Ask a food and drink manufacturing finance team what labour costs per unit and the answer arrives in minutes. Then ask what currency did to margin on that same unit last quarter.
If the room goes quiet, that points to a data problem.
Margin pressure is rising across the sector, and most businesses have worked hard on the costs they can see. Labour and energy sit on dashboards that leadership reviews every week. Currency rarely gets the same treatment, even though most businesses in the sector buy abroad. Ingredients and packaging are often priced in euros or dollars, and the invoice is paid weeks or months after the price is agreed.
Take a business that agrees a £500,000 purchase priced in euros. The price is fixed on the order date and paid 60 days later. If sterling weakens by 4% in between, the purchase costs roughly £20,000 more than budgeted. A 4% rise in sterling would cut the cost by a similar amount, but either way, the business learns the result after it has committed to the order.
While nothing about the supplier has changed in either case, the variance lands in cost of goods, where it can easily read as a price change. Buyers reopen negotiations, and nobody traces the movement back to its source.
Why nobody sees it
This persists because the information is scattered. Purchasing holds the order and finance holds the invoice. The currency purchase happens somewhere else entirely, usually in a bank portal days before payment is due. Often, no single person holds the full set of foreign currency commitments against the budget rate, so exposure builds without anyone seeing it.
Without that view, currency management becomes reactive by default. Businesses buy what they need on the day the invoice falls due, at whatever rate the market offers, and the margin outcome is decided by timing. Rates move daily, so a business that reviews exposure quarterly sees what happened rather than what is happening. Forecasting the market rarely comes into it. Businesses first need to know what they are exposed to.
How joined-up data supports productivity and decision-making
Many businesses only see their currency exposure once an invoice falls due. Recording commitments when the order is placed and tracking them in one place against the budget rate set at the start of the year, can give an earlier and clearer picture of what the business is exposed to, and therefore a firmer footing for decisions.
A business can set target levels and trigger action when the market reaches them, instead of relying on someone to remember to check (though it’s important to note that target levels may not be reached, and once a rate is fixed the business can’t benefit if the market later moves in its favour). It can report currency impact separately from supplier pricing, so commercial teams see which products carry the exposure and negotiate with the right information in front of them.
Finance teams spend hours reconciling spreadsheets and chasing payment details across systems and joined-up data removes that effort. The larger benefit is that earlier visibility may help a business respond to currency movements sooner and reduce its impact on margin – though no approach can remove currency risk entirely.
Acting early also supports making more confident commercial decisions. When a business knows the currency impact on each product line, pricing and supplier negotiations rest on a clearer margin figure. In a market that changes quickly, having confidence in that is worth as much as the time saved.
Food and drink businesses have invested heavily in tracking what happens on the production line. The same discipline applied to currency exposure gives leadership a clearer view of margin and more time to act on it.
A structured hedging approach may help some businesses manage foreign exchange risk more consistently. However, no hedging strategy can eliminate currency risk entirely, and the suitability of any approach will depend on a business’s individual circumstances, objectives and financial position.
This publication is provided for general information purposes only and does not constitute financial, legal, tax or other professional advice from Lumon, nor is it intended as a substitute for obtaining advice from appropriately qualified professional advisers. Foreign exchange services provided by Lumon are offered on an execution-only basis. Lumon makes no representations, warranties or guarantees, whether express or implied, as to the accuracy, completeness or timeliness of the content of this publication.
Foreign exchange transactions involve risk. Currency movements and market volatility may affect costs, cash flow and financial outcomes.
