Daily News Digest- 4th Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• India Post may be Amazon’s Ticket to Bharat: Amazon may be testing drones to drop off packages, but in India, the world’s biggest ecommerce company is looking to try out something decidedly low-tech that could give it an unbeatable edge on deliveries. Its secret weapon? The postman. Amazon already sends packages by India Post, but now it wants to use the channel to collect payments from recipients as well, using the cash-on delivery model. Amazon has started a pilot with India Post to test this system, which could help it reach deep into India’s hinterland, according to two people familiar with the matter. A partnership between India Post and Amazon would intensify competition in the still-nascent but burgeoning ecommerce industry if the pilot proves to be a success. Amazon would gain reach while India Post would benefit from the firm’s aggressive growth plans. India Post has over 150,000 post offices, of which 89% are in rural areas. “We are trying to add capabilities such as cash on delivery and reverse logistics. Consumers don’t want to make upfront payments. We are developing software to start the cash-on-delivery service with Amazon,” said a senior official who did not want to be identified. India’s 150-year-old postal service, hurting from the telecom revolution and use of email, has been seeking to reinvent itself.

• Fate of Nokia’s Chennai Plant Uncertain: Finland fears that Nokia could be forced to close its Chennai plant if the company’s tax dispute in India is not resolved and its assets not unfrozen before December 12, when the troubled handset major is likely to give final shape to the global transfer of its devices and services business to Microsoft. The Income-Tax Department had slapped a 2,080-crore tax demand on Nokia on March 21 for not withholding tax on the payment made to its parent as royalty for the software used in its mobile phones. The plant is likely to be excluded from the €5.4-billion ($7.3-billion) agreement between Nokia and Microsoft if the company’s assets are not released by December 12. “In the worst case, it could lead to the closing down of the Chennai plant, which is employing 8,000 people, and with sub-contractors up to 30,000 people,” Finland Foreign Minister Erkki Tuomioja said, adding his government was concerned about the development. He urged the Indian government to resolve the dispute but clarified that Finland was not a party to the dispute.

• Benetton Pips Levi’s to Emerge Top Intl Fashion Brand in India: Italian brand Benetton has overtaken Levi’s to emerge the largest international fashion brand in the country for the first time last fiscal, thanks to a sharp decline in the American brand’s revenues. Benetton reported more than 20% year-on-year increase in its revenues for FY2013 at 523 crore while Levi’s posted its steepest revenue decline of 35% at 484 crore after phasing out its mass brand Denizen. These are company revenues; in retail sales, including the mark-up of franchises and retailers, Benetton is already a 1,000-crore-plus brand. Till the previous year, Levi’s was almost double the size of its nearest rival. In FY12 it had reported sales of 741 crore against Benetton’s 430 crore. But the American brand’s strategy of exiting few brands and shutting down dozens of stores at a time when most global rivals expanded their portfolio and store count in India has backfired in terms of revenues, say experts. “Rival brands have been more aggressive on growth, style and innovation, positioning them as younger brands by following global fashion trends,” Ruchi Sally, director at boutique retail consultancy Elargir Solutions, says. Two years ago, Levi’s started cutting down labels such as Dockers, Sykes, Signature and, more recently, mass brand Denizen, which had been adding substantially to the company’s top line. Sanjay Purohit, managing director at Levi’s India, says, “The financials reflect significant revenue and costs impact associated with the phase out of the Denizen brand.” He, however, says the move has helped the firm put greater focus and increased investment level on the Levi’s brand. But when Levi’s shrunk its portfolio, its competitors became aggressive in India. Benetton, for instance, added a host of new products including shoes, accessories and undergarments to its portfolio, while Marks & Spencer tweaked its premium positioning to expand its customer base and Zara brought in all its latest global offerings at relatively affordable prices.

