News As We Read- 24th June'13

Thought of the Day:

Did you know?

Following made the Headlines:

India:

• Search Over, Google Still Best Workplace: Flying in from all corners of the country, braving monsoon rains and traffic jams in Mumbai, the HR chiefs and CEOs of leading companies queued up at a suburban hotel last Friday, with one question in mind: How had they fared in the coveted list— India’s Best Companies To Work For. Given that India Inc is in the throes of a slowdown, talent management has become crucial as industries marshal resources against the tough times. So this year’s The Economic Times and The Great Place To Work Institute study had special importance. For some years, the study has provided the industry with a much-needed barometer to judge how companies fare on the people front. The 2013 study, one of the largest in the world, covered 550 companies spanning 22 industries, surveying 98,998 employees. So it was but natural for the 60 CEOs and some 300 HR chiefs to wait with bated breath as the list was read out. In the end it was Google which once again took the top honour of being the best workplace in India. Intel, too, retained its No. 2 spot while American Express came in third.

• Raymond to Split Media and Creative Accounts: Textiles, cosmetics and auto components maker Raymond is splitting its media buying and creative accounts into separate agencies in a first such move for the firm, as it looks to step up the game in an increasingly competitive and fragmented market. The overall account, estimated at close to 100 crore, which includes apparel brands Raymond, ColorPlus, Park Avenue and Parx, cosmetics, engineering tools, auto components and condoms, will move to Madison Media, starting next month. The creative work will continue to be held by agencies RK Swamy BBDO and McCann Erickson. RK Swamy had been the creative and media agency of brand Raymond for over a decade.  Mrinmoy Mukherjee, director, marketing & business development, retail, at Raymond, said all group brands including Raymond, Parx and Park Avenue among others, will move to the Sam Balsara-promoted Madison starting next month. “The audience today is subject to a diverse and complex media environment and we have been looking for a specialist agency,” Mukherjee said. He added that there was no immediate plan to call for a pitch for creative agencies. Madison Media group CEO Gautam Kiyawat said the entire business, including traditional media, out-of-home and digital would be handled by the agency. While the Park Avenue range grouped under JK Helene Curtis includes fragrances, body care and shaving products and beer shampoo, Kamasutra under JK Ansell includes condoms, energy drink and fragrances. Five agencies, including Group M, Lodestar and the incumbent RK Swamy are learnt to have pitched for the media account. Raymond had consolidated all its media planning and buying with the RK Swamy’s media group over two years back.  The Clothing Manufacturers Association of India (CMAI) estimates that the readymade garments industry, excluding exports, will double to 4 lakh crore over the next five years, triggered by the removal of excise duty, brand awareness and higher consumption from tier-II and tier-III towns and cities. The unorganised sector accounts for more than half this market.

• Airtel to Cut 4G Charges 31% Today: Bharti Airtel will cut 4G data charges by 31% on Monday in an aggressive bid to boost mass appetite for fourth-generation wireless broadband services and also make life more difficult for future challengers. Skeptics, however, wonder if the move to offer 4G services at 3G rates will actually translate into higher data usage or help expand its modest 4G subscriber base. The move comes barely a week after India’s biggest mobile phone company by customers and revenue cut 2G data charges by nearly 90% to shore up data usage and spur revenue streams. It also comes at a time when the Sunil Mittal-founded telco has been adding fewer customers than closest rivals, Vodafone and Idea Cellular over the past two months. A top company executive said, “Airtel will offer 4G speeds at 3G pricepoints to make fourth generation wireless broadband services more affordable and stiffen the challenge for new competition,” without naming Mukesh Ambani’s Reliance Jio Infocomm, which is slated to roll out 4G services nationally in a year. Bharti Airtel will lower its base 4G data plan from 650 to 450 to offer “more value” to customers in Kolkata, Bangalore, Pune and Chandigarh where it runs fourth generation wireless broadband services. Under the revised data tariff plan, entry-level customers will be allowed 2GB, 3GB and 4GB of free data usage at faster 4G speeds at 3G data charges of 450, 650 and 750 a month respectively. But they won’t have access to Bharti’s 4G entertainment library services, which will be reserved for customers on higher data plans, from 999 and above.

