Ok. I admit it. I am nervous about 2020.Few companies have enough business in high growth countries like China & Indonesia to offset lower shipments to customers in key markets like Italy or France. Not all is doom and gloom ! There are some bright spots beneath the turmoil. We are fortunate to participate in an industry where our consumers still eat, shampoo, and clean their homes every day, even during a recession.
During the last financial crisis, many brands grew. Families prepared more meals at home with food purchased from supermarkets versus going out to restaurants. Raw material prices surged in 2019 forcing manufacturers to increase prices or swallow hard and reduce profit margins. With slowing demand, we have already seen a decline in raw material prices and transportation costs providing some relief for the profit statement.
A weak Euro will increase European competitiveness in export pricing to the Americas, Middle East, and parts of Asia that tie their currency to the dollar. A strong dollar may hurt USA exports to Europe. However most USA companies tend to sell more to other parts of the Americas which are less effected by the European situation.
Listed below are our strategies for Crisis Management 2020.
1. Sync Economic Forecasts to Shipment Expectations.
Experts publish detailed predictions for country level financial metrics. Your shipment projections should mirror overall country performance.An optimistic budget for shipment growth in Asia, South America and Middle East makes sense. Avoid commitments for euro zone growth, as you will likely disappoint.
2. Review Lessons Learned from 2009-2010 Recession
How did your company perform in the last crisis ? What strategies worked ? What were the surprises ?
Look at your portfolio and see which products and countries remained solid and which faced risks and losses.
3. Develop Alternate Scenarios based upon Currency Fluctuation
What opportunities will be created if the euro declines in value 10 % or 20 % (or disappears ?)
What barriers will be created if the dollar or other currencies strengthen ? Currency moves tend to be gradual, but the cumulative,year long effect can be devastating for export brands. Play out “What if ” scenarios now !
4. Shift Resources to Growth Countries
Most of Asia, Latin America, & the Middle East continue to record impressive shipment performance.
Poland,Norway, and Sweden are bright spots in Europe. All could change quickly in a global meltdown, but current business momentum is strong in many countries. Just returned from China where three year compound annual growth rate averaged 20 % for most industry players.
5. Financial Watch List for Potential Problem Zones
New Year is always an appropriate time to request new credit history information from distributors.Watch inventory levels at retailers and distributors warehouses. It does not require an economist to identify potential risks in the euro zone.
6. January Visits or Calls to every Distributor CEO or Country Manager
Get an early pulse on the market. make personal calls to leaders regarding 2020 expectations, planned investments, and insights from large retailers. Reinforce your key priorities and secure commitment for “no surprises”.
A good friend in Argentina once commented ” I am okay during times of financial crisis because I know that the cycle of better times is ahead. I worry more when business has been good for two or three years, because I know that the next crisis is around the corner !”