Daily News Digest- 19th Dec'13

Thought of the Day:

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Following made the Headlines:

India:

• After 46 years, India finally has a Lokpal: After a 46-year wait, India is set to get a Lokpal after the Lok Sabha on Wednesday took barely an hour to pass the landmark legislation to create a powerful anti-corruption ombudsman amid sustained disruptions by anti-Telangana MPs. Congress chief Sonia Gandhi introduced a note of urgency in the proceedings right at the start, crisply asking law minister Kapil Sibal to “keep it short” as he referred to prolonged discussions that preceded the bill.  Disturbances in the House seemed to weigh on Lok Sabha Speaker Meira Kumar who guillotined the debate and swiftly put amendments to the Lokpal bill passed by the Rajya Sabha on Tuesday to vote and declared the legislation as passed. After eight failed attempts to pass a Lokpal bill in the past, Parliament finally gave its seal of approval to a powerful ombudsman. The bill has been drafted and redrafted by two parliamentary committees and now enjoys strong bi-partisan support. The Lokpal will be empowered to probe complaints against the highest political authorities, including the PM.

• USA Draws Big Fire from United State of India: The goodwill enjoyed by the United States in India continued to erode sharply as lawmakers across the political divide came together in Parliament to condemn the hostile treatment of an Indian diplomat who was arrested in New York even as India said it suspected a “conspiracy” in the entire affair. Prime Minister Manmohan Singh termed the incident “deplorable” and External Affairs Minister Salman Khurshid said his ministry would bring back the affected diplomat, now out on bail facing charges of visa fraud, at any cost. “Today, our paramount concern, interest and determination are to be able to intervene effectively and specifically to ensure the dignity of our officer is absolutely preserved,” Khurshid said in the Lok Sabha. “This is an attack on the dignity of the nation, the dignity of India’s womanhood,” the minister added. India’s deputy consul general in New York, Devyani Khobragade, was arrested in New York on Friday on charges of visa fraud and making false statements. The news that she was handcuffed in public, subjected to stripsearch and cavity search and detained in a cell with hardened criminals, has led to widespread public outrage in India.

• Indian Hotels Increases Room Rent by 8-10%: The Indian Hotels Co on Wednesday said it increased the average room rent (ARR) by 8%- 10% for the October 2013-September 2014 season to protect margins. “The hotel industry is looking forward to increase in ARR. We have also revised our rates by 8%-10% on an average for the upcoming season contracts,” IHCL Senior VP (sales and marketing) Deepa Misra Harris said here. “For the last two years, we have been able to maintain average room rentals. However, the margins are getting slimmer at the current levels (of rent). So, if we are to maintain the margins we need to increase the average room rentals,” she said.

• Flipkart’s Customer-facing End of PayZippy Launched: E-commerce major Flipkart on Wednesday announced launch of PayZippy’s customer-facing product for online consumers. This lets customers enjoy a faster, smoother and safer online payment experience across a range of merchants, it added. Earlier this year, Flipkart launched its own payment gateway PayZippy, under a separate firm Flipkart Payment Gateway Services (FPGS) Pvt Ltd, and started with payment solutions to merchants.

