News As We Read- 15th July'13

Thought of the Day:

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Following made the Headlines:

India:

• Manu Anand Set to Take Hot Seat at Cadbury India: Manu Anand, former region president, India and South Asia, at PepsiCo, is set to take over as the head of chocolate maker Cadbury India, three officials in direct knowledge of the development said. It is also learnt that Anand Kripalu, current MD of Cadbury India, is leaving the company to head the Indian arm of a leading liquor multinational. The spokesperson of Cadbury India said the company does not comment on speculation. “Anand Kripalu is MD & CEO of Cadbury India,” she said. Text messages sent byET to both Anand and Kripalu remained unanswered. Kripalu was heading Cadbury India and South-East Asia before he was redesignated as India MD earlier this year. Cadbury’s operations in emerging markets were restructured earlier this year, with the parent company creating individual business units for India and China and dissolving the developing markets division. In India, Cadbury is a dominant player with over 65% share in the chocolates category. Last year, the firm's revenues went up 20.8% to 4,065 crore.

• Sony’s FTA Edge Turns LG, Samsung & Videocon into Pout Potatoes: Consumer electronics majors LG, Samsung and Videocon have ganged up to put pressure on the government to stop ace rival Sony from importing flat-panel television sets from Thailand and Asean countries under free trade agreements arguing such imports do not fulfill ‘nil’ or concessional duty norms. LG, Samsung and Videocon, under the aegis of apex industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA), have written and made representation to the ministries of commerce, finance, communications and IT, saying Japanese companies like Sony and Toshiba do not fulfill the value addition norms specified under the free trade agreements (FTAs) and yet enjoy nil or concessional duty, creating an uncompetitive business environment for domestic manufacturers. “Domestic manufacturers like us are suffering with 10-12% margin disadvantage against few Japanese companies, which is pinching us when the market has become so competitive and the fall of rupee is creating additional pressure,” says R Zutshi, Samsung India deputy managing director, who is leading the cause under CEAMA. “The current policy does not promote domestic manufacturing but import of completely built units at zero or concessional duty,” he says. The development comes at a time when Japan’s largest electronic exporter has become extremely aggressive in India after the country became its fourth largest market globally. CEAMA, in its representation, pointed out that around 60-65% of a flat panel television cost is the panel and another 20% is the IC and other parts which, in the case of Sony, are not manufactured in Thailand or ASEAN countries. Only the sets are assembled in those countries at lower labour cost, which means there is no value addition in the import source, it argued. In comparison, companies such as LG, Samsung and Videocon that manufacture television sets in India pay 10% duty on panel and other parts they import. Sunil Nayyar, sales head at Sony India, says the company is complying with all the norms under the FTA policy. “Sony India follows the best form of corporate citizenship,” he says.

• Rogue Ads Most Rampant in Health, Personal Care Space: Misleading or false advertising is most rampant in healthcare and personal care space, accounting for more than half the total number of advertisements found to have flouted the compliance norms and code of conduct of the Advertising Standards Council of India. According to the consumer complaints council of the self-regulatory organisation of the advertising industry, there has been a significant rise in the number of advertisements being recognised as misleading or false or not adequately or scientifically substantiated in the first four months of 2013. Out of 218 complaints registered with the Advertising Standards Council of India (ASCI) during this period, 148 were upheld and 52% of these were from the healthcare and personal care sector. “The maximum number of misleading ads is pertaining to the healthcare and personal care sector,” Arvind Sharma, chairman at ASCI, told ET. Between December 2012 and May 2013, complaints against around 216 advertisements from the sector have been upheld, said Sharma who is chairman, India Subcontinent, for advertising agency Leo Burnett. To lure consumers, advertisers often exaggerate and make tall claims such as curing diabetes or baldness, reducing weight and increasing height. Consumers of personal care products such as deodorants, anti-aging cream and cosmetics buy these products not just out of need but for the aspirational value they add to their lifestyle as well, an advertising executive said. “While creating that aspirational appeal sometimes advertisers exaggerate,” the person said.

