Daily News Digest- 20th Nov'13

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Following made the Headlines:

India:

• Biyani in Talks with Actis to Buy Nilgiris: Kishore Biyani-owned Future Group, India’s largest listed retailer by revenues, is negotiating with private equity firm Actis Capital to buy Nilgiris, a Bangalore-based supermarket chain in which it holds a majority stake, a person with knowledge of the negotiations said. If the deal eventually goes through, it will give Biyani control over 140 supermarket chains in south India, where the Future Group is trying to boost its presence. “Nilgiris has an annual turnover of 700 crore but 60-70% of the stores are run by franchisees and Nilgiris gets a fee for use of the brand and by selling bakery and dairy products to the franchisee stores. So the revenue is not all on Nilgiris’ books. According to me, the enterprise valuation should not be more than 450 crore,” the person aware of the discussion said. In 2006, UK-based Actis had bought 65% for about $65 million in Nilgiris.

• Dish TV to Offer Option to Skip Unwanted Channels: Direct-to-Home operator Dish TV has come out with a new initiative “request only basis”, in which it will provide flexibility to customers to weed out the channels which they do not want to watch from their bouquet. “Under the scheme, we are providing flexibility to the customers to remove the channels from their bouquet, which they do not wish to watch,” Dish TV India chief executive R C Venkateish said. He further said that under the scheme which would be applicable on the existing packages, the DTH operators would select some channels and inform its viewers by running scrolls that these channels are on “request only basis”. “The viewers would have to send his choice to Dish TV through SMS and within a period of six weeks that channel would be removed from his package,” Venkateish said. Moreover, the Zee Group firm would add 100 bonus points, which are worth 100, in the account of its customers, for the channels which they have removed, he added. “In return, the customer can avail any value added service from its package and even movie on demand or some ala-carte channel,” Venkateish said, adding that the validity of these bonus points would be more than two years.

• Diageo may Knock a Few Bottles Off USL’s Shelf: World’s largest distiller Diageo, which has taken a controlling stake in United Sprits, has hinted that it may get rid of some loss-making brands of India’s top spirits maker to improve its margins. “Diageo won’t shy away from exiting the mass-end brands (of United Spirits) that do not make money,” Gilbert Ghostine, Asia-Pacific president of the £49-billion, or about 4,90,000-crore, British multinational, has said. “Several brands (of the Indian firm) would require a lot of brand investment and the company’s margin improvement would take a lot of time to materialise,” Ghostine told analysts at an investor conference in London on Monday. Diageo, which holds 25.2% stake in Vijay Mallya-promoted United Spirits, said it has already exited direct operation in Tamil Nadu, where it was facing volume pressure for several years but barely made money. Diageo’s move to pull out underperforming mass brands comes at a time when the spirits market growth in the country slowed to a decade low. India is the third largest spirits market by volume. The move is in sync with Diageo’s global chief executive Ivan Menezes’ premiumisation strategy. When Menezes was elevated to head the British drinks company earlier this year, he had highlighted India’s rapid premiumisation with four million new consumers for western-style spirits each year. With brands such as McDowell and Bagpiper, United Spirits controls over 42% of the total Indian spirits market worth 300 million cases annually. Diageo, which owns pricier brands such as Johnnie Walker whisky and Smirnoff vodka, has less than 1% share in volumes. The decision to retire loss-making mass brands may lead to a fall in United Spirits’ volumes as this segment accounts for more than three-fourths of its volumes. By 2015, Diageo aims to generate 50% of net sales from emerging markets, which are now showing signs of a slowdown.