• Being Constructively Discontent- Muhtar Kent: Capitalism, in the form we know it, is passé. And none other than Muhtar Kent, the high priest of the definitive company of capitalism, Coca-Cola, acknowledges that. In an exclusive interview to ET, the 61-year-old chairman and CEO of The Coca-Cola Company argued it is necessary to remain constructively discontent, talked about how he transformed Coke’s senior leadership by empowering women, and shared the India view from the beverage company’s headquarters in Atlanta. Armed with an MBA from Cass Business School, London, the Turkish-American Muhtar Kent started out in the $48-billion Coca-Cola back in 1978 as a delivery hand on trucks across Georgia, Texas, Massachusetts and California. That proved invaluable during his rise to the top. “To start a career from the very first step is always an advantage as it ensures you know and understand those all-important places where money changes hands billions of times each day for our products,” says Kent. What separates Kent from a slew of his predecessors after the iconic Roberto Goizueta’s tenure (1981-1997), is his long-term approach on a range of issues. After coming to the helm in 2008, he was taken aback by the global beverage major’s insularity and lack of vision. As a first measure, he drew up the ‘2020 Vision’ for the company and its bottling partners, which chalks out a roadmap for doubling Coke’s business in 10 years. “It’s not something for the fainthearted, but something clearly do-able. It has made us stronger and, frankly, a more focused competitor,” admits Kent. Besides, he has championed women’s empowerment to such an extent that today nearly 30% of Coca-Cola’s senior leadership are women. His logic that women are pillars of his business is unquestionable since “they control $20 trillion in spending worldwide, representing an economic impact larger than the US, China and India combined”. In 2007, The Coca-Cola Company created the Global Women’s Initiative — a strategic plan with the primary objective of accelerating the development and movement of female talent into roles of increasing responsibility and influence within the Coca-Cola system. Additionally, the ‘5by20’ initiative aims to economically empower 5 million women across Coca-Cola’s supply chain worldwide by the year 2020 through business skills training and financial services. “This programme works because we know if you economically empower women, you lift the livelihood of an entire community.” Empowerment of women aside, Kent’s mantra for his people is to remain “constructively discontent” and shed the hubris that comes with a brand sporting a 128-year legacy. “Coca-Cola is the only business in the world where no matter which country or town or village you are in, if someone asks what do you do and you say you work for Coca-Cola, you never have to answer the question, ‘What is that?’ Our brand is so pervasive that it’s easy for people to become arrogant because there’s an aura around it,” he explains. Kent’s restless energy rubs off online as well, especially on social media. In 2006, social media was a mere 3% of Coke’s total media spend and today, it is upward of 30%. “The social media scene is exploding and gone are the days when you simply needed to create impressions about your brands with consumers… Now it’s all about expressions — communicating in a dialogue with consumers to meet their expectations,” says Kent, taking pride in the Coca-Cola Facebook page, which has more than 76 million ‘likes’. “Consumers no longer want only a great product — they want to buy products from companies that align with their own character and values.” Does such pro-consumerism sound the death-knell for capitalism? It’s time the economic system reinvented itself, contends Kent, who believes the “golden triangle” of business, government and civil society must address deep social, economic and environmental issues.

• Indian IT Firms Shore Up US Retailers Online: Indian technology outsourcers such as Cognizant, Wipro, Infosys and Mindtree are helping retailers in the United States cope with the peak holiday season shopping rush and ensure their shopping portals and systems stay robust, three months after surging traffic crashed the US federal healthcare insurance website leaving many unable to log on. The holiday season, starting from Thanksgiving in the last week of November and going up to New Year’s eve on December 31, is crucial for retailers, accounting for about 30-40% of their annual sales, said firms. Any downtime in the shopping portals during this period could result in substantial losses and long-term damage to their image and perception. The period could represent about 30% of sales revenue and nearly 40% of profit for retailers, said Sandilya Gopalan, vice-president, Cognizant Business Consulting, which supports 14 of the top 30 US retailers and 11 of the top 30 global retailers, and over 30,000 stores during the shopping season. “The peak shopping frenzy is not new. But a significant increase in peak sales and selling channels, coupled with a potpourri of IT systems that may or may not have scaled in line with business and operational complexity, and higher customer expectations make it a humongous challenge to ensure a smooth period,” he said. The risk is greater these days because of channel proliferation, he added. The downtime can affect both stores as well as online channels. For instance, any glitch in point-of-sale systems can annoy customers driving them to shop elsewhere. Similarly, even if the website does not crash, slow response time can push customers towards competing websites. “This (online retail) is an emerging domain for Indian IT firms,” said Pradeep Mukherji, head of outsourcing advisory firm Avasant’s Asia operations. He said after the recent disruption of the Obamacare website due to a large amount of web traffic, managing excess load on e-commerce sites had become an area of focus. “Many retailers see visitor traffic going up exponentially online, 20-100 times compared with a normal day,” said Radha R, senior vice-president at Mindtree, which is currently working with more than 15 retailers. There have been many instances in the past of the retailer’s website going down due to increased load, resulting in lost sales and bad press. As a precautionary step, retailers are performing a rigorous check on their operational effectiveness and their ecommerce site scalability and availability to handle the increased traffic, she said. While Mindtree expects the full picture to emerge in January after the shopping season ends, early trends show that there is a slight downtrend in store retailing but online sales are increasing, she said. Companies, such as Mindtree and Wipro, began preparations for the holiday rush by doing trial runs as early as August. “We have been working with our key customers in retail to ensure their systems work fine during the peak season,” said Bhanumurthy BM, senior vice-president and global head (application services and strategic alliances).

