It is going to be cheaper to get a sip of Starbucks (SBUX) coffee in India than in any other neighboring countries in South-East Asia, including ones with stronger currencies like Singapore or Malaysia. The reason behind this is its local sourcing arrangement with Tata Coffee. India is the only country where Starbucks will not have to import a majority of its beans for its local stores. And the company assures customers that the taste will be the same as it is worldwide.
McDonald’s (MCD) and other U.S. chains promise the same things but it is rarely the case. The menu and coffee blends will be tailored to local tastes in order to be successful. Moreover, India is a place where price sensitivity is far higher than it is in other places. Add to that the extreme worry over opening up foreign retailers’ ability to compete locally and this local sourcing scheme kills a number of birds both political and organizational. I’m sure Starbucks looked at the regional backlash against Wal-Mart’s (WMT) potential entry into India after the relaxation of foreign ownership rules for retailers and made the prudent decision to integrate itself into the local supply chain rather than forge a completely new one.
ConocoPhillips (NYSE:$COP) is showing renewed interest in the lucrative Asia-Pacific oil market.It is gearing up to resume its biggest Chinese operations as well as having made a “final investment decision” on the Malaysian offshore project as it divests from China’s neighbor Kazakhstan. These represent an important diversification tool as the world heads towards a stagflationary, low-growth period.
Honda (NYSE:$HMC) delivered extremely strong quarterly performance in Q4 on the back of a U.S renaissance in car sales – due to aging fleets and hope – as well as improved operations after the 2011 Thailand floods.That said, however, its outlook remains weak due to headwinds in China and Europe. Honda achieved record sales in 2012 of 3.82 million units — an increase of 19%. Quarterly profits increased 62.6% to $851 million but the annual forecast for FY 2013 has been reduced for the second time by 1.33% to $4.01 billion (¥370 billion from ¥375 billion) as Honda expects to sell 4.06 million cars versus the 4.12 million cars announced earlier. Results like this are creating real problems for the number three Japanese auto brand in the U.S., Nissan (NASDAQOTH:$NSANY), as Toyota (NYSE:$TM) also surged back in 2012.
McDonald’s Corp (NYSE:$MCD), the world’s largest fast food chain, recently reported its results for the fourth quarter beating analysts’ estimates. Profit rose very slightly from $1.38 billion in 2011 to $1.4 billion in 2012. Quarterly earnings per share rose to $1.38 as net margins improved slightly on increased non U.S. margins. However, sales in the Japanese and European markets were soft, as would be expected with both areas in recession. Global comparable sales were essentially flat at +0.1%, which is statistical noise.
India’s government finally admitted defeat in subsidizing diesel prices and will repeal the subsidy in the near future.More than 80 percent of India’s fuel needs are fulfilled by imports. Petrol prices were liberalized by the government in June 2010 but the government has constantly tried to prevent prices from rising to insulate the Indian economy from ever-increasing oil prices on global markets. Fuel consumption in India increased 5 per cent in the last fiscal year, its fastest since 2007-08.If you subsidize something you get more of it.The Indian government has finally bowed to this simple economic reality.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
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