You know what your ingredients cost. You don’t know what they’ll cost in sterling until the invoice is due.
For many food and beverage businesses, supplier invoices aren’t just a monthly occurrence. Keeping up with customer demand and maintaining a steady supply of perishable ingredients means procurement teams are making purchasing decisions—and receiving supplier invoices—every day.
Each reflects a combination of ingredient costs, freight costs and surcharges. Every imported shipment also arrives with currency risk attached. The supplier sets the invoice; the currency market decides what it ultimately costs in sterling.
Not only do the prices of raw ingredients change with the seasons, but when you import those ingredients from international suppliers, FX exposure can erode much of their value long before they filter through to your balance sheet. Few finance teams lose sleep over a discrepancy on a single invoice. Hundreds over the course of a year are a different story.
The best food businesses understand that good FX risk management isn’t about predicting exchange rates or hoping individual invoices can time the market. Great FX risk management starts long before the invoice arrives, building a framework that helps manage currency risk before supplier payments fall due.
Why spot trading alone creates a planning problem
Every supplier invoice that’s due in a foreign currency, whether euros or US dollars, remains vulnerable to currency risk until it’s paid. The exchange rate becomes another variable in the cost of every shipment; one the supplier can’t control and the buyer can’t ignore.
Many businesses still wait until supplier payments fall due before buying foreign currency on the spot market. While this may seem convenient, it Private & Confidential – Lumon leaves the business exposed to exchange-rate volatility and unnecessary foreign-exchange risk. Every additional day between ordering and paying is another day the market has an opportunity to move against you.
Exporters face the same risk in reverse. Consider a craft brewery exporting bottled beer to the Netherlands that agrees on prices with distributors months before payment is due. The order value in euros stays the same, but the sterling value can change. If sterling strengthens against the euro during that period, those euro sales convert back into fewer pounds, reducing the revenue the business receives in sterling.
Exchange-rate movements can put pressure on margins and make cashflow planning more difficult, whether they’re driving up procurement costs or squeezing export revenues. The market can rewrite the value of any international transaction long after the commercial terms have been agreed.
Lumon surveyed 100 F&B leaders and found that 74% of UK food and beverage businesses have no formal FX policy, 59% are not using hedging or other financial tools to reduce risk and three-quarters do not review their FX strategy regularly. For a sector where currency fluctuations already wiped out almost a third of average net profits last year, the absence of a structured approach has a measurable cost.1
What good FX risk management actually involves
Food and beverage businesses with the strongest FX risk management tend to anchor currency decisions to procurement cycles rather than to day-to-day market movements. That way, currency decisions become woven into the purchasing process, not a last-minute surprise in an invoice. Although every business has different requirements, structured FX frameworks have three things in common.
1. Visibility over future currency requirements
You can’t manage currency exposure you haven’t identified, the same way you can’t steer around risks you can’t see. Visibility is the foundation of every FX decision that follows.
While procurement teams might have seasonal purchasing plans and supplier agreements already locked in, the final sterling value of imported ingredients remains uncertain until the supplier invoice is settled.
But if procurement teams flag upcoming supplier agreements, finance teams gain early visibility over future currency requirements. Mapping that exposure before supplier invoices arrive allows businesses to forecast procurement spend and foreign currency payments with greater budget certainty.
2. Aligning FX activity with procurement cycles
Procurement teams already plan ingredient purchases weeks or months ahead, so currency decisions should follow the same schedule.
Food manufacturers often replenish stock continuously, with ingredients ordered weekly, fortnightly, or monthly depending on demand and shelf life. Synchronising foreign exchange activity with procurement planning means that currency management becomes embedded in the process, not a last-minute finance task.
When finance teams begin managing foreign exchange risk alongside procurement activity, many of the important decisions have already been made by the time the invoice arrives.
3. Using FX tools to support the framework
Once future currency requirements are visible, tools such as forward contracts and limit orders can be used as part of a broader currency hedging policy to manage currency exposure.
