Do Fashion Brands Need Ugly-queen Discount Contest?

As Indian fashion brands gear up to meet the challenges of growing domestic demand, the ride ahead could be rocky unless the level of preparedness is high. And all this, as experts will tell you, is primarily because of ‘inventory’. The ‘I’ word often emerges as the villain-in-chief —destroying brands, reputations and cash flows mercilessly. Is this just a hype or a legitimate concern? First, let’s look at what some of the global biggies do. Meet Louis Vuitton, a company that never discounts its leather goods. It balances demand-supply cycle very well by ensuring that people buy its products for the right reasons—design and aspiration—and not the wrong reason—discounts. Unlike other luxury brands, Louis Vuitton never licenses out the brand to others. Running its own stores gives it control over inventory, pricing and visual merchandising.
On the other extreme, most of our Indian brands/retailers end up selling half of their inventory at the list price (as fresh stock) and the remaining half at a heavy discount (end-ofthe-season sales). Fashion business enjoys healthy gross margins but the sell-through rate (percent by volume of merchandise that is sold at full price) for most Indian brands is low—45-50%. This dampens their overall profitability and long-term viability. On top of discounts, retailers end up spending more than 40% of their annual marketing budget on communicating the announcement of sale.
Fashion brands don’t really need to participate in such ugly-queen contests, year after year, trying to outdo each other by offering more and more discounts. So, what is the way forward?
Fast-fashion, which ensures that designs move from catwalk to store in the shortest possible time, has been cited as an effective tool to combat such planned customer behavior. While it reduces incentives for consumers in multiple ways, rapid production reduces gap between demand and supply and decreases the probability of excess inventory.
Enhanced product design, on the other hand, gives customers a trendier product that they value more, making them less willing to risk waiting for a sale. Zara, H&M and Mango have been implementing this strategy successfully.
Consider this: Zara churns out more than 11,000 designs in a season, compared to only 2,000-4,000 items that its competitors offer. End result: Zara’s customers visit the store 14 times on an average per year, compared to 3-4 visits per year at traditional chains. Sellthrough rate for Zara is 80-85%. But such an approach needs a lot of planning, determined execution and meticulous monitoring.
However, the fashion sector looks attractive, and this is reflected in the increasing number of brands, even more so in terms of valuations.
But clearly, the pitch is changing. And an advice for Indian brands in a hurry—the ground you are stepping on has wall-towall landmines. Watch the business, the valuations will take care of themselves.
(Author is a Partner with Everstone Capital-Private Equity. The views expressed are personal)

Maruti to Launch 20 Models in 5 Yrs

70-80% of future offerings by India’s largest carmaker is likely to be in the small car segment

KETAN THAKKAR MUMBAI

Maruti Suzuki, India’s largest carmaker, is gearing up for a major product onslaught with the launch of 15-20 new vehicles in five years, people familiar with the matter told ET. To remain competitive and protect market share, the auto giant will continue to focus on low-cost vehicles, with 70-80% of its future offerings likely to be in the small car segment, including facelifts and variants.
Of the new products planned, five are in advanced stages of development. The company is likely to roll out sub-4 metre Swift Dzire at the 2012 Auto Expo in Delhi. This will be followed by a multi-purpose vehicle based on the R-III concept, an A Star facelift, Ritz backlift, and next generation Alto 800 by early 2013.
The company will invest . 1,000-1,500 crore on product development, including its upcoming R&D unit at Rohtak, over the next three-five years. The Rohtak facility will be operational by the first half of 2014. A dedicated R&D facility will lower cost of development and enable aggressive pricing, said industry experts. “With product lifecycles getting shorter, it is absolutely critical for companies to introduce newer and fresher products. New products pull customers and Maruti is responding to that,” said people with knowledge of the matter.
The company is working on future product portfolio strategy with its headquarters in Japan.
Declining to comment on the number of products for the future, I V Rao, chief executive research and development, Maruti Suzuki, said, “The contribution of Indian engineers will be drastically higher going ahead. They are not only involved in the model development for India but also for global projects. With the dynamic market environment in India, where customer expectations and competitive scenario continuously change, we will be in a much better position to react in the future.”
Also, Suzuki has decided to unify the R&D in Japan with its Indian subsidiary and going forward, India will play a bigger role in product development.
“Protecting its market share will be the biggest challenge for Maruti Suzuki. It will have to offer appealing vehicles, which are comparable to competition and that too in a shorter timeframe. The stronger Indian R&D centre with more responsibility will definitely help,” said Rakesh Batra, partner and national director, automotive, Ernst & Young.

A HIKE A DAY BY FMCG COS FOR LAST TWO MONTHS

Hit by Input Costs, Cos Bite Price Bullet

SAGAR MALVIYA & RATNA BHUSHAN
MUMBAI/NEW DELHI

    Consumer product companies in India on an average have increased the price of one daily consumption item every day over the last two months, despite an ever-increasing possibility of a consumer slowdown. Prices of more than 70 stock keeping units—or items with a unique model or packaging size—of more than 15 popular brands across food, personal and household products have gone up in the past two months due to higher commodity costs that have been rising for several months now.
This has forced manufacturers including Hindustan Unilever, Procter & Gamble and Dabur to review prices regularly to ensure profitability. “We have been taking calibrated price increases, to partially mitigate the impact of the sharp rise in input costs,” Dabur India CFO S Raghunathan said.
Hindustan Unilever, the country’s largest consumer products company, is reviewing prices every Monday, Hindustan Unilever Chief Finance Officer R Sridhar said recently. “All the teams, including supply chain, marketing, finance and customer development, come together to study the impact of rising costs and its impact. So it's getting very dynamic,” he told the company’s first quarter press meet on July 28.
HUL increased prices of several pack sizes of its popular laundry and soap brands such as Rin and Pears by 7%. Its arch rival Procter & Gamble, which slashed prices in its laundry brands last year to start a price war, too has increased sticker price of Tide detergent by 5% in the first week of August.
The . 13,000-crore laundry segment, the biggest in the consumergoods space, is under pressure from rising prices of its key raw material crude oil, which is 15% higher than last year at $85 per barrel.
At the same time, the segment is suffering a decline in volume sales.
Personal care makers and food companies such as Dabur, Marico Emami and Amul too have increased prices in June and July.
Between April and June, Dabur hiked prices for Meswak toothpaste, Vatika and Amla hair oils, Real juice, and Odonil air freshener by close to 4%.
Gujarat Cooperative Milk Marketing Federation, makers of Amul, has increased prices of packaged milk, butter and cheese by 4-5% in the past couple of months. “Cost of procurement of milk has gone up so we have to mitigate the impact,” the federation's MD RS Sodhi said. Cooperatives such as Amul are coughing up about 20% more for procurement of milk than they were same time last year in the world's largest milk producing country.
Others like ITC Foods and Nestle have not increased prices, but have dropped weights of packs.
“We have reduced grammage by 4-5% of certain packs in our biscuits and confectionery portfolio,” says Chitranjan Dar, divisional chief executive of ITC Foods, which makes Sunfeast pasta and Minto candies.
But the cigarettes-to-foods maker says it doesn’t plan to take up pricing in the near immediate future. “We are not contemplating a price hike in the short-term; we will take a call to do so only if the commodity situation gets much tougher.”
Nestle too reduced weight of its noodle brand Maggi by 60 grams while keeping the prices intact.
But retailers are trying hard to attract footfalls by clubbing products together for discount offers. “During inflation people like to depend on large value places like Big Bazaar. Also, we have many partners doing large value packs, which value to consumers while increasing category consumption at same time,” said Devendra Chawla, Future Group president of food and FMCG.
But the question is, how long can consumers absorb increased prices without cutting down on their consumption?
Debashish Mukherjee, partner and VP at consulting firm A T Kearney, says consumers will not downtrade just yet. “The trade-offs are delicately balanced right now. With large ticket purchases like homes, cars and high-end electronics on hold because of interest rates going up, households do have surplus cash to spend on essentials,” he says.
That could be because, consumer products firms still haven’t passed on the entire burden of raw material cost. And numbers bear witness. Data by ET Intelligence Group of the top nine listed consumer products firms shows that while sales has risen by 19% last quarter, margins have shrunk for most companies as compared to last year. In fact, six companies have reported a decline in operating margins while rest have grown by lower single digit.

