lockfeld faxed over, and building a spreadsheet model of the cash
flows. "Frank, I think the first thing we need to do is figure out which uncertainties are most
important and what we should be most concerned about. After studying your profit-and-loss
statement, I've built a spreadsheet model and would like to explore some of the assumptions with
you. Your profit-and-loss statement goes out five years. Should we consider the same time
horizon?" After some discussion, the two of you decide to focus on the first two years. As
Lockfeld observes, "This is really the key time period. After two years, we'll know if I have a
viable business." As a result, you argue for the use of an NPV measure, but he suggests that,
because of the complexities of the timing of the cash flows and difficulty in determining an
appropriate discount rate, it wouldn't be worth the trouble. "Let's just look at the total cash
7. generated in 1993-94." You concede, figuring that, with the time horizon so short, it wouldn't
make much difference anyway.
8 UVA-QA-0587 "OK," you continue. "To get a sense of how risky this venture really is, I'd like
to develop ranges for some of the parameter values that you assumed. Specifically, I would like
the low scenario to be a number such that there is a one-in-ten chance that the actual number will
turn out to be less than that amount. Similarly, I would like the high scenario to be a number
such that there is a one-in-ten chance that the actual number will turn out to be more than that
amount. I would also like you to think about a base-case number such that there is a 5050 chance
of being above or below that amount: this may be the number you have already assumed, but you
should reconsider these as well." Lockfeld protests, "I don't know how things are going to turn
out. Many of these numbers are rough estimates. I don't think I can be so precise." "It's because
you don't know that I want you to think about these 10-50-90 ranges rather than particular values
as you are now. It's OK to give rough numbers - the point of this exercise is to determine which
of these uncertainties are most important. We'll think harder about the important ones later.
Stretch yourself-think about how high and low these things might actually be. Here is a list of the
assumptions I would like to consider." "OK, I will try to work up some ranges," Lockfeld states.
(Your list and the results of Lockfeld's thinking about the possible ranges are both presented in
Exhibit 7.) "Great," you continue. "In the model, we need to consider not only those scenarios
when sales are good, but also when sales are weak. How bad would it have to be before you
would abandon this business?" "What a depressing question. OK, if we fail to sell out the 1993
vintage, I would plan to quit the business. Of course, I would still have to try to sell the 1994
vintage, but I wouldn't order again for 1995." "And if sales don't materialize, what would you do
with the leftover oil?" "If we're not in business, painful as it might be, we'd probably have to sell
it to Trader Joe's. I could only eat so much of it." "And if you have leftover oil and stay in
business, what would the oil be worth in that scenario?" "If we are still in business in 1995, we
could sell leftover bottles in later years, though we might have to discount them. Since the cost
of producing a case is approximately $60, I think leftover cases would be worth about $50 each.
After all, if I have leftovers, I don't need to buy as much oil, but it's not worth as much as freshly
bottled oil because we will probably have to discount it. If you want a high and low for your
10-50-90 range, l'd say $60 and $40, respectively."
-9- UVA-QA-0587 "Wow! You are getting the hang of these ranges! While we're at it," you
continue, "I'd like us to consider a few other small points. In your profit-and-loss statement, you
assumed specific numbers for the marketing cases, advertising, and the general and
administrative expenses. If we are going to consider other scenarios with more or less sales, we
8. need to think about how these numbers might change in these other scenarios. For example, take
the number of marketing cases that you give away. Rather than as fixed numbers, can we think
of them as a fraction of demand or as a fraction of the number of cases you produce? In your first
year, the number of marketing cases is about 7 percent of your total production. But in later
years, it drops to 2.5 percent. Can we assume, for example, that it is always about 5 percent of
production per year? Is there a better number? Can you put ranges on that?" "Five percent sounds
about right for the midpoint. I'll think about the ranges." "I have similar questions about
advertising and G&A [general and administrative] expenses," you continue. "Can I assume
advertising is 3 percent of sales? Similarly, can I assume G&A is 1.5 percent of sales? These
ratios are close to what you have." "The ratio for advertising sounds good. The G&A number is
OK for later years, but there were some accounting and legal expenses associated with starting
the business last year that also needed to be included. I'll think about ranges for those as well,"
Lockfeld adds. After a bit of work at the computer, you say, "I've put the base-case assumptions
in the spreadsheet [see Exhibits 7 and 8]. Do the cash flows look about right?" "I'm not sure,"
Lockfeld says. "I'll have to study it some more. Your numbers seem to be a little lower than my
projected profit-and-loss, especially in the later years. I'll have to think about that. I also need to
take a little more time to think about these ranges." "OK," you respond, "but don't spend too
much time on it. Remember the point of estimating ranges is to determine where we should
spend more time. Just fax them to me when you're done. Can we review them next week, after I
have a chance to do some analysis?" (Lockfeld's ranges are included in Exhibit 7.) "Great!"
exclaims Lockfeld. "I really appreciate your help. And here, before you go, please, take a bottle
of oil! I think you'll like it!"
