Strong euro in spotlight at Cologne
Exhibitors respond in variety of ways
By Powell Slaughter -- Furniture Today, February 8, 2004
COLOGNE, Germany — Two years ago here, natives and visitors alike gazed quizzically at the brand new euro bills and coins, trying to translate them into more familiar marks, francs and dollars.
At the time, the euro was worth about 90 U.S. cents. This year, its value approached $1.30.
The surging currency has complicated matters for exporting companies here. Some manufacturers have raised prices in the weaker currencies, although none said they took increases large enough to make up all the difference.
Companies also are using currency futures to lock in pricing, taking a hit on margins, and promoting product features rather than price.
"This currency issue affects all the non-euro countries where we do business," said Calixto Valentí, president of both Spanish case goods manufacturer Valentí and the European Furniture Manufacturers Federation. "The United States is important, but (so are) Russia and Japan."
The strong euro had many manufacturers here realigning their target markets.
"A lot of companies will be diverting business away from America and focus more on local export markets like England and the Netherlands," said Erik Stammberger, president of Schillig USA. "On the other hand, a lot of companies have forward contracts, and companies doing a lot of business are buying leather in dollars."
While Schillig may raise U.S. prices between 5% and 8%, part of doing business internationally is living with the fluctuations of currency values, he said.
"You have an operational side and a financial side to the business," Stammberger said. "We have to average everything out over a three- to five-year range."
Italian contemporary case goods maker Calligaris, which does about 15% of its business in the United States, takes a similar view.
"You fix the rate you use at a point, generally speaking, that will be good for the medium to long run," said Emanuele Corvo, North American sales manager. "The exchange rate has been so high, but the time frame of the imbalance hasn't been long enough to concern us. If it stays this way long enough, we may have to consider across-the-board increases."
Natuzzi, which said it had its first general price increase, 5%, in 11 years in October, looks to efficiency to help offset the impact of a strong euro on margins.
"We have a plan for significant cost reductions of 30% in the Italian operation through improving manufacturing efficiencies and introducing new marketing technologies," said Giacomo Ventolone, public relations manager.
Club 8, which does 16% of its business in the United States, isn't on the euro, but the Danish kroner follows that currency closely.
"We compensate a little internally," said Carsten Pedersen, Club 8 president. "We might take a lower gross margin. Some of our customers have protected themselves by buying currency futures."
Most exhibitors weren't too worried about the euro.
"The exchange rate is a temporary situation," said Paul Braithwaite, vice president of Italian case goods manufacturer Selva America. "In the near term, we'll sell in dollars and we'll take a hit on our margins. If you try to follow the currency constantly, you'd be making up a new price list every week."
German table specialist Vierhaus is counting on new product features to matter more than currency exchange rates.
"We have developed 12 new functions that let people have tables that adjust from bed to coffee table to dining table height," said Eric Thomas, export manager. He said Vierhaus increased its export sales by half last year to 15% of total sales, and expects to hit 20% this year.
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