BizzBlogg

Chat “interoperate” between Yahoo and Msn

2006-07-13T12:44:00.000+02:00

I wonder if the decision made in these last days by Microsoft and Yahoo! to allow their respective chat clients to talk to one another has more to do with:
a) The success of Trillian
b) How much MSFT and Yahoo! fear the connection of AOL and Google Talk.
After all, Google owns 5% of AOL and could one day own it all, making their instant messaging tool the market leader.

Yahoo Inc. and Microsoft Corp. said they have begun a limited public test to allow users of the companies' respective instant messaging programs to trade messages with one another. The agreement to work together, first announced last October, marks a long-awaited breakthrough among major instant messaging services, which include AOL's pioneering AIM service, Microsoft and Yahoo, along with more recent upstarts including eBay Inc.'s Skype and Google's Google Talk.

Specifically, users of an upgraded version of MSN Messenger, recently rebranded "Windows Live," can trade messages with Yahoo Messenger, creating the world's largest instant messaging community, with 350 million accounts.

These instant messaging, or IM, systems allow users to type messages to others on their "buddy list" via computers and in some cases over mobile phones. Historically, each provider sought to create "walled gardens" that prevented users of one IM system from talking to users of rival systems.

AOL agreed in December to make its U.S.-market-leading AIM eventually work with, or to use the technical terminology, "interoperate," with Google Talk, but no date has been set to do so. AIM users can already chat with users of Apple Computer iChat system for Macintosh computers. Google and AIM work with various other independent IM projects too.

With the Yahoo and Windows deal, icons will allows users to distinguish which program their IM contacts are using. Yahoo and Microsoft plan to make interoperability between their services broadly available in the coming months.

Consumers have pretty much settled in and defined their preferred IM systems and buddy lists, It does make it easier for many consumers who will need to keep one less instant messaging system up and running now.

U.S. Internet traffic measurement firm Nielsen//NetRatings data shows AIM with 47.2 million users in June, compared with 28.0 million MSN/Windows Live users and 22.5 million Yahoo Messenger users. The unduplicated audience of Microsoft and Yahoo was 43.5 million U.S. users, the survey showed.

Yahoo and Microsoft took issue with these numbers, citing comScore Networks's global figures which showed that Microsoft IM had 204 million users and Yahoo IM had 78 million users worldwide. AIM had 34 million users, the comScore data showed.

Keeping in perspective the inflation risk

2006-07-11T19:42:00.000+02:00

In both the United States and the euro zone, headline inflation has risen above target rates (4% and 2.5%, respectively). Although core inflation tends to remain under better control, it is accelerating in the United States, and is poised to rise in the euro zone as well.

In response, the Fed raised its key target rate to 5.25%, and the ECB will surely follow suit, raising the refinancing rate to 3.50% before the end of the year. This tightening movement is likely to be followed by a pause, at least according to the signals suggested by economic fundamentals, especially if monetary policy is to be considered “forward looking”.

It is important to keep in mind the following factors:
1) Inflation - and core inflation in particular - is a lagging indicator.
2) The moderating impact of past rate hikes has not materialised yet.
3) The American and European economies are heading for a slowdown next year, which means that growth rates are likely to fall below their long-term potential. This should buffer the impact of inflationary pressures, and current fears should gradually ease.

Yet, more is at play. In increasingly open economies, inflation rates no longer depend solely on internal conditions. Imports, particularly those from emerging market countries with low wage costs, are making a greater contribution to domestic demand. The risks of imported inflation are reduced by the enormous surplus production capacity worldwide. This is true in terms of physical plant (China’s high investment rate is very telling) and in the scope of under-employed labour in the countryside – the steady stream of labour toward urban areas and non-farm sectors is accompanied by greater productivity gains as well as by a moderating impact on wages. Moreover, the opening of markets to the exterior strains wage formation in the developed countries.

Real wages, in both the United States and the Eurozone, are not rising as fast as one would expect at this stage of the cycle: traditional Phillips curves no longer reflect the relationship between unemployment and wages. Several factors have curbed wage momentum: globalisation and the fear that production will be relocated abroad; restructuring and the impact of legal and illegal immigration on protected sectors like construction and services, which cannot be relocated abroad. In an environment marked by the internationalisation of all markets – financial, goods & services and labour – monetary policy decisions can no longer be based solely on internal conditions like unemployment or, to a broader extent, production capacity utilisation rates.

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United Kingdom widening current account poses no serious risk

The UK current account has been in deficit since 1984. In 2005, the deficit stood at 2.2% of GDP. In 2006 Q1, the deficit rose to 2.6% of GDP. These data imply that the UK has been a net seller of assets to non-residents for more than 20 years. One could question if such a long period of deficits could continue unabated.

The structure of the current account
Looking at the current account, one is struck by several aspects. Since 1946, imports of goods have exceeded exports in almost every year. Moreover, in recent years, the trade deficit has been widening. It stood at around 1.6% of GDP in the middle of the 1990s and reached 5.5% in 2005. This is due to the continuing decline of the British manufacturing sector. The deficit of the trade balance has been compensated by surpluses on the services and income balances. Services exports are now about 50% of goods exports, confirming that the British economy is becoming more and more a services-oriented economy.

In particular, the UK wholesale financial services sector ("the City") has established itself as one of the major international financial centres in terms of liquidity and product diversification. In recent year, the surplus on the services balance has been fluctuating in a narrow band between 1.5-2.5% of GDP. The most remarkable fact is the strengthening of the incombe account.

Its surplus rose from close to balance in the mid 1990s to 2.4% by 2005, thus limiting the deterioration of the current account. This development was remarkable, as one would have expected that the continuing sale of assets to non-residents
would have led to weakening of the income account.

The UK net asset position
Both UK gross foreign assets and liabilities have dramatically risen during the past 40 years, from around 40% of GDP in 1966 to close to four times GDP by the end of 2005. However, due to accumulation of deficits on the current account, liabilities have risen more rapidly than assets, and since 1995, the net asset position has been negative. What stands out in this development is the improvement in the direct investment balance. It implies that UK residents have been buying foreign firms, sometimes in exchange of equities. For example, in 2000, direct investment was dominated by the purchase of Mannessman by Vodaphone. As this was financed by an exchange of shares, it appeared in the accounts as a large direct investment inflow balanced by an equity outflow in portfolio investment.

Direct investments tend to be underestimated in the accounts as they are measured at book value. Only non-repatriated profits are added to the stock of direct investment (and also on the current account as income from abroad). By collecting data on the difference between the valuation against book value and market value of 167 companies, Pratten suggests book value ratios of 1.75% for outward investment and 1.50 for inward investment.
- 1 Using these estimates, Nickell calculates that the overall net asset position has remained positive, and is virtually unchanged compared with 1990.
- 2 In addition, the returns on different assets vary widely. The implied return on direct investment is generally higher than on other assets. This is even the case after the market value correction. According to Nickell (op. cit.), the substantial improvement in the income balance can be attributed to the sharp rise in the return on direct investment.

The sustainability of the current account largely depends on the development of the trade deficit, and the possibility of the income account to continue to provide a substantial positive contribution. The deficit on trade balance is related to the strong appreciation of sterling and the ensuing losses in competitiveness. We do not project a reversal of this trend. For 2006-2007, the trade balance is projected remain virtually at the same size. The UK’s net portfolio position is strongly positive in equity type instruments (direct investment, equity investment) and strongly negative in debt type investments (debt securities, bank loans,…).

The capital gains on the former are likely to be higher than those on the latter, suggesting that the revaluation of the asset portfolio could continue to offset the current account deficit.

The major risk to this scenario is that the return that foreigners earn on their UK assets would increase substantially compared to the return of UK residents on foreign assets. This could happen if returns on equity investment would come down relative to returns on debt-type instruments.

Although this possibility cannot be excluded in the short-term, it is unlikely to persist in the medium and long term, due to a positive risk premium on equity investment.

A second possibility is that the portfolio composition of non-residents will converge to that of UK residents by foreigners buying more UK equities. An increased appetite for UK assets by non-UK residents is indeed a possibility, but such a development will only be very gradual. Finally, a permanent real appreciation of sterling may lead to a significant fall in UK assets relative to liabilities. As sterling is already overvalued, such a scenario seems rather unlikely. All in all, we expect the financing of the UK current account deficit does not those a serious problem in the medium term.

Italy: Consumer confidence down in March

2006-03-22T18:16:00.000+01:00

Italy: Consumer confidence down in March

- Italian consumer confidence fell back in March, following its jump last month when it reached a 3-year peak.
- This fall was due to a deterioration in households’ assessment about the overall economic situation (current and future prospects) which was not offset by the improvement in the national economic climate index.
- All in all, fundamentals, amongst which the generous wage deals decided in the latest round, support the view of an acceleration in household consumption this year.

Italian consumer confidence fell back in March, following its jump last month when it reached a 3-year peak. The ISAE composite index lost 0.8 point at 109.2, remaining thus far above its cyclical lows.

This fall was due to a deterioration in households’ assessment about the overall economic situation (current and future prospects). This drop contrasts with growing optimism in Italy’s neighbour countries, France and Germany. Furthermore it was not offset by the improvement in the national economic climate index.

The national economic climate index was up by 0.9 point, at 94.3, its highest level since October 2004. Both assessments of the current situation and expectations improved. Expectations (almost constantly in negative territory since the beginning of the survey) increased the most, up from -21.0 to -13.0, reaching its highest level since June 2002. Nonetheless, a higher proportion of households expected an increase in unemployment in the next 12 months, despite the fact that unemployment rate had remained stable at a 10-year low in Q4 last year for three quarters in a row (7.7%), thanks to the registering of illegal workers and the addition of temporary and part-time jobs to the workforce.

Conversely, the personal economic climate index deteriorated, down from 118.0 to 115.9, as the approach of the general elections probably cast doubt on future economic developments in Italy. Nonetheless, households said they were more prone to buy durables (up from -99.0 to -94.0) as their sentiment about their current financial situation remained stable over March.

All in all, the March fall is probably a correction following the peak reached in February. Indeed, fundamentals, amongst which the generous wage deals decided in the latest round, support the view of an acceleration in household consumption this year.

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US: Rebound in industrial production in February, despite a pause in the manufacturing sector

Industrial production recovered by 0.7% m/m in February (after -0.3% m/m in the previous month). This rebound was exclusively due to the (partial) catching up in the utilities sector (+7.9% m/m). By contrast, output declined slightly in the mining sector and remained stable in the manufacturing sector.

- The rate of capacity utilisation bounced back to 81.2% from 80.8% in January.
- Recent surveys conducted in the manufacturing sector have remained very favourable.

Rebound in industrial production in February, despite a pause in the manufacturing sector
+0.7% m/m, thanks to the upward correction in the utilities sector.

Industrial production recovered by 0.7% m/m in February (after -0.3% m/m in the previous month). In both q/q (annualised) and year-on-year terms, healthy growth rates underline the current robustness of the industrial sector (+8.3% and +3.3% respectively).
This monthly rebound was exclusively due to the (partial) catching up in the utilities sector, following a huge temporary fall in January, resulting from exceptionally mild weather conditions (+7.9% after -11.5% m/m).

By contrast, output declined slightly in the mining sector (-0.5% m/m) and remained stable in the manufacturing sector (following four consecutive sharp increases).
The rate of capacity utilisation back on the way up (81.2%).

The rate of capacity utilisation bounced back to 81.2% from 80.8% in January. It thus came back to its December level. Within the manufacturing sector, it remained broadly unchanged (80.1% following 80.2%).
The upward trend in capacity utilisation in past months contributes, along with stronger labour market tensions (i.e. unemployment rate below 5%), to explain why the FOMC remains cautious with regard to inflationary pressures

Surveys point to strong activity ahead.
Recent surveys conducted in the manufacturing sector have remained very favourable. In particular, the February ISM survey and our March NEM index (which is derived from the New York and the Philadelphia Fed surveys) pointed to more dynamic output and new orders .

BizzBlog Focus for September 23, 2005

2005-09-22T14:25:00.000+02:00

ECONOMY – EUROPE

Equity strategy some themes for the next five years
If you want to know my next week's favourite short you should stop reading now. This is about some themes I believe in for the next 4 to 5 years.

Equities and commodities to beat bonds. No large liquid asset class is likely to beat equities, apart perhaps from commodities. Equities are the only large, liquid asset class to benefit from economic growth. For equities I expect 3.5% dividend yield plus 1.5% real GDP growth, for a 5% real return. This compares with nominal German bond yields of just over 3%, and real rates of close to 1%, which I believe will rise. Commodities may do as well as equities or even better, as Asian (China and India) demand and lack of supply provide a favourable backdrop for another 5 to 10 years.

I prefer play European equities over U.S. equities. European equities in a global context are still catching up. Europe is still an exciting equity market that is catching up through issuance, privatisation and hopefully more entrepreneurship, the latter in part driven by favourable macro reform. In Continental Europe, market cap to GDP ratios were 4 times lower than in the U.S. in 1994, and still 2 times lower in 2004. European valuations are at a 28% discount to the U.S., versus a 20% historical average discount.

Buy European investment banks and consolidating industries like Telcos – new Tech - and Continental European banks. I think the corporate spending boom has much further to go. M&A as a percentage of market cap troughed in 2003 at 6% and is currently annualising at 10%. The peak was in 1999 at 14%. Another sign that I are early in the corporate spending boom is that bidders are outperforming the market and outperforming the targets if measured after the announcement. Corporate balance sheets are strong. Furthermore, private equity and LBO activity is rampant, as this is one of the most effective ways to benefit from low rates and low equity multiples.

The big risk is a consumer-, debt- and property-led recession around the world. This would be triggered by higher rates in the U.S., driven by the large current account deficit and the lack of household savings. The big surprise would be that Germany and Japan take over as drivers of global growth by sorting out their problems, and by their consumers spending more and saving less. My personal recommendation: Buy German and Japanese equities, avoid U.S. consumer exposure.

My model portfolio changes today I am buying Ciba Specialty Chemicals, WPP and ICAP, and selling Atlas Copco and BASF. The main theme is we are buying cyclical laggards on low/trough margins, and selling cyclical out performers on high/peak margins.

Materials remain my biggest overweight, with a heavy focus on cyclical laggards on low/trough margins, such as Paper and Specialty Chemicals. Media becomes my personal 3rd biggest overweight. Capital Goods become my biggest underweight.
- Ciba Specialty Chemicals (SFr 78.70) is expected to have an operating margin of 8.2% this year, just off last year's cycle-trough at 7.4%. Historical peak margins were 12.5% in 2001. The stock trades on an EV/sales of 1.1, at the bottom end of its historical range of 1 to 2.5. I view it as a classical cyclical laggard. Any move up in the dollar would help, as would moderation in the rise in raw materials input costs, which are currently at record highs.
- WPP Group (570p) has accelerating organic revenue growth, on my personal forecasts, together with rising margins. Global agencies are benefiting from strong Asian growth and recovering spirits within the corporate sector as the spending recession of the last few years ends. On 8.2x 2006 EV/EBITDA it is at a discount to its peers.
- ICAP (price 349p) trades at a 15% discount to other inter-dealer brokers and a 26% discount to other exchanges on estimated 2006 P/E of 16.3. Electronic trading now accounts for just 10% of revenue but is growing fast and is higher-margin business. Derivatives are a structural growth area.
- Atlas Copco (SKr 140). This stock has done very well. The analyst now expects 2006 EBIT margins of 18%, versus a previous peak of 15.1%. Average EBIT margins between 1999 and 2004 have been 12.9%. I do think the good news is in the price though. Its 2006 P/E is 13.3x, but its normalized P/E could be 20% higher if not more, we estimate. 2006 IBES P/E for MSCI Europe is 12.7 times.
- BASF (€60.10). Close to peak margins. Only 2% 2006 dividend yield versus market on 3.3%, I estimate. Has been a great stock but is now close to price target.

ECONOMICS - JAPAN

Koizumi Victory To Speed Reform
Prime Minister Koizumi's coalition won 327 seats in the Lower House. This exceeds the 2/3 majority needed to override rejection of bills by the Upper House. As a result, the postal reform bills will likely pass easily. Momentum for other reforms will rise, and the anti-reform forces are splintered, giving PM Koizumi a freer hand. The next areas are expected to include medical reform, civil service reform, public sector outsourcing, and government financial institution reform.

Market overview implications.
1 - Prospects for faster, more thorough reform should support the equity market.
2 - Bond markets will like the better prospects for fiscal reform, but fear the implied stronger economy.
3 - The yen will gain from more foreign money flowing into Japan, but lose from the lower risk aversion of domestic investors, who will send more funds out of Japan.

Two major risks. (1) The LDP could succumb to infighting. (2) Facing a fractured opposition, the LDP could become complacent.

FINANCE - JAPAN

Japan equity strategy vision
The Koizumi victory suggests a major shift to policies based on voter approval. The Koizumi government is establishing a new order in Japan's politics. This election moves Japan toward policy-driven politics, led by the prime minister. It also redefines elections to be tests of the popular will about policies, rather than money- and organization-driven tests.

The market implications in a short-term neutral, long-term positive. Although the ruling coalition won more than expected, I expect only modest impact in the short term because investors will quickly turn attention to the economic outlook and corporate profits. I maintain a view that the Nikkei should move toward settling in above 13,000 by year-end. In the longer term, I see a positive impact due to renewed hopes for fiscal, social security, and local government reforms.

Some risks are limited to populism. The real test of the Koizumi reforms will come after he leaves office. His successors may tilt toward mere populism.

AUTOMOTIVE - CHINA

China-Built Chrysler 300C
Chrysler Group president and CEO Tom LaSorda announced some major developments in Chinese and Taiwan markets that sure give to automaker a huge boost in both countries.
Today’s big blast is the announcement of a new joint venture to build the Chrysler 300C in China. Teaming up with long time partner Beijing Automotive Industry Corp., Chrysler we’ve created Beijing Benz-DaimlerChrysler Automotive Ltd., with the intention of building the car model. In fact, construction’s already started on a new plant where intend to build the 300C. By the moment the company reported just how popular the 300C is in China, Chrysler is gunning to expand its brands in the world’s fastest growing market.

TECHNOLOGY - TAIWAN

Cautious but not pessimistic
The Taiwan stock market corrected 4.4% in August. Heavily index-weighted tech shares declined 5.7% and financial shares dropped 5.3%, whereas steel, plastic, and cement shares outperformed.

In my view, the tech sector's correction in August was caused by three factors.
a) Fear of slow demand after Dell's warning of PC inventory in the channel;
b) Worry that hiking oil prices and interest rate could dampen U.S. consumption prospects;
c) Potentially disappointing 2Q05 results.

I agree that sustained high oil prices at U.S.$70+ could create demand shortfall for tech products in 2006. In a high oil price environment, it is also understandable that technology shares are not a safe haven, as investors would be more cautious in their investment strategy. However, we still think that tech shares could lead a market rebound in the next few months due to the following reasons:
1) Tech end demand is still looking fine. Post Dell's inventory comments, ATI was the only major tech company to announce a performance warning, and it was more related to market share loss rather than slow market demand.
2) Taiwan tech companies' 2Q05 results were better than estimates.
3) I also believe seasonal momentum remains on track for the tech sector and we still expect to see 50% sequential profit growth for the sector in 3Q05 and another 23% QoQ growth in 4Q05.

MOBILE ENTERTEINMENT - UK

Sky confirms TV to mobile plan
Richard Freudenstein, chief operating officer at BSkyB, used the occasion of his speech to the UK’s Royal Television Society conference in Cambridge to confirm earlier suggestions that the pay-TV operator was to launch a service offering access to the live content of entire channels through mobile phones. Sky is now in talks with 3G mobile phone operators to agree revenue-sharing deals, as well as suppliers of content to its existing digital platform line-up. Services offered would include Sky channels and third party channels that are carried by Sky on its subscription television service. It would include channels streamed to handsets and programmes made for viewing on mobiles. Sky has also revealed that its next generation of Sky + boxes would have a broadband capability, with consumers needing to go via Sky to use the function to download ‘on demand’ content.

MULTIMEDIA – INDIA

India’s MTNL reveals triple-play strategy
State-owned Indian telco Mahanagar Telephone Nigam (MTNL) is launching a triple-play service, offering voice, broadband and cable TV on a single line. MTNL's the operator already procured equipment and that installation was under way, with service launch planned for November. MTNL has already secured deals with some 25 TV channels and the company is in negotiations with other channels for similar agreements. MTNL is planning to offer at least 200 channels in all.

TELEVISION – SPAIN

RTVE's losses set to widen
State-owned broadcasting group RTVE - which operates La Primera and La 2 - plans to lose E801.7 million in 2006, 10 per cent more than the forecast debt for this year. In 2005, its accumulated debt will reach up to E7.56 billion. The group will see its ad revenues cut by nine per cent, from E801.7 million this year to E720 million in 2006, as a result of its planned audience decline following the entry of new TV operators in the market; Sogecable-owned Cuatro and a new analogue channel with a 70 per cent coverage. RTVE's budget in 2006 will amount to E1.54 billion, similar to that of this year with operating costs growing by 2.8 per cent up to E1.30 billion as a result of investments in digital terrestrial television.

SAT TELEVISION – ITALY

Samsung STB for Sky Italia
Samsung Electronics announced a set top box contract with Sky Italia, the Italian satellite broadcaster owned by News Corporation. Deliveries are planned to commence in early 2006 to support the Sky Italia Digital TV service.

INTERNET - DOMAINS

Online smut still homeless as .xxx is delayed again
ICANN has delayed again the approval of the .xxx top level domain (TLD) until an unspecified "future date".
The establishment of the domain was originally agreed by ICANN in June, but has been mired in political debate after conservative groups in the US raised concerns about having a TLD specifically for porn. President Bush stepping into the fray with his own worries about a virtual red-light district last month (http://www.theregister.co.uk/2005/08/16/smut_tld_delayed/) has only slowed the process even further. At a meeting on Thursday, ICANN's board of directors told staff that ICM Registry, the company that will operate the .xxx domain, will have to agree to further contractual provisions before the adult-entertainment TLD gets the green light. However, the hordes of feline lovers that surf the web - and what else could explain why "pussy" is such a popular search term? - need not despair. The .cat domain, intended to promote the Catalan language and culture, has been given the go ahead, and is expected to go live next year.
Source: The Register

RAIL TRASPORT – EUROPE

Eurotunnel reports improved results in H1 2005
Eurotunnel has reported revenue growth of 2%, with an operating margin up 7% and net loss reduced by 18% to £87 million.
Shuttle services revenues were up 6% to £146 million, mainly due to higher truck shuttle volumes and yields. Railways revenue remained stable at £117 million, and remains protected until the end of November 2006 by payments under the provisions of the Minimum Usage Charge (MUC) in the Railway Usage Contract, which amounted to £36 million in the first half of 2005.

Operating revenue for the first half of 2005 was £268 million, a 2% improvement compared to the first half of 2004 at constant exchange rates. Operating profit improved by £12 million (19%) to £74 million for the period due to increased revenues (£5 million), reduced operating costs (£4 million) and reduced depreciation and provision charges (£6 million) despite the increase in non-trading charges (£3 million).

In 2006 the Group will no longer benefit from the Stabilisation Advances, rendering the cash flow position more vulnerable particularly at the end of July and October 2006 because of the interest payments due under the current Credit Agreements. Furthermore, Railways revenue will no longer be protected after November 2006; payments under the provisions of the Minimum Usage Charge (MUC) in the Railway Usage Contract for the first 11 months of 2006 will have an estimated effect on cash flow amounting to approximately £65 million.

From the first half of 2007 Eurotunnel will not be able to meet its contractual debt repayments.
Eurotunnel has obtained a waiver from its Lenders, valid up to 31 January 2006, which defines the conditions under which the Group can undertake debt restructuring negotiations with its creditors.

The Group is subject to two uncertainties: the ability to continue as a going concern and the carrying value at which the Group’s assets are recorded in the accounts. The Group is currently working on a refinancing plan, in which the level of indebtedness may differ from the underlying assumptions used at 31 December 2004. The Group has not revised its financial projections, which is normally carried out during the second half of the year as a part of the preparation of its medium term plan.

Disputes:
- Under the Railways Usage Contract dated 29 July 1987 between the Railways (SNCF and BRB) and Eurotunnel, the Railways are required to pay a contribution to the operating costs of Eurotunnel in each year. In November 2001, the Railways initiated arbitration proceedings aimed at reducing the amount of the contribution for the years 1997 to 2002. The amount claimed by the Railways for all of these years together is estimated to be a maximum of £100 million.
The Arbitration Tribunal rejected the Railways’ claims in respect of 1997, 1998 and 2000 on the basis that they were time barred. The Tribunal also rejected the Railway’s claim on allegations of breach of contract by Eurotunnel. The Tribunal ordered the Railways to pay to Eurotunnel the full amount of the provisional contribution to its 2002 operating costs.
- While the Tribunal’s decision regarding the final amount of the operating costs contribution for non-time barred years 1999, 2001 and 2002 has yet to be pronounced, Eurotunnel remains confident in the outcome of these proceedings and has therefore made no provision in the Group’s financial projections.

The termination of the contract between Eurotunnel and Transferry has resulted in a contractual dispute. Eurotunnel has accelerated improvements in its operational performance. Increased revenue in our core shuttle business has been achieved within the framework of a new marketing strategy based on our key benefits: frequency, speed, and reliability. In accordance with Eurotunnel’s timetable for the planned financial restructuring, a business plan was presented to its creditors in advance of the June 30th deadline. Negotiations with the Ad-hoc Committee and two other creditor committees remain confidential, although a progress report is expected to be released by the end of October.

LOGISTICS – CORPORATION

Oracle to acquire G-Log
Oracle has entered into a definitive agreement to acquire G-Log, in a move that will enable Oracle to offer customers the first complete, information-driven logistics management platform for any industry with global supply chains.
Oracle and G-Log have complementary products with a shared focus that information and adaptive business processes are key to achieving corporate supply chain goals. According to Oracle’s, partners and customers will have access to proven best-in-class transportation and logistics capabilities combined with comprehensive, world-class capabilities in ERP applications and technology infrastructure – all from the same vendor. This is expected to significantly reduce total cost of ownership while increasing customers' ability to operate an integrated, information driven enterprise. By combining the talents of both organisations, we will be better able to address evolving partner and customer needs and effectively respond to industry trends that are driving the demand for complex logistics solutions. Oracle integrated solutions for logistics and transportation will address customers’ critical logistics requirements more comprehensively and will facilitate transformation of customers' logistics operations to leading-edge infrastructure that improves competitive advantage.

TECHNOLOGY – SEMICONDUCTOR

Intel's Manufacturing Strength Still Preeminent
Intel continues to lead the semiconductor market in manufacturing process development and in fab capacity,. Intel currently has three 90nm fabs, and will have four 65 nm fabs, including one retro fit and one 90nm conversion, ramping in 2006, the high-tech market research firm says.

But future process technologies will pose challenges as Intel and the rest of the industry struggle with rising leakage current and limitations with current process technology. As other semiconductor manufacturers turn towards partnerships for developing new process technologies and manufacturing capacity, Intel is one of the few vendors that can continue to push ahead alone and uses its technology and capacity as a competitive strength. For example, in 2004, with a strong transition to the 90nm process node and 300mm wafers, Intel realized an estimated savings of $1 billion in manufacturing costs.
A recent market analysis report found the following:
- Despite the rising cost of fabs, mask sets, and in some cases, the die size, Intel's average manufacturing cost per die will remain relatively constant at approximately $40 during 2003-2005.
- Intel's continuous goal to shrink die sizes has resulted in the ability to double on-chip cache sizes with every process generation. In the future, however, Intel will be balancing the use of this transistor budget for more memory and additional cores as a way to increase performance.
- With the transition to 65nm, Intel is planning to begin moving its entire product portfolio, including logic and memory, to a single process.

BizzBlog TechAlert for September 16, 2005

2005-09-15T17:45:00.000+02:00

Microsoft and future - Bill Gates, the Microsoft chairman, made a major push on Tuesday to get software developers to build programs for the next versions of the company's Windows operating system and its Office productivity software, saying new features could drive a fresh wave of personal computer sales.
Microsoft has promised to introduce Windows Vista - formerly known by its code name, Longhorn - in the second half of 2006. The next version of Office is expected around the same time. Windows and Office combined account for more than $33 billion of Microsoft's annual revenue, which last year totaled $36.8 billion. At a developers' conference in Los Angeles, Gates said that Windows Vista would be designed to better connect and exchange data with corporate databases, find information buried in hard drives, and offer better graphics.
In a demonstration of Vista, semitransparent windows on the computer desktop allowed users to see objects underneath, including moving video, while search results were displayed in real time as queries were typed in. Microsoft also unveiled a new interface for Microsoft Office, a collection of programs that includes word-processing, spreadsheet and e-mail applications. Microsoft has been trying to turn Office into a platform for custom-designed applications that can handle business tasks like accounting, customer service and business planning.

Patents and trademarks in China - China must deliver on its promises for better protection for patents, trademarks and other intellectual property, Washington's newly appointed official in charge of combating commercial piracy said Wednesday.
Chris Israel, a former Time Warner executive who in July was named U.S. coordinator of intellectual property enforcement, described Beijing's antipiracy penalties as "fairly minuscule punishments."

"My honest assessment is that we need to focus on results. We need real deterrents that provide lasting and meaningful punishments," Israel said.

China risks facing trade sanctions or other measures if it does not follow through with real action, Israel said, noting that the U.S. Congress and the U.S. Trade Representative's office were watching closely.

Yahoo hopes sleek is chic - Yahoo is testing a sleeker version of its free e-mail service, shifting to a more dynamic design that mimics the look and feel of a desktop application like Microsoft's Outlook. The company plans to invite a "sizable" portion of its current e-mail users to experiment with the retooled service, said Karen Mahon, a Yahoo spokeswoman. Yahoo imported most of the changes from Oddpost, an e-mail startup the company bought for an undisclosed amount last year. For the past two years, Yahoo and its main Internet rivals - Google, AOL and Microsoft's MSN.com - have been introducing upgrades aimed at attracting and retaining their Web audiences so they remain appealing outlets for advertisers.

Microsoft targets graphics - Microsoft introduced three products for designing graphics and layout in software programs and Web pages to compete with Adobe Systems and Macromedia.
Microsoft Expression will be released beginning in 2006, said Forest Key, group product manager. The company has been stepping up competition with Adobe and in April announced a technology that would rival Adobe's PDF format for sharing digital documents.

Smart cards pay off - Oberthur Card Systems, a French maker of smart cards for mobile phones and bank cards, said its first-half net profit rose 39.4 percent to €16.1 million, or $19.8 million, driven by new business in telecommunications and finance and a onetime gain of €4.9 million. Oberthur said it expected growth in the second half of the year to be powered in part by contracts with telecommunications companies in the United States and Europe.

High-class calling - Bang & Olufsen, the Danish up-market electronics maker, is joining forces with Samsung Electronics to introduce a mobile phone this year. The phone will have basic communications features and little in the way of high-tech extras, the companies said, adding that they would target the high end of the market in terms of price and quality.
Torben Ballegaard Sorensen, chief executive of B&O, said only one model was being introduced but that others might follow.

Cisco calling - Tandberg, a Norwegian maker of video conferencing equipment, said its U.S. partner, Cisco Systems, had begun shipping a co-branded telephone with Tandberg video technology. The new product is a Cisco Internet protocol phone, which will be sold as a Cisco product through Cisco marketing channels but will also bear the words "video technology by Tandberg."

High tech mug shots - Viisage Technology, a maker of fingerprint- and facial-recognition systems, said that it was sharing technology with Motorola to create better identification equipment for law-enforcement agencies. The system stores mug shots and fingerprints for use in databases. Law enforcement officials can sort, search and manage the data for use in border control, identity fraud and other investigations. Facial-recognition technology also is used to verify the authenticity of drivers' licenses.

Katrina costs tallied - Sprint Nextel said Hurricane Katrina would cost it between $150 million and $200 million after insurance payments. It also said portions of its wireless network in the U.S. Gulf Coast remained out of service. The telecommunications company said it had restored wireless service to all regions in Alabama affected by the storm; over 90 percent of its network in Mississippi and more than 70 percent in Louisiana.

Vimpelcom deal approved - Shareholders of the Russian mobile phone company VimpelCom approved a plan to buy Ukrainian Radio Systems. The vote marked a victory for Alfa Telecom, VimpelCom's largest shareholder, over the Norwegian company Telenor, VimpelCom's No. 2 investor.

Partial victory for Google - Google won a court ruling that allows a former Microsoft executive to recruit staff at the company's research center in Beijing. But a Washington state judge, Steven Gonzalez, said the executive, Kai-Fu Lee, could not perform other tasks at Google's planned facility in China, including setting budgets and compensation levels or work on research and development projects at the facility. Microsoft had asked for a preliminary injunction, saying that Lee should not be allowed to work at Google while he is still bound by a noncompete contract that he signed with Microsoft. The contract is binding until next July, but Microsoft filed a motion for a preliminary injunction ahead of the trial, scheduled for January.

Misys shares skid - Shares of Misys, a British provider of software for large financial institutions, dropped 17.4 percent after the company said first-half earnings would decline "significantly" because of delayed payments from banks. Misys hired Lexicon Partners in June to advise on the sale of its Sesame unit, whose sales to financial advisers are falling. The shares fell to 197.25 pence, or $3.59, down 41.5 pence, the steepest drop since December 2003 and the lowest level since last September.

Playstation part recalled - Sony Computer Entertainment will recall certain AC adapters sold worldwide with the slim version of its PlayStation 2 following cases of overheating and melting. About 3.6 million adapters manufactured between August 2004 and December 2004 are subject to the recall. They include about 960,000 units sold in North America, 2.3 million units in Europe and 60,000 units in Japan.

Squeezing sound - Victor Co. of Japan, or JVC, said it had developed music compression technology that retains a sound quality similar to that of a compact disc. JVC's technology, called "Net K2," is compatible with formats like Apple Computer's AAC and Sony's ATRAC, according to the company. The company is a unit of Matsushita Electric Industrial.

Speeding up data - France Télécom is testing a technology called VDSL2 that lets data be sent five times faster that the speediest technology now used for Internet hook-ups via traditional phone lines. The company said the technology would allow users to download 90 minutes of video in three minutes.
Separately, France Télécom said that its Viaccess unit and Musiwave, a French company that specializes in providing music over mobile phones, would join forces to provide a variety of mobile music services to customers across Europe that are served by its Orange mobile unit and Wanadoo, its Internet unit.

Ticket takers - Thales, the leading European defense-electronics maker, and the consulting firm Accenture won a €200 million, or $245 million, contract from Denmark to provide an electronic ticketing system that would let passengers pay for public transport, like rail and bus, with one card. TDC, the Danish phone company, is also involved.
Separately, Hewlett-Packard and Philips Electronics said they would work together on a new standard of radio frequency identification technology that helps consumer-goods makers and retailers manage their inventory.

Euro Economic Bulletin, 9 September

2005-09-09T11:38:00.000+02:00

Germany: Economic upswing in July
Industrial production rose for the third month in four in July, posting a 1.8% rise in 3-month average terms, its biggest increase since the beginning of the year. Meanwhile, manufacturing orders recorded their fourth increase in five month, surging by 3.7%, their biggest increase since the beginning of the year. It sounds like the confirmation that the expected upswing in activity is currently occurring.

Actually, manufacturing orders rose thanks to a sharp increase in foreign orders (+7.7% m/m). In particular, foreign orders for machinery and equipment jumped by 10.1% m/m, posting their third straight increase, like those for intermediate goods (+5.9%). These results confirm that exports remain a strong engine of growth in Germany.

The matter comes from domestic orders, which slightly declined in July (-0.1% m/m). Admittedly, they had risen the previous two months, but their July decrease raises concerns about the recovery of the domestic demand. In Q2, the latter stagnated as the rise in public consumption and business spending was offset by a further contraction of private consumption.

In July, domestic orders for capital goods fell by a large 4.1% m/m. However, this drop looks more like a correction of June 7.7% rebound and does not indicate that firm are cutting their investments in Q3. Actually, thanks to supportive exports, business spending is expected to keep on growing, in line with the improvement in leading indicators since June. This outlook seems confirmed by the 0.8% m/m increase in production for capital goods in July.

Besides, after two quarters of contraction, household spending is expected to pickup in Q3. This is probably what firms expect, as they increased their orders for consumer goods by 4.2% m/m in July, their biggest increase in five and a half years.

Nevertheless, the rebound in private consumption will remain erratic and fragile. Admittedly, unemployment has declined since April and consumer confidence started to pickup according to the GfK Institute Survey. Nevertheless, the labour market situation hardly improved and oil prices continued to increase. Therefore household could remain cautious in the coming months.

Italy: Whereas business confidence rose further in August (index up at 87.5), consumer confidence is still lagging behind (index down at 100.8)

Business confidence increased further in August, going up to 87.5, from 86.4 in July, reaching its highest level since last January.

The improvement of business confidence can be explained by the catching up in the assessment of total orders, both from the domestic or the foreign market. Besides, expectations of production rose markedly (from –16 in July to –10 in August).
The rise in business confidence occurred in all sectors, especially in intermediate goods (84.1 in August versus 82 in July) and in investment goods (from 88.3 in July to 89.5 in August). Moreover, the same goes with consumer goods but to a lower extent (from 90.9 in July to 91.2 in August).

This survey contrasts with that on consumer confidence released yesterday in August. Consumer confidence index dropped once again, although slightly down to 100.8 from 100.9 in July for the fifth consecutive month. The main concern for Italian households is their current and expected personal situation. Indeed, the assessment of personal economic situation has worsened markedly (from 114.4 to 112.2).
On balance, prospects about Italian economic situation are still uncertain. Higher oil prices, if they have already affected household confidence, haven’t yet hampered business confidence. Yet, OECD revised upward growth expectations for 2005 at 0.2%, but economic activity remains fragile.

- Business confidence rose in August
For the third month running, business confidence rose in August. The ISAE confidence index, based on a survey among 4,000 manufacturers carried out between August 1st and August 26th, enhanced from 86.0 in July to 87.5, its highest level since last January. This rise is in line with other European surveys (IFO in Germany) procuring little hope for improvement soon.

- A general improvement
The improvement of business confidence can be explained by the catching up in the assessment of total orders, both from the domestic or the foreign market. Besides, expectations of production rose markedly (from –16 in July to –10 in August). The euro’s 8 %-decline against the dollar this year favoured Italian products making them cheaper and offsetting high oil prices. The rise in business confidence was visible in all sectors, especially in intermediate goods (84.1 in August versus 82 in July) and in investment goods (from 88.3 in July to 89.5 in August). Moreover the same goes with consumer goods but to a lower extent (from 90.9 in July to 91.2 in August).

- By contrast, pessimism of Italian households
This survey contrasts with that of consumer confidence released yesterday. In August, the consumer confidence index, based on a poll of 2000 households by the Rome-based ISAE Institute carried out between August 1st and August, 12th, dropped once again, although slightly down to 100.8 from 100.9 in July, for the fifth consecutive month. The main concern for Italian households is their current and expected personal situation. Indeed, the assessment of personal economic situation has worsened markedly (from 114.4 to 112.2). Thus, higher oil prices weighed on both Italian household confidence and their assessment on their current and expected savings, but they are more and more optimistic about the medium-term national economic situation.

