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Weak dollar inflicts pain on Europe's small artisanal manufacturers

Weak dollar inflicts pain on Europe's small artisanal manufacturers

Hugh Quinn has sold traditional Irish lead crystal to U.S. customers for 35 years. That job is harder than ever, he says _ because of the weak dollar that makes Galway Irish Crystal Ltd.'s hand-cut decanters and stemware more and more expensive for Americans.
Times are tough for the crystal maker in Western Ireland and for many other smaller, family-owned or artisanal firms across Europe too small to go to currency markets to engage in the complex, risky hedging that protects larger companies from currency shifts.
Quinn, along with many other Europeans, did not ever think he would see the euro reach US$1.50 _ up from US$1.18 when it was introduced in 1999, and from 82 cents at its lowest in 2000. But it did just that this week _ and on Friday, it hit a new record at over US$1.52.
Smaller and mid-sized businesses making all kinds of things coveted and consumed by Americans _ cuckoo clocks from Germany and wine from Italy and France as well as less glamorous handiwork such as precision machines and industrial goods _ are being forced to cope with a currency shift that shrinks revenues from dollar sales unless they raise their prices. Meanwhile, costs are in expensive euros.
At Galway Crystal, the dollar's fall has reshaped both prices and even the look of the company's products.
"American consumers accounted for probably 50 percent of our market five years ago, and it's down to 20 percent now," said Quinn, sales and marketing director for 80-employee Galway. "And it will probably continue to decline until the dollar resurrects itself."
He said two years ago, when the dollar broached US$1.40 to the euro, it reached the stage where Galway Crystal was selling each piece of hand-cut crystal at a loss. They finally hiked prices mid-season, which lowered sales.
"We spent a good few years telling ourselves: This is not about profit, it's about defending our market share. So we kept our prices firm in US dollars as best we could and just about broke even. We just kept hoping for a turnaround."
"But when you reach the stage where you're actually losing money, you have to take a fresh, hard look at it: When is it going to to come back? How long can I sustain this?"
He said Galway Crystal was surviving by shifting its production lines in tune with European tastes, which favor simpler and lighter designs of glassware, which also means less labor-intensive pattern cutting. European sales are going up at about the pace that U.S. sales have fallen, he said.
There's no such escape route, however, for Germany's cuckoo clock makers in the Black Forest region, who count Americans among their best customers.
Ingolf Haas, together with his wife, father and three employees, runs Rombach & Haas Schwarzwalduhrenmanufaktur, or Black Forest Clock Manufacturers, where they craft over 100 different wooden clocks _ most of them with the little bird peeking out of its door and chirping on the hour.
Between 50 and 60 percent of Haas' customers are Americans, whether they come as tourists or buy the clocks online in the United States.
"Making cuckoo clocks has never been a very lucrative business, but now this drama with the weak dollar is really giving us trouble," said Haas, 45. "I think we've suffered at least a 10 percent drop in profit since the dollar's latest decline started a few months ago."
Haas said he's been looking into selling his products on new markets, particularly in Asia and Russia.
"However, that's not so easy either, since we don't have an additional few hundred thousand euros that we could invest into advertising," he said.
Lately, Haas has also been trying to broaden his range of clocks, which sell from euro80 to euro4,000 ($118 to $5,924) _ which buys a 1.50-meter-tall (5-foot) version _ and he has introduced new, more exclusive series of clocks. For an additional charge, customers can also design their own clocks online.
"I hope the Americans will take advantage of this offer," he said. "Like it or not, they are our main customers and most of the cuckoo clocks end up on living room walls in the U.S."
Roberto Anselmi, a producer of premium white wines based in the northern Italian town of Monteforte near Verona, said his U.S. sales are down 20 percent in the last year by about 50,000 bottles from 2006-7, as prices rose rose from 10-20 percent, depending on the bottle, he said. His wines sell for US$10-15 in U.S. stores.
As a result of the weak dollar, Canada has now become Anselmi's largest export market, followed by the United States, Germany and other northern European countries.
"We can't recoup this market," Anselmi said. "In the United States there is a lot of competition from domestic wines, and consumers are also looking for wines that are more competitively priced from other regions of the world that have lower costs."
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Associated Press writers Colleen Barry in Milan and Kirsten Grieshaber in Berlin contributed to this report.
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On the Net:
Rombach & Hass cuckoo clocks:
http://www.black-forest-clock.de


Updated : 2021-01-28 13:54 GMT+08:00