No Plans to Stop Bada-based Smartphones, says Samsung

Riding on its newfound success with mobile phones in India, Samsung is betting big on
the smartphone market. Samsung mobile business’ senior vice president for global marketing Younghee Lee told ET’s Gulveen Aulakh that the company would not let its own operating system – Bada – take the same fall as Nokia’s Symbian. Excerpts:

What’s your strategy to strengthen stronghold in the Asia Pacific market, including India? Globally, Samsung has seen double-digit growth every year. India is the third largest country after the US and China in volumes. The Indian consumer is very demanding, in terms of demand for the latest and super-premium products.
Is your OS – Bada – going the Symbian way? Samsung is a multi-platform player. We offer consumers more choice in Bada, Android and Windows. Bada based smartphones have been quite successful for us and we have no plans to stop it. The market for mid and low end feature phones (non-smartphones) is collapsing globally because this segment is increasingly being taken over by new entrants who make quick products, have very little R&D facilities and just order in mass from China. Many branded players are exiting or limiting their presence in this segment.
Do markets like India offer a unique advantage to you because Apple has a minimal presence? India, being the leading emerging market, will function as the core growth engine of Samsung's global aspiration to become the No. 1 mobile company. Also, we are strategically positioning India as one of Samsung's key offshore R&D base.
Competition in the tablet segment is starting to intensify... It’s an early stage for tablets. Skeptics are calling it just a trendy device and it will disappear. I don't think it will replace the smartphone because we have seen that people don't mind carrying multiple devices. In a broad sense, the competitive scenario in India is not very different from what we see in other parts of the world. The entry of different players in the tablet market at this stage will fuel the growth of this segment.

HUL, Future to Co-brand Bakery Products

Items to be sold exclusively at select Big Bazaar outlets in Mumbai

SAGAR MALVIYA MUMBAI

The country’s largest consumer products company Hindustan Unilever (HUL) and biggest retailer Future Group will co-develop and co-brand a line of bakery products that will be sold exclusively at Big Bazaar stores in the first instance of such a partnership in the country.
The bakery products will sport both Hindustan Unilever’s ‘Modern’ and Future Group’s ‘Freshly Baked’ brands on their packs and be rolled out in select Big Bazaar shops in Mumbai, an HUL spokesperson said.
“This is co-branding of Modern Foods products with Future group in Future Retail stores,” the person said.
Though new in India, the concept is widespread in developed markets. The world’s biggest consumer products maker Procter & Gamble has worked with Tesco, the UK's largest grocery store chain, to design Great British Flavours, a line of Pringles sold exclusively at Tesco stores. P&G has had similar tieups with Wal-Mart and Kroger in the US.
Experts foresee more such joint marketing initiatives soon, because it's a win-win deal.
“For any retailer’s private brand, the biggest challenge is not to keep prices low or innovative packaging but to source their products from a quality supplier,” says Harminder Sahni, founder of Wazir Advisors, a retail consultancy firm.
“In this case, HUL’s strength is its ability to make good bakery products as well as to distribute it nationally while Future Group has the largest network of stores across India. Hence, both are leveraging their core-strength for the product,” he adds.
For the . 20,000-crore Hindustan Unilever, modern trade accounts for more than 10% of its total sales with Future Group being their biggest customer.
“We believe that in modern trade, breads from a functional product can be developed as a category of choice as consumers are looking for quality and value additions,” says Devendra Chawla, president – FMCG and food at Future Group, whose private brands have been outselling some of the country's best-known brands in select categories across 200-plus Big Bazaar and Food Bazaar outlets. “A lot of discovery will happen, we are working at developing this category for the coming year,” he adds.
Consumer durable makers such as LG, Videocon, Onida and Samsung too are rolling out exclusive models for big retailers, initiating a strategy to differentiate products sold in large chains from those sold in small shops.
But for daily products like soaps and shampoos, companies and retailers in India have had a lovehate relationship historically.
For instance, in February this year, Future Group, Bharti Retail and RPG’s Spencers among others had stopped fresh orders from Reckitt Benckiser, maker of Dettol soaps and Harpic toilet cleaner, after the marketer slashed retailers' margins to 14% from 16% on some of its products to partly offset rising input costs.
Future Group had boycotted chocolate maker Cadbury in 2008, and the following year it boycotted cereal maker Kellogg's brands across its Food Bazaar and Big Bazaar stores, both demanding higher business margins.
The new partnership is in line with Hindustan Unilever’s strategy to focus on new areas, especially food, to grow in a market of over a billion consumers.
It acquired Modern Foods from the government a decade ago in the first public sector undertakings divestment. The 42-year-old bakery brand is the country’s largest brand in the bread segment and is a profitable business for Hindustan Unilever since the last three years.
Baking A Success Story The bakery products will sport branding of HUL’s ‘Modern’ as well as ‘Future Group’s ‘Freshly Baked’ on its pack
First instance of a consumer company and a retailer co-developing a product in India
Though a novel concept in India, it isn’t an alien practice in developed markets such as the UK and US
In the past, P&G has worked directly with Tesco, the UK’s largest grocery store chain, to design Great British Flavours, a line of Pringles sold exclusively at Tesco stores

CCD Plans to Add 815 Outlets by 2014

Restaurant chain Cafe Coffee Day (CCD) on Friday said it plans to almost double the number of outlets it operates in India to around 2,000 by the end of 2014. A division of the Amalgamated Bean Coffee Trading Company (ABCTCL), Cafe Coffee Day currently operates 1,185 outlets in India across three formats — lounges, cafes and kiosks. It looks to add about 815 new outlets in the next threeand-a-half years.
“The company has a plan to aggressively expand the number of outlets it operates to 2,000 cafes by the end of 2014,” Cafe Coffee Day president (marketing) K Ramakrishnan said. The growth of outlets will be across formats. Lounges are the latest and recent format introduced by the company, he added. The firm operates 20 CCD lounges across India, which will go up to 100 in the next two years, Mr Ramakrishnan added. He, however, did not disclose investment, revenue and profitability numbers, stating the company was privately held.
As per the company’s website, ABCTCL has Asia’s second largest network of coffee estates (10,500 acres).

You’ll Get to View Dish TV with Rival Set-top Boxes

Dish TV, India’s largest direct-to-home (DTH) operator, is set to launch Conditional Access Module (CAM), a device that will enable consumers with set-top boxes of other DTH service providers to switch to Dish TV’s feed of television channels.
The product, branded as Dish Freedom, is priced at . 990, which includes an annual subscription of 95 channels. The consumer will be required to insert the device into a built-in slot on the set-top box and realign the dish antennae to the DTH service provider’s frequencies, which could entail extra installation cost of . 100-150.
Popular in Europe, CAM is a small gadget that enables consumers to shift from one DTH service provider to another without buying a new set-top box. “We expect inactive DTH households in metros and smaller cities which are not happy with their DTH connections to buy our product and switch to Dish TV signals,” said Salil Kapoor, COO, Dish TV.

Fiat’s Diesel Engines to Drive Maruti Cars

  Italian carmaker Fiat will make diesel engines for Maruti Suzuki’s popular lineup of cars at its Ranjangaon plant. With 85% of Swift, Ritz, DZiRE and Sx4 sold run on diesel, Maruti is now looking to source diesel engines from outside after its captive capacity has failed to meet rising domestic demand.
Maruti already has a licensing pact to produce Fiat’s 1.3 multijet diesel engines at its Manesar facility since 2007, which initially fired Swift and was later strapped on to DZiRE, Ritz and Sx4 models. This engine was sourced directly by Maruti's parent Suzuki Motor Corp from Fiat Italy.
Both companies are close to signing a supply agreement after Maruti carried out a technical feasibility study on Fiat’s diesel engines a few months ago.
Sources in both companies said some technical changes were likely before any Fiat engine could be strapped on to a Maruti car. “Some parts are different on Fiat’s multijet engine that will need to be taken care of before we strap it on its cars,” a senior Maruti executive said.
Maruti chairman RC Bhargava said, “We need to do a lot of work before going for these engines. Besides technical changes to meet our needs, we need to homologate (technically certify) our cars again to be launched with any Fiat engine in India.” Of the 280,000 diesel engines produced at Maruti’s Manesar plant, about 45,000 are exported to Hungary, creating a domestic demand-supply gap. The carmaker is considering cutting exports to bridge the shortfall of about 120,000 engines.
“We will cut diesel engine exports to Hungary in the next six months and divert the entire supply to the domestic market,” Maruti Suzuki managing executive officer (marketing and sales) Mayank Pareek said.
Fiat is likely to service Maruti's demand from its Ranjangaon plant near Pune. “We have idle capacity that can be utilised by supplying engines. However any decision will be taken by our parent headquarter in Turin,” Fiat India Automobiles CEO Rajeev Kapoor said.
Fiat's capacity to produce 250,000 engines remains largely untilised due to poor sales of its cars as well as that of its ally, Tata Motors, which also uses its engines in India.
Fiat and Suzuki also have a global partnership where the SX4’s hatchback model made by Suzuki's Hungarian subsidiary is sold in Europe as Fiat Sedici and comes strapped with 2.0 litre multijet engine supplied by the latter.

