The Impact of Exchange Rates on Bluestone Lane's Operations

This report examines the impact of fluctuating exchange rates, specifically USD to AUD, on Bluestone Lane, an Australian-style coffee shop chain primarily operating in the United States. The analysis explores how changes in the exchange rate influenced Bluestone Lane's strategic direction and operational decisions. The company, founded by Nick Stone, benefits from importing coffee beans from Australia. The report highlights how a weaker Australian dollar made imports cheaper, boosting profits and enabling expansion. The investment by Stephen Ross and partnerships with RSE Ventures are discussed in the context of exchange rate advantages. The report references key sources, including reports from the Reserve Bank of Australia and news articles, to illustrate the relationship between exchange rate movements and Bluestone Lane's success in the American coffee market, emphasizing the impact of lower exchange rates on coffee bean imports and overall business growth. The report concludes that the favorable exchange rates and the demand for Australian coffee culture played a significant role in Bluestone Lane's expansion and strategic decisions.

Question 4: Discuss the effect that the changing exchange rates of the identified currency to
AUD have had on strategic direction and operations of the Australian company?
Solution 4:
Bluestone Lane is a Limited Liability Company primary established in NewYork and it
has active chain of cafes operating at 30 locations. Bluestone Lane is famous for its artisanal
coffee (Premium Range of Coffee) and also delivers some delicious food items with best in class
service. Bluestone Lane is famous for its Australian Style coffee shop, cafes and lifestyle.
Bluestone Lane has been founded by Nick Stone in year 2010 in city of NewYork and since then
drinking coffee is an experience for American rather than a regular drink. The primary
commitment of Bluestone Lane is to change the perception of people about the coffee and to
promote the Aussie Coffee Culture in America.
In order to understand the impact of exchange rate (USD to AUD) on Bluestone Lane it is
important to know the facts regarding the coffee demand and sales in America after
establishment of Bluestone Lane in NewYork. As per the report by Arielle Milkman in year
2016, New Yorkers drink coffee on large quantities and for them drip coffee is like a drug to
keep them going (Milkman, 2016). But in Australia it is premium beverage which is linked with
wellness, socializing and for practicing mindfulness. The increasing demand of coffee in USA is
widely connected with the work and people productivity but Australian coffee culture is unique,
linked with leisure and relaxed beach centric lifestyle. So, when Nick Stone has started its
business of coffee inspired by Australia coffee culture it sprout out across United States and
business slowly grew to built a $20 million business in year 2017 as per the report of Care
Waters (Waters, 2017). Bluestone Lane takes most of coffee from Australian market due to
lower prices and to get most of exchange rate differences.
Exchange rate difference between USA and Australia has promoted the export of coffee
bean from Australia to USA after year 2014. The increase in demand of coffee products at
Bluestone Lane has promoted the exports of coffee beans from Australia to USA. After 2014, the
exchange rate (A$/US$) start to decline and it value of goods imported from Australia become
more cheaper in USA that helps Nick Stone to earn more profit and expand his business more
quickly. The report published by Reserve Bank of Australia in year 2019, clearly identify the
downfall of Australian dollar with respect to US Dollars and it is main reason the increase of
export of coffee beans from Australia to USA. Please see the below graph for change in
exchange rate (AUD$ to US$).

(Source: Reserve Bank of Australia, 2019)
The investment in Bluestone Lane Coffee by Stephen Ross, a billionaire and owner of
Miami Dolphins, help Nick Stone to make its best strategic move and to announce the expansion
of its store over 100 locations in next 3 years. Stephen Ross has evaluated the increasing demand
of products of Bluestone Lane in NewYork and plans to invest $19.5 million to acquire some
stake in Bluestone Lane business. So, it can be said that exchange rate plays an important role in
strengthen the Bluestone Lane business USA due to higher purchasing power from Australia and
trade the same in USA to earn higher income. A decrease or depreciation in Australian Dollar
encourages Australian exports more competitive in international market due to the fact that
exported goods and services become relatively cheaper in international market due to lower
exchange rates. Exchange rate movement helps economy as well as international players to
adjust in their structural change and it was just happened in Australia. Australia is not the biggest
but it is one of finest producer of coffee beans and it also exports major of production to USA to
earn the benefit of exchange rate.

(Source: Reserve bank of Australia: Cole and Nightingale, 2016)
Above graph shows import and export of goods and service by Australia during 1996 to
2016. According to this graph, during the period of 2010-2016 Australia has export huge
quantity of resources to international market mostly in China and America. Bluestone Lane has
imported coffee beans in large quantity from Australia because American people like the way the
Australian coffee is served and taste. Americans have become addicted to coffee products served
by Bluestone Lane and also like the lifestyle promoted at Bluestone cafes. Business at Bluestone
Lane has very successful and they have entered with partnership with RSE through ventures. The
investment has been announced by the RSE Ventures, an investment company founded by
Stephen M. Ross and Matt Higgins. The main reason why RSE invested in Bluestone Lane was
only due to promote the brand in more successful way to become the partner in such a high
growth firm. The investment by RSE ventures will accelerate the growth of business at
Bluestone Lane and its number of cafes will expand from 30 units to 60 units in more than 10
cities (Cision, 2018). It will help Nick Stone to transform the business into global lifestyle and
brand of hospitality where people can have experience of premium quality coffee. According to
Nick Stone, coffee at Bluestone Lane is not limited to satisfy the need of caffeine but it is totally
unique experience to build a taste that no other coffee shops can have.
So, lastly it can be said that Nick Stone has taken the advantage of decrease in AUD$
with respective to US$ through establishing the coffee café business at prime location of USA.
The two important factors that work for Nick Stone in the growth of Bluestone Lane is demand
of Australian coffee culture in America and lower exchange rates at Australia with respect to
America.

References
Cision. 2018. Bluestone Lane Secures Growth Capital from RSE Ventures. Online]. Available at:
https://www.prnewswire.com/news-releases/bluestone-lane-secures-growth-capital-from-rse-
ventures-300678940.html [Accessed on: 2 September, 2019].
Milkman, A. 2016. Australian Coffee Culture Is Inspiring a new wave of American Cafes.
[Online]. Available at: https://www.eater.com/drinks/2016/2/19/11059310/australian-coffee-
culture-america [Accessed on: 2 September, 2019].
Reserve Bank of Australia. 2019. The Exchange Rate and the Reserve Bank's Role in the Foreign
Exchange Market. [Online]. Available at: https://www.rba.gov.au/mkt-operations/ex-rate-rba-
role-fx-mkt.html [Accessed on: 2 September, 2019].
Reserve bank of Australia: Cole and Nightingale. 2016. Sensitivity of Australian Trade to the
Exchange Rate. [Online]. Available at:
https://www.rba.gov.au/publications/bulletin/2016/sep/pdf/rba-bulletin-2016-09-sensitivity-of-
australian-trade-to-the-exchange-rate.pdf [Accessed on: 2 September, 2019].
Waters, C. 2017. How Nick Stone built a $20 million business selling Australian coffee to New
York. [Online]. Available at: https://www.smh.com.au/business/small-business/how-nick-stone-
built-a-20-million-business-selling-australian-coffee-to-new-york-20171107-gzg8hd.html
[Accessed on: 2 September, 2019].