• BlackBerry in Talks for Data Bundling to Push Phone Sales: BlackBerry is in talks with leading Indian telecom operators to bundle its mobile phone instrument with attractive data plans, said managing director Sunil Lalvani, a move by the Canadian smartphone maker to try and keep pace with market leaders such as Samsung and fast growing Apple. “We are actively talking to key carriers. It is a work-in-progress,” he said in an interview with ET. The latest iPhone 5s were offered by Reliance Communications at less than 3,000 a month for a two-year contract. There was no upfront payment involved for the basic models. RCOM’s initial iPhone stock was sold out within an hour of the plan being announced, underlining the success of the business model introduced in India for the first time. However, the Blackberry’s financing model will not be the same as RCOM’s Apple offer, Lalvani said. “We wouldn’t say it is similar; we haven’t come up with the final thing but we have some financing tie-ups from the past.” Smartphone sales in India are growing at a scorching pace with players such as Samsung, Apple, Sony, and Micromax leading the way. BlackBerry has been struggling to keep pace with these companies. BlackBerry though has changed focus. BlackBerry in India now has equal sales from its enterprise and small office customers as handset sales to retail customers, he said. “Enterprise and professionals represent 30% of our client base generating 50% of our revenue.” The Blackberry Enterprise Server 10, which can be used to manage mobile devices across iOS, Android and Black-Berry platforms, has seen 1,000 clients in just six months, compared with a total of 2,000 for its previous version. Lalvani said soon BlackBerry will host a managed network on a cloud-based service that small companies can use for a monthly fee.

• Arvind may buy 49% in CK India: American clothing giant Philip Van-Heusen Corp (PVH) may induct Arvind Ltd as its new joint venture partner for Calvin Klein in India, one year after it acquired the designer jeans brand for $2.9 billion, people familiar with the matter told TOI. Calvin Klein has an existing India JV in which the Murjani Group and venture capital firm Matrix Partners India together hold a 49% stake. The Sanjay Lalbhai-led Arvind is expected to replace the two existing minority shareholders, sources said on condition of anonymity as talks were private. PVH Corp wants to push Calvin Klein with a renewed vigour in the Asian and Latin American markets, and sees India as a significant opportunity. PVH also owns Tommy Hilfiger, which has mopped up a $100 million business in India. The new alignment would see PVH deepening its ties with Arvind, which manages its other brands like Arrow and IZOD in the local market through Arvind Lifestyle Brands. It also owns 50% stake in Tommy Hilfiger’s Indian unit. Sources cited earlier in the story said PVH could also look at combining Tommy Hilfiger and Calvin Klein operations in India under a single JV with Arvind. PVH has effected similar moves combining operations of the two brands in Europe, they added.

• Luxury brands have to brace for high rent: The luxury market in India seems to be beating the economic slowdown with doubledigit growth. But the fall in the year- on- year growth rate of luxury retail is expected to continue because of high rental costs and the absence of high- street infrastructure, according to experts. The luxury retail market for apparel and accessories grew at about 15 per cent in 2012, compared to 20 per cent in 2010, registering a fall of 5 per cent in just two years. India has most of the leading global luxury brands concentrated in Delhi, Mumbai and Bangalore. Luxury retail will be hampered by the absence of infrastructure in high streets that lend such places their look and feel, and makes up the overall shopping experience of a consumer of luxury brands, says Darshan Mehta, CEO, Reliance Brands, He was addressing a conference hosted by Confederation of Indian Industries. The cost of renting an outlet in Khan Market stands at about $ 265 (₹ 16,525) per sq- ft and about $ 160 (₹ 9,978) in Connaught place in New Delhi. The highest rates stood at about $ 2,087 per square feet at Queen’s Road, Central Honk Kong, according to Global Retail Highlights, 2013 by Colliers International. Most outlets for the luxury brand are located in the lobbies of high profile hotels and this, in turn, limits the number of people and the growth prospects of the luxury market, says Gaurav Gupta, senior director, Deloitte India. Industry experts also point out that luxury is still nascent and limiting the visibility of such brands dampens the prospects of creating a luxury consumption culture. Industry experts also pointed out the concentration of luxury retail malls in Delhi, even as Mumbai craved for more. Owing to the high cost of land in Mumbai and the response from Delhi, most luxury retail players are interested to expand in the capital, says an industry expert. Delhi’s strategic location invites crowds from Haryana, Punjab and other neighbouring states. The demand pattern in retail luxury products, especially, in apparels and accessories, tells that there is little incentive for expansion in tier II cities. “About 60 per cent of the demand comes from Mumbai and Delhi and a little over 10 per cent from Bangalore. In such a scenario, there is not a lot of scope for expansion in smaller cities,” says Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj, a commercial real estate consultant. To capitalise on the limited but potential market, leading brands are looking forward to ‘Indianise’ their products and expand their reach. Recently, Canali had launched ethnic band gala or Jodhpuri jackets that were received well. Hermes, earlier, had showcased acollection of sarees. India has about 470 malls. The leading luxury malls are DLF Emporio in Delhi and Palladium in Mumbai. According to industry reports, the luxury industry in India is valued at $ 8.65 billion (₹ 53,900 crore) for 2013.