Maruti Rolls Out Upgraded Swift

NEW DELHI Maruti Suzuki India has launched an upgraded version of its popular premium hatchback ‘Swift’ in an aggressive price range of . 4.2–. 6.4 lakh. Built on an all-new global platform, the new Swift is cheaper than Volkswagen Polo and Hyundai i20. Maruti hopes the new Swift would help drive sales in the world’s second largest auto market where new car purchases fell 16% in July. The new Swift is lighter by 30 kg and promises better fuel efficiency than its phased out version. The company said the petrol variant would run up to 18.6 km with a litre of fuel, offering 4% more mileage, while the diesel version will deliver 22.9 km with a litre, or 6% more fuel efficiency over the older version.

Sahara Partners Korean Co for Power Plants

NEW DELHI Sahara India Power will set up power plants in India with capacity totalling 6,000 MW in association with Korea East-West Power. The companies have entered into an agreement to jointly participate in tariff-based bidding for UMPPs and other opportunities in India. The two companies would explore possibilities of power generation through thermal, hydro and solar resources. The two companies are already setting up a 1,320-MW power generating plant at Titlagarh in Orissa with an investment of about . 8,000 crore. Sahara India Power CEO Ashok Bhargava said: “We are delighted to partner with Korea East-West Power in setting up 6,000-mw power projects in India.” Korea East-West Power has a power generating capacity of 9,509 MW in South Korea.

Whirlpool Brings HUL’s Manwani on Board

MUMBAI Whirlpool has appointed Hindustan Unilever’s non-executive chairman Harish Manwani to its board of directors. “His proven business leadership makes Harish Manwani an outstanding addition to our board,” Jeff Fettig, chairman and CEO of the $18.3-billion Whirlpool, said. Mr Manwani has served as president on Unilever’s executive board since 2005 and will take charge of the newly created position of COO next month as part of its global re-organisation. He joined HUL in 1976 and has held various key positions including overseeing Unilever’s consumer goods businesses in Latin America, North America and Asia. For Whirlpool India is one of its top two fastest growing markets, ahead of China. HUL is India’s largest consumer products company with annual sales in excess of $4 billion.

Apple may invest $1b in Sharp LCD plant

Apple Inc plans to invest in a Sharp Corp factory to secure a supply of LCD screens for iPhones and iPads, sources said, triggering expectations Apple may step up orders to Japanese parts makers. The proposed move, along with an investment in a new LCD factory of Toshiba Corp, comes as Apple and key supplier Samsung Electronics battle in courts over patent disputes, spurring talk that Apple may diversify suppliers.
Japanese chipmakers in particular, such as Elpida Memory Inc and Toshiba, are hopeful of larger orders from Apple if the US company's relationship with Samsung deteriorates further, sources familiar with the matter said.
"If the situation escalates into a state of war, this could mean a huge shift in orders," said one of the sources who was not authorised to speak to the media.
Since late last year, Japanese media have reported that Apple may invest around $1.3b in the Sharp plant, but Sharp's
    shares outperformed the market on Wednesday after brokerage MF Global FXA Securities highlighted the likelihood of the investment in a sales note.
Sharp's shares ended 1.8% higher versus a 0.8% fall in Tokyo's electrical machinery subindex. Sharp has already clinched a contract with Apple to supply power-efficient screens for the sixth-generation iPhone, to launch in 2012, sources have previously said. Officials at Sharp could not be immediately reached as the company was closed for the summer holidays.
"We think it is highly possible that Apple will make an investment in Sharp's Kameyama plant to the tune of around $1 billion in order to secure a stable supply of screens for iPhones and iPads," MF Global FXA Securities analyst David Rubenstein said in the note.
Sharp faces competition from cheaper panels made by rivals including Korean electronic giants LG Electronics and Samsung.
“An investment could lead to more ties between Apple and the suppliers to Sharp and Toshiba,” said Shuzo Takada, a director of the Japanese trade ministry's industrial revitalisation division.

Game to Pastry: Now You can Eat Angry Birds Mooncakes

 

Restaurant chain in Hong Kong to turn the bird into pastry

AFP HONG KONG

Now not only are Angry Birds available on your mobile phone, they can also be found on your dining plate -- in the form of the Angry Birds mooncake, unveiled in Hong Kong on Sunday.
The popular mobile game, which was first launched for Apple's mobile operating system in 2009, features cartoonish, wingless birds that the player must slingshot into enemy pig territory to reclaim stolen eggs. Its huge popularity has prompted a restaurant chain in Hong Kong to strike a deal with its creator and turn the bird into mooncakes -- a pastry eaten to mark the Chinese mid-autumn festival, which falls on September 12 this year. 

“The Angry Birds game is a world phenomenon now, it is well-liked by people from three-year-olds to 80-yearolds,” said Stephanie Chan, marketing manager of Maxim's Group, which released the bird-shaped mooncakes. The mooncakes come in two flavours, chocolate, and mango and pomelo, and sell at $4.90 per pair, making their debut at the Hong Kong Food Expo on Sunday where they were immediately snapped up by fans. “I come here to buy the mooncakes because I like playing the game,” said an excited Kiki Au, a seven-year-old primary school student.

Angry Birds' popularity has led to versions of the game being released for all major smartphone brands, personal computers, and game consoles. It currently has at least 120 million active users on mobile devices. Its creator, Finland-based software developer Rovio Mobile, launched merchandise sales of its own last year, including Angry Birds soft toys, and said in January that it is developing a cartoon series based on the game. China's mooncake tradition is said to have started after the people were rallied to revolt against Mongolian Yuan dynasty rulers.

Pappu Now Clears the Test with Distinction

From chocolates and toothpastes to mobile games and spare parts, Pappu has become a darling salesman for marketers

RAJIV SINGH NEW DELHI

Cadbury made him popular, but it was a Bollywood chartbuster that gave him instant stardom. And to cash in on his celebrated status, the Election Commission roped him in to persuade people to come out and vote in large numbers. That was in 2009. Last year, he was cast along King Khan for a toothpaste commercial. And now, Maruti Suzuki India has borrowed his services to dissuade people from using fake spare parts.
It seems they just can't do without Pappu, saala!
From chocolates and toothpaste to mobile games and spare parts, the affable, if sometimes simpleton, Pappu has become a darling salesman for marketers. The latest to jump on the Pappu bandwagon is Maruti Suzuki, which is trying hard to battle the menace of fake spare parts that make up 35-40% of the . 24,000 crore genuine spare parts market.
India's largest carmaker has come out with a radio advertisement to promote genuine parts, and it's doing it by narrating Pappu Ki Kahani. The funny radio jingle ends by saying that “Maruti Genuine Parts lagaoge to pappu nahi kahelaoge” (If you use Maruti Genuine Parts, then you won't be termed as Pappu).
Why Pappu?
“Pappu is a normal guy, like the one living next door. And the term Pappu is so common in our day-to-day parlance that we often hear people saying uska pappu ban gaya. That's why we used Pappu in our jingle,” says Mayank Pareek, Managing Executive Officer (Marketing and Sales), Maruti Suzuki India. The radio jingle was done by Maruti's in-house creative team.
From a common and endearing first name found abundantly in small towns and villages in North India to somebody who is made fun of and considered an idiot in the cities, Pappu has many facets attached to him and brands are exploiting all those traits to the hilt.
Jagdeep Kapoor, chairman and managing director, Samsika Marketing Consultants, feels Pappu is a simple and memorable hook in branding.
“Our world revolves around Pappus and Appus,” says Kapoor. “Pappu has been picked up from a slice of life, and from the Indian culture. That's why it's so memorable and effective.”
In 2007, Mumbai-based online game maker Games2Win developed Pappu The Pilgrim—an online game that's still popular with gamers.
Alok Kejriwal, the founder and CEO of Games2Win, wanted to highlight the fact that how people have become a Pappu to religion. “Gaming is the new language of the youth and we gamified a slice of life,” says Kejriwal. “Pappu is a comic name, one who doesn't have an opinion.”
 
PAPPU PAAS HO GAYA It was Abhijit Avasthi of Ogilvy & Mather (O&M) who brought Pappu to the advertisement world, for a Cadbury commercial in 2006. But he never thought that Pappu would become such a massive hit with brands.
“Pappu is an underdog, a lovable character who is not smart enough. In fact, all of us have met some or the other Pappus at some point in our life,” says Avasthi, who is group creative director of advertising agency O&M.
Avasthi is delighted to see the popularity of Pappu, but for a different reason. “If marketers and brands are using Pappu in their ads, it only reminds people of the Cadbury ad. And this, in fact, adds up to the legend of Pappu,” says Avasthi.
Pappu may be a fool to use fake spare parts, but brand experts don't think that Pappu has acquired a negative connotation.
Prasoon Joshi, lyricist and Executive Chairman of McCann Worldgroup, says: “For a mother in a small town, Pappu would still be his loving and affectionate son, and not a loser.” Pappu may be a buffoon and an easy target for potshots, but the name has not acquired a negative connotation, feels Joshi.
Some experts, however, feel it’s time Pappu took a break. Arvind Wable, Executive director and CEO of Draftfcb Ulka, believes using Pappu reflects lazy creative. “Pappu has worked very well for Cadbury and the movie. But it has run out of steam now,” says Wable.
Samsika's Kapoor disagrees. “Pappu is here to stay.”
“He is still young...So, one fine day brand Pappu may be used for propogating family planning or for preaching hygiene,” says Kapoor.

