Issue 72 ■ December 2011
Portfolio
emirates.com
Exclusive to Emirates First Class and Business Class
Georges Kern
AMAZON BOOKSChanging the Industry
FUSION POWERAre We Getting Closer?
MALE SCENTSClassics That Linger
Georges KernTime is the Brand
!Cover December 2011 final.indd 1 11/29/11 10:27 AM
AG_228_M5_En04_Portfolio_41.2x27cm_DPS.indd 1 11/21/11 5:15 PM
AG_228_M5_En04_Portfolio_41.2x27cm_DPS.indd 1 11/21/11 5:15 PM
the cosmograph daytona
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the cosmograph daytona
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status. with its patEntEd Chronograph mEChanism and bEzEl with
taChomEtriC sCalE, it allows drivErs to pErfECtly mEasurE
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100 1007070 3030 100100 60 70 70 4070 70 30 30 100 40 100 40 40 100 10 40 40 20 70 70 3.1 2.2 2.270 40 40 75 66 6650 40 402519190 0 0 0
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www.ca-suisse.com
ABU DHABI - BAHRAIN - BASEL - BEIRUT - DOHA - DUBAI - GENEVA - HONG KONG - LAUSANNE - LUGANO - MONTEVIDEO - NASSAU - SINGAPORE - ZURICH
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and help you build an enduring legacy.
Face the future with peace of mind.
Tomorrow needs care
PortfolioExclusive to Emirates First Class and Business Class 11
Features
42 Flipkart Moves Fast in IndiaOnline sales in India have held great promise but failed to
deliver in the past. That is now changing, with flipkart.com
leading the charge.
46 Food: A Temperamental Star Why does the food on your plate never look as good as
in the TV ad? That’s because there’s a huge advertising
industry behind it.
52 Amazon Takes On PublishingAmazon.com has taught readers that they do not need
bookstores. Now it is encouraging writers to cast aside their
publishers.
Cover Story
This issueDecember 2011
34 The Evolution of AllureGeorges Kern was an untested executive when he joined the luxury group Richemont a decade ago. Placed in charge of Swiss watch manufacturer IWC Schaffhausen, Kern has since transformed the company into a prestigious global brand.
46
42
58 Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant caused
Germany to permanently shut down eight of the country’s
oldest reactors and plans to retire the remaining nine by
2022. But sceptics argue that the decision was premature.
64 Profit vs. RiskBanks are targeting the rapidly growing emerging markets to
keep profits flowing. But emerging markets are volatile and
pose unique problems.
52
11-12 Contents.indd 11 11/20/11 2:07:28 PM
17 NotebookWorld business in a nutshell.
23 ObserverSpotting and analysing business trends.
30 Column: Suzanne GoldenbergCleaning Up the Himalayas
PortfolioExclusive to Emirates First Class and Business Class
12
Departments
Essentials69 Slow Boat Through Russia
A cruise along the historic Volga-Baltic Waterway not
only takes in St Petersburg and Moscow but also all the
history and scenery along the route.
74 Yves Saint LaurentA massive retrospective exhibition covering famed
French fashion designer Yves Saint Laurent’s entire
body of work is on show until January in Madrid.
80 The Art of AppraisalKnowing how much your collection is worth is essential
for insurance purposes or when you want to sell. But
make sure you get the right appraiser, otherwise it can
be an expensive mistake.
84 Fusion Power: Is It Getting Any Closer?For decades, scientists have been predicting that one
day the same process that powers the sun will give
us virtually unlimited cheap, clean electricity. But the
technical obstacles remain huge.
88 That Man Smells FamiliarMen are far more brand loyal than women, which is why
classic men’s fragrances are still on the shelves. And
now there is even a retro movement afoot.
92 Northeast Passage Dream RevivedGlobal warming is shrinking the Arctic ice pack,
resulting in governments and companies scrambling to
exploit new opportunities in this previously inaccessible
region.
96 Other Business Portfolio takes a light-hearted look at the latest
business news.
Portfolio
68
Published for Emirates by
PO Box 2331, Dubai, UAE. Telephone: (+971 4) 2824060,
fax:(+971 4) 2824436, e-mail: [email protected] Printed by Emirates Printing Press, Dubai, UAE
Editor-in-Chief Obaid Humaid Al Tayer Group Editor & Managing Partner Ian Fairservice Group Senior Editor Gina Johnson Senior Editor Guido Duken Editorial Assistant Hilda D’Souza Art Director Tarak Parekh Designer Charlie Banalo Junior Designer Roui Francisco Senior Production Manager S Sunil Kumar Production Manager C Sudhakar Senior Advertisement Manager Jaya Balakrishnan Email: [email protected] General Manager – Group Sales Anthony Milne Email: [email protected] Business Development Manager Nicola Hudson Advertisement Manager Rameshwar Nepali
69
74
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Emirates takes care to ensure that all facts published herein are correct. In the event of any inaccuracy, please contact The Editor. Any opinion expressed is the honest belief of the author based on all available facts. Comments and facts should not be relied upon by the reader in taking commercial, legal, financial or other decisions. Articles are by their nature general, and specialist advice should always be consulted before any actions are taken.
AUSTRALIA/NEW ZEALAND Okeeffe Media; Tel + 61 89 447 2734, [email protected] BENELUX M.P.S. Benelux; Tel +322 720 9799, [email protected] chINA Publicitas Advertising; Tel +86 10 5879 5885 FRANcE Intermedia Europe Ltd; Tel +33 15 534 9550, [email protected] gERMANy IMV Internationale Medien Vermarktung GmbH; Tel +49 8151 550 8959, [email protected] hONg KONg/MALAySIA/ThAILAND Sonney Media Networks; Tel +852 27 230 373, [email protected] INDIA Media Star; Tel +91 22 4220 2103, [email protected] ITALy IMM Italia; Tel +39 023 653 4433, [email protected] JAPAN Tandem Inc.; Tel + 81 3 3541 4166, [email protected] NEThERLANDS GIO Media; Tel +31 6 2223 8420, [email protected] SOUTh AFRIcA Ndure; Tel: +27 84 701 2479, [email protected] SPAIN IMM International; Tel +331 40 1300 30, [email protected] TURKEy Media Ltd.; Tel +90 212 275 51 52, [email protected] UK Spafax Inflight Media; Tel +44 207 906 2001, [email protected] USA Totem Brand Stories; Tel +212 896 3846, [email protected]
INTERNATIONAL MEDIA REPRESENTATIVES
11-12 Contents.indd 12 11/20/11 2:07:31 PM
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April 1819. François Constantin takes responsibility for the worldwide business expansion of Vacheron Constantin. During a business trip to Italy, this visionary man coined the phrase which would become the company motto in a letter addressed to the manufacture: « …do better if possible, and that is always possible …».
True to this motto and to the spirit that forged its history, Vacheron Constantin still remains committed to pushing the boundaries of watchmaking in order to provide its clients with the highest standards of technology, aesthetics and finish.
BoutiqueMall of the Emirates, 1st Floor,
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Emirates Towers 04 330 3262 - Burj Al Arab 04 348 4816Saks Burjuman 04 351 1980
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NotebookBUSINESS NEWS IN BRIEF
December 2011
The Shanghai STock exchange
said it’s “basically ready” to let foreign
issuers sell stock, paving the way for
companies from HSBC Holdings to Coca-
Cola to list in the world’s second-biggest
equity market.
Trading should start “as soon as
possible when the time is ripe,” Xu Ming,
executive vice president in charge of the
international stocks board, said in an
11 November interview at the exchange.
There is no set timetable but the exchange
has finished work on technological and
regulatory requirements.
The trading of foreign equities will
mark the biggest change for China’s stock
market in more than five years and add
impetus to Shanghai’s drive to become
a global financial centre by 2020. It will
also broaden options for the nation’s
85 million individual investors who are
restricted from buying shares abroad by
China Ready for Foreign Shares
an earnings history and strong corporate
governance.
China has the world’s second-biggest
stock market with a combined market
value of $3.6 trillion for the Shanghai and
Shenzhen bourses as of November 2011.
The US is the largest with a market value
of $15.2 trillion. n
China’s capital controls.
Foreign firms could benefit from listing
in China through higher valuations and it
will give them access to Chinese currency
to fund their expansion in the world’s
second-biggest economy.
China is also seeking to revive investor
interest in an equities market that
has slumped the past two years as the
government raised interest rates and
imposed curbs on property transactions to
tame inflation and prevent asset bubbles.
Overseas companies are barred from
selling stock in China, though are allowed
to do so in Hong Kong.
The Shanghai stock exchange
has already been contacted by
foreign companies in the finance,
telecommunications, consumer goods
and manufacturing industries. Xu said
the exchange is looking for companies
that already have operations in China,
Xu Ming, an executive vice president at the Shanghai Stock Exchange.
17-20 Notebook.indd 17 11/20/11 2:05:17 PM
N u m b e r s G a m e
In FiguresThe World
29% plunge in Japan-based Olympus Corp’s shares sees its
stock price hit the lowest since 1995 after revelations
that its senior management admitted to have covered up investment
losses by using Us$687 million paid to advisers on the 2008
takeover of gyrus group and other investments in the 1990s.
$8.4 billion, that’s
how much
venture capital was invested
in start-up companies during
12 months, according to Dow
Jones Venture source. the
total climbed 29 per cent as
funds raised by consumer
internet companies more than
doubled from a year earlier.
the online ventures – including
search, entertainment and
social media – raised
$1.3 billion.
$6.3 billion is the
whopping
credit line readily available
to HNa group, a Chinese
financier in aviation, shipping
and hotels, if it chooses to
support acquisitions in europe
and the Us. the company
aims to boost its overseas
assets from 10 to 40 per cent
within the next five years with
investments in ge seaCo,
spain’s HN hotel chain and
a turkish air-cargo carrier in
the pipeline.
$3 billion is the sum
that British drug
maker glaxo-smithKline will
pay the Us government as
settlement for the multiple civil
and criminal investigations
into the pharmaceutical
firm’s marketing practices.
the settlement is the largest
in a federal case against a
pharmaceutical company,
surpassing the previous record
of $2.3 billion paid by Pfizer
in 2009.
the blue and white Chinese
porcelain was formerly owned
by swiss tycoons, the Zuellig
brothers.
$525 billion is set to be
spent on energy
projects in the oil rich meNa
region from next year to 2016
as per the arab Petroleum
investment Corp. saudi arabia
tops the list by committing
investments of $141 billion,
followed by the Uae with
$76 billion.
$43.2 million is the
record price for
Roy Lichtenstein’s 1961 comic-
style painting of a man looking
through a peephole sold at
Christie’s international at a New
york auction recently. the sale
is one of 13 records set at an
auction of contemporary art by
Christie’s and a world auction
record for the pop artist.
$89 billion savings plan
recently announced
by the French government will
be accrued by way of tax
increases and spending cuts
spread over five years. the big
package of budget savings
will help further slash its public
deficit and aid countering fears of
France getting dragged into the
eurozone debt crises.
$21.6 million, a world
record price for
any item of ming porcelain, was
reached at a sotheby’s Hong
Kong auction. Purchased by an
anonymous telephone bidder,
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18 Notebook
Portfolio
Tokyo’s record-low office rents
may post further declines
in the next six months as
landlords compete to fill space
with supply expected to reach
the highest since 2006.
New office space will rise
12 per cent to 1.54 million
square metres in Tokyo next
year, matching the level in
2006, according to a survey by
Mori Building Co. JP Tower, a
38-storey office tower located
in the city’s main business
district, will be completed in
the spring, while the 27-storey
Marunouchi Eiraku Building
will be built by January.
Tokyo’s office vacancy rate
rose to 8.8 per cent in October,
the first increase in seven
months, while rents slid to
a record low of 17,011 yen
($219) per tsubo. The city’s
office vacancy reached its all-
time low of 2.5 per cent in
November 2007, which drove
the average rent to a new
high the following year. A
tsubo, a standard measure of
property area in Japan, is 3.3
square metres.
Tokyo Office Rents Drop
Re
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17-20 Notebook.indd 18 11/20/11 2:05:20 PM
Sasol Investment Spree
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Dubai’s sunny OutlOOk
19Notebook
December 2011
Sasol, the world’s largest producer of fuel from coal, is looking
at spending an additional $5.06 billion in the southern African
region over the next three to four years. This is after spending a
total of $5.44 billion in the region over the past few years.
Speaking at the inauguration of Sasol Synfuels International’s
$126 million cobalt catalyst plant in Sasolburg, South Africa,
Sasol senior group executive Lean Strauss
said the company remained committed to its
South African roots.
Using noble metals to activate the
catalyst, the catalyst manufacturing process
has been described as the “heart” of the
technology that makes its gas-to-liquids
(GTL) process possible (converting gas to
petrol). Before the commissioning of the
new plant in Sasolburg, cobalt catalyst had
been supplied from Sasol’s manufacturing
partner, BASF, from the world’s first large
scale cobalt catalyst manufacturing facility in
De Meern, near Utrecht in the Netherlands.
Construction on the Sasolburg plant, based
on the design philosophy of the second plant
in De Meern, began in February 2009 and its completion means
Sasol now has its own 100 per cent held facility.
Sasol has been actively seeking to grow the number of GTL
plants it operates globally and while the SA plant will initially
be supplying its existing GTL sites in Qatar, Nigeria and
Uzbekistan, it would later become a supplier to new plants as
they were added.
Dubai’s ever-expanding tourism
industry has posted impressive
results. Dubai hotels hosted
6.64 million guests in the first
three quarters of 2011, up
by 11 per cent compared
with the corresponding period
last year. the guest nights
rose by 26 per cent to
reach 23.68 million, while
the average length of stay
increased by 14 per cent
during the same period.
Revenues of hotels and hotel
apartments increased by 19
per cent to cross $2.98 billion,
with the share in revenues
of hotels increasing by 20
per cent and that of hotel
apartments by 13 per cent.
the total revenues of
hotels and hotel apartments
during the first half of 2011
was over $2.19 billion, an
increase of 18 per cent over
the corresponding period last
year. Of this, about $1.9 billion
came from the hotels and
$290 million from the hotel
apartments. the number of
hotels and hotel apartments
also recorded a modest
increase of one per cent to
reach the number of 573.
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A Sasol GTL plant in Mozambique, southern Africa.
17-20 Notebook.indd 19 11/20/11 2:05:22 PM
eVeNt Name: INDIAN PROPERTY SHOW WeBsite: INDIANPROPERTYSHOW.COM
Date: 15-17 DECEMBER, 2011 VeNUe: AIRPORT EXPO
Real estate in India currently has an astounding growth rate of 10 per cent per annum, which is why there’s been a huge demand for property shows from Non-Resident Indians in the UAE. Unitech Ltd, Hiranandani Group and Godrej Properties are some of the real estate juggernauts amongst the 60 plus exhibitors at this ninth edition of the Indian Property show. Connecting buyers with developers at a prime time the show intends to tap into the growing niche at the luxury end of the market by introducing an exciting new plan – Property Dhamaka! That earns buyers rewarding and profitable deals from participating developers by way of discounts, amazing holiday packages for families and free property registration. In addition, there’s plenty of opportunity to acquire a general knowhow of the different investment options, financing sources and legal guidelines for buying property in India.
eVeNt Name: Middle East Industrial Gas Conference 2011 WeBsite: gasworld.com/conferences/middle-east-2011Date: 5-7 December, 2011VeNUe: Jumeirah Beach Hotel
The Middle Eastern Industrial gas community alongside international producers, distributors and end users converge at Dubai’s Jumeirah Beach Hotel for three days sharing perspective on this year’s theme ‘Balancing growth and investment’. The theme focuses on identifying drivers for growth in the region, current and future gas markets and gas supply options.
eVeNt Name: World of ScadaWeBsite: iirme.com/SCADADate: 12-15 December, 2011VeNUe: Mövenpick Hotel, JBR
The MENA region’s leading SCADA conference presents a unique platform for diverse companies – including telecom, water and transport – to network and exchange valuable information and insights into the operations of SCADA systems.
eVeNt Name: Gulf TrafficWeBsite: gulftraffic.comDate: 12-14 December, 2011VeNUe: Dubai International Convention & Exhibition Centre
As part of the UN’s ‘Decade of Action Road Safety 2011-2020’, the Gulf Traffic conference is the largest event in the Middle East that covers road safety and ITS. Increasing road safety and reducing traffic congestion are some of the key issues addressed by global speakers at the two-day conference.
eVeNt Name: Future Concrete 2011WeBsite: futureconcrete.comDate: 12-14 December, 2011VeNUe: Ritz Carlton, DIFC
More than 30 international experts will share insights on advanced construction materials, innovative practises and smart construction. The conference will feature the first Environmental Construction Exhibition that highlights products and technologies designed to make the construction industry environment friendly.