• Petrol Rises by 1.86/L in Delhi: Oil companies have raised petrol price by 1.86 per litre in Delhi from Monday because of deteriorating exchange rate and rising international oil prices, which may also force the government to raise diesel rates sharply, government and industry officials said. “The Cabinet has restricted oil companies from raising diesel prices by more than 50 paise per litre in a month. This cap is expected to be relaxed as oil companies are losing more than 9 per litre revenue on the fuel,” an official with direct knowledge of the matter said. Only the Union Cabinet is competent to raise diesel price by more than 50 paise in a month, oil ministry officials said. “The ministry will approach Cabinet at an appropriate time,” an oil ministry official said. Oil companies are free to align petrol rates with market prices. The current hike is the fourth consecutive increase in petrol prices after it remained stable in May at 63.09 per litre in Delhi, companies executives said. “We have raised petrol price by 1.55 per litre in the country, but its pump prices will differ from city to city due to different state and local taxes,” an Indian Oil Corp (IOC) spokesman said.

• Forever 21 makes its Indian comeback: Forever 21, a premium apparel brand from the US, is set to make a comeback after fading away in its initial foray into India in 2010. The Los Angeles-based brand, which is partnering DLF Brands in its second coming, plans to open 40 to 50 stores in the next five years. In keeping with Indian sensibilities, the brand has slashed its entry-level prices by over 20% from the tags that it sported in its first time. “In India, Forever 21 aims to impress middle-class customers with offerings starting at just R180,” said Timmy Sarna, managing director, DLF Brands. DLF is the 51:49 majority stake holder in the new partnership. “We plan to open six to 10 stores every year, where the store size would vary between 8,000 square feet and 20,000 square feet,” Sarna said. In California, the Forever 21 brand showcases huge boutique stores averaging over 150,000 square feet in size. The brand has seven retail outlets in Delhi and Mumbai as of now. In its 2010 foray, Forever 21 had partnered West Asia-based Sharaf Retail group, and had just one store. DLF Brands is a subsidiary of real estate giant DLF, and operates 150 single-brand stores for global brands such as Mothercare, Boggi, Ferragamo and DKNY through joint ventures or long-term franchise deals. The company is targeting R1,000 crore revenues in the next three years. “The uncertainty in Indian political and macro-economic scenario is slowing up investments in multi-brand retail segment,” Sarna said. “However, our targets are intact as single brand retail has not been impacted and we haven’t seen any impact on footfalls till now.”

International:

• China GDP growth slows to 7.5%: China's economy grew at a slower pace in the second quarter, continuing a trend that will test the country's leaders as they seek to execute painful structural reforms. Gross domestic product grew 7.5% over the previous year during the second quarter, the National Bureau of Statistics reported Monday. That performance matches the government's target and the consensus estimate from private forecasters. First quarter 2013 growth was 7.7%. Initial market reaction in Asia was muted, with most indexes in positive territory following the release. GDP is closely watched in China as it provides the most complete portrait of the world's second largest economy, and government officials use it as a benchmark to gauge performance. China has averaged growth of around 10% a year in the past three decades, propelling it up the list of biggest economies, generating wealth for its growing middle class and boosting global trade. But many economists now say that China's economy relies too heavily on investment, a trend that has distorted the country's housing market and placed great emphasis on exports over consumption. In addition, the rules governing the country's equity markets make raising capital difficult for some businesses. And state-owned enterprises, which dominate entire sectors of China's economy, are too frequently the recipients of favorable loans and treatment from the government.

• Streaming video site Hulu's owners call off sale: After searching fruitlessly for months, the owners of streaming video site Hulu have stopped looking for a buyer. Walt Disney, 21st Century Fox and NBC Universal said they would keep their ownership stakes and invest $750m (£496m) to help the site grow. "We believe the best path forward for Hulu is a meaningful recapitalisation," said Fox president Chase Carey. Direct TV and AT&T were reported to have submitted bids of $1bn in recent months. Hulu's owners "had meaningful conversations with a number of potential partners and buyers, each with impressive plans and offers to match," said Mr Carey. But in the end, the companies decided the best way forward was to continue to invest in the site and to use its technology to compete against rival Netflix. Hulu has more than 30 million monthly visitors and generates revenue of more than $700m through subscriptions and a free ad-supported service. "Hulu has emerged as one of the most consumer friendly, technologically innovative viewing platforms in the digital era," said Disney chief executive Bob Iger in a statement. A buyer for Hulu property had previously been sought in 2011.

