Daily News Digest- 10th Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• Drunk on the Success of BJP, D-St Hits 5-Year High: The performance of the Bharatiya Janata Party, winning polls in three states and coming close to a majority in a fourth, sent stocks soaring to a record as investors reckoned this meant that it may be best placed to form the next government at the Centre after general elections that are just months away. The key benchmark BSE Sensex and the National Stock Exchange Nifty surged to lifetime highs. The Sensex rose 1.57% to close at 21,326 points, while the Nifty gained 1.66% to end at 6,363 points. “The BJP is considered more right-of-centre, pro-business and reform oriented,” Nomura analyst Sonal Verma said in a note to clients, referring to expectations that the party led by prime ministerial candidate Narendra Modi will push through economic changes that will make it easier to do business in India and implement an investment and development agenda. India needs to revive economic growth, which slumped to a decade low in the year to March, besides restoring its shine as an investment destination, tarnished in the wake of corruption allegations that have rocked the Congress-led UPA, retrospective tax changes, projects getting indefinitely stalled and high inflation. The Congress party sustained heavy defeats in the state elections. The assembly poll results buoyed foreign institutional investors (FIIs), who bought stocks worth 2,473 crore on Monday.

• Star Bags Logo Rights of Team India: Star India has won the bid for the Indian cricket team’s logo sponsorship rights from 2014 to 2017 for 1.92 crore a match, a drop of 40% from 3.34 crore a match that current sponsor Sahara group is paying but 28% higher than the base price of 1.5 crore, reports Our Bureau. Sahara’s bid was found ineligible.

• PepsiCo Ropes in Shivakumar as India CEO: US food and beverage maker PepsiCo on Monday named former Nokia executive D Shivakumar as its chairman and CEO for India region, a position lying vacant since Manu Anand quit in June. Shivakumar — who was managing director at Nokia India before taking over as the handset maker’s senior vice-president for India, Middle East and Africa in 2011 — is PepsiCo India’s first outsider CEO since Rajeev Bakshi, who led the firm from 2001 to 2006. “Shiv has a proven ability to take billion-dollar businesses to the next level by maximising innovation, execution and collaboration,” Indra Nooyi, chairman and CEO at PepsiCo, said in a statement. He takes charge with immediate effect. ET NOW business channel broke the news before the official announcement. PepsiCo on Monday also announced promotion of Gautham Mukkavilli, currently general manager of its beverages business in India, as senior vice-president, business transformation, for the Asia-Middle East-Africa (AMEA) region. He will oversee strategic initiatives in foods and beverages across the region with effect from March 1, 2014. Both Shivakumar and Mukkavilli will report to Sanjeev Chadha, CEO of PepsiCo AMEA. “Shiv and Gautham will be playing key roles in driving PepsiCo’s business forward in the region,” Chadha said. PepsiCo India has been operating without a country head since Manu Anand quit dramatically in June to join foods company Cadbury Kraft. Since then, Mukkavilli and foods division head Praveen Someshwar have been reporting to Chadha. An engineer from IIT Chennai and an MBA from IIM Calcutta, Shivakumar’s appointment has come as a surprise to many as his immediate predecessors Manu Anand (India head from 2010 to 2013) and Chadha (2006 to 2010) were chosen from PepsiCo’s internal talent pool. Bakshi was the last outsider CEO of PepsiCo India, brought in from Cadbury. Shivakumar’s immediate mandate at the firm will be to accelerate consumption of colas and snacks in an environment when growth has slowed down significantly. Growth of soft drinks has slowed down to single digits as early rains cut short last summer on top of weakening consumer sentiment. PepsiCo’s snacks business is facing increasing competition from national rivals, such as ITC and Parle, as well as local players.