China Bright Food to Buy Manassen for $516 m

HONG KONG China's state-owned Bright Food Group has agreed to buy Australian branded food business Manassen Foods, giving it an enterprise value of over $516 million, a person with direct knowledge of the matter told Reuters on Sunday. Bright Food is buying 75% stake in Manassen, which is being sold by CHAMP Private Equity. The deal will mark Bright's biggest ever overseas acquisition, the person said, after missing out on some offshore transactions in previous few attempts. — Reuters

Italian Motorcycle Maker Ducati Plans Asian IPO

LONDON Iconic Italian motorcycle maker Ducati could be floated in Hong Kong next year with a market value of 875 million pounds ($1.4 billion), the Sunday Times reported. Ducati's private equity owner, Milan-based Investindustrial, has discussed a share offering with banks, but is monitoring the current market turmoil and will decide whether to proceed in early 2012, the paper said. Hong Kong has become the financial centre of choice for luxury brands seeking a public listing, with fashion house Prada, cosmetics group L'Occitane, and luggage maker Samsonite all launching initial public offerings there in the past 18 months. Investindustrial has restored Ducati to profitability since taking it over in 2008, the Sunday Times said.

Alpha Male Look, Now Just a Click Away!

NEW DELHI Yepme.com, an online fashion portal for men, has launched its own apparel brand label, and showcased it's first men's apparel, footwear and accessories collection in a fashion show held in New Delhi. Models dazzled in neatly detailed, streamlined, beautifully cut shirts and trousers for all occasions, as per the theme 'Dress by occasion'. The look was further prepared with smart accessories, Swarovski embellished buttons in party wear collections, trendsetting footwear and smart casuals in myriad hues for the punk, as well as for the corporate gentlemen. Bollywood actors and models including Dino Morea, Rahul Dev, Rajneesh Duggal and Shawar Ali walked as the showstoppers on Friday and enthralled the audience with their alpha male oomph, wearing collection for each occasion.

VIP Aims for 30% Jump in Topline, to Target Youth

MUMBAI Luggage maker VIP Industries on Sunday said it is eyeing a 25-30% topline growth, besides strengthening of its position in segments such as handbags and backpacks, this fiscal. “This year, we are looking at . 975 crore revenues,” VIP Industries Chairman Dilip Piramal said here, adding that the firm is now targeting the youth. “The problem is that when you are an established company, the youth are not able to identify with the brand. So we are now targeting them,” he said. The company had roped in Bollywood actor John Abraham as the brand ambassador for its skybags and introduced Carlton, the premium fashion luggage brand, recently. The company's revenue for FY'11 stood at . 758 crore, while its profit was . 89 crore. As part of its expansion plans, VIP will launch ladies' handbags by the end of the fiscal. The ladies' handbag market is estimated to be worth around . 1,500 crore, with some key players being Hidesign and Baggit.

Angry Birds’ Maker may Seek Funds at $1.2-b Valuation

BLOOMBERG SAN FRANCISCO

Rovio Entertainment, the Finnish creator of the ‘Angry Birds’ mobile-phone game, is in talks to receive funding that would value the company at about $1.2 billion, two people with knowledge of the discussions said.
The Espoo, Finland-based game maker is considering taking a strategic investment from a company in the entertainment business, said the people, who asked not to be named because the talks are private.
The name of the entertainment company couldn't immediately be determined. Rovio has rejected similar offers from large institutional investors, the people said.
Rovio may use any new funds to fuel its expansion. The company plans to make an ‘Angry Birds’ movie and open offices outside Finland, and is seeking to capitalise on the popularity of its brand in countries such as China, where it aims to sell stuffed animals and clothing in 200 retail stores. The most likely investors in Rovio include game developers Electronic Arts and Zynga, and media giants News Corp and Walt Disney, said Michael Pachter, managing director of research at Wedbush Securities. These companies could help Rovio reach new audiences, he said.
“I can see how Disney would take ‘Angry Birds’ and turn them into a themepark ride and a movie,” said Pachter, who is based in Los Angeles. “Zynga could take ‘Angry Birds’ and make it into ‘FarmVille’.”
In March, Rovio received $42 million in funding from investors including Skype Technologies SA co-founder Niklas Zennstrom's Atomico as well as Facebook backer Accel Partners. Sini Matikainen, a spokeswoman for Rovio, declined to comment on the company's funding plans.Jeff Brown, a spokesman for Electronic Arts, declined to comment on potential investments. Dani Dudeck, a spokeswoman for Zynga, also declined to comment, as did Dan Berger, a spokesman for News Corp in Los Angeles. Zenia Mucha, a spokeswoman for Disney, didn't immediately respond to a request for comment. ‘Angry Birds’ is one of several Web games to be offered on Google's new social-networking site, the Mountain View, Californiabased company said in a blog post on Thursday.

SpiceJet Records 72-cr Loss in Q1

Low-cost carrier SpiceJet plunged into a loss for the first quarter ended June 30, 2011, as high fuel prices crimped margins and affected profitability. It posted a loss of . 71.9 crore. The Kalanithi Maranowned airline had posted a profit of . 55 crore in the yearago period. Revenue rose 32% to . 945.6 crore. The airline carried 25% more passengers in this quarter but the fuel bill, as a percentage of expenses rose to 53% this year versus 36% last year.
Experts feel that the company has fared better than expected. “SpiceJet has shown a healthy growth in volumes and have kept losses below . 100 crore, which shows that the airline has done better than expected. The next quarter — when airtraffic dips by a substantial number — may see recovery per passenger fall,” said global consultancy firm KPMG Director (Aerospace and Defence) Amber Dubey.
Meanwhile, the company has opened bookings for seven destinations as part of its regional operations.

Maruti Forced to Cut Production

Demand slowdown, inventory pile-up at dealers force move

OUR BUREAU NEW DELHI

    An inventory pile-up at its dealers has forced Maruti Suzuki, the country's largest car maker, to cut production this month as it grapples with a demand slowdown in the sector triggered largely by high interest rates and fuel prices.
Barring Swift and Dzire, the production of the high-volume Alto, WagonR, Estilo and Ritz has been reduced, Maruti chairman RC Bhargava told reporters on Friday. Maruti makes more than half the cars sold in the country.
“We are adjusting our production with market conditions. There are some models which are not moving fast enough given the sluggish demand. So, we have tweaked the production schedule to keep our inventory at the normal level,” Mr Bhargava said.
Car sales declined 16% in July, their first drop in two-and-half years, as rising interest rates and fuel prices forced customers to postpone purchases. The Reserve Bank has raised its key rate 11 times starting March 2010, pummeling demand. In India, some four-fifths of the cars sold are financed. Although Maruti is the first car company to formally announce an output cut, it had produced 17,000 fewer cars last month after it “rationalised” production between its Gurgaon and Manesar plants.
The carmaker sold 75,300 vehicles in July compared with 1,00,857 units a year earlier. The company has built enough buffer to meet market demand, which it expects to revive during the festive season, beginning September 1. “The current slowdown is short term and the demand is expected to revive during the festive season,” said Maruti managing executive officer (marketing & sales) Mayank Pareek. The company has internally cut its annual sales targets, expecting a single-digit growth for the year. The Society of Indian Automobile Manufacturers, the apex body of automakers, had projected growth of 16-18% for the rest of the fiscal, but has now revised it to 10-12%.
The company has, however, not changed its long-term plans and is looking at finalising the location for its new production facility in Gujarat by October, which would need an investment of about . 6,000 crore. Mr Bhargava said, “We have been looking at various sites for almost one year. Gujarat has an advantage as the Mundra port, where we have made substantial investment is located there.”
The company is looking at building a capacity of million cars a year. At present, it can roll out 1.3 million cars annually, which will go up to around 1.8 million cars by 2012-13 when the Indian car market is expected to reach about 4 million units.
Road Block
• Maruti’s car sales declined 16% in
July, its first drop in two-andhalf years

• Maruti had produced 17,000
fewer cars last month after it “rationalised” production between its Gurgaon and Manesar plants

• The company has built enough
buffer to meet market demand, which it expects to revive during the festive season, beginning September 1