- To the beginning of a real rebound
On balance, prospects about Italian economic situation are still uncertain. Higher oil prices, if they have already affected household confidence, haven’t yet hampered business confidence. Indeed, expectations of Italian companies for next three months are good as regards employment (from –7 in July to –2 in August) and the level of production (from 11 in July to 12 in August). Yet, OECD revised upward growth expectations for 2005 at 0.2%, but economic activity remains fragile.

United Kingdom: As expected, the Bank of England keeps its repo rate at 4.5%

As expected, the Bank of England's Monetary Policy Committee has decided to keep its repo rate at 4.5%.
Given the uncertainties, domestic as well as international, rates are expected to remain on hold in the coming months.
A further rate cut should not be excluded if economic growth is losing momentum as a result of higher energy prices and the cooling down of the housing market.

At the end of its two-day meeting, the Bank of England's Monetary Policy Committee decided to keep the repo rate at 4.5% As usual, the Bank did not release a press statement, and we have to wait for the publication of the Minutes on 21 September to know exactly the reasons for the decision. However, as the decision was widely anticipated, the reasons are not difficult to guess.

The latest data show that the economy is picking up after hitting a trough in Q2. This is in line with the Bank's growth scenario. Moreover, inflation has surprised on the upside. In July, it reached 2.3%, an eight-year high. This is partly due to temporary factors, such as the hike in energy prices. More worrying is the impression that the forces that kept inflation down in the past, are gradually fading. In particular, the weak retail sales have not been translated into heavy discounting. The news coming from the housing market is also not quite reassuring for the Bank.

The growth in household borrowing, although easing, remains very high. In July, net lending to individuals rose by 10.7 % y/y. The RICS reported in its latest survey that house prices were falling in July at the slowest pace in five months. The mood in the housing market was probably bolstered by the expectation of an August rate cut (now confirmed). Yesterday, the Halifax reported that house prices gained 1.6% in August (2.6% on an annual basis), the fastest increase since September 2004. However, this is likely a statistical blip. As the ratio of house prices to average earnings is relatively high, we do not expect house prices to surge again. The impact of the housing market on private consumption is very difficult to assess, and is likely to be underestimated by the Bank. International economic developments are dominated by the renewed hike in oil prices caused by Hurricane Katrina. However, it is still to early to gauge its full impact on the global economy.

Given these uncertainties, the MPC took the right decision to put interest rates on hold. In the August Minutes it signalled to the financial market, that further rate cuts should not be expected. This stands in sharp contrast to the opinion of OECD chief economist Jean-Philippe Cotis, who argued that the Bank of England could lower rates as long as inflationary expectations remain well anchored. We share his opinion. The Bank of England might overestimate the growth momentum in the economy. In the coming months, more evidence is likely to surface that the economy is slowing under the impact of higher energy prices and the cooling-off of the housing market. This could necessitate a further cut in the repo rate.

Write: by Luis Batista, September 2005

The hurricane Katrina economic impact on US economy

2005-09-05T11:31:00.000+02:00

It is always delicate to write about economic consequences of catastrophes without being seen as cynical. The aftermath of a terrorist attack or a hurricane is much more about human lives than about economics. All my thoughts are going to Americans in Alabama, Louisiana and Mississippi.

There are always several possible economic consequences. Immediate as well as medium term effects are both direct and indirect. Every year, at the end of the summer and in early fall, the south east region of the US is hit by tropical storms and hurricanes. Last year is considered to have been already harsh, with four major episodes. But this year started with the strongest hurricanes in decades. President Bush declared this was the worst natural disaster in the US history. For the time being, more than hundred fatalities have been confirmed, but officials declared the final number will be in thousands.

The direct immediate effect is related to the interrupted daily economic activity. During few days, or longer for some areas, no one is working the way he or she used to. Ocean-side counties of Alabama, Louisiana and Mississippi (1) represents a very small part of the US. The total population of these counties is 2.5 millions people, versus almost 300 millions for the US as a whole. They represent 0.9% of the total US population. In terms of personal income, they account for even less, with 0.7%. This means than less than 1% of the US economic activity was shut down during few days. In short, this should not be noticeable in national accounts data. Additionally, this downside effect will be offset by the following positive effect related to the reconstruction effort. It is possible to expect a temporary rise in the saving ratio when victims receive their insurance payments (estimates of the losses range from USD 9 bn to USD 25 bn, compared with USD 21 bn for hurricane Andrew in 1992), but this will be transparent in macroeconomic terms, since higher households revenues will be offset by lower earnings from the insurance industry.

If the Gulf of Mexico was not the US oil centre, there will be not more to add. But it is, for extraction of crude oil, pipeline infrastructure, and refineries. Almost half of the US oil production comes from refineries in the states along the gulf's shore. And here is the reason why financial markets focus that much on Katrina. Since the hurricane was expected, oil prices began rising few days before Katrina actually hit the coast. Even if this left the West Texas Intermediate above USD 70 per barrel, the effect is quite limited: at yesterday close, the WTI was just up USD 2.3 from a week earlier. The announcement by President Bush that strategic reserves would be used brought some relief. Additionally, for the time being, there is a lack of information about when refineries will resume production. Should this happen later than expected by the market, oil prices will rise.

There is thus a lot of uncertainties about oil prices in coming weeks. Since the US is highly dependent on oil – The Economist recently called the US and China oiloholics – further rise in the already incredibly expensive oil could disrupt economic growth. This is the reason why markets now expect the Fed to remain on hold in September, resulting in lower bond yield as well as in a cheaper dollar. It is quite impossible to be sure about what the Fed will decide in three weeks from now. On the one hand, direct economic impact does not justify a change of its current policy of removing the excess accommodation. On the other hand, the final impact highly depends on oil prices.

(1) Alabama: Baldwin, Covington, Escambia, Geneva, Houston and Mobile.
Louisiana: Cameron, Iberia, Jefferson, Lafourche, Orleans, Plaquemines, St Bernard, St. Mary, Terrebonne and Vermilion.
Mississippi: Hancock, Harrison, Jackson and Pearl River.

Write: by LuisB. 09.2005

Procter & Gamble Profit, Sales Up in 4Q

2005-08-03T13:28:00.000+02:00

CONSUMER PRODUCTS – MARKET

Procter & Gamble Profit, Sales Up in 4Q
Consumer products maker Procter & Gamble Co. on last 1 August 2005 said fourth-quarter profit rose 9 percent, led by strong volume growth in its beauty, health and home care segments, and the company backed analysts' earnings forecast for its current quarter and fiscal year.

Shares of Procter & Gamble, the maker of Tide detergent, Pantene shampoo, Crest toothpaste and other household brands, fell 37 cents to $55.26 in early trading on the New York Stock Exchange. It has agreed to buy shaving products maker Gillette Co.

Procter & Gamble reported earnings of $1.5 billion, or 56 cents per share, for the three months ended June 30 compared with $1.37 billion, or 50 cents per share, in the prior-year period. Sales jumped 10 percent to $14.26 billion from $12.96 billion.

The results topped analysts' expectations for profit of 55 cents per share on revenue of $14.05 billion, according to a survey by Thomson Financial.

Organic sales - which strip out the effects of acquisitions, divested businesses and foreign exchange swings, rose 9 percent. Unit volume grew 6 percent, led by strong gains in Procter & Gamble beauty, fabric, health and home care businesses, particularly in developing markets.
In the beauty segment, earnings climbed 27 percent to $644 million on sales of $4.93 billion, driven by strong growth of the Olay brand and solid results in emerging markets.

In the family health segment, earnings surged 42 percent to $182 million, while sales jumped 16 percent to $1.9 billion. Procter & Gamble credited the improved performance to continued success of Prilosec, its popular over-the-counter heartburn drug.

In the household care segment, earnings fell 11 percent to $458 million, hurt by higher commodity costs, but sales rose 10 percent to $3.85 billion. Procter & Gamble said higher commodity costs posed "significant challenges" during the quarter, but the company responded with price increases across most of its businesses.
For the current quarter and full year, Procter & Gamble said it is "comfortable" with analysts' current consensus estimate of 78 cents per share and $2.93, which excludes the effects of stock option expensing and an accelerated share buyback program.

Sales growth is expected to range from 6 to 8 percent, the company said. Procter & Gamble in January said it would buy back $18 billion to $22 billion of its shares over the next 18 months as part of the Gillette deal. The increase in share repurchases is expected to bolster earnings by a penny per share for the quarter, while stock option expensing will reduce profit by 3 cents per share.
Write: by LuisB

Japan: The tertiary activity index fell in May

2005-07-22T16:36:00.000+02:00

The tertiary activity index fell 1.5% m/m sa in May, partially offsetting the rise recorded in April (+1.7% m/m). Most components fell in May, with the exception of real estate, learning support, postal services and personal services. In particular, utilities (electricity/gas/heat supply/water) lost 2.3% m/m, while information and communication fell by 1.5% and business services recorded a 2.7% decline.

- The largest negative contributor was wholesale and retail trade (-0.53 pp) due to a 2.2% m/m fall (-3.1% in wholesale trade and -1.0% in the retail sector). However, all these components retreated in reaction to gains in the previous months. Moreover, retail trade is likely to rebound in June according to the Tokyo/Osaka department store sales figures which were very dynamic that month retail. On balance, consumer-oriented industries are likely to remain strong, sustained by high consumer confidence and wages.

- The all-industry index also fell in May (-1.4% m/m) after +1.7% in April, due to the weakness in industrial production (-2.8% m/m) – together with the declining activity in tertiary sector. Conversely, the construction industry index jumped by 1.6%, as the vigour in private non-residential construction offset the weakness in public investment. The latter is disappointing as we expected that the starting of reconstruction programmes could help reviving the sector. Lastly, activity in public services gained 0.2%, after a strong +0.9% in April.

- In year-on-year terms, both the tertiary and all-industry index continued to rise (+1.8% and +1.5% respectively), at a slightly higher pace than in April (+1.7% and +1.2% respectively).

Write: by LuisB

2005-03-09T15:38:00.000+01:00

ECONOMY – FINANCE

Bond markets in focus
Alan Greenspan spoke of “irrational exuberances.” That was back in 1996. At the time, he was referring to the looming stock market bubble. It was a rather unusual choice of words for the world’s most important central banker. Only recently, Greenspan told Congress of a “conundrum” he was pondering over. Even though he was referring to the bond markets this time around, the parallels with 1996 are obvious. And in light of the importance Greenspan attributed to bond markets in his speech, the use of the term went far beyond a mere extension of his jargon.

Here are only a few aspects to consider: Greenspan’s questions
1. If real Treasury yields decline, the market is apparently not concerned about future inflation. Does this mean that it is the market participants who are worried about economic growth, particularly since bond yields have gone down more than inflation expectations?
2. If investors were concerned about the sustainability of economic growth, why, then, are equity markets in relatively good shape?
3. If the economic situation was expected to deteriorate, why are credits spreads extremely narrow?
I have repeatedly pointed to imbalances, such as the fact that Asian central banks are buying U.S. Treasuries and are thus helping keep U.S. interest rates low. Greenspan says the extent of this effect is “difficult to quantify.”

Politically-correct words
Greenspan is well aware of the fact that one-dimensional chains of cause and effect can no longer be adopted indiscriminately in a globalized world. But could political grounds have led him to say that, within the world’s pool of savings, the U.S. could become dangerously dependent due to its deficits? Or, to put it differently: If – and Greenspan put particular emphasis on this – productivity gains in the U.S. resulted in a similar problem as in Switzerland, for instance, and the twin deficit continued to exist, the absence of Asian financiers could create tremendous problems for the world’s largest economy. Many “ifs,” but the problem clearly exists.

Conclusion: No panic over interest rates
I believe that the argument of globalized investments holds water and helps explain why the analyst community prematurely expected interest rates to be hiked far too aggressively at the long end.

Lower bond ratings
Furthermore, I am still convinced that emerging bond markets, with a few exceptions such as Hungary, offer sound opportunities.

Stocks remain attractive relative to bonds
Contrary to other regions, optimism about future earnings still seems to be intact in the U.S. and in Japan. Yet with the exception of Japan, earnings revisions could disappoint. Japan and emerging markets offer quite attractive valuations. Europe, however, currently only has the risk premium that speaks in its favor.
Written: LuisB

2004-12-16T16:38:00.001+01:00

SUPERMARKET - USA

Unions Collaborate on Anti-Wal-Mart Campaign
The United Food and Commercial Workers union here is partnering with several other unions, including the AFL-CIO and Teamsters, to launch a large-scale, multi-media campaign claiming that Wal-Mart Stores, Bentonville, Ark., is forcing competing companies to lower their pay and benefit rates. Jill Cashen, a UFCW spokeswoman, yesterday confirmed reports that the unions planned to spend about $25 million per year on the effort. “We have an ongoing Wal-Mart program,” she said. “The difference is that we’re coordinating more with the [other trade unions].” She said she did not have detailed information about the campaign, noting it was still in the organizational stages.
Author: Mark Hamstra. December 2004

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E-COMMERCE - STATISTICS

E-Commerce Up At Brick-And-Mortar Retailers
Online spending at retailers who have both an Internet and a brick-and-mortar presence is up by more than 50 percent for this holiday season compared to last year's, according to new figures released Friday by comScore Networks. That increase, covering the period Nov. 1 through Dec. 5, is more than twice the 23 percent jump in spending during the same time frame at exclusively online retail sites.

Wal-Mart's online store, which saw 11.5 million visitors last week and 25.8 million in November, continues to lead all multi-channel retails online. eBay, which saw 31 million visits last week, and Amazon, 19.9 million, were the only exclusively-online retailers to draw more traffic than leader Wal-Mart.
Author: Gavin O'Malley. December 2004

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E-BUSINESS - E-RETAIL

Apple's online iTunes music store now accepts PayPal for purchases
Apple Computer Inc.'s online music store, iTunes, will now accept PayPal for purchases of music downloads, audiobooks and gift certificates.
PayPal, which is owned by eBay Inc., allows any individual or business with an email address to send and receive payments online.
Apple's vice president of applications, Eddy Cue, said Friday the deal with PayPal would bring more customers to iTunes. "PayPal already has millions of customers who are used to buying online," he said.
Apple hopes to get these customers to buy music at iTunes and in the process draw some new users to the online music store.
PayPal would receive fees from Apple for facilitating payments on iTunes, but the companies didn't disclose specific financial terms.
PayPal's general manager for merchant services, Todd Pearson, said the importance of the deal to PayPal was less about the specific economics of the pact and more about the value of working with a customer with the market importance of Apple.
ITunes Music Store purchases can be funded through PayPal starting Friday, allowing customers to pay using a credit card, bank account or stored account balance.
ITunes users weren't previously able to pay through bank and checking accounts, something they will now be able to do through PayPal, Cue said.
Source: Associated Press. December 2004

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RETAIL - UK

Sainsbury's aims for better delivery times with Smartnav
UK supermarket chain Sainsbury's is fitting 400 of its home delivery vehicles with Trafficmaster's advanced satellite navigation system, Smartnav, in order to improve delivery times.
Sainsbury’s signed a contract with Trafficmaster partner Cybit that also includes Cybit's Fleetstar-Online fleet management solution.

The use of Smartnav, a navigation system that uses Trafficmaster's traffic data to calculate the best route around traffic jams, is aimed at enabling delivery vehicles to maximise the number of drops and deliver on time.

"Operational efficiencies in Sainsbury's home delivery fleet are critical to the success of the venture. Smartnav and Cybit's telematics technology is an important part of achieving this and we look forward to developing a successful partnership over the next three years," said Sainsbury's delivery operations manager, Jason Soar
Source: Food Retail. December 2004

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BEVERAGE SECTOR - EUROPE/USA

PepsiCo to buy General Mills' stake in JV
US snacks and soft drinks giant PepsiCo has announced that it has signed an agreement with General Mills to buy the US food company’s 40.5% stake in their Snack Ventures Europe (SVE) joint venture for US$750m.
After the transaction, which is expected to be completed in early 2005, the SVE joint venture and its operations will be wholly owned by PepsiCo.
Snack Ventures Europe was established in July 1992 by combining General Mills' savoury snack and sweet biscuit businesses in Belgium, France and The Netherlands with PepsiCo's salty and sweet snack businesses in Greece, Portugal and Spain. The venture is continental Europe's largest snack food company, with annual sales of more than US$1bn. Products marketed by SVE include: 3-Ds, Bugles, Doritos, Fritos, Hamka's, Lay's, Ruffles and Dippas.
General Mills said it intends to use the proceeds from the transaction to reduce debt. The company also said that it expects its 2005 net earnings per share to include a gain from the transaction. Excluding this one-time gain, General Mills reaffirmed its 2005 earnings target of $2.75 to $2.80 per share.
Author: LuisB. December 2004

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RETAIL - MARKET

Wal-Mart vs. Target
Christmas is usually a bountiful time of year for Wal-Mart, America's No. 1 discount retailer. But this holiday season, analysts are delivering lumps of coal in the form of stock downgrades.
Joining a chorus of disapproval, Goldman Sachs cut its rating to "in-line" from "outperform," saying Wal-Mart's decision to position super stores closer together will cannibalize same-store sales growth. First Global lowered its rating to "market perform" from "moderate outperform," also citing falling sales growth. The bad news comes atop Wal-Mart's disappointing November sales growth of just 0.7% and a December same-store sales forecast of up 1% to 3 %, below the usual forecast of 4% to 6%.
Meanwhile, rival retailer Target said November same-store sales rose 3.2%, which was in-line with estimates. The company sees December same-store sales running on plan, up 3% to 5%. "Given that Target is a more seasonal store, we would expect it to easily out-comp Wal-Mart," Banc of America said in a November research note. Target is considered a top pick in the retail industry by Prudential and Piper Jaffray.

All of this may not mean much to the U.S. consumer. Wal-Mart Stores still dominates the retail landscape, with 1,362 traditional discount stores and 1,626 super stores versus Target's 1,177 traditional discount stores and 136 super stores. They both compete with Kmart Stores which is acquiring Sears Roebuck and Costco.

In addition, 2004 sales for Wal-Mart, through the third-quarter, were slightly over $200 billion, more than six times Target's sales of $30.81 billion over the same period.

But, Target has the upper hand in terms of a wealthier consumer base. "Target tends to have more upscale customers who don't feel the effects of gasoline prices and other economic factors as much as Wal-Mart's core customers might," says retail analyst Ken Perkins of Research Connect.

Perkins says Target has successfully siphoned off Wal-Mart's top-tier customers through more aesthetically attractive stores. "Target stores are a lot lighter, aisles tend to be wider and merchandise is displayed better," he says. Moreover, Target is appealing to younger shoppers through snazzy TV commercials featuring sexy models, as well as partnerships with high-end designers such as Isaac Mizrahi and Liz Lange.

Though Target is the presumed champion in terms of December same-store sales-Perkins says the company may even reach 6% growth-the outlook for 2005 favours Wal-Mart. Banc of America recommends investors buy Wal-Mart stock for the year ahead, saying the sales environment is likely to be far better with gains of 5% to 6% as energy costs become less burdensome.
Furthermore, Wal-Mart has a retail presence in nine foreign countries, whereas Target only operates in the U.S. This will inevitably contribute to Wal-Mart's top-line growth, analysts say, especially in markets such as China. "Target won't approach Wal-Mart's level of sales any time soon," Perkins says.
Author: David Ng. December 2004

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FASHION - ITALY

Fila Merges Italian Subsidiaries
Sportswear brand Fila, which is owned by New York based Sport Brands International, is to merge its Italian subsidiaries Fila Italia SpA and Fila Sport SpA in the spring of 2005. In the merger, Fila Italia will be incorporated into Fila Sport.The shareholders of the two companies will choose a new name for the company, which will have legal headquarters in Biella, northern Italy, and operational headquarters in Assago, in the northern Italian region of Lombardy. The new company will be Fila's European headquarters.
Author: LuisB. December 2004

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BEVERAGE - NEW PRODUCTS

Coke may try another diet cola
Coca-Cola is tinkering with a host of new drinks for next year, including another diet cola and a possible rival to Pepsi's popular Mountain Dew.
Coke might launch a Mountain Dew-like drink called Vault, the newsletter Beverage Digest reported Friday. Vault would be a successor to Coke's failed Surge, a Mountain Dew wannabe that debuted in 1997 only to virtually disappear by the fall of 2002.
Coke also is pondering a new diet drink, possibly using the name Coke Zero. The company already uses a similar name for Diet Sprite Zero.
Coca-Cola declined to comment on the company's plans, but it clearly is looking for ways to stoke its North American soft drink sales.
Overall, sales are growing slowly in the industry, and many non-diet brands are losing ground.
Mountain Dew, however, has been a bright spot. Over the first nine months of 2004, it was the only major non-diet brand that grew in sales, according to Beverage Digest. In 2003, Americans bought 638.7 million cases of Mountain Dew, making it the fourth-most-popular brand in the country.
Pepsi expressed little concern about the possibility of another Mountain Dew-ish product from Coke. "We've seen this movie before, and it's a horror show," declared spokesman Dave DeCecco. "No one else can do the Dew."
Getting a new product to catch on is a tough task, even without an entrenched competitor. This year, Coke spent millions of dollars in a largely disappointing bid to sell a new midcalorie drink called Coca-Cola C2. Another diet cola, however, could find success.
Coke has had reasonable success with its Sprite Remix. In 2005, the company might replace the berry flavor it now sells with a new Sprite Remix called Aruba Jam, Beverage Digest reported. The flavor might be orange, similar to Pepsi's Mountain Dew LiveWire.
Author: LUisB. December 2004

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FAST FOOD RETAIL - MARKET

McDonald's top female executive resigns
Turmoil rocked the upper management ranks at McDonald's Corp. again Monday, as chief restaurant operations officer Claire Babrowski abruptly resigned after 31 years at the company.

Many observers saw Babrowski, 47, as a future chief executive of the Oak Brook-based hamburger giant. She joined McDonald's at 16, when she got a job as a crew member in an Ottawa, Ill., restaurant. Rising through the ranks, she earned respect from franchisees and Wall Street analysts.

Babrowski's sudden exit caps a tumultuous year in the McDonald's executive suite. In April, Chairman and CEO Jim Cantalupo died of a heart attack while attending a convention for franchisees. Two weeks after Charlie Bell was tapped to succeed Cantalupo, the new CEO revealed he had colorectal cancer. Bell, 44, resigned last month because of his continuing battle with the illness. The company named Vice Chairman Jim Skinner to be the new chief executive.

At the time of Skinner's appointment, the McDonald's board of directors also named Mike Roberts, 53, president and chief operating officer. Roberts had been president of McDonald's USA.
Babrowski ranked among the handful of executives with the background and skills to succeed Skinner and Bell. As head of restaurant operations, she has overseen site development, equipment systems and research and development. She has also supervised operations in Australia, New Zealand and Canada. Babrowski was the company's highest-ranking woman executive.

In a press release issued Monday afternoon, Babrowski said she was leaving to pursue "business opportunities beyond McDonald's." She did not elaborate, and was not available for comment.

But McDonald's spokesman Walt Riker said, "This was a personal decision to look at other business opportunities."

The company said it would name her successor after Jan.1. In the meantime, Adams said, "the management ranks in this company have been really decimated."
McDonald's shares rose 33 cents, or 1 percent, to close at $31.98. Shares rose two cents in after-hours trading.

Comment
One of the things we've always thought about McDonald's is that they have very deep bench. This kind of weakens the bench; some voices speculated that Babrowski bristled at having to work under Roberts, Skinner's No. 2 and the current heir-apparent to the CEO job. Babrowski might have thought she deserved to be named president and chief operating officer. In my opinion Claire's got vast experience around the world. She'll be a real asset to some competitor.
Author: LuisB: December 2004

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BEVERAGE - GERMANY

Germany insists new law on can deposits meets E.U. court doubts
Upcoming amendments to Germany's law mandating deposits on beverage containers will satisfy all the provisions of a European Court of Justice ruling, a Berlin spokesman said Tuesday. The court in Luxembourg issued its verdict earlier in the day on the issue, which has divided German industry and political parties. It said refundable deposits could be compulsory, but rapid introduction of the rule had discriminated against foreign bottlers.

To prevent unsightly throwaways and encourage reusables, Germany made deposits mandatory from January last year on cans and bottles. Retailers have grumbled at having to take back the empties and on Tuesday again demanded abolition of the law.

After the court ruling, European Commissioner Guenter Verheugen, in charge of trade issues, offered to counsel Germany on how to bring the legislation into line with E.U. law. He said Brussels did not oppose the system in itself, but it must not restrain trade.

The court also ruled that there must be a nationwide agency to handle the recycling, since vendors of table water from Budapest, Bilbao or Belfast could not be expected to haul the empties home.

An Environment Ministry spokesman in Berlin said amendments already approved in November met the court conditions. He rejected opposition calls to delay their planned passage this Friday through the Bundesrat upper chamber awaiting fresh consultations.

Hubertus Pellengahr, spokesman for the retail federation HDE, disagreed. He said the new legislation also broke E.U. law.
The amendment standardizes the deposit at 25 euro cents (33 U.S. cents) for all mineral-water, soft-drink and beer containers and completely exempts milk, wine and juice containers as well as drink cartons and sachets.
Source: Deutsche Presse-Agentur GmbH. December 2004

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BEVERAGE - JAPAN

Suntory to buy stake in Lejay-Lagoute
Japanese spirits maker Suntory Ltd. said Tuesday it will buy a 35 percent stake in the French company Lejay-Lagoute S.A.S. in January 2005 to obtain long-term sales rights to Lejay-brand liquor. Suntory has been selling Lejay liquor in Japan since 1982. It wants to sell it in other countries where it has sales networks, such as China and Australia, it said. Lejay liquor is currently available in about 50 countries. Sales in Japan have been growing steadily, Suntory said.
Source: Suntory. December 2004
Author: LuisB

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E-SHOPPING - UK

United Kingdom survey shows man leave Christmas shopping to last minute
This Christmas, as the race to gain share of the Christmas pound among retailers has resulted in a large number of pre-Christmas sales and promotions, research from consumer review and comparison shopping website, Ciao (www.ciao.co.uk) shows that a third of men claim they plan to leave their Christmas shopping until the week before Christmas.

Ciao’s survey of 1,000 UK adults shows that 33% of men are planning to do their Christmas shopping the week before Christmas, compared to only 8% of women. In fact, seven times as many men (15%) as women (2%) say they are planning to do their Christmas shopping in the last couple of days.

When planning to do Christmas shopping?

% Men Women
Last couple of days 15 2
One week in advance 18 6
Two weeks in advance 23 16
Three weeks or more in advance 45 77

Our research confirms that those Christmas Eve shoppers really are men,’ says Ciao’s co-CEO Max Cartellieri. ‘With so many men saying they are planning to leave their Christmas shopping to the last minute, it’s no wonder men have the reputation of being disorganized about Christmas.’
Ciao’s survey shows that while women dream of receiving weekends away, spa breaks and perfume from their partners, they predict they are much more likely to actually be given books, DVDs and CDs.

Women are also more likely than men to say they intend to buy, and to research their Christmas shopping online.

% UK internet users Women Men
Intend to buy online 87 85
Intend to research online 84 83

Women are perhaps going to be more important for online retailers this Christmas than they ever have been before,’ says Max Cartellieri. ‘Online shopping is going to increasingly challenge and complement the High Street as more consumers are prepared to research and buy an increasing range of products online.’
Source: Ciao.uk. December 2004

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APPAREL SECTOR - SWEDEN

ICA moves into apparel market
ICA will expand the non-food product segment at its stores and will start importing and selling Levi's and Nike products. The ICA Maxi hypermarket stores start selling Levi's jeans at 37 stores across the country as of 10 December. The jeans prices will range from 199 Swedish crowns (E22.2) to 299 crowns (E33.4). In comparison, these jeans cost some 700 crowns (E78.1) at specialised clothing stores.
Author: LuisB. December 2004

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FASHION RETAIL - SWEDEN

Zara to open two stores in Stockholm
Spanish fashion chain Zara, owned by clothing retailer Inditex, and has announced plans to open 2 stores in the central part of Stockholm. Zara opened its second store in Sweden in downtown Malmo in the southern part of the country in October 2004. Inditex currently has stores in over 50 countries. The company closed 2003/04 with E447m net attributable profit, up 2% year-on-year. The company's turnover rose by 16% year-on-year in 2003/04 to E4.6bn.
Author: LuisB. December 2004

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DRUG RETAIL - ROMANIA

Pharmafarm returns to profit
Romanian drug distributor PharmaFarm said that rising sales earned it 4.6bn lei (E116,600) in net profits through September, reversing a loss of 8.4bn lei over the same nine-month period last year. "Our turnover rose by 34% compared to the same period of last year and this was the main reason for the positive result," Chief Executive Officer Marius Chereches said in a statement. PharmaFarm's turnover reached 619.3bn lei through the third-quarter, up from last year's 463.4bn. The company attributes the rise due to a wider client portfolio, aggressive sales strategy and further development of its sales team, he added.
Author: LuisB. December 2004

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RETAIL - MOLDOVA

Metro enters Moldovan market
Metro Cash & Carry Romania has opened a E15m cash & carry store in Chisinau, its first in Moldova. The new store spans more than 5.500 sq.m. and offers some 17,500 products. Metro estimates some 90% of the companies shipping goods to the new store will be local. "Metro is an example of investments that will work for our economy and will develop retail trade in the country," Moldovan President Vladimir Voronin said during a press conference. The outlet is the first for the tiny and impoverished country.
Author: LuisB. December 2004

2004-11-04T20:21:00.000+01:00

RETAIL - UK TRICHOLOGIC MARKET

ASDA launches ethnic haircare range
A haircare range for black and mixed-race women is launching in Asda in a bid to become the first mainstream UK brand in the £50m sector. Shadez, which is manufactured by Creightons, maker of The Real Shaving Company line, was developed in the US in collaboration with a UK trichologist. It will be backed by a £500,000 promotional budget in its first year. The mixed-race demographic is the (UK's) fastest - growing, but when it comes to haircare, they don't know where to go. The range would fill a gap in the market currently served only by “ethnic market stalls”.
Date: November 2004

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RETAIL - DERMATOLOGIC SECTOR

Boots launches Derma-Skincare Advice Centres
UK drugstore chain “Boots The Chemists” began rolling out Derma-Skincare Advice Centres into 80 stores last week. Each location will be equipped with a dedicated counter within the outlet’s skincare area, complete with an advice space and consultant. Derma-Skincare advisors are fully trained to counsel on all aspects of skincare, undertake skin diagnosis and make product recommendations. Boots carries derma-skincare brands RoC, Skin Doctors Dermaceuticals, Avène, Couvrance, A-Derma, Ahava, Eucerin, and starting in spring 2005, Murad.
Another addition for springtime next year will be a skincare diagnostic tool to measure skin moisture, sebum levels, elasticity, pigmentation as well as facial lines and wrinkles.
Date: November 2004

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RETAIL - INFORMATICS

Tesco checks out wearable computers
Every little helps as retailer equips staff with mobile client workstations
Tesco will equip its staff with $9m worth of wearable computers in a bid to boost fulfilment efficiency for customer orders placed over its tesco.com website.
The largest grocery supermarket company in the UK has signed a deal to purchase several thousand Xybernaut Atigo mobile and wearable computers for deployment to more than 300 grocery stores within its UK operation.
An initial rollout of 1,300 Atigo units will be shipped pre-configured with Tesco's client workstation and enterprise network applications.
Xybernaut will also configure the units with predetermined wireless communications capabilities optimised for interoperability with existing and planned Tesco communications systems.
"We wanted a product to make our in-store operations better and simpler so we can continue to improve our customer offer," said Mike Yorwerth, head of operations and infrastructure for tesco.com.
"After evaluating several manufacturers, we quickly realised that the Xybernaut Atigo offered us the most flexibility and performance to meet our needs."
The supermarket chain is also evaluating additional Atigo applications for supply chain, logistics, inventory/stock management, promotional efforts, remote register/cashier services and employee productivity.
In addition to the Atigo hardware order, the Xybernaut services team has been engaged to provide Tesco with a customised build and installation process.
Source: Vnuet. November 2004
Write: by Robert Jaques
Picture: $9m worth of wearable computers

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IRELAND - RETAIL

Grocers blame high operating costs for expensive goods
The representative association for 4,500 independent grocers today told an Oireachtas committee that food prices would fall if the high cost of doing business in Ireland is tackled. "Independent grocers are able to invest in their businesses and compete with the multiples because the Groceries Order bans predatory tactics which would wipe them out," RGDATA told the committee. "As far our members are concerned there is no great mystery as to why food prices are dearer here than other countries. The plain and simple reality is that doing business in Ireland costs more than elsewhere throughout the Euro zone," RGDATA Director General Tara Buckley told the committee. "There were no windfall gains being made by independent retailers. The net margin earned by our member’s averages at 2.65%. This is a very hard-earned profit in a very competitive environment."

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POLAND - HOME APPLIANCE MARKET

Rising prices, taxes blamed for home appliance market slump
Don't look for healthy orders any time soon if you are dealing with a retailer in Poland's embattled consumer electronics market. The sector itself is deeply pessimistic and Euler Hermes Credit Insurance estimates that selling home appliances is now one of the riskiest businesses in the country.
In fact, some are predicting the demise of several retailers with pockets too shallow to deal with drastic marketing and more sophisticated consumer demand.
In particular, the final quarter of 2004 may prove the undoing of companies which are not able to pass on the big supplier discounts that are currently the norm.
Retailers in the south of Poland could be among the worst affected, as that region is predominantly populated by smaller, less powerful distributors, while a new, larger Czech retail network is currently entering the southern sector under the brand OK Polska, hoping to win business with incentive marketing and more attractive prices.
It's a case of a few months making all the difference in the home appliance business, with the watershed coming at the time when the country gained access to the EU in May 2004.
Before that date, retailers were basking in lucrative times. Merloni, the Lodz-based appliance producer, recorded a 50% growth in sales over the first four months of 2004 compared to the same period in 2003.
But an increase in taxes, coupled with soaring retail prices of raw materials such as steel and fuel (to harmonise with EU pricing), produced a very different set of figures for retailers after celebrations for the accession had died away.
Sales dropped significantly following marginally better months in August and September, as companies found themselves with warehouses full of unwanted stock. Now they look none-too cheerfully towards the festive weeks of November/December leading into Christmas as the last chance to salvage a dismal year.
Producers are likely to share in the pain with the country's distributors because it is overall demand that is falling away, a longer-term phenomenon that simple cuts in marketing and advertising are unlikely to solve.
Write: by Ella Sledz, Warsaw Consultant. November 2004

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FRANCE - OPTICAL MARKET

Gem stones and exaggerated styles in Paris optical fashion - report from Silmo 2004, Paris
The new optical looks into 2005 seemed to dwell on jewellery for the eyes, with refinement and exuberant styles making their mark in a large number of instances, with the 22nd to 25th October international optics and eyewear event of the year in Paris attracting some 40,000 visitors in Paris-Porte de Versailles.
About 90 exhibitors attending the international optics and eyewear exhibition were from Hong Kong, amid a field of 1,000 representative organisations from around the world.

Eyewear is very much an integral part of fashion and follows its twists and turns at every step.
A look at the trendsetting Italian eyewear fashion runway organized by ICE (the Italian Institute for Foreign Trade) and Anfao (the Italian Optical Goods Manufacturers' Association), offered a preview of the new collections for Spring/Summer 2005 by leading Italian companies during a fashion event just prior to Silmo.

Among the main themes was a trend towards rhinestones and other gems, which are set to glamorise faces again, often in an exaggerated, almost surreal way. Sometimes glasses highlight complicated design, on other occasions emphasising simple and pure lines, transforming eyewear into jewellery.
Decoration was taken to the extreme at Silmo, emphasising personal or exclusive touches. The message was all about seduction and luxury! A special emphasis has been placed on logos, which are becoming part and parcel of eyewear.

Sport and fashion fusion, concepts in eyewear
The concept often seen was of refined sport and fashion expressed by way of a new, blatantly elitist attitude. This trend reeked of exclusivity. Glasses were exaggerated, wraparound, and clearly sporty, with some items harking back to the 1970s or 1980s.

Gardens and life sustaining opportunities were conspicuous. The romantic and emotionally-striking nature of a wild garden, together with the harmony of natural shades in green, transparencies, lilac, pink, pale colours - as well as deeper or more vibrant hues - were all closely followed by buyers.

In fashion, the romantic garden style finds expression in light and almost impalpable and romantic fabrics like jersey, silk and cotton voile. In eyewear, it is characterized by undefined and overlapping colours, the marriage of nature and technology.

Styles, motifs, cultures, places, eras - concepts and their opposites combined freely. Colours represented energy, sharp and warm such as purple, spicy reds, orange, blue, fuchsia and yellow. There were also motifs such as checks or stripes, to make styles personal. By contrast, this approach followed pop music and the Matrix generation.

Red pervaded many of the eyewear collections. The colour is not always expected to be matched with others in clothing, but is perfect when worn on its own to create strong contrasts, as an attention-grabber. Red communicates a certain mood and transmits positive energy to materials and renews minimalist lines, with an eccentric touch.

Inspired by TV characters and cartoons, Silmo was again a child's world. Gone were the models inspired by adult styles and "in" was eyewear that respects the shape of children's faces. When it comes to colours, anything goes - the brighter the better, such as orange, red, yellow, pink, blue and light green.

Oakley presented its new Monster Doggle in white for a new lifestyle generation of urban eyewear - basically, "hybrid" male and female. The model is featuring an O Matter frame - light and comfortable - from injected and molded plastic. The plutonite lens is made from polycarbonate. The geometry features 8.75 base curve and is spherical, with two lenses. The model will be available within weeks, retailing at between Euros 110 and Euros 180 (US$132 and US$216).

The new Boutique fashion sun wear from Daniel Swarovski was crystal and extravagant. Different crystal colours were smartly blended in sophisticated mosaics, with an almost textile-like look and feel. The Boutique collection came in seven different styles and in four colours, with the shimmering crystal elements linking the lenses to the extra-wide temple. The Boutique models retail at between Euros 600 and Euros 700 (US$720 and US$840).

Gravity-defying lightness was demonstrated by the filigree frame model R 4532 from the Ti-Lite line by Rodenstock. The actual frames of high-quality beta titanium weigh only 3 grams, and with glass about eight grams. Thanks to advanced technology, no weakening welding points are necessary.
The new models are now available in fresh colours from gold to graduated shades in red, blue and brown at around Euros 290 (US$348) and available to the specialist trade by the end of 2004.

Launched just a month before the show, on display was a fascinating new design concept from Rodenstock, combining plastic with steel. The metal frames were equipped with temples of Trogamide®, a high-tech plastic, providing translucent colour, very high break resistance and durability. Metallic inlays in the temples are not necessary any more. The new models will be available at about Euros 170 (US$204) to the specialist trade.

Anti-fog and youth designs more visible
ClimaCoolTM technology from Adidas is a dynamic ventilation technology, allowing for air to be directed in a way that does not disturb the eyesight but rather manages moisture and prevents fogging. The ClimaCoolTM item, being especially designed for running, will be available on retail from between Euros 170 and Euros 185 (US$204 and US$222), while the optical clip to be worn with the glasses will cost about Euros 32 (US$38.4).
The growing independence typical of today's youth inspired Adidas to create its collection, Urban Youth, featuring PowerflexTM and Performance SteelTM - an ideal match for the tastes and styles of modern kids and teens. Adidas holds the worldwide patent for using Performance SteelTM and will sell the different models at a recommended retail price of Euros 123 (US$147.6).

