News As We Read - 3rd Sep'13

Thought of the Day:

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India:

• Forget Ladakh, This Chinese Incursion Comes Straight Home : The rising popularity of Chinesemade mobile applications among smartphone users in India has caught the attention of the government, which is worried about potential security risks of the development. The concerns in the home ministry, the telecom department and the Cyber Emergency Response Team have been triggered by the popularity of instant messaging app WeChat and UC Browser, both of which figure in the top ten most downloaded free apps on the Google Play store. A senior home ministry official told ET that the government is in discussions with various agencies, including the telecom department, about the Chinese app makers’ practices and possible data security threats, although no official communication has been sent to the companies yet.

• Sonali Dhawan to Take Over as Marketing Director at P&G India : Kainaz Gazder, marketing director of consumer products company P&G India is relocating to China to head its baby-care business in markets such as Taiwan and Hong Kong. Best known for P&G’s signature CSR programme Shiksha and Gillette Shave India movement, 39-year-old Gazder is credited with aggressively driving the growth of several P&G brands such as Pampers, Whisper and Vicks in India. She will be succeeded by Sonali Dhawan, who was previously marketing director for P&G’s Pet Care Business for Asia and ANZ. Her career spanning 15 years includes handling beauty and haircare business for India, South East Asia and Australia.

• DLF Brands Ends Franchise Partnership with Italy’s Alcott : DLF Brands, a DLF subsidiary that retails fashion brands in the country, has ended its agreement to sell Italian company Alcott’s collection, according to its managing director. “We are shutting down Alcott as it is not performing too well in India,” DLF Brands managing director Timmy Sarna said, adding that the company has ended the franchise partnership started with Alcott in 2008. It is, however, unclear whether Alcott will now tie up with another Indian retailer. Alcott could not be reached for comment. Alcott is among the foreign fashion brands that have had a mixed fortune in India. In 2011, Alcott’s senior executive Salvatore Colella had said that the brand was doing well and there were plans to convert the partnership with DLF into a joint venture. Last year, retail giant Esprit had exited the country after a nearly seven-year-long stint. “Some brands are not able to survive in a competitive market such as India, and Alcott is one of them,” Sarna said. DLF Brands, which had about 15 Alcott stores across the country, plans to shut down its last operational Alcott store, located in a south Delhi mall, later this month.

• Oberoi Group Opens Trident Hotel in Hyderabad : The Oberoi Group on Monday opened the Trident, Hyderabad, in the city’s information technology hub, HITEC City. The hotel has 323 rooms and suites and offers conference and banqueting facilities along side Amara, an all-day dining restaurant, Kanak, an Indian restaurant influenced by the Hyderabad and Tuscany, an Italian restaurant. “Hyderabad has emerged as a significant business destination and Trident, Hyderabad has been created with the discerning business traveller in mind,” said PRS Oberoi, executive chairman of The Oberoi Group.

• ‘ITC Raises Prices of Some Cigarettes by 10%’ : ITC has raised prices of its Gold Flake and Classic Milds brands by about 10%, according to four distributors. The stock gained the most in two months. The price of a 10-cigarette pack of Gold Flake Kings will rise to 75 ($1.13) from 68 and a 20-unit pack of Classic Milds will increase to 150 from 136, according to distributors.

• UB Seeks $236m Damages from International Aero Engines : Kingfisher’s key shareholder United Breweries (Holdings) Ltd is seeking $236 million in damages from US-based aircraft engine maker International Aero Engines AG, alleging the company supplied defective machines to the carrier, according to its latest annual report. In the report for the financial year ended March 31, 2013, the troubled airline said the IAE V-2500 A5 engines supplied by IAE were “inherently defective, both in design and manufacture.” The case has been filed in the City Civil Court at Bangalore, it said, without specifying when it was filed. IAE is a Zurich-based company with various shareholders including Pratt & Whitney as well as the Japanese Aero Engine Corporation. The company refused to comment.

• IAI expels Kannan, slaps 5L fine : The Institute of Actuaries of India (IAI) has expelled R Kannan, a former member of the Insurance Regulatory and Development Authority, for life over financial irregularities. Kannan was also a former president of the institute. The decision was taken by the institute’s management council on June 29. The council’s orders state that, besides removing his name permanently from the register of members, the council has imposed a fine of Rs 5 lakh.