Apple Copycat 'hiPhone 5' Comes Calling in China

The fake iPhone5 costs $31 and is up for sale on the e-commerce platform Taobao

REUTERS SHANGHAI

The latest version of Apple’s popular iPhone has already hit the fake Chinese market. The 'hiPhone 5' is selling for as little as 200 yuan ($31) on China’s top ecommerce platform Taobao owned by Alibaba Group. But one has to pay around 800 yuan for the “genuine” one, according to some shop clerks at a mobile phone market in Shanghai. “Look at this. It’s not the same as the 300-400 yuan ones,” Shanghai-based daily Metro Express quoted a clerk as saying, pointing to one originally priced at 850 yuan.
The 'hiPhone 5' is based on leaked images of the yetto-be-launched iPhone 5 and is thinner and with less rounded edges than the existing iPhone 4, according to the newspaper. However, it is extremely light, almost like a plastic toy, like most pirated mobile phones, it said.
Western governments have repeatedly criticised China for widespread violation of intellectual property rights, but pirated goods from branded watches, to bags and computer software are easily available. Last month, an American blogger set off a media storm after she posted pictures of an elaborate fake Apple Store in Kunming, selling genuine if unauthorized iPhones, Macbooks and other widely popular Apple products. Reuters also uncovered a look alike of the Swedish furniture giant Ikea in the southwestern Chinese city.
Apple, which is expected to roll out the latest version of the iPhone5 smartphone in a few months, sold a record 20.3 million iPhones in the last quarter, even though its latest model is over a year old.
Apple Blocks
Galaxy Tab Sales in EU SEOUL | SAN FRANCISCO Apple scored its most significant victory in its intellectual property battle against Samsung Electronics after a German court temporarily barred the Korean firm from selling its flagship Galaxy tablet in most of the European Union. The court order comes a week after Samsung was forced to delay the Australian launch of its latest Galaxy tablet because of a separate lawsuit alleging Samsung infringed on a number of Apple’s patents. Apple has said Samsung’s Galaxy line of mobile phones and tablets “slavishly” copied the iPhone and iPad. It has sued in the United States, Australia and elsewhere. Samsung, whose tablets are based on Google’s Android software, has countersued Apple. Samsung is clashing with Apple in many places, which could result in a temporary fall in sales and increase costs related to litigation,” said Lee Seung-woo, an analyst at Shinyoung Securities in Seoul. — Reuters

SPOT THE DIFFERENCE: A posed picture shows a real iPhone alongside a fake model, in Beijing

NEW BATTLEGROUND

Android’s Global Dominance Is Patent Pending

Intellectual property lawsuits threaten to raise the cost of making Android phones

PETER BURROWS & DINA BASS

Android, the mobile operating system from Google, has been on a tear over the past two years. Its share of the smartphone market rocketed from less than 3% to 48% during that time, according to research firm Canalys. Some analysts even think Android could one day be as dominant in mobile as Microsoft was on desktops in the 1990s.
Yet there’s one thing that may stop, or at least slow, Android’s ascent: patent fights. Google and HTC, Motorola, and Samsung, the three largest manufacturers of Android handsets, have each been hit with lawsuits claiming their mobile software violates others’ patents. To some extent, this is normal. Silicon Valley powerhouses have long wielded their patent portfolios to extract concessions from rivals. But Google, with fewer patents of its own and lots of enemies, is in a uniquely poor position. “This is an arms race,” says Christopher Marlett, chief executive of investment bank MDB Capital Group. “Other companies have more bombs than Google—and they’re not afraid to use them.” An abbreviated list of the ongoing litigation: Oracle is demanding the search giant pay $6 billion for using its Java mobile software. Apple has sued Taiwan-based HTC for violating its patents, and on July 15 a judge found in favor of the iPhone maker, which could result in a American import ban on certain HTC phones. In a similar suit in Australia, Samsung agreed on August 1 not to import a version of its iPad-like Galaxy Tab. In a company blog post on August 3, David Drummond, Google’s chief legal officer, called these suits “a hostile, organised campaign against Android…waged through bogus patents.” Patent lawsuits are often predictable. Company A sues Company B for copying an invention or proprietary technology. Company B digs through its own patent hoard, finds one it can accuse Company A of violating, and countersues. The two parties end up signing cross-licensing agreements that give the companies the rights to each other’s patents.
Google, a relative tech newcomer, has had less time to stockpile patents—especially in the mobile world, which it didn’t enter until 2008. And experts say that Google has historically treated patents and royalties as an afterthought. Like many young companies, “they have an attitude of, ‘Let’s generate revenue first and ask questions later,” says Joseph Siino, chief IP officer for patent consulting firm Pendrell. According to MDB, Google has applied for or received a total of 307 mobile-related patents, compared with 3,134 for Research In Motion, 2,655 for Nokia, and 2,594 for Microsoft.
Google is trying to address that imbalance. In July it kicked off the bidding for the patent portfolio of Nortel. Its $900 million offer lost out to a $4.5 billion bid from a consortium that includes Apple, Microsoft, RIM, and Sony, though Google that same month did purchase 1,000 patents from IBM. Shares of cellular technology developer InterDigital have leapt 59 percent since it announced it was putting itself up for sale, with many investors expecting Apple and Google to battle over the company’s patents. Intellectual property experts don’t think Google or its partners will be sued into submission, or that Android will succumb to death by a thousand lawsuits.
Few patents in tech history have been so fundamental that they couldn’t be worked around, says Marshall Phelps, the lawyer credited with pioneering the patent monetization business when he worked for IBM in the early 1990s. But the lawsuits could substantially raise the cost of making Android phones.
To settle an infringement claim, HTC last year agreed to pay Microsoft $5 for every handset it sells, according to estimates from Citibank Global Markets analyst Walter H. Pritchard. If other claims are successful, the total royalty bill could make Android hardware makers consider alternative phone software—including Microsoft’s—says Kevin Rivette, managing partner at 3LP Advisors. “Patents are the only card left for these established companies to play—and it’s an ace,” says Rivette. “Google has to figure out its hand, ASAP.” Any loss of momentum now could have a major impact on the pecking order in mobile for years to come.
“That’s how this patent game is played—at a very high level, by very smart people,” says Rivette. “It reshaped industries before, and it will reshape the mobile industry.”
The bottom line: Google and its Android partners are in a weak position when it comes to patent infringement claims.
BLOOMBERG BUSINESSWEEK

Android Wins Half of Smartphone Market

FRANKFURT Google’s Android platform has taken almost 50% of the global smartphone market, dominating in the Asia-Pacific region, research firm Canalys said on Monday. Android, which Google acquired in 2005 and launched on phones in 2008, is used by almost all the major phone manufacturers including HTC, LG, Motorola and Samsung. Apple — which shipped 20.3 million iPhones — is a distant second with a market share of 19%.

Piramal Healthcare Q1 Profit at . 89 crore

NEW DELHI Piramal Healthcare has posted a net profit of . 89 crore for the quarter ended June 30, 2011. The company had posted a net profit of . 80.7 crore in the quarter ended June 30, 2010. Net sales stood at . 440.98 crore for the quarter ended June 30, 2011. It was . 842.21 crore for the same period last fiscal. The results for the quarter ended June 30, 2011 are not comparable to the previous quarter on account of sales in the domestic formulations business to Abbott Healthcare and diagnostic services to Super Religare, Piramal Healthcare said.

Whirlpool Profit Falls 26% to . 51 crore

NEW DELHI Home appliances maker Whirlpool of India posted a 26% fall in its net profit to . 51 crore for the first quarter ended June 30, 2011. The company, which also reported a 7.8% decline in net sales during the quarter to . 790.5 crore from . 857 crore posted in the year-ago period, said it expects demand to pick up only by the first quarter of next fiscal.

