I appreciated the read and am certain that due to its UK headquarters and global manufacturing and commercial presence, that Brexit is something that is very much on the top of Diageo management’s minds. Similar to your suggestion, I think it’s too early to pursue large cross-border movements of factories until more of the details are worked out. Additionally, I doubt that the 1.3M euros additional cost associated with longer border crossings between Ireland and Northern Ireland is the highest concern for Diageo right now, given their massive revenue base of 12B pounds. Beer is such a high margin business (at least in aggregate through the whole supply chain of producers, distributors, and retailers) that I have no concern that this 0.5% cost increase could be passed on and never noticed by the consumer. Ultimately, as a multinational British company, Diageo would be remiss to not consider every possible impact that Brexit might have to their business, but I think their analysis here that concluded that a 30-60 minute delay would cost them 1.3M euros would likely have been a gigantic relief.
As was mentioned above, I believe that this is an issue that Siemens should be considering very seriously right now, but one where they should follow a wait and see approach as the repercussions of Brexit filter out. In addition to the reasons mentioned above, I believe that part of the reason for this patient response is that there may not be very many other choices for the UK if they wish to continue towards their wind-powered goals. Given that the UK receives 50% of its wind power from Siemens turbines, it is uncertain if another commercial option would be more viable than Siemens, even given the higher costs associated with Brexit. Certainly, if the Siemens turbines become prohibitively expensive, and generating wind power with them becomes uneconomical, this mindset falls apart. Yet even in this situation, if the UK continues to be passionate about pursuing wind power (which is a decision unrelated to the Brexit one), it is not unforeseen that the UK may be able to broker a specific trade rule, given political pressure to pursue renewable energy on both sides of the Brexit divide.
As someone who usually thinks of the improvement in airline fuel efficiency and emissions standards in the context of better and newer aircraft from the major equipment producers, I found this article interesting. I think there’s real promise in the context of flight route optimization, but unfortunately, I think there is capped upside here. While there are certainly improvements to be made in changing an aircraft’s departure and approach trajectory to a more linear or efficient path, once the optimal path is reached, there is no further improvement that can be made. As a result, I ultimately think that the biggest responsibility for fuel efficiency and emissions improvements continues to be on the aircraft manufacturers.
Thanks for the discussion, I enjoyed reading this. As you note, this is obviously a very complex problem, and one with very serious human consequences. I appreciated your suggestion to consider growing more drought-resistant crops, but similarly echo your thoughts on the difficulty to make this switch, especially in the short-term. Additionally, while I would consider food first and foremost a biological need, it’s important to at least consider the importance of food as a cultural value and the implications of forcing a nation of people to switch over their primary cereal crop. Furthermore, I wonder how effective switching to a more drought-resistant crop can be in the long-term, especially in a world where climate change may create bigger and bigger swings in global weather patterns. As such, I think the ultimate solution will necessarily require a more built up and widespread irrigation solution, and the reality of the situation is that I think this investment needs to come from the international community.
I think it’s interesting to consider the question of who will stand to benefit the most from securing the authenticity of pharmaceutical drugs, especially when you compare the societal impacts of counterfeit drugs vs. other counterfeit products. When I consider who stands to benefit the most from the decrease in pharmaceutical drugs, I think it’s mostly the consumer, due to the health risks mentioned above. Sure, there are also financial benefits to each of the companies in the supply chain that come from reducing counterfeits and maximizing sales of the authentic product, but I don’t know how much of these sales represent true cannibalization vs. sales from customers that would be substituting other less expensive products (especially in emerging markets). This stands in stark contrast to other counterfeit goods such as luxury goods where the prime beneficiary of reducing counterfeit goods is the manufacturer. As such, I wonder if there is some way for companies such as Pfizer to share the cost of these supply chain improvements with other actors in the value chain such as health insurers and end customers.
I believe that one of the most important factors to consider here with a “network” business like Rappi is the first mover advantage. As mentioned in the article, on-demand delivery businesses like this are usually highly unprofitable in the growth stage and are sustained by heavy outside investment and the outside investment is contingent on believing that the Company can reach a scale at which it turns profitable. A big part of this thought process for an investor is the competitive dynamic in the market.
Take Uber & Lyft for instance. In a world where these two companies weren’t competing head-to-head with eachother, with the main differentiator being price (at least in most geographies), the path to profitability would be much easier. As such, I’d be encouraged by Rappi’s profitability prospects if they could position themselves in markets without competitors of meaningful scale. One of the most important factors in considering new geographies for Rappi is the competitive landscape and whether or not they can achieve a first mover advantage.