• Biyani to Exit Capital Foods, Sell 44% to European Fund: Kishore Biyani’s listed food and FMCG business division Future Consumer Enterprises (FCEL) — formerly known as Future Ventures — is exiting its 7-year-old investment in Capital Foods, a home-grown processed foods and consumer company, by selling its entire 44% stake to European family office Artal Investments together with its affiliate private equity fund Invus Group for 180 crore. In 2006, Biyani’s investment vehicle Future Ventures, had pumped in 13 crore for a minority 33% stake in Capital Foods, makers of Ching’s Secret instant Chinese noodles, soups, condiments, curry pastes and frozen entrees along with the Smith & Jones range of niche sauces, baked beans. Over the years, it has hiked its stake. The company’s founder-chairman and managing director Ajay Gupta, a former advertising professional turned foodie entrepreneur, would continue to control the company with a 56% stake. Since 1985 Artal and Invus — that manages close to $4 billion — handles the private capital and investments of a “European family group.” Its most famous acquisition was the buyout of Weight Watchers International — a weight management services firm — from Heinz from $224 million. That transaction is regarded by many as one of the most successful PE deals ever. From consumer products and services, food, specialty retail, software to bio-tech and medical devices, the firm’s portfolio is diverse spanning across US, Europe and emerging markets of Asia and Latin America. The investment by Artal comes after buyout discussions with Japanese food major Nissin Foods failed to materialise recently. Sources involved in those discussions said Nissin’s insistence on a controlling stake resulted in the talks falling apart. ET in its September 17 edition had reported about the advance discussions between Nissin and the management of Capital Foods.

• Vinod Mittal Family may buy Majority Stake in Papa John’s Franchisee: The family of Vinod Mittal, the former managing director of the erstwhile Ispat Industries, is poised to enter India’s food and beverages industry by buying a majority holding in a fast food chain that serves pizzas. Vinod, who along with his brother Pramod sold their stake in Ispat to JSW in 2010, will buy Om Pizzas and Eats, the Indian franchisee of pizza chain Papa John’s, according to a person with direct knowledge of the developments. Atulya Mittal, son of Vinod, will helm the initiative which will see the family acquire a significant chunk of the 80 % stake in Om Pizzas held by private equity fund TVS Capital, said the person who spoke on condition of anonymity. He declined to disclose the value of the deal. Atulya, a Harvard Business School graduate who was vice president at Ispat Industries, said he was not authorised to speak on behalf of the family. With Vinod Mittal and family acquiring a controlling stake in Om Pizzas, TVS Capital will dilute its holding to less than 10%, said the source. TVS Capital declined to confirm details. The financial terms of the deal are yet to be drawn up, as the structuring of the acquisition is still under discussion. TVS Capital was in talks with investors to raise around $25 million (over 150 crore) for Om Pizzas in May this year. With the Mittals taking over, TVS Capital will no longer have a management role. This is not the first time that large business houses have shown interest in the food and beverages industry. In 2011, the Bharti Family Office had entered into a joint venture with Pizza Express. The joint venture was led by Ramit Mittal, the son of Rakesh Mittal, who is the elder brother of Sunil Mittal, the founder of Bharti Enterprises that runs Bharti Airtel. In October, Reliance Industries bought a 45% stake in Two Sisters Foods India that supplies poultry, meat, fish and other food products. RIL is said to be planning a chicken-focused quick service restaurant chain, Chicken Came First. Om Pizzas was promoted by Bahrain-based Jawad Business Group, which holds international franchise rights to Papa John's in a number of countries, especially in the Middle East. 

• ITC Gears Up for Big FMCG Sales Push Through Paanwallahs: ITC plans to shake-up distribution of fast-moving consumer goods by rolling out its entire range of packaged food and personal care products through lakhs of paan shops across India, taking advantage of relationships it has built up with paanwallahs over the years through the cigarette business. The strategy is in sharp contrast with that of rivals, which mostly sell confectionery, snacks and at best sachets of shampoos and detergent through paan shops. ITC, on the other hand, even plans to sell its premium cookies and cream biscuits through them. It will offer Sunfeast biscuits, Yippee instant noodles, Vivel soaps, Mangaldeep agarbattis, Dark Fantasy Choco Fills and Choco Meltz biscuits, Delishus cookies and Engage deodorants through these outlets, known to the trade as the paan-plus channel. As part of the initiative, ITC is sprucing up the outlets and training the paanwallahs to sell soaps, biscuits and noodles. Directly servicing the paan shops over decades has allowed ITC to forge close ties with them, said Sanjiv Puri, the company’s divisional chief executive in charge of FMCG trade marketing and distribution. These outlets are already contributing significantly to some of the product categories, he said, declining to elaborate on the numbers. “Several of the paan-plus shops in prime localities in cities have their own dedicated clientele and sell an assortment of consumer products,” Puri said. “Consumers can top up their requirement from such outlets the way neighbourhood convenience stores serve the purpose in the West.” ITC has already made some progress with its initiative, having reached over 10 lakh paan-plus outlets with its packaged food, personal care and stationery products. That’s almost half the number of stores that ITC reaches directly with its non-cigarette FMCG products. ITC's FMCG products are sold in more than 60 lakh outlets across the country. This campaign has given ITC a big lead in the paanplus channel, especially over peers such as market leader HUL, which has a much bigger advantage in its reach through neighbourhood stores, a senior analyst said. “Being a relatively new entrant, it is still some years before ITC can build kirana store access like HUL,” the person said. “It is here the paan shops can boost ITC’s market share.”