• Tesco Plc’s Multi-Brand FDI Proposal Put On Fast Track: The government has put the first foreign direct investment proposal in multi-brand retail, after the policy was liberalised last year, on the fast track to send a strong signal that India is keen on attracting overseas investment. The Foreign Investment Promotion Board (FIPB) is likely to take up Tesco Plc’s proposal at its next meeting, which is expected to be held on December 26. Tesco, the UK’s largest retailer, wants to acquire a 50% stake in Tata-owned Trent Hypermarkets. The Department of Industrial Policy & Promotion (DIPP), the nodal department for FDI policy, is expected to send the proposal to FIPB shortly, a senior government official said, adding that the Tesco plan is in line with the terms of the policy. Among other things, this mandates 50% of investment should be in back-end infrastructure, a condition Tesco is set to meet as it’s injecting funds into its joint venture with Tata group’s Trent that will go towards expanding operations in Maharashtra and Karnataka. After a close scrutiny by the DIPP, it is unlikely that the proposal will face any procedural hiccups. The United Progressive Alliance government opened up the multi-brand retail sector in September 2012 amid stiff resistance that threatened to bring it down, but stringent policy conditions and lack of political support for reforms have discouraged investors. Only 12 states and union territories have so far allowed FDI in multi-brand retail. The world’s biggest retailer Wal-Mart Inc has already put its India plans on hold, citing its inability to meet the norm that calls for mandatory 30% sourcing from small firms as one of the factors. The policy also mandates that FDI-funded stores can only be opened in cities with a population of more than 1 million or in areas where states give special permission for such outlets. Wal-Mart has acquired Bharti Group’s 50% stake in their wholesale joint venture after deciding that it wouldn’t get into multi-brand retailing for a while. Several Indian policymakers, including commerce and industry minister Anand Sharma and finance minister P Chidambaram, have said before that the country would get its first multi-brand retail investment before the year-end. India had pulled out all the stops in its attempt to attract stable foreign direct investment to fund its record high current account deficit that touched 4.8% of gross domestic product last year. The UPA government was very keen to see foreign investment in the multi-brand sector after having put its existence at stake to ensure that the policy was put in place.

• ‘Action on Walmart if US Probe Finds Violation’: The government has said it will initiate fresh action against American retailer Walmart if an ongoing probe by the United States authorities reveals any violation by the company in India. In an ‘action taken report’ on the probe into Walmart’s lobbying activities, tabled in Rajya Sabha on Wednesday along with a 438-page inquiry report, the government said it was “continuously monitoring” developments in the US with regard to such lobbying activities and an ongoing investigation into bribery charges against the company. The government had in January appointed a one-man committee headed by Justice Mukul Mudgal, former Chief Justice of Panjab & Haryana High Court, to look into reports of lobbying by Walmart. The committee submitted its report to the government in May. The report was “inconclusive” due to the lack of material evidence available on record which could prove that Walmart lobbied Indian officials. However, it suggested further investigation depending on the disclosures that are likely to be made in the US by the company. The external affairs ministry is monitoring the developments through the Indian embassy, as the probe panel suggested. According to the report, the Enforcement Directorate is conducting an investigation into the issue of foreign direct investment through automatic route by Walmart in Cedar Support Services “involving alleged violation of Foreign Exchange Management Act 1999 and other applicable laws and guidelines”. The developments are being monitored so that “appropriate action could be initiated as and when relevant information becomes available at a future date or the results of any ongoing investigation under USFCPA (US Foreign Corrupt Practices Act) reveals commission of any offence under Indian law”, the report says. Regarding the inquiry panel’s observation that definition of ‘group company’ was absent in the FDI guidelines, the government has said in the report that the Department of Industrial Policy and Promotion has notified a definition of the term under the guidelines.