LIQUID GOLD: CALAMBRA OLIVE OIL (A) A Collection of Frank Lockfeld's Calambra
Recipes Pat chicken with lemon jusce and spriskle with ground pepper. Warm 4 T CALAMBr.A
Olive Oil in 12" pan. Saate chicken. skin side down. over medium-high heat for 5 minutes. Tum,
lower heat to moderawe, and saud for 1520 minutes, turning so chicken browns everly. Remove
so heated serving dish and cover. Add olives and tomatovs to pan; turn in pan until they are
wanm. Place olrves and lomatoes around shicken. Pour off pan contents, retainieg approximstely
2T in pan. Add shallots, garlic, thyme, and bay leaf; cook for 2 minutes, Add wine and mix pan
scrapings; redace by half over high beat. Add broth, parsley, and redepepger flakes; simmer for
10 minutes, Remove from heat and blend in remaining T CALAMBRA Olive Oil. Spoon over
chicken and serve. Serves 4 . Lamb Chops CALAMBRA
4lambchops(shoulderorroundbone)4TCALAMBRAOliveOil2Tchoppedgarlic,ortotaste4Tchoppe
dfreshparsley,or2Tdried2Tchoppedfreshbasil,or1Tdried3Tfreshthyme,or1Tdried1cupdryredwine
2TbutterLemonjuiceGroundwhitepepper Trim chops well. Rub with lemoe juice and sprinkle
9. lightly with pepper. Saste garlic in CAL_AMBRA Olive Oil over medium-high heat for 1
minutes. Tum and saute for 2 minutes. Remove chops to heated platter and cover. Add wine to
pan, stir, and reduce by half over high heat Remove from beat, whisk is butter and juices frons
chops. Pour sauce over chopo and serve. Serves 4 . Spinach CALAMBRA 2 bunches fresh
spinach, destemmed and 1 T chopped garlic, or to taste prepared in 1/2 " chiffonade 4T toasted
pine nuts 4 T CALAMBRA Olive Oil 1T freshly grated Parmesan cheese Preheat broiler to 350
degrees. Blanch spinach in boiling water for 30 seconds; drain well. Saut garlic in
CAL.AMBR.A Olive Oil in 10" pan over moderate heat for 2 minutes. Fold spinach and pine
buts into oil and garlic, mix well. Cook for 2 minates. Sprinkle with Parmesan cheese. Place
under broiler for 30 sesonds. Serves 4.
In 10"-12" pan, saut garlic in CAL-AMBRA Olive Oil for 1 minate over moderate heat. Add
shiitake and cook over bow beat for 20 minutes. Prepare fettuccini al dente; drain. Combine
shiitake and oil mixture with fettuccini. Add and mix tarmagon, parsley, and chives. Mix in
cemerme fraiche. Serve with Parmesan cheese on the side. (Note: 3 oz dried shintake
roconstitated with water may be ased if fresh shritake are not available. If fresh herbs are not
available, roconstitale dried herbs in a saucer with a small amount of CAL.AMBRA Olive Oil. If
chanterelles are besd, cook for 45 minutes.) Serves 4 as an entre, 810 as a pasta course. Grilled
Tomatoes CALAMBRA 4 large tomatoes, halved 2 large cloves of garlic, thinly sliced 2 T
CALAMBRA Olive Oil Lemon juice 2T finely chopped fresh oregano Ground white pepper
Preheat broiler at 350 degrees, Oil baking dish just large enough to accommodate tomato halves.
Sprinkle tomatoes with lemon juice and pepper lightly. Coser with sliced garlic. Sprinkle with
oregano. Drizzle with CALAMBRA Olive Oil. Broil for 7 mimates with heat 4 inches from
surface. Mayonnaise CALAMBRA 1/4 cup CALAMBRA Olive Oil 1T lemon juice 1 cup plus I
T samlower oil 1t prepared mustard, such as Provencale 1egg or Pommery 1T shallots In
processor work bowl, place egg (white and yolK), mastard, shallots, 1 T lemon juice, and 1 I
safllower oil. Process for 1 minute. Continue processing and drizzle through feed tube: 15 cup of
safflower oil, alrsost drop by drop; CALAMBRA Olive Oil; remaining saftlower oil. (Garlic may
be substituted for shallots.) Pesto CALAMBRA I cup CALAMBRA Olive Oil 1/2 cup grated
Parmesin cheese 2 cups firmly packed fresh basil 4 oz. pine nuts 1T garlic, or to taste Place all
ingredieats is food processor. Process until blended and smooth. Combine with pasta al dente.
Yields approximately 2 cups pesto. Unased portion can be covered with CALAMBRA Olive Oil
in closed container and kept in refrigerator for up to 3 weeks.
1800 gallons at $22 a gallon made 325 cases.
10. 'Assumes handootting in 1993 and use of the botting plant tor years 1994 through 199 /.