• THREELER: India waits as Delhi votes in historic poll: It’s easily the most interesting election that Delhi has ever seen: hotly contested, evenly matched and unpredictable. As 1.2 crore voters of the city-state go to the polls on Wednesday, the only thing that’s certain is the uncertainty about its outcome. Another thing can be said with some degree of certainty — the outcome in Delhi this time will have a disproportionate impact on national politics. If Congress retains the state, it could cramp the march of a Narendra Modi-led BJP. If BJP wins, it will gain significant momentum for the 2014 Lok Sabha election. And if AAP’s magic works, it will not just be the most spectacular debut by a newcomer after NTR in Andhra Pradesh, it will also announce the arrival of a new political force in India. Beyond this, almost everything is uncertain. While it appears that the electoral discourse in Delhi has been set by AAP, it’s hard to tell if it’s in with a chance for victory. In the course of a day-long, stop and-talk exercise with city voters across seven seats in south, east and central Delhi on the eve of the polls, AAP came up in the conversations repeatedly, indeed invariably. Does that mean AAP will win? Not necessarily. In fact, many who said they were voting for it didn’t seem confident about the local AAP candidate winning, while some others who extolled the party’s “imaandaari”, admitted they wouldn’t vote for it. This could be for a variety of factors, from the incumbent MLA having done good work, to a lurking suspicion — especially among the relatively older voters — that it would be a wasted vote. But arguments were spelt out in relation to AAP’s electoral appeal either to endorse it or to dismiss it as unrealistic.

• ITC’s Sunfeast tops in cream biscuits: The slugfest for the numero uno position in the Rs 4,600-crore cream biscuit market has been on for a while now ever since new entrants like ITC and Cadbury joined the fray. Even as the skirmish continues unabated, with each of the brands baking fresh strategies, ITC’s Sunfeast, for now, has emerged a clear leader in the segment. For the year ended October 31, 2013, ITC’s cream biscuit market share stands at around 25% in value, according to industry sources who quoted all-India Nielsen numbers. The market share numbers for Parle Products and Britannia for the same period were under 20%. Exactly a year ago, the three rivals were running a close race with their respective market shares at about 23%. However, there was no clear leader in sight then. Sunfeast, it appears, has inched up by capturing market share from both Britannia and Parle in cream biscuits. Cadbury’s Oreo, on the other hand, has maintained its share of 5-6%. Chitranjan Dar, divisional chief executive, foods division, ITC, attributed the company’s gains in cream biscuits to its relentless focus on portfolio enrichment through innovations like Sunfeast Dark Fantasy Choco Fills and Choco Meltz and Sunfeast Dream Cream range. “These flavours have created excitement among consumers and significantly enhanced the consumer franchise of the ‘Sunfeast’ brand,” said Dar. What’s helped in the process is ITC Hotels’s marketing and distribution infrastructure, which Sunfeast has leveraged to stay ahead of the curve. Britannia Industries, which restaged its cream biscuit brands Bourbon and Jim Jam along with additional flavours, believes it is seeing significant positive shifts in the premium cream segment. “In an intensely competitive segment with high levels of investment, our focused approach is paying dividends,” a Britannia spokesperson said. Britannia believes the “indulgence category” is key to its portfolio of both cookies and creams, which addresses differential consumer choices.

• JV dispute: McDonald's India moves for arbitration in London: US food major McDonald's has moved the London Court of International Arbitration (LCIA) to resolve its dispute with with Indian venture partner Vikram Bakshi over his appointment as the Managing Director. During the proceedings of the Company Law Board (CLB), the counsel appearing for McDonald's India informed that the company has approached the London Court of International Arbitration to resolve the dispute. McDonald's India argued that as per the sections of their joint venture, any dispute between them has to be referred to London for arbitration and it has done so. The step to move LCIA was opposed by the counsel appearing for Vikram Bakshi, contending that the dispute was pending before the CLB and it should not be referred to an international forum. Moreover, McDonald's had filed an application under section 45 Arbitration and Conciliation Act 1996, seeking resolution of the dispute outside of courts. The CLB member B S V Prakash Kumar has posted the matter for further hearing to December 16 on this issue. The board was hearing a petition filed by Vikram Bakshi challenging his removal as the Managing Director of the joint venture. In a public notice on August 30, McDonald's India said: "Vikram Bakshi has ceased to be the Managing Director of Connaught Plaza Restaurants Ltd (CPRL) pursuant to expiration of Bakshi's term on July 17." Subsequently, Bakshi reportedly moved CLB in September. Incorporated in June 1995, CPRL is a 50:50 joint venture between McDonald's Corporation and Vikram Bakshi and it has been running fast food outlets in North and East India.

