Showing posts with label IIPM Gurgaon. Show all posts
Showing posts with label IIPM Gurgaon. Show all posts

Friday, August 24, 2012

Mohit Khattar

Managing Director, Godrej Nature’s Basket, talks to b&e’s angshuman paul about the peculiarities of the industry and the company’s future plans

B&E: Don’t you think the Godrej Group has been too late in recognizing the potential of retailing?
MK: I can’t comment on other businesses of Godrej group but regarding Nature’s Basket, yes. Five years back, the group didn’t have any intention to foray into retail. But during the last two years, the group has moved on and we are exploring all possible opportunities for growth; and one of the biggest opportunities in recent times is in the retail industry.

B&E: Ernst & Young claims that organised retail accounts for an approximate 4% of the total retail sector market, and players are in an inordinate hurry to capture the retail sector. Is this the reason that propelled you to join the retail bandwagon?
MK: We are not into the trading business and we don’t believe in doing something just because other players are doing it. Our retail brand was an initiative to offer everything that the Indian consumers’ palate would require. Most of these are gourmet retailing, which Indian consumers have never seen before. That was the reason we rolled out Nature’s Basket.

B&E: Gourmet retailing already has brands like ‘Le Marche’ functioning. Given that, how do you think your brand is unique?
MK: We are tying up with many foreign brands and will be providing a wide array of products related to food and beverages. Moreover, we have our own food products [of the company]. We started operations in 2005 and in five years, we have done our market-research, set up our logistics and supply chain. We are fully prepared to expand our presence now and we know we won’t come across a situation where we will have to shut down a store once we’ve opened it. We have ten stores while Le Marche has just eight.

B&E: Yes, you have ten stores, but the first store was rolled out in 2005. Do you think the pace at which you’re growing is relatively slow?
MK: The type of format that we are offering [in fine dining] is very exotic and we did not want to roll out stores unless we have done our ground work. Our conscious steps have paid off; we did not have to shut down our stores like other brands had to do in Mumbai. Nature’s Basket is different in terms of the products, offerings and services that are offered. Our target audience are the people living in metros and we can’t be expanding in every nook and corner of the country.

B&E: But then, even in metros, you are present only in Mumbai and Bengaluru. Will you continue to follow this retail penetration strategy in the future too?
MK: Not really. Of course, we didn’t expand in all cities across India as we didn’t believe in going places where we don’t have a market. And then there’s no point in opening stores unless you are financially or logistically prepared for the same. In gourmet retailing, we don’t have much competitors and we are the only one having presence in two metros. We will be rolling out Nature’s Basket in other metros too by the end of this year.


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Wednesday, August 08, 2012

BUFFETT NAMES POTENTIAL SUCCESSOR

 He’s bluffing. Period! The man is a master of contrarian logic and knows how to call a spade an ox and even gets away with it. Warren has no intentions to give away his position in Berkshire and all talk about a successor should be relegated to the bin. Steven Philip Warner in a delightful analysis...

THE ORACLE IS NUMBING

Let’s talk numbers now. Since February 2008, due to his own accepted thumb-sucking wrong investment decisions, Buffett’s personal wealth has plummeted by a ghost-summoning 45.7% to just $38.34 billion today! Berkshire Hathaway’s Class A shares have not been spared the hot iron rod either, having fallen by a neat 30% in just the past 2 years to touch $75,000 per share as on March 5, 2009. And what to talk about the recent bloopers (and big ones at that) in his investment decisions. As B&E had reported much before, not many would have realised that the company had already begun 2008 with an unrealised $1.67 billion loss on its derivative contracts, and further lost on the same. These derivatives, which are directly linked to overall markets and the credit health of companies, worsened further in the third quarter of 2008 and spelled disaster for Berkshire, thus leaving behind a mammoth loss of $2.21 billion.

His largest investments fell not only in the critically-hit financial industry (for example, American Express, plunged 51% ), but also in the relatively booming FMCG industry that has not seen happier times of late too (for examples, Coca-Cola dropped 25% and P&G declined 12% in the same period). If 2007 saw a seat-of-the-pants investment in TTI Inc. [a private, electronic components distributor] and VF Corp’s ‘intimate apparel’ business for a huge $1.6 billion, 2008 has seen mammoth Buffett acquisitions in Marmon Holdings [a trust running 125 manufacturing and service businesses], 63.6% of which was bought by him for a steep $5 billion. Beyond all this, he had also committed $6.5 billion more in April 2008 to help Mars buy chewing gum-maker Wrigley.

