News As We Read- 19thAug'13

Thought of the Day:

Did you know?

FOLLOWING MADE THE HEADLINES :

India:

• Paranjpe Leads iGate CEO Race : Former Wipro co-CEO Girish Paranjpe has emerged the frontrunner to lead technology services company iGate, which has been searching for a CEO after it fired Phaneesh Murthy in mid-May. Paranjpe and one other backup candidate Salil Parekh of Capgemini have emerged the final contenders for the position in a search being undertaken by headhunter Russell Reynolds Associates. Several high-profile candidates, including Patni ex-CEO Jeya Kumar and Infosys director Ashok Vemuri, have apparently dropped out. “Paranjpe is the favourite and will most likely take up the offer. But he is yet to accept it,” said a person aware of the development.

• Pop This-A Business that Makes Slowdown Corny : Where, everyone is asking, is a business that’s got some serious pop and crackle? With double-digit growth rates, new investments, great margins? If you are watching a movie, you are most likely munching on the answer. Popcorn, that eternal movietime munchy, has become a sizzling business in India, as much of a slowdown-buster as movies are. Sales, say industry watchers, are growing 10% annually. Nationwide regularised production, sales and profit data on the popcorn business is tougher to find than a Bollywood movie with a tragic ending. But ET’s close study of the popcorn economy produced enough evidence to support the claim that the business of heating corn kernels is, well, a hot new business.

• Tata Starbucks Builds War Chest, to Open 100 Cafes  : Tata Starbucks plans to open around 100 Starbucks cafes in the country by next year to match up to established rivals and is building a war chest for expansion by more than trebling its authorised capital to . 220 crore. The 50-50 joint venture between US café chain Starbucks Coffee Company and Tata Global Beverages will increase its authorised share capital from . 70 crore by creating additional 150 million equity shares of . 10 each, amounting to . 150 crore, the unlisted firm said in a board resolution filed last week with the Registrar of Companies. While Tata Starbucks said it does not release financial information or future store count, its spokesperson said the company is committed to India. “The joint venture will invest over time, based on the demands of the business and the requirements of our customers, to build a strong presence in the market,” the spokesperson said. The US coffee chain has already signed two dozen properties, including in the suburbs of Mumbai and Bangalore, a real estate official aware with Starbucks’ expansion plans said. Starbucks is displaying an urgency to scale up at a time when most quick-service restaurant operators including Jubilant Foods and McDonalds have reported slowing sales growth in the country due to a consumer slowdown. Experts say Starbucks has been very selective in opening stores in the country. “Starbucks has been opening stores only at locations where the catchment area can value its premium positioning,” Ruchi Sally, director at boutique retail consultancy Elargir Solutions, said. “For them, the key strategy is return on investment from their stores and not just scale at the moment.”

• ‘Reebok is exploring 100% FDI in retail’ : You went for a massive restructuring exercise, bringing the number of Reebok India stores down to half. The focus for us was viability of the business and ensuring profitability for both our franchises and us. We looked at stores that were not viable and decided to close those. Now, we have a portfolio of successful stores and are again on a growth path. But, this is a different type of growth path, where the focus is on profitability of the locations. So, we go for significant due- diligence before a store is identified. For instance, we closed our store in Delhi’s South Extension ( an upmarket location) because the place was not viable. We are now looking at a store around the same place that will be viable. We are also going to Tier- II and - III cities like upcountry Tamil Nadu, where we did not have stores. We had a total of 900 stores earlier. Now, we have 450 and are adding 50 this year. Has the slowdown hit you? We are in an industry where economic slowdown has not had a big impact. That has to do with demographics. We have certain things going in our favour. One, we are in an industry segment where demand is increasing. Two, a population with increasing income wants to spend on, among other things, fitness & sportswear. This has been my experience in India, as well as China. So, no, we have not been impacted by slowdown. Adidas faced a troubled phase in India following the arrest of its top brass, including the flamboyant Reebok India CEO & MD Subhinder Singh Prem, over an alleged financial fraud that cost its India operations € 153 million. To put its Reebok business in order, the German footwear major hand- picked the soft- spoken ERICK HASKELL, who has vast experience of working in China. Within months of his appointment, Adidas India MD Haskell has put the past behind. In an interview with Surajeet Das Gupta, he talks about the future of the group’s business.

