BREXIT’s impact on your supplements prices
As we all know on June 23rd 2016 the United Kingdom voted to leave the European Union by 51.9% to 48.1%. Following this we saw a number of political resignations, the pound fall below 30 year lows against the US Dollar and nearly $3Trillion wiped from financial markets (although the markets have now miraculously rebounded and are above pre BREXIT levels).
So what does this have to do with Sports Supplements?
One word: Currency.
As stated above the pound (sterling) has taken a hammering since the referendum, this causes an issue for UK businesses that buy goods or services in US Dollars. The supplement industry is far more advanced in the US compared to the rest of the world and because of this most brands products are manufactured there. Even if they are not manufactured in the US it is highly likely that the raw materials that are used in the supplements are bought and sold in US Dollars.
Currency fluctuations between the pound and the dollar is normal. In recent years the rate has swung between 1.45 (GBP to USD) and 1.70 (GBP to USD) meaning sometimes companies get more for their money and sometimes less. Even at pre referendum rates of 1.45 (GBP to USD) some companies were struggling.
Currently the rate is around 1.3 (GBP to USD) which is a loss of 12% of the pound’s worth, so if a company made 10% on a particular pre workout they would now make a loss of 2% on every sale of that product. If interest rates are cut further to 0.5% or 0.25% by the BoE (Bank of England) then the pound would devalue even further against the dollar.
Powerhouse investment bank Goldman Sachs is estimating it to reduce to 1.2 (GBP to USD) whilst Deutsche Bank are even less optimistic predicting the rate to hit 1.15 (GBP to USD) by the end of the year.
Something also to note is that most companies will not be able to buy at the exchange rate stated above, the processing bank they go through to make payments will take a cut meaning their pound gets them even less product to supply customers with.
So how will this actually effect your supplements?
Extremely reluctantly supplement companies (both retailers and distributors) in the UK will be forced to raise prices in order to survive in these extreme economic circumstances. It is not possible to say how much they will be raised as that will depend on many factors within the company.
In other retail sectors DELL have announced price increases will occur shortly but with no figure given, meanwhile HP has confirmed a price rise of 10%.
Cheating on your diet is also likely to be more expensive as it is widely predicted that chocolate is among consumer goods to become more expensive in the weeks and months to come following the vote (coffee is also probably on the rise).
It is highly probable that many stores will have to increase their prices in most, if not all sectors of retail within the next 12 months if the pound continues it decline or stays at its current level.
Is there a silver lining to BREXIT potentially hurting the UK Supplement industry?
There are two potential mechanisms which could keep prices down in the very short term. The first is the particular company ‘hedged’ the currency and will be able to buy at the previous higher rate, however most people did not see the leave campaign being successful even if they voted to leave. The second is if the company stock piled products or particular products and therefore have already been paid for at the higher rate. But again this could only happen if the company had foreseen the vote leave campaign being victorious.
We will continue to update this story as it develops. Right now the only certainty is uncertainty.