InMobi Acquires US co Sprout

Deal value pegged at $20-50 m; buy to offer co product and technology capabilities

OUR BUREAU BANGALORE

    Independent mobile ad network company InMobi has acquired US-based company Sprout, which creates rich media mobile advertising, for an undisclosed amount in cash and stock, the Bangalore-based company announced on Tuesday.
However, according to a person with direct knowledge of the transaction, the deal value is between $20 million and $50 million. Company officials declined to provide the financial specifics. “This acquisition gives us product and technology capability that allows us to get leadership positions in most markets,” InMobi founder and CEO Naveen Tewari said.
Tewari also indicated that announcements relating to further acquisitions by InMobi could be made in the next six months. However, additional capital-raising plans are not on the anvil. “From a fund-raising perspective, we are not announcing anything now. We are always open for conversations, but we are not announcing anything right now,” he added.
The four-year-old company, which has marquee investors such as Kleiner Perkins Caulfield & Byers and Sherpalo Ventures, has raised about $16 million in venture-capital funding so far. “This acquisition will help scale the use of rich media advertising globally — a critical next step in helping the industry realise its full potential,” said Ajit Nazre, partner, Kleiner, Perkins, Caulfield & Byers.
The focus on India as a market has also increased.
“We see India as a very fast-growing market. Prices of handsets have come down and data prices have come down as well. Thirdly, with the advent of Android platforms, coming at almost a zero-drop price, you will have very sophisticated operating systems getting proliferated,” Tewari said.
InMobi, which builds technology for mobile advertising, is said to be among the largest mobile ad service companies, competing in a market dominated by Google’s AdMob. It reaches 314 million consumers in 165 countries, through more than 36.2 billion mobile ads per month, according to a company press release. “Thebrands are looking for ways where they can increase the level of engagement with consumers. Using the rich media, the time spent for engagement goes up 10 times,” said Tewari.
Adding Value
• The company has raised about
$16 m in VC funding so far

• Acquisition to help scale the use of
rich media advertising globally

• Company likely to make more
acquisitions in the next 6 months

Fortis may Acquire Vietnam Hospital

SINGAPORE: Fortis Healthcare is in talks to buy a controlling stake in Hoan My Medical Corporation, the Vietnamese hospital operator backed by Deutsche Bank (DBK), according to sources . Shareholders of the privately-held Hoan My plan to sell more than 50% of the company in a deal that may value it at $100 million. The acquisition would bolster Fortis’s expansion in Asia . Ho Chi Minh City-based Hoan My operates five hospitals and two clinics in Vietnam and plans to open more hospitals in the country.

Travel Cos Ready War Chest for Buys

Cos look at inorganic growth for bigger market share and faster expansion

MEENAKSHI VERMA AMBWANI & SOBIA KHAN
NEW DELHI

    Travel firms in India are preparing their war chests in anticipation of growing business out of the Indian market. While Cox & Kings has announced it is acquiring UK-based adventure and camping firm HolidayBreak for . 2,300 crore, several other firms, including Indian arms of international travel firms, are scouting for possible acquisition targets.
In a market that is largely fragmented, inorganic growth strategy will help companies grab a bigger marketshare and expand faster. As per industry estimates, nearly 85% of the Indian travel market is still controlled by small, unorganised or regional players.
Kuoni India, which owns travel companies SOTC and HRG Sita, is in talks to acquire travel companies in India and plans to close the deals in a few months. The company is learnt to be doing due diligence on three companies. “The Indian travel and tourism industry is expected to grow at a high, doubledigit growth in the next five years and Kuoni India wants to capture a share of this growing market. We are looking at specialist travel companies that bring value to our business,” Rajiv Duggal, managing director Kuoni India told ET. He said the company is keen to acquire a mid-scale company specializing in meetings, incentives and conference travel, individual travellers and outbound travel. Mr Duggal believes inorganic growth at this stage will help Kuoni gain market share and earn higher profits.
Analysts said inorganic acquisitions could help a travel industry firm gain consumer base, technology and talent . Le Passage to India, in which European firm TUI is a JV partner, has been looking for acquisitions for some time. “We are exploring several options at this stage for buy outs. But high valuations demanded by some players could be a deal breaker,” said Arjun Sharma, managing director, Le Passage to India.
Ashwini Kakkar, executive vice chairperson, Mercury Travels, said, there are several challenges for mergers & acquisitions in the travel industry. “There are very few independent mid-sized travel companies in India with a large chunk of market being controlled by regional and smaller players,” he said. He said an acquisition of smaller players is an extremely difficult task and could bring little value for the prospective buyer.
Mercury Travels, in which EIH owns 25%, is one of the leading, home-grown players. Others players like Bangalore-based Travel Tours Group have been successful in acquisitions here. It acquired Goabased Splendour Holidays, a charter and inbound tour operator besides adventure tourism firm Get off Your Ass. “We are open to more acquisition if it mixes well with our current portfolio ,” said Ashwini Narayanan COO TravelTours.

Kareena Kapoor Set to be Brand Ambassador of Lakme

Bollywood actress will also be the face of a real estate company soon

NANDINI RAGHAVENDRA MUMBAI

Bollywood actress Kareena Kapoor is set to be the new Lakme girl, said an agency insider on condition of anonymity. With 13 brands already in her kitty, Kareena will soon become the brand ambassadors of a real estate company and Lakme, taking her endorsement tally to 15.
Neither Kareena nor Lakme commented on the story.
At an average of Rs 3 crore every year for each brand, Kareena cuts across all demographics and has become a darling of the marketers—from laptops to shoes and telecom. “Kareena has become a benchmark for confidence and is quite aspirational. In fact, she comes right after the Khans and Ranbir in the list of endorsements, and if you count cricketers, only after Sachin and Dhoni,” says an agency insider, who tracks brand endorsements. What works in her favour, say people who have worked with her, is her fanatic punctuality. For a Head and Shoulders television commercial in Bangkok, she woke up at 3 am, drove two hours to location and arrived a half hour before the scheduled call time. Similarly, for a Sony Vaio shoot, she did nine costume changes in a single day. It is a fact that even director Raju Hirani vouches for, having worked with her in 3 Idiots.
For Lakme, using signature faces is nothing new. In fact, they have had a few Bollywood faces too, including Aishwarya Rai, Katrina Kaif, Juhi Chawla and Bipasha Basu. In fact, Aishwarya was signed on before she won the coveted Ms World crown.

LG, Samsung Lose Share in AC Mkt

Japanese AC makers Daikin, Hitachi and Panasonic eat into the market share of Korean firms

PRAMUGDHA MAMGAIN NEW DELHI

    Japanese air-conditioner makers Daikin, Hitachi and Panasonic have started eating into the market share of Korean firms LG and Samsung for the first time in a decade, thanks to aggressive pricing and launch of entry-level ACs.
While LG and Samsung together lost almost 5% of market share between January and May, the three Japanese firms were among the largest gainers, increasing their share to 11% from just over 9% during the period, shows GFK Nielsen India data. This was also the period when the country’s total AC sales more than doubled to 4.34 lakh units over January.
“Aggressive price cuts by the Japanese companies in the past one year have helped them increase sales volume,” said Ajay Bajaj, market leader LG Electronics India’s AC division head.
Premium players Daikin and Hitachi have launched lowpriced models to cut the price gap with the Korean brands to 10-15% from about 50% a year ago, and are supporting it with high-decibel marketing initiatives.
With just 3% households having an AC, there is huge scope for growth in the segment in the country. Growing at over 20% a year, the . 5,500-6,000-crore Indian air-conditioner market is expected to touch 3.6 million units this year. Split ACs account for twothirds of the market.
“We will continue to play aggressively in the volume zone,” Daikin Airconditioning India MD KJ Jawa said. Daikin launched 14 AC models this year with a starting price of . 26,000. Hitachi and Panasonic too have been expanding networks and portfolios as they target doubledigit market share in 2011.
The Koreans are feeling the pressure. “The game is getting tough. Competition has become intense with more players entering the entry and mid-price segment,” LG India National Sales Head Amitabh Tiwari said.
Samsung said its focus on highpriced split ACs in the past few months is also reflecting in the dip in its market share. “We are consciously focusing on split AC segment as users upgrade to split ACs,” Mahesh Krishnan, vicepresident (home appliances) at Samsung India, said.
LG, Samsung, Voltas, Videocon and Godrej increased AC prices 5-10% early this year to offset raw material price rise. Japanese companies were not affected because most of them import ACs, LG’s Bajaj said.

