By Selwyn Parker
Between the lines
Time is running out for New Zealand exporters to get a fix on how they will handle the euro. Europe's brave new single currency doesn't come in real bank notes and coins until January 2002, but in the meantime everyone's working hard to predict the
impact of the euro on their business.
As Franck Riboud, chief executive of France's beverage to food giant, Danone, remarks: "How do I round off prices when I convert them to euros? How will people react when a six-pack of Evian that costs 18 francs goes to three euros? Where will the new price points be?"
Car-making giant Renault expects prices to fall under the transparency of the euro because consumers will more easily be able to compare the showroom stickers on cars right across Europe. "The uniformity of prices will lead to lower, not higher prices," Renault chief executive Louis Schweitzer argues.
The euro was launched for 290 million people in 11 countries on January 1 this year. Until 2002, it's just a notional currency. But then it becomes the Economic Union's common currency for all transactions, whether to buy a ship or a loaf of bread, and national currencies will be gradually withdrawn.
Meantime in an apprenticeship period, banks quote euros, consumers can pay in euros on their credit cards, central governments can issue debt in euros, and large companies can contract and bill in euros. So far, the euro, which has been kicked around a bit by the financial markets, buys around $NZ2.
Apart from the symbolic value of a single currency for most of Europe, the euro has a considerable practical value. For example, it's supposed to wipe out $US65 billion of currency exchange costs of doing business across borders. But back to pricing policy. According to Anne Gabet, a policy adviser at Ernst & Young's French office, the euro will force manufacturers, distributors and retailers to face the transparency factor.
"[The euro] encourages price comparison for identical or similar products sold in different markets within the euro zone," she told French newspaper Le Figaro. This would require European pricing plans instead of present country by country policies. The buzzword here is "price corridors" -- a range of prices across markets which still ensure reaso
nable margins.
No one is yet saying there's going to be one price in 11 countries for the same product, be it a car or a dishwasher.
"Several factors will continue to allow a manufacturer to differentiate his product and charge different prices -- after-sales service, delivery method, guarantees, even the brand's image," says French economist Hermann Simon. But just about everyone agrees they can't leave their euro strategy to the last minute because the changeover is bound to be turbulent.