Bobby To, managing director of Best Work of Hong Kong, presented his collection of sunglasses for the new season, aiming at innovative and original solutions - and with some surprising effects.
To sees rising demand in sunglasses as a true fashion accessory and component of style. For the coming season he relies on contrasting colours and sees a tendency for bigger frames. Depending on the country, To's eyewear retails at about Euros 40 (US$48).

From New Henry Optical Manufactory based in Hong Kong, Eric Yip, sales and marketing manager, said the coming season will see a strong increase in plastic eyewear for sunglasses and optical eyewear.

The colour red, along with colour combinations with red, such as red/black, red/white or red/crystal, are set to be highly popular for 2005, said Yip.
He also believed that for 2005/2006, material combinations of plastics with metals such as stainless steel, titanium and aluminium will be fashionable. Wholesale prices for eyewear featuring material mixes are likely to be at around Euros 5 (US$6).

Hong Kong's Kelfred Optical Ltd specialises in manufacturing and exporting eyewear models in an average wholesale price range of between Euros 2.9 and Euros 5 (between US$3.50 and US$6).
The company's proprietor, Kwok Kwan Fai, expects an upturn in the world economy and with it greater disposable incomes for better-styled glasses. Due to the strong Euro, eyewear turnover figures are favourable to Hong Kong manufacturers, said Kwok. Especially in large markets, such as Turkey or Spain, quantity sales for low priced models (from Euros 1.2 to Euros 2.5 or US$1.50 to US$3) are on the rise.
According to European fashion dictates, colour combinations are in demand, with acetate rather than metal frames for the coming season.

Optical neck chains are making a comeback
Optical neck chains bounced back at Silmo 2004. Formerly thought of a purely utilitarian accessory, today's neck chains are important to fashion victims, active modern women and trend-conscious men.
Daniel Swarovski Paris Crystal Eyewear launched his new collection of glasses neck chains featuring yellow or white 23 ct gold plated chains decorated with an ornate cylinder made up of tiny crystals corresponding to crystals of the company's evening eyewear - featuring light blue, crystal, topaz or amethyst.
High-end neck chains are retailing at around Euros 100 (US$120).

Locaplast/FJO is a specialist and according to proprietor Jean Paul Deveney there is rising demand for metal chains coated with coloured textures. Also in demand are gold plated chains with a jewelled look and specialist neoprene auto-block chains. Chains are retailing at an average price of between Euros 3.50 and Euros 14 (US$4.2 and US$16.8).

Said Konrad Saur from Carl Zeiss AG: there is a strong polarization of either low-price models or high quality, pricey models. Carl Zeiss deals into the concept of tailor-made lenses offering a unique selling point in order to sharpen the competitiveness of the specialist trade.

Relaxed Vision Terminals allow patients to use state-of-the-art centration technology, so that lenses are precisely fitted to the individual. The interactive machine records the shapes of the lenses, calibrates them and determines the centring values to the nearest 1/10th of a millimetre. The more relaxed vision leads to less eyestrain. The easy and fast handling of the terminal is available from Euros 7,000 (US$8,400) and up.
Write: by Silvia Fricker, Paris. November 2004
Picture: Adidas' ClimaCool

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CHINA - RETAIL

Metro Scaling up Investment in China by 600 Million Euros
Metro, one of the world’s largest retailers from Germany, plans to scale up investment in China by 600 million euros over the coming 3 to 5 years. The investment will be devoted to open 40 metro malls in China which source and distribute local products on their own. Such announcement was made by Metro’s president Dr. Hans Joachim Korber while attending the inaugurating ceremony of Metro Training Center in Shanghai on November 1.Dr. Korber says China is a major component of Metro’s market expansion plan in Asia. The company plans to open 40 new malls in China over a course of 3 to 5 years. 2 will be opened by the end of this year. Another 10 are under planning for 2005 when China is to lift the geographical constraints on the opening of branch operations by foreign retailers and wholesalers. In so doing, Metro will be able to expand its business into cities where Metro is yet to build its presence.
Write: LuisB. November 2004
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CHINA - FOOD SECTOR

China food retail sector set to boom in 2005
The deregulation of the China retail market is set to provide significant opportunities for international food retailers next year as restrictions that have limited foreign players to joint ventures in the major conurbations are lifted
It is now popular knowledge that China holds the potential to become the world’s largest retail market, the deregulation of the China market at the end of this year will increase opportunities for foreign retailers no end, allowing them to expand much more freely.
The saturated food retail markets of North America and Europe mean that key players such as Wal-Mart, Carrefour and Tesco will all be clamouring to increase their foothold on the China market, where a fragmented food retail sector combined with outstanding market growth are further signs that point towards significant prospects.
This week Metro announced plans to add 12 more outlets to its existing 21 warehouse cash and carry operations in the country. Carrefour has even more outlets than Metro and in turn has a slightly higher turnover than the German retailer. It is planning to open a further 21 ‘Champion’ discount stores to add to its 53 existing hypermarkets in the country.
Adding to the competition is the relatively recent arrival of British retailer Tesco. Its joint venture with Taiwanese retailer Ting Hsin has given a strong start in the market, with 30 hypermarket outlets.
Gregory views Tesco’s move as a good one, although he adds that joint ventures will not prove the way forward for the big retailers in the future.

Currently the biggest international retailers in China are Carrefour and Wal-Mart. But with Wal-Mart poised to expand aggressively in 2005, many industry experts expect that it will take the lead next year. Last year Wal-Mart and Carrefour were neck and neck with turnovers of $1.6 billion, while Metro followed closely with a $1.3 billion turnover.
But the domestic retailers should not be forgotten in this equation. Currently the leading player is Lianhea, which in 2003 had a turnover of $3.2 billion. The company was expanding rapidly during the course of this year, and, like its foreign counterparts, is set to increase rapidly in the year ahead.
Either way, with deregulation just around the corner, the race is well and truly on to carve up the biggest slices of the China food retail segment.

Comment
The deregulation of the market means that food retailers are no longer obliged to enter the market through a joint venture. This is likely to spell the end of such arrangements for the biggest international players. On top of that, the potential for these players has also been increased because geographical restrictions on where new retail outlets can be set up have also been lifted. This means that retailers are now likely to expand outside of the three main urban conurbations of Beijing, Shanghai and Guandong into smaller tier one and two urban areas and cities.
Write: LuisB. November 2004

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ECONOMY - US CONSUMER REPORT

November Consumer Outlook: Spending Should Continue Easing From Lofty Levels
Retail Forward's Index of Future Spending indicates that consumer spending should continue to moderate in November from the strong surge posted in the first half of the year. The Index eased to 97.9 this month from a 100.7 reading in October, likely depressed by pre-election jitters.
"The downshift appears to have been exaggerated by the harsh election environment. With the voting over, the negative impact of the election on consumers' moods should dissipate, paving the way for a solid holiday shopping season," said Steve Spiwak, an economist with Retail Forward.

The Index now stands near its levels during the 2003 holiday, which points to retail sales growth this year that is similar to the healthy shopping pace turned in last holiday but weaker than the blow-out growth during the first half of 2004.
In fact, ShopperScapeTM results show there is still plenty of time for consumers to regain cheerier holiday spirits. Nearly half of consumers haven't started shopping for holiday gifts yet, and those who have still have most of their holiday budgets left to spend.
This month's survey also indicates that Wal-Mart continues to expand its share of the food market beyond its core Down Market customers, which bodes well for the world's largest retailer during the holidays.

Markets Moderate Up and Down
The indices for both the Up and Down Markets slipped in November, pulling the overall Index and the near-term outlook for spending lower. However, the index for the large Middle Market segment, which accounts for nearly half of consumer spending, remained nearly stable with a slight increase.
- The index for Up Market households (incomes greater than $75,000) slid to 94.2 this month from 100.5 in October, suggesting the recent strong pace of spending in this segment should weaken in November. A falloff in home buying and weaker assessments of job security compared with high levels in the prior month dampened the outlook, offsetting greater optimism about the performance of investments.
- Down Market households (incomes less than $22,500) saw their index moderate to 101.8 in November from 105.7 in October. Higher debt burdens compared with the prior month fed that falloff even as views of job security and income growth bounced higher. Debt burdens were boosted by an increase in home buying in this segment.
- The index for Middle Market households (incomes between $22,500 and $75,000) improved slightly to 99.9 in November from 99.2 the month before. The improvement was driven by the cash flow and wealth effects of better job security and investment performance, which should feed an up-tick in spending. A weaker pace of home buying tempered the outlook for this segment.
Hostile Election Making Holiday Outlook Less Cheery?
The latest ShopperScapeTM indicates that shoppers are exhibiting more caution about holiday spending as the season draws nearer. Compared with October survey results, more consumers this month said they plan to reduce their holiday spending versus last holiday. This was true across all income segments.

However, the election cycle was reaching a fever pitch just as the latest survey of consumers was fielded. It's likely that the hostile tone of the election and the uncertainty surrounding the outcome contributed to the heightened pessimism on the part of consumers this month in an otherwise favorable spending environment. Consequently, the end of the elections should spark some renewed consumer optimism before the holidays.
- A higher proportion of all shoppers in November (31%) said they plan to spend less on holiday gifts compared with last holiday, up five percentage points from October. The proportion that plans to spend more held nearly steady (Figure 2).
- Down Market shoppers especially showed increased pessimism. Thirty-eight percent said they plan to spend less this holiday compared with 32% last month.

Holidays Still Revving Up
Although some shoppers may not currently be planning to increase their holiday gift spending, stay tuned. Only about half of consumers have begun their holiday shopping, and those who have started still have most of their holiday budgets left to spend. So there's still hope that good news on the political and/or economic fronts could spur them to open their wallets wider as the holidays approach.
- Among all shoppers, 47% said they have not yet started shopping for the holidays (Figure 3). Down Market shoppers were most likely to have said they have not yet started.

- Those who have commenced holiday shopping have spent about 29% of their holiday budgets so far (Figure 4). Down Market households have spent the highest proportion of their budgets, while Up Market households have spent the lowest.

Many Holiday Shoppers Still Cost-Conscious
Holiday gift purchase plans show that consumers remain in a practical state of mind this year, with some exceptions regarding shopping for their kids. Affordable gifts will take priority over unique gifts this holiday season as many consumers, particularly those in the Down Market, remain price sensitive.
- ShopperScape results show that gift cards will get even hotter this year compared with 2003 (Figure 5). Twenty-six percent of all consumers say they plan to spend more of their holiday budgets on gift cards and gift certificates than they did last year.
- Other popular categories for the upcoming holiday season include clothing, electronics (especially among Up Market households), and toys and games. Conversely, it appears that sporting goods sales will do well to match last year's holiday levels.
- Over half of all consumers are more concerned about finding the lowest price for holiday gifts this year. Even in the Up Market-the least price-sensitive group-50% place importance on low cost while only 32% give priority to finding unique gifts as key buying criteria for holiday gifts.

Wal-Mart Makes Gains in Up Market Groceries
ShopperScape™ results indicate that one-fifth of all groceries are now purchased at Wal-Mart or Wal-Mart Supercenter (Figure 6). This market share alone is enough to worry other grocery retailers, and they're probably not even surprised that Wal-Mart is gaining ground among the Down Market. But the recent two percentage point increase in share among Up Market households is downright scary to some. We don't think that the currently stable share among the Middle Market, at 21%, will be much consolation, either.

Source: Retail Forward, Inc. November 2004
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2004-09-29T01:34:00.000+02:00

RETAIL - MARKET

Retailer Karstadt plans shake-up
Germany's KarstadtQuelle aims to shed 77 smaller department stores and may hive off its real estate assets into a listed company as part of urgent surgery aimed at returning the firm to profit next year.
Support from Karstadt's main shareholders for a 500 million euro ($615 million) capital increase to create a financial cushion while it takes the knife to its sprawling portfolio and slashes jobs helped push the stock up as much as 8 percent.

The ailing group said on Tuesday that restructuring costs would result in a loss before tax and amortisation of up to 1.3 billion euros this year but the overhaul should yield savings of 360 million at its two main businesses by 2006.

Karstadt Chief Executive Christoph Achenbach, who took charge in June, said the changes were ``both long overdue and essential.''

"They may be extremely painful in the short term but will open a good future perspective for (Karstadt) in the mid to long term,'' he said at a news conference.

German financial services group Allianz, which owns about 10 percent of the department store and mail order group, said it had confidence in Karstadt's new management and was ready to subscribe to the capital increase. The Schickedanz family, which owns some 41 percent, will also subscribe. The process should be completed by the end of November.

The mid-cap stock was up 6.65 percent at 14.27 euros by 1150 GMT after opening as much as 4 percent weaker on news of the restructuring charges and share issue. It had touched a high of 14.45 euros. The MDAX index of mid-cap stocks was flat.

"Positive above all is the fact that Allianz will take part in the capital increase,'' said Christoph Rehbach, an analyst at HSBC Trinkaus & Burkhardt.

"(The restructuring) is in principle the right approach. The question is whether it can be realized in this form,'' he added.

Particularly challenging will be the disposal of the stores, analysts and bankers say. Karstadt is planning to transfer them to a new company and sell it as quickly as possible. It will retain 89 larger stores as part of its core business.

Disposals, job losses
The Essen-based group wants to raise 1.1 billion euros in 2004 and 2005 through divestments that will also include clothing chains SinnLeffers and Wehmeyer, sports goods shops Runners Point and Golf House, and its stake in a joint venture with U.S. coffee shop chain Starbucks.
The company will keep a 50 percent stake in Thomas Cook, Europe's second-largest tourism firm, it said.
Karstadt, which announced the appointment of Harald Pinger as chief financial officer, said it expected the overhaul to result in ``markedly positive'' earnings before tax and amortisation from 2005.

A supervisory board source said thousands of jobs would go as a result of the restructuring but that the final figure had not yet been agreed. Media reports have said the company would shed up to 8,500 jobs, or about 11 percent of full-time staff.

Services union Verdi said the plans had been forced through against the wishes of employee representatives. It announced works meetings for Wednesday that could force store closures across Germany, including the KaDeWe flagship in Berlin.
Analysts said KarstadtQuelle's financial shape would be uncertain until its first progress reports on the restructuring.

The company's long-term debt totaled 2.3 billion euros at the end of June, compared with equity of 1.29 billion.

Some analysts have said investors will stay cautious until it is clear KarstadtQuelle can increase sales again. They have said the overhaul may take two to three years to complete.
In the restructuring, Karstadt plans to shed non-core businesses accounting for about 700 million euros in sales, or around 15 percent of its over-the-counter retail business.
It said that it would reposition the mail-order brands Neckermann and Quelle and develop growth areas in online, foreign and specialty businesses.

Dresdner Kleinwort Wasserstein and ABN Amro are joint bookrunners for the capital increase.
Source: Reuters. September 2004
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RETAIL - UK CREDIT

Retailers warned of credit threat
Britain's growing credit crisis could trigger a retail slump affecting some of the biggest names in the high street, a leading credit management lawyer has warned. While consumers come to terms with soaring credit card bills - the nation's personal debt broke through the trillion pound barrier last month - Larry Coltman believes the knock-on effect will inevitably be felt by retailers. He also warns that a sharp slowdown in the spending spree that has provided the dynamo for the UK's economic buoyancy over the past few years, will almost certainly result in a dramatic increase in the number of insolvencies and business-related bankruptcies. But runaway debt, and the steep rise in bankruptcies, point to a looming crisis, warns Coltman, a partner in the Midlands office of international law firm Reed Smith, and President of Coventry and Warwickshire Chamber of Commerce.
Write: by LuisB. September 2004
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RETAIL - NEW BUSINESS

Tesco in digital photo deal
Photo-Me International to install minilabs
Tesco is to install 165 digital photo minilabs from Photo-Me International (PMI) in stores across the UK.
Photo booth operator PMI, which has been successfully expanding its digital business, said more than half of the DKS 1550 minilabs will be supplied to Tesco in its current financial year, ending on April 30 2005.
As photography moves inexorably from conventional film to digital media, there is a huge opportunity for retailers, and Tesco's decision is a vote of confidence in both the market and PMI.
The DKS 1550 can produce 1500 prints an hour from both traditional and digital sources, including photo transfer from digital cameras, cameraphones and PDAs
Write: by LuisB. September 2004
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RETAIL - NORWAY MARKET

Lidl attracts customers with cheap fruit
Lidl apparently aims to attract customers to its newly opened stores in Norway with cheap fruit and juices. The price of bananas at Lidl stores is 3.90 Norwegian crowns per kg and juices cost 3.45 crowns per litre, which is many times cheaper than in other Norwegian food stores. Big Norwegian grocery chains like Rimi and Rama1000 feared that Lidl would attract new customers by offering very cheap beer and therefore reduced beer prices in the summer of 2004 before Lidl had opened any stores in Norway. The company already has stores in Sweden and Finland and is expected to soon expand to Denmark as well.
Write: by LuisB. September 2004
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RETAIL - SERBIA MARKET

Metro to open Belgrade store January 2005
Metro will open its first store in Serbia on 1 January next year in the capital Belgrade and will invest in it E15m, the state Radio 1 reported. Metro will invest E15m in the store and plans to open 8 to 10 stores in Serbia over the next three years. The next three are planned to be in the northern city of Novi Sad, in Nis in southern Serbia and Kraljevo in central Serbia. After Metro opens its first store it is expected that other German retail chains will also invest in the country, the state broadcaster RTS quoted Serbia's Deputy Prime Minister Miroljub Labus as saying. He added that Serbs spend around E50m annually in Metro's stores in the neighbouring countries.
Source; Metro AG
Write: by LuisB. September 2004

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RETAIL - SOUTH KOREA MARKET

South Korea’s five-day workweek to generate new retail trends
South Korea’s new five-day workweek could revolutionise the country’s shopping trends especially for department stores, analysts said.
According to a recent report by Samsung Economic Research Institute (SERI), retailers needed to become more leisure-oriented to meet new consumer demand for venues, activities and products.

Legalised in July this year, the five-day workweek would affect a total of 1.8 million workers in South Korea from companies with more than 1,000 employees each. Companies with 300 employees or more will implement the system on 1 July 2005, followed by the remaining workplaces in 2011.
The report also highlighted the emergence of more multifunctional shopping complexes in both urban and rural areas. "More retailers will provide cultural events and activities as they focus on entertaining rather than just serving as a shopping stop. They will be pervasive in the years to come,” said Im Bock-soon, director of the distribution and logistics team of the research division at the Korea Chamber of Commerce and Industry.
Shinsegae Department Store and Hyundai Department Store in southern Seoul are pertinent examples, both housing a diverse array of facilities comprising retail outlets, arcades, movie theatre and educational attractions.

Kwon Tae-woo, assistant manager of the marketing team at Shinsegae, said the department store would also be organising more cultural prize giveaways, gift certificates as well as cash-back events to go with the country’s move towards a more leisure-oriented shopping experience.

Meanwhile, the majority retailers - solo department store branches with no accompanying entertainment facilities - are looking at alternative ways to build up their businesses.

For instance, renovation plans are underway for Lotte Department Store's main branch in downtown Seoul to upgrade its retail space with more floor areas and room for leisure activities by end 2004. This will entail creating more rest areas with cultural themes like art gallery and musical events, a bigger food court and restaurants with standards equivalent to those found in five-star hotels.
"We're competing with the discount retailers, such as Carrefour and Samsung Tesco's Home Plus. These days, people can get everyday items at low prices, so operations like ours will have to offer a more extravagant place to spend time," said Ha Soo-yeon, head of the public affairs department at Lotte Department Store in downtown Seoul.

Other smaller outlets like Migliore, a thrift market comprising hundreds of independent retailers, prefer to focus on the more practical side of its business by like offering specialized products in the recreation area.
In the meantime, retailers like E-Mart and Carrefour are already going in line with the increased demand for leisurely pursuits by focusing on recreational equipment and clothing, as well as consumer electronics. A Carrefour spokeswoman has also predicted a sales increase for its home improvement items, with increases in labour costs, and people spending more time to improve their living environment.
Source: AsianTrade. September 2004
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RETAIL - LUXURY MARKET

China bans sale of leading luxury brands outside of Beijing
China has banned the sale of leading luxury brands outside Beijing chain stores regardless of whether or not they are genuine items. Speaking at a news conference in early September, Li Dongsheng, vice-director of the State General Administration for Industry and Commerce said vendors selling luxury brands outside Beijing’s chain stores would face criminal charges for intellectual property violation even when the goods are genuine.

He added that luxury products in Beijing would only be sold at authorised stores like Louis Vuitton, Chanel, Prada, Givenchy and Fendi.

Foreign brand companies had asked the Chinese government to announce the ban in view of problems of piracy and counterfeiting in China. In fact, China's Ministry of Commerce has investigated more than 160,000 cases of counterfeiting involving goods worth Rmb1.89 billion (US$228.6 million) last year.
Although most of these cases involved food, mobile phones, fertiliser and seeds, as well as cars, luxury brand owners said they are losing business to Chinese imitators offering fakes at better quality and more varieties.

Maxime Elgue, managing director of Cartier Far East, said the Chinese government must do more to combat counterfeiting. “They need to convince the country that fakes are bad for them. We are spending millions every year to sue companies and terminate workshops," said Elgue.

According to reports citing the International Chamber of Commerce’s findings, half of the US$100 million in counterfeit goods seized by US Customs officials in 2002 were from China. In total, counterfeiting makes up as much as 7% of global trade or US$450 billion annually.

Meanwhile, China has launched a year-long campaign to tighten law enforcement on the country’s intellectual property rights violations.
“Considering that the violations are currently very serious, China needs to lower the threshold for the criminal offences,” said Zhang Qin, deputy head of the State Intellectual Property Office.

Nevertheless, analysts said demand for genuine brands is still higher for Chinese consumers. Dong Tao, Hong Kong-based chief regional economist at Credit Suisse First Boston, said China's consumption of genuine luxury products is still very strong in the face of its rising middle-income class and upper class population. In fact, government statistics has shown a 36% increase in disposable income last year from 1998 to Rmb8, 500 city dwellers.

Giorgio Armani, Prada Holding and Cartier are some of the luxury brands that are confident that their sales in China could increase with rising affluence. While Cartier aims to increase store numbers in China from 10 this year to 20 by 2006, Prada plans to spend 35 million euros (US$42.9 million) to establish up to 15 stores in the country through 2005.
Source: RetailAsia. September 2004

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BRANDS - MARKETING

Private Labels: Does branding matter?
With the amount of branded product these huge retailers move each day, there’s no doubt that their outlets are a valuable asset to brand owners. However, their objectives might at the same time be considered at cross purposes with the branded product they retail. That is because each of these outlets has private label product, which competes at a lower price, side by side with branded products.

Traditionally, private labeling has been strongest in low-emotional involvement goods such as butter, eggs, flour, and sugar. Most often, such products are staple ingredients of larger recipes and individual performance becomes unidentifiable in the resultant mix. However as the private label market matures, it takes on more diverse products and services. For instance, Tesco in the UK offers petrol; President’s Choice, from Canadian retailer Loblaw, offers everything from cookies to financial services, and US-based Costco’s private label, Kirkland Signature, offers tires alongside fresh food and alcoholic beverages.

How big are these discount retailers? Wal-Mart based in the US and Carrefour based in France are considered to be the first and second largest retailers in the world. Costco Wholesale is the largest wholesale club operator – that is 36 million consumers have a membership to purchase goods at a discount in the US, Canada, Japan, Mexico, South Korea, Taiwan, and the UK. The 114 year old, Dutch supermarket giant Royal Ahold (Koninklijke Ahold NV) – whose retail outlets include supermarket chains like Albert Heijn in the Netherlands, ICA in Scandanavia, Bompreço in Brazil, Disco in Argentina, CRC Ahold in Thailand, and BI-LO, Giant, and Stop & Shop in the US – is active in 28 countries on four continents with a reported annual sales of E 66.6 billion last year (US$ 6B). (Ahold is currently responding to charges that its earnings claims in last year’s annual report left items undisclosed.)

Private label sales for these retailers contribute significantly to the bottom line. Jan Hol, Vice President Public Relations and Public Affairs for Ahold, says private labels comprise a considerable part of Aholds overall sales. “If you take the Albert Heijn company, with sales around US$ 7 billion (E 7.7B), 30 percent of their sales come from private label. In Sweden, ICA derives between 30 and 40 percent from private label.”

According to published research from retail consultant John Stanley at John Stanley Associates roughly 45 percent of products sold in Europe and 25 percent of products sold in the US are private label goods. Both markets are considered fairly mature with little room for growth, particularly in Europe, so many of the global private label giants are expanding to capitalize on less-saturated markets. According to a recent ACNielsen report Latin and Central America are showing the largest growth among the new markets (September 1991).
As for the consumer side, Stanley writes that in Europe savings can be between 10 to 18 percent, and in the US, that figure rises to as much as 25 percent cheaper than branded goods.

Because private label products are less expensive, one might be tempted to think of them as a lower quality alternative. Indeed early ventures in private labeling yielded inconsistent quality and tarnished the overall image of a private label concept. Retailers found that consumers, faced with uncertainty, weren’t going to experiment with a non-brand name item. A large part of growing the private label market involved improving the product’s quality.

Now according to Frank Dell, President of Dellmart & Co., a management consultant for retailers, wholesalers and manufacturers, consumers will no longer sacrifice performance for price. “The product must perform in the same way as the branded [product].”

Indeed, performance might be the only leg to stand on for private labels. For when there is no advertising or marketing spin, the product must do all the talking.

Most of the mature private label operators claim to deliver on price and quality. According to Kevin Hade, Vice President of Category Management at Ukrops Super Market chain in the US, Ukrops “wants to offer a product that is equal to or higher in quality to the leading national brand at a lower price.”
Costco’s Cynthia Glaser, Vice President and General Merchandise Manager, Private Label Non-Foods, says Costco will not develop a Kirkland Signature product unless it can make it better and cheaper: “It has to be an item that merits the time and effort that goes into it.”

Similarly Hol at Ahold places quality and price at the heart of an Ahold private label product. “We don’t want to position our private label as a discount label. It is a balancing act between the price, quality and the uniqueness of certain items. We prefer to position ourselves not only on price but in the unique recipe of a product and also the quality.”

To ensure that quality, private labelers began to analyze the contents of a leading brand and then, based on those findings, recreate that item step by step. Now most leading private labelers take an active role in the manufacturing specs of the product and no longer slap their logo on whatever comes off the assembly line. The result is that often the only thing separating one product from the other is the name on the label.

Attention to quality has helped grow the consumer base across economic classes. Private label’s typical consumer was traditionally well-educated high earners. Ironically, those who could benefit most from the lower price alternatives did not do so because, according to Dell, “They were putting their hard earned money out and they wanted a guarantee of the quality and the product’s performance.” As the private label’s quality improves the lower earning consumer can be more certain of the value for money ratio. Just like a branded product, once the relationship has been established, the consumer will continue to buy as long as it continues to perform well.

How far can a private label stretch before the consumer loses confidence in it? According to Hade at Ukrops it’s a fine line “You’ve got to be careful. I question when people get into these intensive multi-tiered strategies. Are they doing that as a benefit to the consumer? What are they accomplishing?”

He explains that although Ukrops wants to grow its private label line, decisions are largely based on what Ukrops thinks the consumer wants. “We measure our success by when we introduce a product. Did it get the appropriate amount of share that we anticipated in the subcategory? If not, the consumer is clearly telling us that we missed the mark and that it needs to be removed from the shelf.”

Hol on the other hands says that with regard to stretch, Ahold “hasn’t seen the border yet.” He goes on to cite examples of success with stretch. “In Europe we sell financial services under our Albert Heijn brand. We have a credit card company in Brazil under the store brand Bompreço. If the store brand is reliable with a good track record, and people have built confidence in it, there are a lot of new innovations and services that you can bring and market under this brand.”

But are private labels “real brands”? Hol insists that they can be. “We do have certain private labels that have emerged into the power and authority of a brand.”

Dell agrees. “But they didn’t start out [as brands]. They started out as a second-tier price alternative. And it’s very clear that the consumer is not really interested in that. And just like a branded product, if I buy a private label product and I don’t like it, I’m unlikely to buy any other private label product.” What’s more, he says, the private label should be managed like a brand as part of the marketing mix of the chain.

In fact, Dell suggests, the private label industry suffers by not taking itself seriously enough as a branded category. “The industry has tried to implement category management, which is a take off of the brand category management from the national brand manufacturers. A lot of them have titles called category managers, but I call them super buyers. They don’t have MBAs in marketing; they don’t spend time studying the industry. These people are in charge of a category, so one of the things that I find as a weakness is that they don’t have what I would call ‘brand managers.’ I think that is going to limit the success and effectiveness of private labels by not having that.”

Still as the private label industry grows, the threat to branded product rises. After all brands are now competing for shelf space with the store’s own product and sometimes, like in the case of Ahold, that product may have one, two or three different levels of varying degrees which procures even more shelf space. What’s more the branded product has an added burden of a large advertising-marketing budget, which can substantially impact the bottom line, particularly on low-margin goods.

The retailers we spoke with agreed that a growing private label industry represents a threat to the branded product, but none were too eager to share advice on how to compete against them.

Hade at Ukrops says brand owners competing with private labels need to offer a combination of quality and price that is a value proposition. “If a private label can meet those requirements and is significantly lower in price [than the branded product], than I would question how well [the brand owner] is running that company. Have they got their resources allocated right? Too much marketing costs?” Not surprisingly, he ultimately concluded that competing with private labels is “their problem.” What will keep private labels from taking over entirely? Is it possible that the cost to market will become too high for branded goods, squeezing brand product owners out of the business? The market seems to saturate at 50% and besides, without someone to copy, the private labels’ R&D costs will lower their own margins. Perhaps the fact that the branded product needs the retailer to carry the product and the private label needs something to copy makes for an unlikely but symbiotic relationship.
Write: by - Robin Rusch. Jonathan Schneider, founder of Square One Research, contributed to this article. September 2004

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BEVERAGE SECTOR - MARKET

US: Coke turnaround could take 2 years
Coke’s turnaround may take two years, according to the company’s CEO Neville Isdell.
In an interview published in the Financial Times, Isdell said that recovery "will probably take 18 months to two years and there is a period in the middle where people will say it's not happening quick enough. But I'm comfortable with that; I'm here for the long term."
He added that he did not believe a radical shift in strategy was required, despite the success rival PepsiCo has had outside the traditional carbonated sector.
"I know there is scepticism around this, but the number one priority is recreating the relevance of carbonated soft drinks," he said.
Also speaking to the Wall Street Journal, Isdell said the comany would shelve plans to change how it prices its soft-drink concentrate for its biggest bottler, Coca-Cola Enterprises.
Negotiations over how Coca-Cola charges CCE for its syrup have been continuing for a year. But Isdell said Coca-Cola would now focus instead on boosting sales and improving its marketing.
Source; FT. September 2004
Write: by LuisB

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SPORTING GOODS - MARKETING

Nike - does it“Cool!”
No doubt this is what Nike intends the visitor to say when opening Nike.com.
Nike's brand and swoosh trademark were born in 1971, and through state-of-the-art marketing, climbed to fame in no time.

The company turned public in 1980. With neat products, TV commercials, Niketowns, and merchandises nicely aligned with the brand, the athletic gear brand became a benchmark of 360-degree branding. Can the same case be made of Nike.com?

The website opens rather quickly, revealing splashy Flash technology. As the visitor returns or refreshes, the background picture of an athlete or a shoe will change. The splash page redirects to different national and category websites, including speed, football, basketball, soccer or women. The impact is professional but rather sober in comparison with what lies ahead.

Interestingly, every category displays a different design and feeling: Deep red for soccer, urban gray for basketball, or green-blue for speed. All of the screens are appropriate for the sport and make extensive use of streamed media. It is Flash 7 at its best, surprising and delighting the user through a satisfying workout of clicks, dives and interaction.

Like playing a new video game, visitors could be hooked for an entire evening just surfing Nike.com. With only two dimensions on a flat screen, the mind is absorbed by Nike's storytelling talent. The intro of "The Outer Limits" comes to mind: "There is nothing wrong with your television set. Do not attempt to adjust the picture. We are controlling transmission. We will control the horizontal. We will control the vertical. […] You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to the outer limits."

Nike.com flies in the face of usability standards and tests the boundaries to new uncharted territories. From a branding viewpoint, there is much to be questioned or at least debated. But for sure, Nike lives by its standards. It applies to its marketing and entrepreneurialism the same go for it approach that has made its brand known on, and off, the tracks.
Source: Brandchannel. September 2004

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HUNGARY - HEALTHCARE SECTOR

Constitutional Court gives green light to healthcare privatisation referendum
The Constitutional Court has given green light to the referendum on the privatisation of the healthcare sector. The referendum was initiated by the communist party in an attempt to repeal a debated law that would have allowed the involvement of more private capital in the healthcare sector. The twist in the issue is that the law the referendum had been initiated against does not exist any more as it was repealed by the Constitutional Court in an earlier decision. In addition, it is not entirely clear whether a possible outcome being against the privatisation of the healthcare sector reverses the already undertaken - mostly small scale - property sales or it only bans future sales of state healthcare property (hospitals, in particular).
Write: LuisB. September 2004
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CROATIA - TELECOMMUNICATIONS

Entry of third GSM operator to lower mobile call charges by 20-50%
The entry of a third GSM operator would lower mobile call charges between 20% and 50%, Karl-Johan Nybell, member of Tele 2’s management board said. Tele 2, in consortium with nine Croatian companies, filed the only bid for a third GSM license. The bidding deadline expired on 27 September. Nybell said Tele 2 would aim at a 30% market share and projects mobile penetration rate of 90% in 2009. He added Tele 2 holds 51% in the consortium, but declined to comment on investment plans. Tele 2 hopes to sign interconnection agreements with the other two operators HTmobile and VIPNet as quickly as possible. Nybell admitted Tele 2 was interested in the fixed-line telephone market, but would wait for liberalisation in the telecom sector to be completed. Among the Croatian partners of Tele 2 are Agrocor, Lura, Dalekovod, largest insurer Croatia Osiguranje and Privredna Banka Zagreb
Write: LuisB. September 2004
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2004-09-19T16:43:00.000+02:00

INDIA - ENERGY

India, Iran Close To Signing Pact In Energy Cooperation
India and Iran are close to reaching an agreement that will allow Indian petroleum companies to explore for oil and natural gas in Iran and set up joint ventures in petrochemicals in the two countries.
"The long-awaited package of measures for cooperation in the hydrocarbon sector has been virtually finalized through three rounds of negotiations in Vienna between the Indian Petroleum Minister Mani Shankar Aiyar and his Iranian counterpart Bijan Zanganeh," said an Indian government statement.
The final agreement is likely to include Indian participation in three Iranian oil fields, joint exploration of gas fields, long-term purchases by India of Iranian liquefied natural gas and modernization of two Iranian refineries by the state-run Indian Oil Corp. (530965.BY).
Aiyar is in Vienna to attend the summit of the Organization of Petroleum Exporting Countries.
The Indian government is encouraging state companies to bid for overseas petroleum assets to ensure the country's energy security.
To meet consumer demand of the world's seventh-largest retail oil market, worth $15 billion a year, India imports about 70% of the crude oil it uses. More than 60% of its imports come from Middle Eastern countries. India's total petroleum products consumption is close to 108 million metric tons a year.
Write; by Himendra Kumar. September 2004
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OIL SECTOR - MARKET

Demand, Speculation, Not Supply, Behind Oil Prices
Unrestrained demand and speculative trading, rather than a lack of supply, are to blame for today's high oil prices, India's petroleum minister said Friday.
In particular, rising current account and budget deficits show the U.S. isn't trying to restrain its spending, avoiding steps that could blunt growth in oil demand, Mani Shankar Aiyar said in an interview on the sidelines of an energy conference organized by the Organization of Petroleum Exporting Countries.
"There's not an energy deficit as such, but yes, there is a huge account deficit. There is a huge budget deficit," Aiyar said of the U.S. "If you started addressing those, there would be a restraining of demand, and the restraint on general demand in the U.S. would also be a restraint on oil."
High prices are also the result of the declining value of the U.S. dollar, Aiyar said. OPEC has that and speculation as factors behind today's high prices. Oil is traded in dollars on global markets.
Oil prices have shot up by more than 50% this year, as surging demand has pushed suppliers to the limit, leaving too little spare capacity to cover disruptions in places like Iraq.
India imports about 70% of the crude oil it uses, with more than 60% of this coming from countries in the Middle East. Domestic consumption of petroleum products in India is close to 108 million metric tons a year and growing.
Aiyar, who addressed the conference Friday, met this week with Saudi Oil Minister Ali Naimi and other oil heavy hitters this week. He said he no longer believes oil supply is the problem.
"I have been persuaded by what I've heard this week that there is not a supply problem," Aiyar said. "There is a problem of speculative trading. There is a problem of the erosion of the dollar...and there is a problem of deficits of various kinds, all of which is contributing to this otherwise inexplicable rise in prices."
Write; by John M. Biers. September 2004
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CHINA - ENERGY

China Reiterates Hope Of Oil Pipeline Deal With Russia Archived Story
Beijing Friday stepped up pressure on Moscow to approve a proposed oil pipeline deal, ahead of a visit by senior Chinese officials to Russia next week.
Premier Wen Jiabao is scheduled to visit both Kyrgyzstan and Russia between Sept. 21 and Sept. 25.
He is expected to meet Russian President Vladimir Putin.
"Construction of the pipeline is the core issue in energy cooperation between the two nations," said Li Hui, a senior official under Minister of Foreign Affairs Li Zhao Xing.
"We hope that no matter which pipelines (Russia chooses), there should be one via China," Li said.
Li told reporters Friday that in addition to energy, technology and other economic issues, political relations would also be on the agenda, including the fight against terrorism.
Li said energy has played an "extraordinary role" in bilateral trade and economic relations between Russia and China and will "certainly" be on the agenda of the upcoming high-level meetings.
Russia overtook the Middle East as China's biggest supplier of crude oil in June, and Li said two-way trade between the two countries would top a record US$20 billion this year, up from US$15.7 billion in 2003.
The official didn't indicate whether China anticipates a pipeline deal during Wen's visit.
China has long sought a deal for a pipeline to link the almost-depleted Daqing oil field in its northeast with the Angarsk fields in Siberia.
Japan, however, is also lobbying Russian officials to sign a deal as soon as January for a pipeline running to Russia's Pacific coast city of Nakhodka, from where oil could be shipped to Japan.
Li said he had no specific information on what deal would be successful, but said China is prepared to cooperate in other energy areas. He suggested deals on natural gas supply from Russia may also be on the agenda.
He also noted the "promising prospect" of transporting oil from Russia to China by rail.
Premier Wen will first visit the central Asian state of Kyrgyzstan for a six-nation meeting of the Shanghai Cooperation Organization, which includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
Write; by Victoria Ruan. September 2004
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POLAND - ECONOMY