• Burger King joins hands with Everstone for India foray: Fast-food chain Burger King has entered India through a joint venture with the Everstone Group, a private equity and real estate firm. Under the deal, announced on Tuesday, Everstone has entered into a long-term master franchise and development agreement with Burger King Worldwide that includes sub-franchise rights for all of India. Everstone will work with BK AsiaPac to set up a supply chain and execute a rollout plan to establish Burger King's outlets across the country. "India is a market with huge potential for us and we have the chance to offer the unique Burger King brand proposition to its consumers with our own local twist to the menu," said Elias Diaz Sese, president, BK Asia-Pac. "I am very excited about this venture."

International:

• Nokia Microsoft mobile deal gets shareholder go ahead: Shareholders of the phonemaker Nokia have agreed to sell their mobile phone business to technology giant Microsoft for 5.4bn euros ($7.2 bn; £4.5bn). The deal goes ahead despite objections from some investors who opposed the sale of a Finnish asset. Regulators must clear the sale, but is expected to close early next year. In September, Microsoft agreed to buy the mobile phone business and licence patents from Nokia. Nokia has seen its share of the smartphone market shrink as competitors such as Apple and Samsung have risen in popularity.

• Macy's Joins Forces With Shopkick: The “magic” of Macy’s is being enhanced by Shopkick’s app, using Apple’s iBeacon-based presence signal, to further the retailer’s push into omnichannel. Shopkick’s app layers on its ShopBeacon, a proprietary software that adds encrypted signals to remind shoppers who enter Macy’s stores of location-specific deals, discounts and recommendations, as well as how to earn rewards while in the store. The technology builds upon Apple’s iOS7 Bluetooth Low Energy mobile protocol. ShopBeacon is live at Macy’s Herald Square in New York and Macy’s Union Square in San Francisco as part of closed beta testing, with plans to go live to Shopkick users in a few weeks. Martine Reardon, Macy’s Inc.’s chief marketing officer, said that as an inaugural partner with Shopkick when it first launched a few years ago, the retailer is constantly thinking about mobile and how customers interact with the store when they walk into it. “The evolution in shopping is using the mobile device now more so when in the store, sometimes to see the balance of the assortment when they come in, other times for entertainment to see what’s happening. They are not always on a mission to buy. What ShopBeacon can do is show them some product if they’re walking down an aisle or in one part of the store and not the other. It’s one way to engage consumers with the products,” she said.