• Tyra Banks Invests in Shopping Start-Up The Hunt: Supermodel and businesswoman Tyra Banks has joined actor Ashton Kutcher as an investor in the community-driven shopping start-up TheHunt.com. Terms of the investment were not disclosed. It was made through Fierce Capital, the investment arm of The Tyra Banks Co. The Hunt is the first fashion investment for Banks through Fierce Capital, which was set up as a vehicle to provide seed funding to early-stage start-up firms. “I created Fierce Capital LLC because supporting female owned, led and targeted businesses is extremely important to me. We are excited about The Hunt, our first fashion investment, because it truly sucks to discover a great style item but not be able to find and buy it. The Hunt solves that fashion dilemma in a fun and innovative way,” said Banks. The Hunt makes it easier for shoppers to find out where to buy items featured in photos — whether sent directly to TheHunt.com or seen on photo-sharing sites such as Pinterest, Facebook, Instagram and Tumblr — through the help of The Hunt community. Users who recognize items tell others where they can buy the product. Banks said, “What I love about The Hunt is that women help other women find their perfect outfit [head-to-toe]. I am excited to be part of this new approach to collective retail and styling.”

• Michael Kors Sues Costco: Michael Kors Holdings Ltd. is taking Costco Wholesale Corp. to a familiar place — court. The New York-based clothing and accessories brand slapped the wholesale club with a lawsuit, claiming Costco falsely advertised that it sold Kors handbags. Filed on Thursday in the Southern District of New York, the suit pointed to e-mail blasts that Costco sent out on April 16 of this year in advance of Mother’s Day. Those e-mails, which Kors called “bait-and-switch” e-mails, advertised a selection of “designer handbags starting at $99.99 delivered.” Next to that text, the Issaquah, Wash.-based chain showcased three handbags, one of which was a monogrammed Kors bag, bearing the “MK” trademark. Several other photos of Kors bags were also featured in the ad, which prominently displayed Kors’ signature “MK” circular gold-toned hangtag.

• Juicy Founders Look to Buy Back Brand: The Juicy Couture gals want their old brand back. Pamela Skaist-Levy and Gela Nash-Taylor have been reaching out to private equity firms, looking for someone to help them buy back Juicy from Fifth & Pacific Cos., according to financial sources. So far, Skaist-Levy and Nash-Taylor have yet to find an investor to partner with, sources said. The pair did not respond to requests for comment Thursday. Fifth & Pacific has been shopping Juicy as well as Lucky Brand in recent months, hoping to raise money for the Kate Spade expansion. Final bids for Juicy were due earlier this week, sources said. Brand management firm Authentic Brands Group and private equity group IDG Capital Partners are both said to be in the bidding.

• Tom Ford Opening Flagships in Chicago, Dallas: Tom Ford is expanding its retail footprint, with new flagships in Chicago and Dallas, bringing its U.S. store count to five. The 4,700-square-foot Chicago unit, slated to open in August, is located on two floors of the old Esquire Theatre building on Oak Street, which has been transformed into a luxury shopping complex. The store’s ground floor features 15-foot ceilings and marble floors, with VIP rooms enveloped in ivory ultra suede situated upstairs. The Dallas store will open in September, as reported, and will occupy about 5,000 square feet in Highland Park Village. The design scheme includes Newport white marble floors, mirrored walls, an Alexander Calder mobile and Makassar ebony fixtures. “As a Texan, it is extremely meaningful for me to open a flagship store in Dallas,” said Tom Ford, who was born in Austin. The two new units join existing Tom Ford stores in New York, Las Vegas and Beverly Hills. With these openings, there will be 95 Tom Ford locations globally, including directly operated stores, partner-operated units and shops-in-shop. That store count is slated to reach 99 by the end of the year.