News As We Read- 7th June'13

Thought of the Day:

Did you know?

Following made the Headlines:

India:

• Like the Heat, Rupee Keeps all Sweating at 57: A confluence of adverse domestic and global factors is threatening to push the Indian rupee to historic lows, making the import of crude oil and coal more expensive and aggravating the problems of an economy already battered by decade-low growth and poor investments. The currency breached the psychological level of 57 to the US dollar, making importers nervous. But the government and the Reserve Bank of India (RBI), which have made gold imports difficult to shore up the currency, appeared to be unmoved. “There is no cause for alarm on the Indian rupee, and capital flows are strong,” said Finance Minister P Chidambaram. “I think the rupee will stabilise and find its correct level,” he said. The flight of funds back to the US, where yields are rising, is weakening currencies across emerging markets, robbing India of the benefit of higher exports because of depreciation. Even China, which has an enormous trade surplus, unlike India that is suffering from high trade deficit, saw its currency yuan fall the most in a month. “I think there is still some more weakness left to play out in the rupee,” said Arvind Narayan, head of treasury at DBS.

• RIL Lines Up 1.5-L Cr Investment in 3 Years: Reliance Industries (RIL) plans to invest 1.5 lakh crore over the next three years, said Chairman Mukesh Ambani at the company’s 39th annual general meeting in Mumbai on Thursday. “Your company is investing the largest capital in India by any enterprise public or private, Indian or foreign. This is an expression of the faith of Reliance in India and in her potential. We are making these investments at a time when the global economy is facing one of its most challenging periods in modern times, we have the conviction to look through the cycle and make investments at this time,” he said. RIL is the country’s largest private sector company with business interests that span energy, petrochemicals, retail and telecom. Discussing the outlook on the company’s core oil and gas business in India, Ambani said, “We have now commenced our exploration campaign in the East Coast of India. Our first success has been achieved in the MJ1 well in KG-D6 block. Success that we now know has the potential to significantly add to our resource base.”

• Is Raj Kundra the New Shetty of IPL Thriller?: Raj Kundra, the co-owner of Rajasthan Royals team whose three players are in jail accused of spot fixing, has admitted to betting on his team, the Delhi Police chief has said, in a fresh twist to the scandal convulsing the Indian Premier League and Indian cricket. Delhi Police Commissioner Neeraj Kumar on Thursday said Kundra, a British-Indian businessman and the husband of actress Shilpa Shetty, had “confessed” to placing bets on his team’s performance during his questioning. However, Kumar told journalists the police had no evidence against Kundra and his confessional statement was not admissible in court. “Our case is about spot fixing and not gambling. There is no proof or indication yet that Kundra was influencing any player of his team to underperform and hence resorting to spot fixing,” Kumar said, adding the police has not booked Kundra because evidence against him was weak and booking him under the Gambling Act was pointless, since that would have entailed at most a small fine or a few months in jail with bail being granted at the police station itself.

• BlackBerry Launches Q10 in India at 44,990: Smartphones with a physical keyboard has always been one of the biggest strengths of BlackBerry. Leveraging on this strength, the company has launched its second smartphone running the BlackBerry 10 OS – BlackBerry Q10 in India with a physical keyboard. The new phone combines a 3.1-inch touchscreen with a wider and more ergonomic qwerty keyboard. It is powered by a dual core processor; 2GB RAM with 16GB internal storage and features an 8MP rear camera along with a 2,100mAh battery. BlackBerry has also worked on increasing the number of apps available for the new OS. In January, BlackBerry World launched with 70,000 apps which has increased to 1,20,000 now. Out of these, 70,000 apps are compatible with the new BlackBerry Q10 from the day of launch. BlackBerry India managing director Sunil Lalvani said that with the Q10 the company was targeting corporate customers and specifically those who were not comfortable moving to the full touch experience. “With Q10 we’re targeting the power user who uses a lot of email, BBM, browsing, texting etc and wants the qwerty experience and security. This is a very niche segment that is not price sensitive,” he said. BlackBerry will look to offer the Q5 for the price sensitive retail customers in India as the handset will cater to needs of college going youth and first time smartphone users. It will be priced less than the Q10.

