News As We Read- 28th June'13

Thought of the Day:

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Following made the Headlines:

India:

• Probe Hits a Wall, But No Clean Chit to Walmart: Terming some of the answers provided by Walmart as “incomprehensible” and parts of the deposition by its just-departed India boss Raj Jain as “ambiguous”, a committee set up by the government to look into whether the US retail behemoth indulged in bribery in India has refused to give it a clean chit, complicating its efforts to draw a line under the episode. The one-man committee under Justice Mukul Mudgal has said in its final report that it was unable to reach a definite conclusion on the matter because of a lack of “investigative” or “summoning power”, and suggested that the government keep open the option to investigate the company depending on what disclosures Walmart makes in the future to the US Congress. “Walmart has not furnished the documents and information to the US Congress till date and has also not provided this committee with full details sought by it. However, as and when Walmart replies to the queries of the US Congress fully and an adverse report or disclosure indicating violations of Indian laws is made, the investigation should be carried out by the government,” the report, whose contents were shared with ET, has concluded. The 32-page report was submitted to Corporate Affairs Minister Sachin Pilot.

• Cafe Coffee Day to Add 500 Outlets by 2015: Coffee chain Cafe Coffee Day (CCD) on Thursday said it will open over 500 outlets by 2015 to take its total network to 2,000 outlets as part of a pan-India expansion programme. The company will set up outlets based on the three formats — cafe, lounge and square — which it currently operates. “We will take total number of our outlets to 2,000 by 2015. Majority will be in the cafe format and we will also look at opening some outlets in lounge and square formats too,” Cafe Coffee Day president marketing Ramakrishnan K said. At present, CCD has 1,497 outlets, out of which three are in square format, 47 in lounge and rest in cafe formats. All these are company owned.

• Govt Likely to Review FDI Norms in Retail: The government on Thursday promised foreign retailers that it will review the stringent investment conditions imposed on foreign investment in the multi-brand retail sector after its much hyped opening up of sector failed to enthuse them. “The objective of the policy is to encourage investments, job creation, benefit to the farmers and benefit to the consumers. Therefore, we have sufficient space to address those concerns, bring in the clarity, and an early and appropriate view will be taken so that the guidelines can accordingly be given out,” Commerce and Industry Minister Anand Sharma told reporters after a two-hour long meeting with the retail industry. Representatives of both foreign and domestic retail companies, including Walmart, Tesco, Metro, Carrefour, Bharti, Aditya Birla Group, Tatas, Reliance and Pantaloon met Sharma. “The industry raised two-three major points like the 30% sourcing issue. We have said that it should be ‘preferable’ and not ‘mandatory’. Industry cannot buy everything from SMEs,” Bharti Enterprises Vice Chairman and Managing Director Rajan Bharti Mittal told reporter after the meeting.  The government has already made this concession to foreign investors in singlebrand retail segment. Foreign retailers also want agro-sourcing to be a part of the minimum 30% sourcing. Retailers sought a relaxation in the rules for investment in the back-end infrastructure. The current policy says that foreign retailer must bring at least $100 million investment and 50% of this must go into new backend infrastructure. “We should be asked to invest only 50% of the first tranche of the investment in back-end infrastructure and the condition should not apply to every tranche of future investment,” Mittal said.

• Taj Mansingh: MHA Opposes Right of First Refusal to Tatas: The union home ministry has said that the Tatas should not be allowed the right of first refusal in the upcoming auction of the Indian Hotels Company-operated Taj Mansingh hotel, opposing the proposal of the New Delhi Municipal Council, which owns the building that houses the luxury hotel in central Delhi. In a letter to NDMC on May 10, the home ministry said “that the proposal to allow IHCL to have the ‘first right of refusal’ in the public auction has not been provided for in the lease deed. A provision of ‘first right of refusal’ will result in lower bids in the public auction. Therefore, the ministry of home affairs is of the opinion that ‘first right of refusal’ should not be allowed to IHCL in the proposed auction and fresh lease should be granted by open public auction.” ET has reviewed a copy of the letter. The home ministry's views are important since it is the administrative ministry for the municipal body, which has to find a new operator for the hotel by October this year. Following the development, the civic body has decided to seek the opinion of the Solicitor General of India. “We will seek his opinion through the ministry of home affairs and the urban development ministry, on how to move forward with respect to the lease, considering there are cases pending in the Delhi High Court and Supreme Court,” the spokesman for NDMC, AK Mishra, said. A spokeswoman for the Indian Hotels Company Ltd, which runs the Taj hotels and operates the Taj Mansingh hotel under a lease with NDMC, declined to comment as the matter is sub judice. The 33-year lease ended in October 2011 after which the civic body decided to extend the lease with the existing operator for one more year. During this period, the civic body had appointed Ernst & Young to value the property and to find a way forward. E&Y, in its report, suggested auctioning the property, with the first right of refusal resting with Taj. In its meeting in last September, NDMC had decided to opt for an auction giving the right of first refusal to Taj, while extending the company’s lease by another year up to October 2013. BJP legislator Karan Singh Tanwar, who is a member of the council, blamed the government for the mess. “An open auction should happen in this case but it looks like council members are trying to take another route. The ministry of home affairs has said that first right of refusal will mean loss of revenue,” he said. In April this year, IHCL had filed an injunction suit in the Delhi High Court ahead of a possible auction of the property's lease by the government agency in order to protect its position. The company had claimed part ownership of the Taj Mansingh hotel, which is contrary to NDMC’s claim that was also verified by consultant firm Ernst & Young. IHCL claimed that it too had invested in the property when it was built in the late 1970s and, therefore, is a rightful joint owner.