Hausner eyes 5.1-5.2% GDP growth in Q3 and Q4 04, but sees lower investment rise
Economy Minister Jerzy Hausner said Friday he sees third- and fourth-quarter GDP growth of 5.1-5.2%, according to comments cited by the PAP news agency. That would give full-year growth of 5.7-5.8%, the minister said. Yet, he also admitted that lower-than-expected investment figures from the first half meant his prediction of 10% investment growth this year was unlikely to be realised.
The third and fourth quarter predictions mark a slowdown from GDP growth of 6.9% in the first quarter and 6.1% in the second (6.5% for the first half). But Hausner stressed that the lower figures did not mark any slowdown in the growth pace. The lower rates were rather a result of base effects as growth began picking up in the second half of 2003, he said.
The minister acknowledged that investments would play a smaller role than he once expected. His admission was predicated on the fact investments rose by 3.3% in the second quarter after rising 3.5% in the first. Some bank analysts had expected growth of as high 7% in the second quarter.
“This means that the increase will mainly be pulled by exports plus consumer demand, which is rising quickly, though not in a way that would threaten price stability and lead to faster inflation,” the minister was cited saying.
Hausner also expects the August jobless rate to fall to 19.1% from 19.3% in July and then down to 18.9% in September. The minister said recently that he expected the jobless rate at end-2004 to be 18.8-18.9% and at end-2005 to be below 17%, over a percentage point lower than the 18.2% written into the initial 2005 budget draft.
Write; by LuisB. September 2004
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RUSSIA - FINANCE

Yukos manages to pay USD 2.2-2.4bn on the tax claim
Yukos has so far paid USD 2.2-2.4bn of the tax claim bill, announced Bruce Misamore, Yukos's CFO. The total bill that the company has to pay is more than USD 7bn, while only USD 3.4bn (for 2000 back taxes and penalties) has been recognized in court yet. The company had to pay the USD 3.4bn claim till end-August but it could not. Misamore assured that the company is trying to stay afloat using all resources it can to both pay taxes and somehow scrape for operation. He said that USD 2bn in revenues are coming every month, of which USD 1bn goes to taxes while the other USD 1bn goes into the frozen accounts. In that respect, he said that the chief concern is keeping the company operational and if there were a choice between taxes and operation, the management would put the money in operations. The company is close to bankruptcy but he assured that the management has no intention to call it now. The statement comes after earlier today the company posted a massive 5-time increase in the estimated value of potential reserves of Yuganskneftegas - the largest oil-producing unit of Yukos.
Write; by LuisB. September 2004
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TURKEY - FINANCE

25% in Denizbank to be sold by public auction
25% of Denizbank’s shares will be sold through public auction on 23-24 September according to a statement from the bank today (17 September). Denizbank reported USD 50mn of profits for H1, up by 233%. The bank’s assets were also up by 66% to USD 4.8bn, while the rate on equity reached 25%, up by 16pps in the same period. Meanwhile, the capital adequacy ratio of the bank was 17%. USD 3.4bn was used through the bank as credits in H1, where USD 7.2bn of FX trade volume – up by 38%, and USD 3bn foreign trade volume – up by 55% was realised. On the other hand, the bank’s gold trade volume reached USD 3bn in the same period. The bank is owned by Zorlu Group since 1997 and has 13 affiliates, 190 branches and two banks abroad – one in EU and another in Russia. Fitch Ratings had on 6 September raised Denizbank’s national rating from BBB+(tur) to A-(tur), while the bank’s long-term FX rating and local currency rating were confirmed at B+, while individual rating was confirmed at D. The outlook of Denizbank was deemed “stable”, where the upgrade relied on the successful development of the medium-sized bank according to the same statement by Fitch.
Write; by LuisB. September 2004
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HUNGARY - FINANCE

Government to raise car registration taxes to gain HUF 8-15bn in 2005
The government plans to hike up car registration taxes in 2005 in order to raise budget revenues by HUF 8-15bn (EUR 32-60mn). The tax was introduced earlier this year as a compensation for the losses of car import duties due to EU accession. The introduced tax level did not seem to be high enough, as car registry tax revenues fell considerably short of their target so far. According to the plans, the car registration tax will be raised by 7-8%, VAT will be levied on the registration tax augmented value of cars and motorbikes will also be subject to this tax.
Write; by LuisB. September 2004
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CZECH REPUBLIC - CORPORATE FINANCE

Plzensky Prazdroj brewery pays out CZK 2bn dividend
The biggest Central European brewery Plzensky Prazdroj is to pay out CZK 2bn (EUR 65mn) in dividends, today’s general shareholder meeting decided. This amount is the same as the previous year and accounts for 71% of the company’s net profit in the financial year ending March 2004. Net profit increased by a healthy 30% y/y, which the company’s management attributed to the lower income tax rate. 96.85% of the brewery is owned by SABMiller.
Write; by LuisB. September 2004
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ROMANIA - OIL SECTOR

Lukoil to restart Petrotel refinery soon
The Petrotel Ploiesti refinery (located some 60km north of Bucharest), owned by Russia’s Lukoil, with a refining capacity of 3.5 million tonnes, will be opened in the near future. Lukoil president, Vagit Alekperov, mentioned September or October for re-launching the refinery Lukoil bought in 1998, but shut down in 2001 while laying off 2,400. Upon closing Petrotel, Lukoil said the reason was a USD 25mn programme for modernisation enabling Petrotel supply Euro 4 and Euro 5 fuels, however the closure was largely seen as a move to force the Romanian state grant some facilities which eventually happened. Alekperov made the statement after announcing the Russian group’s plans to hike the oil output to 90.2mn tonnes in 2005 from 81.5mn tonnes this year. After closing Petrotel, Lukoil saw losses worth ROL 455bn. Apart from Petrotel, Lukoil operates as many as 230 filling stations in Romania. Lukoil initially announced the opening date in June this year, following modernisation, saying the bulk of the output would be exported mainly in the Republic of Moldova where Lukoil operates 80 stations and Hungary.
Write; by LuisB. September 2004
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CROATIA - ECONOMY

Government issues EUR 750mn domestic bond since start of year
The government has placed EUR 750mn worth of bonds on the domestic market since the beginning of the year, Finance Minister Ivan Šuker said. He added that this has led to lowering of domestic interest rates by 1.29pps ytd to 5.94%. Besides, Šuker asserted that the cabinet has managed to slow down foreign debt, growth as recommended by IFIs, and now the debt stock stands at some USD 26bn. He added that in line with this target, the ministry has given up the idea to float new Samurai bond and would seek financing from the local market instead. Šuker continued that the government has given green light to EUR 300mn domestic bond issue to be placed on 20 September. The bonds will mature in 2014 and carry interest rate of 5.5% p.a. On the same day, the ministry will redeem EUR 200mn bonds, placed three years ago. Besides, it will repay HRK 410mn credit of state social insurance fund HZZO, as well as lend another HRK 230mn to the state-owned road building corporation HAC. On his part, Prime Minister Ivo Sanader asserted the new bond issue would not boost public debt as the accumulated funds would be used for repayment of part of the outstanding debt principle, as envisioned in this year’s budget plan.
Write; by LuisB. September 2004
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UKRAINE - FINANCE

Cabinet forecasts high GDP rates, lower inflation in mid- and long-term
The government disclosed its long-term forecast for development of the economy in 2005-2015. According to it, the GDP growth rate will fall significantly from the planned 12.4% y/y growth in 2004, but will remain quite high – 6-8.6% y/y in 2005-2010, slowly decelerating to 5.5-6% y/y in 2011-2015. There have been no comments from local economists on this forecast, but most likely it will be deemed extremely optimistic. It seems entirely possible that the figures have been influenced by the desire to increase the public appeal of the PM by pointing that his government already has reached high growth rates and should be left in place to strengthen these achievements.
The CPI inflation, both y/y and eop, should remain within a one-digit range, slowing to about 4-5% y/y and eop by 2008. the revised inflation targets for this year suggest 7.6% y/y and 7% eop inflation, instead of 6.8% y/y and 6.3% eop targets used earlier. The annual inflation is often underestimated by the government at the start of the year. In 2003 the government forecasted 7.2% eop inflation, while the actual figure was 8.2% eop. The government also plans to enjoy foreign trade surpluses in 2005-2008, which is entirely likely, considering constant surplus in services and existence of capacities for expansion of primary exports with high foreign demand – ferrous metals, chemical production and machinery. The expected drop in surplus should be caused by growing imports fuelled by increasing disposable incomes, economic growth and investment demand.
Write; by LuisB. September 2004
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EUROPE - TELECOMUNICATIONS

Tiscali takes users to the movies
European ISP Tiscali has partnered with CinemaNow to offer films to consumers in the UK, Germany and Italy, to stream or download.
CinemaNow provides online video-on-demand (VOD) distribution and technology, with content partners including 20th Century Fox, Disney, Lions Gate, MGM, Miramax, and Warner Bros.
The firm has licensed its PatchBay technology to manage part of Tiscali’s on-demand services, including digital and territorial rights protection, user profiling, pay-per-view and subscription services.
PatchBay uses Microsoft’s Digital Rights Management solution and is integrated with Microsoft’s Windows Media 10 Series.
Mario Mariani, senior vice president business development of Tiscali Corporate, said: “Just as we did with our revolutionary Music Club, Tiscali is stepping in the domain of legal online movie distribution throughout Europe. Working with CinemaNow allows us to expand our content offerings and provides us with a simple technology solution that can manage the complexities of a video-on-demand service.”
Write; by LuisB. September 2004
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2004-09-16T18:07:00.000+02:00

RETAIL SECTOR - E-BUSINESS

Catalog, Web Sales Jump 16% for Q2 at J. Crew
J. Crew Group Inc., New York, said yesterday that consolidated revenues for the 13 weeks ended July 31 increased 13 percent to $188 million from $167 million during the comparable year-ago period.
Comparable store sales rose 12 percent during the second quarter. In the direct segment, Internet and catalog sales jumped 16 percent to $44 million, with both channels posting growth.
For the 26 weeks ended July 31, consolidated revenues totaled $334 million compared to $329 million last year, an increase of 2 percent. Direct sales for the first half, however, dropped 14 percent to $80 million.
Source; J, Crew Group Inc., September 2004

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GERMANY - E-BUSINESS

Online spending to pass euro 11 bn in 2004
In the first half of 2004, German consumers spent more than euro 5.3bn online. According to an extrapolation by GfK Panel Services Consumer Research sales exceeding euro 11bn are forecast for the year as a whole. Internet sales have continued to increase in the country. The number of internet users rose by around 6m last year to 38.1m and the frequency of online purchases by internet users is also up. Compared with the first six months of 2003, retail via the internet to sell textiles, electronic products and durables was up by over 60%.
Source; GfK, September 2004

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BEVERAGE SECTOR - BUSINESS

Coke CEO vows to improve culture after profits tumble
Coca-Cola's top executive said Wednesday the world's largest beverage maker needs to work harder, better execute its business strategy and improve its culture as he warned that third-quarter per-share income will drop at least 24 percent from a year ago.

Chief executive Neville Isdell said in a speech to employees that a lack of personal accountability and internal politics, among other issues, have hurt the Atlanta-based company.
"We need to systematically remove the barriers that impede our progress," Isdell said. "In my opinion, these include a lack of accountability, personal accountability, the hindrance of internal politics, an aversion to risk and an underinvestment in developing the capability necessary to succeed."

The comments came hours after Coke temporarily shelved its policy of not giving quarterly earnings guidance and announced its unfavorable outlook, which would fall short of expectations. The company's stock fell on the news.
"Today, we are not growing the way we should be," Isdell said in a conference call with investors and reporters.
Coke, citing poor weather in Europe and problems executing its business strategy in North America, said its reported net earnings for the July-September period will be in the range of 35 cents to 38 cents. At 38 cents, that would be a 24 percent earnings per share decline from the 50 cents Coke reported in the same period in 2003.

Excluding charges, Coca-Cola said it now forecasts third-quarter earnings in the range of 46 cents to 48 cents per share. Analysts surveyed by Thomson First Call were looking for Coca-Cola Co. to post third-quarter earnings of 54 cents per share, excluding one-time items.
For the second half of the year, the company now expects to earn in the range of 88 cents to 92 cents. Coke releases its third-quarter and year-to-date earnings on Oct. 21.
"I am not satisfied," said Isdell, who was named CEO in May, replacing Doug Daft. "I understand these results to be the symptom and not the problem, and we will set about what is needed to move our business forward and improve our long-term performance."

Coke shares fell $1.71, or 4 percent, to close at $41.16 Wednesday on the New York Stock Exchange. Coke stocks had risen steadily from since last year ago to a high of $53.50 in April before dipping in July and hovering around $40. Rival PepsiCo Inc.'s stock has fallen since a high of $55.71 in June, but less dramatically than Coke stocks. The New York-based beverage company's shares have hovered around $50 since mid-July.

Coca-Cola blamed unfavorable volume trends in the North America bottle and can business, as well as changing marketplace dynamics in Germany and unfavorable weather in northern Europe for its reduced forecast. In particular, a German requirement placing a deposit charge on returnable bottles has negatively affected the company's outlook.
The company forecasts a 1 percent to 2 percent increase in worldwide unit case volume for the full year. Volume growth for the third quarter will be flat to 1 percent.

In North America, Coke also has seen some challenges with sales of its new mid-calorie cola, C2, Isdell said. While the company has had success in sales of its 20-ounce version, it has underperformed with its eight-pack can version, Isdell said. Abroad, C2's performance has been good in Japan.
Source; Associated Press, September 2004
Write; by Harry R. Weber

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DRUG, COSMETICS - CORPORATE AFFAIRS

P&G sticks to earnings forecast
Procter & Gamble Co. on Thursday stuck to its previous first quarter earnings guidance of 72 cents per share, or roughly $2 billion, a increase of 14 percent from a year earlier.
The updated forecast matches the consensus estimate of Wall Street analysts, according to Thomson First Call.

The announcement marks the second quarterly update in a row where the Tide manufacturer did not boost its guidance - a move appreciated by many economical analysts.

P&G also said it expects total sales to grow by a percentage in the low double digits, including 2 to 3 percent benefit from favorable currency exchange rates and another 4 to 5 percent from acquisitions and divestitures, mostly the $5 billion-plus purchase of German hair care company Wella AG.
Analysts have called for the company's top line to grow 12 percent on top of its $12.2 billion in sales from the fall quarter last year.
The Cincinnati-based consumer products giant said it expects organic sales growth - excluding impact from acquisitions, divestitures and foreign exchange - to grow in the range of 4 to 6 percent for the September quarter.

Organic volume growth is expected in the high-single digit range.
The company said new product introductions and upgrades in fabric and home care, baby care and beauty care have helped add to strong performance in the quarter last year with the launch of hit non-prescription heartburn drug Prilosec OTC.

Comment
In recent years, the company had gotten itself into a cycle of under promising at the start of a quarter and then raising guidance in its mid-quarter update. I believe that cycle is now over and applaud the change.
P&G shares dipped 64 cents or 1 percent to $56.09 at the end of trading on the New York Stock Exchange Thursday.
The company is slated to report quarterly results late next month.
Source; LuisB, September.2004

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RETAIL - MARKETING

7-Eleven introduces pre-paid cards
As the leading convenience store in Taiwan, 7-Eleven is planning to promote pre-paid cards among its consumers as a means to boost customers' loyalty. It has been reported that 7-Eleven has installed around 300 units of the machines for using the pre-paid cards in its branch stores and should be launched as soon as the end of October. The pre-paid cards will bring new business opportunities to the 7-Eleven. To develop the pre-paid cards by itself, 7-Eleven acquired 50% of the financial service company founded by Cosmos Bank, which earlier had been merged with Chinatrust Commercial Bank. The financial service company will team up with the Bank of Taiwan, International Commercial Bank of China (ICBC) and E.Sun Bank for founding a settlement bank to take charge of all the transactions coming from the use of the 7-Eleven pre-paid cards.
Source; LuisB, September.2004

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RETAIL - KOREA MARKET

Carrefour Plans Massive Investment in Korea
The headquarters of France-based multinational large discount store Carrefour Korea on Thursday announced that it will launch a massive investment in Korea by designating Korea as its ``priority investment site.''
The headquarters in France notified is Korean managers that it has designated Korea as its priority investment site. From next year, it will invest more than 250 billion won each year in order to open its stores in every Korean city of more than 300,000 people.
Every year, among the 30 countries worldwide that have its stores, Carrefour chooses one that has great growth potential and invests more in it than other places by designating it as "a priority investment site". China has been also chosen as a "priority investment site.''
Currently, Carrefour has 27 stores in Korea. Since 2006, it will newly open five or more each year. In the long term, it will expand the number of stores in Seoul from seven to 25 and will continue to launch aggressive investments and open other new stores.
It is true that the headquarters in France has been a bit hesitant about launching a new investment in Korea due to nuclear issues, complicated regulations, and sluggish consumption. However, since consumer sentiment hit rock bottom recently, it is expected to go up again. Carrefour seems to have decided that Korea has high growth potential.
Since its launch in the Korean market in 1996, Carrefour is one of the biggest multinational companies doing business in Korea, which has invested 1.6 trillion won up to now. Last year, it recorded 1.44 trillion won in total sales and is the fourth biggest large discount store in Korea after E-Mart, Home Plus and Lotte Mart.
Source; Carrefour
Write; LuisB, September.2004

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DRUG SECTOR - USA MARKET

Sara Lee’s Barely There Launches Tagfree Bras
Sara Lee Corp has launched a tagless bra range under its Barely There brand, responding, it says, to women’s calls to remove itchy, unsightly bra tags.
The first-ever tagfree Comfortable Curves collection features six different styles with size, fabric content and washing instructions printed directly on the inside of the back of the bra.
Sara Lee also produces tag-free underwear for men, women, and children under the Hanes brand.
“When Hanes launched the Tagless T-shirt for men last year, it only made sense to offer ultimate comfort for the apparel item worn closet to a woman's skin,” said Michele Termotto, Barely There brand manager.
“Women said they want a tagfree bra; now it's a reality.”
Priced at less than $30 and offered in a wide range of sizes, the Barely There Tagfree Comfortable Curves collection will be sold at better department stores nationwide.
Source; Sara Lee, September.2004

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FOCUS

LUXURY FASHION SECTOR - CHINA MARKET

LVMH finds rising market for luxury goods in China
A steady appetite for luxury goods by China's growing middle class may eventually propel the country ahead of Japan as the third-largest retail market for LVMH Moët Hennessy Louis Vuitton, the company's chief executive said Wednesday.

"China is a market that is growing rapidly, although it is still small in terms of sales per square meter," the LVMH chief, Bernard Arnault, said at a meeting in Paris with analysts and journalists. "But if growth continues at the present rate, there is every like lihood that China will overtake Japan within a generation."

Japan represented about 15 percent of group sales worldwide in the six months ended June 30, behind Europe at 36 percent and the United States, at 27 percent.

Japan is the luxury conglomerate's largest market for fashion and leather goods like Louis Vuitton and Fendi handbags, representing 32 percent of that division's E2 billion, or $2.45 billion, in sales during the first half.

Arnault said that mainland China was already the company's fourth-largest retail market, although he declined to provide sales figures. Combined with Hong Kong, the two markets are already the third-largest, he said, surpassing Japan.

Mainland tourists have flooded into Hong Kong since China's government lifted restrictions on individual travel to the city. More than five million Chinese tourists visited Hong Kong - a city of 6.8 million - in the first half of this year, according to Hong Kong's tourist board.

Arnault said LVMH's flagship store in Hong Kong's Central district was one of the main attractions for Chinese tourists visiting the city. He added that while Japanese tourists had long been LVMH's main customers in the countries that border China, today these shoppers are increasingly Chinese.

Arnault's remarks came as the company, whose stable of brands includes Christian Dior fashions, Veuve Clicquot Champagne and TAG Heuer watches, reported a 49 percent jump in profit to E396 million in the first half on sales of E5.7 billion. The company attributed the gains to a resurgence in tourism.
Source; International Herald Tribune, September 2004
Write: by Nicola Clark IHT

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2004-07-27T13:43:00.000+02:00

FOOD SECTOR - M&A

Dreyer's Grand Ice Cream Acquires Silhouette Brands
Dreyer's Grand Ice Cream Holdings Inc. has added firepower to its low-carbohydrate arsenal by acquiring Silhouette Brands, Inc. for $65.2 million in cash.

Based in New York and founded in 1994 by Marc Wexler and Sam Pugliese, Silhouette, whose brands feature low-fat and low-carb ice cream snacks marketed under the Skinny Cow and Skinny Carb labels, said in February it was seeking to be acquired.

For Dreyer's, the acquisition marks the next chapter in the company's ice cream-buying binge, which in February found the country's top-selling ice cream parent gobbling up the U.S. rights to Haagen-Dazs, including ownership of 236 stores.

Prior to the acquisition, Dreyer's acted as the national distributor for Silhouette Brands. Following this acquisition, Dreyer's anticipates significant administrative, selling, and management synergies; reduced costs; and raw material sourcing improvements.

As one of the fastest-growing partners in Dreyer's distribution portfolio in recent years, company officials said Silhouette Brands adds significant breadth to the ice cream assortment that Dreyer's offers consumers and retailers across the country. Silhouette Brands' executives, meanwhile, praised Dreyer's as an essential partner in its growth by providing direct-store distribution for many years.

Dreyer's paid Silhouette stockholders $4.76 for each common stock share and $6.56 for each preferred stock share held. The common stock price represented a 15 percent premium over Silhouette's closing stock price of $4.15 Friday.
Source; eMedia, July 04

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FOOD SECTOR - MARKET ANALYSIS

PBH Research Exposes Missed Opportunities
Fruit and vegetable offerings by quick-service, quick casual, family, and casual dining restaurants are increasing, but foodservice operators are still largely missing opportunities to appeal to their customers' interest in better health - and to ring up better sales in the process.

That's according to new "5 A Day Foodservice Opportunity Gap" research and analysis presented by the Produce for Better Health Foundation (PBH) at a special 5 A Day Foodservice Summit held late last week in Monterey, Calif.

Hosted by PBH and the Produce Marketing Association (PMA), the invitation-only summit revealed a wide gap in fruit and vegetable offerings in quick-service, quick casual, family, and casual dining restaurants, "which presents an opportunity for everyone to get what they want - customers, operators, and fruit and vegetable suppliers," PBH foodservice director Brenda Humphreys told summit attendees.

Opening the conference by offering PBH's "State of the Country" address, Humphreys noted that public health, public policy, and consumer health awareness are converging to create an environment conducive to change among foodservice operators, especially in these dining formats.

"The foodservice industry has been taking a lot of the heat for the obesity epidemic," she said, adding that healthier menu options like fruits and vegetables offer chains a way to get out of the kitchen, or at least the kitchen of public opinion. Likewise, while the foodservice sector offers significant opportunity, it has largely been untapped by fruit and vegetable suppliers, Humphreys said, adding that with almost half of every American food dollar now being spent on food prepared away from home, "the industry can't afford to overlook the market potential that exists in foodservice."
Source; PBH, July 04

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LOGISTICS - CORPORATE

Soaring volumes drive Kuehne & Nagel results
Swiss based logistics operator Kuehne & Nagel has released its interim results for the first six months of 2004. Reflecting the positive mood of many logistics businesses, the company has put in a strong performance so far this year. Net revenues increased by 20% to CHF 4,246.9m (€2,759.9m) compared with the same period last year. Operating profit (EBITA) increased by 36.9% to CHF 181.6m (€118m).
The good results were largely due to the performance of its air and sea forwarding division. Sea freight volumes grew by 25% with container traffic to and from Asia increasing by over 40%. Even volumes on the relatively weaker transatlantic trade lanes grew strongly with traffic up 12%. Operating profits improved by 16.3% in comparison with the same period in 2003.

The results were also buoyed by the integration of Pracht Spedition in Germany. The acquisition was a key driver of revenues in the company’s Road & Rail unit, with particularly strong demand for international and intermodal services. Meanwhile its Contract Logistics division doubled its operating profits to CHF20.2m (€13m) on a 5% increase of turnover to CHF581.1m (€377.6m). The unit has experienced problems over the past few years especially in the US, but a re-structuring combined with strong warehouse utilization in Europe has brought about a turnaround in fortunes.
Write; LuisB, july 04

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ADVERTISING - POLAND

Bigger billboard turnover boost for Stroer Polska
Stroer Polska, one of the leading companies on the domestic outdoor advertising market, has published results for the first six months of the year with revenues of zł. 45 million and a near 20% increase in turnover compared to the same period last year.
"The growth is due to the introduction of a new hoarding campaign. At the beginning of the year we launched a two-week system replacing the previous monthly campaigns. This led to an increase in supply of billboards and cut display costs for customers," said company president Janusz Malinowski. The price of a two-week campaign is cheaper by around 30% than a monthly campaign. According to company forecasts Stroer Polska will post profits of zł.3 million on revenues of zł.100 million this year. In 2005 the company plans to invest around zł.10 million on further development of its services.
Write; by A.K., July 04

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ENERGY - BRAZIL

Regulatory Agency Approves Petrobras Appraisal, Drilling Plans
Brazil's hydrocarbons regulator ANP has approved plans by federal energy company Petrobras to appraise and drill 27 areas for commercial feasibility, O Globo news service quoted the company's exploration and production director Guilherme Estrella as saying.

The approval was given after Brazil's federal audit court cleared Petrobras's plans. The company has asked for permission to study and drill the fields in the next two to three years to study their commercial feasibility.
The authorization includes the Mexilhão field, in the Santos basin, where 419 billion cubic meters of natural gas reserves have been found, the Golfinho field in the Espírito Santo basin where the company has found signs of light crude and the Baleia Franca field in the Campos basin, the news service reported.
The development of the Espírito Santo basin includes a US$500mn investment plan to build gas pipelines to shore and a liquefaction plant. The basin is seen to reach production of 100,000 barrels of oil a day (b/d), from the current 40,000b/d, and 1.1 million cubic meters of gas a day, Estrella told O Globo.

Petrobras should speed up production plans for most profitable fields, including light crude production, which should help the country be self-sufficient in oil by 2005, bringing forward self-sufficiency target from 2006, O Globo reported.

Petrobras currently produces 1.6mb/d in Brazil, accounting for about 80% of the country's oil needs.
Estrella declined to say how much would be invested in the development program but said the company invested US$500mn in the initial exploratory activities.

Mature fields
Separately, the development of Petrobras's mature fields by small and medium size companies will depend on talks between those companies and Petrobras, ANP board member Newton Monteiro told local press.
Petrobras has operation licenses for 40 mature fields that have low levels of productivity.
Monteiro, who was sworn in last week for a second four-year term as ANP board member, said small and medium size companies would have to seek partnerships with Petrobras to develop the fields.
It is part of ANP's policy to use the cheaper development of mature fields in Brazil as an incentive for the creation of small and medium sized oil and gas companies and development of local technology.
The 913 blocks that ANP plans to auction on August 17-19 in the sixth round of oil and gas exploration licenses include several mature fields.
Write; by LuisB, July 04

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INFORMATION TECHNOLOGY - ASIA

Korea, Japan and China agree on IT cooperation
The governments of Korea, Japan and China have agreed to start an international working group to share their advancements in information technology, extending a movement among Asian countries to jointly develop solutions to compete against dominant multinational high-tech firms such as Microsoft Corp.

The three countries announced the launch of the East Asia ICT (CJK) Summit in Tokyo on July 26, with all countries agreeing to exchange information on markets, technology trends and standardization activities while encouraging business partnerships and strategic alliances in both the public and private sectors.
The working group will run through December 2009 and include officials from governments, research institutes and private companies. The agreement resulted from a meeting of information and communication technology ministers from each country.

Korea, China and Japan had been cooperating in expanding broadband Internet coverage and developing new IT industry growth engines over the past few years. The East Asian region has put itself in a position to become the trendsetter in the global IT industry.
The three countries have agreed to set up an advanced framework to cooperate on mobile communication, next generation Internet and open-source solutions among other sectors. We believe private companies to benefit greatly from this agreement.

Under the agreement, the three countries will continue recent efforts to develop open-source software, setting up the tentatively named "Northeast Asia open-source software promotion forum," comprised of working-level officials from industries, research institutes and other related organizations to promote open-source applications.

In other issues, the three countries decided to cooperate in developing third-generation mobile telephony and other wireless solutions, encouraging joint efforts in research and development of communication technologies and their standardization.

The working group will jointly develop solutions for the next-generation Internet, most notably Internet protocol version 6, and radio frequency identification technology. The sides will cooperate in the development and promotion of IPv6 application services, while leading the experiments in setting up an interoperable regional network for RFID.
Write; by LuisB, July 04

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TECHNOLOGY - DIGITAL CAMERA

Digital camera boom drives new Web sites
Photo-sharing now a rich revenue source
Can't get anyone to peruse the 50 family photos from your new digital camera? Internet companies would love to see them.

As digital cameras continue their sales boom, Web sites have found an increasingly attractive business helping consumers share their photos with friends and family.

This month, two online photo-sharing services were bought within a 24-hour period. The technology publisher CNET Networks will pay $70 million for a longtime market leader, Webshots, and Google paid an undisclosed amount for a relative newcomer, Picasa.

The announcements came on the heels of a series of improvements from Yahoo Photos that have helped it leapfrog Webshots as the Internet leader in photo sharing.

Why all the activity? Analysts said a resurgence in the online advertising market had helped, along with a seemingly insatiable consumer appetite for digital photography.

"The digital camera adoption rate continues to defy expectations," said Chris Chute, an analyst with the research and consulting firm IDC, who predicted that digital camera sales would reach 25 million this year. Including the 27 million camera phones that are expected to sell this year, at least one-third of American households will be able to take digital photos by year's end.

Chute said that 28 percent of digital-camera owners shared their pictures over the Internet and that cellphones and devices connected to home networks, for instance, would facilitate photo sharing.

Some online photo sites have had a surge in visitors in the past year, according to comScore Media Metrix, an Internet measurement firm, while others have leveled off. Yahoo and Webshots have had marginal declines in visitors, while Kodak's Ofoto.com, District Photo's Snapfish.com and Shutterfly.com attracted 25 percent to 30 percent more visitors. What is more, the value of those visitors has increased as the demand for online advertising has intensified.

Executives said those audience sizes were enticing enough for marketers to open their checkbooks. Narendra Rocherolle, co-chief executive of Webshots, said one reason Webshots chose CNET over other suitors was that it could help the company reach more well-known advertisers, because it already had long-term relationships with advertisers like Canon and Sony.

Webshots said it was profitable and expected to generate $12 million to $13 million in revenue this year, half from advertising and the remainder from selling premium online services and photo prints. CNET said it expected overall revenue for Webshots to grow by at least one-third next year.

Webshots, like several other photo-sharing sites, lets consumers upload their digital photos to a Web page on the site, free of charge. From there, users create albums, then e-mail invitations for others to look.

Webshots has faced increasing competition from Yahoo, which has in recent months added a number of features to enable users to share their photos more easily and decreased the number of places where advertisements appear.

Late last year, Yahoo began a service that allows users to view their photos on wireless phones. "So instead of Dad pulling out his wallet for pictures, you can do it all electronically," Jeff Stoddard, director of Yahoo Photos, said.

Even so, the smaller competitors have some advantages. Ofoto.com and Sony's Imagestation.com, for instance, have considerable muscle behind them, while Snapfish.com can rely on marketing support from District Photo, one of the biggest mail-order film processors.

Ofoto, Snapfish and Shutterfly.com have for years helped customers convert conventional photos into digital images they could e-mail to others. Now they, too, enable digital camera users to swap photos, or print them professionally for less than 20 cents an image.

Raj Kapoor, president of Snapfish, said the company had recently allowed camera phone users to e-mail images directly to their albums on the Snapfish site. This week the company will vastly expand the merchandise people can order decorated with their photos. The new items include dog leashes, baby bibs and neckties.

In this competitive market, Google's purchase of Picasa is particularly intriguing. Unlike most other services, Picasa is a peer-to-peer sharing application. Users open a window similar to that of instant messaging applications to swap photos.

Google declined to comment on its acquisition, citing the required "quiet period" for companies that are about to sell shares to the public.
Source; The New York Times, July 04
Write; by Bob Tedeschi

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RETAIL - CLOTHING SECTOR

USA: Benetton Shuts Second Prime-Location Store
Clothing retailer Benetton has closed its store at 666 Third Avenue, 42nd Street - the second high-profile location abandoned by the company in recent months as it focuses on the more upmarket Sisley brand.
Benetton shut its 555 Broadway outlet in SoHo in the spring.
The company, which has about 5000 franchised stores, reported a 13 per cent year-on-year profit decrease for the first half of 2004.
Write; LuisB, July 04

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RETAIL - CORPORATE

Lidl sets sights on Aldi
Lidl is poised to overtake arch-rival Aldi to become the leading hard discounter in Europe by 2012 as it pushes into 7 new territories, according to food think-tank IGD. Both the German chains have been expanding in France especially and Western Europe, while Lidl is planning an assault on Central and Eastern Europe. The markets Lidl is targeting include Denmark, Hungary, Estonia, Latvia, Lithuania, Croatia and Slovenia, where Aldi has no presence. Both retailers also want to expand in Switzerland and Norway, but Aldi is focused on growth in Canada and New Zealand, which could allow Lidl to push ahead in Europe. At present, Aldi is almost double the size of Lidl in Germany. Aldi has a German market share of 9.4% and 4,050 stores, while Lidl has 4.9% and 2,522 shops. Excluding Germany, Lidl already generates greater European sales than Aldi - E9bn sales, compared with E8bn - and looks likely to beat Aldi to the Continent's number one slot.
Write; LuisB, July 04

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COSMETICS - CORPORATE

Shiseido narrows first-quarter net loss
Japanese beauty group Shiseido reduced its net loss to Y6.61bn/$60.2m for the first quarter ended June 30, 2004, compared with Y8.42bn/$76.7m in the same period last year. The company attributed the reduction in net loss to lower income taxes. Net sales, however, increased 1.7% during the quarter to reach Y144.2m/$1.3m. Sales at Shiseido's core cosmetics activity were up 2.1% to Y115.6m/$1.1m, offsetting a 3.1% decline in toiletries sales which reached Y13.3m/$121,120.
By region, the group recorded a 0.5% dip in sales in its home country, its largest market, to Y103.8m/$945,673. Overseas sales fared better increasing 7.7% to Y40.4m/$368,238 with European sales climbing 12.7% to Y19.7m/$178,956.
Write; by LuisB, July 04

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RETAIL - UK MARKET

Tesco selling Dillons, partnering with eDiets
Leading UK supermarket operator Tesco is understood to be in talks to sell its Dillons newsagent chain in a deal worth £20m (US$36.8m).
The Dillons chain includes 180 stores selling newspapers, tobacco and grocery items. The mooted buyer is private convenience store chain TM Retail.
Tesco acquired Dillons in autumn 2002 as part of its £357m acquisition of the T&S Stores neighbourhood store group, and has never seen it as core to its business.
TM Retail is already one of the country’s biggest newsagent operators, owning the Martin’s and Forbuoys chains.
In a related story, Tesco is reported to have signed a licensing deal with eDiets.com, the US Internet diet service. Tesco has paid £2m to acquire the UK and Ireland rights to eDiets.com’s technology.
Tesco is reported to be planning to expand the service to enable dieters to order products recommended in their personalised meal plan to their door.
Write; LuisB, July 04

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FOCUS

COSMETIC BUSINESS - INDONESIA

Unilever washes investment woes away
Though foreign investors are still reluctant to invest in Indonesia or to expand their existing businesses in the country, publicly listed PT Unilever Indonesia, a subsidiary of the Anglo-Dutch global consumer-products giant Unilever Plc, last week announced plans to increase its investment.

Indonesia's "most admired company in 2003" in the toiletries and cosmetics category said it would invest another Rp4.5 trillion (US$500 million) in the country over the next 10 years.

The company claims that almost 99% of Indonesian households use at least one of its brands of soap, detergent, shampoo, cosmetics, toothpaste and food and beverage products, which include margarine, milk, ketchup and ice cream.

Indonesians get Unilever's highest-quality Lux soap at the lowest price in the world because, according to Unilever Indonesia's former president, Nihal Vijaya Devadas Kaviratne, the raw material is available in the country and the labor is productive and low-cost.

With household names such as Pepsodent, Sunsilk, Rinso, Surf, Lux and Lifebuoy, and the best-selling tea, Sariwangi, Unilever has cashed in on most, if not all, of several positive business factors in the world's fourth-biggest nation.

Net profits increased fivefold in the three years leading up to 2003, and sales are now more than before the 1997 Asian financial crisis.

Audited net profit surged by 33% last year on higher sales and amid strong consumer purchasing power. The company booked sales of Rp8.12 trillion against Rp7.01 trillion in 2002. Meanwhile, profit rose last year to Rp1.29 trillion ($151 million), or Rp170 per share, from Rp978 billion, or Rp128 per share, in 2002.

Dividend payments were Rp1.53 trillion ($162 million), or Rp200 per share, equivalent to 118% of Unilever's net profits for 2003. Unilever made the gesture to celebrate the company's 70th anniversary this year, but shareholders may have cause to be happy for some time to come as the company's strengths continue to grow.

Unilever takes off amid crisis
Though the company has operated in Indonesia for seven decades, it was not until the 1997 regional financial crisis that it really got into top gear.

Unilever and other multinationals quickly wired into the liberal investment regime in Indonesia in the wake of a change in the law in January 1999 that removed the 49% limit on foreign shareholding in Indonesian companies. A ban on foreign investment in the distribution business was also removed, making it easier for foreign companies to manufacture and distribute their own consumer goods. The protracted weakness of the rupiah in the years following the crisis and the consequent bargain brands for personal and household-care products also aided the company's expansion.

The company has made six acquisitions and joint ventures since 1999, including five local ones, the first of which was Yuhan. This deal gave Unilever the rights to the best-selling Moltos fabric conditioner and Superpell, a popular floor cleaner. Unilever then paid $120 million for Kecap Bango, the country's top-selling soy sauce. A portfolio of more than 65 brands was slashed in half to enable the company to focus on its strongest brands.

Private consumption has driven economic growth in Indonesia since the crisis, accounting for about 60% of the growth recorded. This, coupled with strong levels of household savings, a low-interest-rate environment and a predominantly young population, has helped lift the company's sales to new highs.

Though labor issues remain a problem in Indonesia, cheaper wage levels have been an added incentive for Unilever Indonesia to increase exports, particularly to other countries in the region.

Lower tariffs due to the ASEAN (Association of Southeast Asian Nations) Free Trade Agreement are another positive factor. AFTA prompted the corporate decision to make Indonesia the regional sourcing center for a number of Unilever's products. Tea factories in Australia and Singapore were closed down and relocated to Indonesia, as were Lux and Lifebuoy soap factories previously located in Malaysia.

The AFTA agreement allows most products manufactured in one of the 10 ASEAN member states to be shipped to any other state at a 5% duty or less.

In addition to these factors, Unilever's expansion was also encouraged by the availability of raw material locally. The special taste of Kecap Bango, for example, derives from black soybeans, which grow only in Indonesia. To ensure continuity of supply, the company has struck deals with some 800 farmers who grow about 200 tons of black soybeans every year for Unilever.

Indonesia is also one of the world's major producers of palm oil, a primary raw material for many of the company's products. Industries under the Unilever group need about 1.7 million tons of crude palm oil (CPO) every year, equivalent to 5% of the world's CPO production, which is about 22 million tons.

Globally, about 56% of Unilever's business is in food, while some 44% is in household and personal care products. In Indonesia, the household and personal-care business is growing at about 14-15%, but this rate is dwarfed by its food business. Food currently accounts for about 18% of the company's total business in Indonesia, but Unilever expects this to increase to about 25% by 2010.