Waiter, There’s an Investor in My Pie

Venture capitalists falling over each other to fund restaurants, bars & pubs

RAHUL SACHITANAND MUMBAI

The Indian food and beverage (F&B) industry is attracting a surge of interest from investors interested in backing companies with scaleable businesses and a robust back end supply chain.
Riding on a growing propensity of eating out and growing disposable income, several businesses have either raised funds or are planning to do so. Investors are jostling with each other to fund these fast-growing enterprises. In mid-January this year, Jubilant Foodworks, the Indian franchisee of Dominos Pizza, was oversubscribed 31 times when it listed on the bourses, and is today quoting 501% higher than the issue price.
Others, including Devyani International, the franchisee for Pizza Hut, KFC and Costa Coffee, and OmPizza, the franchisee for Papa John’s Pizza, raised funds from ICICI Venture and TVS Capital respectively, catalyzing a spike in investor interest in the . 100,000 crore F&B market, which includes quick service restaurants or QSRs, fine dining restaurants, bars and pubs.
However, soaring rentals, questions over scalability of businesses and durability of backend operations could dampen their enthusiasm.
The promoters of BJN Group, which operates restaurants such as Angeethi and Firangi Paani, are set to sell a majority stake to fund ambitious growth plans. Mamta Bhatt, a Mumbai-based director of BJN, says the details have not yet been finalized.
Industry sources say the deal is stuck over valuations with BJN pressing for a higher price, given the potential in the market. “We have 36 restaurants across 14 brands and we want to expand across the board,” Bhatt says.
Ravi Jaipuria, India’s leading beverage bottler and chairman of Devyani International, will use funding from ICICI Ventures to plot expansion of the Pizza Hut chain from 200 stores to around 350 in the next 12 to 18 months.
With cuisine preferences changing rapidly and disposable incomes growing, Jaipuria says people are flocking to restaurants such as Dominos, McDonald’s and even local restaurant chains. “The F&B business is one of the fastest growing industries in India … venture capitalists back growth industries and there will be many more investments in the next couple of years,” predicts Jaipuria. Analysts expect the industry to grow at a cumulative average rate of 20% annually for at least the next five years.
Gaurav Jain, co-founder of Mast Kalandar, a no-frills QSR chain that serves north Indian food in Bangalore, says he will quadruple the number of restaurants he runs from 25 to 100 in the next 18 months. He raised funds from investors including Helion Ventures last October, which will last until he has set up 75 to 80 units; Jain will then raise another round of funding, likely from venture capitalists.
Kanwal Singh, Managing Director, Helion Ventures, reckons that Bangalore itself can absorb 50 to 60 Mast Kalandars.
Deepak Shahdadpuri is one of the older investors in India’s foods business, having made an early investment in Sula Wines back in 2004. Since then he has backed two more companies: Baker’s Circle, a bread maker for top QSRs like Subway) and Impressario Entertainment and Hospitality, which runs the Mocha coffee bars, Smoke House Grill and Salt Water Café fine dining restaurants. Now, Impresario will soon be in the hunt for more funds. “To give you an idea of the potential, I invested in Impressario when it had a dozen Mocha outlets; today it has 34 and will near triple this to 100,” says Shahdadpuri.
Indians, on an average, eat out just 1.2 times a month; in Singapore, the number is 40. “Even if this number goes up to four in India, this will be among the largest opportunities in the market,” says Riyaaz Amlani, CEO and Managing Director of Impresario.”
There is a growing preference for branded eateries and an Indian brand may have the upper hand in terms of local knowledge of cuisine and customs,” he adds.
Analysts think that with the right recipe, the F&B business can be a gold mine. Says Pinakiranjan Mishra, Partner at consulting firm Ernst & Young: “This is a very high-margin business and with people eating out more often and willing to pay for quality, there is plenty of opportunity for growth.”
But not every business will make it. K.P. Balraj, Managing Director of Sequoia Capital, who has seen the rise of Café Coffee Day (CCD) and Jubilant, thinks the success of such businesses will be limited. While CCD had the first-mover advantage in what is now a crowded and competitive business, Jubilant has focused on fine-tuning the supply chain and using a franchiseeheavy structure to k keep costs, especially rentals, relatively low. “Food retail is a tough business to operate in India since realty costs are high and scale of operations has yet not been established by most firms,” says Balraj. And consumers are as yet unwilling to pay a premium for quality,” he adds. Mast Kalandar’s Jain admits to dealing with these concerns. “Rentals alone can be up to 12-15% of your revenue …it’s hard to find good real estate and when you do, its often expensive.” Despite all these concerns, entrepreneurs believe that there’s massive untapped potential in the Indian market. Rustling up the right recipe for their businesses may hold the key to making a success of their enterprises.

CONNECTING PEOPLE, AGAIN

Nokia Turns to Mobile Money to Revive Fortune

Drops ‘Nokia’ from fin service name, makes it accessible on all handsets

OMKAR SAPRE PUNE

Nokia, whose domination in the mobile handset market is under severe threat, is betting on mobile money — a service that lets people without bank accounts pay bills and retailers, send money and save money through their handset —to revive its fortune.
The Finnish firm has formed a company, Nokia Mobile Payments, to roll out this service, branded Money, across the country after pilots in Pune, Nashik and Chandigarh.
And it won’t use the ‘Nokia’ name because its accessible on all mobile phones.
“We have branded the service as Money because it’s built on open architecture and works on all phones,” Nokia Mobile Payments General Manager Gary Singh says.
Unlike mobile banking, which is an additional channel to those with bank accounts, mobile money is positioned as an alternative to cash for the unbanked and underbanked population.
Nokia is among the first bench of companies offering mobile money in the country, a new buzz among banks and mobile service providers after it got the central bank clearance in 2010 with the condition that the money must be parked in a traditional banking system.
“We aim to work across all handsets, all operators and all banks,” says Singh.
MAKE OR BREAK Analysts say mobile money will be crucial for Nokia to check the free fall in its mobile handset sales.
“Over the last two years there has been a huge onslaught of local (handset) brands, which have had a deeper penetration into the market. So to get closer to those customers, Nokia has taken a right strategy to go with an open brand name,” says advisory firm Deloitte India Director Sandip Biswas. The world's largest handset maker is losing its hold in the market. According to Gartner, Nokia’s global market share stood at 25.1% in Q1 2011, down from 39.1% Q1 2008. In India, its share slipped to around 30% in 2011, down from over 70% in 2007 and 54% in 2009. That explains why the most respected brand in the country opted not to use its brand name in perhaps its most ambition project in the country.
SLOW START Mobile money has huge potential in India where nine out of 10 villages don’t have a bank branch and 97% retailers lack facility to accept credit cards. On the positive side, there are some 84 crore mobile phone users in the country and this number is growing around 2% every month.
But there is strong competition. While Nokia has tied up with Yes Bank and Union Bank of India for the service, its rivals include mobile operators Airtel, Vodafone, Idea Cellular and Aircel that have combined with SBI, ICICI Bank and Axis Bank.
However, despite the launch of pilots by all, mobile money is still to gain popularity.
The number of registered mobile money users has risen to 1.13 crore in June 2011, from 400 in August 2010, but the number of transactions has crawled to 6,401 from 430.
Observers say none of the operators, banks or even the RBI is promoting mobile money. On the ground, agents find it challenging to convince end users. “Many do not know about it and there is a very less use by those who have enrolled,” says Shailesh Khandelwal, a sub-agent of Nokia in Pune. “The company should tell people about it.”
Rajashree Malusare, another Nokia agent, says that text message-based system is a hindrance. “Sometimes the transaction does not go through, but the customer is charged for the SMS.”
She, however, says many customers like this service and are eager to explore it.
Mahesh Pardeshi is one such customer. “It is great to see I can recharge my talk-time using my phone itself, and not walk to the shop every time. They (the agents) told me I can also pay for services, though I have not used it yet,” he says.

Chrome Launches TV Data for North-East

NEW DELHI Chrome Data Analytics & Media has launched a North East report, saying that 4.15 million houses in the region have cable and satellite TV connections. That is about 4% of the total TV connections in the country. Television rating agencies TAM and aMap have been criticised by the Information & Broadcasting ministry for not covering areas like Jammu & Kashmir and North East.

Joono Simon Joins Ogilvy Bangalore as ECD

MUMBAI Joono Simon will be in charge of the creative department at Ogilvy Bangalore. Simon moves to Bangalore and back to India after a brief stint with Leo Burnett Colombo. The office has apparently not had a creative chief after the departure of Amit Akali and Malvika Singh who moved to Grey India as national creative directors a little over a year ago. Ogilvy Bangalore has brands like Bingo from ITC, Titan, IBM and Allen Solly.

Tata Motors to Rejig Dealerships Strategy

NEW DELHI Tata Motors on Tuesday said it is rejigging its dealerships with plans to open product categoryspecific outlets as it looks to increase sales volumes of passenger vehicles. The company, which currently has 250 full-range dealerships, will open 300 Nano-specific and 100 utility vehicle-specific showrooms by the end of this fiscal.

Liberty Ropes in Hrithik as Brand Ambassador

 NEW DELHI Footwear retail firm Liberty Shoes on Tuesday said it has appointed Bollywood actor Hrithik Roshan as its brand ambassador. "Hrithik has an immense sense of style and connection with the youth that complements Liberty, which is trying to revamp the brand by adding youthful and vibrant feel to it," Liberty Shoes Director Anupam Bansal said in a statement. The firm said it will introduce a range of new products across all brand portfolios by the end of this month. Besides, it is also planning to strengthen its presence in the southern markets by opening up at least 50 stores.

