News As We Read- 16th July'13

Thought of the Day:

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Following made the Headlines:

India:

• GM Workers Fudged Tavera Test Engines to Meet Emission Norms: General Motors India, the Indian arm of the Detroit-headquartered automaker, has admitted to the government that an internal probe had revealed the company violated testing norms and its employees re-fitted already approved engines in new Tavera models sent for inspection in order to meet specified emission norms. The company has also acknowledged that the weight of several of its models was manipulated to comply with less stringent emission norms. In a letter to the government on July 18, GM India said it had suspended production and sales of two Tavera variants after it ‘discovered’ compliance failures. “Recently, the company has discovered information that it wishes to report to you…investigations initiated by the company have revealed that over a period of time some employees of the company engaged in the practice of identifying engines with lower emission which were fine-tuned and kept aside to be used for installation on vehicles during inspection,” states GM India’s letter addressed to various government ministries and departments.

• Jet Writes Back to FIPB to Clear Air on Stake Sale: Jet Airways has responded to concerns raised by the Foreign Investment Promotion Board (FIPB) on its proposed stake sale to Abu Dhabi-based carrier Etihad, in an attempt to persuade the apex inter-ministry group to clear the troubled proposal. FIPB, which has circulated Jet’s response to stakeholder ministries, will consider the proposal on Monday along with Sebi’s views on the deal. “It (Jet Airways) has responded to the issues raised by FIPB. It needs to be examined closely,” said a government official. The board is likely to defer the proposal on Monday since the ministries may require more time to study Jet’s response, which reached them late Thursday evening. ET had reported in its edition dated July 22 that Sebi was concerned the control of Jet Airways could pass into foreign hands because of the manner in which the 2,000-crore deal with Etihad has been structured. Sebi had voiced reservations over the so-called special rights enjoyed by Etihad, including the right to appoint a vice-chairman and members of the audit committee. It is not clear if Jet has explicitly addressed these concerns.

• Manu Anand to Join Mondelez as India Head: Former PepsiCo India head Manu Anand will replace Anand Kripalu as the India head of Mondelez International that owns Cadbury India, the chocolate maker said on Thursday. Kripalu is expected to join Diageo, the British liquor giant that has taken a controlling stake in United Spirits. Anand will take over as president, India and South Asia, Mondelez International, and MD at Cadbury India. He will also be part of the Asia Pacific leadership team and will sit on the Mondelez International Leadership Council, the company said in a press release. Anand will assume office on August 16. Kripalu is expected to stay back for some time to help him settle in the organisation. While the Mondelez release said Kripalu has decided to pursue an opportunity outside the organisation, a person close to the development said he will join Diageo in October, and is ultimately expected to take over as its India CEO when Ashok Capoor retires next year. Kripalu declined comment. He is leaving Cadbury India after eight years at the helm. In fact, Kripalu had been leading Cadbury India and South East Asia, before he was re-designated as India MD earlier this year as part of a global restructuring exercise. Mondelez restructured its operations in emerging markets including India earlier this year, which had led to individual business units being created for India and China. Mondelez said in the statement that under Kripalu’s leadership, Cadbury India grew its revenues to over 4,065 crore in 2012, from less than 746 crore in 2005.

• Ravi Jaipuria to Foray into Ready-to-eat, Frozen Foods: Industrialist Ravi Jaipuria plans to foray into packaged frozen and ready-to-eat foods through his firm Devyani Food Industries, maker of Creambell ice cream. “We plan to leverage the cold chain and backend infrastructure of our existing businesses for the foods venture,” said Jaipuria, cola maker PespiCo’s biggest bottler in South Asia and largest Indian franchisee of KFC and Pizza Hut restaurant chains. The new brand, Farmbell, is scheduled for launch within two years. Devyani is also doubling the capacity of the Kosi plant of Creambell, which is now among the top five ice-cream brands in the country. Creambell CEO Nitin Arora said the Kosi plant, its third manufacturing facility after Baddi and Goa, could be the single largest plant for ice cream in the country by next year. While Amul leads the estimated 3,000-crore organised ice-cream industry with a market share of close to 30%, Creambell has a share 10-11% and is neck-to-neck with Mother Dairy, according to company estimates. Both trail Hindustan Unilever’s Kwality Walls and Ahmedabad-based Vadilal. Creambell now hopes to increase its revenues by one-third this year ending December to 400 crore, up from 300 crore last year. “Though we too are seeing the impact of an economic slowdown and growth could have been faster, the semi-premium and premium segment is growing faster than the mass-priced products,” Arora said. For future growth, Creambell officials said it plans to enter key markets such as Gujarat, Tamil Nadu and Kerala where it is not available over the next couple of years. Also, RJ Corp will take the brand to select African markets like Kenya and Zambia where Jaipuria has existing dairy businesses next month. Besides ice cream, it plans to sell milk, yogurt and butter under Creambell brand in Africa.