• Coca Cola promotes Vikas Chawla as head of Europe : In an organisational rejig, beverage giant Coca Cola has elevated Vikas Chawla, vice- president (operations), India, as the head of Europe. Effective September 1, Chawla, who has been with Coca- Cola India for 16 years, will be in charge of bottling operations in Greece, Romania, Bulgaria, Cyprus, Serbia, Croatia, Albania, Moldova, Malta, Bosnia, Montenegro and Kosovo. While the 12 markets constitute about one per cent of global volumes for the Atlantabased major, the move is significant since this is the first time an Indian will occupy such asenior position in Europe. Chawla will be based in Athens, Greece. The appointment also comes two months after Atul Singhs elevation as the deputy president of Coca- Colas Pacific Group. Prior to his current role, Singh was the president and CEO of Coca- Cola India and Southwest Asia. The elevation put Singh in charge of 10 markets, including China, which is the thirdlargest for Coke, and India, the seventh largest. Again, this was the first time an Indian oversaw operations of the two high- growth markets together within Coca- Cola. Singh continues to be based in India. The elevation of Chawla and Singh has happened when the recognition of Indian management talent has been growing in the fastmoving consumer goods (FMCG) segment. FMCG, besides banking & finance and technology, has been at the forefront of exporting talent abroad for many years now. However, this effort has been given a boost with the spate of recent appointments including that of Sameer Suneja, who takes over as global CEO of confectionery major Perfetti Van Melle in October.

International:

• Grim Picture of Recovery in Forecasts by Retailers : A lot of Americans are still spending their money only on socks and other essentials, highlighting the disparity between younger and poorer consumers and those who are benefiting from the economic recovery. Major retailers, like Wal-Mart and Kohl’s, that cater to budget-conscious customers with lower incomes cited sluggish sales last week as they decreased their annual forecasts. Macy’s, with a slightly higher-income clientele, did not meet analysts’ expectations for the first time in 25 quarters. But even upper-income consumers do not seem to be spending as freely as some hoped. While Nordstrom’s, which reaches a middle- to luxury-end market, reported a higher-than-expected quarterly profit Thursday, it too said sales “remained softer than anticipated” and lowered its forecast. The latest sales reports painted a bleak picture for a sizable swath of the retail sector even as other economic indicators, like an increase in auto loans, showed signs of consumer confidence. “There is a certain segment of the population that is faring well in this economy and have seen their net worth rise sharply with stock and housing market gains,” said Ken Perkins, president of Retail Metrics. “Then there is the much larger segment of Americans that are working in low-wage jobs, part-time jobs, that are struggling to make ends meet and are living paycheck to paycheck. They are not spending beyond necessities.” In a call with reporters Thursday, Wal-Mart’s chief financial officer, Charles M. Holley Jr., said there was “a general reluctance of customers to spend on discretionary items right now.” As the back-to-school season reaches its peak, some retailers are not optimistic that they could see a big revival among shoppers. 

• Samsung Beats Apple to the Wrist : It looks like Samsung  not Apple! will be first to market with the product we’ve all been expecting since David Hasselhoff used a souped-up digital watch to summon his talking Trans-Am. That’s right, a wrist phone, known as the Galaxy Gear, will apparently debut next month. It will be able to surf the Web, make phone calls, and send e-mails  presumably, short ones. What’s really interesting is that Samsung, not Apple, is getting there first. Post-Steve Jobs, Apple seems to be turning into more of a normal technology company. Which has implications. The last time Apple turned into a normal technology company post-Jobs, things got kind of grim, kind of fast. That’s not to say that Apple is headed for the junk heap; my home is filled with Apple devices, and so are millions of others. But some of the magic edge, the market-leading innovation, seems to be a bit blunted. Every company has to negotiate this sort of transition when its founder departs. Some handle it beautifully. Others have a grim interim which they eventually turn around, like Ford in its botched hand-off to Edsel. And still others never quite recover; they live off their brand capital for a while and eventually fade away. I don’t know of any good way to tell which of these three paths Apple will follow. But the Galaxy Gear’s jump on the iWatch to market can’t be a good sign for Apple.