• Cadbury Gets a Taste of Tough Times Despite Mondelez: Cadbury India, whose revenue growth has consistently outperformed the economy over the past few years, experienced the first hints of a slowdown in 2012, incidentally its first year under new parent Mondelez International. Its revenues increased 20.8% to 4,065 crore, the lowest growth rate since 2006 and a sharp deceleration from the 34.4% growth recorded in 2011. Profit after tax increased by 2.1% to 303.4 crore. This slowdown will be seen as a small setback to Mondelez International’s plans to rev up growth in emerging markets. Last week, CEO Irene Rosenfeld announced a plan to invest $600 million over three years in emerging markets, including China and India. She was speaking at the Citi 2013 Global Consumer Conference in New York last Wednesday. “The race is on for us to secure and expand our positions in these fast-growing markets. Our competitors also find emerging markets attractive… That’s why stepping up our investments now is critical to deliver long-term shareholder value,” she had said. Mondelez came into existence in October 2012, when grocery and snacks giant Kraft was split into two companies. Its international business, including Oreo cookies and Cadbury, was spun off and named Mondelez while most of the US assets remained in Kraft. Kraft had acquired Cadbury in January 2010. Cadbury India experienced a slowdown in sales and profit in 2012, despite launching legendary Swiss triangular chocolate brand Toblerone, as consumers cut back on discretionary products, many even trading pricier chocolates with lower priced candies and confectionery. The slowdown comes after two years of aggressive growth enabled by Kraft launching its global brands here through Cadbury India. Since 2010, the company has brought in three Kraft brands — biscuits with Oreo, fruit juices and beverages with Tang and premium chocolate Toblerone — helping post high sales growth of 30% and 35% in the initial two years. Oreo cookie clocked more than 200 crore in sales, stealing share from market leader Britannia in the cream segment. Toblerone already has over 2% share in modern trade within a year of its launch. Rosenfeld remained bullish on India during her presentation in New York arguing that Cadbury will be covering only a million of the seven million outlets that sell confectionary products even after increasing its reach by 1.5 lakh outlets this year.

• Amazon Eyes Local Partnerships: Amazon may be fighting tooth and nail with its brick-and-mortar counterparts such as Walmart and Tesco in the West, but in India it has laid the green carpet for Indian retail chains for its just-launched online marketplace. The world’s largest online retailer plans to enter into selling partnership with many leading retail chains, including Future Group, Shoppers Stop, Crossword, Viveks, UniverCell, Spencer’s Retail and Woodland, to sell their wares through the Amazon India marketplace. Several retailers confirmed to ET that they are keen to enter into a selling agreement with Amazon. “There is no significant or sizable online marketplace in India which Amazon will create and can become a significant sales channel for us,” says Spencer’s Retail CEO Mohit Kampani. Future Group’s Kishore Biyani said the Amazon marketplace constituted a good opportunity. “We will consider it. After all, we are merchants. We have to sell,’’ said its founder. A person familiar with the development said Reliance Retail has been approached by Amazon but added he wasn’t aware of the details. Amazon on Wednesday launched its global marketplace model in India as amazon.in, but the company has stayed away from directly selling any products to customers since Indian FDI regulations in multi-brand retail prohibits e-commerce trading in any form by foreign firms. Hence, Amazon wants to rope in top retailers by providing its platform as a sales channel for them.

• Flipkart stops goods delivery over 10k in UP: E-commerce dealer Flipkart has stopped delivering consignments worth more than Rs 10,000 to customers in Uttar Pradesh, including Noida and Ghaziabad in NCR. Insiders said there were many instances of customers ordering expensive goods on the cash-on-delivery scheme and then refusing to accept the orders, causing loss to firms selling products through the site. There have also been cases of fraud in which lost or stolen credit cards were used to book orders online. According to sources, many people from the state logged on to Flipkart and ordered “just for fun”.

