Exchange Rate of €-¥ Reached 7.67, Making Importers Anxious
Write | WBO Morris
Translate and Edit | WBO Kiwi
Last year, WBO has many reports about the sharp rise of USD to CNY exchange rate due to the devaluation of CNY. The same situation happened in Euro too, what reaction will importers have at this stage?
Exchange rate of Euro to CNY goes up 5%
Exchange rate of Euro to CNY was 1 to 7.3 in this January, which has reached 1 to 7.67 by the end of May 17th. The sharp rise of exchange rate started from March of this year, according to WBO’s survey. At the beginning of March, Euro to RMB exchange rate was 1 to 7.25, but the number has increased to 7.67, with a growth rate of 5%.
The highest point of Euro to CNY dated back to 2011, with the exchange rate of 1 to 9.6995, and the lowest point appeared in the May 2014, exchange rate of Euro to CNY then dropped to 6.5133.
The exchange rate was hovering between 7.1 and 7.4 in 2016 and this is the first time that it goes beyond 7.67 in just two months.
Stable political situation leads to € upvaluation
Li Yajun, chief representative of MAISON BOUEY for China, pointed out that European economic status went back to a stable condition and its overall political stability is free from tension now, especially benefit from the French presidential selection. These factors will definitely lead to Euro upvaluation.
“But it’s absolutely bad for wine importers, imports cost will increase in both importers and distributors, which will finally affect their profits and prices.” Li analyzed. Associating with price rise and shipment delay in early days of this year, French wine importers are suffering great pressure from frost in the end of April and exchange rate rise now.
Price is hard to rise with cost rise
Which kind of importer is likely to be involved into the cost pressure? Wine business observer Richard Xi said, “It’s a huge challenge for small sized wine companies who sell entry level wines. Such importers are likely to affect or kick out by cost rise.”
Through Richard‘s analysis, price rise is not totally decided by cost but by supply-demand relationship. Cost rise will accelerate their transformation or give up from wine industry.
Who have wine in stock is the winner
Wang Canhui, a wine importer based in Fujian province, said, “Importers with wines in stock surely have the confidence to keep the price. The pressure of exchange rate rise will be seen obviously in medium and high-end wines. Many entry level wines were imported and stored in free trade zone in large volume, so they are not going to be affected by the exchange rate and shipment price rise problem.”
In addition to his analysis, Wang still said, “As the empty bottle project emerged in many ports and imports inlarge volume last year, some OEM wines will not trapped in this situation.”
Price pressure reflects in next half of year ?
Importers are now preparing for festivals such as Mid-autumn or National Day of the following months, thus price rise will not reflect in wholesale and terminal channels until the second half of the year. When the time draw near, importers focusing on French wines are facing heavy cost rise pressures, according to WBO’s observation.
However, Zheng Junjie, a Spanish wine importer, pointed out that price rise will not break out at one specific time. Many producers provide a gentle solution for cost rise, which means the cost price will increase gradually in the next three years. “We are informed of 20% price rise from our producer and done in three years. Some big wine groups tend to increase its bulk wine price by 15%, with an annual increase of 5% in three consecutive years.”
In fact, certain French wine representatives and Italian wine importers have received price rise email from their producers recently, according to WBO’s survey.