With Xavier Rolet KBE, former CEO of the London Stock Exchange, we take a bird’s eye view and explore the current situation’s global picture. We discuss finance, international governance, tech and sustainability as key levers of change, and how they are extremely relevant to both big and small players of the Fine wine world.
Xavier Rolet is a respected commentator on global economics, 2017 Harvard Business Review 100 Best CEOs in the World, with three decades of experience at the peak of international finance. Along with his wife Nicole, chair of ARENI, Xavier fulfills his passion for nature and sustainable viticulture with the purchase and development of Chêne Bleu wines.
In a rush? Here are some of the major takeaways.
We’ve seen that there are a couple of models that the economy could take post Covid, following either a V, W or U shape in terms of growth and recession. What is for you the most likely scenario in all of these and what are the main levers that need to be actioned in order to reach this result?
“I am not sure that the “post period” is about to start. As long as we don’t have a vaccine, it will be hard to restore confidence and trust, which are key to economic growth.
What this crisis is demonstrating is the lack of international governance. If there is one time to share good practices, it is now. We are going to see ups and downs in global recovery, and the sooner the rate of global cooperation increases, the more lasting and continuous the recovery will be. The more we stick to local or national policies, ignoring what works, the more difficult it’s going to be.“
We are currently seeing a decoupling of the financial markets from the real economy, with the financial markets performing really well when the real economy is visibly stopped in a Great Cessation. Why is that?
“The indices have a strong bias towards big companies, “blue chips” in financial jargon and the markets are missing the suffering.
Should we be happy about this, is that a good news?
If you are an investor, you see that almost 100% of government help is being offered as debt, mostly bank loans, cheap money that will help big companies acquire competition. In parallel to this, you see the huge unemployment rate and you know that cost of labour is not going to increase any time soon. So logically, investors do think that this is going to play well for the big ones, and we are heading towards more and more monopolies.“
What does it mean for the world of Fine Wine?
“The world of wine is going to be even more competitive than before with a couple of groups controlling online distribution, already a key to survival. If SME’s do not regroup in “chosen consolidation”, they won’t be able to compete.“
How can 75 000 wine producers in France can negociate interesting terms when they are dealing with three, maybe four distributors in the US? The industry can not hope to survive if it remains in this state of fragmentation. There will need to be innovation, and raising of long-term, patient capital.
But margins are historically small in the Fine Wine world, how can we attract investors?
“The problem with margins in the wine industry is that small producers replicate the same thing, the same business model, the same investment for quantities that are small, you don’t have any economy of scale. There is a way that you can still focus on high quality production while centralising distribution and transportation, or some of the wine making storage facility, and bring the costs down.“
What trend/behaviour/initiative, developed over the quarantine weeks would you like to see staying when we are back to “normal”?
Environmental, social and financial sustainability. If you haven’t thought about ESG (Environment – Social – Governance) yet or if you are not interested in working and communicating around the notion of sustainability, very soon even bank debts won’t be accessible to you anymore.
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