A prime export position
Exports account for nearly 6% of turnover, though this is expected to increase to about 15%, approximately $150 million, within the next three to five years.

Products for export include toothpaste, which is manufactured in Indonesia and supplied to the Philippines and other countries in the region. In addition, all the tea and soap for the Asia-Pacific region are now supplied from Indonesia. Tea is also exported to Japan and Australia. Ice cream made in Indonesia is also a large export item and margarine will follow soon. Economies of scale make production costs very competitive, compared with players with a small market share and ensuing high costs.

Even the poor can afford at least some of their basic needs, with the widely available single-use packs of Rinso detergent and Sunsilk shampoo priced at Rp500 (5.5 cents).

With more than 20,000 distributors and at least 2 million retailers, there is little chance of major hiccups in getting the goods to the customers.

Of course, it's not all plain sailing for businesses in Indonesia. Labor-intensive factories have shut down because of competition from China. Sony decided more than a year ago that it was not worth the hassles and risks and left the country. Many other businesses chose to relocate their factories out of the country at the same time that Unilever was doing the opposite and relocating several factories from elsewhere in the region to Indonesia.

But Unilever is a classic example of how savvy companies that have long-running exposure to a country and understand the risks are prepared to invest further and also to reach out to other committed multinationals. A 50-50 joint venture with Kimberly-Clark, for instance, now produces Huggies diapers and Kotex feminine napkins in Indonesia.

In the Asia-Pacific region, stretching from Australia to India, and to China and Japan, Unilever's Indonesia business is bigger than that in Japan or Australia, and second in size only to India's.

Unilever's strong position in the Indonesian market and economies of scale explain its full-blooded commitment to go forward and also why it may be around for another seven decades to come.
Write; by LuisB, July 04

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BANKING - SPAIN

Abbey opens its doors
Spain’s biggest bank is buying a British household name, in Europe’s largest-ever cross-border merger between high-street banks. The deal changes the continent’s financial landscape, but it is unlikely to spur rivals to do the same

It was widely expected, but no less eye-catching for that. On Monday July 26th, Abbey National, a British building society turned listed bank, said its board had accepted a takeover offer from Spain’s biggest bank, Santander Central Hispano (SCH). The shares-and-cash deal was valued at around £8.5 billion ($15.6 billion) when it was announced. If completed, it would be Europe’s largest retail-banking merger across borders.

Many a pundit had predicted that the European Union’s “single market” project and the introduction of the euro would lead to a flood of cross-border mergers in financial services. But, by and large, banks have shied away from such deal - which is why some of those pundits are talking of this week’s Anglo-Spanish union as a long-awaited milestone. There are several reasons for this reluctance. First, national markets still differ in lots of ways when it comes to financial regulation and taxation; as a result, a financial product that is popular in one country may be a non-starter in a neighbouring one. Added to this is continuing regulatory resistance to foreign takeovers: in some European countries - France being the most notable example - banking is considered a “strategic” industry that should be kept out of foreign hands.

Not so in Britain, but approval is not the same as success. Santander is paying a premium for Abbey. This is only worth paying if costs can be cut and profitability boosted. Domestic bank mergers have been popular in both Europe and America because of the scope they offer to close branches and crunch together back offices. By contrast, cross-border mergers are usually more about extending empires than cutting costs - and, since many an attempt at expansion into new markets has come a cropper, stockmarkets tend to frown on such deals. In this case, Santander is stressing cost-cutting as much as revenue-building, with annual savings of €500m ($606m) mooted, much of that coming from replacing Abbey’s out-of-date computer systems.

For the Spanish bank, the deal marks the end of a long search for a partner that would give it bulk in another European market. Santander’s driving force is Emilio Botin, its chairman, who inherited a small regional bank, Banco Santander, and turned it into the largest in Spain and the biggest foreign bank in Latin America, through a series a bold acquisitions. In 1999, Mr Botin brought together Banco Santander and Banco Central Hispano, a smaller bank. Since then, he has made no secret of wanting to get the group into the global top ten.

Britain was always the focus of his search for a new partner. The reason was, in a word, efficiency. The best Spanish banks make very nice profits - on the day the Abbey takeover was announced, Santander unveiled first-half net profits of €1.91 billion - and they want partners that are in the same league. British banks fit the bill: like their Spanish counterparts, they have been able to merge with each other, jettison overlapping bits of their networks, and so on. As a result, their return on equity tends to be above that of banks in countries like France, Germany and Italy, where obstacles to restructuring have held profits back.

However, Abbey is hardly the pick of the bunch. Having been a steady earner in retail banking and mortgages for years, it started to lose its way in the late 1990s - so much so, in fact, that it made pre-tax losses of £947m in 2002 and £686m last year. Dabbling in junk bonds proved particularly disastrous. Abbey’s life-insurance division has also been a worry, but the recent announcement that it would not have to stump up more capital under new regulatory rules was seen as removing the last obstacle to a bid. Abbey is halfway through a three-year turnaround programme designed to return it to its profitable ways of old.

Abbey’s rocky recent history may reduce the chances of a counter-bid emerging. Moreover, tightly run American banks are likely to balk at the premium payable, while most continental European banks simply can’t afford it. One or two of Abbey’s domestic rivals would like to bid, but they know they would face imposing regulatory hurdles. In 2001, Lloyds TSB was forced by the Competition Commission to withdraw a bid for Abbey.

The Abbey/Santander tie-up is not yet a done deal. Though it has been welcomed by Abbey’s board, the bank’s mostly British shareholders must vote on it, and many of them are less than thrilled at the prospect of their shares being turned into Spanish paper, with the currency risk that goes with it. However, they may still vote for the merger and dump their shares at an opportune moment soon after it is completed.

If the deal does go ahead, it would create a new giant in Europe, but it probably wouldn’t herald a wave of copycat cross-border mergers. As long as the continent’s financial-services markets retain their national quirks, banks will worry about straying from home turf. Santander’s rivals will want to wait and see how it fares as it grapples with its bulky British bride. After all, bank mergers have an unhappy history, whether domestic or cross-border: more often than not, the cost savings and revenue gains achieved (as opposed to promised) fall far short of the premium paid by the acquirer. Is it different this time? If history is a guide, probably not.
Source; The Economist, July 04

2004-07-22T18:41:00.000+02:00

GROCERY - TECHNOLOGY

Grocery shoppers: Pay by cash, check or finger scan?
Supermarket shoppers soon will encounter a wave of new store technology that will make the self-checkout station seem quaint.

In the coming months, some of the nation's biggest chains will roll out biometric scanners, interactive kiosks and "smart" carts. They are designed to get customers to spend as much as possible and still speed their way out.
Grocery operators hope the big investments in technology will help them better withstand competition from big-box discounters that are making food a mainstay of their product mix.
Supervalu Inc. of Eden Prairie said it's close to testing a system that allows customers to pay for groceries by placing their finger on a scanner. Other chains such as Albertson's and Food Lion are rolling out "smart" shopping carts that allow people to price-scan groceries as they shop.
Those innovations will join kiosks that can take orders and offer product information.
Supermarkets traditionally have been incubators for retail technology. But experts say the furious pace of innovation reflects a sense of urgency by food retailers to confront big-box price-slashers.
"If you look at supermarkets today, they are scared of Wal-Mart," said Allan Couch, director of the food and drug industry markets for NCR Corp., a Dayton, Ohio-based manufacturer of kiosks and self-checkout stations. "They can't compete on price. So [they say,] 'What else can I do? How do I differentiate from Wal-Mart?' "

All this technology isn't cheap for retailers. Installing one self-service checkout lane can cost $20,000, plus maintenance costs, according to IHL Consulting Group in Franklin, Tenn. Kiosks range from $3,000 to $7,000 a machine.
But retailers say the investment is worth it. Technology isn't a magic bullet, especially if Wal-Mart, Target and others eventually decide to use me-too systems. But a little bit of geekyness can go a long way to winning customers, analysts say.

"Often, these new technologies provide a real spark to the shopping experience," said John Hauptman, vice president of Willard Bishop Consulting in Barrington, Ill. "It can be enough to tip the scales in favor of one store over another."

Beyond self-checkout
Supermarkets introduced self-checkout stations a few years ago to allow time-pressed shoppers to bypass long lines, especially if they had only a few items. Now companies are trying to extend that convenience beyond the checkout.
Last month, Supervalu installed self-order kiosks at deli departments throughout its Bigg's stores in Cincinnati and Clarksville, Ind. Customers can punch in a deli order at the kiosks and return within 15 minutes to pick it up, avoiding the wait at the counter.
It's no accident that the Cincinnati and Indiana stores got the kiosks. Wal-Mart is a major competitor in those cities, Supervalu executives say.

"We thought, 'What else can we do to differentiate ourselves, particularly from a Wal-Mart, and give us an advantage in service,' " said John Eversman, Supervalu's vice president of retail technology.”Areas like produce and deli are not Wal-Mart's strength, so why not take advantage of that?"

In the Twin Cities area, shoppers soon could find similar kiosks at Cub Foods stores. Lund Food Holdings Inc. of Edina, which operates Lunds and Byerly's stores, already offer the kiosks at the Ridgedale and Chanhassen stores and is considering adding more.
"We view the kiosks as another type of service," said Dennis McCoy, kiosk project manager for Lunds.
Food Lion and Stop & Shop are testing a version of a "smart cart" that allows people to scan and bag groceries as they walk through the store. Neither chain operates in Minnesota.
One system, made by Symbol Technologies Inc. of Holtsville, N.Y., works like this: consumers use a handheld device to keep a running total of their purchases. At the checkout, shoppers scan an "end of trip" bar code on their cart and the entire order is downloaded into the register without any of the items having to be removed from the cart.

The system is not perfect. A dishonest shopper could scan one product but place a more expensive item into the cart. Frank Riso, Symbol's director of retail industry marketing, said consumers must sign a code of conduct agreement before enrolling in the program. The retailer also will rescan orders randomly to make sure customers aren't cheating, he said.
With Cuesol and IBM's "Companion Cart," customers can enter their shopping lists into a Web site and then download the list onto a screen attached to their cart that maps the location of each product in the store. The device also highlights items on the list once the customer enters the right aisle.
Eversman of Supervalu said the company also is interested in the cart technology. One problem, though, is that those systems currently require retailers to have a loyalty card program to establish a customer's identity and track purchases. To "leapfrog" loyalty cards, Supervalu and Milwaukee-based Roundy's Inc., which operates the Rainbow Foods chain, are exploring a biometric-based checkout system developed by Pay By Touch.

No more cash, cards
Consumers can place their finger on a scanner, enter a code and access a credit card or a checking account previously submitted to the retailer, eliminating the need to carry cash or cards. Pay By Touch says the system doesn't store actual fingerprints but rather a series of "data points" unique to each finger.
Eversman declined to give a timetable but said the technology's introduction is "imminent." John Boyle, Roundy's group vice president of information technology, said the company will test Pay By Touch in Milwaukee next month and soon could introduce it to Rainbow customers. The company also is developing a portable handheld scanner that allows employees to check out customers when regular cashiers are too busy.

While all these devices help customers save time, other technology aims to keep shoppers in stores for as long as possible with a flood of product information and advertising.
At Lunds and Byerly's, shoppers can look up and print recipes from special kiosks. FarmFresh, an East Coast chain operated by Supervalu, recently installed EasyAnswers Touchscreen kiosks that offer information on health, nutrition, weight control and sports and fitness. The kiosks, made by Healthnotes Inc. of Portland, Ore., also offer safety information on potential interactions between supplements and frequently used prescription and over-the-counter drugs.

"It often encourages consumers to make corresponding purchases in that particular department," Hauptman of Willard Bishop said.

The technology also offers supermarkets a lucrative source of income from manufacturers who want to reach customers.
Shop 'n Save, a St. Louis-based division of Supervalu, now plays ads on 40-inch digital flat screens suspended from the ceilings of its stores.
Advertisers "want to catch a person's attention close to where their products are” said Ed Carter, senior buyer and ad manager for Shop 'n Save.
Eversman envisions transmitting promotions and messages to specific customers through carts, video screens, kiosks or checkout stations.
What's uncertain is how concerned people will be about the privacy issues implicit in biometrics and retailers knowing their shopping lists, or whether all the extra information will be welcomed or viewed as so much more noise by shoppers already overwhelmed by advertising.
"We try to strive for a happy balance," Eversman said. "We try to be careful. Technology for technology's sake can turn people off."
Source; by The Star
Write: by Thomas Lee, July 04

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RETAIL - FOOD INDUSTRY

Food industry seeks riches in diet niches
Revised nutrition labels also may join arsenal in fat fight
Savvy food manufacturers and restaurateurs could make a lot of money helping Americans battle the obesity epidemic, just as they profited by larding up consumers, food industry consultants say.
Leonard Teitelbaum, a Merrill Lynch food analyst, told the Institute of Food Technologists convention here this week that every 1 percent shift in what foods Americans buy represents a $1.5 billion market, and new product lines that appeal to lighter consumer tastes could be lucrative.

"That's enough to get anyone concerned and excited," Teitelbaum said, noting that Wall Street can punish the stocks of food manufacturers who don't keep up with what customers want.
He said stocks of bread and chocolate manufacturers currently are feeling the wrath of stock holders because of the impact low-carbohydrate diets are having on traditional bread and cookie producers.
"Obesity is a big deal," Teitelbaum said.
But some consultants said the Atkins diet is just a fad and destined soon to go the way of the Scarsdale and grapefruit diets. They predicted the next food fad will be healthy, lower-calorie foods and products that can be marketed as "good for you, better for you."
"You are going to see calorie consciousness back," John Stanton, a professor of food marketing at Saint Joseph's University in Philadelphia, told the annual convention of professional food scientists and industry representatives.
Stanton said he expects the Atkins fad to begin running out of steam in two years, replaced by a niche market for foods that are lower in fats, lower in added sugar and lower in calories.
"There are riches in niches," he said. "Obesity can mean fat profits."
Lester Crawford, acting commissioner of the U.S Food and Drug Administration, said his agency this year will propose the first revision in food labels in a decade, emphasizing the calorie content of foods. He said final decisions haven't been made, but he wants to make the type size larger and add information to the nutrition label.
Crawford said the government also is asking restaurants to come up with a way of telling consumers the nutritional content of the foods they serve.
"We're going to try voluntary, but if that doesn't work, we're going to come back to this," Crawford said, hinting that the government will consider mandatory regulations.
The industry adamantly opposes nutrition labeling, pointing out that consumers make so many changes in the way they want their food prepared that labeling would be difficult to implement properly.
Judith Stern of the American Obesity Association and a food nutrition professor at the University of California-Davis said the government's actions are much too timid.
"I am very discouraged about this," Stern said, contending that the government isn't doing enough to seriously address the problem of obesity in America.
"There's been a piddle response to obesity."
Stern said that government statistics show a startling increase in rates of obesity in the United States, with the number of teenagers classified as obese rising from 5 percent in 1985 to 16 percent in 2002, and a four-fold increase in the number of Americans more than 100 pounds overweight. More than 60 percent of American adults are obese or overweight.
Stern noted that U.S. Department of Agriculture statistics show that between 1985 and 2002, average daily calorie consumption rose to 2,680 from 2,220 calories. The government says the average daily caloric intake should be no more than 2,000 calories.
Stern said small reductions in the calorie content of restaurant food could have a major effect over time.
She criticized the industry for super-sizing portions to increase sales.
Over the last 50 years, the size of standard plates in restaurants has increased from 10 inches in diameter to 12 inches, and the content of muffins and bagels has doubled. She said cookbooks also have increased portion size, and some fast-food restaurants no longer offer soft drinks in small sizes.
"People should move more and eat less," said Robert Earl of the National Food Processors Association.
He said the food industry is being blamed even though most Americans eat a majority of food at home, and less than 5 percent of cooks are following government food serving guidelines.
Cathy Kapica, global director of nutrition at McDonald's restaurants, said her industry is responding to concerns over obesity by offering salads and low-cal Happy Meal choices of apple slices. In hopes of increasing sales of milk rather than soft drinks and juices, the restaurant is repackaging 1 percent low-fat milk into plastic jugs that Kapica said were designed to attract youngsters.
"Packaging is everything," Kapica said.
The company also is unveiling a new, slimmer Ronald McDonald and displaying the nutritional content of its products on tray liners.

Better labeling
The U.S. Food and Drug Administration is seeking the following, according to Lester Crawford, acting commissioner.
• Food labels: The first revision in a decade will emphasize the calorie content of foods. In addition, Crawford wants to make the type size larger.
• Restaurants: Crawford said the government wants restaurants to come up with a way of telling consumers the nutritional content of the foods they serve.
Source; Scripps Howard News Service
Write; by Lance Gay, July 04

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RETAIL - BUSINESS

Whirlpool Posts 13% Q2 Profit Gain
Whirlpool Corp reported it earned $106 million for the quarter ended June 30, a 13% year-over-year increase.
Whirlpool's sales for the period hit $3.26 billion, a 9.2% gain over the $2.99 billion reported for the period last year.
Source; Whirlpool, July 04

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E-SHOPPING - MARKET

Shoppers and buyers will keep coming online, eMarketer projects
The number of online shoppers and buyers hasn’t reached its limit yet, projects eMarketer Inc. in its latest B2C E-Commerce in the U.S. report, just out. EMarketer projects that 74% of the Internet population over the age of 13 will shop online this year, up a tad from 73% last year and 7 percentage points from 2001. That equals 115.1 million consumers over 13, up from 82.3 million in 2001. In 2007, 77% of the online population over age 13 - 131.3 million people - will shop online, eMarketer projects.
61% of the online population over age 13 will buy online this year, up from 58.3% last year and 53.2% in 2001. That will equal 94.9 million buyers, up from 85.7 million last year and 65.3 million in 2001. EMarketer projects 67.4% of the online population over age 13 - 115 million people - will buy online in 2007.
EMarketer projects that online sales excluding auctions, travel and event tickets, will reach $72.5 billion, up from $56 billion last year. Sales will reach $121.1 billion in 2007.
Source; eMarketer, July 04

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RETAIL - FURNITURE

IKEA Heads to Kiev
IKEA, the world's biggest home-furnishings retailer, plans to open its first store in Ukraine within a year to tap Eastern Europe's fastest-growing economy.
The store in Kiev will cost about 250 million euros ($310 million), construction will be completed in about a year, she said.
The Swedish company are prepared to open a total of two to three stores a year in Ukraine and Russia.
Write; by LuisB, July 04

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INDUSTRY - ENERGY

Gazprom Battles Costs
Gazprom, the world's largest natural gas producer, said Tuesday that it is forming a working group to cut expenses amid rising costs for pipes, transport and labor.
The group will be led by chief financial officer Andrei Kruglov, the company said in a statement.
Gazprom CEO Alexei Miller ordered the group to draft cost-cutting programs that will be reviewed by Gazprom's management and board.
Investment banks such as Moscow-based Renaissance Capital earlier this month urged Gazprom to cut spending, saying it suffers from "a cost overrun" and that management is showing "negligible zeal."
Gazprom last week said that its operating costs rose 19 percent to 593.4 billion rubles ($20 billion) in 2003, when reporting 2003 financial results based on international accounting standards.
Write; by LuisB, July 04

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RETAIL - NETHERLANDS

Laurus first half sales down 10%
Laurus said today that first half sales are still under pressure. In the first half of 2004 total consumer sales by the Laurus formats came out at E2.1bin against E2.3bn. Like-for-like sales at Laurus are still under pressure. All stores have undergone a thorough face-lift and the prices of 5,000 products have been reduced by an average of 7%. Combined like-for-like consumer sales at Edah, Konmar and Super De Boer fell by 7.7% in the first half of 2004. Edah, Konmar and Super De Boer recorded net sales of E1.75bn. This is 11.6% lower than the net sales in the first half of 2003 which stood at E1.97bn.
Source; Laurus NV
Write; LuisB, July 04
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RETAIL - CHINA

Sales of key retailers up 9,6% in June
Sales of the 100 key retailing enterprises in China went up 9.6% year on year in June to reach 11.1bn yuan, according to the China Commerce Federation. Food sales led the growth in the month, surging 46.2% to 1.22bn yuan. Sales of consumer electrical appliances slid, while that of high-tech commodities such as digital camera and video camera remained good. In June, sales of electrical appliances of the key enterprises stood at 1.22bn yuan, down 8.3% from the figure for the same period of last year. Garment sales, particularly summer style garments, increased steadily. The total garment sales in June hit 2bn yuan, up 14.7% year on year.
Source; CCF
Write; LuisB, July 04

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FASHION - FRANCE

Christian Dior Couture Q2 Revenue Up 26%

Fashion house Christian Dior Couture has reported a second-quarter revenue rise of 26 per cent on the back of worldwide growth.
Dior, part of luxury goods group Christian Dior SA, said that between April and June revenue had risen to a record €138 million.
The company also said that operating profit had risen at a rapid rate, by over 30 per cent, in the first half of 2004.
Dior said that whilst its European markets had seen good growth, its markets in the US and Asia had been the most prosperous. The company highlighted John Galliano’s women’s collection and Hedi Slimane’s Dior Homme division as important influences on the company’s success
Source; Christian Dior SA
Write; LuisB, July 04

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E-RETAIL - ENTERTEINMENT INDUSTRY

Blockbuster testing online DVD rentals for Q4 launch
Blockbuster is testing a long-anticipated online DVD-rental service with a multi-channel twist: In addition to receiving mailed DVDs rented online at a starting price of $19.95 per month, subscribers also get e-coupons good for two in-store rentals at no extra charge. So instead of always waiting for the next mailed DVD, subscribers will be inclined to visit their local Blockbuster store where they may also purchase some candy or popcorn if not even rent an extra DVD or electronic game, Jerianne Thomas, director of marketing, tells InternetRetailer.com. “The e-coupons are a way we can differentiate from Netflix,” she says.
Blockbuster is also undercutting the retail pricing of Netflix, the recognized leader and pioneer of online DVD rentals and No. 30 in the Internet Retailer Top 300 Guide to online retailers. Blockbuster’s basic offering is an unlimited number of rentals per month, with up to three DVDs out at any one time, for a monthly fee of $19.95. Netflix recently raised its price for the same service by $2, to $21.95.
The price spread between the two companies widens with more expensive service plans. Blockbuster is charging $29.99 and $39.99 per month, respectively, for plans that allow up to five DVDs or up to eight DVDs out at the same time. Netflix charges $33.99 and $49.99 for the same service levels.
The Blockbuster service, which is expected to officially launch in the fourth quarter, became available last week at Beta.Blockbuster.com. “The early response has been good,” Thomas says, noting that she was unable to say how many people were using it.
Blockbuster’s service is not offering the lowest price on the market, however. Wal-Mart Stores Inc.’s WalMart.com undercuts Blockbuster’s basic service price by more than $1, offering an unlimited number of DVD rentals per month with up to three out at the same time for $18.76.
Blockbuster hasn’t determined yet exactly how it will fulfill its online orders. But Thomas says it will consider fulfilling at least some orders out of its more than 6,000 retail stores in the U.S.
Source: IRM, July 04

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FOCUS

RETAIL - ITALY

Will Italy attract new entrants?
Five major alliances currently account for some 84% of the Italian grocery retail market. While international participation in these alliances comes principally from French retailers (Carrefour, Auchan and Leclerc), the analysts believes there remains significant opportunity for further international retailers to invest in the market, which is one of the least consolidated in Western Europe.

Italian Market Share by Buying Group

Buying Group Retailers                                                                     Market share (%)
Coop Italia                           Coop Italia, Sigma                                             20.1
Intermedia                           Auchan Gruppo Rinascente, Gruppo Pam,
                                           Bennet, Sun, Gruppo Lombardini                        17.4
ESD Italia                             Esselunga, Selex, Agora                                     16.6
Carrefour Italia                    Carrefour, Finiper, Il Gigante, Algros, Cds,
                                           Disco Verde, Gdm                                             15.6
Mecades                               Inderdis, Sisa, Sintesi (DeSpar), Crai, Aligros       14.2

The high market concentration levels achieved by the leading alliances in Italy might suggest that the market is impenetrable for new entrants. This is not the case, however, as many alliances lack cohesion in terms of the formats operated, organisational culture, structure and strategy. There is therefore significant opportunity for these alliances to shift over time resulting in the creation of new partnerships between existing and/or new like-minded players.
Write; by LuisB, July 04

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TOY INDUSTRY - MARKET

Barbie's mid-life crisis
The world's Number One fashion doll is 44 years old this year.
But despite sales of over 1 billion Barbies worldwide, the American icon is facing some serious competition for her fashion doll crown.
In April, her makers Mattel saw their profits slump by 73% and this week announced that worldwide Barbie's gross sales are down 13%.
So who is stealing her thunder?

Real choice
Her main contender comes in the form of the Bratz dolls; Yasmin, Jade, Sasha, Cloe, Meygen, and Fianna are designed to be more streetwise and funky than Barbie.
Launched three years ago in the USA by Iranian immigrant Isaac Larian, over 80 million Bratz dolls have been sold worldwide.
In the UK, Bratz owns more than 30% of the fashion doll market and Bratz's UK distributor Nick Austin is confident that their share will grow.
"If you asked children a few years ago what they wanted it was always Barbie, Barbie, Barbie, but that was because there was no competition," he says.
"There was nothing else there and I think this is the first time that little girls have had a real choice on the doll shelves."

Just like me
But its not just Bratz who want a slice of the UK's £100m fashion doll market. Barbie's old rival Sindy is planning to re-launch.
Sindy originally came on the scene in the 1960s as a very British doll with a girl next door look. She triumphed amongst British girls in the 1980s but was trounced by Barbie in the 1990s.
Denise Deane, design and development director of Sindy points out that "it's a very competitive time to make a re-launch, but we're confident that we have something unique to offer and that Sindy will be a main player within the doll industry".
Twentyfirst Century Sindy looks very different from her 1980s incarnation. She is more flexible than ever before and her manufacturers plan to market her to girls as a doll who is "just like me".

Secure position
Mattel however is not taking any of this lying down. Barbie's target market is three years and upwards, while the Bratz dolls appeal to eight year old girls.
So Mattel have also brought out a much funkier range to appeal to this older age group; My Scene. Like traditional Barbie, this group of doll friends have a love of fashion but offer more accessories.
So far their strategy seems to be working; launched in 2002, their sales increased by 380% in 2003.
However, Barbie is still a bigger brand than My Scene and Barbie is clearly not ready to hang up her fashion doll crown just yet.
Despite the increased competition, Tim Kilpin, Mattel's senior vice president of girl's marketing, says her position is secure.
"We're very confident that we can continue to prevail and continue to be the number one girls brand in the world," he says.
Source; BBC Money Programme
Write; by Nicola Seare, July 04
Picture; Barbie is not ready to hang up her fashion doll crown.

2004-07-14T15:30:00.000+02:00

RETAIL – INTERNET

PMA Expands Photo Web Site Offering to Enhance Retail Experience
TakeGreatPictures.com here, a joint Web site of the Photo Marketing Association (PMA) and the PhotoImaging Manufacturers and Distributors Association (PMDA), will add a feature highlighting special sales and retail activity, it announced earlier this week. The addition is geared toward enhancing consumers’ retail shopping experience. Visitors to the site will be able to click on a “Special Offers Near You” link to find location listings for retail options available in their state each month. PMA and PMDA launched the Web site several years ago to increase consumer awareness and enthusiasm for new photoproducts, tips and techniques.
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RETAIL – FOOD SECTOR

Wild Oats Enters Cincinnati
Wild Oats Markets, Inc., the US nation's No. 2 natural and organic supermarket chain, will be moving into the Cincinnati market with a new store opening in the Deerfield Town Center July 21.

The opening is part of the company's ambition to expand existing markets over the next three years. "We have very aggressive growth plans," Wild Oats spokeswoman Sonja Tuitele told Progressive Grocer. "This year we are opening about 12 stores; next year we will open 20 stores; and in 2006 and beyond we will be opening about 40 stores a year."

In the near future Wild Oats plans to do the bulk of its expansion in existing markets, to provide customers with greater convenience as well as to leverage distribution and the supply chain, and gain economies of scale in advertising. "For example, with only one store in Cincinnati, we are already distributing to that store, our regional folks were already having to travel out there to the store, and we were already advertising to that market," says Tuitele. "If we have three or four stores in the area, we are able to leverage that spend across all of them."

The Cincinnati store will be 28,000 square feet, which will be the size of most of their new prototype stores, said Tuitele, as it offers customers what they're looking for in terms of natural and organic products, in a friendly, community-market-style store.

One new feature will be a Holistic Health Center, a store-within-a-store format where vitamins, supplements, and body care products are to be sold. The concept was first tested in Wild Oats' flagship store in May and, counting the new location, will be in three stores.

"In our older stores these products were in the center of the store, because our founders came out of that industry," said Tuitele. "Through our research we found that it was a bit intimidating for our customers. In the new concept the shelving is lower, so it fosters better customer service; it is more inviting, kind of like a little boutique which offers the natural personal care items, and body care and vitamins and supplements. There are interactive screens where you can look up information; all the employees have been trained fairly extensively on product knowledge, so they are really armed to serve our customers better."

For future stores Wild Oats plans to seek out areas where the demographics consist of college-educated consumers; following this, level of income is the next big factor in choosing its locations, though, as Tuitele pointed out, this is becoming increasingly less important.

"Typically what follows education is income, and those are people who can afford to shop natural and organic foods," she said. "But here the price differential is coming down when you shop in-season or when you shop the bulk department; you are finding prices that are very competitive to what you find in a conventional store. Plus our high-touch customer service and high level of employee training help to keep customers coming back. It is an experience they don't find elsewhere.

"It definitely helps us differentiate ourselves from other stores," Tuitele added. "Especially if the conventional stores are worried about Wal-Mart and worried about lowering their prices, it gives us a positioning in the marketplace that is very unique."
Write; by Joseph Tarnowski, July 04

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FOOD SECTOR – RETAIL

Grist Mill Granola Bars and Muesli Cereals Recalled
Grist Mill Co., based here, is voluntarily recalling Fruit & Nut Trail Mix Granola Bars and Muesli Cereals, sold under retailer brand names, because they are potentially contaminated with salmonella.

"Although we have had no reported incidents of salmonella poisoning from these products, the company is just being overly cautious," FDA spokeswoman Kay Carpenter told Progressive Grocer.

The Fruit & Nut Trail Mix Granola Bars are packaged in 7.4-ounce boxes with expiration dates between June 6, 2004 (JUN0604) and Dec. 31, 2004 (DEC3104). The Muesli Cereals are packaged in a 15.3-ounce box with the expiration dates between Sept. 10, 2004 (SEP1004) and Dec. 10, 2004 (DEC1004).

The Fruit & Nut Trail Mix Granola Bars were distributed nationwide to retail chains and are sold under their brand names: Acme, Albertsons, BiLo, Food Club, Food Lion, Fred Meyer, Giant, Giant Eagle, Great Value, Hill Country Fare, Hy-vee, Jewel, Kroger, Laura Lynn, Meijer, Millville, Our Family, Price Chopper, Ralph's, Roundy's, Stater Brothers, Stop & Shop, Sunny Select, Tops and Weis. The Muesli Cereals were distributed nationwide to retail chains and are sold under their brand names: Acme, Albertsons, Archer Farm, Best Choice, Central Market, Flavorite, Fred Meyer, Harris Teeter, Hy-vee, Jewel, Kroger, Ralph's, Safeway, Select Healthy Advantage, Shaw's, and Shop & Save.

"All of these stores have been notified by phone, letter, and e-mail, with plenty of follow-ups, to make sure that the message doesn't slip by," Carpenter noted.

Almonds received by Grist Mill were randomly tested for the presence of salmonella. This ingredient testing did not reveal a presence of salmonella in raw almonds before the ingredient was used to manufacture the subject products, and there are no reported illnesses associated with these products. However, the company is working with the FDA to assure the quality and safety of the food supply.

This recall is in response to a voluntary recall by Paramount Farms of California of whole and diced raw almonds, based on over 20 possible illnesses associated with the almonds nationwide.
Source; FDA, local media. July 04
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CORPORATE – MARKETING STRATEGIES

P&G Rewrites The Marketing Book
Procter & Gamble, the company credited by many with writing the book on brand management, is adding a new chapter on marketing to African-American consumers.
The company announced last week it had signed a multi-million dollar agreement with radio personality Tom Joyner and his company, Reach Media.
The deal is important for a number of reasons, not the least being it represents a fundamental shift in how P&G communicates with consumers in the African-American community.
The consumer brands giant is taking its message to the audience through radio, the medium that helped put it and its iconic brands on the map. P&G will air commercials on the "Tom Joyner Morning Show," which is syndicated in 115 markets across the U.S. Mr. Joyner's show has an estimated audience of eight million listeners.
P&G's deal, however, is a lot more than just running spots on the radio.
The company's brands will also sponsor features like "Thursday Morning Mom," a salute to moms, and "It's Your World," a daily soap opera.
Mr. Joyner and his on-air crew will interact with P&G products on the air, what the company calls "endorsement radio."
P&G will also support organizations, including the Tom Joyner Foundation, which assist students at historically black colleges.
Source; P&G, July 04
Link; Procter & Gamble and REACH Media's Tom Joyner Morning Show Sign Broad-Ranging Sponsorship Agreement - PR Newswire

Comment;
Does P&G's deal with Tom Joyner and those by it and other large companies represent a shift towards more targeted, grassroots marketing approaches? Will it pay off?
First, it should be noted that Procter and Gamble is no neophyte to the African-American market. They have two agencies with an African-American specialization, Williams Advertising and Burrell, and P&G has also been a big sponsor of organizations like the National Underground Railroad Freedom Center, the United Negro College Fund, the BET College Tour and others.
To answer our own question, P&G is apparently asking itself if more targeted, grassroots marketing is the key to success in modern brand management.
According to an article in the New York Times, Procter will be conducting a study to measure the value of this new partnership. Said P&G's Susan Mboya, "Because it's becoming more and more difficult to reach consumers," we must "understand better the return we're getting on every marketing investment."

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RETAIL EUROPE – TECHNOLOGY

Polish Retailer Deploys New Technology to Support European Expansion
LPP S.A. is a rapidly growing fashion retailer based in Poland. From its headquarters in Gdansk, the company designs clothing that it distributes throughout Europe. Production process takes place in the Far East by the same manufacturers that work for other well-known fashion houses throughout the world.
Building on recent success that saw consolidated sales revenue in May 2004 exceed 39 million Polish Zloty (PLN), a 27 percent increase from the same period in 2003, LPP has partnered with Accenture and Retek to implement new merchandising, forecasting and planning systems. The new technology provides the infrastructure required to support LPP's ambitious expansion strategy across Eastern and Western Europe.
To expedite the implementation, LPP elected to deploy the Retek merchandising system with virtually no modifications aided by Accenture, who is involved in 90 percent of Retek implementations. Although typical enterprise merchandising implementations can take up to 24 months, the LPP rollout took just 10 months.
The Retek Merchandising System (RMS) records and controls virtually all data in the retail enterprise and ensures data integrity. The solution helps users improve merchandising activities and better achieve sales and profit targets. LLP will use the new system to reduce inventory and markdown costs as well as increase sales.
In addition, LPP is using Retek Demand Forecasting to produce highly accurate forecasts at store, SKU and day levels. This capability, in conjunction with the Retek Merchandise Financial Planning application that provides improved product, channel and location planning, is enabling LLP to better match supply with demand and optimize inventory performance.
Retailers of all sizes and categories need toolsets to help them focus on strategic efforts to grow their business. By integrating the Retek products into its operations quickly and at low cost, LPP will be better equipped to make insightful, fact-based decisions, enhance its overall business performance and strengthen and expand its market position.
Write; LuisB, July 04

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INDUSTRY – INDIA

Adidas To Expand In India Under New MD
Andreas Gellner, soon to take over German sports manufacturer Adidas’ Indian operations, hopes to bring the Indian segment up to par with others in Asia.
Gellner, who is presently the managing director of Adidas Malaysia, aims to expand the company’s Indian sector by opening 30-60 stores over the next couple of years.
He has suggested that India, which is currently one of the company’s smallest markets in the region, may be integrated with neighbouring markets – for example Bangladesh and Nepal – in the future.
Gellner said: "India is a high potential market. In fact, it has the capability of becoming the third-largest market for us in Asia, after Japan and China. At present, it is a very small market for us. We have plans to invest significantly in India in manpower and systems."
Another likely area to undergo expansion is the apparel segment:
"The apparel market in India is very big. Also, apparel is priced very competitively, more so because 99 per cent of the manufacturing for apparel is done locally."
Source; Adidas, July 04

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CORPORATE – FINANCE

Levi Strauss & Co. Announces Second-Quarter 2004 Financial Results
Levi Strauss & Co. today announced financial results for the second quarter ended May 30, 2004 and filed its second-quarter 2004 Form 10-Q with the Securities and Exchange Commission. Results for the quarter, as compared to the same quarter in the prior year, reflected improved gross margins; lower selling, general and administrative expenses; higher operating income; higher net income; and lower net debt.
Second-quarter 2004 net sales were $959 million compared to $932 million for the second quarter of 2003, representing an increase of 3 percent on a reported basis and a decline of 1 percent on a constant-currency basis. The sales performance reflected the continued growth of the company's Asia Pacific business and worldwide rollout of the Levi Strauss Signature(TM) brand. Net sales declined in LS&CO.'s U.S. and European Levi's® and Dockers® businesses. Key factors contributing to sales decreases of the U.S. Levi's® and Dockers® brands compared to the second quarter of 2003 included:
- the impact of wholesale price reductions taken in mid-2003 for both brands;
- a planned reduction in sales of Levi's® product to warehouse, club and off-price retail channels in 2004; and,
- substantial volume shipments in the second quarter of 2003 to fill retail shelves in conjunction with upgrading two major core Dockers® programs.
"So far, so good," said Phil Marineau, chief executive officer. "Overall, I'm pleased with our second-quarter performance, which delivered on our goal of improving our profitability this year. We still have a lot of work to do, but I'm encouraged by the progress we're making in all our businesses."
Source; Levi Strauss &Co. July 04

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INDUSTRY – OPTICAL

Oakley Says Lagging Demand Takes Shine Off 2004 Earnings
Sunglass maker Oakley Inc. on Monday cut its earnings forecast for 2004 and said it expected to report second-quarter sales below analysts' forecasts after customer demand for its products waned.
Sales in the second quarter were about $152 million, the Foothill Ranch-based company said.
The sales estimate is about 8% less than the $164.5 million expected by analysts, according to Thomson First Call. The company had sales of $143.8 million a year earlier. Oakley plans to report second-quarter results July 21.
Production shortfalls of the company's two most popular new sunglasses - the Dartboard and the Why 8 - led to fewer sales at a time when demand for other sunglass styles waned.