#1 Calambra (April 1993 Extra Virgin, Central Valley) CRITERIA FOR EVALUATION OF
HIGH-QUALITY OLIVE OIL - Bouquet, perfume, aroma of the fresh olive - Flavor on the
tongue; fruitiness versus greasiness - Degree of acidity and extent of burning and stinging at
back of mouth; some pepperiness, but not too much to override the delicate flavor - Color-deep,
rich emerald to golden green, depending on degree of filtering
15 UVA-QA-0587 Exhibit 5 LIQUID GOLD: CALAMBRA OLIVE OIL (A) Selling Points and
Accolades - Ranked no. I in tasting of 21 Italian, French, Greek, Spanish, and California olive
oils at Narsai's Market, Kensington, California Praised as the "outstanding olive oil" at the third
annual International Gourmet Food and Wine Show, San Francisco, by Harvey Steiman, San
Francisco Examiner food critic - Seventh-generation olive-oil master - Full flavor and aroma of
olives - A very light oil without greasiness (does not stick to the roof of your mouth) - Smooth,
balanced taste without sharpness common to other olive oils - Made from fully ripe black olives
only; no green-olive bitterness - Olives from selected farms in northern Central Valley, where
heat brings fruit to ripeness - April harvesting when the olives are fully developed - Very lightly
cold-pressed, avoiding bittemess near pit (pit is not crushed) - No "culls" (canned olive rejects);
no heat, no chemicals - Gravity-filtered twice through cotton; no pressure applied
This is an agreement between Calambra Olive Oil (Calambra), a California subchapter S
corporation, and Gino Ambrano, Martine Avenue, Mountain View, California. Gino Ambrano
will provide Calambra with olive oil of his own pressing from the 1994 crop according to the
following price schedule: The oil will be received by Calambra at Gino Ambrano's place of
business in Mountain View, California, in 55-gallon drums, unless prior written arrangements
are mutually agreed upon. Delivery will be made during the last week of April 1994. All drums
delivered to Calambra prior to April 30 will be returned not later than May 5 . Calambra may,
upon consent of Gino Ambrano, purchase the drums at a price of $50 per drum. Payment for the
oil shall be made by check drawn on the account of Calambra, upon receipt of delivery,
excepting the first $5,000.00, which is due upon execution of this contract. This represents the
entire agreement between the parties hereto, notwithstanding any prior or verbal representations
by either party. Any amendments to this agreement shall be written and signed by the parties to
this agreement.
17 UVA-QA-0587 Exhibit 7 LIQUID GOLD: CALAMBRA OLIVE OIL (A) Model Parameters
and Assumptions Model Assumptions Potential Uncertainties
11. I IOIII COI.D. CAI AMRRA OI IVF. OII. IA
Cases Available Disposition of Oil Cases given away for marketing purp Cases sold at full price
Cases sold in liquidation Cases left over at end of year
1630900611,15000911,725071372,5880232053,88105 Revenue Full price sales Liquidation
sales Total Revenue begin{tabular}{rrrrr} $46,313 & $172,500 & $258,750 & $388,125 &
$582,188 $0 & $0 & $0 & $0 & $0 hline$46,313 & $172,500 & $258,750 & $388,125 &
$582,188 end{tabular}
Selling expenses begin{tabular}{lrrrrr} Freight & $1,235 & $4,600 & $6,900 & $10,350 &
$15,525 Broker & $9,262.50 & $34,500.00 & $51,750.00 & $77,625.00 & $116,437.50
Advertising & $1,389.38 & $5,175.00 & $7,762.50 & $11,643.75 & $17,465.63 hline Total
Selling Expenses & $11,887 & $44,275 & $66,413 & $99,619 & $149,428 end{tabular} Cost of
Goods Sold begin{tabular}{lrrrrr} Oil Costs & $17,600 & $62,000 & $90,500 & $133,250 &
$195,000 Bottling Costs & $2,213 & $15,607 & $21,977 & $31,534 & $45,337 Warehouse
Costs & $1,138 & $4,239 & $6,382 & $9,619 & $14,316 Selling Expenses & $11,887 &
$44,275 & $66,413 & $99,619 & $149,428 hline Total Cost of Goods Sold & $32,838 &
$126,120 & $185,272 & $274,022 & $404,082 end{tabular} begin{tabular}{lrrrrrr} General
and Administrative Expenses & $694.69Startupexpenses & $2,587.50 & $3,881.25 & $5,821.88
& $8,732.81 Profit & $11,680 & $43,792 & $69,597 & $108,282 & $169,373 cline { 2 - 7 }
end{tabular} Inventory credit Total value at end of year 2 $23$55,495
Calambra Olive Oil Cash Flows
ContinueBusinessatendofyear1993TRUE1994TRUE1995TRUE1996TRUE1997TRUE Oil
Supply
GallonsplannedGallonsofoilorderedCostofOil($)800$17,6003,000$62,0004,5004,500$90,5006,7
506,750$133,25010,00010,000$195,000 Bottling
NetgallonsinbottlesCasesproduced7733252,8811,2124,3361,8246,5182,7429,6714,067 Bottling
costs Printing Other Materials Total Cost of Bottling begin{tabular}{rrrrr} $0 & $7,362 &
$9,565 & $12,869 & $17,643 $39 & $145 & $219 & $329 & $488 $2,175 & $8,106 &
$12,200 & $18,341 & $27,211 hline$2,214 & $15,613 & $21,983 & $31,539 & $45,342
end{tabular}