• The downturn, hurting consumer spending and industries, has bypassed the uber- luxury streets : The air of confidence that the attendant at the Worli outlet of Swarovski wears sums up the mood at the Austrian company, leaders in precision- cut luxury crystal ware. A delicate piece of Swarovski crystal replete with intricate work would cost nothing less than 1 lakh. Despite the steep tag, the attendant says it has been doing brisk business in the last six months. “ On an average I land up having about 75 to 100 customers a month. This is higher during the festive and wedding seasons when gifting goes up. There is no slowdown that I see,” he says candidly. Swarovski is not the only luxury brand to buck the slowdown that has hit consumer spending in other segments of the 1.8 lakh crore FMCG industry. At a Gucci store located at the upscale Palladium Mall in Mumbai, the sales executive says its star products – leather handbags with bamboo handles and clutches in anaconda skin – have been flying off the shelf. The average ticket size of these products is more than 1.3 lakh. “ I have walk- ins everyday, and more often than not, we manage converting quite a few of them into sales,” he says, choosing not to reveal the number of bags he sells per month. A similar refrain is heard at a nearby Jimmy Choo outlet. The average ticket size of a pair of Jimmy Choo shoes is 35,000- 40,000. Star products and limitededition collections easily cost a few lakhs, but the sales executive says customers have hardly deserted her store. “While the rupee has depreciated against the dollar and even the pound in the last three months, customers still prefer buying their products from here rather than London or Dubai because the ticket size is steeper there,” she says.

• Brand bonanza at Kidzania : The indoor edutainment park Kidzania, which launches this month, has roped in an array of brands as partners. From retail, FMCG to banking, brands like Big Bazaar, Kellogg’s, Cadbury, Birla Sun Life, Hyundai, Mad Over Donuts, Future Group’s Central, and YES Bank will be seen at the kid’s park. The lure for the 21 brands to line up? These will get to work the pester power that kids wield over parents with some kiddie engagement tactics. Kidzania will create a lifelike environment, scaled down to a child’s size. It will allow children to role- play with real brands. Viraj Jit Singh, the CMO, explains, “ For Kidzania, brands bring in authenticity and know- how. Having an actual Kellogg’s counter or a Yes Bank ATM lends to the experience. Kids don’t just consume a product; they examine it, create it, build it, deliver it, buy it and sell it. It’s an ideal setting for educating children on how products are made and services are delivered. Of course, brands bring financial backing which helps reduce the ticket prices.” The brands are investing 50 lakh- 5 crore to be a part, and then between 75 lakh and 1.5 crore annually for five years. The estimated cost of the project is 100 crore and the promoters expect to recover almost 30- 35 per cent from the brands. In return, the brands get access to toddlers and older kids through Kidzania, indirectly widening their recall with parents too.

International:

• Verizon, Voda in $130bn deal, 3rd largest ever : Verizon Communications Inc said on Monday that it has agreed to buy out Vodafone Group Plc’s 45% stake in Verizon Wireless for $130 billion, capping a decade-long bid to win full control of the most profitable mobile service provider in the US. Under the agreement announced on Monday the thirdlargest deal in corporate history Verizon will take full control of the largest mobile operator in the US by paying Vodafone $58.9 billion in cash, $60.2 billion in Verizon stock and an additional $11 billion from smaller transactions. The boards of Verizon and Vodafone have unanimously approved the sale, bringing an end to a partnership that had started in 2000.

• Is Gareth Bale really worth 100m euros? : Gareth Bale is now the most expensive player in the history of football, with a price tag of 100 million euros ($132 million). But why is Real Madrid shelling out such a huge amount for the 24-year-old? Bale has wowed audiences with his swerving free kicks and defence-splitting surges. He has long been seen as a ‘Real type’ of player because of his power and pace. Besides, Real has a history of splurging on ‘galacticos’. But pundits point out that Bale is still not a complete player. He will have to improve a lot if he is to live up to his price tag.