DUBAI
United Arab Emirates
DUBAI
20 Notebook
Portfolio
17-20 Notebook.indd 20 11/20/11 2:05:24 PM
Although you will probably never actually see most of the levers, wheels, and
springs in the SAXONIA DUAL TIME calibre, Lange’s master watchmakers
meticulously perfect them by hand. Aficionados will appreciate the fact that
not all of these lavishly finished parts are concealed. Fortunately, the sapphire-
crystal back reveals the fascinating interaction of quite a few of them. Treat
yourself to a close-up look. For instance at Ahmed Seddiqi & Sons in Dubai.
We perfect this watch by hand.Even the parts that you can’t see.
The SAXONIA DUAL TIME. Exclusively at:
Final_MD_UAE_C_Seddiqi_Portfolio_SaxDT_PG_206x270_ATMO-302-11.indd 1 04.11.2011 16:39:57 Uhr
December 2011
The DeuTsche PosT office
across from the train station in Düsseldorf,
Germany, offers DVDs, umbrellas, phone
cards and toys – with the processing of
mail appearing nearly an afterthought.
And the facility housing it is not a post
office at all. Deutsche Post occupies a
corner space in a bank.
With mail volumes decreasing one to
two per cent annually in many countries,
European postal services from Germany
to Sweden to Switzerland have reinvented
themselves over the past decade as
multifaceted delivery and information
companies tailored to the virtual age.
Though Deutsche Post by law still delivers
to every address six days a week, it has
jettisoned tens of thousands of buildings,
100,000 positions and its traditional focus
on paper mail.
“We realised that being a national postal
provider was an endangered business,
that we had to redefine the role of postal
providers in a digital world,” said Clemens
Beckmann, executive vice president of
innovation of the German post office’s
mail division.
With the US Postal Service facing
insolvency, it is looking toward Europe for
new operating models, even though US
legislation currently precludes adapting
some of those innovations.
After selling off all but 24 of 29,000
post office buildings in the past 15 years,
the German postal service is now housed
mostly within other business ‘partners,’
including banks, convenience stores and
even private homes. In rural areas, a
shopkeeper or even a centrally located
homeowner is given a sign and deputised
as a part-time postmaster.
At the same time, many European
postal services have developed a host of
electronic services that are increasingly
making traditional post offices and
mailboxes obsolete. Bills and catalogues
can go first to digital mailboxes run by
the post office on customers’ computers,
and the customers can tell the post office
what they want it to print and deliver.
And while Americans are asked to send in
suggestions for what celebrity should grace
the next stamp, Germans can buy virtual
postage from their cellphones.
Deutsche Post has expanded package
delivery networks to profit from the
uptick in online shopping and has also
progressively expanded its offerings into
completely new areas, like running online
marketplaces for freelance writers similar
to eBay.
Instead of watching its business be
Due to decreasing mail volumes, European postal services had to adapt to the digital world in order to survive, reports Elisabeth Rosenthal.
Reinventing Post Offices
BUSINESS NEWS IN BRIEF
Observer©
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23-24 Observer Opener.indd 23 11/20/11 2:09:27 PM
Portfolio
Observer24
eroded by more aggressive marketplace
competitors, as has happened in the
United States, Deutsche Post completed
its purchase of the logistics company DHL
in 2002, meaning many Americans have
been customers of the German post office.
European postal services vary widely in
their degree of adaptation to the digital
age. “But the United States Postal Service
(USPS) is probably the best example
of a pure monopoly that has seen the
least change,” said John Payne, the chief
executive of Zumbox, a Los Angeles-based
startup that offers virtual mailboxes for
personal computers in the United States
on a private basis and that has sold the
program to foreign postal services.
Payne has empathy for the failing
postal service and for all the regulation it
must abide to, including not being able
to close an outpost “solely for operating
at a deficit.” He said: “They live under
legislative restrictions on what businesses
they can enter and are expressly prevented
from entering business unless it’s related
to physical mail.”
To close a projected $9 billion budget
gap, the USPS has proposed eliminating
3,700 of its 36,000 post offices and is
selling off historic buildings that have
anchored towns across America. The
1,579-square-metre neoclassical landmark
post office in downtown Greenwich,
Connecticut, was recently sold to a
developer. Meanwhile, the post office will
move to a former pet supply store.
European postal services started to think
about new business models in the 1990s,
when the European Commission opened
up postal monopolies to competition and
liberalised regulation. But the subsequent
changes have come in response to
declining mail volumes and, to a lesser
extent, pressure to reduce greenhouse
gas emissions.
While Deutsche Post was an owner
of 29,000 post offices in 1990, it is now
largely a tenant, with tens of thousands
of counters lodged in other businesses.
Outsourcing has allowed it to trim staff.
AfTer DeuTsche Post closed the post
office in the village of Dorn-Assenheim
seven years ago, it hired Renate Weitz, a
retiree, to dispense postal services from
her house each morning – though it
now has plans to close that ‘branch’ as
well. In Schmitten (population 10,000),
Jens Kinkel took over postal tasks at his
stationery store. “I run the post office to
get more customers,” Kinkel said. “Most
buy stamps and grab a paper as well.”
Dr Julia Neu, a professor of sociology
at the Niederrhein University of Applied
Sciences, said the loss of post offices had
been particularly painful for older people
in the former East Germany, where they
doubled as meeting places. “A lack of
post offices is mostly dealt with by people
helping each other by sharing cars or
dropping off mail for the ones who aren’t
mobile,” she said.
But overall, advocates say the expansion
into virtual services has improved
customer satisfaction, saved money and
helped reduce carbon emissions.
Virtual mailboxes can receive, store
and organise years of bills, sparing digital
customers the need to check one by one
the websites of credit card companies
and cellphone providers. While this free
service was slow to catch on in Sweden,
membership has spiked in the past year,
said Anders Asberg, head of product and
market development for the Swedish
post office.
For actual packages, Deutsche Post
customers can choose to pick up items
at automated banks of lockers in places
like train stations; the locker number
and opening code are sent to their
cellphones. Posten, the Swedish post office,
allows vacationers to transmit cellphone
photographs that Posten prints as
postcards and delivers as physical mail.
Surprisingly, perhaps, new postal models
have not meant the end of direct marketing
(aka junk mail), a lucrative business –
though executives say such promotional
material will be increasingly likely to arrive
via computers and cellphones.
PostNord – an umbrella company that
includes both the Danish and Swedish
postal services – now even helps smaller
companies develop direct marketing
campaigns through its ‘Advertising
Planner,’ which boasts: “It’s just as natural
for PostNord to ensure that your offer
reaches the right customer at the right
time via satellite and cyberspace as via a
traditional postman.” n
Renate Weitz, a retiree, dispenses postal services from her home in the German village of Dorn-Assenheim.
23-24 Observer Opener.indd 24 11/20/11 2:09:29 PM
chaumet.com
Creating watches for 200 years
UK-Emirates 206x270 dandy_UK-Emirates 206x270 dandy 06/10/11 17:25 Page1
O N E 2 W A T C H
International Business Machines Corporation (IBM), the
world’s largest computer-service provider, has selected its
senior vice president, Virginia M Rometty, as its new chief
executive officer effective from 2 January. Rometty, 54, will
become the first female chief executive to lead the New
York-based company in its 100-year history. She will replace
Samuel Palmisano who will continue as chairman from early
next year.
Rometty, a graduate from Northwestern University with a
degree in computer science, joined IBM in 1981 as systems
engineer and steadily progressed to the top of IBM Global
Services. Serving as the division’s strategy leader in 2003, she
oversaw the successful integration of PriceWaterhouseCoopers
Consulting after IBM bought the consulting firm for $3.5
billion. As senior vice president and group executive for
sales, marketing and strategy in 2009, she spearheaded the
company’s push into emerging markets such as China, India
and Brazil. In this position she was responsible for IBM’s
worldwide results, which exceeded $99 billion in 2010 and
drove the company’s shares to the highest level since it went
public in 1915.
IBM’s five-year plan, which was initiated by the outgoing
Palmisano, aims to enhance revenues by $20 billion by
expanding in markets such as cloud computing and analytics.
This is likely to flow smoothly with Rometty as chief and
working closely with Palmisano, as she’s well versed in strategy
and her experience in sales, service and acquisition
is invaluable.
It has been an uphill struggle, but Australian Prime Minister
Julia Gillard’s Clean Energy Futures plan is set to become law
on July 2012, setting a cost of A$23 ($23.80) on each metric
tonne of greenhouse-gas emissions linked to climate change. The
carbon levy is fixed until 2015, when Australia begins a so-called
cap-and-trade system to let the market set the price as emitters
buy and sell permits.
Australia’s emissions market is forecast to be as large as the
one planned in California and the second biggest after Europe’s.
Miners, energy producers, utilities and others bound by the new
law also have the option of importing emissions credits from less-
developed countries via the United Nations’ Clean Development
Mechanism. UN offset, known as Certified Emission Reductions,
have been trading in the US$9 range on the ICE Futures Europe
exchange in London. That’s less than half of Australia’s fixed
price in 2012. That means Australian companies could get a good
buy if they are willing to move early.
Australia, which burns coal to produce about 80 per cent of its
electricity, voted to put a price on carbon to help the country cut
emissions by five per cent as of 2020.
TExT: HildA d’sOuzA
Virginia M Rometty
Oz Carbon Trading
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Magnifique French Inspired Design
From Paris to Dubai, from London to New York, from Munich to Beijing…
Live a magnifique life around the world.
www.sofitel.com
Dubai Munich beijing Paris
AP_Sof157_PP206x270_portfolio_41152.indd 1 12/04/11 15:28
India expects to have 10 gigawatts of solar power capacity by
2017, more than double what it initially targeted, as the industry
ramps up quicker than predicted.
The Ministry of New and Renewable Energy plans to award
permits for as much as 10,000 megawatts of grid-connected solar
plants by 2017, up from its initial target of 4,000 megawatts, Bharat
Bhargava, a director at the ministry, said at a conference in the
southern city of Hyderabad. It’s also doubling its target for off-grid
solar plants to 2,000 megawatts.
Asia’s third-largest energy consumer provides a bright spot for
solar panel makers facing plunging margins and slowing growth.
Developers of projects that generate electricity from the sun in
Europe, the world’s largest solar market, are unable to get bank
financing to start new plants, leading demand for panels to fall 10
per cent short of expectations this year.
Interest from solar power developers exceeded the amount of
available capacity on offer by more than seven times for India’s next
auction of permits, Bhargava said. The ministry has received 218
applications seeking to build 2,500 megawatts of solar plants. The
plants are scheduled to be finished by January 2013.
Mitsubishi, Japan’s largest
trading company, has agreed
to pay $5.39 billion for
a stake in Anglo American’s
Chilean copper unit in the
Asian nation’s biggest mining
acquisition.
Anglo sold 24.5 per cent
of Anglo American Sur SA
to Mitsubishi. The deal may
stymie Chile’s state-owned
producer Codelco from taking
up its option to buy a 49 per
cent stake in the operation.
Buying the stake in the
unit, valued at $22 billion
India’s Solar Boom
based on Mitsubishi’s offer,
will almost double the Tokyo-
based company’s copper
output as supply of the metal
used in wires and pipes
drops. Rio Tinto Group, the
world’s second-largest mining
company, expects global
copper demand to rise more
than 40 per cent by 2020.
Mitsubishi’s investment
will give it a share in Anglo’s
undeveloped Los Sulfatos
and San Enrique Monolito
assets, which Anglo says are
“world-class.”
Mitsubishi Buys $5.39 Billion Stake
President Barack Obama has
received a commitment by
eight other nations to join the
US in forging an Asia-Pacific
trade accord. Officials agreed
on a blueprint that will lead to
drawing up a formal Trans-
Pacific Partnership in the next
AsiA-PAcific TrAde Accord12 months, a deal that could
create a model for expanded
trade with more Asian
countries.
The current talks involve
Australia, Chile, Peru and
Singapore, all of which already
have separate free-trade
agreements with the US, as
well as Malaysia, New Zealand,
Vietnam and Brunei. Two-way
trade between the US and
those eight nations totalled
$171 billion last year, compared
with $457 billion with China.
President Obama said taken
together, the eight member
economies would be America’s
fifth largest trading partner.
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Citigroup agreed to sell EMI Group’s recorded music and
publishing businesses in separate transactions for a combined
$4.1 billion. The breakup of London-based EMI, the 114-year-
old music company that owns Abbey Road Studios, sells Beatles
albums and publishes songs written by the late Amy Winehouse,
ends a nine-month bidding war. Citigroup, the New York-based
lender, seized EMI in February after investor Guy Hands fell out
of compliance with loan covenants.
Vivendi’s Universal Music Group will buy EMI’s record labels,
home to Katy Perry and Coldplay, for $1.9 billion, and a Sony-led
group that includes billionaire David Geffen will pay $2.2 billion
for the publishing unit.
The auction had a surprise ending, with the two winning
bids outstripping rivals who had been in the lead for much of
the process. Warner Music Group, owned by billionaire Len
Blavatnik, offered $1.5 billion to $1.6 billion for EMI’s recorded
arm, according to sources. Sony was vying with BMG Rights
Management GmbH, the music company controlled by KKR &
Co., which had bid $1.8 billion to $2 billion for publishing.
Citigroup Sells EMI in Parts
Observer 29
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TOp 10 GlObAl FiNANCiAl CENTrEs (According to the 10th Global Financial Centre Index)
RANK CITY GFCI 10 RATING1. London 7742. New York 7733. Hong Kong 7704. Singapore 7355. Shanghai 7246. Tokyo 6957. Chicago 6928. Zurich 6869. San Francisco 68110. Toronto 680
WOrld’s 10 MOsT ExpENsivE COuNTriEs FOr CONsTruCTiON (As per the EC Harris report)
Rank 2011 20101. Switzerland Switzerland2. Denmark Denmark3. Sweden Finland4. Ireland Australia5. France Ireland6. Australia Sweden7. Germany Canada8. Austria Bahrain9. Belgium New Zealand10. Canada Singapore WOrld’s TOp rANkiNG NATiONs sHOWiNG HiGHEsT dEGrEE OF ECONOMiC FrEEdOM (2011 Index of Economic Freedom)
Rank Country Freedom score Change from previous
1. Hong Kong 89.7 0.02. Singapore 89.2 +1.13. Australia 82.5 -0.14. New Zealand 82.3 +0.25. Switzerland 81.9 +0.86. Canada 80.8 +0.47. Ireland 78.7 -2.68. Denmark 78.6 +0.79. United States 77.8 -0.210. Bahrain 77.7 +1.4
The World
Top 10
SOURCE: HERITAGE.ORG/INDEx/RANKING
SOURCE: ZYEN.COM
SOURCE: ECHARRIS.COM(Note: Japan and Finland have been excluded from the 2011 survey)
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1
Cleaning Up the Himalayas
Suzanne GoldenberG
The people who seT ouT To
climb Everest spend months dreaming
about reaching the summit. They pay
$65,000 in fees to the Nepali government,
they train, trek for days, endure extreme
discomfort, even danger. So it should
be a simple thing to get them to pick up
after themselves.
Apparently not. Nearly 60 years after
Edmund Hillary conquered Everest,
and 30 years after climbing turned
commercial, the region is still struggling
to deal with mass tourism.
By the standards of the 70s, when the
main climbing routes were littered with
discarded tents and food packets, Everest
is a lot cleaner, with just a smattering
of plastic bottles and sweet wrappers
on the rocky plateau that is base camp.
But a Nepali environmental coalition is
pressing the government in Kathmandu
to adopt a new management plan to
safeguard the Himalayas in the age of
mass tourism – and to make amends for
the environmental sins of the past.
“Everybody talks about waste in the
mountains but nobody talks about proper
solutions,” says Phinjo Sherpa, director
of Eco Himal. “Cleaning up Everest
every once in a while does not help.
The main thing is management, waste
management.” The group has lodged
a plan with the government that calls
for tougher penalties against litterbugs
at Everest and the surrounding areas.
They are also pushing for the installation
of portable toilets at base camp and
investment in waste treatment facilities –
which currently do not exist in the region
– with proposals for five incinerators and
sewage treatment plants.
It’s difficult to tread lightly in the
high-altitude environment, especially in
areas this remote. The first expeditions
to Everest were monumental in scale.
