Dive Brief:
- The U.S. dollar has been rising rapidly, increasing 17% versus other major currencies in the past year, and this has affected earnings reports for some major food and beverage companies.
- In some cases, with the U.S. dollar factored in, a company might report a loss, whereas without the dollar, that loss could actually be a gain.
- According to the Associated Press, this rise of the dollar hurts companies in two ways: With a higher dollar comes higher prices, particularly for the European market, and fewer products on foreign shelves means less revenue and lower earnings.
Dive Insight:
PepsiCo Inc. is one such affected company. PepsiCo reported earnings that included 5% organic revenue growth for its fourth quarter and 4% for the year, but net revenue fell 1% in Q4 and was even for 2014, attributed in part to the rising dollar in foreign markets.
In a Bloomberg article, a different point was made on how the rising dollar affects American businesses. It said, "While a strong dollar may weaken exports, it also means cheaper oil, less costly goods from overseas and continued low inflation -- all good things for an economy that’s powered by consumer spending."