Stock Spirits Group PLC this week demonstrated the potential danger of selling the majority of your exports in just one market. The vodka making company announced they are expecting pre-tax earnings for the year 20% lower than previously forecast in August. The drop is from an initial estimate of €60m – €68m, to €50m – €54m. Shares plummeted 28% in the final hour of trading on Friday after the announcement, closing at 129.75p.
Stock Spirits Group focus their trading in Central Europe, where more than half of their sales come in Poland. The company already made it clear that they were having unexpected trouble in Poland this year, where consumers have moved away from luxury brands like their own, and more towards discount brands. As well as this, Stock Spirits claimed they were competing against aggressive pricing from their competitors. Another issue they are facing is the devaluation of the Polish currency, the zloty. The company said they are at risk of losing another €1 million if the exchange rate stays at its current level. Outside of Poland, sales have continued in line with expectations.
Keeping such a large proportion of their sales in Poland has put Stock Spirits at risk of this type of downturn, because they have been relying on the Polish consumers and on a stable exchange rate – which has now become unstable, and far less predictable – to provide most of their income. It may be beneficial to focus additional time and resources on a wider range of markets, lessening their reliance on Poland, and then if one does suddenly underperform, it will not affect the company so dramatically.
