Retail head honcho Pillai: Not going anywhere, he says

Had everything gone according to plan, there must have been 200 FoodWorld supermarkets, largely in the southern part of the country, around now. That was the gameplan of the eponymous company, a joint venture between the RPG Group (51 per cent) and Dairy Farm International (49 per cent; this is part of the Hong Kong-based Jardine Matheson Group). However, today, FoodWorld (the company's revenues are around Rs 340 crore now) boasts less than 100 outlets. That's poor going for a company that had 88 outlets up and running by July 2003. And it is poor going for a company that predicted a growth in revenues of 40 per cent in 2003-04, and expected to return net profits that same year. According to Raghu Pillai, the head of RPG Enterprises' retail ventures, this (net profits) will now happen in 2005-06. Gross margins are around 20 per cent at store levels, he points out, and many stores return profits, but this is yet to translate into profits at even regional levels. Pillai points to the anaemic growth of 8-9 per cent in revenues as the reason for this. According to one executive in the company, 2002 saw FoodWorld serve 1.3 million customers per month; the corresponding number for 2004-05 was 1.1 million.

Chairman Goenka: Committed to retail

The link between growth and expansion, in this case, is evident; over the past two years, RPG has focussed its efforts (both managerial and financial) on Spencer's hypermarkets, a 100 per cent-owned venture (through subsidiary Spencer & Company). Today, there are Spencer's hypermarts in Hyderabad, Mumbai and Visakhapatnam, and 15 more are planned by March 2006. The buzz in Chennai is that RPG's focus on Spencer's (formerly Giant) irritated Dairy Farm. The two companies are apparently keen on going their own ways although this would mean that Dairy Farm looks for another partner (foreign investment in retail ventures is not allowed now; Dairy Farm entered the country when the rules were far more liberal). The Tata Group has been mentioned as a possible partner-it already has an alliance with Jardine Matheson Group; the latter has a 20 per cent stake in Tata Industries and an interest in Tata Automotive Components Ltd., and TCS and Jardine OneSolutions have an alliance going-but although the group has a retail venture Trent Ltd. (this runs the Westside chain), it has never appeared eager to enter the grocery business.

Pillai insists that nothing of the kind is afoot. He also insists that he is not leaving the company as has been widely reported in the media. "The RPG Group has no plans of selling out; it is looking at a private placement of equity that will put FoodWorld back on the growth path." Interestingly, at a recent industry do in Delhi, RPG Vice Chairman Sanjiv Goenka had only one thing to ask India's Finance Minister P. Chidambaram. It had to do with FDI in retail.

-Nitya Varadarajan

Baby, No More
It isn't as bad as the Tylenol thing, but Maharashtra's FDA believes J&J is not into babies.

J&J India's Ambwani: To baby or not to...

Johnson & Johnson (J&J) is a company that likes to stay out of the limelight. You are unlikely to find its CEO, global or Indian, making rash statements about revenue milestones or product innovations. It is also a company that takes its image as a good corporate citizen seriously; the Tylenol incident-in 1982, seven people died in the us after consuming Tylenol; the packs were found to have been tampered with, and the capsules injected with a dose of cyanide; J&J, the parent of McNeil Pharmaceuticals that owned the brand, stopped all advertising, distributed warnings and ordered a nationwide recall at a cost of $100 million; it later reintroduced the capsules in tamper-proof packs-has only sought to reinforce this image. In India, the company has a hegemony of the baby-care segment with its soap, shampoo, baby oil and assorted offerings enjoying market shares in excess of 70 per cent.

Which is why the show-cause notice issued by the Maharashtra Food and Drug Administration (FDA), charging J&J India with violating Section 17C of the Drugs and Cosmetics Act, 1940-the Indian subsidiary of the $47.3-billion (Rs 2,08,120-crore) healthcare and pharmaceutical major has till the end of March to reply to the charge of "misbranding" levelled against it-caused ripples in the market. The two-page notice lists nine products from which the FDA wants the word 'baby' dropped; its contention is that these are just regular cosmetics masquerading as baby products. "Now the onus is completely on them to prove that these products are specifically designed keeping babies in mind," says Baba Siddique, Maharashtra's Minister of state for FDA.

The product that's borne the brunt of the FDA's crackdown is the company's Vitamin D-enriched baby oil, manufactured primarily at its Mumbai factory. For a start, the baby oil does not figure in the list of products approved for children and infants by the Bureau of Indian Standards. What's more alarming is that even the clinical trials seem to have been carried out on adults. That, contends N.K. Ambwani, Managing Director, J&J India, is only half the truth. "We regularly carry out tests on babies in India also; it is just that in this case the data was never asked for."

The FDA says the notice was spurred by complaints it received about infants breaking out in a rash after using the baby oil. J&J refutes this and says it has conducted more than 200 safety tests and product trials in India, and continuously monitors complaints through a toll-free helpline.