Buffett is surely panicking with respect to his investment calls; and much of it can be attributed to the fact that modern day capital theory is getting more complicated and technical than can be summed up in just one line (as is usually done by Warren to justify his investments – “I’m looking for businesses I can understand,” is how Buffett explains his logic of buying Wrigley).

Worse, during the last quarter of 2008, Warren assigned another $5 billion of Berkshire’s cash for a stake in Goldman Sachs, a company which later even gave up its primary investment banking business. No wonder, the opening line in his letter to the shareholders runs as: “Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A & Class B stock by 9.6%.”

you can’t take the call!

Conclusively speaking, Buffett is still the man calling all the shots, and one who still owns 32.68% of Class A shares at Berkshire (with super-voting rights); and he’s also the Chairman of Berkshire. Buffett could very well choose to give away his throne to any of the three we mentioned earlier; or to 82 year old Charlie Munger (his right hand man and billionaire partner), or to David Sokol (Chairman, MidAmerican Energy Holdings Company; a multi-billion dollar Berkshire company). Or even to his eldest son Howard Graham Buffet (who serves currently on Berkshire’s board of directors) or to his younger son Peter (well, a musician). But you know what, he won’t! If even a line of what he told Daily Telegraph has to be believed, Warren will hold on steadfastly to the reins of Berkshire till the day he dies. And then guess what, it’ll be the Berkshire board that’ll decide the successor, irrespective of Warren’s letter.

But hey, really, if Ajit Jain can be the one, why can’t it be me? Think about it, why not? Well, I have insurance experience (auto industry; especially motorcycles; in fact, one motorcycle, mine); I too lead 30 odd people (at least, I’ve found them really odd); and even my godforsaken boss calls me every night for Chrissake! Warren, I’m calling your bluff here and now... I’m your guy, not Ajit... If you really have to choose him, choose me.

Warren... Warren, can you hear me?!?!


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Friday, August 03, 2012

Policy-STATE

At the recently concluded India-Japan Global Partnership Summit in Tokyo, Haryana’s Chief Minister Bhupinder Singh Hooda, made a strong pitch for investment in his State. In an exclusive interaction with B&E, Hooda says the state’s strong industrial base, infrastructure and agriculture are its drawing card.

While other states like Gujarat have also been fairly successful in attracting investments through investor-friendly policies, Haryana has earned itself a special place in the area of agricultural productivity as well. In July this year, Prime minister Manmohan Singh awarded Haryana the Krishi Karman Award for being the best performing state in terms of wheat production for the year 2010-11. As per the citation, Haryana has been awarded ‘for exemplary work in supporting farmers of the state and for achieving highest productivity and production of wheat during 2010-11’. Haryana also happens to be the first and the only state in the country to have ensured 100% treatment of certified seeds of wheat produced by the government as well as seeds from private producers during 2010-11. The entire cost on seed treatment was also borne by the state government.

Hooda has also been consistently working towards increasing food productivity in the country, having been appointed by the Centre to lead the Working Group on Agriculture Productivity in India. Speaking about the steps that his government has taken to improve food productivity in the state, Hooda says, “A special campaign was launched to educate farmers regarding the fungal disease ‘Yellow rust’ and control measures were taken on a war-footing. As a result of the initiatives taken, there has been a record production of 11.630 million metric tonne of wheat in 2010-11 and the productivity has also reached the highest ever level of 4,624 kg. per hectare in the state.” Some of the other initiatives taken by the government for increasing food productivity include mapping village-level soil fertility, water management, promotion of resource conservation technologies and increase in the seed replacement rate.

Still, the absence of inclusive growth has often been a point cited by critics of the government. Hooda, however rubbishes these claims outright. “Look, I am a farmer’s son and I understand the problems that the poor have to struggle with,” he says. His government has installed several power projects and set up Information Technology and Information Systems (ITIs) in the remotest of towns and many of these are already operational. To give a boost to the state’s strong agricultural growth, the government has also started imparting agricultural training and providing the right quality of seeds and irrigation facilities. The response, especially from farmers, has been very promising. After all, what farmers need is the right kinds of seeds and good irrigation services. The people of Haryana are a laborious lot and Hooda’s policies are helping them to move up on the productivity scale – both in business and agriculture.


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Monday, July 30, 2012

Coal abundant or dependent?