International demand for Oakley sunglasses fell, sales of prescription eyewear failed to meet company expectations, and online and direct sales were soft, the company said.
As a result, Oakley cut its earning forecast for the year. The company expects to earn 60 cents to 65 cents a share on revenue of $575 million to $585 million.
In April, the retailer said it would earn 65 cents a share on sales of about $585 million. Analysts polled by Thomson had expected Oakley to earn, on average, 67 cents a share on sales of $585.8 million. The company's shares fell as low as $11.50 in after-hours trading. The stock was down 37 cents at $12.54 in regular trading on the New York Stock Exchange.
Write; by LuisB, July 04

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E-RETAIL – US STATISTICS

Online retail spending grows 25% in the first six months
With online consumer retail spending that reached $1.02 billion for the week ending June 27, online sales in the first six months of this year reached $27.8 billion, up 25.27% from $22.2 billion in last year’s first half. The numbers are based on weekly reports from comScore Networks Inc. Sales for the week ending June 27 were up 31% from the corresponding week a year ago.
Total retail sales for the week ending June 26 were up 11.3% from the same week a year ago, according to ShopperTrak’s National Retail Sales Estimate.
Online travel sales the week ending June 27 were up 2% to $792 million from $780 million in the same week a year ago, comScore reports.
Source; ComScore, July 04
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RETAIL – UK MARKET

IKEA future looking gloomy
Flat sales, falling profits, stiffer competition and an ageing customer base mean that the future may not be so bright for IKEA. The retailer's latest accounts for its UK division for the year to August 2003 show turnover of £882m, barely up on the previous year. Pre-tax profits slumped from £154m to £133m. In the accounts, the directors say that 'limited growth' was 'mainly due to poor trading conditions'. They add that 'poor sales performance was observed during the first half of the year due to the geopolitical climate'.

However, trading did improve significantly in the second half of the year, but not fast enough to prevent the profits setback. Though Ikea is still gaining market share, the rate of growth is stalling. According to retail research group Verdict, Ikea's growth in market share has slowed dramatically in recent years. Between 1997 and 1998, market share jumped from 2.6% to 3.3%. That had increased to an impressive 4.5% by 2000. But last year, Ikea's share of the market edged up by only 0.1 of a percentage point to 4.8%.
Write; by LuisB, July 04

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FOCUS

ICELAND – RETAIL MARKET

Further sales slide at Iceland
Big Food Group pushing ahead with store revamps
Like-for-like sales at food chain Iceland continued to slide in the 13 weeks to July 2, as owner Big Food Group pushed ahead with it programme of store refits.
With total group like-for-likes down by 0.5 per cent across the quarter, the company said that in continued tough trading environment "strategic developments across all business units have been progressed" including the acceleration of the Iceland refit programme, and increased penetration of the convenience store sector by the Booker cash-and-carry business through its Premier.Big Food warned that price competition has increased in the industry over recent months and it "expects the more competitive environment to continue for the foreseeable future".

Iceland like-for-like sales declined by 1.7 per cent across the quarter. Forty more store refits were completed and three new stores opened, bringing the number trading in the new format to 185.

New Iceland managing director Andy Clarke "is now concentrating on the sales performance of Iceland through a combination of measures to improve customer service standards", said the company.

At Booker, like-for-likes declined by 1.1 per cent, with non-tobacco sales down by 1.8 per cent. However, like-for-like sales to the Premier retailers by around 7 per cent, with another 131 retailers joining the badged group to bring the total to 1,586.

Chief executive Bill Grimsey said: "Against tougher market conditions, our priority is to accelerate our strategic initiatives, particularly the Iceland refit programme, the roll-out of Premier and our drive into the delivered foodservice market through Woodward."
Write; LuisB, July 04

Picture; Iceland: Store refits stepped up in tough market

2004-07-01T15:06:00.000+02:00

HIGHLIGHTS

RETAIL – M&A

Sears to Buy Up to 54 Kmart Stores
Kmart Holding Corp. agreed to sell up to 54 stores to Sears, Roebuck and Co. for $621 million, the companies said on Wednesday, a deal that gives Kmart much-needed cash and Sears more room to expand.
The move comes less than a month after Kmart agreed to sell as many as 24 stores to Home Depot Inc. The discount retailer has been building up its cash position since getting out of bankruptcy in May 2003.
Kmart, which closed some 600 of its 2,100 stores while under bankruptcy court protection, said it would continue to operate these 54 stores until March or April 2005.
For Sears, the largest U.S. department store chain, buying the stores will help it get back into expansion mode after about two decades of stagnant growth. The company has been looking for ways to roll out its new Sears Grand prototype stores faster.
The stores, which Sears is opening away from the shopping malls that most of its 870 stores anchor, combine the retailer's usual assortment of appliances, tools and clothing with a small selection of food, books and magazines, and health and beauty aids.
Chairman Edward Lampert, by far Kmart's biggest shareholder, said at the company's annual meeting in May that Kmart is not actively looking to sell its stores, but would consider an offer if it involved more money than the company thought it could make running the stores.
In a statement on Wednesday, Kmart Chief Executive Julian Day said the retailer was "not currently in discussions regarding any additional significant store sales, although we will continue to evaluate opportunities as they arise."
Kmart in January 2002 became the largest U.S. retailer to file for bankruptcy, after a poor holiday shopping season compounded financial woes. It emerged from Chapter 11 in May 2003 with new investors, far less debt and a management team led by financier Lampert.
Lampert is also a big Sears shareholder. His investment companies owned 13.5 percent of Sears' stock, according to the retailer's proxy statement filed with the U.S. Securities and Exchange Commission in March.
Source; Reuters, June 04

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RETAIL – MARKET

Sears to Buy 61 Stores From Kmart, Wal-Mart; Expand Grand Concept
Sears, Roebuck & Co. here said yesterday it would acquire 54 Kmart locations and seven Wal-Mart stores, and convert them to an off-mall format similar to that of Sears Grand.
Three of the acquired Kmart stores will open under the Sears Grand banner, while the remaining locations will trade under the Sears name, but feature a product mix similar to Grand. The Sears Grand concept, which debuted in two locations last year, includes convenience food items in addition to apparel and home merchandise. The stores generate more frequent visits from a tighter trade area than mall-based stores, said Alan Lacy, Sears' chief executive officer, in a conference call yesterday. Sears did not disclose specific locations of stores to be purchased, but said about 60% of them are located in the top 15 population markets.
Source; Sears insider, June 04

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RETAIL – MARKETING

Internet marketing strategies on Wegmans
Wegmans Food Markets here is offering its customers a new computer screensaver that offers daily recipes for breakfast, lunch, and dinner. Consumers were alerted to the program via weekly e-mails that the chain sends out to its frequent shopper card customers.

"Be among the first to test drive our screensaver," the headline on the Wegmans Web site reads.

"You're invited to be among the first Wegmans customers to 'test drive' our very first screensaver," the copy reads. "Actually, it's more like an electronic cookbook that's continually updated with mouthwatering images that link directly to our latest seasonal, chef-developed recipes. The graphics are outstanding, and there's even a cool feature that lets you 'turn' the pages from one recipe to another and back again. You can send it to a friend, print recipes from it, and link to Wegmans.com for help with cooking techniques, making your shopping list, or looking up an ingredient."
Source; PGrosser, June 04

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LOGISTICS – RAIL

Slow going for rail freight liberalisation
The European Commission has issued an update on the performance on the main European networks, including an assessment of the rail freight industry several years after it first initiated legislation leading to deregulation.

In the rail freight sector the main development occurred in 2003 when legislation on market liberalisation entered into force. In theory the directive opened up the trans-European rail freight network to international goods services, with the entire network following in 2008. A second railways package proposed by the Commission in 2002 aimed to open up the national freight markets by 2006 and cabotage (the domestic movement of goods by operators from third party countries) by 2008.
However by 2003, the first package had not yet been fully 'transposed' in seven Member States. Countries, which have been slow in implementing the requisite legislation, are: Austria, Germany, Greece, Ireland, Luxembourg, Sweden and UK. In addition to legislative delays the Commission has found a whole range of other barriers to free market competition being employed by countries seeking to protect its present incumbent.
For instance in Germany the report found that the process to allocate capacities remained problematic, as its independence was not guaranteed. In other countries where a proper institutional framework does not exist, a range of informal barriers prevents access to new market entrants. The result has been that in many cases the state owned incumbent still dominates the markets with shares in excess of 90%. However where proper procedures are in place to facilitate private sector competition new market entrants have been forthcoming. This is particularly the case in the Netherlands.
Write; by LuisB, June 04

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INTERNET – BUSINESS

Google Says Sued Over Orkut Code
Google Inc. said late on Wednesday that it has been sued by Affinity Engines, which alleges that Google's Orkut social networking site is built with code stolen from its company.
Mountain View, California-based Google, which is preparing a much-anticipated initial public offering, said Affinity's claims are without merit.
In its lawsuit filed on May 25 in Santa Clara County Superior Court, and first reported by Wired News, Palo Alto, California-based Affinity Engines charged that company co-founder Orkut Buyukkokten took software code he wrote on Affinity's behalf and used it to build Orkut.
Affinity further charged that Buyukkokten had promised he would not build a rival social-networking service at Google.
Representatives from Affinity Engines, which is seeking damages and royalties, could not be immediately reached for comment.
Google said Affinity Engines had not provided any evidence to Google that their source code was used in the development of Orkut.com.
"We have repeatedly offered to allow a neutral expert to compare the code in the two programs and evaluate Affinity's claims, but Affinity has rejected that offer," the company said in a statement.
Google added that it has thoroughly investigated the claims and concluded that Affinity Engines' allegations are without merit.
Google rolled out Orkut, which is still in testing, in January. Other social networking companies include Friendster, Tribe and Zero Degrees, which was bought by Barry Diller's InterActiveCorp Web conglomerate in March.
The services connect friends of friends for dates and activities and have attracted millions in venture capital funding.
Source; Reuters, June 04

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ENERGY – DENMARK

Statoil: consolidating its position in Denmark
Statoil's acquisition of Haahr will have little long term impact on the Danish fuel sector.
The Danish Competition Advisory Board has passed Statoil's takeover of the Haahr petrol station chain after the deadline for objections expired. Despite it making Statoil the second largest retail gasoline brand in Denmark, the merger has gone through unopposed, primarily because the deal will not significantly boost the company's market share.

According to preliminary figures from Datamonitor's forthcoming Forecourt Retailing Database, the acquisition of the 30 Haahr sites would make Statoil the fourth ranked player in the Danish fuel sector on fuel volumes, with a 14.9% slice of the market. Statoil has yet to state its intentions for the 30 sites, 50% of which are unmanned.

Irrespective of how Statoil develops the newly acquired sites, it poses little direct competition to other main players, making the lack of objections understandable. DK Benzin, under the DK and OK retail brands, has a 26% share of volumes. It operates 202 manned and 586 unmanned sites, making it clear market leader. DK Benzin should only be concerned if Statoil attempts to acquire another small player. However, the opportunity for this is limited. Jet is the only smaller player in the market with a significant number of sites that is yet to merge with another company. Owner ConocoPhillips is unlikely to surrender its 60 unmanned operations in this important part of the Scandinavian region, especially in light of the company's 2% increase in market share over 2002-03.

The sole company with reasonable grounds for complaint over the Statoil purchase would be Q8. Given that Q8 enjoys a 14.6% share of fuel volumes, the takeover nudges Statoil slightly ahead of it in terms of market share. Nevertheless, despite the change in Q8's ranking position to fifth place, the merger will have little effect on its absolute position.

The reality is that Statoil's takeover of Haahr has simply enabled it to maintain its share of fuel volumes. In 2002 it accounted for 14.7% of volumes, and it now has 14.9%. In the absence of the Haahr merger this figure would have fallen to 13.8%. The takeover has simply been a sensible move by Statoil to make up some lost ground and consolidate its position. It is unlikely to alter significantly the competitive landscape of the Danish fuel retail market.
Source; DT, June 04

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FOCUS

ECONOMY – US ISSUE

The Fed’s
The wait is almost over.
The Fed’s meeting ends this afternoon and an announcement on the anticipated quarter-point rate hike will come about 2:15 p.m. EDT. It’s the announcement’s language that the market is going to dissect. The interest rate hike is already priced in.

If the language remains substantially the same, that will augur for a relief rally in the Treasury and foreign exchange markets. On the other hand, if the words conveying “measured” or “patience” are not in evidence, expect what one of my colleagues calls a brown trousers kind of day.

U.S. stocks are seen little changed at the open. Freddie Mac reported a 52 percent drop in net profit for 2003 due in part to last year’s restatement. Sears is buying more than 50 stores from Kmart for $621 million.

General Mills just reported its earnings and is warning that next year may not be so sweet. It also announced the winner of the 41st Pillsbury Bake-Off this morning. An ex-librarian from Ohio won the $1 million prize.

Note; U.S. central bank policy-makers were set to pull the plug on June 30, 2004 on the cheapest credit in decades by raising official interest rates for the first time in four years. Analysts universally expect the Federal Reserve's policy-setting Federal Open Market Committee to move the federal funds rate a quarter percentage point upward from its current 1 percent, which is its lowest level since 1958.

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2004-06-24T23:31:00.000+02:00

HIGHLIGHTS

SUPERMARKET – U.S.A. MARKET

Consumer Outlook Improving, But Supermarkets Will Lose Share
The economic outlook is improving, but conventional supermarkets will be challenged to reap the benefits, according to economists at Retail Forward here. In a conference call yesterday, the group noted that conventional supermarkets need to develop concepts focusing on upmarket customers because competition from supercenters will continue to gain share of the lower end. “Most of the growth of supermarkets over the past five years was simply a result of climbing food prices,” said Steve Spiwak, an economist with Retail Forward. “Although food inflation this year is benefitting growth, easing inflation thereafter should [put] further pressure on growth in this channel.” The group expects the economy overall to improve: Mortgage rates despite recent rises will remain affordable, and demand for home goods and food will remain steady. “The good news is the general outlook for retailing is very good. The U.S. economy is again going to be among the strongest economies in the world,”
Source; RF, June 04
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TECHNOLOGY – MARKET STRATEGIES

BMW and Apple announce iPod auto promotion
Tightly Integrates Music Unit Into Car Audio System
Following Volkswagen's successful co-promotion of an iPod/vehicle package last year, BMW of North American and Apple Computer yesterday announced a BMW/iPod deal. The automaker will offer an integrated iPod adapter for select 2002 through 2004 models beginning July 12.

Different from VW
Stan Ng, director of product marketing at Apple, said last year's iPod deal with Volkswagen of America differed because it was merely a summer promotion offering Beetle hard-top buyers an iPod and adapter. Jim McDowell, vice president of marketing at BMW, in Woodcliff Lake, N.J., said BMW's iPod adapter will be directly hooked into the vehicle's audio system, allowing owners to use the car's controls for the iPod. The personal music device is plugged into a cable connection in the glove box and stored out of the way there. Control features allow the driver to change tracks, playlists or volume from touch buttons installed in the steering wheel. The iPod adapter for BMWs will cost $149, plus installation costs done at dealerships.

'Lot of car companies'
Mr. Ng pointed out that BMW won't have exclusivity for vehicle-integrated adapters. "I think a lot of car companies are looking at this," he said.
Along with a new Web site, iPodYourBMW.com, BMW will use cable TV and national newspapers and magazine advertising to promote the offer. That campaign launches today, the company said. Publicis Groupe's Fallon, Minneapolis, created the theme - "Control freaks, rejoice" - for the campaign, which also includes outdoor ads in five cities and spot radio. Parts of the media buy continues into August. Spending wasn't disclosed.

Mini Coopers included
BMW will offer the iPod adapters on its 3 Series, Z4 roadster, X3 and X5 sport utility vehicles. Mr. McDowell said the marketer hopes to add more of its models, but started with its highest-volume lines. The adapters will be available in late summer for all BMW-owned Mini Cooper models. Apple has sold more than 3 million iPods since introducing the product in fall 2001. Depending on the model, the suggested retail prices range from $249 to $499.
Source; Crain Communications, June 04

Picture; BMW's integrated system allows the audio, playlist and track shuffling features of an iPod to be operated from a touch-button panel on the steering wheel.

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RETAIL – LEGAL ISSUES

Discrimination Lawsuit Against Wal-Mart Gets Class-Action Status
A federal judge here yesterday granted class-action status to a gender-discrimination lawsuit against Wal-Mart Stores, Bentonville, Ark., that could allow as many as 1.6 million women who have worked for the company to seek damages, according to reports.
The suit alleges that the retailing giant has systematically paid women unfairly and passed them over for promotions. In a prepared statement, Wal-Mart said it would appeal. "Let's keep in mind that today's ruling has absolutely nothing to do with the merits of the case," said Mona Williams, a spokeswoman for Wal-Mart, in a prepared statement. "[The judge] is simply saying he thinks it meets the legal requirements necessary to move forward as a class action. We strongly disagree with his decision and will seek an appeal." No trial date has been set.
Source; RF, June 04
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RETAIL – CORPORATE OVERVIEW

Strike-Lockout Cost Kroger $71.6 Million in Profit
Kroger here said Tuesday net income for the first quarter ended May 22 fell 25.2% to $262.8 million, or 35 cents per share. Results were impacted by the final stages of and recovery from the 141-day Southern California strike-lockout, which Kroger said reduced net income by $71.6 million, or 10 cents per share. Sales for the quarter rose 3.9% to $16.9 billion, while identical-store sales, excluding fuel, increased 0.3% for all stores and 0.5% excluding the chain's Ralphs and Food 4 Less stores in Southern California. The company also said it estimated product-cost inflation, excluding fuel, to be 1.6%
Source; Kroger inside, June 04
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TECNOLOGY CONSUMER – CHINA MARKET

Sony unveils strong China sales, investment plan
Japan's Sony plans to spend $200 million this fiscal year to boost production in China, its third-largest market and top driver of growth, after posting a 70 percent surge in sales last fiscal year.
Sony, now neck and neck with Matsushita Electric Industrial for the mantle of the world's biggest consumer electronics maker, is hoping for brisk sales of its Cybershot digital cameras, Vaio personal computers and camcorders in China.

"China is increasing its strength in the manufacturing world," Sony President Kunitake Ando told a news conference on Wednesday. "As a market, it has very huge potential."
But rivalry in China's $9.8 billion consumer electronics market is heating up, with South Korea's Samsung Electronics Co and domestic players such as Sichuan Changhong slugging it out for consumers' cash.

China accounted for about two percent of global revenue in the last business year, but it is the company's fastest-growing market and already generates more sales for Sony than any other country except the United States and Japan.
Price-based competition from domestic manufacturers, however, will weigh on margins. Rampant software piracy is expected to hinder efforts to market its blockbuster PlayStation 2 console, a key driver of global operating profit.
It has also been criticised recently as slow to market with innovative products such as flat-panel televisions.

Bigger than Japan
Sony posted a 70 percent leap in sales in China to $1.7 billion in the year ended in March 2004, slightly exceeding its own previous forecasts and putting it on track to achieve sales of $8 billion annually by 2008, the company said.
It had forecast China sales of $1.6 billion for the latest business year.
"Mathematically, China, this market, is a few times bigger than Japan," Sony Chief Executive Nobuyuki Idei said, after opening a three-storey showroom in downtown Shanghai displaying the robot dog Aibo and other gadgets.
"We are confident of achieving our goals," Idei said.
Sony's shares closed down 0.7 percent at 4,020 yen on Wednesday, underperforming a flat Tokyo market.

The Japanese company invested some $900 million in China over the past decade.
Its latest investments include plants in Southern China to make components and an expansion of production facilities in Wuxi city, in the country's east.
Sony is joining a wave of Japanese manufacturers building plants in China to capitalise on lower costs, while enhancing its research and development capability and boosting the number of staff.

The consumer electronics giant, which also vies with Japan's Sharp Corp, posted a 23 percent fall in annual net profit in the last financial year due to restructuring charges.

But it forecast better earnings for this year.

Part of that would be driven by China, whose increasingly wealthy consumers have developed a taste for new-fangled digital toys, executives said.
"China will be the main growth driver for Sony," said Kei Kodera, chairman of Sony China. ($1=109.13 Yen) (Additional reporting by Vivian Xiao)
Write: by Lee Chyen Yee in Shanghai, June 04
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RETAIL – RFID/EPC TECHNOLOGIY

Wal-Mart Announces Expansion of RFID/EPC Program
In a series of briefings last week with its top 300 suppliers, Wal-Mart Stores here announced its plans regarding its electronic product code (EPC) initiative using RFID (radio frequency identification) technology.
Wal-Mart launched its initial implementation on April 30 in the north Texas area. Cases and pallets of 21 products from eight suppliers were shipped to Wal-Mart's Sanger, Texas, distribution center, then onward to seven local supercenters with RFID tags. "Over the next 16 months, we also plan to significantly increase the number of Wal-Mart stores and Sam's Clubs where customers can benefit from this revolutionary technology," said Linda Dillman, executive vice president and CEO, Wal-Mart, in a statement. Wal-Mart's top 100 suppliers, plus 37 additional suppliers, are already working on meeting a January 2005 deadline to be live in north Texas in three DCs and about 100 stores. Following that, the retailer said it planned to be live in up to six DCs and up to 250 Wal-Mart stores and Sam's Clubs by June 2005, and up to 13 DCs and 600 Wal-Mart stores and Sam's Clubs by October 2005. Also, the next top 200 suppliers will begin tagging cases and pallets by January 2006, Wal-Mart said in its statement.
Source; LuisB. Corporate official sources. June 04
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RETAIL – EUROPEAN TECHNOLOGY ISSUE

European Retailers Declare Plans to Use WWRE for Global Data Sync
Several European retailers — including Auchan, Casino, Delhaize Group, El Corte Ingles, Royal Ahold and Tesco — last week announced their plans to work with the WorldWide Retail Exchange on global data synchronization. The retailers and WWRE held a meeting here June 17 for 16 of their key suppliers to collaborate on plans to advance global data sync. “Delhaize has selected the WWRE’s Worldwide Item Management solution as our global data pool. Therefore, [it is] the entry point of all information concerning the items sold in our stores," said Pierre-Olivier Beckers, president and CEO of Delhaize Group here, in a statement. "WIM will interconnect with all data pools containing the item information of our suppliers, both global and local. We believe this approach will simplify and accelerate the rollout of data synchronization as it will avoid our global suppliers to deliver the item information directly in each country where we operate.”
Source; LuisB, June 04
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BEVERAGE SECTOR – COMPANY OVERVIEW

Coca-Cola Names New C.M.O.
Look for some new ad campaigns in different media at Coca-Cola Co. now that the world's largest soft drink company has named Chuck Fruit chief marketing officer, succeeding Daniel Palumbo, who has left the company to pursue other interests.

Fruit joined Coca-Cola in 1991 as head of Global Media Services and has held a variety of positions, most recently as s.v.p. of Integrated Marketing, with the responsibility for developing the company's worldwide media and sponsorship strategies, and its investments in all forms of traditional and emerging media platforms. He was also acting c.m.o. in 2003.

"Marketing is clearly evolving, and the emergence of new media and many competitive opportunities for consumer stimuli mean that we need to find new, innovative ways of addressing our consumers and ensuring the relevance of our brands," Neville Isdell, Coca-Cola chairman, said in a memo sent Tuesday to Coca-Cola employees. "In the last 50 years, the 30-second television spot has defined our brands, and while it is still important, I think its impact has diminished."

"Today's consumer and media environments call for a more multifaceted and integrated approach to marketing, from our consumer communications to the point of sale and all the way through to opening a bottle of Coca-Cola," Isdell continued. "Creativity is vital, and so is a broader, holistic view of how to reach our consumers."

Palumbo had only been with Coca-Cola for one year, joining the company last June from Eastman Kodak, where he held several positions, notably s.v.p. of the Consumer Imaging division, which accounts for half of that company's sales. During his career he also held positions with Procter & Gamble.
Source; LB/Yuumei, June 04
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INDUSTRY – MARKETING STRATEGY

P&G Continues Media Innovation Mandate, Hires Gunn Report
Procter & Gamble is giving the ad industry a forum for recognizing media excellence. The award for "best flowchart" can only be so far away.
Yesterday in Cannes, France, the packaged-goods behemoth announced its sponsorship of the newly created Gunn Report for Media.
The Gunn Report, started by Donald Gunn in 1999, is an annual collection of worldwide creative advertising awards. The initial Gunn Report for Media, to be published in October of this year, will be a similar showcase for industry awards honoring media planning and buying. Details on which media awards will be included and how often the Gunn Report for Media will be issued were unavailable.
According to a press release issued by P&G: "The goal of this publication is to put a global spotlight on media innovation and success, and ultimately, inspire a higher quality media around the world."
"Everyday, consumers are bombarded by marketers who are vying for their attention," said Bernhard Glock, P&G's manager of global media, at a press conference yesterday. "As an industry, we need to better understand how to reach our consumers when and where they are most receptive. In order to do this, we have to elevate the importance and quality of our media efforts globally."
The sponsorship by P&G would appear to be in line with an ongoing push by the company to shake up the way its advertising agencies approach media planning. Back in February, P&G Global Marketing Officer Jim Stengel gave a speech at an American Association of Advertising Agencies conference entitled "The Future of Marketing," during which he encouraged marketers to move beyond focusing solely on 30-second TV spots.
Then, in April, P&G also commissioned a complete "communications review," seeking to "redesign its media planning agencies into communication planning agencies."
"By sponsoring the Gunn Report for Media, P&G recognizes that media is as vital to our success as the outstanding creative product we demand from our agencies," Glock said. "We value innovation in media, as well as breakthrough thinking and creativity from our marketing partners."
Source; P&G, June 04
Write; by LuisB
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RETAIL FASHION – INTERNET

Loehmann's Goes Online With SmartBargains
Off-price fashion retailer Loehmann’s Holdings Inc has launched a strategic alliance with online retailer SmartBargains Inc to sell Loehmann’s women’s apparel on the Internet.
Through a co-branded department, Loehmann’s@SmartBargains, customers will be able to purchase Loehmann’s products with the added benefits of 24-hour access and direct-to-home delivery.
It marks the first time Loehmann’s apparel has been available to customers via the Internet.
“We are very pleased to form this alliance with Loehmann’s,” SmartBargains CEO Carl Rosendorf said.
“It joins two like-minded retailers that serve similar audiences, and provides a vehicle for both companies to generate potential growth and meet the interests of their customers.”
Loehmann’s operates 48 ‘real world’ stores throughout the United States.
Source; Juststyle, June 04
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RETAIL FASHION – CORPORATE OVERVIEW

H&M price cuts help drive sales
Volume growth across first half
Swedish fashion retailer Hennes & Mauritz has taken advantage of a weaker dollar to drive down its prices across the past few months.
H&M said that it had lowered its prices by 5 per cent across the three months to May 31, a move which has paid off by lifting sales volumes by around 14 per cent.
The retailer reported an 8 per cent increase in turnover across the six months to the end of May, up to SEK SEK13.2 bn. At comparable currency rates, the increase was 10 per cent.
H&M said sales in its first two stores in Canada, have been well ahead of expectations, and announced plans for further expansion in North America, with a store in San Francisco planned to open next year.
Source; H&M, June 04
Write; LuisB

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FOCUS

RETAIL – CORPORATE OVERVIEW

Dixons holding share in competitive market
£200m to be returned to shareholders
Dixons has grown sales in a highly competitive market, with a strong performance across the group offsetting disappointing sales in the core Dixons chain.
As expected, Europe's leading specialist electrical retailer has announced plans to return £200m to shareholders through a share buyback programme, using the proceeds of the sale of its stake in ISP Wanadoo and European property business Codic.

In the year to May 1, Dixons turnover increased by 13 per cent to £6.5bn, with group like-for-like sales up 3 per cent. UK like-for-likes grew by 2 per cent, with international like-for-likes up 4 per cent. Pre-tax profits rose by 11 per cent to £331.6m, towards the top end of City forecasts.

Overall, the UK Retail division made an operating profit of £254.2m. There was strong growth in new technology products including plasma & LCD TVs, DVD players and digital photography, while sales of games consoles dipped in the absence of new hardware launches, while VCRs and 35mm photography sales fell as consumers moved to new technology. The overall computing market grew by 2 per cent, with PC hardware sales down by 2 per cent as strong unit volume growth was offset by price deflation.

In April, the group announced plans to close 106 under-performing smaller Dixons stores, mainly in town centre locations. Dixons said the costs associated with the closures are now expected to be £44m.
Across the year, the Dixons chain saw total sales fall by 6 per cent to £798m, with like-for-like sales down 5 per cent. A new Dixons management team is focused on improving performance in the core chain. This plan includes revamping store space around growth categories, as well as more effective advertising and aggressive price promotions.

Signalling a move to larger formats, the group said trials of the new Dixons XL format continued, with four new stores opened and two further XL planned for this financial year.

There were stronger performances in the groups other UK chains. Currys sales of £1,752m were up 4 per cent. Like for like sales grew by 4 per cent for the full year, but were up 8 per cent in the second half. Currys continued to relocate to larger out-of-town sites, opening or resiting 14 new stores across the year, taking the total number of stores to 379, with 13 more new stores to open or resite during this financial year.
PC World sales grew by 6 per cent to £1,327m, despite significant price deflation in PC hardware. There was strong growth in sales of laptops, accessories and wireless networks. Twelve new PC World stores opened during the year, taking the total to 138, with similar numbers expected to open or resite in the current year.

Sales at mobile phone retailer The Link grew by 10 per cent to £407m, with like-for-like sales also 10 per cent up. A new concept store format was developed, giving greater prominence to contract connections and more effective display of handsets. The format will be rolled out across the 28 store group this year.

Sales in the International retail division were £1,760, up 47 per cent in total and 4 per cent on like-for-like. Dixons international businesses now accounts for 27 per cent of group sales.

Group chief executive John Clare, said: "The group made good progress during the year. Sales and profits were up and we recorded a strong performance in our four largest chains - Currys, PC World, Elkjop and UniEuro.

"Our investment businesses are progressing well and we agreed the roll-out of PC City in Spain. In the second half, we implemented the first steps of our improvement plan for the Dixons chain."

The group said performance for the first seven weeks of the current financial year has been in line with expectations, with LCD and plasma TVs selling well across Europe ahead of the Euro 2004 tournament

Dixons said it is cautious about growth prospects in the UK, given rising interest rates and the potential for a slowdown in the housing market. However, international outlook is generally more favourable, and all the Group's operations are expected to benefit from demand for new technology products, and Dixons "remains very confident about its abilities to perform well against its competitors".

Clare said: "It is too early to extrapolate this trend for the year as a whole, but I believe the group is well placed for a year of further progress."
Source; General media and corporate sources. June 04
Write; by LB/Yuumei

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2004-06-17T11:42:00.000+02:00

HIGHLIGHTS

RETAIL – PRICE STRATEGIES

Asda to cut petrol prices again
Supermarket chain Asda has unveiled a fresh round of petrol price reductions - cutting the cost of a litre by 1p. Asda said that from Wednesday the price of unleaded petrol and diesel at its UK forecourts would be 78.9p a litre.
Britain's second biggest grocer cut petrol prices by 2p a litre last Thursday, prompting a wave of similar reductions by rivals.
Asda said its decision had been made possible by the falling cost of oil on the world market.
Petrol pledge Paul Mancey, Asda's trading director, said: "We all had to pay higher prices when costs went up and we should all be paying less now. Our customers, quite rightly, expect nothing less."
The company operates 150 petrol stations across the UK.
Responding to Asda's announcement, supermarket rival Sainsbury's said it would also be looking to cut prices.
A spokeswoman for the firm said: "In line with our policy of selling the cheapest petrol where we trade, we will be undercutting Asda again."
Source; BBC News, June 04
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BEVERAGE SECTOR – MARKETING

Coke's water bomb
Coca Cola is not a company known for making too many mistakes. Its marketing is slick and Coke is the best-selling soft drink in the world. Few would have predicted that Coke's attempt to launch its Dasani bottled water brand in the UK would prove to be a disaster for such an experienced company.

Yet, in March this year, only five weeks after its multi million pound UK launch, red-faced Coke executives were forced to take Dasani off the shelves in the UK.
What went wrong?
Dasani was launched in the USA in 1999 as a bottled, purified water, and had become a huge success there. Taking that same formula and repeating it for the UK market must have looked like a breeze, but that wasn't quite how it turned out.
Unlike most of the bottled water sold in British petrol stations and supermarkets Dasani hadn't come from alpine glaciers or trickled out of a precious natural spring - it had come out of the local tap. True, the company put it through a purification process and added mineral salts, but the source was still tap water.
At its launch on 10 February, some people in the drinks industry already knew Dasani's big "secret". Simon Mowbray of The Grocer magazine had mentioned the source of the water in an article, but didn't think anyone else would pick up on it. Now, he sees it more graphically. "It was a bomb waiting to go off," he says.

The Real Sting
At first, the launch seemed to have go well, and Coke executives thought the public would respond to their new product with its distinctive blue packaging. But everything changed when the Press Association reporter Graham Hiscott saw the reference in the Grocer magazine to the real source of Dasani.
The following day, the story was splashed across the daily papers. Headlines like "The Real Sting" a play on Coke's "The Real Thing" slogan and the more obvious "Coke sells tap water for 95p" could hardly have been worse for Coke and their new baby.
The tabloids drew on the uncanny parallel with the episode in the BBC sitcom "Only Fools and Horses", in which Del Boy and Rodney take ordinary tap water from their Peckham flat and bottle it up to sell as Peckham Spring. The irony couldn't have been worse. Dasani was sourced and bottled in a factory in Sidcup, just a few miles down the road from Peckham! The tabloids continued their onslaught. "Are they taking us for plonkers!" yelled the Daily Star.

Contaminated
Despite the pages of negative press coverage, Coke persisted with Dasani. Executives protested that they had been misunderstood and that the drink was not just tap water but in fact the result of a highly sophisticated process to create the purest drinking water you can get. As far as Coke were concerned, Dasani was a lifestyle drink, a drink you would want to be seen with, the source was all but irrelevant.
Then on Thursday 18 March there was even worse news.
Something had gone wrong at the Dasani factory and a bad batch of minerals had contaminated the water production with a potentially carcinogenic bromate. Coke admitted defeat. Immediately they withdrew all 500,000 bottles of Dasani in circulation. In just five weeks, Dasani had come and gone, arguably providing more in terms of entertainment than refreshment.
The cost to Coke is thought to run into the millions, but behind the financial loss is the possibility of an even more serious problem. After years of heady growth, sales of Coca-Cola are beginning to flatten out. Bottled water, by contrast, is now the fastest-growing of the soft drinks and Coke still need a successful bottled water for the UK and the European market.
An organisation the size of Coke, with the marketing strength that has made it the biggest drinks company in the world, is unlikely to give up easily. Astonishingly, Dasani could make a comeback one day. Asked whether the company has any plans to bring Dasani back, Patricia McNamara, New Beverages Director at coca cola GB says coyly, "we like to think it's a definite maybe".
Source; BBC Money Programme, June 04
Write; by Bill Garrett
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RETAIL – M&A

El Corte Ingles denies offer for Ahold's Spanish assets
Spanish retailer El Corte Ingles has denied bidding for the Spanish operations of Dutch retail giant Ahold.
"El Corte Ingles hasn't made any offer on the Dutch group Ahold," a company spokeswoman was quoted by Dow Jones International News as saying.
Earlier this week a report in a Spanish newspaper said that El Corte Ingles had made an offer of €480m (US$579.8m) for the assets, which include more than 600 stores.
Ahold, which has made several major divestments in the last year as it seeks to cut debt in the wake of an accounting scandal, has said it hopes to sell its Spanish operations by the end of the year.
Source; JF, June 04
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SUPERMARKET SECTOR – INDONESIA MARKET

Hero supermarket’s domestic expansion
PT Hero Supermarket said today it plans to build four new hypermarkets this year to boost sales. Hero also plan to build another 16 pharmaceutical shops and small-size convenience stores. The company will spend around 200bn rupiah on its business expansion plans. In 2003, the company's sales rose 24% to IDR3trn. However, falling margins at supermarkets reduced the retailer's operating income to IDR43bn from IDR48bn. The company closed some loss-making shops last year and opened new ones. The new shops include several hypermarkets, pharmacies, and convenience stores.
Write; by LuisB
Date; June 04
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SUPERMARKET SECTOR - JAPAN MARKET

Japanese supermarket chains post 2003 revenue growth
A total of 30 listed supermarket chains in Japan posted year-on-year growth in revenue for the fiscal 2003/2004, ending March 31, 2004, the results of a survey carried out by Japanese credit research company Teikoku Databank Ltd, showed today. The survey was carried out among 51 listed supermarket chain operators with an annual revenue of over 30bn yen each. The overall revenue of the 30 supermarket chains marked an 8.4% year-on-year increase in fiscal 2003/04. Japanese supermarket chain operator Aeon Co topped the sales volume ranking, followed closely by Ito-Yokado. Supermarket chain operators Daiei, Uny and Seiyu were also among the leading retailers in terms of sales in fiscal 2003/04.
Source;Teikoku Databank, June 04
Write; by LuisB
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SUPERMARKET - AUSTRALIA MARKET

Woolworths struggles amid fuel competition
Woolworths is believed to be facing another set of soft supermarket sales numbers in the fourth quarter, as it struggles against a revived Coles Myer and a slow rollout of its linked Caltex petrol sites. One market source said Woolworths was "hurting" because of the slow rollout of its petrol offer and that sales were "soft" because of competition from the fully realised Coles-Shell petrol alliance. The speculation follows a 4.9% rise in third-quarter supermarket sales.

After that result in April, chief executive Roger Corbett said improvements would come in the fourth quarter when the Caltex petrol agreement was finalised. The final agreement was signed two weeks later and the more than 90 Caltex sites were expected to be converted "immediately". At the time, Caltex had converted 41 of more than 130 sites slated for the alliance. A spokesman declined to comment on the sales figures. But he said that since the agreement was finalised, Woolworths had co-branded about 40 of its 310 Petrol Plus sites to Caltex, and was aiming to convert between 10 and 12 Petrol Plus sites a week.
Source; Local economical sources, June 04
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RETAIL – COMPANY OVERVIEW

7-Eleven U.S. May Merchandise Sales Up
Convenience store operator 7-Eleven Inc. said on Wednesday that merchandise sales in U.S. stores open at least a year rose 7.8 percent in May.
Total sales rose 16.8 percent to $1.09 billion in the month, helped by a 37.6 percent rise in gasoline sales.
The average price of gasoline was $2.01 in May, up from $1.53 a year earlier, the company said.
Write; by LuisB, June 04
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RETAIL – GROCERY

Deal$ Increasing Grocery Selection
Deal$-Nothing Over A Dollar is expanding its grocery selection at 21 of its area stores, according to a report in the St. Louis Business Journal.
The expanded selection will include private label and national branded frozen foods, dairy products, packaged meats, and produce all at $1 or less.
According to the story, the company said the expansion is part of its commitment to offer "extreme value" to customers, providing convenience and savings by combining general merchandise and groceries.
Deal$ is a division of St. Louis-based Save-A-Lot, which is in turn a division of Eden Prairie, Minn.- based Supervalu and runs 1,150 grocery stores in 36 states, generating more than $4 billion in annual chainwide retail sales.
Source; St. Louis Business Journal, June 04
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FOCUS

ECONOMY – LATIN AMERICA

Latin America's Stunted Growth
Latin America is headed toward an unhappy anniversary: 25 years of failed attempts at economic growth. The world has no comparable period of failure anywhere else in at least the last century, including the Great Depression. From 1960 to 1979, these economies grew at a decent rate, chalking up an 80% gain in income per person. In spite of Latin America having the world's worst inequality in income distribution, this was enough to substantially improve living standards for the vast majority of the population, including most of the poor.
But then something went wrong, and it has as much to do with policies advocated by the "Washington consensus." From 1980 to 1999, per-capita income grew by only 11%. The 1980s were known as Latin America's "lost decade," when the region's income per person actually fell. The 1990s produced only modest growth, and the first decade of the 21st century is now looking like it might also count itself among the missing. Using the International Monetary Fund's [IMF] projections for 2004, the first half of the new decade [2000-04] shows a gain of about 1% for the whole five years.