The 1953 attempt, which brought success
to Hillary, set off from Kathmandu
with 1,200 porters for their equipment,
according to Kancha Sherpa, the last
surviving member of the team that made
it to base camp.
Even Hillary admitted to leaving
equipment behind, and more than 2,500
people have made it to the summit since
his day. The heavy traffic left its mark.
“People were careless. They would take a
rubbish bag but they would still leave stuff
behind,” said Tshering Tenzing Sherpa,
an official of the Sagarmatha Pollution
Control Committee, the NGO charged
with overseeing the Everest cleanup.
Modern expeditions are much more
conscious of their footprint. Groups must
pay a $4,000 (£2,500) deposit on their
equipment – in the hope that they will
carry down everything they brought.
Repeat visitors to Everest see a difference.
“It’s visibly and spectacularly better,” says
Jan Morava, an electrical engineer from
the Toronto area who was attempting the
summit with his brother and a climber
from the UAE. “There were piles of
rubbish in base camp before.”
BuT conservaTion groups say the
deposit is small compared with the other
expenses associated with an ascent on
Everest. They also argue the Sagarmatha
Pollution Control Committee lacks the
resources to keep up with all the groups
climbing Everest and to make sure that
they do indeed carry all their equipment
back down to Kathmandu.
The committee says it brought back 25
tonnes of rubbish from Everest last spring
– including 12,000kg of paper and plastic.
But conservationists argue that waste
disposal is haphazard. There are rubbish
dumps with heaps of tuna cans and plastic
bottles only a few minutes’ walk away
from villages on the trekking trail.
And, says Tshering, there is plenty
more detritus of the past still out there –
rubbish discarded by climbers years and
even decades ago, preserved in ice and
snow. “Just above the ice falls at crampon
point you can see cans from 10, 20, 30
years ago or even older,” Tshering says.
“There’s a lot of old rubbish out there.”
Other high peaks less famous than
Everest are even dirtier, notes Tshering.
And with climate change, snow and ice on
mountaintops is melting, exposing even
more rubbish. “We are in a garbage race,”
he says. n
ge
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34-39 Cover Story.indd 34 11/20/11 2:13:25 PM
December 2011
35
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December 2011
The Evolution of AllureGeorges Kern was an untested executive when he joined the luxury group Richemont a decade ago. Placed in charge of Swiss watch manufacturer IWC Schaffhausen, Kern has since transformed the company into a prestigious global brand. Nick Rice visited the IWC headquarters in Schaffhausen to ask how he pulled off one of the most remarkable success stories in the watchmaking industry.
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The first watches with a digital hours
and minutes display were created here,
almost implausibly, way back in 1885. One
of the world’s first known wristwatches
left Schaffhausen destined for the market
in the 1890s. Just a few years later, the
fascinating history of the company reveals
that the lauded psychiatrist and founder
of Analytical Psychology, Carl Gustav
Jung, became a co-owner of IWC through
marriage in 1903.
Unique from the outset, IWC watches
were created when Florentine Ariosto
Jones selected this small, idyllic city
in Switzerland as the base to develop
and manufacture high-quality Swiss
watches for the American market. The
company had a successful beginning
and Jones flourished in his venture until
adversarial circumstances and fluctuating
financial markets forced the sale of IWC
to the Rauschenbach family in 1880.
This initial change of ownership and all
subsequent inheritors has not stunted
the American’s original vision though,
and the company has always stood on a
solid foundation. However, at the turn of
the present century, IWC was in need of
some rejuvenation. The injection of flair
required to elevate the company came in
the form of current CEO, Georges Kern.
Although quick to acknowledge the
intrinsic, historical weight of the brand,
Kern nevertheless knew he had to
shake things up. “At that time 10 years
back, IWC was a very regional-oriented
company. Well known in Austria,
Switzerland and Germany, and very
well established, but dusty and old. A
good brand, not a destroyed brand at
all – turning around a destroyed brand is
always more difficult than developing a
dusty brand – but what we have managed
to do over the years is to take a solid
regional brand and make it truly global.”
The son of renowned European jeweller
René Kern, Georges Kern was born in
Düsseldorf in 1965 and grew up in both
Germany and France before moving to
Switzerland to attend the University of
St Gallen. After graduation, Kern decided
to stay in Switzerland and found work at
Jakob Suchard. Four years later he secured
his first position in the watch industry
when he joined TAG Heuer – a role that
would provide valuable experience as the
company underwent rapid and expansive
growth. When Kern sensed that TAG
The first IWC watch in the Portuguese family was released in 1939. The Portuguese Yacht Club Chronograph, which was released last year, is the first model to bring a sporting note into the family.
Walking around the immaculate and imposing museum that was once the home of F.A. Jones, the American entrepreneur who founded the International Watch Company in 1868, it is immediately apparent that the IWC brand has a rich history.
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December 2011
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Clearly as sharp intellectually as he is
sartorially, Kern has a forensic knowledge
of the modern watch industry and knows
what he must do to maintain the growth
of the company.
“We didn’t have boutiques or marketing
tools when we were developing, and
many products were not in the portfolio,
but you evolve. The brand evolves or
you die, this is Charles Darwin, you have
to always adapt. Today’s management
and challenges are totally different than
from 10 years back. You have to manage
growth. The pressure when you have a
substantial size in the context of a big
group is different. Ten years ago the
question was ‘what shall I do, how do
I build the brand?’ Today you have to
Heuer was to be acquired he set his sights
on joining the Richemont Group.
Nicolas Hayek, head of the Swatch
Group, arranged for Kern to be contacted
by Franco Cologni at Richemont and Kern
made it into the Richemont Group and
was appointed CEO of IWC two years
later at the relatively young age of 36.
Kern recalls how he secured the premier
position with humility, in consideration of
IWC’s current global status. “Well nobody
else wanted to do it and, joking apart, when
Richemont acquired Jaeger LeCoutre and
A. Lange & Söhne back in 2001, the priority
was on those brands. IWC was just in the
package. The reality is that I was one of
the few people at Richemont who could
speak French, English and German and
I was looking for more responsibility. I
guess looking at the position of IWC today,
they would never give me the job again
considering the size of the company. But at
the time the company was not in the focus
and so they said ‘Okay, let the guy take care
of it.’ Now we are one of most successful
brands in the group.”
So how exactly did he take care of it?
What were the strategies, the creative
ideas and the plans to implement them?
“Well we had the right product, the
right advertising, the right communication
and the right distribution. We had the
support and we changed the strategy,
reworking the existing products.”
Maintaining fidelity with the company’s
six different lines of watches was crucial.
As Kern elaborates, “We have not launched
one single product which is totally new.
Everything we have, be it the Pilot, the
Portuguese or the Portofino, had been
there as part of IWC. What we have done is
bring them up to speed in a contemporary
way. I don’t think we need to change that.
We can grow with what we have.”
Kern is clearly in his element when
discussing the mechanics of brand
building. He adjusts the cuffs on his
colourful lime green shirt and his eyes
sparkle as he extolls on the subject.
(L-R) Georges Kern, CEO of the International Watch Company, Tim Jeffries, Peter Lindbergh and Matthew Fox attended the IWC Presents Peter Lindbergh Exhibition at this year’s Cannes Film Festival.
The International Watch Company was founded in 1868 by the American entrepreneur F.A. Jones. The company’s rich history is displayed in a museum housed in Jones’ former home.
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Ligurian coast of Italy was a famous
enclave for the Hollywood glitterati of
the 50s and 60s and has always been
associated with classical Italian elegance.
It was the obvious place to stage a
marketing masterstroke. A world-touring
exhibition by the celebrated photographer
Peter Lindbergh, featuring an extensive
cast of brand ambassadors, too many
to list, but that includes football legend
Zinedine Zidane, actors Kevin Spacey,
Jean Reno and Cate Blanchett, and
model Elle Macpherson (a particularly
fitting choice given that Lindbergh is
credited with creating supermodels and
deliver all the financial results. If we want
to become a classic brand – and you only
have a few classic brands in the world
– you have to act in a different way. To
become a global brand you have to make
it evolve.”
It is with this brand evolution in mind
and with a focus on creating the essential
myth around IWC that Kern approached
the recent revamping of the Portofino
line. Kern knew that he had to produce
something special.
“Over the last 250 years everything
has been invented in watchmaking. You
cannot change physics – a minute remains
Renowned photographer Peter Lindbergh shot an impressive cast of IWC brand ambassadors in the Italian town of Portofino. The resulting photographic exhibition was unveiled with the launch of the Portofino watch collection earlier this year.
Clockwise from top left: Oscar-winning Australian actress Cate Blanchett; renowned American actor Kevin Spacey; Japanese actor Hiroyuki Sanada with 80s supermodel Elle Mcpherson.
a minute. The challenges in the watch
industry are different now. First of all,
the world changed. Today when you buy
a watch you don’t buy it to read time. You
want a total emotional experience. So you
need a strong design and a story. And you
need high quality in terms of technical
features. You buy a package, an emotion,
a brand, a story and a design.”
The STory for the new Portofino
collection came to Kern instinctively.
A recreation of the timeless, enigmatic
style epitomised by Portofino itself.
The seductively beautiful village on the
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she was the first of the ’80s supermodels.
Macpherson’s first professional photo
session was with Lindbergh for Italian
Vogue and he remained a mentor).
Kern lighTS up when he recalls
the experience of creating the shoot in
late 2010. “You know that old perennial
question: ‘Who would you invite to your
perfect party?’ This was it. The question
put into practice. Not as good as I had
hoped for – better. Much better.”
For Lindbergh it was also a dream
job and he said afterwards that, “This
was the sort of shoot I became a
photographer for. The sort of shoot I
dreamed of as a teenager.”
The exhibition was unveiled to
compliment the launch of the new
Portofino collection earlier this year at
the Salon International De La Haute
Horlogerie (SIHH) in Geneva with a
star-studded array of celebrity ‘Friends
of the Brand’ in attendance. In Dubai the
appearance of the Lindbergh Portofino
exhibition will be on 10 December at the
Dubai International Film Festival.
Whilst creating a powerful brand
image is essential, there must be genuine
substance behind the allure, and this
is where IWC really triumphs. The
dedication to form and flawless design
is immediately evident the moment you
see and hold an IWC watch. A tour of
the manufacturing plant in Schaffhausen
reveals the astounding levels of precision
and the rigorous testing implemented
throughout. Dedicated employees
demonstrate the production of tiny
components barely visible to the naked
eye, which can only really be appreciated
with the aid of powerful microscopes.
Even then it’s only a partial insight into
the intense scientific testing each part
undergoes before it can be used in a
watch that will tell the right time for
centuries to come.
Ultimately it is the quality of each
IWC product that stands as an immovable
frame around which the fabric of the
brand can be weaved. This is central to
Kern’s continual striving to elevate IWC
to still greater heights. “I believe in ‘love
brands’ – meaning that, there are brands
out there, and I hope IWC will be one of
them, which you love so much that you
just go for it.”
He continues, “I truly believe that
wealth is growing, the wealth of humanity
will grow – you see it every year in
statistics. The question is who can reach
these wealthy people? If you have that
‘love brand’ quality, if you are able to build
one of them, then you are fine. That’s the
art, that’s the magic.”
And what are Kern’s plans for the
future? “In the next decade we will turn
IWC into an institutional brand,” is his
confident reply. n
Kern believes in ‘love brands’. These are brands that are so well-loved and known that they inhabit an exclusive realm.
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Online sales in India have held great promise but failed to deliver in the past. That is now changing, with flipkart.com leading the charge, reports Vikas Bajaj.
flipkart is India’s answer to Amazon. It delivers books, phones and other consumer items, but with no delivery charge, and customers can pay cash on arrival.
W hen Prabhu Kumar
could not find a book
he wanted in Bangalore’s
local bookstores, he found it online at
Amazon.com for $10. But he had to pay
more than $9 in fees to have Amazon
ship it to him.
Kumar, a software programmer, said
he would not be doing that again. He
now shops on India’s answer to Amazon
– flipkart.com – which delivers books,
phones and other items in as little as 24
hours at no extra cost. Kumar doesn’t
have to pay flipkart a single rupee until
a courier bearing his books arrives at his
door. He can then hand over cash or a
credit card. “I think it perfectly fits the
Indian mentality,” Kumar said.
While dozens of electronic commerce
firms have recently sprung up to capitalise
on India’s growing internet use, they have
a problem. Indians are not yet comfortable
with shopping on the web. Many of them
remain unwilling to use credit cards online.
So the Indian retailers have gone to great
lengths to gain customers. Clients may pay
cash on delivery, and the company fields
delivery squads to ensure shipments get to
customers quickly.
One recent afternoon, four flipkart
delivery men loitered at a bungalow in the
Koramangala section of Bangalore where
the company started. When a small delivery
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van arrived from the company’s warehouse,
the men rushed to take out two large duffel
bags filled with packages that they put onto
two tables in the house. After scanning the
packages with hand-held computers, they
put the boxes into large backpacks, which
they carried on their backs as they rode off
on motorcycles to deliver them.
Online sales still make up a small
portion of overall retail spending – one
estimate pegs it at $10 billion, a tiny
fraction of India’s $500 billion retail
market – but they are growing fast.
flipkart says it had revenue of 500
million rupees ($11 million) in its last fiscal
year, and is now clocking sales of about
10 million rupees a day. SnapDeal.com, a
coupon and deals site similar to Groupon,
expects sales of 1.5 billion rupees this year,
up from almost nothing the year before.
The top executives of the Future Group,
India’s largest retail company, says its daily
online sales are on pace to triple between
now and March next year.
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Sachin Bansal, left, and Binny Bansal, founders of the Indian e-commerce company flipkart at the company’s head offices in Bangalore.
“This time it is for real,” said Kishore
Biyani, the founder and chief executive of
the Future Group, referring to an earlier
wave of e-commerce euphoria in the
early 2000s. “This is the biggest thing to
happen in India.”
That rapid growth has drawn the
attention of venture capitalists who poured
$183 million into 20 e-commerce firms
within the last year, up from $61 million
for 13 firms in the previous 12 months,
according to Venture Intelligence, a
research firm.
The rapid growth has also attracted
the notice of American online retailers.
Amazon, which has a software development
office in Bangalore, is now building a
warehouse and hiring employees for an
Indian site, according to two industry
officials. And earlier this year, Groupon
bought an Indian website, SoSasta.com.
But, like in frothy Silicon Valley, some
Indian analysts and investors are starting
to question the frenzied deal-making.
These sceptics find it difficult to justify
the high prices venture capitalists are
paying to invest in unprofitable Indian
e-commerce firms. For instance, VCCircle,
a news site, recently reported that flipkart
may soon raise $150 million, which would
give it a $1 billion valuation. (Executives
at the company declined to discuss its
financial plans.)
IndIa has 50 million to 100 million
internet users, according to various
analysts, and the number is growing by
about 30 per cent a year. JuxtConsult, a
New Delhi-based research firm, estimates
that 17 million people bought something
online this year, up from 10 million last
year. The Indian government estimates
that household consumption has increased
by more than two-thirds in the last five
years, and most of that increase has come
in the purchase of nonfood items.
“It seems to be more for real than a
flash in the pan,” said Kanwaljit Singh,
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its orders. It can also track packages
more accurately. And because labour
costs are relatively low in India, its
delivery cost is a modest $1 a package.
“More than 90 per cent of retail
transactions in India are in cash,” Bansal
said. “People like my dad and my uncle,
they are much more comfortable with
cash. If we want to increase our customer
base, we have to accept cash.”
FlIPKart Is not alone in tweaking its
model to suit Indian conditions. Myntra,
an online retailer of clothes, has a delivery
staff in Bangalore and plans to hire
couriers in other cities. SnapDeal offers
customers the option of making partial
payments online and paying the balance
to merchants whose products and services
it sells, said Kunal Bahl, a co-founder of
the service.
Consumers and suppliers laud flipkart’s
service and execution. But they expect the
company to soon face greater competition,
especially if Amazon starts an Indian
operation. “Today they are the best,” said
Ananth Padmanabhan, vice president for
sales at Penguin India. But, he asked, “If
Amazon comes here next month, and they
might, what will flipkart do?”
An Amazon spokesman, Craig Berman,
declined to comment on the company’s
plans for India, but Padmanabhan said
Amazon officials have been holding talks
with publishers, and another industry
official said the retailer has begun hiring
employees for an Indian site.
The Bansals say they are prepared
for competition from Amazon. Sachin
Bansal, who worked with Binny Bansal
as a software developer at Amazon
before starting flipkart, brushed aside a
suggestion that the firm would make for
an easy acquisition by Amazon.