Amidst tight global supplies and price rise, it’s imperative to reassess the management of our coal resources and its impact on our energy security

Amongst the major energy sources, coal is the most rapidly growing fuel by consumption on a global basis. Coal plays an important role in electricity generation and steel and cement manufacturing worldwide. Currently, 39% of global electricity produced depends on coal feedstock. The Indian coal industry is the fourth largest in terms of coal reserves and third largest in terms of coal production in the world. But despite its huge resource base, India has not been able to minimise its coal deficit. The country continues to produce a majority of the coal that it consumes, but coal imports are rising at a fast pace, already contributing to over 10% of our coal consumption. And domestic coal production is unlikely to meet the expected demand growth over the next five years. According to a Credit Suisse report, the coal deficit in India is currently pegged at 142 million tonnes and is likely to increase to 400 million tonnes by FY 2017.

The Geological Survey of India estimates proven reserves of coal in India to be 114 billion tonnes, or 40% of the total reserves. The latest proven reserves represent a 3.6% increase over the previous year’s 110 billion tonnes. At current levels of production of about 550 million tonnes, the coal reserves will last for more than 100 years, Coal Minister Sriprakash Jaiswal recently told the upper house of the parliament (Rajya Sabha) in a written reply. Coal demand is anticipated to grow at a CAGR of over 10% during 2011-12 and 2013-14 with the demand for thermal coal and coking coal by the power and steel sectors expected to show maximum growth in the near future.

According to data available from the Ministry of Power, coal-based power generation capacity (86GW) is 53% of the total installed capacity (162GW) in the country and it contributes 66% of the generation (in kWh). There are 105 thermal-generation plants currently in operation throughout India, and another 59, which are expect ed to come into production over the next three years. The Ministry of Power expects coal imports for the power sector to increase from 16 million tonnes in FY ‘09 to 68 million tonnes in FY ‘12. Similarly, total coal requirement for India’s steel sector work out to 68.5 million tonnes/year by FY ‘12. That translates to incremental demand of 33.5 million tonnes of coal by FY ‘12. The cement sector is another important consumer of coal. As per Plan documents, annual cement production during the 11th Plan period should increase 61%, from 156 million tonnes during FY ‘07 to 251 million tonnes during FY12. This, despite the fact that average specific consumption of coal in cement plants has been decreasing in recent years, driven by substantial technological improvements. Nevertheless, coal requirement for incremental cement production is estimated to be at 11.9 million tonnes by FY ‘ 12.

Clearly, a large part of the coal requirement would have to be met through imports as PSU companies, who account for four-fifths of the country’s coal production, are finding it difficult to accelerate production growth. Coal India Limited (CIL), India’s largest coal producer and also the world’s biggest producer of coal has scaled down its production targets for 2011-12 to 452 million tonnes from 460.5 million tonnes. Last year, against the target of 460.5 million tonnes, it produced 431.32 million tonnes. The coal ministry blamed the shortfall on delays in getting environmental clearances, laws and litigation delays, and seasonal rainfalls that disrupt mining activities. The coal sector has been traditionally dominated by government-owned companies and with limited participation from the private sector. But there is no denying that private sector participation is a must for augmenting coal production.


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Saturday, July 28, 2012

When Banks become Robbers

No doubt the High Court of Allahabad – and even the Supreme Court a few weeks ago – has delivered justice for farmers in what is euphemistically called Noida Extension. Very briefly, the government had invoked a law dating back to the colonial era to de facto grab land belonging to farmers at throwaway prices in 'public interest'. Farmers were paid about Rs.800 per square meter for land; in turn, the Greater Noida Industrial Development Authority sold the land acquired for 'industrial units' to real estate developers at a minimum of Rs.10,000 per square meter. In turn, builders sold flats to middle class investors in search of a dream house at prices starting at Rs.25,000 per square meter. So the price paid by a middle-class home buyer was at least 30 times more than what the farmer was given. Clearly, this was bizarre and in defiance of common sense, apart from basic principles of justice. By declaring such land acquisition null and void, the courts have hopefully halted a nationwide trend where governments grabbed land from farmers to enrich builders and industrialists. Hopefully, this series of judgements will set a precedent and governments might be forced to stop indulging in the very worst kind of crony capitalism. This series of verdicts has already triggered another debate about the colonial era policy of land acquisition in India. A Bill to change the Land Acquisition Policy is waiting to be debated in the Parliament and the controversy will attract many comments and columns.

But I want to focus on the plight of the hapless middle-class investors and Shylock-like behaviour of commercial banks. The media is replete with callous statements from heads of banks saying that people who have taken loans to invest in these houses in Noida Extension have no choice but to keep paying the EMIs – even if they have no hope whatsoever of getting their dream houses. Some investors might be lucky to get a refund from builders because the Supreme Court has so directed (Can you imagine builders voluntarily refunding money?). But even they will have to forfeit the huge amounts of interest they have already paid to the banks. Quite simply, the banks are behaving like highway robbers and taking refuge under perverse agreements and fine prints. The fact is: the banks must have been aware that the projects were controversial and that there was litigation involved in the housing schemes. Knowing the risks, they merrily lent money to home buyers at exorbitant rates of interest. And now that the courts have stopped one part of the robbery, the banks continue to persist with their brand of loot.