• Nissan Goes Online to Sell Cars in India: Japanese car major Nissan, on Monday, said it will sell cars online in India and make its entire product line-up available for purchase via internet. “Customers will be able to book their cars by making payments through an online gateway by credit card. The car will then be delivered to the customer by their nearest Nissan dealership when ready,” the company said.

• Dunkin’ Donuts to Revamp Menu to Woo Young Adults: Barely 18 months into the country Dunkin’ Donuts is carrying out a major revamp that would help the US coffee-anddoughnut chain take on fast-food majors such as McDonald’s and KFC besides café rivals such as Starbucks. ‘Tough-guy burger’ and ‘alive-by-chocolate doughnut’ are among the choices that Dunkin’ offers in its new series of what it calls ‘destressing’ foods targeted at young adults to step up profitability. “The new products are one part of our biggest revamp…we want to build a profitable business,” said Dev Amritesh, president and COO of Dunkin’ Donuts division at Jubilant FoodWorks that runs the $8.8-billion US chain in India. Dunkin’ officials said they want the chain to occupy the space between the quick-service restaurant (QSR) and cafe segments, and appeal to young adults. “Our research shows that after more than a decade of experiencing QSR brands, there’s a segment of consumers who find existing options to be somewhat childlike,” Amritesh said. Dunkin’ has launched yam patties, bagel buns, mutton and corn burgers, and a revamped coffee range should be in stores next month. All upcoming stores will have a more ‘adult’ theme with slightly muted colours, Amritesh said. Existing 21 stores will also be revamped on these lines. The exercise will pan out over three-six months. Industry watchers say the move is necessitated because doughnuts alone cannot drive volumes and profitability in India because it’s a small business here. “Doughnuts remain a once-in-a-while category in India,” Harminder Sahni, founder and MD at retail consultancy Wazir Advisors, said. “Moreover, unlike a pizza where prices can be increased with newer toppings, doughnuts’ prices can’t be increased beyond a point. So Dunkin’ is under pressure to step up both volumes by adding newer products on its menu and value by pricing products higher, which requires a completely different positioning,” he added. Shirish Pardeshi, executive director of investment banking at Anand Rathi Securities, warned that it would be challenge for the doughnut chain to get into a new space that targets adults. “But if it works, the expanded portfolio could attract a larger consumer base and result in enhancing revenues in the long-term,” he said. Dunkin’s new offerings will replace slowmoving products such as green vegetarian burgers and some varieties of doughnuts and beverages. Company officials denied that the move is necessitated by the overall consumer slowdown in the market. “Slowdown is an issue for brands with higher penetration. We are just 21 stores old,” Amritesh said. For the July-September quarter, Jubilant FoodWorks, which also runs pizza chain Domino’s in India, saw same-store sales growth slow down to 6.6% from 19.8% in the corresponding year-ago quarter. Jubilant intends to set up 20 new Dunkin’ Donuts restaurants this fiscal against its earlier target of 18.

• Future to launch US Co Sunkist's juices and drinks: Kishore Biyani's Future Group has signed a licensing agreement with California-based Sunkist Growers, one of the largest international suppliers of fresh fruits, to launch its citrus beverage products in India, marking the retailer's entry into consumer business outside its private label portfolio. "The opportunity in the beverage segment is huge and we plan to add a lot of food and beverages brands through foreign partnerships," Biyani said. To begin with, Future Group will make and sell Sunkist-branded citrus juice and aerated drink within the next 6-8 months through both modern trade as well as general stores. Sunkist Growers is the oldest operating citrus cooperative in America, owned by some 6,000 citrus growers across California and Arizona. So far, it has over 52 licensee tie-ups globally, and it's the market leader in citrus drinks in the US despite competition from beverages giants Coca-Cola and PepsiCo. Sunkist products in India will be sold at a premium compared to existing brands.

