Ferrari: Magic from Maranello - [Business Breakdowns, EP.140]
This is Dom Cooke. Today we are breaking down Ferrari. Ferrari was founded in 1929 as a race team by Italian driver, Enzo Ferrari, but it wasn’t until 1947 when Enzo was 50 that Ferrari sold its first car. Today, the car company is one of the most recognizable brands in the world, in large part because of its history in Formula 1, where it is both the oldest and most successful team ever. To break down Ferrari, I’m joined by Brian Lum, an Investment Manager at Baillie Gifford. We discuss how Ferrari went from racing team to a $70 billion business, the various ways it looks more like a luxury goods company than a car maker, and how its business model both nurtures and monetizes its famous red brand. There aren’t many things money can’t buy, but in many instances, a Ferrari is one of them. The ways in which the company manufactures scarcity are fascinating, and this conversation dives into all the aspects that make Ferrari so successful and unique. Please enjoy this Business Breakdown of Ferrari. Interested in hiring from the Colossus Community? Click here. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors, and provider of Canalyst. Tired of calculating fully-diluted shares outstanding? Access every publicly-reported datapoint and industry-specific KPI through their database of over 4,000 driveable global models handbuilt by a team of sector-focused analysts, 35+ industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets. Tegus’ models automatically update each quarter, including hard to calculate KPIs like stock-based compensation and organic growth rates, empowering investors to bypass the friction of sourcing, building and updating models. Make efficiency your competitive advantage and take back your time today. As a listener, you can trial Canalyst by Tegus for free by visiting tegus.co/patrick. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke Show Notes (00:02:31) - (First question) - An introduction to the numbers behind the Ferrari brand (00:04:26) - Exploring Ferrari's roots to understand the impact on the brand's present-day business landscape (00:07:06) - Enzo Ferrari’s dedication to the company extended to the location of his house (00:07:50) - A look at the brand’s racing heritage over the last 75 years (00:13:04) - A unique way of structuring a marketing budget, wholly focused on F1 (00:17:51) - Ferrari's restraint in capitalizing on the SUV market to uphold their brand identity (00:21:40) - A look at the product portfolio and how they cultivate exclusivity for their “collectors” (00:23:51) - A unique buying experience, how existing Ferrari owners become frequent buyers (00:26:50) - How Ferrari sets itself apart from its competitors (00:29:20) - An overview of Ferrari’s financials (00:35:21) - Alternative strategies beyond volume growth to uphold scarcity without compromising the brand's prestige (00:36:40) - A look at other segments of the business like fashion (00:38:44) - The business’ cost profile and its significant investment in R&D (00:41:27) - Ferrari’s approach to electrification and hybrid cars (00:48:31) - Comparing electrification and luxury watchmakers during the quartz crisis (00:52:39) - Looking at Ferrari’s future and incremental evolution (00:54:47) - Lessons learned from studying Ferrari