• HBO Deal will Add to Eros Earnings: The recent tie-up of Eros International Media with premium channel HBO to launch two new movies channels, HBO Defined and HBO Hits, will help it reduce its dependence on highly unpredictable revenue streams. The launch of these channels, when viewed in light of the rapid digitisation of the media industry (over 90% in most metros), offers high revenue visibility to the company given the huge scope of revenues in the pay TV market in India and its key differentiating features from other movie channels. India’s movie channel segment is dotted with a large number of movie channels, with huge entry barriers for any new player, making it difficult to achieve breakeven. Eros now has a library of over 1,000 films, while HBO, along with its library of films, has a presence in 50 countries with an average market share of 25%. Through monetisation of these films, Eros should be in a position to earn revenues consistently in the next few years. This will enable its channel to break even earlier than its peers. Unlike most movie channels, which have advertisements, these two channels are free of advertisements. The revenue stream for these channels will primarily be based on subscription. According to a KPMG analysis, India’s pay TV market will grow from 111 million in 2011 to 170 million in 2016. This provides ample scope for the Eros-HBO venture to tap into this market. It also helps that these channels are available with audio sync in multiple languages. In the last two years, the market share of American films in India has risen from 4% to close to 7.5% thanks to many American movies being dubbed in Hindi. These two channels will have 70% American content and 30% Indian, with HBO Define focusing more on meaningful cinema and HBO Hits on commercial films.

• Govt may scrap SEZ Policy: Plagued by a series of controversies and scams, it seems, the government is finally planning to do away with the Special Economic Zone (SEZ) programme it had launched in 2006 with much fanfare. While the existing SEZs will continue to remain operational, those approved might not be notified and developers be allowed to utilise the land for other purposes. The commerce ministry has asked the Export Promotion Council for EoUs and SEZs (EPCES) to commission a study to Icrier to find if SEZs have met the economic objectives for which the programme was rolled out. It has been given six months for the study. Ministry officials told Business Standard this had been done to end the turf war between the commerce and finance ministries, as the latter believed some numbers given out by the former on exports, investments and jobs in SEZs were exaggerated. “There has always been some tension between the two ministries over the success of SEZs. So, we are doing a study by a neutral organisation on whether it has been able to measure up to its objectives. Else, we see no point in continuing with this scheme and giving them tax subsidies,” said a senior commerce department official. The objective of the study was to find if the economic goals had been met, said PC Nambiar, director of the Pune- based Serum Biopharma Park ( the country’s first biotech SEZ), and the chairman of EPCES. “The finance ministry feels those have not been met,” he said. It seemed the commerce ministry was also keen to do away with the policy so that it could promote the National Manufacturing and Investment Zones (NMIZ), under the National Manufacturing Policy, officials indicated. It was the Minimum Alternate Tax, imposed on both developers and units from 2011- 12 onwards that took away the interest of companies in SEZs. Additionally, a dividend distribution tax (DDT) was imposed on developers. However, existing SEZs were reported to be doing quite well. This raised the finance ministry’s apprehensions. According to the latest data, exports from SEZs rose almost 30 per cent to $ 88 billion in 2012- 13, from $68 billion the previous year. These were up 17 per cent in 2011- 12, compared with $ 58 billion a year before. These are quite impressive numbers, given that the country’s total exports fell 1.76 per cent to $300.6 billion in 2012- 13. It means exports from SEZs accounted for 29 per cent of total exports in 2012- 13. Total investments in SEZs rose to $ 44 billion in 2012- 13, compared with $ 43 billion the previous year. As of March 31, SEZs had generated 1,074,904 jobs. The government has so far formally approved 577 SEZs, of which 389 are notified. At present, 170 operate across India. The Parliamentary standing committees on both commerce and finance have been opposing the policy. It has often been said that SEZs have led to large- scale realty scams, offering developers the opportunity to make quick money while enjoying tax exemption.