Bajaj Auto Sales Rises 14% in July

 NEW DELHI The country's secondlargest two-wheeler maker Bajaj Auto on Tuesday reported a 14% jump in total sales in July, 2011, to 3,63,712 units. The company sold 3,18,415 units in the corresponding month last year, Bajaj Auto Ltd (BAL) said in a statement. Motorcycle sales stood at 3,18,095 units during the month, as against 2,79,781 in July last year, translating into a 14 per cent increase. The company said commercial vehicle sales amounted to 45,617 units last month, as against 38,634 units in the same period last year, up 18 per cent, it said.—PTI

Wockhardt to Sell Nutrition Biz to Danone for $356m

Wockhardt said on Tuesday that it has signed an agreement with French food company Danone to sell its nutrition business, which include brands such as Farex, Dexolac, Nusobee and Protinex. The transaction size is not known but a news channel estimated the value to be around €250 million ($356.3 million).

RIM Overhauls Blackberry for iPhone Battle

BLOOMBERG TORONTO

Research In Motion (RIM) is releasing three new versions of its BlackBerry smartphone simultaneously in the first overhaul of the handsets in a year as the company tries to regain ground from Apple. RIM is introducing the first touchscreen version of its Bold model, plus an updated Torch slider phone and a new touchscreen-only BlackBerry, all based on RIM’s new BlackBerry 7.0 platform, said Patrick Spence, managing director for global sales and regional marketing. The three devices will be available from 225 carriers, with some operators starting next week, in the “biggest launch in the history of BlackBerry,” he said on Tuesday. RIM is counting on the phones, the first new models since August 2010, to reverse a revenue slowdown that led to RIM’s prediction in June that sales this quarter may drop for the first time in nine years.
All the models include pinchand-zoom browsing and Web-page loading speeds that are 40% faster than the old Torch, said Spence. “We’re taking it a step further by enhancing the browsing experience, which is something we know we had to work on,” he said. With the addition liquid graphics that render images faster and make zooming smoother, “it’s an industry-leading experience,” he added.

Turbocharged Race

THE LEADERS... MARUTI SUZUKI Product range: 800, Alto, Ritz, A Star, Wagon R, Swift, Estilo, Dzire, SX4, Kizhashi, Eeco Installed capacity: 1.75 million per annum Market share: 41.67%
HYUNDAI Product range: Santro, i10, Getz, i20, Accent, Verna, Elantra, Sonata
Installed capacity: 6 lakh per annum Market share: 15.48%
TATA MOTORS Product range: Nano, Indica, Indigo CS, Manza, Safari Installed capacity: 5.5 lakh per annum Market share: 12.66%
...THE COMPETITORS... GENERAL MOTORS Product range: Spark, Beat, UVA, Aveo, Optra, Cruze, Tavera , Captiva
Installed capacity: 2.25 lakh per annum Market share: 4.4%
FORD Product range: Figo, Fiesta, Endeavour
Installed capacity: 2 lakh per annum Market share: 3.54%
HONDA SIEL Product range: Jazz,City, Civic, Accord, CR-V
Installed capacity: 1 lakh per annum Market share: 1.29%
FIAT Product range: Grande Punto, Linea
Installed capacity: 1 lakh per annum Market share: 0.94% …AND THE NEWER CHALLENGERS TOYOTA Product range: Liva, Etios, Corolla, Camry, Prius, Innova, Fortuner
Installed capacity: 1,50,000 and by September 2011 to 2,10,000 Market share: 4.85%
VW Product range: Polo, Vento, Jetta , Passat, Phaeton
Installed capacity: 1.3 lakh per annum Market share: 3.08%
NISSAN Product range: Micra, X Trail, Teana, 370Z
Installed capacity: 2 lakh (another 2 lakh by May 2012) (Renault-Nissan combine)
Market share: 0.73%
RENAULT Product range: Fluence Market share: 0.048%

Of the top three, Tata Motors seems to be the weakest. Nano didn’t give them the market share
RC BHARGAVA
Chairman,Maruti Suzuki

There is demand, but we are all constrained by capacity
MICHAEL BONEHAM
MD, Ford India

Audi to Roll Out Used-car Biz in India by Year-end

GURGAON German luxury car maker Audi said it will start used-car business in India by the end of this year, expecting it to account for up to 20% of its new car sales in future. “The way Indian market is growing, there is an opportunity in the used car business and we also want to tap it. By the end of the year, we will start our used car business under the Audi Approved Plus brand,” Audi India Head Michael Perschke said. The company on Wednesday launched the new version of its sedan A6 priced between . 37.7 lakh and . 47 lakh (ex-showroom Delhi), which will be available in four variants.

General Motors India Ropes in Piaggio’s Khosla

PUNE General Motors India, the passenger car manufacturer which is planning to enter the utility vehicle segment next year, has roped in Ashutosh Khosla as its director, sales and marketing, commerical vehicles. Mr Khosla, who was with Piaggio Vehicles will be based in Pune. Karl Slym, president and MD, GMI, said: “We have recently inducted Mr Khosla to head the commercial vehicle business. We plan to introduce utility vehicles from SAIC’s portfolio, next year.” GM has recently entered into a joint venture with Chinese automobile company SAIC.

Premium Truck Sales Enter Fast Lane on Core Growth

The segment is expected to grow 50% this year

LIJEE PHILIP MUMBAI

    Sales of premium trucks are replicating the successful run enjoyed by top-end passenger cars, as transporters see sense in buying larger and more fuel-efficient vehicles to keep pace with the fast-growing infrastructure sector.
A slew of high-end truckmakers such as Daimler, Volvo, Mahindra Navistar, Scania and homegrown Tata Motors Prima and Ashok Leyland’s U truck are vying for a share of the premium pie that is expected to grow 50% this year.
Experts said, sustained export growth, expansion of highways and need for better logistics will see sales of highend commercial vehicles touching 11,000 this year. Premium trucks handle better, are safer, comfortable and more fuel-efficient. Priced between . 20 lakh and . 70 lakh, these high-end trucks sold over 7,000 units in 2010, growing nearly five-fold in three years.
Right now, these trucks form a fraction of the total commercial vehicle sales, which grew 14% to 1.72 lakh units during April to June. “Highend truck sales are growing at a faster pace, but the base is still low,” said Amol Sandil, EVP, Hino Motors India, which recently launched a range of high-end trucks in the country.
Sales of tippers, tractor-trailers, multi-axle and rigid trucks are up, following an increase in container freight, mining and construction activity.
Experts said, sales growth of high-end trucks will see some products in the market, such as 16- and 20-tonne mediumand heavy-commercial vehicles, being replaced by 25-, 35-and 40-tonne vehicles.
“Transporters are becoming revenue-oriented, instead of cost-oriented,” Mahindra Navistar managing director Nalin Mehta said, and added that the fleet operators are now looking at carrying more load and doing more distance and not worrying about price and fuel cost.
“Fleet operators’ buying behavior is changing from acquisition cost to total cost of ownership,” said Somnath Bhattacharjee, EVP-sales, marketing and aftermarket president, Volvo Trucks.
Truck drivers, too, have started demanding more comfort, safety and quality. “Operators buy these trucks for driving comfort at top speeds,” Ashok Leyland executive director Rajiv Saharia said. The Chennai-based truck-maker recently launched the U range of high-end trucks.
However, some fleet operators are skeptical about the return on investment. A Mumbai-based operator said it was still a niche product for certain high-end applications.
Hot Wheels Sales of high-end
commercial vehicles will touch 11,000 units this year, say experts
Currently, these trucks
form a fraction of the total commercial vehicle sales, which grew 14% to 1.72 lakh units during April to June

Shriram Group to Foray into Hsg Finance

Group expects to get NHB approval soon, open to selling 49% stake in the business

APURV GUPTA MUMBAI

Diversified non-banking financer Shriram Group is likely to launch its housing finance business in August and is in talks to sell up to a 49% stake, persons familiar with the matter told ET.
The . 40,000-crore Shriram Group, which will compete with players such as HDFC, LIC Housing and Dewan Housing, and banks such as State Bank of India and ICICI Bank, expects to get approval from regulator National Housing Board (NHB) within a few weeks. An investment banking source told ET, “We have been approached to find an appropriate partner for Shriram’s housing finance foray. It is open to selling up to 49% to financial or strategic investor and expects a book of . 4,000 crore over four years.”
The housing finance business will be a 100% subsidiary of Shriram City Union Finance (SCUF) and will have a capital base of . 100 crore. It is headed by Sujan Sinha, who was earlier with Axis Bank. “We are expecting the requisite approval shortly. Nothing has been finalised on the stake sale front. While financial investor is a possibility, we don’t require a strategic investor as we have enough knowledge of the lending business. We have a good market share and we can leverage the existing customer base,” said Subhasri Sriram, ED and CFO, SCUF.
The housing finance company will target middle-income customers, largely in tier-II and tier-III cities, with a ticket size of loans at . 10-30 lakh. SCUF will focus its housing finance operations across the country. SCUF has a customer base of more than 6.25 million borrowers and caters to product segments in retail loans. A separate housing finance entity will help SCUF avoid any asset liability mismatch.