• EBay and Amazon Eye Same-Day Delivery : Getting a new music CD or a cup of coffee delivered to your door within the hour was one of the things that made the Internet seem so amazing back in the late ’90s. Then, of course, it turned out the Net wasn’t able to revoke the laws of business physics, and delivery services such as Kozmo.com and Urban Fetch blew up. Now, the two giants of Web retailing are giving same-day delivery another try. But they’re taking very different approaches, and it remains to be seen whether the services will scale up beyond a few cities. Earlier this week, EBay (EBAY) invited select San Francisco customers to sample EBay Now a shopping app that boasts same-day delivery. Bay Area residents who have received an invite will be able to download the app to their Apple (AAPL) iPhones and iPads. All of the products featured will be new and sold directly by local stores, including Target (TGT), Nordstrom (JWN), and Walgreens (WAG). Once you hit the “Bring It” button, your personal EBay shopping valet will pick up and deliver the item to wherever you are—the office, home, coffee shop.Amazon.com (AMZN) already offers limited same-day delivery. Shoppers who have signed up for a $79-a-year Prime account can get it on eligible items for $3.99 in 10 metro areas, including Chicago, New York, and Seattle. Retail experts speculate Amazon could roll out a more extensive same-day model, coupled with a change in its sales tax policy. The Seattle-based company has avoided having a physical presence in states that require e-tailers to charge sales tax. That has kept prices low but made same-day delivery in those places almost impossible.

• Yahoo ceases China news and community services : The Yahoo China home page now redirects users to a site run by Alibaba, which manages Yahoo's Chinese operation. In a farewell message which appears before the redirect, the firm says it is "adjusting its operations strategy". It also implies that its staff will be working on Alibaba content instead and thanks users for their support. Yahoo has yet to comment. The company faces big competition in the Chinese market. Social media services such as the Twitter-like platform offered by Weibo are hugely popular in China despite being openly censored. Yahoo has a significant stake in Alibaba, the business-to-business online retailer which has been licensed to run its Chinese services. Some analysts suggest that Alibaba's own services have benefited from its relationship with Yahoo. "China Yahoo has been under Alibaba for many years. Its most valuable properties have been dismembered and used," anlayst Li Zhi from Analysys International told IT World. "Alibaba already has no need for a China Yahoo that's been squeezed dry."

• Microsoft to buy Nokia phones unit : The deal will also see Nokia license its patents to Microsoft. Nokia, once a global leader in the mobile phone market, has struggled in recent times amid increased competition from rivals such as Samsung and Apple. The transaction is subject to approval by Nokia shareholders and regulatory approvals. "We believe this transaction is the best path forward for Nokia and its shareholders," said Risto Siilasmaa, chairman of the Nokia Board of Directors.

• L'Oréal's Jean-Paul Agon Clarifies Nestlé Stake Comments : L’Oréal stock continued climbing Monday after its chairman and chief executive officer Jean-Paul Agon neither confirmed nor denied the French beauty giant might buy back Nestlé’s 29.3 percent stake in the company. L’Oréal closed up 1.5 percent on the Paris Bourse to 128.20 euros, or $169.10 at current exchange. Agon made his remarks Friday at a financial analyst meeting at L’Oréal headquarters in Clichy, a Paris suburb, where he reviewed first-half results and clarified information in a Les Echos newspaper story. Agon refuted he had said L’Oréal wished to buy Nestlé’s stake which is valued at 22 billion euros, or $29 billion. “All I said was…that we have considerable financial wherewithal because we have positive cash and 9 percent of Sanofi,” he explained, referring to the French pharmaceutical concern whose 2012 sales were 34.95 billion euros, or $44.94 billion at average exchange.

• Half of U.K. Retailers Seen at Risk : A new report on the state of the British high street by Bill Grimsey, the former chief executive of home improvement chain Wickes and supermarket group Iceland, paints a bleak picture and offers strategies to get town centers back on their feet. "The time is right for a fresh debate on the high street because current government policy is achieving very little," Grimsey told WWD. "We know that there are 40,000 empty shops across the U.K., that thousands of small businesses are horribly financially stressed and at risk of failure, and that many town centers are a shadow of what they should be. People really value their local high street and we want to give every town center a fighting chance of a better future."