This is not the first time the Maharashtra FDA has gone after a respected multinational brand. Two years ago, it had come down heavily on Cadbury India after consumers found worms in chocolate bars. Consumer forums have of long accused multinationals of having double standards; they claim these companies have no qualms about selling inferior products in developing markets. The multinationals' response, these forums add, follows a predictable pattern: there's first a vehement denial, followed by an apology, and a behind-the-scene revamping of manufacturing and packaging standards.

According to the FDA, Indian companies selling baby products have not been spared either. A clutch of such companies, including Wipro, which goes head to head against J&J in most categories, have also received similar notices. However, a Wipro spokesperson denied receiving any notice. This is one controversy that won't end anytime soon.

-Abir Pal

Split Wide Open
LG's successful FMCG joint venture runs aground.

IHHL's MD Vijay Singh: No longer the preferred partner

It was a rocky marriage that's now headed for divorce. Last fortnight, Indian Household and Healthcare Ltd. (IHHL), the sole India licensee for LG Household and Healtchare Ltd. (lghhl), obtained an interim injuction from the Chennai High Court, restraining lghhl from marketing its products in India. IHHL's move followed LGHHL's decision to terminate the franchisee agreement.

What's driven the partners apart? Ironically, it seems to be the venture's success. In November 2003, IHHL signed an MoU, followed by an agreement, to deliver $5.5 million (Rs 24.2 crore) in revenues between 2004 and 2006. IHHL racked up $4.1 million (Rs 18.04 crore) in sales in the first year itself. If the industry grapevine is to be believed, that is said to have upset top executives at LG Electronics India, which apparently wanted to market the products itself. Finally, in September 2004, IHHL received a faxed message from LGHHL asking it to "put on hold the cosmetic and household business", citing reasons of confusion over the use of LG logo. IHHL was, however, assured by C.H. Kim, VP (Overseas Sales Department), LGHHL, that matters would be soon resolved.

But on January 12, 2005, within hours of withdrawal of Press Note 18, LGHHL terminated the agreement for computer peripherals. Subsequently, on February 15, the licence agreements for both the cosmetics and FMCG businesses were cancelled. The reason offered by LGHHL: the agreement was wrongfully signed by "working level officers of LGHHL without necessary authorisation of senior management". Says IHHL's Senior Counsel, Nalini Chidambaram (yes, she is the fm's wife): "Issues regarding logo and working level officers are untenable and frivolous." LGHHL could not be reached for comment. With Press Note 18 gone, the Indian partner's best hope is the Rs 1,000 crore it plans to claim in damages.

-Supriya Shrinate

FISHING
LSE AIM(s) High

LSE AIM's Graham: Eyeing Indian catch

Do you own a small software company with $15-20 million (Rs 66-88 crore) in market cap, customers in Europe and the UK, and with ambitions of being a global leader tomorrow? Or, is yours an early stage company, not listed on the domestic stock exchanges, but seeking to issue less than 25 per cent of its shares during an IPO (initial public offer) in international markets? If you answered yes to either of the two questions, then, Martin Graham has a simple message for you: Come to London Stock Exchange's (LSE) aim. Set up in 1995, aim boasts of 1,300 stocks with a combined market cap of $50 billion (Rs 2,20,000 crore). To get a listing on aim, an Indian company has to approach one of the 75 nominated advisors (nomad) approved by aim, who in turn convince the exchange that the company is appropriate for joining aim. Says Graham, who heads aim and was in India recently to woo companies: "If you are a small company and go to NASDAQ, you are a small fish in a large pond, whereas at aim you are a reasonably big fish in a small pond." A logic not too hard to be appreciated.

-Roshni Jayakar

Emotional Intelligence FAQs

William H. Tredwell, managing director, hay resources Direct and Senior Consultant with Hay Group, should know about Emotional Intelligence (EI). The concept, after all, was developed by Daniel Goleman, a Hay associate. Tredwell was in Mumbai recently on a roadshow to launch a suite of diagnostic products and tools to assess EI. BT's Roshni Jayakar got the low-down on EI from him. Excerpts:

What do you mean by Emotional Intelligence?

Emotional Intelligence (EI) is about recognising what it is that makes people effective; it is about positive relationships.

Is there a link between IQ and EI?

Being smart is important. What we find though is that IQ is a small piece of the puzzle. When you look at leadership, being smarter doesn't make a difference. For instance, I read this morning that Larry Summers, President of Harvard University, lost the trust of the faculty. This is a classic case of someone who is smart, has many good qualities, managing to alienate so many people. My point is, he lacks EI.

Can EI be acquired?

Yes. Our focus has been to determine what makes some people more effective than others.

How do you go about increasing EI?

You can increase EI through training or coaching. The first step is giving people an opportunity to assess their strengths and their needs. Once an individual identifies the gap between his actions and behaviours, and that of outstanding performers, he must build on that. Building these behaviours takes time. It's like building a habit.

What is the impact of improved EI?

It creates a positive organisation climate where people want to do their best. According to Hay research, nearly 30 per cent of a company's bottom line is locked in discretionary effort. We don't need to invest more money if we can get people to give their best.