Anyone saddled with credit card debt knows how banks in India behave as badly as evil moneylenders from old Bollywood movies. Everyone knows how banks send goons and thugs to people's houses and offices if there is a default on consumer loans. Everyone knows how banks behave in the most unethical manner by using glib salesmen to sell dubious financial products and hoodwink investors. All of us know that.


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Friday, July 23, 2010

Coca Cola acquired local brand Thums Up hoping to kill competition.

The move backfired and Thums Up is still India’s largest selling cola drink. Despite MNCs and big national brands, the staying power of local flavours continues, says Savreen Gadhoke

Bombay, March 15, 1959: Seven semi-illiterate women with a borrowed capital of Rs.80 assemble at a vacant terrace to start their entrepreneurial journey in an endeavour to support their livelihoods. The sales of their product touched Rs.6,196 in the first year itself and in no time the number of workers (only women, fondly called ‘sisters’) catapulted into hundreds and thousands of sisters coming together and joining hands. In 1968, the company opened its first branch outside Mumbai in Gujarat and also added new products to its portfolio. Today, the same company has its annual sales exceeding Rs.3.5 billion with over 80 branches all over India and 45,000 women employees. The product is Lijjat Papad (yes! the same one with a toothy rabbit as its ambassador) started by Shri Mahila Griha Udyog. Lijjat Papad is perhaps the best instance of a regional brand successfully going national. In its 50-year long journey, Lijjat Papad has set precedence for countless regional brands to fulfill their dreams of going pan-India (and even overseas). But what does it take for a regional brand to spread its wings and fly in national – or even global skies?

“Basically,” says Neeta Wali, Director, Brand Talk, “it is the theory of 4Ps only that has to be extended wisely and smartly when a regional brand plans to roll out its offering nationally.” Here, the most important is, of course, the product itself. What products are on offer and are they enough to satisfy or meet the demands of a national audience? Although Lijjat Papad started its business with a single product offering (papad), it subsequently added new stuff to its portfolio like masalas, flour and bakery products. As net income grew, the sisters diversified into other areas like matches, agarbattis and leather products as well. Besides, Shri Mahila Griha Udyog also started producing a detergent powder by the name of Sasa, which became an instant hit. Although papad by itself did appeal to a national audience; but it was also the diversification and addition of new product offerings that added economies of scale to the business, which eventually allowed it to catapult into a strong national brand to reckon with.

Pricing too has played an important role in the journey of regional brands charting a national roadmap. A classic example of a price-warrior has been Nirma, launched by a small time chemist at the Gujarat Government’s Department of Mining and Geology, Karsanbhai Patel in 1969. Priced at a lowly Rs.3 per kg, Nirma gave HLL (now HUL) many sleepless nights, giving tough competition to Surf priced at Rs.15 per kg. Nirma was established as a home-grown regional player with a unique consumer proposition and a special focus on rural as well as low-income groups. “Knowing your target audience is very essential. Even when you roll out nationally, your customer does not change. So, your pricing should be such that it appeals to a pan-India audience,” says Anand Ramanathan, Advisory Service Manager, KPMG. Even when Nirma spread its wings across the country, it maintained its consumer proposition and continued to focus on its target audience only.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Saturday, April 03, 2010

I don’t have a philosophical disagreement with global collaboration


Exclusive In chat with Society Magazine - Prof. Arindam Chaudhuri

He’s living in the same house for the last 40 years; and claims that even his food habits, friends and hours of work have remained mostly unchanged. The only changes that excite Sam are the ones he’s implementing at Madison. Excerpts from our interview:

4Ps: You once believed that a good agency is one that is small with a select clientele. Looking at Madison’s billings today, we assume that you’ve changed your mind about that?
SB: (shrugs) I always wanted to be a craftsman, not a manager. Today, I have inadvertently become a manager. I left Mudra because Mudra wanted to become the largest and the best agency and I did not relate to the agency’s objective. I believed that a good agency should be small with a few large clients.

4Ps: Today, however, is different?
SB: (laughs) Consistency is the virtue of fools! I started Madison with just two clients – Godrej and Nelco. For the first 5 years, I did not even look at any other client because I was so afraid of letting down existing clients. Today, I view things differently as I am certainly better resourced than in 1988.