• Sharma to meet heads of global retail chains: The list of international retail chains invited for an open house with Commerce and Industry Minister Anand Sharma this Thursday seems to suggest there are at least four more American groups, apart from Walmart, that have shown interest in the Indian market. Also, from Germany, there are two others, besides the already present Metro Cash & Carry, which might have made enquiries on the Indian retail business. For a meeting called by Sharma to clarify issues related to the multibrand retail policy, announced in September 2012, heads of 11 foreign chains and 10 Indian companies have been sent the invites, it is learnt. The $ 90- billion American grocery chain The Kroger Company is among those called for discussions on the policy, which permits up to 51 per cent foreign direct investment (FDI) in multi- brand retail. Traded on the New York Stock Exchange (NYSE), Kroger has 3,000 stores in the US. Another American group, Costco Wholesale Corporation, a membership- only warehouse club, is expected to send arepresentative for the meeting. Listed on Nasdaq, Costco, a competitor to Walmart’s Sam’s Club, operates 600 stores across the US, the UK, Australia, Canada, Mexico, Taiwan, South Korea and Japan. The other two American chains, not present in India but invited, are Walgreens or The Walgreen Company, the largest drug retailing group in the US, and The Home Depot, which is into home improvement and construction products and services. With its shares traded on NYSE and Nasdaq, the $ 71- billion Walgreens runs 8,000 drugstores in America. The NYSE- listed $ 70- billion Home Depot is the largest home improvement retailer in the US. Schwarz and Aldi are the German retailers invited. Schwarz Unternehmens Treuhand, a privately held global discount supermarket chain with revenue of € 60 billion, operates 10,000 stores across Europe. Aldi is a close competitor with revenues of € 53 billion. Representatives of French supermarket chain Auchan, in India through a franchise tie- up with Max Hypermarkets, are likely to be present at the Thursday meeting as well. It could not be independently verified with these chains on whether they had received the ministry letter or if they were keen to invest in India. Even nine months after the policy was cleared by the union cabinet, not a single FDI proposal has come to the government so far. That, perhaps, has prompted the government to invite even those who have shown some kind of interest in the Indian retail space, a source pointed out. Other than the new names, the world’s largest retailer US- based Walmart, French chain Carrefour, the UK’s Tesco and German major Metro — already present in India either as wholesale players or as franchise partners for backend — have got the invite. The Indian companies that have been called are Pantaloon, Raheja Group, Tatas, RPG, Landmark, Piramal, Subhiksha, Bharti Walmart, Reliance Retail and the Aditya Birla Group.

• ITC revs up food, personal care biz to boost growth: In a bid to sustain its growth momentum, ITC's packaged foods division and personal care business are putting in place strategic plans this fiscal. To drive volumes, ITC is betting big on research & product developments, distribution competencies and consumer engagement strategy to woo new consumers. To start with, ITC Foods, makers of `Bingo' snacks, is planning to scale up its business by drawing upon the agri-sourcing strength of the e-Choupals, in-house cuisine knowledge, product development capabilities, packaging strategy and branding, sales & distribution competencies. On the company's strategy, Chitranjan Dar,chief executive, Foods Division, ITC, said: ''Our growth momentum will be driven by enhanced focus on innovative product development, consumer insights and improvement in product and process efficiencies as well as smart sourcing." As part of the strategy, ITC Foods plans to invest in distributed capacities and capabilities to meet its anticipated growth. ''We feel encouraged by the increasing consumer franchise for our brands and the growth momentum will continue to be sustained this fiscal,” said Dar. In FY13, ITC Foods had to contend with high levels of input costs. Global demand-supply dynamics, policy uncertainties and adverse currency movement led to steep hike in prices of key commodities such as wheat, edible oils and packaging materials particularly during the first half of the year. ''These cost pressures were, however, mitigated through a combination of improvements in product and process efficiencies, smart sourcing and supply-chain initiatives,” said the company.

International:

• UK and China in £21bn currency swap deal: The Bank of England and its Chinese counterpart have signed a deal likely to boost trade between the UK and China in the yuan. The Bank and the People's Bank of China have signed a three-year currency swap arrangement worth 200bn yuan (£21bn, $33bn), the UK central bank confirmed. The UK is looking to become a centre for the Chinese currency, also known as the renminbi. British banks hold 35bn yuan worth of deposits in the Chinese currency. Currency-swap agreements allow central banks to swap currencies and can be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China's currency is not fully convertible to other currencies. The prospective deal was first announced in February by BoE Governor Sir Mervyn King. "In the unlikely event that a generalised shortage of offshore renminbi liquidity emerges, the Bank will have the capability to facilitate renminbi liquidity to eligible institutions in the UK," Sir Mervyn said on Saturday. Last year, the UK Treasury announced plans to make London - the world's largest currency trading hub - the leading international centre for trading the yuan outside mainland China and Hong Kong. China has been gradually relaxing strict controls on the value of its currency and on flows of capital. Beijing has been using these pacts as part of its push for a more global role for the yuan. It has a swap agreement with Brazil worth $30bn and has also signed similar agreements with other trading partners such as Japan, Australia and Hong Kong.

• Ferragamo Cites Robust U.S. Growth: Markets may be volatile, but Salvatore Ferragamo chief executive officer Michele Norsa is keeping his eye on the ball, i.e. the flow of tourists. “Customers are mobile and we are not worried with where they buy because they are attentive to the prices and shop where it’s more convenient,” said Norsa ahead of the brand’s show on Sunday. He noted that the Florence-based company is “substantially maintaining its prices,” with slight adjustments in Japan, for example, to “eliminate the differential” given the devaluation of the local currency. Norsa said the U.S. has shown “several quarters of double-digit growth,” adding that this “may be the region where we will invest the most in 2013,” citing the renovation of stores in Chicago and San Francisco and a new unit in Toronto. Norsa said growth has globally been “relevant,” and that gains in the second quarter are expected to be in line with the first quarter.