• S Kumar Nationwide Chairman, Nitin Kasliwal declared defaulter of Rs 110 cr bank loan: In May this year, when Kolkata-based UCO Bank decided to name and shame its defaulters, the bank zeroed in on Nitin Kasliwal, Chairman of S Kumars Nationwide. The bank published his pictures in leading newspapers identifying him as a defaulter of a Rs 110 crore loan reports Business Standard. The loan was taken by Reid & Taylor and Kasliwal was a guarantor to the loan. The bank has tried all its modes to recover loans but failed. This extreme step was taken as bank unions have been reiterating that such heavy loans affect the profitability of the banks. A list of top bank defaulters published by bank union All India Bank Employees Association (AIBEA) last week identified S Kumars Nationwide as one of the top defaulters. The company owes close to Rs 3,000 crore to the government-owned banks as reported. Nitin's S Kumar Nationwide had made a loss of Rs 414 cr on revenue of Rs 3,395 cr in fiscal 2013 as compare to profits of Rs 179 cr on revenue of Rs 3,512 cr in fiscal 2012. This even impacted the loss of wealth of stock investors and simultaneously adverse market condition even failure to launch IPO of Reid & Taylor since 2011 added to its woes that today, the banks are getting ready to sell its assets.

• Narendra Modi top trend on Facebook in India: BJP’s prime ministerial candidate, Narendra Modi, is the most talked about person on Facebook in India beating likes of cricketing legend Sachin Tendulkar and Apple Inc.’s iconic device iPhone 5s, the US-based social networking site said on Monday. According to the social networking giant’s top Indian trends of 2013, Reserve Bank of India (RBI) governor Raghuram Rajan and India’s Mars mission also failed to beat the Gujarat chief minister, who was the most mentioned person on Facebook this year. Facebook, which at present claims to have 1.19 billion monthly active users (MAUs), has 82 million MAUs in India for the quarter ending 31 June 2013. “Take a look at the most mentioned people and events of 2013, which point to some of the most popular topics in India,” Facebook said in a statement. This includes Narendra Modi followed by Sachin Tendulkar, iPhone 5s, Raghuram Rajan and Mangalyaan, it added.

International:

• American Airlines and US Airways merger finalised: American Airlines and US Airways have completed their long awaited merger to create the world's biggest airline. It follows AMR Corporation, the parent company of American Airlines, emerging from its 2011 bankruptcy filing. Shares in the new company soared after making their debut on the Nasdaq exchange under the stock symbol AAL. The merger had previously been blocked by the US Justice Department (DOJ) over concerns about competition in the sector. "Our people, our customers and the communities we serve around the world have been anticipating the arrival of the new American," said new boss Doug Parker. Mr Parker had previously been the head of US Airways. "We are taking the best of both US Airways and American Airlines to create a formidable competitor, better positioned to deliver for all of our stakeholders. We look forward to integrating our companies quickly and efficiently so the significant benefits of the merger can be realised." The two companies say they expect to save more than $1bn in synergies with the merger.

• PVH Q3 Earnings Rise 17.3%: Ongoing struggles with the Calvin Klein Jeans business didn’t stop PVH Corp. from beating Wall Street’s and its own expectations for third-quarter earnings. But the strength during the quarter didn’t translate into optimism about the holiday season. The New York-based apparel giant stuck with its full-year earnings guidance of $7 a share, implying fourth-quarter adjusted profits of $1.40 a diluted share, below analysts’ consensus estimate of $1.53. “Despite better-than-expected third-quarter results, we believe the current holiday season will be very competitive and highly promotional,” said Emanuel Chirico, chairman and chief executive officer. Net income for the three months ended Nov. 3 rose 17.3 percent to $196.6 million, or $2.37 a diluted share, from $167.7 million, or $2.27. Excluding a series of one-time items such as integration costs related to the February acquisition of Warnaco Group Inc. and a pretax loss of $19 million on the sale of the assets of Bass to G-III Apparel Group Ltd., adjusted earnings per share were $2.30, above Wall Street’s expectations for $2.24 and PVH’s guidance of $2.25. Revenues totaled $2.26 billion, 37.5 percent higher than the $1.64 billion recorded a year earlier.