• Hennes & Mauritz gets government nod to invest Rs 720 crores in India: Swedish retailer Hennes & Mauritz has received final approval from FIPB to invest Rs 720 crores ($115.2 million) in the country, according to a government statement on Monday. The world's second biggest fashion retailer had said in April this year it plans to open 50 stores in India, hoping a growing population and rising incomes in Asia's third-largest economy would fuel demand for its fast-changing fashions. The government approval will allow the company to set up a wholly-owned subsidiary in the country, the statement added. India permitted foreign single-brand retailers to own 100 per cent of their Indian operations in January 2012 and Swedish budget furniture chain IKEA was one of the first to receive an approval for its investment plans in May this year.

• US retailer Children’s Place may partner Arvind for India entry: Children's Place, the largest children's apparel retailer in the US, may partner Arvind for an India entry next year. The $2-billion retail chain's discussions with Sanjay Lalbhai-spearheaded Arvind are fairly advanced as the brand looks to expand outside its core North American markets, people familiar with the matter said. Both companies would soon decide whether the partnership will involve an equity joint venture or a licensing and distribution deal, sources familiar with the matter told TOI. Arvind Brands, a subsidiary of the Mumbai-listed Arvind Ltd, has been adding international fashion names to its portfolio — the most recent being Debenhams, Nautica and Next. It is close to announcing a joint venture with Japanese retail major Uniqlo early next year and has held exploratory talks with US mega apparel retailer Gap. Swedish fast fashion retailer Hennes & Mauritz and Uniqlo are the two most anticipated brands slated to enter the country over the next year or two after the Indian government liberalized foreign investment rules for single-brand retailers, opening it up 100%. An email sent to Children's Place remained unanswered till going to press on Monday while J Suresh, CEO, Arvind Brands, declined to offer any comments on the story. Arvind is present in the fast-growing kidswear category through its private label Cherokee Junior as well as Elle Kids. It also plans to launch Nautica Kids going forward.

International:

• Cyber Monday sales set record: Amazon, eBay and other online retailers saw sales soar on Cyber Monday and, by 9 p.m., the day's sales were up 19% over last year, according to data from IBM. "Cyber Monday has been the single biggest shopping day of the year for U.S. retailers for a number of years now," Forrester Research analyst Sucharita Mulpuru said. "The big story is that stores continue to lose share and web retailers continue to gain share."

• Apple buys social media analytics firm Topsy Labs: Apple has bought social media data analytics firm, Topsy Labs, which specialises in using data from Twitter to track customer sentiment. Topsy is one of the few firms to have access to Twitter's entire data stream. It has recently created a searchable database of all tweets sent - more than 400 billion - since Twitter's launch. Apple did not say how much it paid for the firm, but the Wall Street Journal which first reported the story put the figure at around $200m (£122m). Topsy competes with firms like DataSift and Gnip to figure out who is influential on Twitter, what terms are trending, and the impact of specific Twitter campaigns. It is Apple's second acquisition in recent weeks. Last month, it announced it had bought Israeli firm PrimeSense, which specialises in making 3-D motion detection technology.

• Quiksilver Looking to Trim Portfolio: Quiksilver Inc. plans to continue paring back its operations to focus on the Quiksilver, Roxy and DC Shoes businesses. The Huntington Beach, Calif.-based company said Tuesday that it is looking to sell its Surfdome, Hawk and Moskova brands as well as its Maui and Sons licensed business. The firm recently completed the sale of its Mervin Manufacturing snowboard subsidiary for $58 million, purchased the minority interests in its joint ventures in Mexico and Brazil and established a 60 million euro, or $79.3 million at current exchange, European credit facility with Eurofactor. “These transactions represent additional milestones in executing our multiyear profit improvement plan,” said Andy Mooney, president and chief executive officer of Quiksilver. “We used a portion of the Mervin proceeds to invest in our high-growth subsidiaries in Mexico and Brazil, and we now own 100 percent of our operations in both countries.” He said the corporate downsizing “will allow management to focus on expanding our three core brands — Quiksilver, Roxy and DC Shoes — along with driving additional operational efficiencies.” The Mervin, Surfdome, Hawk, Moskova and Maui businesses have been reclassified as discontinued operations. For the fiscal year ended Oct. 31, Quiksilver said the discontinued operations had sales of $83.2 million and gross profits of $43 million. In the prior year, the whole company had gross profits of $980.3 million on sales of $2.01 billion.

