‘Pent up demand may push sales of FMCG cos on normal monsoon this year’
With drought in different parts of the country putting pressure on rural sales, FMCG firms including Marico, Dabur and Godrej Consumer Products Ltd (GCPL) are pinning hopes on ‘pent up’ demand to push growth after predictions of a normal monsoon this year. They expect a pick up in sales during the second half of the current fiscal. “Rural sales have definitely come under stress due to the two successive droughts. We have extreme water scarcity in some states. These two successive droughts have lead to purchasing power of people to crash in the rural areas,” GCPL Business Head India and SAARC Sunil Kataria told PTI. Expressing similar sentiments, Marico Ltd MD and CEO Saugata Gupta said: “There is short-term pressure on rural consumption and the situation is slightly stressed, especially in the states that have been affected by drought for two consecutive years.” Dabur India Chief Financial Officer Lalit Malik said: “Poor monsoons last year did have an adverse impact on rural demand and we have seen growth slowdown in the hinterland towards the second half of the year.” Kataria said due to the combined effect of drought and lower price for crops, overall rural demand which was growing significantly between 2011 to 2014 has definitely come down. Many parts of states like Maharashtra, Karnataka, Kerala, Gujarat, Uttar Pradesh, Orissa and West Bengal are facing drought. With companies garnering up to 30 per cent of their overall sales from rural markets, they are keeping their fingers crossed for a good monsoon this year. The companies are keeping fingers crossed for a good monsoon this year so that sales could be revived in the second half of this fiscal. “The monsoon is going to be very critical for the rural demand to pick up, and with prospects of a good monsoon, we remain assured that the second half of the year will go well,” said Gupta. Expressing similar views, Kataria said: “I expect a significant swing in the second half because of monsoon is June to September and it would change the consumer sentiments.” He said the measures announced by the government in the Budget to boost rural economy will also have an impact on FMCG sales during the course of the year. “There has been a pent up demand. People have been postponing purchases because as they do not have money today but aspirations do not die in consumers’ mind. They just hold back,” Kataria said. Agreeing with him, Malik said the government initiatives coupled with the forecast of a normal monsoon this year, should accelerate demand growth in the hinterland. The Met office predicted last month that after two consecutive drought years, the country will receive “above normal” monsoon with a fair distribution of rainfall across major parts of country and it will be a “good year”, easing fears of struggling farmers. With the expectation of demand to pick up in the second half, Gupta said Marico lined up “an aggressive pricing strategy, prioritising long-term value and consumer delight over maximising short term margin.” Malik also said Dabur has already put in place distribution footprint to tap the demand growth. It is continuing to enhance distribution coverage in rural India from 14,000 villages to over 45,000 villages now. “In addition, we are also working towards improving the portfolio coverage in rural outlets,” he added. Likewise, Kataria said GCPL has also continued its focus on rural markets, despite the challenging conditions through product innovations to drive sales growth from the hinterlands. “We have kept our rural journey intact and not taken shortcuts and taken back investments,” Kataria said. Ken Boyer Jersey
The retail industry is transforming – but not the way you think it is
There’s a major shift underway in the retail industry, but it may not be the one you think. Goldman Sachs’ global cohead of consumer retail and healthcare banking, Kathy Elsesser, described the impacts of e-commerce on the sector on a company podcast released Wednesday. She said those impacts are significant, yet often misunderstood. “I recall about five or six years ago being on an internet conference where there was a lot of casually-dressed entrepreneurs wondering why I possibly would run the global retail group at Goldman Sachs,” Elsesser said. The implication was that the retail industry was in decline, as e-commerce took over. But, Elsesser said, “I don’t think retail is on the way out.” The real change underway, in her view, is that the retail and e-commerce industries are converging – and creating more of a focus on what customers want versus which channels they will use to get it. “So it’s no longer, ‘Where do I buy it?’ It’s about, ‘I just want to buy it and I want to do it any way that I want,’” Elsesser said. Every traditional retailer now has web and mobile offering, while many e-commerce companies, like Amazon, Warby Parker, and Bonobos, are opening brick-and-mortar shops. Elsesser acknowledged that the retail model needs to evolve. She said the internet has boosted the level of engagement and convenience that consumers expect. “E-commerce has completely changed the way that consumers interact with products and vice-versa,” Elsesser said. She continued: A lot of manufactures always thought about the product and having the best product. Now, you still need to have the best product, but now you also need to find the best way to engage with your end user. And for some companies, the end user was never a part of the formula. [Now] the customer is really the center of all of those discussions. And what the consumers want is really paramount. So I think that’s probably the most interesting shift that’s taking place. Trumaine Johnson Authentic Jersey
CAIT alleges Flipkart violated e-Commerce FDI norms
Traders’ body CAIT today filed a complaint with the Department of Industrial Policy & Promotion alleging violation of FDI norms for e-Commerce by online retail major Flipkart. The complaint is in reference to an advertisement in newspapers announcing the sale of an item together with its discounted price to be available on the e-commerce platform of Flipkart, which is said to be a marketplace. The said Advertisement violates conditions of the guidelines for FDI in e-Commerce spelled out in Press Note No.2 (2016 Series) issued by DIPP on March 29, 2016. “We invoke your attention to Provision of the said Press Note which said ‘e-Commerce entities providing marketplace will not directly or indirectly influence the sale prices of goods or services and shall maintain level playing field,’” the Confederation of All India Traders (CAIT) said in a letter to the DIPP Secretary. However, immediate response could not be obtained on a mail sent to Flipkart regarding the allegations by CAIT. CAIT said the advertisement “clearly contravenes the above provision in as much as it is inviting the consumers to register themselves for purchase at a discounted price at marketplace of Flipkart… and this act directly or indirectly influences the sale price of goods and also creates an uneven level playing field”. The traders’ body urged DIPP Secretary take cognisance of the Advertisement and demanded suitable action against the erring entities. Luis Severino Jersey
Air India posts profit first time in decade, but still not out of woods
Air India has reported a modest operational profit for the first time in a decade, two years ahead of the target as per its turnaround plan. This is significant since any profit, even if it is at the operational level, has been generated for the first time since the erstwhile Air India and Indian Airlines merged to create the present behemoth. Representational image. PTIRepresentational image. PTI Lower fuel prices coupled with improved operational performance are being cited as the two main reasons for this happy state of affairs and airline officials have indicated that net profit could similarly be advanced by two years. Aircraft availability, increased cabin manpower and more aggressive marketing are some other reasons the airline’s financials are improving. Civil Aviation minister A Gajapathi Raju informed Lok Sabha on Tuesday that the airline has turned in an operational profit of Rs 8 crore last fiscal by cutting operational expenses by almost 11 per cent. Here are five reasons why this milestone in Air India’s lifespan is a significant one, but the airline is not out of the woods yet: 1) Fuel saved the blushes: As per data given in Parliament during the first part of the Monsoon Session, Air India may have saved close to 9 percent or about Rs 720 crore on fuel costs alone in 2015-16. Since fuel expenses may have accounted for about 30 percent of total expenses during the fiscal, savings from benign global crude prices helped the airline significantly in showing an operational profit in 2015-16. Other improvements, though welcome, would not have helped the cause unless fuel prices also helped. In other words, when global crude prices begin to rise, Air India’s operating profit will also get squeezed significantly unless it takes giant stride in improving other operational parameters. The airline is estimated to have flown close to a million more revenue passengers last fiscal at 17.77 million versus 16.88 million in 2014-15. A report in Mint newspaper earlier this year cited the CASK – Cost per Available Seat Kilometer – of India’s airlines to drive home the point that fuel prices are make or break, since cost rationalization does not seem to be successful for India’s airlines. 2) Losses pile up: According to data provided in Parliament, Air India’s losses stood at Rs 5490.16 crore, Rs 6279.6 crore and Rs 5859.91 crore in 2012-13, 2013-14 and 2014-15 respectively. As per Budget Estimates, the airline would have still declared a net loss of Rs 3529,8 crore during FY16 despite being profitable at the operational level. While fuel accounts for the single largest cost head, employee expenses also account for close to 10 percent of total costs. In other words, 10 paise out of every rupee spent by AI is used to pay employee salaries. This, when the airline has already hived off two subsidiaries – one for ground handling and another for engineering – and halved total manpower. 3) Debt worries remain: Air India, which accounts for the largest share of Indian airlines’ total debt pile, was sitting on borrowings of over Rs 51,000 crore till March 31, 2015. MoS Aviation Mahesh Sharma said in Parliament in March that Air India’s total debt burden of Rs 51, 367.07 crore includes Rs 22,574.09 crore outstanding on account of aircraft loans. As per the Turnaround Plan (TAP), the equity infusion by the Government into Air India also includes Rs 18,929 crore for the repayment of the government-guaranteed loans/interests till FY 2020/21. Air India’s interest bill alone for FY16 is estimated to be around Rs 3,700 crore! Since government is the owner of Air India, the airline seems to have a perpetual cushion to fall back on, something no private airline can boast of. So a modest operating profit is good news but provides little relief on the airline’s actual financials. 4) Privatisation: This government has blown hot and cold over any move to consider offloading the white elephant called Air India. Sources tell us that there is stiff opposition from the top management of the airline over any such move. This can only spell disaster for the airline, which has been guzzling public money at an alarming rate. Last year, the independent directors on the board of the airline had met minster Raju to convince him about the need to privatise Air India. In March this year, the heavy industries ministry had created a flutter by classifying Air India as ‘sick’, reviving a discussion on whether the government should get Air India off its hands as its financial situation is not improving despite continuous equity support. At that time, airline officials had said that there has been some talk of initiating the process of privatisation by starting with two businesses which were earlier spun off from the airline – engineering and ground handling. They had said then that Air India Express could also be considered under this scheme. A proposal to recommend privatisation of Air India has been discussed informally at several board meetings of the airline – a subject usually taken by its independent directors, but no formal resolution has been drafted in this regard. Now that AI is operationally profitable, time is ripe for at least a discussion over privatisation. 5) Image problem: Air India suffers from an image problem due to service standards, frequent delays and engineering issues. According to DGCA data for March, Air India continued to have top ranking in the complaints’ register with 32,518 passengers affected due to various issues like denied boarding, delays and cancelled flights on the domestic sector. Though the airline has less than half the share of the domestic market compared to IndiGo, the number of people affected due to flight delays alone was more than twice that of IndiGo passengers similarly affected. For its operational performance and therefore revenues to improve, these image issues need to be settled. The government is committed to spend over Rs 30,000 crore in equity support to Air India as per the Turnaround Plan. Of this, over
Govt fixing air fares will kill airlines
There are many lessons the government can draw from the stupendous growth of the telecom sector and one of the top most would be to not meddle in tariff fixation in any sector unless there is something that can distort market competition. But, the current NDA government appears to be ignoring this in the case of the civil aviation sector, which in effect will harm the consumers though the politically-expedient idea is to help them. Civil Aviation Minister Ashok Gajapathi Raju said in the Lok Sabha yesterday that the government is considering a proposal to ensure that only Rs 2,500 is charged per ticket for one-hour flights, and his ministry will soon start the consultation process with the stakeholders to explore the possibilities of containing fares. It is true that steep airfares during emergency situations like unprecedented floods in Chennai and Srinagar and the recent Jat agitation raise concerns, but that can’t be seen as a case for imposing restrictions on air fares across the board, which can derail the airlines’ business completely. The price of any commodity or service is best left to the market dynamics and if the government wants to support any segment, it should upfront do it through subsidies allocated in its budget, instead of forcing it on the business entities — the Indian Railways is a burning example of how regulated tariff is forcing it to lose both passenger and freight traffic. So, the better idea would be to let the airlines fix the air fares that they think is necessary to run their business and then leave it on the market competition to decide whether those prices could be sustained or not. The government needs to remember the findings of the Directorate General of Civil Aviation (DGCA) analysis of airfares on 18 routes, including high density routes (Delhi-Mumbai and Bangalore-Mumbai) and low-density ones (Kolkata-Port Blair) during the four quarters of 2014. The study revealed while there was a big difference between the minimum and maximum fares, the average was closer to the minimum fare. This means that the bulk of tickets is being sold closer to the minimum fares. If the government is really serious about reducing air fares, it should focus on reducing the cost of operation of the airline companies, especially ATF prices and taxes, instead of imposing restrictions on air fares in a high-handed manner. Matt Breida Authentic Jersey
Aviation policy before Cabinet soon
The civil aviation policy is likely to come before the Cabinet next week, sources in the civil aviation ministry said. It may retain the proposal of auctioning unused bilateral rights. According to sources, the proposal for auctioning the bilaterals will remain as part of the first civil aviation policy despite opposition from private airline firms. They contend that the proposal would favour foreign airlines, especially the gulf carriers. They have also argued that such a policy doesn’t exist in any other country. Shelby Harris Authentic Jersey
Jet Aviation Basel refurbishes first Legacy 650
Jet Aviation has refurbished its first Embraer Legacy 650 business jet on behalf of a private owner. The project was undertaken at the business aviation services provider’s completions centre in Basel, Switzerland, during its scheduled C-check heavy maintenance inspection. The large-cabin business jet has since been sold to Johannesburg-headquartered company Planair Enterprises. The refurbishment included a full-carpet replacement, seat and divan re-upholstery, wood repairs, re-covering of the dado panels, new flooring in the galley and a full exterior repaint, says Jet Aviation. The Basel facility is the only service centre in Europe that is authorised to perform the full suite of MRO services on Embraer business jets, including Part 21 design organisation and interior work, it adds. According to Flightglobal’s Fleets Analyzer database, there are around 90 Legacy 650s in service globally. The Rolls-Royce AE3007-A2-powered aircraft was introduced in 2009 as an extended-range version of the 14-year-old ERJ-135-derived Legacy 600. Meanwhile, Jet Aviation’s facility in St Louis, Illinois, is to install for the first time Honeywell’s JetWave satellite communications terminals in a Bombardier Global Express. The project will be undertaken as part of a major refurbishment contract for the long-range business jet and will provide passengers with much faster high-speed connectivity during flight. Frostee Rucker Womens Jersey
China plans $11.9 billion investment in aviation infrastructure
China plans to invest 77 billion yuan ($11.9 billion) this year in the construction of civil aviation infrastructure, particularly airports, the country’s chief civil aviation regulator said. China will begin with 11 key construction projects and 52 aviation-related upgrades, the Civil Aviation Administration of China (CAAC) said on Wednesday. “The general aviation sector, especially aircraft research and manufacturing, has become a hot spot of both industrial upgrading and social concern,” Feng Zhenglin, head of the CAAC, said. The aviation sector will get preferential treatment to improve transportation, foster new growth engines, and boost employment and the service sector, state-run Xinhua news agency reported. Richard Rodgers Authentic Jersey
Air India inks codeshare pact with Flybe
Air India today said it has inked a codeshare pact with European regional airline Flybe which will give passengers of the national carrier a seamless connectivity to the UK and rest of Europe from here and vice versa. Flybe, a member of Star Alliance along with Air India, is Europe’s largest regional airline operating on 216 routes through 75 airports across 10 countries. Code-sharing allows an airline to book its passengers on its partner carriers and provide seamless connectivity to multiple destinations where it has no presence. The new partnership will allow customers of both Air India and Flybe to fly seamlessly from Europe to India and from here to destinations covered by Flybe, via Birmingham, an Air India statement said. “The codeshare will enable Flybe travellers using its multi-frequency BirminghamBSE 0.00 % services from Belfast City, Edinburgh and Glasgow to book seamless flights onward to Delhi. Under the unilateral agreement, Air India (AI) will place its marketing code on these Flybe flights (BE),” it added. The seats for codeshare flights will be available for booking via Air India bookings portal as well as through local travel agents from May 10 for travel from June 1. “The United kingdom is the residence of a large number of Indian diaspora. This codeshare agreement will be a huge benefit not only to the Indians living in the UK but also to tourists travelling to and from domestic sectors of the UK and India,” Air India Chairman and Managing Director Ashwani Lohani said. Flybe Chief Executive Officer Saad Hammad said the airline can now give the customers (under the code share pact with Air India) in the UK regions convenient access to the Indian subcontinent through Birmingham airport. “This will relieve them of the need to undertake long road or rail journeys to and from the UK’s congested south east hub airports. It will also serve in contributing further to local economies by encouraging inbound travel from South East Asia,” Hammad said in the statement. Air India now operates five daily direct flights to India from London/Birmingham. On its overall European network, its presently connects eight destinations in six countries. Flybe is the largest airline by traffic movements at Belfast City, Birmingham, Bournemouth, Cardiff, Exeter, Glasgow, Isle of Man, Jersey, Manchester, Newquay and Southampton airports It has a fleet of 75 aircraft. Besides, it also operates codeshare flights with British Airways, Air France, Etihad, KLM, Finnair, Cathay Pacific and Emirates. Karl Mecklenburg Jersey
Government approves Rs 4,428 crore highway projects in UP,Himachal Pradesh
The government today approved Rs 4,428-crore highway projects in Uttar Pradesh and Himachal Pradesh under its highways building programme NHDP. The projects were approved by the Cabinet Committee on Economic Affairs (CCEA) today. The project in Uttar Pradesh pertains to four-laning of Lucknow-Sultanpur section on NH-56. “This work will be under the National Highways Development Project (NHDP) Phase-IV. The approval is in Hybrid Annuity Mode,” a statement from Ministry of Road Transport and Highways said after the meeting. The cost of the project is estimated to be Rs 2844.72 crore including cost of land acquisition, resettlement and rehabilitation and other pre-construction activities. The total length of the road will be approximately 128 kms. The second project approved by the government pertained to two-laning with formation of four lane of Shimla Bypass (Kaithlighat to Shimla section) on NH-22 in Himachal Pradesh. This work will be under the NHDP Phase-III. “The cost is estimated to be Rs 1,583.18 crore including cost of land acquisition, resettlement and rehabilitation and other pre-construction activities. The total length of the road will be approximately 28 kms.” The main object of the project is to expedite improvement of infrastructure in Himachal Pradesh and also in reducing the time and cost of travel for traffic, particularly heavy traffic, plying on the Kaithlighat to Shimla section on National Highway-22, it added. Evgeny Kuznetsov Jersey