4Ps: The Ambani flavour had spread in Mudra during your stint there? Your key takeaway from there?
SB: I learnt a lot from the Ambani’s – especially that every job must be done and done on time. I’ll narrate one incident of more than 26 years ago when remote phones had just about started appearing. One weekend I was away on vacation. I was in a swimming pool in this resort and Anil Ambani managed to reach me even there over some urgent matter that he wanted to discuss. This really told me that the word impossible did not exist in the Ambani dictionary.

4Ps: And TV as an advertising media became your passion during those years at Mudra.
SB: In the early days there was simply no television content available. So we not only had to think of advertising but also in terms of organising relevant programming. Remember, I’m talking about the time when only DD was there. So unlike today, when channels like Star and Zee look after their own viewership, back then we had to slog to create viewership.

4Ps: And you carried that learning to Madison...
SB: In Madison, I was involved in creating Shanti on DD during the afternoon slot. It was a risk. At a time when advertising was mostly restricted between 8:30-10:30pm, we had the nerve to ask DD to give us 325 afternoon slots between Monday and Friday. Nobody bothered to watch TV on weekdays and that too in the afternoon. We changed that with Shanti and brought in P&G and Godrej as advertisers. The clients were happy because we bought them air time at cost effective rates. Most people make the mistake of not fully understanding that clients/ advertisers actually hate advertising. It is only media owners and ad agencies who love advertising. Our search at Madison therefore has always been to find cost effective solutions for clients that help build brands.

4Ps: Are you saying that cost effective solutions are a prerequisite to brand building?
SB: Absolutely! Advertising per se has become so expensive that most brands have to do big time jugglery to have affordable and workable plans. But to get to that elusive El Dorado of a perfect fit one needs cost effective solutions. We are standing on shifting stands. We have to keep doing new and different things to catch attention and grab consumer’s mind.

4Ps: Is that why you are diversifying your offerings? Given the quicksand world of advertising, where you yourself have sometimes suffered big lows, what’s your risk assessment on this expansion?
SB: Madison’s lowest point till date was in 1998, when our partnership with DMB&B broke. They were a huge billion dollar enterprise and we were the size of a pin compared to them. They were asking for something that we did not agree with. So we parted ways with them and also some big accounts (like P&G and Phillips) in creatives. Almost 60-70% of our revenues vanished overnight. I was disheartened but even then I knew that I’ll never give up.

4Ps: Where does Lara fit into the picture? Are you grooming her to step into your shoes?
SB: Yes. I think that today the person who runs Madison World needs to have skill sets that go beyond advertising and its craft. You need specialist managerial skills and Lara fits in beautifully. She is not as dogmatic as I can be and so both of us are able to look at newer opportunities, identify gaps and fill them.

4Ps: But are you not expanding too fast? I mean, from 5-6 units in 2004, you’ve almost 20 units today.
SB: See, we are constantly making some successful and some not so successful attempts at predicting the future. Remember, advertisers do not come to us because they like advertising. They come because they want a solution to a marketing problem. Our specialist units in entertainment, outdoor, rural and mobile marketing will help us do just that. My dream is to be the agency of choice for every large client, not every client.

4Ps: But these other units are not really doing much to enhance the Madison bottomline yet?
SB: Madison World’s billings have today crossed Rs.2,000 crores and most of it is brought in by Media and MOMS (outdoor unit). My dream is that every unit should be as highly regarded as media is. In terms of billings – Media will obviously remain the highest because it’s a Rs.20,000 crore market. In comparison, the other units cater to still nascent markets. Outdoor and PR are doing rather well, but they can never match up to media billings.

4Ps: What about selling out to a global player. The industry is constantly speculating along that lines?
SB: I do not have any philosophical disagreement with global collaboration or partnership. But the partner must respect what we bring to the table. It must be a win-win partnership and serve the interests of our clients, employees and shareholders – in that order.

4Ps: For now, what do the challenges ahead look like?
SB: Decline in profits, not enough money and cash flow problems – but we can make that sacrifice to deliver to our clients. Following that model, if we have survived for 22 years, I know we have a viable business model. Besides, one of these days, I’ll prove the industry wrong about MC2’s ability to churn out great creatives.

4Ps: Madison World’s billings today stand at Rs.2,700 crore. How soon do you hope to reach Rs.5,000 crore?
SB: I don’t dream of becoming a Rs.5,000 crore company. That’s not a part of our DNA. But if tomorrow there is an opportunity, we will not let go. Our primary purpose is to improve our ability to provide cost effective solutions to advertisers. If we do that honestly, Madison World’s growth will be a by-product. If we focus only on Madison’s growth, we will lose the plot!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

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For Exclusive Footage by Sunday Indian Click Here

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