• Micromax and MTS join hands to launch smartphone Canvas Blaze for Rs 10,999: India's largest home-grown mobile phone maker Micromax said Wednesday that it will introduce a range of co-developed smartphones to provide high speed data services together with Sistema Shyam Teleservices Ltd that offers mobile phone services under the MTS brand. The duo launched Canvas Blaze 3G Android smartphone with 5-inch touchscreen, 8 mega pixel rear camera and dual sim, priced at Rs 10,999 on Tuesday. Canvas Blaze comes with introductory offer of free data and voice benefits for six months to its consumers. "This smartphone will help consumers enjoy the 3G EVDO network of MTS while retaining their GSM number. Supported by strong distribution channel and retail presence of both the companies, out aim is to catalyze the mobile internet penetration in the country," said Micromax co-founder Vikas Jain. Micromax has 10.1% market share in the smartphone mobile handset business while MTS is a new service provider on the CDMA platform. The Canvas Blaze will be available across all retail outlets in India from December 16.

International:

• Lupin Launches Generic Version of HIV Drug in US: Drug major Lupin on Wednesday said it has launched the generic version of ViiV Healthcare’s (ViiV) Trizivir tablets in the US market with 180-days of marketing exclusivity. The company said its US subsidiary Lupin Pharmaceuticals has launched Abacavir Sulfate, Lamivudine, and Zidovudine tablets in the US market after the US District Court for the District of Delaware ruled that Lupin’s generic version of Trizivir did not infringe on patents, Lupin said in a statement. The Mumbai headquartered firm had earlier received approval from the US Food and Drug Administration for the same. 

• SABMiller announces death of its chairman: SABMiller, one of the world's biggest brewers, says its chairman, Graham Mackay has died after suffering from a brain tumor. The 64-year old Mackay helped lead the company through some of its most dramatic recent moments as it moved from its South African roots to become a massive global player with operations in 75 countries. He became chief executive of South African Breweries Plc upon its listing on the London Stock Exchange in 1999. He led SABMiller's global expansion, including the acquisition of Miller Brewing Company in the United States and the subsequent re-naming of it as SABMiller plc. He also was instrumental in the joint venture between SABMiller and Molson Coors in 2008; and the acquisition of Foster's in Australia, 2011. John Manser was named chairman Wednesday.

• Bitcoin sinks after China restricts yuan exchanges: Bitcoin has fallen to less than half the value it recently traded for, following reports of fresh action by Beijing to restrict trade in the virtual currency. BTC China has said that local payment companies have been blocked from providing it with clearing services. It means that the firm - the world's biggest Bitcoin exchange in terms of trading volumes - can no longer accept yuan-based deposits. Prices tumbled following the news. One bitcoin was trading for as low as 2,560 yuan ($421, £258), according to the South China Morning Post.

• Salvatore Ferragamo Awarded $4.3M in Online Counterfeit Case: Salvatore Ferragamo was awarded $4.3 million by a Manhattan federal court in connection with the luxury brand’s fight against counterfeiting. The lawsuit was filed in January against 15 defendants who were holding a total of 95 domain names that infringed upon the Ferragamo trademark and sold counterfeit goods. Earlier this year, the Manhattan federal court overseeing the lawsuit had ordered the transfer of the domain names, such as FerragamoBagSale.com, FerragamoSingapore2012.com and FerragamoOnlineStore.com, to Ferragamo and had shut down the Web sites. Ferruccio Ferragamo, chairman of the Salvatore Ferragamo Group, said, “Our company is committed to protecting our brand and contributing to the fight against counterfeiting, which for many years has beleaguered the world’s most prestigious fashion and luxury brands. The Internet has now become a leading channel for traffickers of counterfeit goods, and is now the central focus of the recent lawsuits filed by our group, historically one of the most affected by this crime.”