• Diageo to pay CEO Menezes 105cr : The world’s largest spirits maker Diageo Plc has proposed an annual pay package of up to 10.9-million British pounds (about Rs 105 crore) for its newly appointed Indian-origin CEO Ivan Menezes. Menezes, who has been with UK-headquartered Diageo for about 13 years, was paid total remuneration of 7.8-million pounds (Rs 75 crore) in the last financial year ended June 30, 2013 when he served as chief operating officer. After his promotion as CEO with effect from July 1, he has been given an 8.6% hike in base salary to one-million pounds (about Rs 9.6 crore) and would be entitled to further benefits totalling up to 9.9-million pounds (Rs 95 crore) a year, Diageo said in its latest annual regulatory filing. Diageo, which owns brands like Johnnie Walker, Smirnoff, Baileys and Guinness, recently acquired a significant stake in India’s leading liquor firm United Spirits from Vijay Mallya-led UB Group in a deal worth over $2 billion. 53-year-old Menezes, who studied at premier Indian educational institutions like St Stephen’s College and IIM-Ahmedabad besides Kellogg School of Management in the US, is said to have been instrumental in the United Spirits deal. While Diageo said that “Menezes’s salary has been positioned below median to reflect the fact that he is new to the chief executive role”, his total package is much higher than the average salary earned by CEOs in India and abroad. As per a latest managerial remuneration report by the Institutional Investors Advisory Services (IIAS) last month, the average CEO salary for India’s biggest 500 companies in the last fiscal stood at Rs 3.6 crore while the figure for the biggest 500 companies in the US was Rs 28 crore.

• Facebook to test mobile payment feature : It will use payment details added by users to their Facebook account to automatically fill in forms when they make purchases on mobile applications. Various companies have been looking to tap into mobile payments markets. However, Facebook said the feature would not involve moving the payment processing away from an app's current service provider. "This product is simply to test how we can help our app partners provide a simpler commerce experience," Facebook's spokeswoman Tera Randall said in a statement. She added that the firm has a "great relationship" with PayPal, one of the biggest processors of online payments.

• L'Oreal to buy Chinese skincare firm Magic Holdings : L'Oreal will pay $6.5bn Hong Kong dollars ($843m; £539m) in cash for Hong Kong-listed Magic, the companies said in a joint statement. Shares of Magic surged 21% when trading resumed on Friday. International companies are looking to take advantage of the growing luxury market in China. L'Oreal, which has brands such as Garnier and Lancome under it, said it would offer HK$6.3 per share for the Chinese company. That is a 25% premium on the closing price from the previous day. Magic Holdings, based in Guangzhou, is famous for its facial masks. The company generated $150m euros (£128m) in revenues in 2012. The deal still needs approval from China's Ministry of Commerce, L'Oreal said.

• Major Retailers See Tough Second Half : Wal-Mart Stores Inc., Nordstrom Inc. and Kohl’s Corp. all cut annual profit projections Thursday joining Macy’s Inc., which a day earlier kicked off the second-quarter earnings season on a surprisingly sour note. The revisions show that retailers on the front lines have grown more bearish on the consumer in the second half, even as they try to talk up the early read on the back-to-school season. And although Wal-Mart was more cautious overall, the company talked about apparel with enthusiasm for the first time in years, which could reflect both the discounter’s efforts to up its game and a consumer who’s trading down.

Currency: