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Euro Dive Triggers Price Increases

Published July 13, 2010

NEUSTADT, Germany (BRAIN)—Since January, the falling value of the euro has increased raw material costs for Sigma Sport by 15 percent, according to Frank Sirringhaus, president of the Neustadt, Germany based computer, light and heart rate monitor company.

To help offset the rising costs, Sigma plans to announce a 6 percent price increase at Eurobike this fall, Sirringhaus said during an interview with BRAIN at the company’s headquarters last week.

Sirringhaus recognizes that Sigma has to be careful in price increases as to not disrupt products’ price ratio, but with “freight rates up, the euro down and production costs up, it’s not so easy these days,” he said, adding that Sigma buys nearly all its raw materials from Asia using the dollar.

Sigma is one of many European companies expected to ratchet up prices this fall to help preserve margins in light of the ongoing currency headache. The euro was trading against the dollar at $1.27 on Tuesday, and has fallen steadily since the beginning of the year when it was $1.43. In May, the currency hit a four-year low against the dollar at $1.22.

Schwalbe, which also buys its raw materials in the dollar, will announce a 5 percent price increase for its tires on Aug. 1, said Carsten Zahn, product manager at the company’s headquarters in Reichshof, Germany. However, Zahn said Schwalbe’s customers can be assured prices will stay fixed for at least one year per company policy.

Scott Bikes will dial up its prices by 10 to 20 percent and even then, the company will still sacrifice margin because of the weak euro, said Pascal Ducrot, vice president of Scott’s bike division.

“It’s not a bad thing. It’s a challenge to have to overcome and adapt our structure. It’s quite a challenge, but it’s maybe not so unhealthy to do that. I see it also as an opportunity to keep a lean structure, not to overspend for stuff which you probably shouldn’t do,” Ducrot said.

SKS, on the other hand, manufacturers nearly all its goods in Germany so it’s gaining profit in exports to the U.S. This allows the company to spend more on marketing and advertising to grow its presence in the U.S., said Marcel Spork, global sales manager for SKS Germany.

Still, the euro’s ongoing fluctuation is a top concern for many doing business in Europe because its unpredictability makes it difficult to plan for.

“I was at a meeting of the Germany bike industry in May and half or two-thirds of these guys had tears in their eyes when talking about this. Others are laughing, like SKS, because it’s good,” Spork said.

—Nicole Formosa

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