“We are very keen on going our own
way,” he said. “The opportunity is so large
that we would want to grow it to a much
bigger level before we think of anything.” n
who is a senior managing director at
Helion Advisors, which has invested in
about a half-dozen Indian e-commerce
sites, including MakeMyTrip.
But capitalising on India’s growth
online will not be easy. Sachin Bansal
and Binny Bansal (who are not related),
the founders of flipkart, have had to do
things that their American or European
counterparts would never have. They
have set up delivery operations in 13 big
Indian cities like Bangalore, Mumbai
and New Delhi because Indian shippers
do not have the delivery and package-
tracking abilities that FedEx and UPS
provide for its American customers.
They plan to expand flipkart’s delivery
network to 25 cities within a year.
Sachin Bansal, the company’s chief
executive, said that by having its own
staff, flipkart avoids paying courier
services’ commissions of more than
two per cent to accept cash on delivery,
which make up about 60 per cent of
Couriers with flipkart sort packages in preparation of their delivery, at a distribution hub in Bangalore.
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Why does the food on your plate never look as good as the one in the TV ad? That’s because there’s a huge creative industry behind it, reports David Segal.
The sauce will not
behave. It is supposed to drip
twice, on cue, from the bottom
right-hand corner of a forkful of tortellini
– first as the fork is lifted above the plate
and, second, after the fork pauses briefly
in the air and starts to rise again. Two
drips. A sequence that lasts a second and
a half, tops.
A dozen men at MacGuffin Films, a
studio in Manhattan, are struggling to
capture this moment. For more than an
hour one recent afternoon, they huddle
around a table rimmed with enormous
stage lights, fussing over a casserole as
if it’s a movie star getting primped for a
close-up.
“Lights. Roll. Action. Drip!” shouts
Michael Somoroff, a veteran commercial
director who has shot television ads
for Red Lobster, Burger King, Papa
John’s and dozens of other fast-food and
casual-dining chains. A specialist in the
little-known world of tabletop directing
– named for the piece of furniture where
most of the work is set – Somoroff is hired
to turn the most mundane and fattening © 2
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staples of the American diet into luscious
objects of irresistible beauty.
If you watch television, you’ve seen
his work, and the work of the five or six
other major players in this micro-niche
of advertising. These men – yes, they’re
all men – make glossy vignettes that star
butter-soaked scallops and glistening
burgers. Their cameras swirl around fried
chicken, tunnel through devil’s food cake
and gape as soft-serve cones levitate
and spin.
Few outside the business know their
names. But given the more than $4 billion
in television air time bought by restaurant
chains and food conglomerates each year,
these directors arguably have some of
the widest exposure of any commercial
artists in the US. In a typical week, tens of
millions of viewers see their work.
“Aside from movie directors,” Somoroff
says during a break in shooting, “I don’t
know anyone with an audience as large
as mine.”
On this particular afternoon, he is
filming a commercial for a chain that did
not want to see its name in this article.
And you can sort of understand why.
If you’ve ever been to a restaurant and
thought, “This does not look like the dish
in the ad,” here’s the irony: The dish in the
ad doesn’t look like the dish in the
ad, either.
This casserole shot, for instance, is
an elaborate tango of artifice, technology
and timing. The steam wafting over the
dish comes not from the food, but from a
stagehand crouched under a table with the
kind of machine that unwrinkles trousers.
The hint of Alfredo sauce that appears
when the fork emerges from the pasta?
That’s courtesy of tubes hidden in the
A TemperAmenTAl STAr
Jimmy Furino lays a piece of chicken on a grill during a shoot for O'Charley's restaurants at MacGuffin Films in New York.
Food:
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back of the dish and hooked to what
look like large hypodermic needles.
Moments before each take, Somoroff
yells, “Ooze!” That tells the guy with
the needles, standing just outside of the
frame, to start pumping.
As for that quarrelsome drip from the
fork, it is the responsibility of Anthony
DeRobertis, a special-effects rigger who
holds his own hypodermic of sauce and
is having a hard time synching with a
hand model, a young man with a military
haircut who is clutching the fork.
“Anthony, the second drip is about
10 minutes after the shot is over,” says
Somoroff after five or six takes, sounding
faintly annoyed. “I’m right on it,”
DeRobertis says. “You’re on it, but it’s not
dripping when it has to drip.”
A break is called and a tube is attached
to DeRobertis’ sauce injector, which is
then taped near the bottom tine of the
fork, in a way that’s invisible to Somoroff ’s
immense Photo-Sonics camera.
Sauce and fork are finally in unison.
After a few more tries, Somoroff has a
take he likes enough to show to reps from
the client and its ad agency, a group of
whom are waiting in a nearby room that
is decked out with a large high-definition
TV. The pasta appears moist, the steam
organic and the minuet of drip and hand
nothing more than a diner on the verge of
a blissful bite.
“i make my living basically taking
food and painting a reality with it,”
says Somoroff, leaning back in a chair
in his office as the team preps another
set-up. “And if I succeed in a given
moment, you’re going to go buy that dish
because you’re going to identify with
the experience we’ve created. To do that
with something as banal as food is the
challenge. I mean, it’s easy to go out and
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shoot a beautiful sunset or a beautiful
girl. They’re beautiful, OK?” He gestures
toward the middle of the studio. “I’ve got
a noodle over here.”
This is a good moment to be a tabletop
director in the big leagues, particularly
if you specialise in food. Low- and mid-
priced chain restaurants are one of the few
segments of the economy that decided,
during the recession and in its aftermath,
to spend as much or more on advertising
than they did in the years before.
Fast-food, casual-dining and pizza
chains, as well as what are lumped
together as ‘doughnut and coffee
restaurants,’ spent $300 million more on TV ads is in serious trouble. “If you come
off television, when your sales dip, it
takes a long time to get them back to
where they were before they stopped
advertising,” says Michael Branigan, vice
president for marketing at Sizzler. “There
are a tonne of studies that show this. You
TV ads in 2010 than they did
in 2007, according to Kantar
Media, a market research
firm. If patterns hold, the
numbers will be even larger
this year.
“Generally speaking,
restaurant chains spend
about three per cent of
revenue on advertising,”
says Michael Gallo, an analyst at C.L.
King & Associates. “Because these
restaurant systems are large and have
density, television is an easy way to reach
customers in a cost-effective way.”
And any restaurant chain that forswears
Michael Somoroff, center, a tabletop director who shoots television ads for fast-food and casual-dining chains, with his director of photography, Nick Fuglestad.
Ed Fountain, who builds food-tossing devices, next to a catapult in his workshop at Silvercup Studios in the Queens borough of New York. Fountain originally constructed the contraption for a Long John Silver's commercial that featured colliding shrimp.
“Because these restaurant systems are large and have density, television is an easy way to reach customers in a cost-effective way.”
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lose brain share of your customers, and
it is expensive to get revenues up again.
If I stopped advertising, Sizzler’s revenue
would be down, minimally, 10 to 15 per
cent for the year.”
anything that flatters the food, of
course, is fair game, and that includes
gimmicks you’re unlikely to find in a
fridge. Glue is used to keep spaghetti on
forks and pizzas in place. The ice in a
beverage might be made of acrylic and
cost $500 a cube. The frost coming off a
beer could be a silicone gel, mixed with
powder and water.
The difference between enhancement
and fakery, though, becomes a little
murky, and some directors tiptoe right up
to, and well past, the marbles-in-the-soup
line. If the tomatoes in a client’s red wine
reduction aren’t visible, some fresh ones
may be sliced up and tossed in. On rare
occasions, the food you see on screen is
merely a facsimile of the product.
“We used lard and Karo syrup for an
ice-cream client,” says David Deahl, a
tabletop director in Chicago. “The lights
we have melt the product so quickly that
it’s impossible to make ice cream look like
ice cream. So we got permission from our
client to fake it.”
That’s a rarity. Deahl and other
directors say they expend far more
effort making the food look authentic
than they do glamorising it. The risk is
overpromising, a topic that comes up a
lot on sets.
Until the early 1970s, most TV
commercials for food and drink were
static, shot with a zoomed-in, wide-angle
lens mounted on a camera that didn’t
move. Then came Elbert Budin, a former
still-life magazine photographer, who set
up a studio not far from Penn Station in
Midtown Manhattan; his pet finches had
the run of the place. He used micro lenses
placed five centimetres from the product,
close enough to see individual droplets on
a soda can. With the help of a mini jib, he
would swing the camera in graceful arcs.
If tabletop has a vocabulary, Budin
coined many of the words. He popularised
prep shots (a kind of back story for the
product, typically ingredients being
chopped), crave shots (self-explanatory)
and hero shots (a glorifying farewell look
at the product, usually in the last few
seconds of the ad).
And it is from Budin that we get one
of the lasting visual tropes of American
advertising: flying food. Ever since he
launched an orange through a thin
sheet of water for Sunkist – showing in
gorgeous slow motion the hole left by the
fruit – everything that you can put in your
mouth and store in a pantry has been
hurtling through the air.
“Food has to be in motion to have
character,” says Alex Fernbach, another
Budin acolyte, who now works at Arf &
Co, a studio in Hoboken, New Jersey. “It
gives food a personality.” n
Food ads are carefully crafted and enhanced with gimmicks, such as using glue to keep everything on a pizza slice in place.
gr
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46-48, 50 Food Advertising.indd 50 11/20/11 3:52:45 PM
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Amazon will publish
122 books by the end of the
year in an array of genres, in
both physical and e-book form. It is a
striking acceleration of Amazon’s fledging
publishing programme that will place the
retailer squarely in competition with the
New York and international houses that
are also its most prominent suppliers.
It has set up a flagship line run
by a publishing veteran, Laurence
Kirshbaum, to bring out brand-name
fiction and nonfiction. It signed its
first deal with the self-help author Tim
Ferriss, a favourite with young men.
Recently it announced a memoir by the
actress and director Penny Marshall,
for which it paid $800,000, a person
with direct knowledge of the deal said.
Publishers say Amazon is aggressively
wooing some of their top authors. And
the company is gnawing away at the
services that publishers, critics and
AmAzon TAkes on PublishingAmazon.com has taught readers that they do not need bookstores. Now it is encouraging writers to cast aside their publishers, reports David Streitfeld.
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agents used to provide.
Several large publishers declined to
speak on the record about Amazon’s
efforts. “Publishers are terrified and
don’t know what to do,” said Dennis Loy
Johnson of Melville House, who is known
for speaking his mind.
“Everyone’s afraid of Amazon,” said
Richard Curtis, a longtime agent who
is also an e-book publisher. “If you’re
a bookstore, Amazon has been in
competition with you for some time. If
you’re a publisher, one day you wake up
and Amazon is competing with you too.
And if you’re an agent, Amazon may be
stealing your lunch because it is offering
authors the opportunity to publish directly
and cut you out. It’s an old strategy:
Divide and conquer.”
Amazon executives declined to say how
many editors the company employed, or
how many books it had under contract.
But they played down Amazon’s power
and said publishers were in love with
their own demise. “It’s always the end
of the world,” said Russell Grandinetti,
one of Amazon’s top executives. “You
could set your watch on it arriving.”
He pointed out, though, that the
landscape was in some ways changing
for the first time since Gutenberg
invented the modern book nearly 600
years ago. “The only really necessary
people in the publishing process now
are the writer and reader,” he said.
“Everyone who stands between those
two has both risk and opportunity.”
Amazon has started giving all
authors, whether it publishes them
or not, direct access to highly coveted
Nielsen BookScan sales data, which
records how many physical books
they are selling in individual markets
like Milwaukee or New Orleans. It is
introducing the sort of one-on-one
communication between authors and
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Amazon, the online retailer, has long competed with bookstores; now it is starting to make deals with authors, bypassing the traditional publisher.
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“Publishers caught a glimpse of a future they fear has no role for them late in September when Amazon introduced the Kindle Fire, a tablet for books and other media sold by Amazon.”
their fans that used to happen only on
book tours. It made an obscure German
historical novel a runaway best seller
without a single professional reviewer
weighing in.
Publishers caught a glimpse of a future
they fear has no role for them late in
September when Amazon introduced the
When Penguin found out, it went
“ballistic,” Davenport wrote on her blog,
accusing her of breaking her contractual
promise to avoid competing with it. It
wanted Cannibal Nights removed from
sale and all mentions of it deleted from
the internet. Davenport refused, so
Penguin cancelled her novel and has said
it will pursue legal action if she does not
return the advance.
“They’re trying to set an example: If you
self-publish and distribute with Amazon,
you do so at your own risk,” said Jan
Constantine, a lawyer with the Authors
Laurel Saville self-published a memoir about her mother after it was rejected by conventional publishers. It caught the attention of Amazon editors who offered to republish it, in essence becoming a business partner.
Jeff Bezos, the CEO and founder of Amazon, introduced the Kindle Fire in September. The device may allow Amazon to develop, promote and deliver its products directly to the consumer.
Kindle Fire, a tablet for books and other
media sold by Amazon. Jeffrey Bezos,
the company’s chief executive, referred
several times to Kindle as “an end-to-end
service,” conjuring up a world in which
Amazon develops, promotes and delivers
the product.
For a sense of how rattled publishers
are by Amazon’s foray into their business,
consider the case of Kiana Davenport, a
Hawaiian writer whose career abruptly
derailed in September. In 2010 Davenport
signed with Riverhead Books, a division
of Penguin, for The Chinese Soldier’s
Daughter, a Civil War love story. She
received a $20,000 advance for the book,
which was supposed to come out next
summer. If writers have one message
drilled into them these days, it is this:
hustle yourself. So Davenport took off
the shelf several award-winning short
stories she had written 20 years ago and
packaged them in an e-book, Cannibal
Nights, available on Amazon.
Guild who has represented Davenport.
Davenport knows her real crime:
“Sleeping with the enemy.”
Penguin declined to comment.
If some writers are suffering collateral
damage, others are benefiting from this
new setup. Laurel Saville was locked
out by the old system, when New York
publishers were the gatekeepers. “I got
lots and lots of praise but no takers,” said
Saville, 48, a business writer who lives
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in the upstate New York town of Little
Falls. Two years ago she decided to pay for
the publication of her memoir about her
mother’s descent from California beauty
queen to street person to murder victim.
She spent about $2,200, which yielded
sales of 600 copies. Not horrible but far
from earth-shaking.
Last autumn, Saville paid $100 to be
included in a Publishers Weekly list of
self-published writers. The magazine
ended up reviewing her memoir, giving it
a mixed notice that nevertheless caught
the attention of Amazon editors. They
sent Saville an email offering to republish
the book. It got an editorial once-over,
a new cover and a new title: Unraveling
Anne. It was published in November.
Saville did not get any money upfront,
as she would have if a traditional
publisher had picked up her memoir. In
essence, Amazon has become her partner.
“I assume they want to make a lot of
money off the book, which is encouraging
to me,” said Saville, who negotiated her
deal without an agent.
Her contract has a clause that forbids
her from discussing the details, which is
not traditional in publishing. The publicity
plans for the book are also secret.
Can amazon secretly create its own
best sellers? The Hangman’s Daughter
was an e-book hit. Amazon bought the
rights to the historical novel by a first-
time writer, Oliver Potzsch, and had it
translated from German. It has now sold
250,000 digital copies.
“The great and fascinating thing
about Amazon’s publishing programme
is that there can be these grass-roots
phenomena,” said Bruce Nichols of
Houghton Mifflin Harcourt, which
republished the novel this summer.
Saville no longer even contemplates a
career with a traditional publisher. “They
had their shot,” she said. She is now
writing a novel. “My hope is Amazon will
think it’s wonderful and we’ll go happily
off into the publishing sunset,” she said. n
Amazon’s business model has already made severe inroads into conventional bookstores’ bottom line. Borders, a large chain, was forced to file for bankruptcy protection. Publishers fear they may be next.
Author Laurel Saville is happy with her relationship with Amazon and is no longer prepared to work with conventional book publishers.
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Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant alarmed Germany to such an extent that it permanently shut down eight of the country’s
oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature and emotional, reports Elisabeth Rosenthal.
NoT sInCe THe GrIm perIoD
after World War II has Germany had
significant blackouts, but it is now
bracing for that possibility after shutting down
half its nuclear reactors practically overnight.