• Adidas Sets 2014 Sales Target: Powered by the running and soccer categories and driven by all brands, regions and markets, Adidas is forecasting high-single digit sales growth on a currency neutral basis in 2014. At its investor field trip Thursday to the group’s headquarters in Herzogenaurach, the German active sportswear giant also said it expects operating margin to increase about one percentage point in comparison to 2013. For 2013, the group's forecast calls for an operating margin of about 8.5 percent, with low-single-digit growth in 2013 currency-adjusted sales. In 2012, group sales reached 14.98 billion euros, or $19.16 billion. Adidas also reconfirmed its Route 2015 targets Thursday — sales of 17 billion euros and an operating margin of 11 percent in 2015.  For the year ahead, Adidas is particularly bullish about its soccer business in the run up to the FIFA World Cup in Brazil. The brand said it "expects to achieve record sales and be the first to break through the 2 billion euro mark with (soccer) performance products." In the Sport Performance footwear category, the brand's innovative Boost technology will be integrated into all performance running shoes in 2014, as well as being introduced into other categories including basketball footwear. Adidas is forecasting a total Boost volume of 15 million pairs in 2015.

• Madison Ave. Retailers to Participate in 'Miracle Saturday': Although it’s that time of year when retailers battle each other tooth and nail for business, on Madison Avenue there’s a collaborative disposition this week. Graff, Georg Jensen, Gucci, Ralph Lauren, Mulberry and Missoni are among 85 retailers from 57th to 86th Streets participating in “Miracle Saturday” on Dec. 7 by donating 20 percent of their sales — up to $15,000 — to support the pediatric initiatives of The Society of Memorial Sloan-Kettering Cancer Center. That’s 25 more than last year’s miracle day, according to the Madison Avenue Business Improvement District which organizes the event. “The season of giving has been imbued with the spirit of partnership on Madison Avenue,” said Matthew Bauer, president of the Madison Avenue BID. “This is a 27-year philanthropic tradition supporting children in need.” The event gets promoted in grand style on Thursday, when The Society of MSKCC president Martha Vietor Glass, along with event chairs Muffie Potter Aston and Courtney Arnot, flip the switch to ignite the “shooting stars” on the lamp poles along Madison Avenue. The Hewitt Carolers, a choir of second graders, will also be performing. Town & Country magazine, for the first time, is the media partner for the day and has created a 44-page gift guide for the Madison Avenue retailers for the December issue focusing on philanthropy. The magazine will give another lift to the cause by stationing editors in the stores Saturday to help shoppers with selections and styling tips. “It will be a personalized experience that Town & Country editors bring to the avenue,” said Jennifer Levene Bruno, the magazine’s publisher. Town & Country also created a gift guide for Rodeo Drive retailers, polybagged with magazines distributed on the West Coast. Rodeo Drive retailers are conducting their own charity efforts.

• Chanel Goes Bigger in Boston: After trying to secure a larger space here for years, Chanel today quintuples its selling space with a new 10,000-square-foot store. The door is its fourth biggest in the U.S. behind New York; Waikiki, Hawaii, and Beverly Hills, which is set to grow substantially thanks to the brand’s purchase of an adjoining building. The new store at 6 Newbury Street replaces a 2,000-square-foot space in the Taj Hotel, which closed Sunday. For years, the brand negotiated unsuccessfully with the hotel to expand any way it could. “We were even trying to take over part of the lobby,” said Chanel fashion division president Barbara Cirkva. Then a developer approached the Paris house to be the retailanchor of a new building containing six luxurycondos. Architects Peter Marino, a longtime Chanel collaborator, and Richard Bertman together gave the building a thoroughly Chanel signature with a white limestone facade, rectilinear window bays and gridlike black trim. “We felt it was time to give an important city like Boston the size and scale of boutique that it deserves. Boston is a key cultural city in the U.S. and, in some ways, its historical importance to this country echoes that of Paris’ importance to France,” said John Galantic, president and chief operating officer of Chanel Inc. A Boston native who was born in the city’s Back Bay neighborhood and attended school here, Galantic called the long-sought new store “gratifying.” “In the past we offered a cherry-picked presentation,” Cirkva said. “We’ve never been able to expose the full collection before to Bostonians.”