Father Christmas is a rubbish entrepreneur
Today is Saint Nicholas Day and while people in the UK or the United States don’t celebrate this day, it is big in the Netherlands, Belgium, and Germany. Children in these countries will be visited by Saint Nicholas today (not to be confused with Father Christmas, who visits on Christmas Eve) and get gifts if they were nice and a lump of coal if they were naughty.
In essence, today starts the gift-giving season and it is a great opportunity to check in on the workshop of Father Christmas (or Santa Claus for US readers) in Lapland. The good people at Expert Market have tried to estimate the income statement of Father Christmas’ private business. After all, it is a family business that has been going strong for roughly 2,000 years, so we might learn something from it.
First, the folks at Expert Market estimated the running costs of the workshop in Lapland.
It turns out that in the bigger scheme of things, Father Christmas’ workshop has a pretty lean distribution unit. Feed, veterinary care and upkeep of a herd of reindeer are about £18,000 ($23,000) per year. The sleigh costs about £800 ($1,000) in maintenance per year, but the insurance is expensive. Because the sleigh is a hi-speed sleigh that circles the globe in one night, it is in the same insurance class as a Ferrari supercar and costs about £9,300 ($12,000) in insurance premium per year. Still, the overall distribution costs of £28,100 ($36,000) are peanuts for a global operation of this size.
HR costs are significantly bigger. Assuming that Father Christmas employs 3,000 elves at the average wage in Lapland, the total salaries, pension benefits, etc. for the elves amount to £109m ($140m) per year. On top of that Mrs. Claus acts as CEO of the company and earns the average annual salary of a CEO in Finland of £85,154 ($109,000). Mr. Claus is working for free (as so many entrepreneurs do) but has to at least cover his living expenses. Assuming that he lives modestly, this will cost about £17,300 ($22,200) per year.
The biggest cost for Father Christmas is the production cost for all the toys given to children. The people at Expert Market took the total number of Christian children in the world below the age of 14 and multiplied it by the average spend of British families on Christmas gifts for their children. This will give the retail value of the toys produced in Lapland. To get to the true production costs, they divided this sum by 8 to arrive at an estimated production cost for toys and presents of £13.3bn ($17.1bn).
Thus, the total operating expenses of Father Christmas workshop are about £13.4bn ($17.2bn).
On the income side, Father Christmas makes the big mistake of giving all the toys away as presents, thus generating no income on his biggest expense. In order to make up the shortfall, Father Christmas has to run a reindeer stud. Arguably, because his reindeer are very special, he can charge stud fees that are comparable to those of a champion racehorse, but this will still bring in only £206m ($265m) per year.
Additional income is provided by recycling Christmas cookies left by children and sold to local supermarkets at retail prices (£28.3m or $36.3m) as well as the billions of Christmas wish lists (£247,000 or $318,000).
The biggest income comes from tourism to Lapland to meet Father Christmas (£1.2bn or $1.5bn) and from the image rights and marketing deals. The analyst at Expert Market estimates that while Christiano Ronaldo has 122 million Facebook followers, there are 2.3 billion Christians on the planet who are fans of Father Christmas. Thus, it is conceivable that Father Christmas could rake in sponsorship deals that are about 18.7 times the value of the sponsorship deals of Christiano Ronaldo. Hoping that Mrs. Claus is good at negotiating these deals, this would provide an annual income of £3.6bn ($4.6bn) based on Christiano Ronaldo’s existing deals worth £190m per year.
Add to that some additional income from Airbnb rentals of elf rooms not needed most of the year and you come to an estimated total income of £5.0bn ($6.4bn).
Thus, Father Christmas is operating a business that rakes in an annual operating loss of about £8.4bn ($10.8bn). And these losses accumulate every year for about 2,000 years now, which makes you think how he is funding this shortfall. Does Father Christmas run the world’s biggest endowment fund? If we assume that he can safely withdraw 4% of the funds each year, the size of the endowment would be about £210bn ($270bn) – that’s more than five times bigger than the Harvard University Endowment fund and a little bit smaller than CalPERS.
Or does Father Christmas have other sources of income? Is he secretly financed by the parents of this world through donations for gift manufacturing? I think we will never really know for sure…
All we know is that Father Christmas is really bad at running his business.