Nuclear plants have long generated nearly a
quarter of Germany’s electricity. But after the
tsunami and earthquake that sent radiation
spewing from Fukushima, half a world away in
Japan, the government disconnected the eight
oldest of Germany’s 17 reactors – including the
two in the drab factory town of Biblis – within
days. Three months later, with a new plan to
power the country without nuclear energy
and a growing reliance on renewable energy,
parliament voted to close them permanently.
There are plans to retire the remaining nine
reactors by 2022.
As a result, electricity producers are
scrambling to ensure an adequate supply.
Customers and companies are nervous
about whether their lights and assembly
lines will stay up and running this winter.
Economists and politicians argue over
how much prices will rise.
“It’s easy to say, ‘Let’s just go for renewables,’
and I’m quite sure we can someday do without
nuclear, but this is too abrupt,” said Joachim
Knebel, chief scientist at Germany’s prestigious
Karlsruhe Institute of Technology.
He characterised the government’s
shutdown decision as “emotional” and pointed
out that on most days, Germany has survived
this experiment only by importing electricity
from neighbouring France and the Czech
Republic, which generate much of their power
with nuclear reactors.
Then there are real concerns that the plan
will jettison efforts to rein in manmade global
warming, since whatever nuclear energy’s
shortcomings, it is low in emissions. If
Germany, the world’s fourth-largest economy,
falls back on dirty coal-burning plants or
uncertain supplies of natural gas from Russia,
isn’t it trading a potential risk for a real one?
The International Energy Agency, generally
a fan of Germany’s green-leaning energy
policy, has been critical. Laszlo Varro, head of
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Germany Dims Its Nuclear PowerThe accident at Japan’s Fukushima nuclear plant alarmed Germany to such an extent that it permanently shut down eight of the country’s
oldest reactors and plans to retire the remaining nine by 2022. But sceptics argue that the decision was premature and emotional, reports Elisabeth Rosenthal.
NoT sInCe THe GrIm perIoD
after World War II has Germany had
significant blackouts, but it is now
bracing for that possibility after shutting down
half its nuclear reactors practically overnight.
Nuclear plants have long generated nearly a
quarter of Germany’s electricity. But after the
tsunami and earthquake that sent radiation
spewing from Fukushima, half a world away in
Japan, the government disconnected the eight
oldest of Germany’s 17 reactors – including the
two in the drab factory town of Biblis – within
days. Three months later, with a new plan to
power the country without nuclear energy
and a growing reliance on renewable energy,
parliament voted to close them permanently.
There are plans to retire the remaining nine
reactors by 2022.
As a result, electricity producers are
scrambling to ensure an adequate supply.
Customers and companies are nervous
about whether their lights and assembly
lines will stay up and running this winter.
Economists and politicians argue over
how much prices will rise.
“It’s easy to say, ‘Let’s just go for renewables,’
and I’m quite sure we can someday do without
nuclear, but this is too abrupt,” said Joachim
Knebel, chief scientist at Germany’s prestigious
Karlsruhe Institute of Technology.
He characterised the government’s
shutdown decision as “emotional” and pointed
out that on most days, Germany has survived
this experiment only by importing electricity
from neighbouring France and the Czech
Republic, which generate much of their power
with nuclear reactors.
Then there are real concerns that the plan
will jettison efforts to rein in manmade global
warming, since whatever nuclear energy’s
shortcomings, it is low in emissions. If
Germany, the world’s fourth-largest economy,
falls back on dirty coal-burning plants or
uncertain supplies of natural gas from Russia,
isn’t it trading a potential risk for a real one?
The International Energy Agency, generally
a fan of Germany’s green-leaning energy
policy, has been critical. Laszlo Varro, head of
December 2011
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The anti-nuclear movement has always been strong in Germany and the accident at Japan’s Fukushima plant gave it added impetus.
prepared to make huge investments in
improving energy efficiency in homes and
factories as well as in new clean power
sources and transmission lines. So far,
there have been no blackouts.
Juergen Grossmann, chief executive
of the German energy giant RWE, which
owns two closed reactors here in Biblis,
about 64 kilometres south of Frankfurt,
expressed scepticism. “Germany, in a
very rash decision, decided to experiment
on ourselves,” he said. “The politics are
overruling the technical arguments.”
Germany’s planners believed
they could forgo nuclear energy in large
part because of the country’s remarkable
progress in renewable energy, which now
accounts for 17 per cent of its electricity
output, a number the government
estimates will double in 10 years. On days
when the offshore wind turbines spin full
tilt, Germany produces more electricity
from renewable sources than it uses,
according to European energy monitors.
Germany has “exceeded everyone’s
expectations on renewable power,” said
Varro, showing that it could be cost
effective and reliable.
Until it closed the reactors, Germany
was Europe’s leading energy exporter.
With a total of 133 gigawatts of installed
generating capacity in place at the start of
this year, “there was really a huge amount
of space to shut off nuclear plants,” Harry
Lehmann, a director general of the
German Federal Environment Agency and
one of Germany’s leading policymakers
on energy and environment, said of the
road map he helped develop. The country
needs about 90.5 gigawatts of generating
capacity on hand to fill a typical national
demand of about 80 gigawatts a day.
So the 25 gigawatts that nuclear power
contributed would not be missed – at least
within its borders.
To be prudent, the plan calls for the
creation of 23 gigawatts of gas- and coal-
powered plants by 2020. Why? Because
renewable plants don’t produce nearly
to capacity if the air is calm or the sky
is cloudy, and there is currently limited
capacity to store or transport electricity,
energy experts say.
New coal and gas plants will use the
cleanest technology available and should
not aggravate climate change, government
officials said, because they will operate
within the European carbon-trading
system in which plants that exceed the
allowed emissions cap have to buy carbon
the agency’s gas, coal and power markets
division, called the plan “very, very
ambitious, though it is not impossible,
since Germany is rich and technically
sophisticated.” Even if Germany succeeds
in producing the electricity it needs, “the
nuclear moratorium is very bad news in
terms of climate policy,” Varro said. “We are
not far from losing that battle, and losing
nuclear makes that unnecessarily difficult.”
The government counters that it is
German chancellor Angela Merkel inspects a commercial offshore wind farm in the Baltic Sea. Merkel extended the operating licenses of Germany's nuclear plants last year, but she had to do an about face earlier this year due to public pressure.
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Angela Merkel, herself a physicist, decided
last fall to extend the operating licenses of
Germany’s nuclear plants over concerns
that innovation alone would not satisfy the
country’s energy appetite.
Fukushima changed everything. That
Japan is a technologically advanced
country made the nuclear accident more
alarming to the German people than
the Chernobyl disaster, at an old Soviet
reactor. Despite that, industry experts and
residents of reactor towns like Biblis and
nearby Philippsburg were stunned by the
suddenness of the about-face. Both towns
will lose hundreds of jobs and millions in
tax revenue. German energy companies,
however, say they have been handed a
national energy template that looks good
on paper but is technically challenging.
Although the country’s production of energy
is bounteous, they say it is not always
available where and when it is needed.
Northern Germany has offshore wind
and coal deposits, but southern Germany
– a manufacturing epicentre that is
home to Mercedes, BMW and Audi –
has no plentiful local fuel source other
than nuclear. Germany’s current grid is
highly decentralised, lacking high-voltage
transmission lines to move electricity over
long distances. “Now, with the nuclear shut
down, we have a very difficult task,” said
Joachim Vanzetta, head of transmission
system operations at Amprion, the largest
of the country’s four grid operators.
This winter, Amprion predicts its
grid will have 84,000 megawatts of
electricity at its disposal, to provide 81,000
megawatts needed for consumption – an
uncomfortably slim margin of safety,
Vanzetta said. In prior years, electricity
was readily available for purchase on the
European grid if the price was right.
But exported German power is what
helped keep France glowing in winter.
“At the moment, we have a stressed
system, but it’s under control,” Vanzetta
said. “If we have days with no wind and no
solar and can’t buy energy from abroad,
then there is the risk of blackouts.” n
Stefan Martus is the major of Philippsburg. The town will lose hundreds of jobs and millions in tax revenue when its nuclear plant is closed.
credits from companies whose activities
are environmentally beneficial, thus
evening out the environmental ledger.
Electricity prices are expected to rise
by 35 to 40 euros ($50 to $60) per
household each year, or less than five per
cent, the government estimates. Although
nuclear energy generally costs less than
newer options, German law has long
stipulated that renewable energy must be
purchased first even if it is costlier.
But sceptics consider government
assumptions overly optimistic. Stefan
Martus, the mayor of Philippsburg, says
he believes energy costs could rise more
dramatically than government estimates;
the price of permits to offset dirty power
plants is highly unpredictable and
variable, like the value of stocks. And the
International Energy Agency does not
think Germany – or any other country –
will be able to reduce its emissions at a
reasonable cost without nuclear power.
even before Fukushima, nuclear
energy’s days in Germany were numbered.
Biblis had been the site of giant national
antinuclear demonstrations, and Germany
was already enacting a plan for slowly
phasing out nuclear energy by 2023.
The country has become the world leader
in wind power and a master at squeezing
more energy efficiency out of appliances and
homes, having built tens of thousands of
self-heating ‘passive houses’. Still, Chancellor
“The country has become the world leader in wind power and a master at squeezing more energy efficiency out of appliances and homes, having built tens of thousands of self-heating ‘passive houses’.”
58-60, 62 Germany Nuclear.indd 62 11/20/11 3:46:11 PM
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Banks are targeting the rapidly growing emerging markets to keep profits flowing. But emerging markets are volatile and have unique
regulations, report Susanne Craig and Ben Protess.
Wall Street loveS
to crow about its
overseas conquests.
Vikram S. Pandit, the head of
Citigroup, boldly promised in 2009
that “we will be the single largest
emerging markets financial services
company.” Goldman Sachs’ chief
executive, Lloyd C. Blankfein, said
at a conference last year that one
of his firm’s big goals was “to be
Goldman Sachs in more places.”
But there’s a quiet truth to success
in those risky markets: The path to
profits is often filled with mistakes
and setbacks.
“A lot of big banks are looking to
developing markets, but historically
it’s tended to be a volatile move,”
said James Sinegal, a bank analyst
at the research firm Morningstar. “It
might not be as easy as they expect.”
Banks like Citigroup, Goldman
Sachs and Morgan Stanley are
chasing the potential payoff abroad.
The economies of countries like
China, India and Brazil are growing
faster than that of the United States.
Such places also represent an
untapped client base, with a growing
middle class and a large number of
wealthy individuals.
As profits wane on the home
front, Wall Street firms are
increasingly dependent on the
emerging markets to bolster their
bottom lines. Citicorp, a division
of Citigroup, draws about half
of its revenue from emerging
countries, up from roughly 25
per cent in 2005. International
markets account for 47 per cent
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Vikram Pandit, CEO of Citigroup, promised in 2009 that the bank would be the largest emerging markets financial services company.
of Goldman’s profits. Morgan Stanley
generated nearly a third of its net revenue
from outside the Americas.
“With the United States slowing down,
it is not surprising that institutions are
looking in the emerging markets,” said
Hamid Biglari, a Citicorp vice chairman
and chief of emerging markets.
But the perils can be plentiful, with
economic, political and regulatory
challenges. Foreign regulators have scolded
banks, fined them and even banned their
activities in various countries. Citigroup
twice ran into problems with Japanese
authorities. In turn, Wall Street says it has
cleaned house at overseas offices, taken
greater control of foreign ventures and
tapped local bankers to lead new projects.
Local knowledge is especially critical,
as firms try to navigate the regulatory and
political environment that is crucial to a
bank’s business. Earlier this year, Citigroup
found itself in hot water with Indonesian
regulators. After an investigation into
suspected embezzlement by an employee
and the death of a client after meetings
with the bank’s outside debt collectors, the
country’s central bank imposed sanctions
on Citigroup, including a one-year ban on
opening new branches.
In June, the bank removed its top
country officer, replacing him with a
native Indonesian, Tigor Siahaan, a
seasoned banker experienced in dealing
with local regulators and government
officials. Now, the bank is tweaking
its internal controls, bringing its debt
collecting in-house and regularly rotating
back-office personnel. The bank said it
was also working closely with Indonesian
authorities. “How to behave responsibly
in these markets comes with experience,”
Biglari said. “You have to figure out how
to work with the cultural norms.”
Financial firms have also realised that
they need to commit to a market, because
it can take years if not decades to build
up local relationships and understand the
country’s customs.
“Financial firms have also realised that they need to commit to a market, because it can take years if not decades to build up local relationships and understand the country’s customs.”
While Goldman says on its website
that it has had a presence in Russia since
1998, the firm has had its troubles in the
country. Not long after opening in Russia,
Goldman downsized its operations,
concerned about the financial crisis that
prompted the government to devalue the
ruble. It closed the Moscow office and
reassigned staff members. Christopher
Barter, co-chief executive for Goldman’s
Russia business, said the investment bank
should not have left the country. “We
missed out on years of a footprint there,”
he said. “When you go into a country, you
have to maintain your commitment.”
It took years to build up the business
in Russia again. Goldman reopened the
Moscow location in 2001, but it didn’t
fully ramp up there until 2006, when it
obtained a brokerage license. Today, the
firm has 140 employees in Russia, up from
Hamid Biglari, a Citicorp vice chairman and chief of emerging markets, stresses the importance of understanding the cultural norms of different markets.
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several times a year. And Blankfein,
along with other Wall Street chiefs like
Jamie Dimon of JPMorgan Chase, has
joined a committee set up by the Russian
government to help bring more foreign
money to the country.
Firms have also realised they need
30 people five years ago.
The company has established stronger
ties in the country since it has returned.
In 2008, Goldman held a board meeting
in Russia, a nod to its re-emergence
there. Michael Sherwood, vice chairman
at Goldman Sachs, now visits Russia
more management oversight of overseas
investments.
Morgan Stanley was one of the
first investment banks to establish a joint
venture in China. In 1995, it teamed up
with China Construction Bank to form the
China International Capital Corp. But the
Wall Street bank was a passive investor,
owning just one-third of the business, the
limit for foreign securities firms under
Chinese rules. It also ceded management
control to its partners. In 2010, Morgan
Stanley sold the stake to a group of private
equity firms. Since then, Morgan Stanley
has forged a new relationship with Huaxin
Securities. While it still owns a one-third
stake in the venture, called Morgan
Stanley Huaxin Securities, it has seats on
the firm’s board and plays a role in the
day-to-day management of the firm. A
Morgan Stanley managing director, Yang
Kai, is the chief executive of the company.
While foreign business is hardly a
guaranteed win, financial firms are willing
to take the risks. It’s one of the industry’s
few options as banks deal with costly new
regulations, sluggish economic growth in
their home markets and a volatile market
– all of which are weighing on profits.
“These guys are hurting and it gets
worse by the day,” said Michael Driscoll, a
professor at Adelphi University’s business
school and former senior trader at Bear
Stearns. “You can only squeeze so much till
you go looking elsewhere for a return.” n
Not everybody succeeds in emerging markets. Barclays and Banco Santander SA are among western lenders who abandoned retail operations in Russia as state companies gained market share and expanded into investment banking.
“It’s one of the industry’s few options as banks deal with costly new regulations, sluggish economic growth in their home markets and a volatile market – all of which are weighing on profits.”
Stephen Roach, non-executive chairman of Morgan Stanley Asia, has valuable local knowledge thanks to having lived in Tokyo, Hong Kong and Singapore.
The chairman and CEO of Goldman Sachs, Lloyd Blankfein, wants to expand aggressively in emerging markets.
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Travel
EssentialsThe besT of leisure and lifesTyle
RussiaA cruise along the historic Volga- Baltic Waterway not only takes in St Petersburg and Moscow but also all the history and scenery along the route, reports Christina Pfeiffer.
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Kizhi island is a unesco World heritage site, famed for its wooden buildings. The Church of the Transfiguration is russia’s oldest wooden church.
Valaam is an archipelago of islands in lake ladoga, which is the largest lake in europe.
that connect the Volga River to the
Baltic Sea. Cruising is one of the most
comfortable ways to travel through
Russia, where few people speak English
and reading the Cyrillic alphabet is next to
impossible. Then there is also the luxury
of only unpacking once and having your
belongings float with you.
After a $14 million refit, MS
AmaKatarina began cruising Russia’s
waterways in May 2011. By Russian
standards, the ship is luxurious with 10
stateroom and suite categories. Many
of the staterooms have balconies and
amenities such as new ensuite bathrooms,
satellite television, internet access and
a nightly turndown service with
chocolates on your pillow.