Consider a food wholesaler that expects to purchase €500,000 of imported cheeses and cured meats over the next four months. By using a forward contract to secure today’s exchange rate, the finance function knows exactly what the expected import costs will be in sterling, improving cash-flow planning. That certainty holds in both directions: if sterling weakens, the business is protected, but if it strengthens instead, the business is still committed to the agreed rate and doesn’t benefit from the better one.
Not every supplier commitment can be forecast. If customer demand surges, the wholesaler may need to procure additional stock. A limit order enables a business to target a preferred exchange rate for future ingredient orders and execute the trade if that rate is reached. If that rate isn’t reached, the order simply doesn’t execute, so it offers no protection on its own and works best alongside other tools, such as a forward contract, for the exposure it doesn’t cover. Rather than reacting to currency movements, the business can respond to procurement needs.
Different FX tools don’t compete with each other. Each is tailored to solve a different currency challenge. The forward contract provides cost certainty for expected purchases, while the limit order gives the wholesaler flexibility to secure a favourable exchange rate if additional stock is needed. Combined, they help protect planned margins without sacrificing agility. Neither removes market risk on its own: a forward commits the business to its rate even if the market later moves in its favour, and a limit order only protects if the target rate is reached at all.
What FX risk management looks like in practice
Let’s look at an example of what a reactive approach would look like compared to a structured approach in practice.
A reactive approach
A UK ready-meal manufacturer imports €150,000 worth of frozen vegetables each month. When the business sets its annual budget, the GBP to EUR exchange rate stands at 1.182 so each shipment is expected to cost around £127,100. By the time the supplier’s invoice becomes payable, sterling has weakened to 1.142 Although the supplier hasn’t increased its prices, the same shipment now costs £131,600. That’s more than £4,500 over budget. Nothing about the shipment changed, only the exchange rate did.
Because the business purchases euros to meet supplier payments when invoices are due, it has little choice but to absorb higher ingredient costs. The invoice reflects today’s market, not yesterday’s budget. Margins tighten, and cash-flow planning becomes more difficult. Finance must revise budgets or find savings elsewhere.
The information provided is hypothetical and intended for illustrative purposes only. Exchange rates referenced are interbank rates and should not be used as an indication of past, current or future performance, nor do they constitute a recommendation of any kind.
A structured FX risk management framework
Consider the same ready-meal manufacturer forecasting €900,000 of euro purchases over the next six months based on procurement plans and supplier agreements.
Instead of purchasing currency on an invoice-by-invoice basis, the business locks in exchange rates for a significant proportion of its future imports using forward contracts.
When sterling later falls to 1.142 most purchases continue at the agreed exchange rate. Procurement costs remain within budget, improving budget certainty and preserving operating margins. The business understood that they couldn’t control the market, only its exposure to it. The trade-off works the other way too. If sterling had strengthened instead of weakened, the business would still be paying the rate agreed in the forward contract, and would have missed out on the cheaper import costs available on the spot market at the time. The forward removes that uncertainty in both directions: it protects against the market moving against you, but it also means you don’t benefit if the market moves in your favour.
The information provided is hypothetical and intended for illustrative purposes only. Exchange rates referenced are interbank rates and should not be used as an indication of past, current or future performance, nor do they constitute a recommendation of any kind.
Getting started
Ad hoc spot trading isn’t a strategy. The alternative isn’t complex or speculative; it just requires a process. Building that process starts with understanding where your business is exposed to currency risk. Once future currency requirements are mapped, finance teams can make FX decisions that support procurement planning, rather than being left on the back foot when supplier invoices arrive. Currency volatility is inevitable. But how much of it reaches your balance sheet isn’t.
A conversation with one of our specialists can help you assess how currency risk affects your imports, exports and procurement activity, and explore what a more structured approach could look like.
Sources used:
1. The FX Factor, Lumon, 2026, p.5
2. Bank of England (BoE). Daily spot exchange rates against sterling (GBP/EUR). Historical data from June–October 2025 used to derive the illustrative GBP/EUR rates (1.18 and 1.14).
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.
