With the fallout from the Brexit vote and the now near-permanent state of uncertainty about Britain’s status in Europe, the Pound’s exchange rate has continued to take a battering against the Euro and the Dollar. For the catering equipment sector, which by and large is an import business in the UK, this has had the effect of pushing up manufacturers’ and suppliers’ costs.
Increasingly we are hearing announcements of trade price rises for suppliers’ dealer customers, as the manufacturers seek to retain a margin and even avoid operating at a loss. Hobart publicly kicked off the avalanche of increases way back in July, but of late there have been many more joining the fray, including Hubbard and Precision. I know plenty of others that haven’t wanted to announce their measures so openly too.
Can we assume therefore that these immediate changes are only valid until the New Year, when the traditional round of pricing announcements usually kicks off? With Sterling seeming more likely to head towards parity with the other major currencies than bounce back up, I’m going to look into my crystal ball and predict that even those manufacturers which have just had to hike their rates will do so once again for 2017.
However, if dealers are up in arms about this, just consider: who can really blame manufacturers for trying to recoup what are reportedly 13% increased costs? Any business is likely to do the same – pass at least some of the extra expenditure on.
And for those who would remark that manufacturers didn’t reduce their prices in the boom times, being in business is about making money, and if their customers, ie, distributors, paid the previously-increased tariffs (despite any complaints!), they know that these price points have been accepted.
Other manufacturers are using these rises to their advantage though, maintaining their prices for now and absorbing the costs in the hope that the Pound recovers. These optimists will soon discover if their glass half full approach has paid dividends.
But I think we need to see the whole situation in the context of many prices actually being frozen over the past couple of years, during the period the market has been flying high.
When the industry has seen the same figures in recent times, any increase feels like a real disadvantage. So maybe dealers should be thinking more of passing costs onto end users.
While retail chains and national accounts etc have a real reputation for cutting specs down the bone and squeezing prices as much as possible, even they may have to accept that in a post-Brexit world, the only way is up.