• Acquisition Costs Lead Neiman Marcus to Loss: This could be Neiman’s moment. Defying critics who say it’s a no-growth proposition, the Neiman Marcus Group Ltd. LLC on Wednesday laid out a shopping list of strategies to grab market share, following the release of its fiscal first-quarter earnings report, which was skewed by acquisition costs. With the purchase by Ares Management LLC and Canada Pension Plan Investment Board finally done, Neiman’s executives are back focused on growth strategies. They’re also sensing that luxury customers are feeling financially healthier, and the firm is champing at elevated prospects for picking up talent and building brand relationships due to the transformational state of arch rival Saks Fifth Avenue. Last month, Hudson’s Bay Co. closed on its $2.9 billion deal to buy Saks, which is now being integrated and streamlined, in a disruptive period involving layoffs and cultural shifts. “As one of our major competitors is going through the changes there could be very well be some opportunities for us on a number of fronts,” Karen Katz, Neiman’s president and chief executive officer, told WWD in an interview. “Obviously, our relationships with our brands we take very seriously and we treat them very respectfully. We are in constant discussion with them on a one-on-one basis. We always are. That’s part of our DNA. We are always looking for who is new.” The Bergdorf Goodman division of NMG recently scored wholesale exclusives on Berluti men’s wear and Goyard men’s leather goods. “We are going to continue to work on those kind of things,” Katz said. There is speculation that Neiman’s could be loosening up on its policy to exclude leased shops from its selling floors. Designer brands, as well as Saks, Bloomingdale’s and Macy’s, have been increasingly embracing the model that is prevalent in Europe. Neiman’s does have Louis Vuitton leased shops, an exception to the store’s policy. Prada is also sold, though at Bergdorf’s it’s considered a hybrid arrangement, and not a traditional wholesale or leased situation.

• Bon-Ton's Mike Nemoir to Retire: Mike Nemoir, a men’s wear fixture at The Bon-Ton Stores Inc. and its predecessor companies for more than four decades, will retire on March 28. The senior vice president and general merchandise manager of men’s and home has been with the company for 45 years, starting his career in the Milwaukee offices of the Boston Store on Sept. 9, 1968 as a trainee assistant buyer after graduating from Marquette University. Over the course of his career, Nemoir has been sales area manager, buyer, divisional sales manager and divisional merchandise manager; he was named gmm in 1995. Over the years, the company has gone through six ownership and name changes but Nemoir said that despite all the “acquisitions, sales and purges, I’ve survived and never left the building.” Over the years, the business has also operated under the names PA Bergner, Carson Pirie Scott, Proffitt’s, Saks Inc. and then Bon-Ton, which acquired the company in 2006. Brendan Hoffman, chief executive officer of Bon-Ton, recalled that when he joined the company in early 2012 and did a “roundtable” with the staff, “Mike said he’d been with the company longer than I’d been alive. Well, I had him by two months,” he said. Hoffman called Nemoir a “fixture” and “a pleasant guy to be around,” and someone “the market rallied around.” He said that since Nemoir gave the company over three months notice of his departure, Bon-Ton will take some time to decide on a replacement. “There are some good internal candidates and we’ll most likely go that route,” he said. “Mike has done a good job mentoring people.” He said he may decide to split the merchandising for men’s and home, but that has not been determined. “We just have to get through this holiday season first,” Hoffman said. Nemoir said he expects to spend time with his three children and eight grandchildren upon his retirement and will also travel, first to Scotland and Italy in 2014 and then Australia and New Zealand in 2015. Will he miss retailing? “I’m not sure I’ll miss the business, but people is what really make a business thrive, and I will miss the people.”