What’s the background to your business?
We work with global wineries and major retailers. In 2006 we founded Cornerstone US Wine Imports, which works closely with Tesco’s US operation, Fresh & Easy, and other multiple retailers in the US. We set up Source Wines which specialises in wines for the UK independent and on-trade sector.
How does foreign exchange impact your business?
We have had many different challenges with the fluctuating nature of currency over the past few years. Sometimes it creates opportunity, at others problems for retailer, supplier and importer. All our businesses are growing exponentially and the currency side is becoming very complicated. We need to be quite precise when dealing with the exchange rates to ensure our margin is protected.
How do you protect yourself?
The moment we know we have an invoice for, say, €500,000, we protect our margin by doing the exchange there and then. If the exchange rate moved against us, we would not be making any profit on the deal. We would much rather protect the profit we have rather than speculate that the exchange rate will move in our favour.
In the UK, we have allowed a little speculation regarding the timing of the exchange as it isn’t necessarily as important to us at the back end of things. Overall, I think we have come out about even which is pretty amazing given we haven’t put much effort into it. Now we’ve decided to take the risk out completely.
What is the biggest currency issue facing your business?
In the UK, if the US dollar strengthens, clients’ wines from the US, Chile and California become less competitive and we sell less of them. Similarly, if the euro strengthens we sell less European wine. There’s no inherent risk to our business, but in an ideal world, we would be back at US$2/£1 and €1.50/£1, those wines would be back in focus with major retailers and we would be selling much more wine. With our side of the business we are able to manage our risk to avoid this from unduly affecting things.
For our US business it would help us a great deal if the Australian dollar would weaken, as well as the euro. If these currencies weakened it would create a bigger sales opportunity for retailers, the suppliers and us. We often advise our suppliers to hedge the currency if it is in their favour at a particular moment.
Some have taken our advice and reaped the benefits, others have not and have often been left exposed.
No comments:
Post a Comment