The ship accommodates 212 passengers
and it is the most spacious vessel on the
Volga-Baltic Waterway. There are two
restaurants, the Opera on the second
floor and the cosier Symphony above it,
and two bars. The atmosphere aboard
is convivial and the
open seating policy
makes it easy to make
new friends. Each
n ethereal calm
fills the air as the MS
AmaKatarina cruises past
fishing boats towards
a landscape of onion-
domed churches, spires,
monasteries and colourful
villages, towns and cities. Slicing across
Lake Ladoga, the ship creates ripples of
liquid gold to match the colour of the
sky. It is past 11pm at night and the sun
is a fiery ball sinking slowly behind the
forested shore. Yet it feels like it is still early
afternoon as I stand on deck, marvelling at
the Russian white night. Even after the sun
has set, magic lingers in the purple-pink
sky, leaving me with vivid memories of
midnight sunsets that flood my mind long
after I have left Russia.
The cruise between St Petersburg
and Moscow travels along a picturesque
section of the Volga-Baltic Waterway,
which flows through 1,367 kilometres
of lakes, rivers, reservoirs and canals
day there is a shore excursion in a village,
town or city, accompanied by a team of
attentive young English-speaking men
and women.
When passengers are not exploring,
there is a daily programme of cultural
and educational activities such as Russian
language lessons, history lectures, doll-
painting, balalaika-playing and cooking
lessons. The informative talks about
Russian costumes, tea and vodka were
particularly well attended.
St PeterSburg is the perfect place
to embark as this historic city is spread
over 101 islands and 66 canals, meaning
that water is never far from your mind.
From St Petersburg the Neva River
flows into Europe’s largest freshwater
lake, Lake Ladoga (it’s the world’s 14th
largest lake), then into the Svir River,
where the MS AmaKatarina cruises past
colourful timber houses and jewel-box
churches. After touring grand palaces,
golden-domed churches and museums
in St Petersburg, cruising through the
countryside is a relaxing contrast.
At Svirstroy, a small town with around
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1,000 residents, we stretched our legs
among villagers dressed in colourful
Russian costumes selling toys, lace,
hand-carved timber eggs, dolls, lacquer
bowls and crochet tops. The shopping in
Svistroy is much cheaper than in Moscow
and St. Petersburg, which makes it a good
place to buy souvenirs.
One of the highlights of the cruise is
Kizhi Island, which is a UNESCO World
Heritage site of timber buildings and
home to the oldest wooden church in
Russia – the 14th-century Church of the
Resurrection of Lazarus. In the 1950s,
dozens of historical wooden buildings were
moved to the island from various parts
of Karelia (a federal republic of Russia)
for preservation purposes. Nowadays, the
entire island and the nearby area form
a national open-air museum with more
than 80 historical wooden structures. Our
walking tour of the island took us in and
out of chapels, belfries, log houses, mills,
bath houses, barns and the jaw-dropping
18th-century Church of the Transfiguration
with its 22 silvery onion-domed cupolas
glittering in the sun.
Lake Onega is connected to the Kovzha
The rostov Kremlin state Museum is a major attraction in the yaroslavl region, which forms part of russia’s famed ‘Golden ring’ of cities
Passengers on the MS AmaKatrina can participate in daily cultural and educational activities.
“It’s at this point, as one gets closer to Moscow, that the cruise enters one of the most fascinating regions in Russia known as the ‘Golden Ring’ of cities.”
River via the Volga Baltic canal, which is
a series of locks that rise 80 metres (about
the height of a 30-storey building). The
river then flows into Lake Beloye and
Sheksna River where we docked at Goritsy
and toured the nearby Kirillo-Belozersky
monastery. The monastery is a massive
complex of 15th to 17th century churches
surrounded by fortress walls on the shore
of Lake Siverskoye. Inside are some of
the most intricate and beautiful historic
icons I’ve seen while just outside,
along the shores of the lake, is the local
swimming spot.
It’S at this point, as one gets closer to
Moscow, that the cruise enters one of
the most fascinating regions in Russia
known as the ‘Golden Ring’ of cities. The
main currents of history ignored these
cities, leaving towns such as Vladimir,
Suzdal, Sergiev Posad, Rostov Velikiy and
Yaroslavl as quaint and perfect as when
they were first constructed. The ‘golden’
refers to the historic and architectural
wonders preserved in these towns. Some
of them, like Yaroslavl, were centres of
powerful principalities subjugated by
Moscow during its rise to power. Others,
like Uglich, have never been large or
powerful but have still played important
roles in Russian history.
The MS AmaKatarina calls at two of
these towns. First is Yaroslavl, which is
one of Russia’s oldest cities and traces its
roots back to the Vikings. The historical
part of the city, a World Heritage Site, is
located at the confluence of the Volga and
the Kotorosl Rivers. Besides the unique
architecture in the old town, the Yaroslavl
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opportunity to experience modern life by
having breakfast in a local home. Some of
us got a taste of life with poor families in
the countryside while others visit Soviet-
era apartments in town. Many of the hosts
speak little or no English but we were all
served the same food: millet porridge,
blini and home-made jam.
the next and last stop is Moscow,
where the various tours naturally include
Red Square and the Kremlin, the Tretyakov
Museum, an optional visit to the Moscow
Circus, and Moscow’s famed Metro.
Tourism in Russia is still in its infancy
and the overall standard of cruise ships
is not in the same league as the luxury
cruise ships in Western Europe, where
companies compete to launch more
luxurious ships every year. Keep this in
mind when travelling through Russia
and you’ll enjoy the amazing history,
culture and architecture that the country
has to offer. After 12 days aboard MS
AmaKatarina, I know for sure I’ve fallen
in love with Russia. n
uglich, another Golden ring town, is full of architectural wonders. of particular note are the historic wooden houses with their ornate trim.
Museum of Russian Art – in the former
governor’s residence – has a unique
collection that includes Russian icons and
masterpieces of ornamental art. Museum
guides dressed in beautiful silk ball
gowns lead visitors through the grandly
furnished rooms. The tour ends in the
ballroom with a recital of chamber music.
Uglich is a small town with a bloody
history but you wouldn’t think so looking
at the picture-book Church of Prince
Dmitry on the Blood with its blue domes
yaroslavl’s Museum of russian art is housed in the former governor’s residence. Museum guides in ball gowns teach visitors the intricacies of ballroom dancing.
dotted with stars. Here, our guides regale
us with tales of treason and murder; this
is where Ivan the Terrible’s 10-year-old
son Dmitry had his throat cut in the
palace courtyard. Suspicion immediately
fell on the tsar’s chief advisor, Boris
Godunov. Official investigators concluded
however that Dmitry’s death was an
accident. The officials cut a ‘tongue’ from
the cathedral bell that had rung the news
of Dmitry’s death and ‘exiled’ it to Siberia.
In Uglich, we were given the
svirstroy, a small town of around 1,000 inhabitants, is known for its handicrafts, especially wooden carvings.
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A massive retrospective exhibition covering famed French fashion designer Yves Saint Laurent’s entire body of work, from his early days at Dior to his final spring/summer runway collection in 2002, is now on show until January at the Mapfre exhibition galleries in Madrid, reports Scott Adams.
YVES SAINT LAURENT
“He wAs THe ABsoluTe
embodiment of the French couturier,” says
France’s First Lady, Carla Bruni-Sarkozy,
who modelled his creations during her
years on the catwalk. “He turned art into
fashion and fashion into art and gave
women strength, beauty and freedom,” she
adds. But one shouldn’t think of Yves Saint
Laurent as solely French as he proved that
beauty had no borders. He was inspired by
the burning sun of the Mediterranean and
it was that fire that was always alive within
him and pushed his work forward.
Yves Mathieu-Saint-Laurent was born
in 1936 in Oran, Algeria, which, at the
time, was a French colony. As a child he
made costumes for paper dolls and later
designed dresses for his mother and sisters,
which his mother had made-up by a local
dressmaker. Saint Laurent moved to Paris
in 1954 after winning top prizes in the
dress category of a design competition. The
editor of French Vogue introduced him to
Christian Dior and history was made. Dior
took him on as an assistant in 1955 and
two years later, at just 21, Saint Laurent
became the house’s top designer after Dior
began suffering from ill-health. It was
during his time at Dior that Saint Laurent
met Pierre Bergé, who was to become his
astute business partner, and his friend for
life. Bergé now runs the Yves Saint Laurent
Foundation in Paris. Together, in 1961,
Saint Laurent and Bergé, with the help of
an American backer, opened the first Yves
Saint Laurent fashion house in Paris.
Yves Saint Laurent understood that
power lay with men, so he used men’s
clothes to dress women. “It was a transfer
of power,” says Bergé. Saint Laurent’s
pantsuits, jumpsuits and safari jackets were
men’s clothes, but when he made them for
women they became sensual, seductive
and feminine. “Yves Saint Laurent spent
his life thinking about women and how to
make their bodies look beautiful,” Bergé
confides. “So many designers stay in their
ivory towers, but Yves Saint Laurent helped
women move ahead and create a new
identity for themselves.” An entire wall of
the Madrid show is devoted to variations
of Saint Laurent’s 1966 Smoking Suit,
inspired by the tuxedo.
The spectacular exhibition succeeds in
synthesising an enormous body of work
in order to show the harmony in Saint
Laurent’s creations. “He was neither a
minimalist nor an extravagant baroque
type. He achieved a balance,” says Bergé,
describing what makes Yves Saint Laurent
so quintessentially French. One hundred
and fifty pieces of haute couture and
prêt-a-porter are displayed in a number
of galleries with low lighting and the feel
of a giant catwalk. The show’s 11 themes
showcase how he redefined the female
silhouette by introducing the trapeze line,
how he produced runway travelogues
that borrowed from Russian, Chinese
and Moroccan native dress, and how he
made the perennial fashion motifs of
flora and fauna his own. A keen art lover
and collector, Saint Laurent also took
inspiration from classical masters such as
Vermeer, Goya and Velasquez, as well as
contemporary artists including Picasso,
Mondrian and Jean Cocteau as can be seen
in the 1965 cocktail dress with blocks of
primary colours.
Numerous pieces stand out above
the rest – a 1988 Van Gogh Irises jacket
embroidered with 40 pounds of sequins
and beads; a 1997 garden party gown
with a thicket of pink and green organza
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flowers, leaves, semiprecious stones and
satin ribbons; a 1990 coat flocked with
flame-coloured rooster, pheasant and
vulture feathers; and finally the black wool
dress with satin collar and cuffs worn by
Catherine Deneuve in the 1967 film Belle
de Jour. Reminding us of a by-gone era
the exhibition displays some of the most
luxurious gowns you’ll ever see all made to
order for the richest women in the world,
including Lauren Bacall, The Duke and
Duchess of Windsor, Nan Kempner, Marisa
Berenson and Princess Grace.
“I hate travel,” Saint Lauent once said.
“With my imagination and through books
with photos I travel to faraway lands.”
Morocco was the only country Saint
Laurent visited regularly. It was there
that he had a second home, Le Majorelle,
in the colourful city of Marrakesh. Today
the house and gardens are a museum
dedicated to his work. Many of the
pieces on show in Madrid are inspired by
journeys, either real or imaginary, which
connect the designer with foreign people.
There are garments with direct influences
from China, Japan and Russia. Then there
are six African-inspired pieces from the
1967 spring/summer collection beginning
with a silk organza column gown with
wood beading. It’s inspired by textiles from
the Congo and is combined with a raffia
coat as big as a wigwam.
Colours were essential to his work
and he particularly loved gold and red.
In the last room of the exhibition visitors
are treated to a series of gowns in a wide
variety of brilliant hues. The muslin gowns,
from his last collection in 2002, show his
brilliant use of colours, either as a singular
tone or in amazing combinations.
Yves Saint Laurent wasn’t always
acclaimed by the press and his summer
1971 collection was harshly criticised
by the fashion magazines. Although
Yves Saint Laurent started his career at Dior. In this 1957 picture he is working on a new collection.
28 loft suites and one Royal Loft Suite that boasts a baby grand piano.
Torero look from 1979.
Iconic Le Smoking tuxedo suit from 1966.
The 1965 homage to Piet Mondrian.
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78 EssentialsFashion
“So many designers stay in their ivory towers, but Yves Saint Laurent helped women move ahead and create a new identity for themselves.”
Yves Saint Laurent designed two haute couture and two prêt-à-porter collections annually.
seemingly inspired by the 1940s and the
war years in Paris, Yves Saint Laurent’s
real inspiration came from the type of
women he imagined living in that time.
The pieces were aimed to be worn by the
woman who wanted to provoke a reaction.
The bad press had no effect on sales
and the public adored the new style and
flocked to the boutiques. Perhaps that’s
why the most provocative pieces in the
show are the ones that changed the way
women dressed, back when haute couture
really was a design laboratory for ideas
that filtered out to the world. There’s a
wool pea coat from 1962, a cotton safari
jacket from 1968, and the first le smoking
from 1966. These are so basic, and yet so
groundbreaking. And they’re looks you
would find at almost
any department store
in the world today.
Even from a young
age, Saint Laurent
was hugely involved
in marketing and
maintaining the image
of his own label. In 1971 he posed naked,
albeit discreetly, for photographer Jeanloup
Sieff for an advertisement for his first
perfume for men. In Madrid visitors can
contemplate 14 other art-inspired images
from the same shoot for the first time.
There are also photos of the designer at
work, his models and portrait photos such
as the informal shot taken by Andy Warhol,
which provide a glimpse of the man.
Saint Laurent has been the inspiration
for many across a number of decades and
his influence and inspiration is still being
felt. This year saw the film L’Amour Fou
(Crazy Love) released. It tells the story of
the designer’s dramatic life from rags to
riches. A flurry of books and new editions
of biographies are also hitting the shelves,
such as Laurence Benaim’s emotional
chronicle Requiem pour Yves Saint
Laurent or Alice Rawsthorn’s biography
titled Yves Saint Laurent. The designer is
also the subject of an album of 16 songs
by Alain Chamfort that is set to open as a
full-scale musical in 2012 at the Parisian
Chaillot National Theatre.
It’s an interesting moment to think
about Saint Laurent’s work, now that
fashion is so important in women’s politics.
Hillary Clinton’s pantsuits and Sarah
Palin’s sexy secretary look are all inspired
by Saint Laurent’s work over the decades.
“Saint Laurent thought that if you took
the male garment and you passed it to the
women’s shoulders, you pass the power
from men to women,” Bergé says. “For
Saint Laurent, fashion was a dialogue,
a rendezvous between a designer and a
woman.” And according to Bergé, much of
fashion today is out of touch. “Designers
are telling women what to do, not listening
to what they want.” n
Yves Saint Laurent with Carla Bruni in 1996. Bruni married French president Nicolas Sarkozy in 2008.
The Madrid exhibition will be on show at the Mapfre Exhibition Gallery until 8 Jan 2012. More information at exposicionesmapfrearte.com.ysl
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Knowing how much your collection is worth is essential for insurance purposes or when you want to sell. But make sure you get the right
appraiser, otherwise it can be an expensive mistake, reports Ann Carrns.
W hether it is fine
wines, vintage movie posters
or abstract paintings, some
people spend a great deal of time and
money compiling collections of valuables.
Even if they’re collecting out of personal
passion, rather than as an investment, it
makes sense to keep tabs on how much
the collection is worth.
“You need to know what you own, and
to know the value of what you own,” said
Nancy Harrison, a fine art specialist with
Emigrant Bank’s fine art financing unit
in New York and the president of the
Appraisers Association of America.
Whether an appraisal is done for tax
purposes, for an insurance policy or to
divide property in a divorce, the most
important first step is finding someone
who has broad, deep knowledge about the
kind of pieces you collect.
The ArT of ApprAisAl
“All appraisers are not created equal,”
said John Cahill, a lawyer in New York
who specialises in art. “And even the good
ones are not good at everything.”
You can, of course, ask for referrals
from lawyers or wealth management
advisers. But even then, you should check
the appraiser’s qualifications. Personal-
property appraisers aren’t licensed, but
reputable professionals are affiliated
with at least one of the three major
appraisal organisations: the Appraisers
Association of America, which focuses on
personal property; the American Society
of Appraisers, which includes specialists
in real estate and other areas; and the
International Society of Appraisers.
These groups require members to keep
up to date with appraisal practices, called
the ‘Uniform Standards of Professional
Appraisal Practice,’ and to adhere to a
code of ethics. That means, for instance,
that they charge only fees based on
an hourly rate, or a negotiated project
rate, rather than on a percentage of the
appraised value. You can search for an
appraiser by name or expertise, and
review information about his or her
background, on each group’s website.