• Holt Renfrew to Expand Montreal's Ogilvy: Amid the tide of rising competition, Holt Renfrew & Co. Ltd. is out to create Canada’s largest and most compelling luxury destination. On Tuesday, Holt disclosed that it will spend $60 million to renovate, expand and transform the Montreal-based Ogilvy, one of North America’s oldest department stores. The 147-year-old emporium, situated on the corner of Saint Catherine Street, will be enlarged to 220,000 square feet, from the current 140,000 square feet, thereby becoming the biggest unit in the Holt Renfrew chain, which bought Ogilvy in 2011. New luxury and designer shops, both leased and nonleased, will be installed. “Ogilvy is being reimagined by Holt Renfrew,” said Mark Derbyshire, the president of Holt Renfrew, in an interview. “We have spent the last two years diving deep into this, talking with, and mostly listening to, customers of Ogilvy and Holt to really understand. We discovered the stores have more that’s in common than dissimilar. They are both about fashion, style and luxury, and customers looking and feeling great.” Construction on Ogilvy is scheduled to start next fall and be completed in 2017. It involves expanding Ogilvy into the adjacent site of the former Hotel de la Montagne, which was demolished. 

• Uniqlo Ramps Up Fashion With Spring Collaborations: Fast Retailing Co. Ltd.’s Uniqlo is upping the fashion quotient for spring, revealing the product of its first collaborations with Inès de la Fressange and Nigo alongside the presentation of its main spring collections here on Wednesday. Uniqlo design director Naoki Takizawa was inspired to contact de la Fressange when he saw a photo of the French fashion icon and former model sporting Uniqlo designs, he explained at an exclusive preview of the collections. The pair met last May and closely collaborated on the collection, much of which has a vintage French feel. “I wanted to make the clothes in her wardrobe,” Takizawa explained, adding that the two got together at de la Fressange’s Parisian home, where she would go and take pieces out of her closet for inspiration. “It’s amazing the ‘kawaii’ taste that she brings,” he added, using the Japanese word for “cute.” The collaboration is timely for de la Fressange, who has come back to her namesake brand and is in the process of relaunching it after the label was bought by a consortium led by CalaoFinance earlier this year.

• Paul Blum to Exit Juicy Couture: Paul Blum, chief executive officer of Juicy Couture, has decided to leave the company, effective Jan. 31. Blum was brought in as ceo last December to lead turnaround efforts, focusing on global expansion, strengthening product categories and marketing to the global consumer. “It’s been a great year for me personally and professionally,” said Blum, in an interview at Juicy Couture’s offices at 1440 Broadway here. “It was a great experience working with Bill McComb and Fifth & Pacific, and taking over where LeAnn Nealz [former president and chief creative officer] really left off. The brand had some good creative momentum and there was a good business opportunity. There was a lot of low hanging fruit.” Last month, Fifth & Pacific Co. Inc. sold the intellectual property assets of Juicy Couture to Authentic Brands Group for $195 million. As part of the deal, F&P entered into a short-term licensing agreement with ABG that runs through the end of 2014 and guarantees ABG a minimum royalty payment of $10 million. F&P will continue to operate Juicy retail stores through June. The plan is for ABG to name operating partners or licensees for Juicy shortly. Kohl’s said last week it would start carrying Juicy Couture for fall 2014.

• Gucci in Trademark Tussle in U.K.: Following a decision by the U.K.’s Intellectual Property Office earlier this month, reports have been swirling in the British press that Gucci has lost the rights to its GG trademark in the U.K. In a ruling published Nov. 5, the IPO did revoke Gucci’s U.K. rights to a version of the GG logo in four categories, which encompassed garments such as bracelets, shoulder bags, scarves and coats. The action came following an application by German clothing firm Gerry Weber to revoke the trademark on account of its “nonuse” in the periods from 2003 through 2008 and 2007 through 2012. The IPO ruled in favor of Gerry Weber, citing a lack of evidence on Gucci’s part to demonstrate the trademark’s “actuality of use” in the U.K. However, according to Gucci, the ruling does not affect the use of its GG logo in the region, as the firm has a number of registrations that protect its trademarks in the U.K. and Europe. The company said: “Gucci clarifies that Gucci’s rights in its GG logo are not affected by this decision,” the firm said. “Gucci is the owner of several other valid registrations for this mark, including a Community Trade Mark [covering the European Union] for its iconic GG logo and those rights are directly enforceable in the U.K.,” the company said.