• GoAir stops hiring male pursers to save fuel: The falling rupee has claimed a new victim — the male cabin crew. Low cost carrier GoAir has decided to recruit only airhostesses from now on, doing away with the ‘heavier’ male flight pursers. The LCC took the glam route as all airlines are desperately looking at ways to lighten their aircraft to reduce fuel burn because the runaway dollar has increased operating costs. GoAir currently has 330 cabin crew members, 40% of whom are males, for its fleet of 15 aircraft. The airline flies its aircraft for 80,000 hours annually. Every additional kg carried on board costs Rs 3 per flight hour, and conversely a reduction in weight will lead to a reduction in cost. With an airhostess weighing about 15-20kg less than a male flight purser, GoAir expects to save Rs 2.5 crore to Rs 3 crore annually by reducing crew weight on planes and, therefore, burning less fuel! The airline’s 130-odd male flight pursers will keep flying but future cabin crew recruitments will be all airhostesses. Go plans to induct about 80 aircraft over next seven years, for which it will recruit about 2,000 airhostesses and pilots. “The rupee’s fall has hurt the industry badly. All major expenses — aircraft leasing, spare parts and fuel costs — are linked to the dollar. The fall in exchange rate of a rupee costs us Rs 30 crore on an annual basis. We are looking at every possible way of cost-cutting to remain profitable,” GoAir CEO Giorgio De Roni said. With the rupee’s freefall hiking operating costs, the airline has taken other steps to lighten its aircraft and improve fuel efficiency. “We are reducing the weight on board our aircraft. The size of inflight magazines has been reduced. The potable water tanks are no longer being filled to capacity as only 35% to 40% of that water is actually used. Now the water tanks are filled 60%,” De Roni said. Operational procedures have been revised with aircraft now doing single engine taxi to save fuel. “Our new aircraft will have sharklets (wingtip devices) that will help in reducing fuel burn by 5%. From next year onwards, we will have sharklets installed in five of our existing planes as the remaining 10 will be phased out to have a young fleet,” he said.

International:

• Peugeot Family Ready to Step Aside for GM: PSA Peugeot Citroen’s founding family has offered to give up control of the troubled French automaker as it tries to revive plans for a closer tie-up with General Motors backed by a fresh capital injection, sources said. But any deal combining Peugeot with GM's European Opel division would face major political hurdles because it would bring more factory closures and job losses in France and Germany, people with knowledge of the discussions told Reuters.  The Peugeot clan, one of Europe's three surviving car dynasties, turned with beleaguered chief executive Philippe Varin to 7% shareholder GM after inconclusively sounding out other potential investors including Chinese partner Dongfeng, they said. “GM faces the same overcapacity situation with Opel, and that's why PSA is trying to convince them to merge the two,” said one of the people, who asked not to be identified because the talks are confidential. “The Peugeot family has now accepted that they'll lose control, so this is no longer an issue.” The Peugeot family, which founded the company in 1810 as a coffee mill manufacturer, holds a 25.4% stake that commands 38.1% of voting rights in a group that is now struggling for survival. Both Peugeot and GM declined to answer questions about their frequent discussions. “We don't comment on speculation or rumors,” Peugeot spokesman Jonathan Goodman said. Before injecting more cash, GM would need assurances that it had a free hand to cut production capacity as it took control of integrating Peugeot and Opel, sources said.