• Joseph R. Gromek Named Tumi Chairman: Joseph R. Gromek, former president and chief executive officer of The Warnaco Group Inc., has become chairman of Tumi Holdings Inc. Gromek joined Tumi’s board as a director in April 2012 and succeeds Richard P. Hanson, who stepped down as chairman Monday. Hanson said, “I believe that the time is right for this transition given the company’s recent operating performance and continued excellent financial health. I am proud to have been part of Tumi’s success over [the] last few years and pleased to be passing the reins over to Joe. He continues to bring a wealth of industry knowledge and experience to Tumi, making him the ideal person to help guide the company forward.” Prior to joining Warnaco in 2003, Gromek was president and ceo of Brooks Brothers Inc. from 1996 to 2002. He retired from Warnaco, which is now part of PVH Corp., in February 2012. Gromek is also chairman of The New School, holds board seats at the Ronald McDonald House and the Stanley M. Procter Co., and is on the board of trustees at the Trevor Day School. Additionally, the Tumi board appointed Alexander W. Smith and Christopher Fielding as new board members, bringing the total number of directors to seven. Smith is the president and ceo of Pier 1 Imports Inc. and Fielding is a principal at private equity firm Doughty Hanson & Co.

• Sass & Bide Opens New York Store: Sass & Bide recently opened its first international store, a 2,000-square-foot flagship at 480 Broome Street in New York’s SoHo neighborhood. “It’s been a long time in the making,” said Heidi Middleton, creative director, speaking by telephone from Down Under. The company in September launched an international e-commerce site and identified a strong customer based in downtown Manhattan. The 70 million Australian dollar, or $63.9 million at current exchange, company offers a full range of women’s ready-to-wear and denim, as well as handbags, jewelry, footwear and innerwear. “We have 21 stores in Australia and New Zealand and concessions at Myer department stores,” she said. “It made sense to test the retail in our homeland. But there’s no point in expanding beyond the stores we have in Australia.” Middleton said the New York store is the first location in a planned expansion strategy. “We’re looking in a few markets,” she said. “It was instinctual to open the first store in New York. We also looked in L.A. We love the [SoHo] area and felt it had a great energy. Broome Street felt like a new pocket of SoHo that was starting to evolve. We love our neighbors there and the street seems to be growing a strong like-minded presence.” Middleton and cofounder Sarah-Jane Clark worked with Australian architecture and interior design firm Akin Creative and the design collective Guild is Good to transform the space. “I’m surrounded by a lot of nature in Sydney,” Middleton said. “I’m always sourcing inspiration from nature around me. The concept of the store is strength, beauty modernity and spirit. I wanted to have a beautiful blank clean canvas that could house different collections, moods and feelings.” A white sculpture provides interest and texture to the store. “I kept finding beautiful knotted driftwood,” Middleton said. “The idea was to superscale it and marry that collision of the natural and man-made worlds. We want to retain the designer feel of the brand and retail uniqueness.”

• Giambattista Valli to Open First Store in Italy: Giambattista Valli is landing here. The Italian designer will officially unveil his first store in his home country in February during Milan Fashion Week, preceded by a soft opening a month earlier.  Nestled in the courtyard of a historic building on Milan’s tony Via Sant’Andrea, between Via Montenapoleone and Via Spiga, the 1,400-square-foot space will carry Valli’s ready-to-wear and accessories, including handbags, shoes, jewelry and furs. “I had been looking for the right space for a long time,” said Valli, who enthused about the street and the positioning of the store. “It’s a privilege, it’s a more discreet, less institutional and less show-off location, and the fact that it’s in a courtyard also makes it very interesting.” Valli was born and raised in Rome, studied at Central Saint Martins in London, and after stints at Roberto Capucci, Fendi and Krizia, moved to Paris in 1997 where he worked with Emanuel Ungaro. In 2005, he launched his namesake collection, which he shows in Paris. Valli opened his first store in Paris in December 2010, followed by an accessories boutique there last September. “I wanted to open a store in Italy, after my two boutiques in the country I work in. The Milan venue is another Valli house, conceived as an apartment,” said the designer, who worked on the project with Luigi Scialanga, the architect in charge of the blueprints of Valli’s two Parisian units. There, the spaces are embellished with Yves Saint Laurent drawings, Fornasetti mirrors and furniture designed by Valli.

• New U.S. CEO to lead Uniqlo's major growth plan: Former Forever 21 executive Larry Meyer's recent appointment as Uniqlo's USA CEO won't bring a sea of change for the retailer that has set itself up as the opposite of fast fashion, but shoppers will likely see inventories change up more frequently, industry experts say. Meyer will lead as the retailer embarks on an aggressive U.S. expansion plan. "If Meyer can combine Uniqlo's unique formula with the real estate expertise that grounds fast fashion's biggest success stories, we could see Uniqlo in every mall in America," said Susan Scafidi, professor at the Fashion Law Institute.