International:

• Markets fall on EU and US worries: Stock markets in Europe and the US have dropped to their lowest levels in six weeks. Investors focused on disappointing EU data as well as questions over whether the US Federal Reserve would cut back on its stimulus programme. Better-than-expected growth in the UK service sector was not enough to stop the FTSE 100 falling. The index of blue chip shares closed down over 2%, mirroring similar falls in France and Germany. The world's stock markets have been closely tracking comments from the US for clues as to when the country's central bank might start to rein in its bond buying programme. The Fed is currently buying $85bn (£55bn) of bonds a month, and has said it will continue to do so until the US unemployment rate falls back. The programme, together with other stimulus action by central banks, has been cited as the major reason for the recent rise on shares over the past few months. Any sign that the Fed is set to scale back the bond buying tends to lead to a share sell-off.

• Latvia to become 18th eurozone member from 2014: Latvia will become the 18th country to use the euro after being approved for membership by the European Commission. In a report, the Commission confirmed that the Baltic state had met the criteria for joining the single currency. Latvia is keen to strengthen ties with western Europe and reduce its dependency on Russia. Officials said the eurozone had defied those who predicted it would collapse under the sovereign debt crisis.

• American Eagle Makes Retail Push in Mexico: American Eagle Outfitters Inc. opened its third store in Mexico today in Guadalajara, less than one week after opening its second store in that country in the Santa Fe district of Mexico City, where the Santa Fe mall is the third largest in Latin America. The plan is to have six stores in Mexico by yearend, according to Simon Nankervis, senior vice president, Americas and global country licensing. The first store opened in Mexico City in January. The stores will include an aerie presence either as a shop-in-shop or a side-by-side format. “Mexico has been a phenomenal business for us. We have over 1.5 million Facebook fans. When we enter a market [where the stores are] company owned, we launch our direct-to-consumer business first, then our brick-and-mortar store,” Nankervis said. In addition to the three stores planned for later this year, the company has inked deals for two store sites for next year in Mexico. Nankervis said the market can support 40 to 50 American Eagle stores, which will be opened over the next three to four years provided the global economic backdrop remains stable. In Latin America, the biggest market opportunity is in Mexico, largely because the country has the largest population and is the most developed in the region. There are also opportunities in Colombia, Panama and Brazil, according to Nankervis. He said “Brazil is one of the biggest for growth potential; it’s a matter of timing,” explaining that right now customs and import duties require companies to work with different business models, such as a joint venture or licensing to enable scalability. How fast the Brazilian market can develop will depend on what “approach the Brazilian government takes to become a global player,” Nankervis said. The licensing model is used in Japan, the Philippines, Israel and Poland, with deals structured for either five, seven or 10 years. The joint venture model has greater potential for India and Brazil due to the size and scope of the local markets, Nankervis said. American Eagle is also in China, where it owns and operates its stores. While U.S. stores can be more than 7,000 square feet on average, the overseas stores have a wider square-footage range. Three in Japan are more than 7,000 square feet and three are under that size. Some stores in Israel are as small as 4,000 square feet. The store concept is adjusted to fit the particular space range and still maintain the same shopping experience.