• Cadbury’s Kripalu may join Diageo: The outgoing Cadbury India head Anand Kripalu is likely to join Diageo as the world’s largest drinks company plans to infuse some top-level FMCG experience into the leadership of the recently acquired United Spirits (USL). Sources told TOI that Kripalu is initially expected to join Diageo with a regional role based in Singapore before transitioning to steer USL, when the Bangalore-based company’s current CEO Ashok Capoor retires in little over a year. The development comes against the backdrop of ex-PepsiCo India chief Manu Anand joining the maker of Dairy Milk and 5 Star chocolates as its new India MD.An IIM-Calcutta alumnus, Kripalu joined Cadbury in 2005 as its head after a 22-year stint at consumer goods giant Unilever. When contacted, Kripalu told TOI that he hasn’t decided on his next assignment but was toying with a few options, including one in Singapore. There has been speculation about Kripalu’s move to Diageo for weeks. And now it looks set to happen with Cadbury India on Thursday officially confirming Kripalu’s exit from the company. A Diageo spokesperson declined to comment on “market rumours”.  The London-based distiller of Johnnie Walker and Smirnoff is unlikely to disturb the USL top deck in a hurry and is said to be impressed with the management depth of a business which sells more bottles locally than Diageo globally. Still, Kripalu is arriving at Diageo with the backing of its new India-born boss Ivan Menezes, who wanted an FMCG veteran to lead the domestic operations. India’s liquor industry is notoriously regulated and prone to regular political interventions, as federal governments often look to it for maximizing tax revenues through populist welfare schemes.

International:

• Dunkin’ Doubles Profit as New Menu Whets Appetites: Dunkin' Brands Group more than doubled quarterly profit to beat Wall Street forecasts with a revamped menu that drew more customers to its Dunkin' Donuts cafes in the United States. Same-store sales at Dunkin' Donuts US, which contributes about 70% of the company's revenue, rose 4% in the second quarter. Like its rival fast-food chains, Dunkin' has launched a range of new products. Its tuna and chicken salad wraps, as well as the nationwide rollout of its turkey sausage breakfast sandwich, drew more customers in the quarter ended June 29. Dunkin', which also owns the Baskin-Robbins ice cream brand, said net income rose to $40.8 million, or 38 cents per share, from $18.5 million, a year earlier.

• Google launches new tablet, TV gadget: Google Inc on Wednesday showcased a new- generation, slimmer Nexus 7 tablet that the internet search company hopes will expand its presence in consumer hardware, and ensure that its online services remain front- and- centre on mobile devices. The latest Nexus 7, featuring a Qualcomm Inc Snapdragon processor and a higher display resolution, on July 30 will be priced at $ 229 for a basic version with 16 gigabytes of storage. The original year- old tablet started at $ 199 for an 8 gigabyte version. Sundar Pichai, head of Android and Chrome software, said on the sidelines of an event to launch the tablet that the Internet Company would make a profit off the new product. The first- generation Nexus 7, which marked its initial foray into mobile electronics, was financially a break- even product for the company, analysts have said. “The new Nexus 7 is designed so that its profitable for all the people involved. Retailers, us, everyone included,” Pichai told Reuters. Also on Wednesday, Google revived an earlier attempt to get into online video streaming with the introduction of the “Chromecast” — a two- inch $35 gadget that will plug into the back of televisions and let users stream YouTube and Googles Motorola division is expected to unveil the competitive mobile market. Google and other traditionally non- hardware companies such as Amazon. com Inc and Microsoft Corp have begun making inroads into mobile devices as consumers increasingly access the Web on the go. It introduced its first tablet in June 2012, hoping to replicate its smartphone success in a hot market presently dominated by Amazons Kindle Fire, Apple Incs iPad. Google, which gets the lions share of its revenue from online and mobile advertising, wants the aggressively priced Nexus tablets to be a hit as more users would mean increased exposure for its ads. Its Nexus line, which include smartphones and tablets made by partners like Samsung Electronics and HTC, also serve as references for manufacturers across the globe adopting its Android mobile software system.

