For 50 years, Alfred Spaltenstein and his family have grown Christmas trees at their farm outside of Zurich, Switzerland. Now the strong Swiss franc is threatening to spoil his festive spirit.
In the past two years, the currency traded almost 20 percent above its 10-year average against the euro. That made it even easier for tree growers from Germany and Denmark, who already benefit from lower operating costs at farms that produce in bulk quantities, to undercut prices in Switzerland.
“There’s huge competition,” Spaltenstein, 60, said during an interview at his farm, 14.5km from Zurich. “We are happy if we can more or less hold on to what we have.”
While Switzerland’s largest companies, including Nestle SA, Roche Holding AG and ABB Ltd, have successfully managed to adapt to the franc’s gain because of foreign factories and sales, smaller manufacturers with locally-based production are feeling the strain of a strong franc.
The currency is poised to stay strong, with economists predicting the Swiss economy will continue to outpace the eurozone next year.
“We avoid the pure Swiss producers,” said Martin Lehmann, a portfolio manager at 3v Asset Management in Zurich, adding that he always considers how much of a company’s production is Swiss-based before investing.
“The franc will stay at these levels, or even test the 1.20 level versus the euro again. The euro crisis is not totally over yet,” Lehmann added.
The currency traded at 1.2178 per euro on average in the past two years, compared with the 10-year average of 1.4467 per euro. This week, it appreciated to 1.22 per euro for the first time since May.
In Baden-Wuerttemberg, a federal German state bordering Switzerland, a top quality 2m tree of the sought-after Nordmann Fir type costs about 40 to 50 euros (US$54 to US$67), while a lower-quality tree retails for 32 euros, according to the region’s Association for Christmas Tree Growers.
IG Suisse and the Swiss Forest Owners Association said that Swiss Nordmann Firs sell for about SF75 (US$84).
Denmark has about 3,500 growers of Christmas trees and greenery that produce 12 million trees annually, most of which are Nordmann Firs for export, according to the Danish Christmas Tree Growers Association.
While Denmark is not part of the eurozone, the country’s krone currency is pegged to the euro.
As a result, Spaltenstein, whose 12-hour day tending to his 9-hectare plot begins before 6am every morning in the peak business period before Christmas, is changing his business strategy.
He now tries to distinguish his business with higher-quality trees and makes customers aware of the ecological benefits of local trees, compared with ones transported from far away.
“We’ve worked on it and invested so much,” Spaltenstein said. “The farm has to keep going.”