• Modnique Buys Totsy Assets: Global e-commerce retailer Modnique Inc. has acquired the principal assets of Totsy Inc., a New York-based private sale Web site dedicated to off-price children’s, infant and toddler apparel and related merchandise. Terms of the transaction weren’t disclosed. Einaras von Gravrock, cofounder and chief executive officer of Redondo Beach, Calif.-based Modnique, said the acquisition includes the Totsy brand, customer list, vendor book, social media presence and about $3 million in inventory, the majority of which will be donated to KIDS (Kids in Distressed Situations). Von Gravrock told WWD that customers logging on to Totsy.com will be redirected to Modnique’s site, at modnique.com, which will be updated to include a new Modnique Kids department, adding to its current offering of women’s and men’s apparel, accessories, footwear and beauty products. He noted that Totsy had encountered financial difficulties in recent months and the company’s assets had been acquired from its lenders, who weren’t identified. Calls to Rho Ventures, which had previously held a stake in Totsy, weren’t returned by press time Thursday.  Founded in 2010, Modnique has emphasized serving a global audience of fashion customers with stylish products from U.S. brands and European designers. Originally a flash-sale site, it supplemented its events with less-time-sensitive offerings arranged according to classification at the end of last year. “Most flash sites serve a particular niche and a particular locale,” the ceo said. “We saw a need to connect international brands with international buyers, and with the introduction of our shops in last year’s fourth quarter, we now have inventory that can stay on the site longer and give the customer the ability to come back and find a specific item at any time. It’s still a great selection at great prices.” The acquisition of Totsy assets, he noted, provides for expansion of the business in several different directions. Modnique’s assortment of children’s, infant and toddler merchandise will be expanded; the Totsy customer base will be migrated to Modnique’s site, and Totsy’s customers will gain access to a broader and more global selection of merchandise both inside and outside the children’s category.

• LVMH's Latte: LVMH Moët Hennessy Louis Vuitton has taken a majority stake in storied Pasticceria Confetteria Cova Srl, owner of the Cova brand and of the Cova Montenapoleone Srl firm that manages Milan’s arguably most fashionable and iconic coffee house, located on Via Montenapoleone. Financial details of the deal were not disclosed. The previous owner, the Faccioli family, will continue to be a shareholder and to manage Cova to “guarantee the continuity and success that Cova has built over almost 200 years,” said LVMH. The French luxury group said it plans to maintain the current location, and “to strongly support its development at an international level thanks to the synergies available” at group level. LVMH’s acquisition came as a surprise on Thursday, as speculation had been circulating for months that Prada Group was keen to buy Cova.

• U.S. to Suspend Trade Benefits to Bangladesh: The Obama administration is getting tough with Bangladesh. The U.S. said Thursday it will suspend trade benefits to Bangladesh, turning up the pressure on the Southeast Asian nation to make serious reforms to workers’ rights and safety in the wake of two tragedies in the country’s apparel sector that claimed the lives of more than 1,200 garment workers. The U.S. and European Union have each been conducting reviews of General System of Preferences trade benefits to Bangladesh, intensified by the Rana Plaza building catastrophe in April that claimed 1,129 lives and an earlier fire at Tazreen Fashions that killed 112 garment workers. “The recent tragedies that needlessly took the lives of over 1,200 Bangladeshi garment factory workers have served to highlight some of the serious shortcomings in worker rights and workplace safety standards in Bangladesh,” said U.S. Trade Representative Michael Froman. “While taking this action today, the administration is also initiating new discussions with the government of Bangladesh regarding steps to improve the worker rights environment in Bangladesh so that GSP benefits can be restored and tragedies like the Rana Plaza building collapse and Tazreen Fashion factory fire can be prevented.” The suspension of benefits will come 60 days after the notice is published in the Federal Register. The entire U.S. GSP program expires at the end of July and must be renewed by Congress. The U.S. did not make any stipulation for the renewal of Bangladesh’s GSP status.

• Chanel Among China's Most Sought-After Luxe Brands: Chanel, Estée Lauder and Louis Vuitton were among the top five most sought-after luxury brands in China, according to the World Luxury Index China 2013 — 2nd Edition, produced by the Digital Luxury Group. Chanel came in third place, Lauder took fourth place and Vuitton was in fifth place. The first two spots went to Audi and BMW, respectively. The report is part of the World Luxury Index, an international ranking and analysis of the most-searched-for brands within the luxury industry. The study covers more than 400 luxury brands within six key segments (fashion, cars, beauty, watches, jewelry and hospitality). The information is culled from 680 million consumer online searches originating from search engines Baidu and Google from January through December 2012. The study revealed that Chinese consumer interest is focused on cars (53.5 percent), beauty (22.7 percent) and fashion (14.9 percent). New brands to enter the top 50 were Elizabeth Arden (number 43) and Rado (50), while brands such as Moncler and Salvatore Ferragamo fell off the top 50 list. Last year, Moncler was number 42, and Ferragamo was number 48. According to the report, the top 10 most sought-after brands, in order, are Audi, BMW, Chanel, Estée Lauder, Louis Vuitton, Lexus, Mercedes-Benz, Dior, Porsche and Lamborghini. The next 10 are Lancôme, Gucci, Hermès, Volvo, Land Rover, Infiniti, Chow Tai Fook, Cadillac, Cartier and Clinique. Interestingly, in last year’s survey, Vuitton was in third place and Chanel was in fifth place. As for the reversal of positions between Chanel and Vuitton, David Sadigh, founder and chief executive officer of Digital Luxury Group, said, “Chanel is benefiting from an important level of interest in China, mostly emanating from strong interest from Chinese consumers in its beauty products, which Louis Vuitton does not have.” He also said Vuitton has been suffering in the Chinese market from oversaturation, and recently decided to raise its prices and sell more high-end leather to give more exclusivity to the brand.