Mexico’s malaise; Amazing, isn't it? One would think that after 25 years of reforms - opening up to international trade and investment, privatization of state-owned enterprises, enforcing budget and monetary discipline, and other measures that have caused quite a bit of pain and dislocation to the region's citizens - these countries would have something to show for it.
The fact that this problem has received so little attention is even more astounding. Remember, 2004 is also NAFTA's 10th anniversary. And while a number of press reports have hailed the huge increase in trade and foreign direct investment that Mexico has experienced over the last decade, few mentioned how low the growth rate has been.
This is comparable to evaluating a professional baseball player without including his batting average. He may be a great fielder and a good team player, but if he bats .125, can he make it in the major leagues? That's a fair analogy to Mexico's economic performance during the NAFTA decade: less then 1% annual growth in gross domestic product [GDP] per person - not even a quarter of what was achieved in the decades prior to 1980.

Economic growth - not tariff reduction or a balanced budget - is what determines whether people have a higher standard of living than that of their parents or grandparents. And when the economy grows, it's at least possible to direct a larger share of the new income and wealth to people who are less well off. When the economy doesn't grow, it means that any gains at the bottom must come at the expense of someone else.

Lackluster at best; When pressed, defenders of the "Washington consensus" reforms say we really shouldn't count the 1980s, since there was a lot of hangover from over-borrowing during the 1970s. They also say the growth in prior decades was unsustainable. But Latin America had decent growth for 30 years, going back to the 1950s, so the idea that it isn't sustainable is hard to fathom. South Korea maintained a per-capita growth rate averaging more than 6% annually - much higher than Latin America at its best - for four decades. And whatever Latin policy mistakes were made in the 1970s, it's a bit of a reach to keep blaming them for economic failure into the 21st century.
And it's fair to use 1980 as a dividing line for looking at Latin America's economic performance, because 1979 was a business-cycle peak for the U.S., which is the destination for about two-thirds of Latin America's exports. But even if we restrict our focus to the 1990s, the region's growth performance was lackluster: just 14% for the decade. If this is the best that can be done while the U.S. is enjoying its longest-running economic expansion in history, something is very wrong.
It's not hard to see what that might be. Look at Brazil, which once had one of the fastest-growing economies in the world. From 1960-79, its per-capita income grew by 160%. If that growth had continued, the country would today have living standards approaching those of Western Europe. But it has grown at about one-eighth that rate since 1980. And in 2003, the Brazilian economy shrank.

Wrong prescription; Yet Brazil's central bank is currently keeping short-term interest rates at 16%. With inflation running at about 6%, this means a real interest rate of more than 10%. That's terribly high for an economy struggling to come out of a recession. For comparison, the U.S. Federal Reserve has kept short-term rates at 1% more than two years into an economic recovery. Imagine if it had chosen 11% or 12% instead. There wouldn't have been much of a market for home mortgages or much chance of an economic recovery.
Brazil has also upped its primary budget surplus to 4.25% of GDP. Again, this is the opposite of what the U.S. does in response to a slow economy. America went from a budget surplus of 2% of GDP to a deficit of more than 4% - a stimulus of more than $6 trillion dollars - since the economy slowed down in 2001.

These kinds of procyclical economic policies are often promoted by the IMF, which is dominated by the Treasury Dept., and its partner, the World Bank. Nobel Prize-winning economist Joseph Stiglitz likes to joke that the IMF made a mathematical "sign error" on the blackboard back in the 1950s - writing a minus instead of a plus - and hasn't corrected it yet.
More independence and departures from the "Washington consensus" will be needed if Latin America is to resume a normal growth path. And they probably will be forthcoming. But it would help if more policymakers north of the Rio Grande were at least willing to recognize that they may not know what's best for their Southern neighbors.
Date; June 04
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BUSINESS STRATEGIE

Companies Must Learn to Achieve the Price Advantage (or Pay the Price)
Pricing, the intersection at which untold numbers of buyers and sellers meet every minute of every day, lies at the core of any business - large or small, old or new, Rust Belt or high-tech, local or global. Yet pricing remains misunderstood and poorly managed, according to The Price Advantage, a new book by three consultants at McKinsey & Company. Even executives at highly successful companies may not fully appreciate how small changes in price can lead to large changes in profitability.

Several software programs have been developed in recent years to help companies strengthen their pricing capabilities. But the authors – Michael V. Marn, Eric V. Roegner and Craig C. Zawada – argue that companies can truly achieve the price advantage only by making deep and lasting changes in their organizations. Such a major shift takes time, they say, but the effort can pay big dividends. Wharton marketing professor David J. Reibstein recently spoke to Marn, a partner in McKinsey’s Cleveland office, about the major themes that he and his co-authors discuss in the book. Over the years, Marn has developed some of the most widely used analytics for identifying pricing opportunities.

Reibstein: Mike, a good place for us to start is with you defining what you mean by the price advantage.

Marn: When we talk about the price advantage what we mean is not that a company has a product with a low price relative to competition. We’ve got a much more holistic definition. We think of price advantage as a superior capability to use price as a source of real competitive advantage that at the end of the day makes your company more successful. You’ll often hear companies talk about their other advantages. They’ll talk about a purchasing advantage or a cost advantage or an innovation advantage or a distribution advantage or a service advantage. You never hear them talking about having a price advantage - that they price better than their competitors do.

What we’ve observed over the years, and one reason we wrote the book, is that we had so many clients that worked so very hard to create advantages in other areas only to give them away because they didn’t have the price advantage, because they didn’t know how to price to make sure that the advantages they created really delivered benefit. Why bother to work so very hard to cut your costs if you’re just going to pass it on to your customers without taking anything for yourself? Why bother to work as hard to innovate if you’re just going to charge the same price for the old product that you’re replacing? Why bother working so hard to be a high-service provider if you’re going to match the price of a low-service provider in the marketplace? In a lot of ways, the price advantage is more than just an advantage unto itself. It’s an advantage that enables companies to realize the benefits of the other advantages they work so hard to create.

Reibstein: My understanding of a cost advantage is that I have lower costs. My understanding of a distribution advantage is that I have easier access to distribution. But you’re not talking about a higher price or being able to command a higher price or charge a lower price than the competition.

Marn: No. We're talking about having the capability to come up with the right price more consistently. I would insist that the mistake most companies make, if you look at it over time, is they typically price too low. They have real benefits for which they don’t charge appropriately. The error bias is much more toward companies under-pricing. But at the same time, having the price advantage would let you know when you are indeed pricing too high and appropriately adjusting downward when that makes sense. It’s not about always being too high or too low. It’s about understanding the power of having the right price for as many transactions in the market as you can.

Reibstein:You make a strong point in the book about how you can leverage a small price change into big profit changes, and I think you articulate that pretty well. I’m curious how you see the tradeoff between price and market share, where the price advantage happens to lead to more of a short-term profit advantage versus going for market share, which might gain you a longer-term advantage in terms of distribution or, ultimately, lower costs.

Marn: That’s a good question. I think you have to read The Price Advantage in the context of overall strategy. In other words, what we’re talking about in most cases is, against the backdrop of the strategic decisions you make, how can you manage pricing? If indeed a management team says, ‘We need to have 35% market share or more in this particular market to survive, to support our infrastructure, to run our plants at adequate capacity,’ then we would suggest that even if you pursue that 35% market share, there are things you can do to maximize your price that will likely improve your profitability.

Reibstein: Is the issue of price critical across all industries? Let me tell you why I’m asking that question. I was looking at the numbers that you threw out for where a company gets leverage on price and it’s more the case for companies that have very high variable costs. I was wondering about industries where the variable costs are quite low, such as the airline industry or software. I was wondering how critical you think the pricing component is in those contexts?

Marn: I would make the case that the pricing lever is crucially important in all situations. What you often see happening in high fixed-cost, low variable-cost businesses is that, despite the fact that gross margins are very high, it’s not uncommon for actual operating profits, or earnings before interest and taxes, to be relatively thin. So the leverage of improving pricing is just as high on the bottom line. The way it trades off versus volume might be a bit different. But, that said, the upside of improving pricing is still equally powerful. Quite frankly, I think the one time I would take care about backing away from a strategy driven by understanding very carefully the tradeoff between price and volume and margin, would be a situation where you think your market is growing very, very quickly -- in other words, situations where early penetration into a market or development of markets is crucially important. But any market that has grown to maturity where growth rates aren’t wild and where competitors have settled in – the payoff of doing this well, whether you have a heavy fixed cost or heavy variable cost structure, is extremely high.

Reibstein: What readership do you envision for the book?

Marn: We wrote this book for individuals in businesses who have a role in pricing. We believe there’s a role for the general manager, the CEO. There’s a role for the VP of marketing. There’s a role for the product manager. There’s a role for the sales manager. There’s a role for the salespeople. We wrote this book for the whole range of individuals up and down the hierarchy of most organizations who play a role in pricing decision-making.

Reibstein: What was your motivation for writing the book?

Marn: At McKinsey we’ve been doing pricing work as a major part of our marketing efforts for the better part of 20 years. It’s one of the largest single function areas of marketing in which we help clients. The thing that’s amazing is, you would think that after 20 years there would be a bit of a collective awareness of the pricing opportunity and of the basic frameworks and tools to create price advantage in organizations. It continued to amaze us that we would go into some business units of very good companies, Fortune 1000 companies, companies all around the world, and start talking about pricing as if we just turned on the light bulb for the first time. Our thought was by writing this book we could give managers a practical way of understanding and capturing this still-elusive opportunity for so many companies. Twenty years ago, I would have thought, golly, there wouldn’t be a need for a book like this because everyone had signed on to the powerful ideas around pricing. But we’re sitting here in 2004 with 50% of companies not being good at this. It’s one of the biggest surprises of my professional life.

Reibstein: Actually, I share in that amazement and, frankly, some disappointment that industry is not moving along a lot faster.

Marn: When you find a company that is really good at pricing, it goes beyond doing the Excel spreadsheets. Courage is required to really nail this. A lot of companies don’t do a very good job of creating the institutional courage to price right. It’s easier not to price well. It’s easier to cave in when customers ask for low prices, or competitors lob a low price into a situation. It takes a lot of intestinal fortitude to do it well. I’m wondering out loud if that behavior has prevented this from catching on like other more cut-and-dried management function improvement processes over the years.

Reibstein: Are there some industries where you think achieving price advantage is more developed than others?

Marn: I cannot point to one industry and say 80% do this well. It comes down more to individual players in a variety of industries.

Reibstein: I’ve been surprised to see how well the chemical industry does it.

Marn: I think a few chemical companies have really stepped up their game in pricing in the last five years or so. But I cannot point to a single industry where the top five players all do pricing well. Typically, you find zero or one in an industry that do it really, really well. Or maybe two. And that, to me, is what’s so exciting about pursuit of the price advantage. It’s not something everyone has already. It is still an advantage that can really cause you to stand out in terms of your performance. This is not about playing catch-up. This is about getting out ahead and investing in creating an advantage that most others in your industry probably don’t have already.

Even industries that invest tens of millions of dollars in pricing processes and systems don’t do it all that well. Look at the airlines. For all the sophistication they have in how they price, the performance of airlines today is not that great. You wouldn’t put a big part of your investment portfolio into airlines. In the specialty chemical industry a couple of players do it really well. In consumer packaged goods there are a couple that do it well and a bunch that don’t. You look at service industry and there are a minority that do it well and most don’t. You go right down the list and there’s no one industry you can point to and say across the board this is one industry that’s got it really nailed.

Reibstein: I want to pick up on something you said earlier - that there’s always a temptation to cave in. Where do prices really end up being set in a company? You talk in the book about how pricing departments have sprung up in companies in the last 10 years. But it’s one thing to have the price set at corporate and another thing when you get down to the front line where the salesperson is talking to the customer. First of all, how much of whatever ends up happening concerning pricing really happens on the front line rather than at corporate? And, second, how much leeway should you give the sales force in determining prices?

Marn: That’s a very rich question, and it’s one that I think is misunderstood by a lot of companies. I have seen companies price exceedingly well with very centralized pricing processes and very decentralized pricing processes. By centralized, I mean all price decisions are made at headquarters. By decentralized, I mean there is considerable discretionary authority to discount price out in the field. Now, I think the mistake a lot of companies make is they say, ‘You know, my sales people have no price discretion. Any price discount that they want to grant customers, they need to get approval from the “pricing desk.’” One would think with that control, or lack of field discretion, that they would have the pricing process under control and that nothing bad is going to happen. But that’s exactly the wrong point of view.

No matter whether your pricing authority is centralized or decentralized, something very crucial happens at the salesperson/customer interface. Even without pricing authority, what you’ll find is the best salespeople, the ones who really understand customers well and know how to sell value, will actually end up charging higher prices. And their customers end up, even if the pricing is centralized, going back to the central pricing desk with fewer price-discount requests. So I would suggest that whether the salesperson has field pricing authority at a high or low level, it doesn’t matter. He or she is always going to be a crucial cog in the creation of a price advantage in an organization. That would be point number one.

Point number two builds on the idea that companies can be successful at very centralized and very decentralized pricing. The connection to make is this: The more decentralized your pricing process - that is, the more pricing authority you push out to the field, be it to regional managers, district managers or salespeople - the higher level of pricing skill you need to build in those people. You also need a higher level of monitoring of their performance. And you need a higher level of incentives tied to pricing in their compensation plans. A lot of companies push pricing authority out to the field, but they’ll fail to create those three conditions for success.

Reibstein: I think that’s an excellent point. I’m particularly intrigued by your observations on technology’s role in pricing. Do you want to talk a little bit about what you see as the role of technology today and where you see it going?

Marn: What you’re seeing now is a number of software companies filling that gap that existed maybe 10 years ago or so when companies were trying to get their pricing processes supported by systems. It turns out that a fair number of viable software alternatives out there today support the pricing process. We have felt for years that investing in this kind of software for most companies usually does make great sense.

Reibstein: Which software systems are you thinking about?

Marn: Some 30 or so are decent. But if I mention one, I risk endorsing it. There are several that are very good alternatives. The point is that the payoff for doing even a little better in pricing, even a half a percentage point or a percentage point, is so high that it makes sense to have systems that let you deal with the issue at that level of precision. By the way, we’re not taking about rocket-science software. It’s simple software that makes very visible to salespeople and sales managers and market managers and product managers just what the real economics of a customer and a transaction are.

Reibstein: Rather than mention any companies, can you talk about the class of software you’re referring to?

Marn: There’s a class of software called administrative software that helps you figure out what the so-called price waterfall looks like for a customer or a transaction. So when it’s time for you to make a decision when a customer is negotiating with you on next year’s contract, you can at the press of a button see where my discounts are but not the waterfall. What’s the bottom line, pocket price, and pocket margin? Was that realized for that account during the last year? What changed? Are they taking more cash discounts? Are they taking longer to pay? A system that adds it up together for you properly on a real-time basis can be hugely beneficial at times when you’re negotiating with customers.

[Editor’s Note: Many companies use an incomplete metric for transaction pricing, such as the list price or invoice price. Pocket priceis simply invoice price minus all the off-invoice discounts that occur after invoice price, including items like cash discounts, volume bonuses, freight allowances, promotional allowances and cooperative advertising. Pocket price represents the real dollars and cents that are left in a business’ pocket as the result of a transaction. A business does put list price or invoice price in its pocket, but it puts pocket price in its pocket to cover costs and ultimately contribute to margin and profitability.

The pocket price waterfall is simply the graphical representation of pocket price.
The format is a set of vertical bars, the left-most one being list price and the following bars being the discounts subtracted from list price to get down to invoice price. From the invoice price bar, all of the off-invoice items mentioned earlier are subtracted to get down to pocket price. The picture ends up looking like a waterfall with dollars and cents "leaking away" with every bar down to pocket price.

When a product is custom-made to individual customers -- for example, not a standard packaged product for each consumer -- or if there exist important cost-to-serve items that vary widely by customer or transaction, then pocket price itself can be an inadequate representation of the attractiveness of a transaction. In such situations, Marn and his co-authors often suggest the extension of pocket price down to pocket margin. Hence, pocket margin is pocket price minus standard costs and minus any special costs-to-serve that a company might incur. The pocket margin metrics allows the comparison of transactions where the product is not standard or the cost-to-serve is highly variable. The pocket margin waterfall is the graphical representation of pocket margin.]

The second class is what I call optimizing software, which tries to provide some intelligence on how to price. This software looks up past transactions and tries to judge at what price level you’ll get an optimal price/benefit tradeoff for a certain category of products.

There’s a third category of price-testing software that I find very exciting. These products let companies that either sell online or sell through call centers on a real-time basis test price levels. If you are a computer company selling personal computers online, for every 20th PC that you sell in a certain class you might bump the price up 3% or bump it down 5% when you quote it. If you do this on a regular basis, if you have enough of a high-volume transaction stream, you can get a sense, with this real-time testing, how sensitivity to price is changing over time.

Reibstein: I’m a big believer in that.

Marn: That’s some of the most exciting software that’s come out in recent years, and I think companies are just beginning now to reap the benefit of that real-time understanding. The idea is that you always have a price test going on. You always have your thumb on the pulse of how price sensitivity is changing for products all the time.

Reibstein: Mike, is there something I haven’t asked you yet that you’d like to mention?

Marn: I’d like to say that all too many well-intentioned companies approach price improvement as a project, as something you can knock off in six months or a year and then go on to the next thing you need to fix. When you look at companies that have really created the price advantage, it’s not that way at all. This is at least a medium- to long-term journey. To get it right in most companies, you have to potentially touch hundreds, even thousands, of people. You have to change their day-to-day behavior, change the tools they use, change the way they think about price versus volume versus market share. It’s more work than you think. It’s a larger investment than you think. But the good news is that it’s worth it.

We’ve seen clients that have stuck with this over the years and they keep accumulating benefits over time, in terms of stretching out their margins on a year-over-year basis. But there’s almost a change in the feel of the culture of the company. If you go into a company that has created the price advantage, you see a couple of things. You see people who really are customer focused. They understand that they can’t create the price advantage unless they create value for their customers. And, you see workers at all levels who understand, ‘If I work hard to create an advantage for my customer or an advantage for my company, I know we’re going to get a payoff for it. My hard work at a company where the price advantage exists always has a payoff. It’s not going to be given away to the market. It’s not going to be frittered away in a temporary volume increase.’ There’s a certain spirit in companies that achieve the price advantage. It’s a long-term cultural change.
Source; Wharton School of the University of Pennsylvania, June 04
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RETAIL – GROCERY

Giant, union join to keep Wal-Mart out
Montgomery proposal would impose strict zoning regulations
Giant Food and the union that represents local grocery store employees have joined forces in support of a proposed ordinance aimed at keeping Wal-Mart supercenters out of Montgomery County.
While other Washington-area jurisdictions have imposed restrictions on "big box" stores, legislation sponsored by Montgomery County Executive Douglas M. Duncan is aimed more narrowly at Wal-Mart Stores Inc.
The measure would impose tough new zoning restrictions on stores that are larger than 120,000 square feet and devote at least 10 percent of their floor space to groceries. It would exempt stores that do not sell food, such as most Target stores and Home Depot, and it would exempt club membership stores such as Costco.
Wal-Mart, based in Bentonville, Ark., has one standard-size store in Montgomery County, in Germantown, and no plans to expand in the county, said Mia Masten, Wal-Mart's community affairs manager for the eastern region.
Still, Wal-Mart opposes the measure. "We think it's anti-competitive and anti-consumer," said Masten. "It not only affects us, but other competitors who want to come into Montgomery County and offer consumers one-stop shopping, which is what consumers say they want."
The alliance against Wal-Mart reflects the shared interests of supermarkets and Commercial Workers Local 400, which recently reached a four-year labor contract after weeks of preparations for a strike.
Across the country, the nonunion discount stores have been a serious competitive threat to established supermarkets and their unionized work forces.
During the contract talks between the chains and the union, supermarket executives noted increasing competition from Wal-Mart and other nonunion retailers as the impetus for proposed benefit cuts.
"We have spoken to coordinate lobbying the bill," said Barry F. Scher, Giant vice president of public affairs.
"We are supportive of the concept," said Safeway spokesman Greg TenEyck, although he said his chain has not taken an active role in lobbying for the measure.
A Local 400 official confirmed that the union is working with Giant to push the bill. "We are communicating about it," the official said.
The pre-emptive move in Montgomery County did not surprise industry experts.
"A grocery store cannot compete against a supercenter," said Jason Whitmer, an analyst at FTN Midwest Research Securities. "The logic is to fight Wal-Mart before they come, rather than when they come."
FTN Midwest found that within a year of opening, a Wal-Mart supercenter takes 11 percent of grocery store business within three miles.
It's not clear whether the proposed ordinance will win approval from the Montgomery County Council. Uncertainty remains about whether singling out combination retail stores - those that sell food and general merchandise - would survive a court challenge.
"I don't think we've been provided with enough information to draw a circle around something called a combination retail store and have it pass legal muster," said council President Steven A. Silverman.
Source; The Baltimore Sun, June 04
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BUSINESS – CORPORATE OVERVIEW

Lean Times for Unilever
Busy shrinking a vast and unwieldly slew of brands, the consumer-staples giant was way late to the low-carb party
For too long, analysts say, Unilever the consumer-staples giant behind household brands such as Lipton teas and Dove soaps, thought the low-carb diet craze was just that -- a craze. Its stock is still paying the price for that widely publicized miscalculation. Now, the Anglo-Dutch outfit that manufactures Slim-Fast diet products has got the low-carb religion, replacing the head of that division and preparing to roll out a slew of low-carb products.

Meantime, while Unilever's performance continues to lag, peers like France's Danone and Switzerland's Nestlé have seen revenues and stocks rise nicely this year. Unilever squeezed only a 1.3% revenue gain from its leading brands - a key sales measurement - in the first quarter of 2004 amid a variety of challenges, including increasing competition.

Analysts had forecast at least a 2% boost, and the figure was a far cry from Unilever's 3% to 5% long-term growth target for leading brands such as Knorr soups and Surf detergent. Its stable of leading brands, which make up nearly 95% of sales, rose 2.5% in 2003.

Star-studded cupboard. When the latest results were announced on Apr. 28, Unilever's American depositary receipts (ADRs), which trade on the New York Stock Exchange, dropped more than 7%. (Each Unilever ADR represents one share of Rotterdam-based parent Unilever NV. Although Unilever operates as a single company, a separate London-based parent company, Unilever PLC, trades on the London stock exchange.)

Since then, the shares have recovered some. Trading around $66 as of June 14, the stock is up about 3% so far this year, vs. a 2% gain for the benchmark Standard & Poor's 500-stock index, of which Unilever ADRs are not a component.

Unilever shares have been resilient because many of its brands, including Vaseline and Ben & Jerry's, to tick off a few more, are recognized around the world. Unilever is also highly profitable, boasting some of the fattest margins vs. its European rivals. First-quarter operating margins were a rich 14.9% before exceptional items and amortization of goodwill and intangible assets (BEIA).

Faltering strategy? In fiscal 2004, Unilever is expected to have 4 billion euros ($4.8 billion) in net income (BEIA), 3% higher than in 2003, on revenue of 42.3 billion euros ($51.2 billion), according to Michael Steib, executive director with Morgan Stanley in London. Steib's revenue forecast is about 1.4% lower than last year's number, mainly because of currency translations.

"They have strong brands, and they have strong value," Steib says. "Bottom-line growth and margin improvement have been impressive." Still, Steib remains neutral on Unilver, rating it equal weight. And his 58 euro price target for shares trading on the Amsterdam exchange suggests only 5% or so price appreciation in the next 12 months. "They need to demonstrate through innovation and change in brands that they intend to have a pickup in top-line growth."

Unilever management has its work cut out, analysts and company watchers say. "Growth strategy appears to have sort of faltered," says Lex Werkheim, a partner at Eureffect, an Amsterdam asset-management firm which owns Unilever shares.

Slim-fast’s slow switch. Unilever says it's nearing the end of a five-year "Path to Growth" launched in 1999. It's on track to trim brands to the most profitable 400 from a once dizzying 1,600 worldwide, it says. It also has cut more than the expected 3.9 billion euros ($4.7 billion) from manufacturing and other operations as part of the growth initiative.

And Unilever PLC has had a change at the top. Chairman Niall FitzGerald, 58, is leaving to become chairman of British news and information company Reuters. In keeping with tradition, Unilever PLC has picked an insider to fill the spot. Patrick Cescau, a 55-year-old director of the firm's global foods division, takes the helm later this year.

But analysts want to see more progress before becoming more upbeat about the stock. First, Unilever needs to do a better job of managing its brands, analysts say, especially Slim-Fast. "In early June of last year, Unilever was still saying low-carb diets were a fad that was going to go away," says London-based J.P. Morgan analysts Arnaud Langlois, who has an underweight rating on the stock and believes the price could actually decline. Slim-Fast products traditionally have included foods such as shakes and meal bars that serve as low-calorie - but not necessarily low-carbohydrate - alternatives to regular food.

On the scent. Someone finally got the message. At the end of last year, Unilever rolled out five low-carb Slim-Fast products. And in its Apr. 28 earnings release, the big news was that the low-carb newcomers are already accounting for about 20% of Slim-Fast revenues.

But it also said in the same note that Slim-Fast's low-carb debut "has not yet compensated for the decline in share of the traditional products." Seventeen more low-carb products are going to be launched, the company said. And on June 4, Unilever said the president of the Slim-Fast unit would be leaving, to be replaced by a food-division exec.

Slim-Fast isn't Unilever's only struggling brand. There's also the Prestige fragrance division, which sells Calvin Klein Obsession, Eternity, cK, and other designer names. "Other companies have been quicker to launch more products," Steib says. "With fragrances, consumers are on to new things very quickly." Those twin problems with Slim-Fast and fragrances have hit Unilever particularly hard in North America, which represented 23% of revenues in 2003, and where first-quarter sales fell 4%.

In an e-mail response to BusinessWeek Online, company spokesman Trevor Gorin said consumers have not had any "significant change in taste" when it comes to Unilever fragrances. Rather, marketing the scents became tougher, as consumers became more selective in their discretionary spending. The division, Gorin says, is under new leadership and expects to see the benefits from a restructuring plan in the second half of 2004. As for Slim-Fast, Gorin says Unilever forecasts "a return to modest growth as we rebuild consumer loyalty" in 2004.

New focus. Unilever also has more work to do in getting rid of underperforming brands, analysts say. As the prime target, most investing pros singled out the frozen-food business in Europe. Increased competition from discounters and others is making pricing tough there, analysts say.

Unilever has already identified 10% to 15% more frozen-food products as noncore, according to Gorin. "Actions are being taken to rationalize the portfolio and focus on higher growth segments," he says.

The company has also been criticized for not returning more of its cash on hand to shareholders, says Julian Lakin, an analyst with brokerage firm Pereire Tod in London, who rates Unilever accumulate. Cash flow in the first quarter grew 18%, to an impressive 970 million euros ($1.2 billion). Proceeding with special dividends to shareholders or stock buybacks are two methods of increasing investor interest, Lakin says.

Check-out line. For now, Gorin says Unilever is focused on trimming debt to 10 billion euro ($12.1 billion) from the current 12.5 billion euros ($15.1 billion). After that, he says surplus cash generation "will be used to enhance shareholder return."

Since Unilever's founding in 1930, it has posted average annual earnings per share growth of 8%, Gorin adds. Over the same period, that bests the Dow Jones index of industrial companies by 20%, he says. And few doubt that Unilever is a formidable company. Even Langlois, who is negative on the stock, says "management needs to be given more time" to improve the situation.
It's also true that Unilever faces multiple challenges, including growing competition in its traditionally high-margin and high-profit emerging markets. Still, investors hoping to see quick returns may want to consider giving Unilever more time before putting its shares in their shopping carts.
Date; June 04
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BEVERAGE SECTOR – MARKET STRATEGIES

The cola wars are back
Not that Coca-Cola and Pepsi ever stopped competing against one another. But with this week's almost simultaneous launch of Coca-Cola C2 and Pepsi Edge, both containing 50 percent less calories, carbohydrates, and sugar than regular sodas, the two soft-drink manufacturers will once again heat up their decades-old rivalry.
The difference is that the stakes are much higher and the competitive landscape much different since the debuts of Diet Coke and Diet Pepsi during the 1980s. Coca-Cola and Pepsi have been desperately searching for ways to jump-start stagnant soft-drink sales as consumers buy more energy drinks and bottled water.
As obesity becomes a more serious health concern in the United States, critics are lumping Coca-Cola and Pepsi with the likes of Big Macs and Oreo cookies. Foodmakers ranging from General Mills Inc. to Kraft are scrambling to jump aboard the low-carb bandwagon before the phenomenon runs out of steam.

Whether C2 or Edge succeeds or simply fizzles out is anybody's guess, analysts say. For years, the companies have tried unsuccessfully to bridge the gap between diet and regular sodas (remember Pepsi One?). Soft-drink manufacturers also are not known for their innovation skills (remember New Coke?).
But Gary Hemphill, senior vice president of Beverage Marketing Corp., a consulting firm in New York, credits Coca-Cola and Pepsi for trying to shake things up. Until now, Coca-Cola and Pepsi have been content to develop flavor extensions such as Vanilla Coke or Mountain Dew Code Red, a less risky strategy that generates more sales "but does not create heightened demand for carbonated soft drinks."
C2 and Edge "are significant departures from the flavor innovations that the industry has pursued the past several years," Hemphill said.
"It makes a lot of sense to focus on more functional [health] needs," Hemphill said. "There's greater potential here for longer term growth."
The industry could use a boost. Carbonated soft drinks sales increased only 0.4 percent last year, according to Beverage Marketing Corp. figures. Per-capita consumption dipped to 53.8 gallons from 54.2 gallons in 2002, the fifth consecutive year of such a decline. Flagship brands Coca-Cola Classic and Pepsi both lost market share. Only diet sodas showed strong growth.
To fight what industry observers call "cola fatigue," both Coca-Cola and Pepsi are heavily hyping C2 and Edge. Coca-Cola spent an estimated $30 million to $50 million to promote C2, its biggest product launch since Diet Coke in 1982. In addition to television and Internet ads, Coca-Cola gave a million cases of C2 to employees, a new initiative called "Ambassador Sampling."
With consumers interested in health and wellness products, C2 hits retailers at the right moment, said Jeffrey Laschen, vice president and general manager of Midwest Coca-Cola Bottling Co. in Eagan, whose territory includes the Twin Cities.
"Timing is everything and the timing is right now," Laschen said. C2 "is a great platform to bring back people who left carbonated soft drinks for one reason or another. ... There are a whole segment of consumers looking for a diet beverage but don't like the taste."
Laschen thinks C2 could create a new category of soft drinks, similar to the way Anheuser-Busch positioned Michelob Ultra as a premium low-carb beer. C2 could play particularly well in the Twin Cities, Coca-Cola's largest market for diet sodas, he said. The question is whether C2 will attract new customers or siphon existing sales from Diet Coke and Coca-Cola Classic.
"Although C2 will cannibalize Coke and Diet Coke, the company is reasonable ... in expecting the brand to draw from noncarbs, as noncarbs, including water, have benefited from consumers' search for lower-calorie alternatives to regular soft drinks," Mark Swartzberg, an analyst with Legg Mason, wrote in a recent research note.
For Pepsi, Edge represents its latest attempt to fill the gap between diet and regular soda drinkers. The company estimates 60 million Americans are dual users -- they drink both regular and diet sodas.
In 1998, Pepsi rolled out Pepsi One, which contains only one calorie, but it never caught on.
"Maybe it was ahead of its time," said David DeCecco, a spokesman for Pepsi-Cola North America. Pepsi One "never found the scale nor the following we would have liked it to have."
With 20 grams of sugar, 20 grams of carbs, and 70 calories, Edge will appeal to consumers who want to make only gradual changes to their diets and lifestyles, DeCecco said.
"This isn't about just one product," he said, "but a fundamental change in how people drink soft drinks. ... People are paying more attention to what they eat and drink. We hope Edge helps people rediscover the soft drink aisle."
Not everyone is convinced. Tom Pirko, president of Bevmark, a consulting firm in Santa Barbara, Calif., said Coca-Cola and Pepsi are looking for a market that doesn't exist.
"To be honest, they are really wasting their time," Pirko said. "Consumers want either a full-flavor soda or they want to lose weight. C2 and Edge don't solve obesity issues at all. This piddling, little bit of this, little bit of that approach only confuses consumers. Pepsi One was a much more full-flavored soda, but it didn't work."
And by releasing C2 and Edge at the same time, Coca-Cola and Pepsi will only cancel each other out, he said.
Harry Balzer, vice president and food analyst with NPD Group Inc., thinks the market is large enough for C2 and Edge to make their case. The brands will get consumers' attention because soft drinks are "a high-interest category," he said.
"I'm sure people will try them," Balzer said. "But will they have staying power?"
Source; Startribune, June 04
Write; by Thomas Lee

Picture; Cola wars - Glen Stubbe

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2004-06-03T22:06:00.000+02:00

HIGHLIGHTS
E-BUSINESS – INTERNET

Amazon Testing "Plogs"
First Amazon.com recommended products that it thought its customers would find interesting. Now it's taking advantage of the blogging phenomenon by topping its home page with a personalized "Plog," a blog-style feature that links to recommended products and provides relevant information.

"Your Amazon.com Plog is a diary of events that will enhance your shopping experience, helping you discover products that have just been released, track changes to your orders, and many other things," the company says on its site. "Just like a blog, your Plog is sorted in reverse chronological order. When we think we have something interesting or important to tell you, we'll post it to your Plog."
The Plog feature is still in beta testing.
"The goal of the plog service is to provide users with an easy way to keep current on events that are relevant to them," said Craig Berman, director of platform and technology communications at Amazon, in an e-mail exchange. "The service is designed to further enhance the customer experience by providing personalized information, including product recommendations, order updates and other Amazon.com content in one convenient location."
The information that appears in the Plog is driven by Amazon's database of information about a user -- previous purchases and ratings of products. One entry begins: "'The Rule of Four' was released today; We thought you'd be interested because you rated 'The Da Vinci Code'." Following that introduction is a Publishers Weekly review of the newly released book. Each book mention links to its Amazon product page.
To allay privacy concerns, Amazon allows users to opt out of having purchase details shown on the Plog in their account preferences area.
While many businesses, most notably Amazon partner Google, have launched blogs to communicate with the public, the personalized nature of the Plog and its prominent home page placement make Amazon's approach unique. The Plog could almost be called the reverse of a blog. While blogs are usually highly personal diaries produced by an individual and read by others, the Amazon version is produced by a company (or a company's technology) and each version is personalized for just one individual.
So far, there appears to be no RSS feed of the Plog, though it would seem like a natural distribution method. Most blogging software generates an RSS or Atom feed automatically, and Amazon has been a pioneer in using RSS to distribute information about its products. Many marketers and publishers are looking to RSS as a spam-free alternative to e-mail newsletters. (Amazon wouldn't comment on whether an RSS feed is in the works.)
Amazon, through its subsidiary A9, has lately been experimenting with new ways of collecting and using data about its customers. A9 recently launched a search site that keeps a log of users' searches and site visits, also allowing them to keep notes about sites.
Source; ClickZ, May 2004
Write; by Pamela Parker

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BUSINESS – WORKING LIVE

The Rise Of The Mompreneurs
EBay has given corporate dropouts a new way to balance work and family
For many high-powered women who put "former" in front of their titles to stop out and stay at home with their kids, selling stuff on eBay often starts as a dalliance, a means of purging closets of never-worn mistakes and stripping the guilt from all those forays to Filene's Basement and the ever-seductive Prada and Gucci outlets. By picking up an extra pocketbook here, a pair of thrift-store-priced stilettos there, these moms in turn flip the items on eBay - essentially shopping their way to earnings.

Ever since founder Pierre M. Omidyar started the global bazaar by selling a broken laser pointer for $14, the eBay economy has given Mayan villagers a chance to sell their pottery to Park Avenue princesses and rural Kansas collectors an opportunity to vie against Christie's. Now, with the help of wireless technology, digital photography, and friendly postmen, eBay is becoming a hot new career for managerial-class moms. "Flexibility is a big part of it. But they also get the opportunity to do something they enjoy," says eBay Inc. CEO and President Margaret C. Whitman. "Often these women are trading in areas they have always been passionate about."

Today, upwards of 430,000 people in the U.S. alone - more than are employed worldwide by General Electric Co. and Procter & Gamble combined - earn a full- or part-time living on eBay selling everything from fashion to farm equipment, with the highest-sellers grossing up to $1 million a month. Of the estimated 48% of these sellers who are women, many are "mompreneurs" - corporate stopouts who have found in eBay a way to tap into an international marketplace from their kitchen tables and finesse a saner work-life balance at the same time. It's no coincidence that the rise of the eBay mompreneurs comes as more highly educated women are choosing to stay at home with young children. The percentage of working women with children under the age of one dropped from a record 59% in 1998 to 55% in 2002, after rising steadily for 30 years. Some see the decrease as a referendum on the work-life balance. As in, it doesn't exist.

Megasellers
On eBay, however, says Marsha Collier, author of the bestselling Starting an eBay Business for Dummies, "there's no commuting. No back-stabbing. No office politics. No glass ceiling. No need to waste gas. No waiting in line at the post office, because they'll pick up for free. I mean, how much better could it be?"

For former Dow Chemical Co. engineer Kim Kincaid of Leavenworth, Kan., not much. She began selling antiques on eBay in 1998 as a hobby (her first coup: a $7.50 Pillsbury Doughboy cookie jar that sold for $75). Today she moves at least $100,000 worth of antiques and rare books a month. But she is still able to arrange her schedule around her four- and 10-year-old sons. "When women look at the workforce once they have children," says Kincaid, who now runs the business with her husband, sister, and parents, "they say: 'I'm going to be working for $2 an hour after child care and not having all that time with my kids."'

Ann Whitley Wood, a Stanford University grad who has a law degree from the University of Texas at Austin, quit her job as an appellate attorney at Dallas blue-chip firm Haynes and Boone in 2000 after her second of three children was born. She simply couldn't figure out a way to make the job work part-time. Yet as a buyer on eBay, she was dumbfounded by the volume sellers were doing. So she started experimenting. (Her first sale: an old evening gown hanging in her closet, $400). In 2002, she got more professional, scouring last-call sales for Lilly Pulitzer dresses and Kate Spade handbags. She now makes a decent part-time income.

The idea of selling on eBay came to Elise Wetzel as a way to raise funds for her kids' preschool. Holding a virtual garage sale on eBay seemed like a better idea than pushing overpriced candy or tired wrapping paper. Wetzel, a former director of marketing at Unilever, quit her job after attending her Northwestern University Kellogg School of Management reunion in the summer of 2002. Of all the women there who had two kids, she was the only one who was still working. "It was like I missed the memo," she says. After the school fund-raiser, she was hooked and today has an eBay business called iSold It, which is fast developing into a chain of online consignment stores.