“If an appraiser says they know it all,
run as fast as you can,” said Jane Jacob,
an appraiser who specialises in American
and European fine art from the 19th
through 21st centuries.
Collectors have a variety of options for
getting pricing information for artwork,
collectibles and wine at online sites that
primarily track sales at public auctions.
Appraisers consult those sites too – but
only as a first step. Gayle Skluzacek, a New
York appraiser who evaluates both artwork
and wine, says a knowledgeable expert can
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A staff member holds a costume worn by Michael Jackson when he performed in the Jackson Five group. Record amounts have been fetched recently at movie and music memorabilia auctions, which has led to higher appraisals.
interpret the nuances of a given sale. Why
did it sell above or below the estimate? Was
it offered before? Only a professional, she
said, knows “what questions to ask when
discrepancies appear.”
Expertise is especially important with
appraisals that are submitted for tax
purposes, because the Internal Revenue
Service has detailed requirements for
appraisals submitted as documentation
for donations or estate tax calculations.
The IRS requires a written appraisal by a
qualified appraiser for any deduction taken
on items valued at more than $5,000.
The agency’s own appraisal staff
reviews valuations, and some appraisals
are subject to further review by its Art
Advisory Panel, a group of 25 volunteer
experts. The panel meets periodically to
review appraisals and may decide they
are too high (or, in the case of estate tax
from my experience in the art world,”
he said, “that they’re a well thought of,
responsible and reliable organisation.”
Susan Brundage, the director of that
group’s service, said it focused primarily
on appraisals of fine art for tax purposes.
It draws on the records of its member
dealers, she said, to supplement data on
prices for works sold at public auction.
The appraiser will often – but not
always – examine an item or collection
physically to determine its condition,
before conducting research into previous
sales of similar works to determine a
value. Personally examining an object
allows for a thorough assessment of its
condition, but sometimes appraisals
are done from photographs and other
documentation although that must be
disclosed on the appraisal report.
“You have more gravitas if you’re
valuations, too low). Last year, the panel
reviewed 475 items valued by taxpayers
at a total of nearly $235 million and
recommended adjustments on more than
half, according to its 2010 report.
Arthur fleischer, a New York
lawyer and arts patron whose collection
includes prints by the artist Elizabeth
Murray and images by the Dutch
photographer Hellen van Meene, said
he didn’t spend much time worrying
about the value of his collection because
his motivation was not to make money.
When he has made gifts to museums,
including the Whitney Museum of
American Art and the Solomon R.
Guggenheim Museum, he has worked
with the appraisal service of the Art
Dealers Association of America, for the
documentation the IRS requires. “I know
The ivory-pleated ‘Subway’ dress worn by actress Marilyn Monroe from the 1955 film The Seven Year Itch was expected to bring up to $2 million at auction. It sold for $4.6 million.
“Expertise is especially important with appraisals that are submitted for tax purposes, because the Internal Revenue Service has detailed requirements for appraisals submitted as documentation for donations or estate tax calculations.”
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Chinese artworks. Von Habsburg’s firm
was asked to appraise a collection of 20th-
century decorative jade and porcelain
pieces from an estate. Previous sale
records led to an estimated maximum
price of roughly $124,000, but they sold
for more than $1 million on the online
auction site iGavel.
The market for collectibles, like
Hollywood or sports memorabilia, is also
volatile; prices can surge when there is
a “landmark” auction taking place, said
Leila Dunbar, an appraiser who specialises
in such items. The auction earlier this year
substantiating something you’ve
seen in person,” said Elizabeth von
Habsburg, managing director of the
Winston Art Group.
Even with a thorough appraisal,
fluctuations in the art markets can
lead to surprises. Collectors must
understand that there is not “one
mammoth market” that determines a
work’s value, said von Habsburg, adding,
“There are many submarkets, and they
move at different rates.”
Lately, for instance, Chinese collectors
have been bidding up the prices of
of costumes owned by Debbie Reynolds,
for instance, increased the value of
outfits worn by Marilyn Monroe, Audrey
Hepburn, Grace Kelly and others.
BecAuse mArkets can change
quickly, insurance companies encourage
collectors to have works reappraised
periodically to make sure coverage is
adequate. Mary Sheridan, assistant
fine arts manager for Chubb Personal
Insurance, said collectors with extensive
inventories typically worked with
professional curators and kept their
appraisals current. Those with smaller
or lower-value collections – say, less than
$10 million – are sometimes reluctant,
however, to spend the money for regular
appraisals, which can cost as much as
$300 an hour, along with the higher
premiums an increase in valuation might
bring. “They do not see a need – until
there’s a claim,” she said.
Failing to keep up with rising values can
prove risky. Sheridan recalled an owner
who had a painting by the French artist
Raoul Dufy, illuminated by a picture light
attached overhead. The screws came loose
from the light, allowing the bulb to fall into
the painting and burn a hole through the
canvas. “It was a total loss,” Sheridan said.
The painting was insured on the
collector’s homeowner’s insurance policy,
for $18,000. The market for Dufy’s work
had grown, she said, and the painting’s
value at the time of the damage was close
to six figures. n
The value of the Ferrari 250 LM has risen and fallen with economic cycles. $2.5 million is the record price for a 250 LM in this decade, but it is well below the record price of $5.5 million paid in 1990.
Chinese art collectors are pushing the prices of Chinese art to record levels. Slave and Lion by Xu Beihong sold for $6.9 million in 2006, way above the estimate of $4.1 million. If it came on the market today it might sell for double.
“Because markets can change quickly, insurance companies encourage collectors to have works reappraised periodically to make sure coverage is adequate.”
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For decades, scientists have been predicting that, one day, the same process that powers the sun will give us virtually unlimited cheap, clean electricity. But the technical obstacles remain huge, reports Leo Hickman.
it is a “moral duty” to commercialise this
technology as fast as possible. Without it,
our species will be in “very deep trouble
indeed” by the end of this century.
If only it were that simple. Fusion
energy – in essence, recreating and
harnessing here on Earth the process that
powers the sun – has been the goal of
physicists around the world for more than
half a century. And yet it is perpetually
described as ‘30 years away’. No matter
how much research is done and money is
spent attempting to commercialise this
‘saviour’ technology, it always appears to
be stuck at least a generation away.
Cowley hears and feels these
frustrations every day. As the director of
the Culham Centre for Fusion Energy,
he has spent his working life trying to
shorten this exasperating delay. Fusion
energy is already a scientific challenge
arguably more arduous than any other we
face, but recent events have only piled on
further pressure: international climate-
change negotiations have stalled; targets
to ramp up renewable energy production
seem hopelessly unrealistic; and the
Fukushima disaster has cast a large
shadow over the future of fusion’s nuclear
cousin, fission energy, which has been
providing electricity since the 1950s.
But today, Cowley seems upbeat.
After an 18-month shutdown to retile
the interior of the largest of the centre’s
two ‘tokamaks’ – ring doughnut-shaped
chambers where the fusion reaction takes
place – he is bullish about the progress
being made by the 1,000 scientists and
engineers based at Culham.
“By 2014-15, we will be setting new
records here. We hope to reach break-
even point in five years. That will be a
huge psychological moment.”
Cowley is referring to the moment of
parity when the amount of energy they
extract from a tokamak equals the amount
Fusion Power: Is It Getting Any Closer?
A star is born. and, less
than a second later, it dies. On a
drab science park just outside the
Oxfordshire village of Culham in England,
some of the world’s leading physicists stare
at a monitor to review a video of their
wondrous, yet fleeting, creation.
“Not too bad. That was quite a clean
one,” observes starmaker-in-chief Professor
Steve Cowley. Just a few metres away from
his control room, a ‘mini star’ not much
larger than a family car has just burned,
momentarily bright, at temperatures
approaching 23 million degrees centigrade
inside a 70-tonne steel vessel.
Last year, when asked to name the
most pressing scientific challenge facing
humanity, Professors Stephen Hawking
and Brian Cox both gave the same answer:
producing electricity from fusion energy.
The prize, they said, is enormous: a near-
limitless, pollution-free, cheap source
of energy that would power human
development for many centuries to come.
Cox is so passionate about the urgent
need for fusion power that he stated that
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Fusion is the process that powers the sun. But replicating this
process on Earth poses huge technological challenges.of energy they put into it. At present, the
best-ever ‘shot’ – as the scientists refer
to each fusion reaction attempt – came
in 1997 when, for just two seconds, the
JET (Joint European Torus) tokamak at
Culham achieved 16MW of fusion power
from an input of 25MW. For fusion to be
commercially viable, however, it will need to
provide a near-constant tenfold power gain.
so, what are the barriers preventing
this great leap forward?
“We could produce net electricity
right now, but the costs would be huge,”
says Cowley. “The barrier is finding a
material that can withstand the neutron
bombardment inside the tokamak. We
could also just say damn to the cost of
the electricity required to demonstrate
this. But we don’t want to do something
that cannot be shown to be commercially
viable. What’s the point?”
At the heart of a star, fusion occurs
when hydrogen atoms fuse together under
extreme heat and pressure to create a
denser helium atom releasing, in the
process, colossal amounts of energy. But on
Earth, scientists have to try and replicate a
star’s intense gravitational pressure with an
artificial magnetic field that requires huge
amounts of electricity to create.
The fusion reaction occurs when the
fuel (two types, or isotopes, of hydrogen
known as deuterium and tritium)
combines to form a super-hot plasma
which produces, alongside the helium,
neutrons which have a huge amount
of kinetic energy. The goal of plasma
physicists such as Cowell is to harness the
release of these neutrons and use their
abundant energy to drive conventional
turbines to generate electricity. The
JET tokamak has been shut down for
the past 18 months while the interior
has been stripped of its 4,500 carbon
tiles and replaced with new tiles made
from beryllium and tungsten. The hope
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arguing that the money could be better
spent building offshore wind turbines.
Meanwhile, there is criticism from some
plasma physicists that the design of ITER
is wrong and alternative designs might
produce better results for much less money.
Francesco Romanelli, the Italian director
of the European Fusion Development
Agreement, the European agency that
funds JET, rejects this analysis. We simply
must make this investment, he says: “The
prize on offer is too tantalising to ignore.
Fusion doesn’t produce greenhouse gases,
it is intrinsically safe and it leaves no
burden on future generations. And the
fuel is virtually unlimited. All you need
is lithium and hydrogen. Sea water alone
could fuel current human consumption
levels for 30 million years.”
If fusion offers such glorious bounty, it
prompts the question why the world isn't
concentrating much harder on delivering
is that these new tiles will be far more
neutron resilient, allowing for shots to be
conducted for longer periods and at much
higher temperatures.
last year, bulldozers began clearing
land 60 kilometres north-east of
Marseille in southern France. By 2019,
it is hoped that the world’s largest and
most advanced experimental tokamak
will be switched on. The ¤15 billion
International Thermonuclear Experimental
Reactor (ITER) is being funded by an
unprecedented international coalition,
including the EU, the US, China, India,
South Korea and Russia. Everything
learned at Culham will be fed into
improving the design and performance of
ITER which, it is hoped, will demonstrate
the commercial viability of fusion by
producing a tenfold power gain of 500MW
during shots lasting up to an hour.
Professor Steve Cowley, a plasma physicist, is the director of the Culham Centre for Fusion Energy. He believes electricity from commercial fusion is still 30 years away.
But ITER’s projected costs are already
rocketing, and politicians across Europe
have expressed concern, demanding that
budgets be capped. Fusion energy also
has its environmental detractors. When
the ITER project was announced in 2005,
Greenpeace said it “deplored” the project,
The fusion reaction takes place inside
a ‘tokomak’ – a ring doughnut-shaped
chamber that has to withstand
temperatures up to 23 million degree
centigrade.
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to be, in my mind, a 10-fold increase in
fission power by 2050. We still need fission
because it is a bridging technology until
fusion becomes commercial. By 2100,
fusion could be producing 20-25 per cent
of all our energy.”
what Cowley is admitting, though,
is that as long as fusion research remains
underfunded (a term he doesn’t utter,
but the implication is there) then it
will never save humanity from climate
change, oil wars and the poverty and
underdevelopment caused by ever-higher
energy costs. As if to prove his point,
he admits that on occasion he has even
turned to eBay to buy spare parts for the
smaller UK-owned tokamak at Colham,
which is known as Mast (Mega Amp
Spherical Tokamak).
But such things do not deter him from
pushing forward as best he can, he stresses.
He is first and foremost a plasma physicist.
“Saving the planet is a nice thing to
do,” he laughs. “Doing something that no
one else has ever done is attractive, too.
But, ultimately, this is fascinating. Every
night on the train home I prefer to do a
calculation rather than a sudoku. I try
to work out things such as how a 200-
million-degree-celsius plasma behaves in
a magnetic field. Such things are critically
important for the future of our world, but
they’re really good fun, too.” n
Wu Bangguo (L), Chinese National People’s Congress Standing Committee chairman, and Kaname Ikeda of Japan (R), general director of the International Thermonuclear Experimental Reactor (ITER), look at a model of the ITER site in southern France.
it as fast as possible. Yes, ¤15 billion is a lot
of money to be spending building ITER.
But, by comparison, the global cosmetics
and perfume industry is worth some
$170 billion a year. If the motivation was
there, the global community could find
the money to fund 10 rival fusion projects
to fast-track the process of finding the
optimum design. So, why haven’t we seen a
Manhattan Project-style push for fusion?
“People – and particularly politicians –
still remember fission’s early claims that
it would produce electricity that was ‘too
cheap to meter’,” says Cowley. “We scientists
have to be honest, too: we thought it would
be easy to crack fusion. But there’s no other
comparable challenge. There is no model
for this technology. We’re having to start
from the very beginning.”
Cowley says a Manhattan Project for
fusion would, of course, greatly speed up
its delivery. “ITER will cost around ¤15
billion, but that is not expensive when
you consider the prize. At present, all
we can hope for is, if oil prices are still
high in 2015 and we pull off a big shot
demonstrating parity of power, this gets us
the international attention – and therefore
the funding – we need to really push on.”
It’s hard not to look at the potential of
“This is why there needs to be, in my mind, a 10-fold increase in fission power by 2050. We still need fission because it is a bridging technology until fusion becomes commercial. By 2100, fusion could be producing 20-25 per cent of all our energy.”
Rob Dunn, who is working with James Danoff-Burg, a field biologist from Columbia University, looks around the base of a tree for diverse ant species on a median in New York.
Scientists have to replicate a star’s intense gravitational pressure with a magnetic field to enable the fusion process.
fusion and scream: “We need this right
now!” But Cowley says we still face a
30-year wait for the magic day when we
flick a switch and electricity generated
from fusion flows from the socket.
“After ITER, we will then have to build
a demonstration plant. We hope to have
that built by 2040. This is why there needs
rE
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As nostAlgiA for the eArly
1960s persists, a handful of men’s
fragrances from that period are getting
a second look. Their names evoke two-
button Botany 500 suits and drinks sipped
in a 707’s front cabin: Eau Sauvage, Habit
Rouge, Pour Monsieur. And although sales
are a fraction of the overall market for
fine men’s fragrances, experts in the field
acknowledge their lasting relevance.
“They’re like benchmarks – anything
that comes after is almost always a direct
descendant,” said Grant Osborne, founder
and editor of Basenotes, a website for
perfume enthusiasts.
Chanel Pour Monsieur, introduced
in 1955, “should by all rights be sitting
under a triple-glass bell jar next to the
metre and kilogramme at the Pavillon
de Breteuil as the reference masculine
fragrance,” wrote Luca Turin, the
biophysicist, olfactory scholar and an
author of Perfumes: The Guide.
Christian Dior’s Eau Sauvage,
introduced in 1966, revolutionised the
men’s category as the first perfume to
make heavy use of hedione, a synthetic
analogue of jasmine. Guerlain Vetiver,
based on the aromatic grass native
in India and introduced in 1961 after
similar scents by Givenchy (1959) and
Carven (1957), continues to beget modern
ThaT Man SMellS FaMiliarMen are far more brand loyal than women, which is why classic men’s fragrances are still on the shelves. And now there is even a retro movement afoot, reports Michael Walker.
iterations like Grey Vetiver, by Tom Ford.
These classic men’s fragrances “left
very long-lasting impacts on how people
develop perfumes,” said Eddie Roschi,
a founder of Le Labo artisanal
perfumery in New York. “You
look at what Guerlain did with
Vetiver, and so much of it has
been copied. In some countries
you can smell it in the subways
because everyone wears it.” (In
Europe, the classics still sell
as if it’s 1969; last year
Eau Sauvage was the
third best-selling men’s
fragrance in France,
according to the NDP
Group, a market research
company that tracks sales
in department stores.)