• Amazon reports second quarter loss and weak outlook: Online retail giant Amazon has reported it lost $7m (£4.56m) in the second quarter of the year. The loss compares with a profit of the same amount for the same period last year and comes despite a 22% rise in sales to $15.7bn for the April to June quarter. The company is trying to diversify away from simply warehousing and selling gadgets to provide broader technologies, such as tablets. Its shares fell by 2% on the news. The online giant is spending billions trying to expand into a broader technology company, which also involves competing hard in China. For the coming quarter, Amazon forecast sales of between $15.45bn and $17.15bn, or an increase of between 12%-24%. Founder and chief executive, Jeff Bezos, said the emphasis on technology was clearly showing, with its Kindle tablet computer continuing to sell very well: "This past quarter, our top 10 selling items worldwide were all digital products - Kindles, Kindle Fire HDs, accessories and digital content."

• Refinery29 Evolves Into Lifestyle Platform: Refinery29 is ready to make the leap from fashion Web site to lifestyle player — and is looking to define how the next generation of media companies operate. Once a site that published just a single post per week, Refinery29 now garners 90 million page views per month and will see its first overhaul since its launch in 2005 on Monday.  The look, which includes an updated logo and a sleek, modern interface that tracks how articles are trending on social networks, is part of the company’s mission to become a “24/7 technology lifestyle platform,” according to cofounders Philippe von Borries and Justin Stefano. “It’s definitely not a magazine,” said Stefano. “We’re a media destination, it’s not about still or flash content, it’s not just flat. The advertising side has been a unique point of differentiation for us. Our ads are real content that people are viewing the same they would view a commercial if they were watching Bravo.” The site has seen 100 percent growth year-over-year, receives 5.5 million unique visitors per month (this is closer to eight to nine million when you take into account its followers on social networks) and has 1.5 million e-mail subscribers. The site features about 80 posts per day, and in addition to a new headquarters in New York City, maintains offices in Los Angeles, Chicago, San Francisco, Washington and London.

• Players Making Moves in Saks Sale Saga: Saks Inc. stock was active Thursday, amid continued speculation that a deal may happen soon and that private equity firm Sycamore Partners could enter the bidding for the luxury chain in tandem with another party. There were also reports that Saks and Hudson’s Bay Co., which is bidding on Saks, had hired additional banks for advice. Shares of Saks closed down 0.2 percent, or 3 cents, to $15.18 Thursday in heavy trading. Over 4.5 million shares traded hands, well above the 2.7 million average for the past three months. The company ended the day with a market capitalization of $2.2 billion and the stock has proven to be volatile as investors bet on whether the company will ultimately be bought out. It could not be determined who Sycamore could be partnering with, but sources said it could be Starwood Capital, which is mostly interested in Saks’ real estate and is said to be bidding for Saks against Hudson’s Bay, operator of Lord & Taylor in the U.S. and Hudson’s Bay in Canada. Hudson’s Bay could purchase Saks on its own or choose a partner to minimize risk. Sycamore is considered a smaller private equity but the firm’s manager director and cofounder, Stefan Kaluzny, is well-connected. “He’s not big enough to go after Saks alone but he can pick up the phone and call anyone,” said one financial source. Sycamore’s holdings include The Talbots Inc., Hot Topic and a 51 percent stake in Mast Global, a sourcing firm. At Talbots, Sycamore has also brought back certain former members of the retailer’s executive team to engineer its turnaround. Sources on Thursday also said KKR & Co. had renewed its interest in Saks after considering buying Saks and merging it with rival Neiman Marcus in May. Neiman’s, however, shot down that idea at the time. A KKR spokeswoman declined to comment. “If there is a [sale] process going on, you can be sure KKR is going to take a look,” said the source.

• Zara Heading to Miami: Lincoln Road Mall in Miami Beach, a pedestrian-only promenade between Alton Road and Washington Avenue, attracts 13 million visitors annually with retailers such as Adidas Y-3, AllSaints Spitalfields, Scotch & Soda, John Varvatos, Madewell and Anthropologie. Spanish retailer Zara will join the retail roster of Lincoln Road with a 24,000-square-foot flagship on two levels opening in the winter of 2013. A registered Miami Beach landmark, 420 Lincoln Road was originally designed by architect Albert Anis at the site of the Lincoln Road Hotel. The Zara flagship will integrate the property’s Art Deco design elements and two-story rounded glass facade. With 1,763 stores worldwide, Zara continues to open more units, despite the fact that its sales, like those of other fast-fashion companies, have been slowing. Inditex, Zara’s parent, said last month that the second quarter started off at a faster pace, with sales between May 1 and June 7 increasing 8 percent in local currencies. Still, the figures represent a deceleration. Inditex recorded 16 percent revenue growth in the year ended Jan. 31 and a 12 percent gain in local currencies between Feb. 1 and March 11 of this year. The Lincoln Road flagship will offer men’s, women’s and children’s apparel and accessories.