EBay, experts say, is a welcome, recession-proof option for many women, especially since it makes a virtue of the very traits that are often perceived as weaknesses in Corporate America. Research shows, for example, that women's detail-oriented strengths - as well as their tendency to bear down and have lunch at their desks - are impediments to advancement. On eBay, those so-called shortcomings become a competitive advantage, allowing women to provide the kind of high-touch customer service - the Holy Grail among buyers - that the big retailers just can't give. The real test now will be how the eBay entry on the updated résumé plays when they try to return to the corporate world. That is, if they even want to.
Source; BWO, May 2004
Write; by Michelle Conlin in New York

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E-COMMERCE – U.S.A.

Abandoned shopping carts an e-tail challenge
More e-tail browsers are turning into buyers-but many are still abandoning their shopping carts before completing a transaction, a study has shown.
The number of shoppers who end up buying something has gone up from 3.5 percent in the last quarter of 2003 to 4 percent in the first quarter of 2004, online marketing company DoubleClick said in a report released Wednesday.
But for every dollar sold, $5 was left in an abandoned cart, DoubleClick said. "It's encouraging to see conversion rates increasing, although abandoned shopping carts still represent an enormous opportunity cost," Court Cunningham, senior vice president at the company, said in a statement.
Although returning customers are just 1 percent of all Web site visitors, they spend the most time - 7.69 minutes on average--and money, about $180 every session, DoubleClick said. Nonbuyers accounted for 95 percent of all visitors but added up to 78 percent of the abandoned carts, the market researcher said.
The study was based on data culled by the company's Web site measurement software, which analyzed the habits of 160 million Web site visitors.
E-commerce Web sites have recently been reporting higher sales. In the first quarter of 2004, sales grew by 28.1 percent, compared with the same period last year.
Source; CNET, May 2004
Write; Dinesh C. Sharma

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RETAIL – U.S.A. MARKET

Retail Sales Rise, Led by Spring Clothing
U.S. retail sales rose in May as shoppers splurged on spring clothing, undeterred by the impact of rising gasoline prices on household budgets.
Most retailers, including Wal-Mart Stores Inc., Gap Inc. and Costco Wholesale Corp., outperformed sales expectations for the month, picking up pace from a weak April when they reported their sales on Thursday.
Demand for items such as apparel, electronics and food helped offset the effects of waning tax refunds and a late U.S. Memorial Day, which pushed some sales into June. The companies' outlooks were "limited and somewhat mixed," said Ken Perkins, an analyst for research firm Thomson First Call.

Wal-Mart, the world's largest retailer, said sales at stores open at least a year, a key retail measure known as same-store sales, rose 5.9 percent last month. That was at the high end of its 4 percent to 6 percent target range for the four weeks ended May 28.
The increase came even after the Bentonville, Arkansas-based company had warned that high prices at the gas pump - which are costing the average American an additional $7 a week - could cut into the pockets of its more than 100 million weekly customers.
Wal-Mart forecast same-store sales will rise at the low end of a 4 percent to 6 percent range in June. Its stock gained 82 cents, or 1.5 percent, to $57.14 on the New York Stock Exchange in late morning trade.

Gas prices have topped $2 a gallon across the United States as the price of crude oil has soared to record highs.
Costco said its May same-store sales jumped 16 percent, well above expectations, on demand for food, electronics and gasoline. The largest U.S. warehouse club operator also sells gasoline at some of its stores.
Discounter Target Corp. said its same-store sales climbed 4.6 percent, roughly in line with its forecast.
Not all flourished. Sears, Roebuck and Co., the largest U.S. department store operator, projected same-store sales would be flat to down slightly in the second quarter, following a worse-than-expected drop in May.

Lackluster children's and home goods businesses weighed on sales at department store chains Dillard's Inc. and May Department Stores Co., and home furnishings retailer Pier 1 Imports Inc. cut its quarterly profit view due to a disappointing holiday promotion.
J.C. Penney Co. Inc. which posted a 9.1 percent rise in May same-store sales on a strong Mother's Day, also noted "concerns over the impact that higher energy prices" are having on the consumer.
The S&P Retailing index was down Thursday morning but recovered at midday and was up 0.5 percent at 407.59.

Clothing a hit in May
Upscale spring clothing was a bigger hit with shoppers compared with the same month last year, giving a sales boost to department stores such as Federated Department Stores Inc. and Nordstrom Inc., which surpassed analysts' forecasts.
"The mix of sales is good, discounting is under control, and inventory levels are in good shape," said Darrell Rigby, head of Bain & Co.'s global retail practice.

Specialty apparel companies were standouts, including women's chains Talbots Inc. with a better-than-expected 8.1 percent rise, and Limited Brands Inc., which posted a 3 percent increase on robust demand at its Victoria's Secret chain.

Gap, the biggest U.S. specialty apparel retailer, posted a better-than-anticipated 6 percent rise in May same-store sales, driven by summer merchandise such as tank tops and skirts.
"Rising oil prices have slowed consumer spending somewhat. But with incomes rising, the consumer is (spending) a little bit extra," analyst Claire Gallacher of Caris & Co. said, noting that freer spending on clothing was a good sign for the economy.
Source; Reuters, May 2004
Write; by Jackie Sindrich

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RETAIL – FOOD SECTOR

Kraft Backs Off on Plan to Reduce Package Sizes
Kraft Foods, Inc. has abandoned its plan to reduce some portion sizes, saying consumer research shows shoppers prefer to have the choice of whether to go with smaller packages.

According to reports, Kraft disclosed the decision in a progress report on the anti-obesity initiatives it announced last July. With the food industry facing growing consumer health concerns and the risk of obesity lawsuits, Kraft had pledged to change some product recipes, reduce portions in some single-serve packages, quit marketing snacks via giveaways at schools, and encourage healthier lifestyles.
"When we spoke with consumers about what they wanted with single-serve, what they told us was that they didn't want us to reduce the size because they wanted to have more choice," Kraft spokeswoman Kris Charles said yesterday. "Different people have different body sizes and activity levels, and it made more sense to provide different portion choices."

Kraft said is still planning to offer a broad range of portion-size choices, including snacks in small packages, such as its new Nabisco 100 Calorie Packs. It also will give nutrition information for entire packages, rather than just for individual portions, to make it easier for consumers to make nutritional decisions.
That move, Kraft said, should support the U.S. Food and Drug Administration's recent call for food companies to enhance labeling on packages in a way that helps consumers make informed decisions.
Kraft has also reduced the fat content and made other changes to about 200 products it sells in North America, accounting for about 5 percent of its products.
Date; May 2004

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BUSINESS – BEVERAGE SECTOR

A Beer Brews in Brooklyn
Legendary Rheingold Beer, a New York-area icon brand, will once again be brewed in its hometown of Brooklyn, according to news reports.
New York-based Rheingold Brewing Co. has teamed up with Greenpoint Beer Works, which will produce from 1,000 to 2,000 barrels of Rheingold at its Waverly Ave. brewery.
The beer is expected to be sold initially in local bars and restaurants. Rheingold was established in 1850 and soon became a New York favorite. For almost 30 years Rheingold was the most requested beer in the New York area. In addition to Brooklyn, the company operated breweries in Orange, N.J. and other locations, but in the 1960s it began to lose sales and market share to Anheuser-Busch, Miller, and other larger companies. The company filed for bankruptcy and shut down in 1976.
In 1999, Walter "Terry" Liebman, a descendant of Rheingold's founding family, re-established the brand. The bulk of the company's product is being produced at an upstate contract brewery.
Date; May 2004

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2004-06-01T19:29:00.000+02:00

HIGHLIGHTS

RETAIL - EUROPE

Ahold Will Consider Takeovers in 2006
Dutch retailer Ahold will reportedly begin looking at takeovers again in 2006, the retailer's c.f.o. was quoted as saying, Reuters reports.
Although no concrete plans have been discussed, Hannu Ryopponen, Ahold's c.f.o., told Dutch daily Het Financieele Dagblad: "At around that time we will be ready to write a check for two to three billion euros. I would rather not invest a lot, but would be prepared to do so for a good acquisition."

Ahold, which has been struggling to recover after admitting to overstating earnings by more than U.S. $1 billion in 2000-2002, will reportedly eye takeovers in Europe in an effort to lessen an imbalance of its income structure, which currently generates 72 percent of sales in the United States, according to the newspaper report.
Acknowledging that the company's first priority this year and next was recovering from the accounting scandal, Ryopponen was quoted as saying: "It would be idiotic to go on the takeover path while the ship is still leaking. You cannot do too much that is new. First, we must be rid of the credit agencies' junk bond status. Then we will be ready for growth."

Noting that the company's U.S. focus will continue to be directed to strengthening its Stop & Shop and Carlisle, Pa.-based Giant Food Stores unit, Ryopponen said Stop & Shop's sales could double in 10 years through new store openings and small acquisitions.
Last week Ahold received a "serious warning" from Euronext, a European stock exchange, which officially reprimanded the global food retailer for breaking market rules by delaying the disclosure of accounting problems that had it near bankruptcy last year.
Date; Amsterdam, May 04

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SHOPPING MARKET – U.S.A.

Self-Checkout Transactions to Surpass $330 Billion Annually by 2007
Self-service shopping will generate transactions worth $70 billion in 2004, according to a new study from IHL Consulting Group. The study forecasts that the value of these transactions will increase to over $330 billion by 2007 as many more systems are deployed in the next few years.

The "2004 North American Self-Checkout Systems Market Study" details the trends as well as the quantitative functions of the self-checkout market, including system shipments, installed base, market value, key technology vendors, and the value of transactions through these systems.

The report also includes a four-year forecast for shipments, installed base and market value, and an analysis of projected penetration in key retail segments.

"We live in an age where self-sufficiency often reigns supreme, and time is at a premium," said Greg Buzek, president of IHL Consulting Group, an analyst firm and consultancy that serves retailers and retail technology vendors. "New self-service technologies are emerging that will revolutionize the way we shop for goods and services.

The report provides data, charts, and graphs on self-checkout trends and challenges, key vendors, retail segments, market opportunities, and forecasts. Some key insights from the report:

- In stores currently using self-checkout systems, as much as 40 percent of the total number of transactions now go through the self-checkout, allowing retailers to provide more customer assistance within the aisles to help customers find products.
- More and more retail segments are adopting self-checkout. The Home Depot now has more than 3,200 lanes installed.
- The key technology players in self-checkout are NCR, IBM, and Fujitsu
TransactionSolutions. NCR is currently the dominant player, but IBM and Fujitsu have recently entered the market through key acquisitions, bringing with them significant point-of-sale success.

"The No. 1 challenge facing retailers of all sizes is, 'How do we compete with Wal-Mart?'" said Buzek, adding that self-checkout systems are allowing retailers to move labour from checkouts to other areas of the store, creating a differentiation in customer service that can be used to compete with the world's largest retailer.
Date; May 04

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SUPERMARKETS – FOOD SECTOR – U.S.A.

Supermarkets, Packaged Food Companies Top National Customer Service Poll
Supermarkets and packaged food companies top the list of industries that scored the best marks for serving their customers, according to an annual Harris Poll ranking 15 industries on how well they serve consumers.
Fully 87 percent of the survey's respondents believe supermarkets do a good job of serving their consumers, while 77 percent said the same of packaged food companies.
Next on the list come airlines, at 74 percent, followed by computer hardware (73 percent), banks (73 percent), and software (72 percent) companies.
At the bottom of the list, only 30 percent think tobacco companies and managed care companies do a good job. Oil companies, with 32 percent, are only marginally better.
The Harris Poll was based on a survey of 979 adults surveyed by telephone between April 8 and 15. The polling organization said the substantial changes between 2003 and 2004 concerned airlines, which fell very sharply in 2001 but have bounced back, going from 64 percent last year to 74 percent this year. The airlines' score depicts a 23 percent increase since the airlines' lowest number, 51 percent in 2001.
By contrast, oil companies have slipped 10 points this year, from 42 percent in 2003 to 32 percent, a decline of 32 percentage points since their best number, 64 percent, in 1998.
Source; Harris Poll, May 04

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RETAIL – U.K

New formula is working, claims buoyant Boots
Boots chief executive Richard Baker, the former Asda director, yesterday said the retailer was "changing fast", as he unveiled a 2.7pc rise in underlying profits to £544m.
The company also announced plans for a £700m share buyback over the next two years.
This sent the shares up 43.5 to 675.5p, making it the second-biggest riser in the FTSE 100 yesterday.
The news cheered investors, who were shocked just seven weeks ago when the company revealed a £390m investment plan that would hit profits.
However, credit rating agency Standard & Poor's cut the 150-year-old group's rating two notches to A- on fears that it would have less cash to pay off debt. The group's net debt at the end of the year to March rose £97m to £149m.

Mr Baker, who was working behind the tills at the Boots store on Cannon Street on Tuesday, said: "We do expect some degree of disruption from the investment."
However, he was bullish about the prospects for the company, whose 1,400-strong chemists chain accounts for 90pc of profits.

Boots, which took a £16m hit from voluntary redundancies, said cost cuts and rising sales, up to £5.325m from £5.320m, helped offset lower prices. Boots unveiled a 6.6pc rise in operating profit to £531m, while same-store sales rose 3.9pc, against growth of 4.8pc last year.

However, the chemist chain suffered a fall in operating margin to 11.9pc from 13.3pc, due to cutting prices 18pc on 2,000 products.
The photography division struggled with the tradtional development business down 12pc and overall down 6pc.

Meanwhile, the optician and dentalcare business saw losses narrowed to £5m from £31m and the international arm reported losses down to £10.4m from £22m.
Boots also said 15pc of its pension funds assets would be transferred out of bonds, although Mr Baker said: "This is not a view on where the equity market is."
Source; Telegraph Group Limited, May 04
Write; by Helena Keers

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BUSINESS – CORPORATE

P&G; Realignment of management structure USA
The US consumer goods giant Procter & Gamble Co (P&G) has announced some business unit realignments and associated management changes in the course of which several senior managers will be retiring within the next six to twelve months.

Steven N. David, 55, chief information officer and business to business officer will retire on January 2, 2005. Until that time, he will continue to be the global business to business officer.

Michael J. Griffith, 47, president-global beverages will retire on January 2, 2005.

Mark D. Ketchum, 54, president-global baby & family care, will retire on November 1, 2004.

Jorge P. Montoya, 57, president-global snacks & beverages and Latin America, will retire on October 1, 2004.

Martin J. Nuechtern, 50, president-global hair care, will retire on June 30, 2005.

New senior managers
The company will realign its business units effective July 1, which will take the form new units called global beauty care, global health, baby and family care, and global household care.

Bruce L. Byrnes, 56, currently vice chairman of the board and president-global beauty & feminine care and global health care, will become vice chairman of the board and global household care.

R. Kerry Clark, 52, currently vice chairman of the board and president global market development and business operations, will become vice chairman of the board and global health, baby & family care.

Susan E. Arnold, 50, currently president global personal beauty care and global feminine care, will become vice chairman global beauty care.

Robert A. McDonald, 50, currently president global fabric & home care, will become vice chairman global operations.

International changes
Additionally, the company is creating a new group president position to recognize the scope of these business responsibilities. Werner Geissler, 51, currently president Northeast Asia, will become group president Central & Eastern Europe, Middle East and Africa.

Dimitri Panayotopoulos, 52, currently president Central & Eastern Europe, Middle East and Africa, will become group president global fabric care.

Paul Polman, 47, currently president Western Europe, will become group president-western Europe.

Robert A. Steele, 48, currently president North America, will become group president-North America.

In line with these changes, the following executives were elected to new positions, effective July 1: Ravi Chaturvedi, 44, currently vice president Greater China health & beauty care, will become president Northeast Asia.

Christopher de Lapuente, 41, currently vice president United Kingdom & Ireland, will become president global hair care.

Jorge A. Uribe, 47, currently vice president customer business development and marketing, Latin America, will become president Latin America.

Fillippo Passerini, 46, currently global business services officer, will become chief information and global services officer.
Source; LB, May 04

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FOCUS

TRADE – RUSSIAN MARKET

An inside look at Moscow
Moscow Giant shopping centers everywhere, rents at an astronomical level. Interest in
German investment.

Europe. Moscow is a city that is changing at lightning speed. West European companies who'd like to take part in this economic development will have to change their perceptions.

The rules are not exactly known for their clarity and potential investors have a hard time getting to grips with things. As the Russian poet Fjodor Tjutschev once said, "Russia can neither be understood with intellect nor with a measuring stick," and this is as true today as it ever was.
No wonder that the first question that investors ask is what are the chances in this country and how high are the risks? Where are the bad guys? How can I find the good ones? Managers who don't have the guts or who get ensnared by false prophets will never get the doors open.

Opportunities abound
Having said that, consultants such as A.T. Kearney and the Federation of German Economists in the Russian Federation report that the city stands for growth. "The opportunities in Russia are close at hand. The German economy must not, and will not, miss the boat."

Siegfried Hübner, a German marketing consultant, has been keeping his eye on the city's development for two years, and he is keen to pass his knowledge on to the new Federation of Russian-European Entrepreneurs.

The federation's goals are quick to explain. The transfer of know-how to both retailers and manufacturers for successful market penetration, the development and support of investment strategies, as well as the creation of specific contact networks.

Good food, good business
These contacts are particularly important, and this is something that Cesim Cacan, a German-Turkish restaurateur knows all too well. The various restaurants he operates in Moscow, such as Bosfor, Route 66, Kebab fast food places and ethnic food restaurants have brought him wealth and prestige.

He is chairman of the Preussisch Gesellschaft Berlin Brandenburg and realised very early on which opportunities lie waiting in Moscow, a city with more than 20 million inhabitants.
He is also vice-president of the Turkish-Russian Association and has a widespread and prestigious gastronomic network. His company ABA Handelslogistik acts as supplier to such well-known retailers as Metro, Auchan, Marktkauf or the Russian Ramstore.

Turkish network
Turkish is the common language in his restaurant Bospor, it is a popular meeting place for many Turkish entrepreneurs. One of his guests is sometimes Haluk Bozoðlu, vice-president of Günal Construction Trading & Industry Co. Inc., a construction company specialising in bridges, dams and, nowadays, shopping malls. It belongs to the Ankara-based conglomerate MNG Group.
Bozoðlu's company is currently building a fantastic shopping mall on a premium sight at Puschkin Square. When asked if this would be a good address for German food retailers, Bozoðlu replied that basically, of course, yes, but he doubted whether they could achieve the rents.

Astronomic rents
He is planning on square meter prices that seem astronomical, anywhere between 900 and 1000 US dollars. Metro would have to sell nothing but caviar in Germany for years before being able to afford rents like these.
Of course Bozoðlu could build more affordable sites, for instance for stores like Kaufland, Minimal or Plus, in fact his company has already secured relevant sites. But even these would charge rents of around 180 US dollars per square meter, much higher than any charged for greenfield sites in Germany.
In a neighbouring table in Bozoðlu's restaurant Bosfor there is another German business man with a thorough knowledge of the Russian market, Michael Deines. He is an advertising and marketing specialist who has been working on projects for Rewe and Tengelmann.

A simple message
He "got stuck" in Moscow, so to speak, after the completion of a project for the AVA subsidiary Marktkauf Rus, and now operates an advertising agency with a Russian partner.
Deines has plenty to report about German-Russian business dealings, as well as about day to day business. Although he can now read Russian, he still chooses to count the stations of the legendary Moscow Metro system rather than relying on his reading skills. Just to make sure.
He has a simple message to pass onto any entrepreneurial-minded retailer: the only mistake anyone can make is not to open at all.

Modern Russian managers
Someone else with deep-seated wisdom of what is happening here is Andrei Gorski, in fact one could say that he is the archetype modern Russian manager. He is extremely well-educated, speaks several languages, open-minded and oozes self-confidence.
In his mid-thirties, Gorski joined Tengelmann in the mid 1990s, was managing director of the Russian subsidiary of its production company Wissol between 1995 and 2001. This was followed by a period as head of non-food procurement at the AVA subsidiary Marktkauf Rus.

Calling on dynamics
Both he and the Russian Department of Trade and Industry, which invited Lebensmittel Zeitung to Moscow, are more than a little disappointed in AVA's reticence to get on with its expansion in the Russian capital. The government had hoped that the company would be quite a bit more dynamic.
Gorski, who is also consultant to Tigran A. Karachanov, Russia's Minister of Economics and responsible for the conurbation around Moscow called Oblast, is particularly interested in the success of German companies in this area.
The area is in direct competition with Moscow itself. The political leaders of the region, led by its governor Boris Gromov, would like to convince more investors of the advantages of setting up operations in Oblast.

Beyond Moscow's doors
Gorski waxes lyrical about the advantages that the region has to offer, taking care to draw attention to the growing traffic congestion in the capital itself and the exorbitantly high rents. "The margins to be achieved here were last achieved in Germany 30 years ago."
Minister Karachanov's message is quite simple: he would like to see German companies investing in his region, and Gorski is the man to help when it comes to first steps and speeding things up.

Where funds flow ...
Gorski doesn't hide the fact that corruption still exists, but what actually is to be classed as such is difficult to say. Money paid to the authorities for services such as security and health, for instance, does not end up in the pockets of the staff there. Instead it is paid into a kind of social fund, says consultant Siegfried Hübner, and is part of the country's business system.
Some companies work closely with the ministries and supply food to kindergartens, others supply the offices of the welfare service with modern equipment and still others have delivered air-conditioning units to a controlling institution.

. . . and if they don't
Not so long ago, the Swedish furniture giant Ikea discovered that it was not always such a good idea to show reluctance to ideas put forward. A regional authority put its foot down about the erection of a new building because, it was said, environmental demands had not been fulfilled.
Metro Group, which has strict behavioural rules for expansion into foreign countries, just as Ikea does, realised quite early on that in Russia's case "ministers have to be treated the same way that business partners are".

Connections is the name of the game
It is of paramount importance to have the right connections to the right offices if a business venture is to be successful and carried through without any major hassles. Those who do not heed this maxim often end up paying for their misjudgement.
The security services, often run by former military players, play a major role here. The call themselves services providers, and their service is to iron out problems between state agencies and the investors in a pragmatic way.
Although Lebensmittel Zeitung would have liked to hear more about this subject, the interview with Tigran Karachonov, aged 60, draws to a close. The 30 minutes that were planned ended up as 45, although this included several mobile phone conversations.

European companies considered slow
Karachonov, who is keen to extol the advantages for German investors opening up shop in the region, wonders why there are so many negative reports about business in Russia, while at the same time the list of interested parties is growing longer by the day.
Maybe VW will be building a factory after all? Talks have not broken down entirely yet although the car builders want special treatment in the form of a reduced VAT rate for its cars. "Agreeing to such a demand would put our own car manufacturers at a disadvantage.
The minister is also surprised that German food retailers often take such a long time to get going. "Russians tend to take a long time to prepare things, but when the decision has been made then we pull the whole thing through quickly."

This is probably a stab at Rewe who was presented with various options for the Oblast region already a year ago. Although it would like to, Lebensmittel Zeitung is unable, at present, to report that Rewe is taking Penny to Russia.

The road to Eldorado
There are plenty of shopping centers lining the roads leading out of Moscow, and the names filling them are all too familiar: Metro, Obi, Ikea and Auchan.

A quick look into Auchan shows plenty of German products on the shelves. "Saturday is so busy," says Wolfgang Deines that all 86 checkouts have to be opened.

Another French company, the dairy group Danone recently opened a new production facility south of Moscow. The French company plans to increase its turnover in Russia by 30 per cent this year, and the new plant will certainly help it to achieve this goal.

The Department of Trade and Industry lists quite a few German companies who have already set up in this region around Moscow. Ritter Sport (chocolate) EUR 15 million, completion 2005; Hochland (cheese) USD 35 million; Ehrmann (dairy) USD 30 million; Döhler (fruit concentrates) EUR 5 million; Obi (DIY) EUR 25 million; Metro (C+C) EUR 100 million and Marktkauf (Hypermarket/DIY) 32 million.

All in all, it can be said that the region's favourable strategic position is truly a region with a promising future, and the governmental agencies see further growth on the backs of western investments.
Date; May 04

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2004-05-27T14:39:00.000+02:00

HIGHLIGHTS

RETAIL – BUSINESS DIVERSITY

Video Rental: Blockbuster Rolls Subscriptions, McDonald's Tests Vending
Two big companies have made significant news in video rentals this week. Blockbuster here said it has rolled out its in-store Movie Pass, which is similar to the subscription model used, online by Netflix and Wal-Mart.
For fees ranging from $24.99 to $29.99, customers can rent an unlimited number of DVD or VHS video titles, up to two or three at a time, and keep them indefinitely with no due dates or late fees. Meanwhile, McDonald's, Oak Brook, Ill., is reportedly testing Redbox vending machines in its 105 Denver restaurants, offering video rentals for $1 a day, with payment by credit card. About two dozen machines have been installed so far, according to media reports. In a previous test in the Washington and Baltimore markets, McDonald's had tried vending units offering a wide array of convenience items, but the video rental component was the most successful, the media reports said.
Data; May 04

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RETAIL – EUROPE

Wal-Mart Eyes European Expansion With Asda
Wal-Mart here is considering rolling its Asda banner out to additional European markets as it explores the possibility of expanding into every country in Europe, Lee Scott, chief executive officer, reportedly said during a visit to Brussels, Belgium, where he is meeting with regulators.
Wal-Mart currently operates Asda in the United Kingdom and has stores in Germany; otherwise, it does not have a presence in Europe. “We’re definitely interested in growth, and a lot of that will come outside the U.S.,” said Bill Wertz, a Wal-Mart spokesman. He told SN he could not confirm Scott’s specific remarks. According to a report in the Financial Times online edition, Scott said the company would expand in Europe through a combination of acquisitions and new-store development.
Date; May 04

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E-RETAIL - CORPORATE

Amazon.com's Bezos ducks questions on Toysrus.com suit
Annual corporate shareholder meetings sometimes hold an element of surprise. Online retailer Amazon.com yesterday had its own unscripted moment.
Dan Barr, a productivity consultant from Seattle, led shareholders in three "hip-hip-hoorays" during the online retailer's question-and-answer session at Bell Harbor Conference Center. The audience seemed reluctant to participate at first, but warmed up by the third cheer.
"I suppose it was because, often, there was kind of a deafening silence," said Barr, 62, of starting a tradition two years ago to lead cheers at local corporate annual meetings. He headed one at Nordstrom's annual meeting yesterday, too.
"These are fabulous companies," said Barr, who attended 17 annual meetings last year. "I think (shareholders) ought to be celebrating and encouraging them to be the very best."
Amazon's annual shareholders meeting serves as the one time each year that noninstitutional investors can meet and question Chief Executive Jeff Bezos. One shareholder suggested strengthening Amazon's executive compensation policy. The proposal received 3 percent of the shareholder vote.
As has become customary, Bezos used part of the time to show off a variety of the online retailer's better-selling, if not more unusual, products. He selected from a wall of items arranged next to letters from A to Z.
Next to H was the Stiletto-brand hammer, a 15-ounce piece of titanium that sells for $174.99 in the retailer's home and garden store.
"This is the hammer of choice - solid cast titanium," Bezos said, holding it up for investors to see. "That's important in case your hammer ever needs to go Mach 3."
S stood for Sweet Mele's Hawaiian Coconut Surfboard Syrup, which sells in the gourmet food store for $3.69.
"Our anti-Atkins strategy is that, as groceries shed products like this and replace them with healthy, high-protein products, we'll be the last man standing," Bezos quipped.
Amazon last year reported a $35.3 million profit on $5.3 billion in sales, as its customers responded to deep discounts and a standing free-shipping offer on orders of more than $25.
After the meeting, Bezos declined to answer questions from reporters about a lawsuit brought last week by partner Toysrus.com.
"It's active litigation," he said. "It's not appropriate to comment on it."
In August 2000, the companies signed a 10-year deal to operate co-branded toy and baby stores online. But Toysrus.com sued Amazon on Friday, alleging it violated that arrangement by allowing other retailers to sell toys and baby products on Amazon's site.
Toysrus.com, a division of Toys R Us, has paid more than $200 million since the deal began for the right to exclusivity, according to the lawsuit.
The deal became the cornerstone of Amazon's strategy to expand its selection through partnerships with other retailers. Its largest partners include retailers such as Target, Borders.com and Office Depot.
Prominent mediator Randall Wulff, principal of Wulff, Quinby & Sochynsky in Oakland, Calif., oversaw talks on Thursday and Friday. Toysrus.com filed the lawsuit on the second day.
Wulff said yesterday that a lawsuit doesn't mean the end to mediation, and he has encouraged both sides to consider returning to the table. "It's not unusual to retire, let the dust settle, reflect maturely and then return," he said.
Amazon's shares closed yesterday at $43.62, up $1.99.
Source; Seattle Times, May 04
Write; by Monica Soto Ouchi, Seattle Times technology reporter

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CORPORATE – APPAREL

Russell Athletic launches new logo to reflect athleticism authenticity
Russell Athletic, the flagship brand of Russell Corporation, recently unveiled a more athletic and evolutionary version of its classic red and blue capital "R" logo that has been seen for decades on thousands of sports teams worldwide.
Source; Yahoo, May 04

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FOCUS

E-RETAIL – STATISTICS

Excluding travel, online retail sales grew 34% to $72 billion last year
Excluding travel, online retail sales in the U.S. grew 34% in 2003 over the previous year, reaching $72 billion, with a rising economic tide “floating all boats,” meaning that all product categories online did well.
Online revenues in every product category gained (with the exception of autos and auto parts, due to a survey methodology change.) The growth rate in categories that have greater maturity online, such as computers and books, took a back seat to that of newer categories. For example, online sales of sporting goods grew 104% in 2003 over 2002; while the flowers, cards and gifts category grew 98% and health and beauty grew 93%.
Overall, online sales accounted for 5.4% of total retail sales in 2003, up from 3.6% in 2002. In 2004, online sales are projected to account for 6.6% of total retail sales. One of the most significant changes from 2002 is that in the aggregate, all retailer types recorded operating profitably in 2003. A total of 79% of retailers posted positive operating margins for their online businesses last year, with retailers in the aggregate reporting operating margins of 21%.
Web-based retailers showed the greatest improvement in operating margins over last year, turning a loss of 16% in 2002 to a gain of 15% in 2003.
According to recent market report online retailing has experienced its own version of survival of the fittest, pointing out that those that failed to control costs and attract consumers shut down. Store-based retailers improved profitability, reporting average operating margins of 7% in 2002 to 21% in 2003. With average operating margins of 28%, catalog-based retailers were retail’s most profitable group in 2003.
A recent survey found that while retailers’ investment in technology such as cross-channel tracking systems was flat between 2002 and 2003, the multi-channel experience of the customer didn’t suffer as a consequence. The web influenced one in four offline purchases, the retailers reported. 87% of retailers now accept in-store returns of online purchase, up from 78% last year. However, as cross-channel integration improved as retailers encouraged shoppers to buy in stores and online traffic increased, conversion rates fell – to 2.4% in 2003 to from 3.2% in 2002.
According to the report’s authors, online sales and profitability gains in 2003 indicate most retailers have mastered the basics of online selling. The key to the next phase for retailers is differentiating themselves on the basis of marketing, merchandising, and the quality of the multi-channel experience.
As investment in digital marketing reaches an all-time high, retailers must experiment with local search, word-of-mouth marketing, and e-mail segmentation in order to reach new customers and create intimacy with existing ones,” the report states. “Combining merchandising expertise with automated technology will produce more relevant product recommendations and increase customers’ loyalty, as will offering custom products.”
Including travel, the survey found that online sales in 2003 grew 51% over the previous year to reach $114.1 billion.
Source; VWB
Write; LuisB, May 04

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2004-05-25T20:45:00.000+02:00

HIGHLIGHTS

RETAIL – EUROPE

Netherlands; SPAR turnover up 4%
Spar has announced turnover of E27bn for 2003, an increase of 4% on the previous year. The group presently operates around 15,000 stores in 34 countries.
International Spar, the Dutch-based head office of the group, stressed the importance of its multi-format strategy in allowing the banner to adapt to different markets. Spar also pointed to its continued growth in key markets such as Austria, South Africa and the UK, as well as its entry into Croatia, Cyprus, India and Singapore.
Date; May 04

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HUNGARY – RETAIL

Tommy Hilfiger to open 15-20 Hungarian stores
U.S. clothing company Tommy Hilfiger Corp is likely to open between 15-20 stores in Hungary, it was announced today.
Hungarian fashion house Roland Divathaz, the exclusive Hungarian distributor of Tommy Hilfiger brand products will establish the U.S. company's local store network with investments of several billion of Hungarian forints. Roland Divathaz will open three brand stores in the autumn of 2004, of which two will be located in Budapest and the third one in Szeged, southeastern Hungary. Later, the plan is for each Hungarian city to havea Tommy Hilfiger brand store.
Date; May 04
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TECHNOLOGY – SHOPPING ONLINE

Online sales on rise, but problems also increasing
Shopping online has become a serious business as more Web retailers turn profits and improve their operating margins, according to a study to be published today.
Online retail sales totaled $114 billion in 2003, a 51 percent jump from the year before, with online travel, home furnishings and computer hardware and software spurring the biggest gains.
Although online retailers halved their marketing expenses, they still struggle with holding down the costs of helping customers and fulfilling orders, according to the study of 150 retailers that sell goods online by Forrester Research for Shop.org, a division of the National Retail Federation, based in Washington, D.C.
The increased costs reflect a broader population of online shoppers, the report concluded.
"As more mainstream shoppers begin to shop online, they need more help with the ordering process and are more likely to pick up the phone when they need service, raising costs for retailers," the report stated.
Customer service costs increased to $2.30 per order in 2003 from $1.90 in 2002, with store-based retailers ringing up the highest costs of $2.70 per order.
Retailers' online fulfillment costs jumped to $9.80 per order from $6.30 in 2002. That cost, too, could result from shoppers new to the Web, who require extra incentives before they hit the "buy" button, the study concluded. Retailers often lure newbies to buy by offering free shipping.
Another trend that might raise retailers' fulfillment costs is the growth in online sales of jewellery, clothing and furniture - items more expensive to ship than books and electronics, according to the study.
Retailers also had a harder time convincing their broader audience to close sales online, the study found.
As more consumers get broadband access, they're able to comparison-shop more easily across more Web sites. So retailers focused more on helping shoppers research products than on pushing them to close a sale, the report concluded.
Also, brick-and-mortar retailers are using their Web sites to drive traffic into their stores, which mean the Web sites don't record those sales, said Scott Silverman, executive director of Shop.org.
Nevertheless, more retailers are making a profit - 79 percent of all online retailers in 2003 vs. 70 percent in 2002.
"Retailers online have found the right balance between selling a product, acquiring and retaining customers and earning a profit, which is powerful news for consumers and retail investors," said Elaine Rubin, chairman of Shop.org.
Online retailing accounted for 5.4 percent of all retail sales in 2003.
Source; Sun Times, May 04
Write; by Sandra Guy

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FOCUS

ECONOMY – EUROPE - GERMANY

German business confidence dips
German business confidence dipped slightly in May, reinforcing the view that growth in the eurozone's biggest economy is likely to remain subdued for some time to come.
The Munich based Ifo institute said its closely watched business climate index fell to 96.1 in May from 96.3 in April. The fall, slightly less than expected, took the index back to its November level.
Ifo president Hans-Werner Sinn said the data, based on a survey of 7,000 companies, pointed to "a continuation of the ongoing, moderate recovery in Germany over coming months."
He attributed the slight fall in the index to "gloom in the eastern states, whereas in western Germany it rose slightly."
The institute said companies' assessment of current conditions worsened slightly while future expectations was little changed.
Howard Archer of Global Insight said the survey results showed firms remained cautious in their investment and employment plans.
"Continuing softness in the labour market is likely to weigh on the consumer " making it difficult for the German economy to grow "by much more than 1.5 per cent," he added.
The broad based weakness of German domestic demand was highlighted by final first quarter gross domestic product figures which confirmed earlier estimates of 0.4 per cent growth.
The data showed that Germany's economic revival continued to be export led, with exports rising 4.6 per cent in the quarter. Imports rose 2.9 per cent.
The federal statistics office said net exports contributed 0.8 percentage points to GDP growth while domestic consumption declined 0.4 per cent from the final quarter of last year.
Government consumption fell 1.2 per cent while private consumption was unchanged on the quarter. Spending on machinery and investment fell 0.4 per cent. Construction spending was down 3.1 per cent.
Economists said there was little sign that booming external demand was sparking an upturn in private consumption and investment, both seen as vital if Germany's modest economic recovery is to prove sustainable.
Gernot Nerb, Ifo economist, said the trend in German employment was still downwards although it should stabilise by the end of the year. He said there was also sign of modest improvement in the retail sector.
Given the current state of the German economy, Mr Nerb, who has in the past advocated an interest rate cut to stimulate activity, said he now saw little need for the European Central Bank to ease its stance.
The ECB meets next week to consider its stance on interest rates.
Many analysts fear growth in Germany and the rest of the euro-zone could start to slow in the second half of the year as the pace of global expansion eases in the face of surging oil prices.
Source; FT, May 04
Write; by Tony Major in Frankfurt

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RETAIL – EUROPE – MARKET

French Supermarkets Gain Share as Wal-Mart Sets Sights on Europe
Shares in French supermarket groups rose today after Wal-Mart, the world's biggest retailer, announced it wanted to open stores in every European country and would reach this goal through acquisitions and internal growth.

Shares in Casino, France's second-largest listed retailer, soared 3.4 percent, besting a slightly weaker DJ Stoxx index of European retailers. Carrefour, the world's second-largest retailer, went up 1.3 percent, and Dutch Ahold increased 1.4 percent.

Those rises followed a Financial Times report that Wal-Mart c.e.o. H. Lee Scott was interested in opening Wal-Marts across Europe, and that the retailer's international growth would come from a combination of strategic acquisitions and greenfield expansion.

According to analysts, Wal-Mart's interest in European growth is nothing new. "It's an issue that has come up frequently ever since Wal-Mart acquired [British retailer] Asda, and they have not made any secret about their ambition to be a pan-European player," one London-based retail analyst said. "The added wrinkle this time seems to be that Wal-Mart is approaching Brussels."

Right now Scott is in the Belgian capital, where he is scheduled to meet European officials, including competition commissioner Mario Monti, according to the Financial Times. Analysts believe Lee will confer with EU authorities, as Wal-Mart did in the United Kingdom before purchasing Asda, about possible EU obstacles to takeovers and greenfield expansion.

As well as Asda in the United Kingdom, Wal-Mart has two money-losing acquisitions in the difficult German retail market. That leaves France and Italy as the big European markets most likely to appeal to Wal-Mart, but with few retailers of any size to purchase in Italy, analysts think France will be the company's first choice.

Carrefour merged with Promodes in 1999 in part to counter Wal-Mart's anticipated European invasion, but the current weak share prices of both French retailers - which this year have trailed behind European rivals by 18 percent and 15 percent, respectively - make both more vulnerable currently.

According to one investment banker, "There is no doubt [Wal-Mart wants] Carrefour. It makes the most sense for them. They can't do anything big in the U.K., and Carrefour gives you not only France, but southern Europe and emerging markets. Both in size and format, Carrefour works better for them than Casino."

But purchasing Carrefour, with its sales base in France and Spain, would make Wal-Mart by far the largest retailer in Europe - a potential concern for the EU on competition grounds. A bid would also have to be hostile, making a management exit more likely and cultural issues more delicate.

Analysts say France's second-largest retailer, Auchan, might also beof interest to Wal-Mart, but Auchan's capital is privately held by an independent-minded family, so a takeover would be harder.
Date; May 04

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