The vogue for
all things retro is a
marketing opportunity
not lost on perfume
makers. Christian
Dior promoted Eau
Sauvage with a print
and television campaign
built around a 1966
photo of French actor
Alain Delon. (The music
for one commercial
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As nostalgia for the early 1960s persists, a handful of men’s fragrances from that period are getting a second look.
was a snippet from the theme of Mad
Men.) In an age when hip young people
transformed the flat-lining Pabst Blue
Ribbon and Parliament brands into
winking fashion statements, it makes
sense that artefacts like Eau Sauvage
and Habit Rouge might follow.
indeed, the venerable Old Spice has
been brand-extended so deftly that most
younger users are probably unaware that
the formula dates to 1938 or was derived
from a women’s perfume.
Last year, the flagship Old Spice
line, including the original aftershave
in a buoy-shaped bottle, grossed $33
million at mass-merchandise outlets
excluding Walmarts, according to
Symphony IRI, a Chicago-based market
research company. Meanwhile Brut,
which was introduced in 1964 and
endorsed by quarterback Joe Namath
during his heyday, grossed $9 million.
“Brut is an amazing fougere,” said Roschi,
referring to the lavender-based fragrance
family also including Canoe (introduced in
1936 and still in production).
But for a generation raised on CK
Be and body sprays like Axe, retro
scents aren’t necessarily an easy sell. At
Beverly Hills Perfumery, which stocks
a comprehensive collection of vintage
perfumes, the owner, Alan Berdjis,
sprayed a test card with Pour Monsieur
and took a long sniff. “It’s kind of a thin,
creamy citrus,” he said approvingly. But
Berdjis, 30, added, “If you introduced
this today and it did not have the Chanel
brand recognition, I don’t think it would
do well.” Why? “You smell it and just
know,” he said. “This is an old fragrance.”
Epitomising the new is Acqua di Gio,
introduced by Giorgio Armani in 1996
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and the No. 1-selling fine men’s fragrance
for the past 10 years, according to the
NDP Group. Acqua di Gio popularised
the light, quiescent ‘aquatic’ accord that
dominates men’s fragrances today and has
inspired countless imitators – “a slew of
apologetic, bloodless, grey, whippetlike,
shivering little things that are probably
impossible, and certainly pointless, to tell
apart,” Turin said.
CompAred to the breezy aquatics,
certainly, the classic ’60s scents – with
their base notes of musk, oak moss,
sandalwood and leather – can seem
leaden, especially to younger noses.
Nevertheless, sweet, unisex aquatics are
ceding market share to scents redolent
of woods and spices. Of the top four
men’s fragrances introduced in 2010,
“two were woods, one was a woody
oriental and only one was a water,” said
Karen Grant, a beauty industry analyst
with the NDP Group.
The introduction last year of Bleu de
Chanel, which despite its sport-aquatic-
sounding name is considered a woody
aromatic, was a sign that the pendulum
is swinging toward earthier accords; it
became the No. 3 best-selling men’s scent
in the United States.
The Old Spice ad, starring actor Isaiah Mustafa, makes fun of men’s fragrances that smell too feminine. The ad went viral on YouTube with millions of hits. Old Spice has been around since 1938.
“Epitomising the new is Acqua di Gio, introduced by Giorgio Armani in 1996 and the No. 1-selling fine men’s fragrance for the past 10 years.”
Men are far more brand-loyal than
women when it comes to fragrance, Grant
said, “which is why when something
becomes a top scent it continues to be
a top scent – it’s hard to break into that
ranking.” She added that in survey after
survey, men say the No. 1 consideration
when they buy a fragrance is that it appeal
to their partners.
“A lot of women feel the newer
fragrances for men are a little too
feminine,” Berdjis said, a sentiment
hammered home in the recent ‘The Old
Spice Guy’ campaign, which pointedly
mocked “lady-scented body washes” with
the tag, “smell like a man, man.” Female
customers at his store, Berdjis added,
“buy the older-type fragrances to give to
their boyfriends.”
“Their preference on a man goes back
to the more masculine type of smell,” he
continued. “That might speak to how
society has changed – you didn’t have
metrosexuals in the 1960s.”
Indeed, what constitutes a masculine
fragrance today, said Roschi, who himself
wore Chanel No. 5 for several months, “is
going to be much more diverse than it was
in the ’50s and ’60s, because masculinity
has evolved so much.” n
Christian Dior is promoting Eau Sauvage, which was released in 1966, with an ad campaign centred around a 1966 picture of famed French actor Alain Delon.
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To the renegades. To those who do things for love not money.
160 years of winemaking.
Max SchubertWinemaking legend and creator of Penfolds Grange
Dreamed of making a truly Australian red with such balanced complexity it would mature and develop for at least 20 years and rival the world’s finest wines. First vintage maligned and misunderstood. Ordered to stop making it, he persisted (with the support of Jeffrey Penfold-Hyland). Penfolds Grange is now one of the most sought after red wines in the world.
Newspix/News Limited
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Global warming is shrinking the Arctic ice pack, resulting in governments and companies scrambling to exploit new opportunities in this previously inaccessible region, reports Andrew Kramer.
Rounding the noRtheRnmost
tip of Russia in his oceangoing tugboat
this summer, Captain Vladimir V. Bozanov
saw plenty of walruses, some pods of
beluga whales and in the distance a few
icebergs. One thing Bozanov did not
encounter while towing an industrial
barge 3,702 kilometres across the Arctic
Ocean was solid ice blocking his path
anywhere along the route. Ten years ago,
he said, an ice-free passage, even at the
peak of summer, was exceptionally rare.
But environmental scientists say there
is now no doubt that global warming is
shrinking the Arctic ice pack, opening new
sea lanes and making the few previously
navigable routes near shore accessible
more months of the year. And whatever
the grim environmental repercussions
of greenhouse gas, companies in Russia
and other countries around the Arctic
Ocean are mining that dark cloud’s silver
lining by finding new opportunities for
commerce and trade.
Oil companies might be the most likely
beneficiaries, as the receding polar ice cap
opens more of the sea floor to exploration.
The oil giant Exxon Mobil recently signed
a sweeping deal to drill in the Russian
sector of the Arctic Ocean. But shipping,
mining and fishing ventures are also
looking further north than ever before.
Iceland’s president, Olafur Ragnar
Grimsson, speaking at a recent conference
on Arctic Ocean shipping held in the
Russian port city of Arkhangelsk not
far south of the Arctic Circle, called it
“paradoxical that new opportunities are
opening for our nations” at the same time
that the threat of carbon emissions has
“become imminent.”
At the same forum, Prime Minister
Vladimir V. Putin of Russia offered a
full-throated endorsement of the new
business prospects in the thawing north.
“The Arctic is the shortcut between the
largest markets of Europe and the Asia-
Pacific region,” he said. “It is an excellent
opportunity to optimise costs.”
This summer, one of the warmest on
record in the Arctic, a tanker set a speed
record by crossing the Arctic Ocean in
6∏ days, carrying a cargo of natural gas
condensate. The previous record was
eight days.
Scientists say that over the last 10 years
the average size of the polar ice sheet
in September, the time of year when it
is smallest, has been only about two-
thirds the average during the previous
two decades. The Arctic Monitoring and
Assessment Programme, a Norwegian
group studying the Arctic, forecasts that
within 30 or 40 years the entire Arctic
Ocean will be ice-free in the summertime.
And so business plans are being drawn
up to capitalise on changes in a part of the
world that for much of seafaring history
was better known for grim final entries in
diaries of explorers like Hugh Willoughby
of England. He died with his crew in 1553
trying to navigate this shortcut from Europe
to Asia, known as the Northeast Passage.
The Russians, by travelling near the
coast, have been sailing the Northeast
Passage for a century. They opened it to
international shipping in 1991, after the
breakup of the Soviet Union. But only
recently have companies begun to find the
route profitable, as the receding polar ice
cap has opened paths further offshore –
allowing larger, modern ships with deeper
drafts to make the trip, trimming days off
the voyage and saving fuel.
In 2009, the first two international
commercial cargo vessels travelled north
of Russia between Europe and Asia. This
Northeast Passage Dream reviveD
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A decade ago it was rare that the Northeast Passage was
ice-free, necessitating the use of expensive icebreakers
to move shipping.
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as abandoned Russian polar stations,” the
Australian operator, Aurora Expeditions,
noted in its promotional literature.
on some routes, the trip over the top of
Russia is now competitive with the passage
from Europe to Asia via the Suez Canal.
The voyage from Rotterdam to Yokohama,
year so far, 18 ships have made the now
mostly ice-free crossing.
The voyages included a scenic cruise
through the Northeast Passage, the first
ever, departing from Murmansk and
arriving in Anadyr, a Russian port in the
Pacific Ocean across the Bering Sea from
Alaska. “The voyage offered attractions such
THE NEW YORK TIMES
The Northeast Passage Opens UpThe Arctic ice cap has been shrinking, opening up new shipping lanes. This has given access to oil and gas fields, as well as fishing in international waters that were not accessible before. RUSSIA
UNITEDSTATES
ALASKA
CANADA
NORWAY
SWEDEN
FINLAND
GREENLAND(DENMARK)
ICELAND
North Pole
Observed iceextent in
September2011
Median iceextent in
September,1979-2000
Internationalwaters
Murmansk
Kirkenes
Arkhangelsk
DudinkaTiksi Khatanga
DiksonIsland
ReykjavikBaffinBay
BeaufortSea
BarentsSeaChukchi
Sea
BeringSea
HudsonBay
AtlanticOcean
Thule
Anadyr
Nome
Pevek
MAP KEYNortheastPassageShorter,more northernroutes nowaccessible
Portion ofthe Arctic’s
international waters ice-free
in SeptemberSources: The National Snow and Ice Data Center; Pew Environmental Group; [Russian] Partnership of Northern Sea Route Users; Natural Earth (map terrain)
’11’00’79
10
20
30
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N.Y. Times News ServiceDate: 10/25/11Graphic Slug: ARCTIC-KRAMER-BSPRSize: 7.2 x 7.2With Story: (BC--ARCTIC-KRAMER-BSPR--NYT)
“The voyage to Lianyungang in China took 21 days in 2010, compared with the 37 days typically required to sail to China through the Suez. Tschudi executives estimate they save about $300,000 a trip. “Very few people in the shipping community know about this route,” Felix Tschudi, the chairman, said in an interview.”
Japan, via the Northeast Passage, for
example, is about 7,162 kilometres
shorter than the currently preferred route
through the Suez, according to Russia’s
Transportation Ministry. (Of course, the
Arctic route has far to go before catching
up to the 18,000 ships a year sailing
through the Suez Canal.)
But the primary use of Arctic Ocean
shipping so far has been to support other
industries heading further north, like
mining and oil drilling, according to
participants at the Russian conference.
Tschudi, a Norwegian shipping company,
has bought and revived an idled iron ore
mine in the north of Norway in order to
ship ore to China through the Northeast
Passage. The voyage to Lianyungang in
China took 21 days in 2010, compared with
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frozen year round. Now, large portions
north of Alaska and eastern Siberia are
usually ice-free in the summer.
The spectre of hungry southern nations
fishing the newly navigable doughnut
hole prompted a recent report by the Pew
Environment Group to warn that without a
new set of regulations for the region, Arctic
cod populations might be decimated.
Meanwhile, because ice floes still
menace shipping even in the otherwise
open sea lanes, authorities in the United
States, Russia and Norway are studying
the business potential of overhauling
ports on both sides of the Northeast
Passage to transfer containers from
ordinary freighters to ice-class vessels that
would ply the Arctic Ocean, serving Asia,
Canada, the US West Coast and Europe.
Under this plan, now hopelessly remote
ports like Kirkenes in Norway or Adak in
Alaska, south of the Bering Strait, might
be transformed into bustling logistics
hubs for Arctic shipping.
Alaska’s lieutenant governor, Mead
Treadwell, was one of the attendees at the
Russian conference. He noted that about
$1 billion worth of goods passed through
the Bering Strait last year. “The ships,” he
said, “are coming.” n
Russian Prime Minister Vladimir Putin (R) shakes hands with the President of Iceland, Ólafur Ragnar Grimsson, during a meeting in Arkhangelsk to discuss the Arctic.
the 37 days typically required to sail to
China through the Suez. Tschudi executives
estimate they save about $300,000 a trip.
“Very few people in the shipping
community know about this route,” Felix
Tschudi, the chairman, said in an interview.
The Russian company Norilsk’s nickel
and copper mine can now ship its
metals across the Arctic Ocean without
chartering ice breakers, as in the past,
saving millions of rubles for shareholders.
In northwest Alaska, the Red Dog lead
and zinc mine moves its ore through the
Bering Strait, which is less often clogged
with pack ice than in past decades.
Citigroup’s Moscow office has identified
five Russian companies well positioned to
benefit from global warming in the north,
where temperatures are rising about twice
as fast as the global average.
Besides Norilsk, they included
Sovcomflot, the state shipping company,
and the nation’s two largest natural gas
companies, Gazprom and Novatek. The
fifth is Rosneft, the state oil company that
has entered the joint venture with Exxon
Mobil to drill in the Kara Sea, a part of
the Russian sector of the Arctic Ocean.
Russia is retooling a military shipyard
outside Arkhangelsk that built the Soviet
Union’s nuclear submarines to make ice-
capable oil and gas drilling platforms.
FoR the international fishing industry,
the target is the so-called Arctic Ocean
doughnut hole – the millions of square
kilometres in the ocean’s centre that
are beyond the 322-kilometre exclusive
economic zones of the coastal nations.
Until 2000, the entire doughnut hole was
Hong Kong flagged Nordic Barents, carrying 40,000 tonnes of iron ore, leaves Kirkenes in the north of Norway on route to China via the Arctic Northeast Passage. G
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Harrisburg, the cash-strapped capital of
Pennsylvania, USA, has enough muskets,
stage coaches, sheriff's badges and
ammunition to see off creditors. Nearly all
of the artefacts were collected by former
Mayor Stephen Reed, who dreamed of
building a Wild West museum in
Harrisburg that never materialised.
Desperate to climb out of a $300 million
debt crisis, Harrisburg has allowed
appraisers and
auction houses
into a storage
space where
more than
8,000 bits of
Americana
have been
gathering dust
for years. Reed
began buying
the artefacts
with tax dollars
more than five years ago. Two city
auctions of some of the Wild West
pieces in 2007 and 2008 have netted
$1.66 million.
Harrisburg spokesman Robert Philbin
said about nine companies have taken
a recent look at the artefacts and gave
the city hope some of the $8 million to
$15 million Reed spent to buy them will
be recouped.
Wild West Cash
Times are economically tough in Europe
and shoppers aren’t feeling very festive.
In France household spending dropped
1.3 per cent in September versus the
same month a year earlier and spending
on clothing fell 7.3 per cent, according
to France’s statistics office.
That’s why live rock and roll is
replacing recorded Christmas carols
in the windows of Galeries Lafayette
as the famed Parisian department
store seeks to drum up curiosity, and
client numbers, for this year’s gift-
buying season.
With a debt crisis forcing much of
Europe into austerity, consumption
has dropped in recent weeks, making
Rock Replaces Carolscrowd-pullers all the more important,
even for upmarket stores that can count
on a large tourist contingent in the
heart of the French capital.
Rock legend Iggy Pop has helped
Galeries Lafayette get the show on the
road, posing for photo fliers in red Santa
hat and matching shoes. The opening
weeks include nightly live shows in the
window by a variety of major-label rock
and folk bands.
Galeries Lafayette, which first
started doing its Christmas window
shows after World War II, says that
this year’s show was inspired by the
increasingly close relationship between
rock and fashion.
RE
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German Accounting BlunderThe German
government has
been scathing about
the accounting
practices of some
Eurozone countries,
so it was particularly
embarrassing when a
¤55 billion accounting mistake came to light.
Federal Minister of Finance Wolfgang
Schaeuble said it was “an extremely annoying
mistake” for the nationalised mortgage
bank Hypo Real Estate (HRE) and the PwC
accountancy firm to have let such an error slip
through undetected.
The blunder briefly raised Germany’s total debt
by more than ¤55 billion, and Schaeuble and the
government were lampooned by cartoonists and
pilloried in editorials.
As a result of the corrected debt, Germany now
expects its ratio of debt to gross domestic product
to be 81.1 per cent for 2011, 2.6 percentage points
less than previously forecast.
96 Other business.indd 96 11/20/11 2:34:32 PM
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