• Kering to Focus on Organic Growth: Kering managing director Jean-Francois Palus said Thursday that the Frenchluxury goods group is focusing on organic growth of its existing labels but it might pursue smaller acquisitions if the right opportunities present themselves. "We are going to calm down with the acquisitions but again, some of them could come to complement [the group's portfolio]," the executive in Tokyo at a briefing on the company's strategy in light of its name change from PPR to Kering. But he went on to say that these potential purchases would be considered small or "not so meaningful" considering the size of the group's other assets. Kering has made several acquisitions recently including Christopher Kane, Pomellato, Brioni and Chinese jeweler Qeelin. Palus said Kering, which owns brands such as Gucci, Saint Laurent and Bottega Veneta, is more interested in brands with global potential rather than provenance. The executive said the company found this characteristic in Qeelin, which will open at least one store in Japan while continuing to target Chinese consumers. "A non-European brand, of course, Japanese, Chinese, Brazilian, American, African, could be of interest," he said. Echoing recent comments from other executives, Palus said the Japanese luxury market has gained a newfound momentum. In particular, he noted that younger consumers are shopping more and Kering's brands have adapted their products in terms of fit and style to appeal to Japanese consumers and encourage them to trade up from small leather goods to handbags, ready-to-wear and shoes. Kering's luxury division saw its first-quarter sales in Japan rise 10 percent in constant currency terms. As for the yen's weakness, he said Kering will look at its pricing strategy but it will also leverage its merchandising and product mix to help offset the currency effect. "The pricing of the product maybe one of the answers to the situation but this will not be the only one," he said. In terms of a slowdown in the Chinese market for luxury goods, Palus acknowledged that dynamics there are changing as consumers become more sophisticated and demanding. Kering needs to pay close attention to pricing, consumer service and product assortment to lure shoppers, he said. "Fortuitously enough, we have various degrees of maturity for our brands and some of them are just accessing the Chinese market, whereas others have been in China for a decade," he said. "All of our brands are enjoying good growth in China."

• Li & Fung Wins Over $1.7M in Legal Dispute: Li & Fung LTD. has scored a six-figure judgment against Contemporary Streetwear LLC, a New York-based apparel supplier, which failed to pay the sourcing giant for orders it made for the company from 2009 to 2011. On Thursday, New York Southern District Magistrate Judge Debra Freeman awarded the Hong Kong-based firm $1.7 million in compensatory damages. This does not include a pre-judgment interest rate of 9 percent a year that will be calculated by the court. In the lawsuit, which was filed in New York federal court in 2011, Li & Fung claimed that Contemporary Streetwear “refused to pay” three years of invoices and that it “indicated no intent to pay” the invoices that were “outstanding but have not yet become due.” Initially, Li & Fung was looking for $5.1 million in damages, but it also cited in its complaint a host of unpaid orders that it delivered from October 2010 to February 2011, which amounted to $1.7 million. In the complaint, Li & Fung referenced a deal meant to “induce” it to remain Contemporary Streetwear’s primary buying agent. According to court papers, the contract stipulated that Contemporary Streetwear would “assume the obligations” of its licensee Icer Brands, also known as Cavi Juniors, if Li & Fung dropped its claims against Icer. After releasing the legal claims, Contemporary Streetwear said it would pay $48,000 for sample charges, take possession of Icer’s inventory worth “at least $94,307.50” and sell it in order to pay the Hong Kong firm, but according to the lawsuit, the defendant never sent Li & Fung any of the proceeds related to the sale of the inventory. These figures were folded into Thursday’s $1.7 million award, according to court papers. Freeman’s monetary award follows last year’s order for summary judgment by New York District Court Judge Colleen McMahon, who presided over the case. In her judgment, McMahon cited Contemporary Streetwear’s refusal to cooperate during the discovery phase of the litigation. She then sent the case to Freeman to mull over damages.

• Kristen Blum Departs as J.C. Penney's Chief Technology Officer: Kristen Blum, chief technology officer and executive vice president of J.C. Penney Co. Inc., has resigned. She had been responsible for the retailer’s jcp.com business and information technology systems. Prior to joining Penney’s in January 2012, Blum was with PepsiCo as senior vice president and chief information officer of enterprise transformation. Earlier she was Abercrombie & Fitch Co.’s senior vice president and chief information officer, and before that served as Apple Inc.’s director of supply chain solutions and international retail. Neither Blum nor Penney’s officials could be reached for comment Thursday.