• Zegna’s High End Push: Tapping Stefano Pilati last year has given Gildo Zegna an additional spring in his step. Speaking ahead of the Ermenegildo Zegna show on Saturday morning, the company’s chief executive officer was upbeat and brimming with energy. “I’m proud and satisfied, happy with a partnership that helps us raise the bar” at a time when business is generally challenging, said Zegna. “It is at such a moment that one must be daring, take risks, do different things, press the accelerator, not the brake. We have not put a stop to our investments, approved in November. The challenge is how to manage the complexities effectively, provided one has the resources and the brand,” said Zegna forecasting a 2014 “better than 2103, but still not easy.” Asked about the second half of this year, the executive said he expects low, single-digit growth, lamenting currency headwinds, for example. On Saturday, Pilati unveiled his own interpretation of the Ermenegildo Zegna Couture collection, which was first launched a decade ago and is now being given a higher profile. Couture is priced 50 percent above the flagship line, which includes the Sartorial (tailor made) and upper casual collections. With Couture, Zegna said he is eyeing the “super-affluent” consumer in new markets, explaining that the line will be available in no more than 50 stores globally, including the Milan Via Montenapoleone boutique, which will be expanded with an additional dedicated floor to be unveiled in the first part of 2014. “We continue to add markets that are always more challenging, demanding and even more exclusive, notwithstanding the crisis,” said Zegna, pointing to social and economic troubles in Brazil and Turkey, in addition to a slowdown in China and India, which “never really took off.”

• Trevor Edwards Tapped to Head Nike Brand: Stewardship of the Nike brand will pass to Trevor Edwards in a far-ranging reorganization at Nike Inc. made in advance of Charlie Denson’s retirement in January. Edwards, currently executive vice president of brand and category management at Nike, will succeed Denson as president of the Nike brand on July 1. His responsibilities will include Nike; the Jordan brand; action sports, including Hurley; digital brand, and brand management throughout the world. In an integration of omnichannel activities, wholesale, retail and e-commerce operations will fall under his purview. Eric Sprunk, currently executive vice president of merchandising and product, has been named to the new post of chief operating officer of Nike Inc. with responsibility for manufacturing, sourcing, information technology and procurement as well as continued oversight of supply chain innovation. Jeanne Jackson, president of direct-to-consumer, will move to the new post of president of product and merchandising with oversight of footwear, apparel and equipment. Thomas Clarke, president of new business development, will become president of innovation, leading the company’s advanced product innovation teams and the sustainable business and innovation, or SB&I, team. Hannah Jones will remain vice president of SB&I and report to Clarke while continuing to report to Mark Parker, president and chief executive officer of the Beaverton, Ore.-based company, on policy matters relating to sustainability and labor practices. Edwards, Sprunk, Jackson and Clarke will report to Parker, as will such current direct-reports as Hilary Krane, general counsel; Don Blair, chief financial officer, and Jim Calhoun, president and ceo of Converse. Krane and Blair are executive vice presidents of the company. Denson has been with Nike for 34 years and has served as brand president since 2006. 

• E-Commerce Gains a Foothold in South Africa: In 18 months in business, commerce newcomer Zando.co.za has established itself as South Africa’s top online fashion retailer. Zando went live at the end of January 2012, selling only shoes. Since then, the company has expanded to offer clothing, accessories, sports and beauty, which increased its appeal to customers, garnering more than 10 million views in the process. By May 2012, it had reached a consistent weekly unique visitor count of 200,000, according to Web analytics company Alexa, propelling Zando into the top five leading e-commerce Web sites in the country. By November, there were apparently more searches for Zando than for eBay within South Africa. The company’s growth was no doubt boosted by an investment from J.P. Morgan Asset Management in September, to the tune of “double-digit million U.S. dollars,” according to co-founder Peter Allerstorfer, who would not disclose the exact amount. In November, London-based Summit Partners invested 20 million euros, or $26.4 million atcurrent exchange, in Zando. The deal included the growth equity investor taking a stake in the company through its German holding company. Zando, said Allerstorfer, was an attractive investment for J.P. Morgan and Summit because “both investors saw the potential of e-commerce in the South African market.” Scott Collins, a managing director and head of the Summit Partners London office, said, “We seek to invest in companies that build long-term value, and Zando.co.za has shown dynamic growth in a short period of time.”