Hot business: Tapping beans for a tasty profit

LAHORE: Considered as “fuel” in their daily routine, coffee has become the way of life for many in Pakistan. The rapidly expanding coffee culture has paved the way for various foreign and local coffee shops to invest and take advantage of this lucrative market.

Coffee shops and cafes have now become a common feature of the country’s urban centres and are the preferred “hangouts”.

While the market has been ripe for investment, increased competition also means businesses need to maintain their quality to retain the customers.

Coffee Planet Chief Executive Officer Kashif Anwar has been part of this sector for the last two years but still struggles for profits. The reason is not low sales or lack of investment.

“Majority are not aware of what high-quality coffee tastes like,” Anwar said. “There are several global standards that need to be followed.”

Coffee Planet – a franchise of Dubai-based Roaster – started its operation in Pakistan in 2012. The Pakistani chain is operating under the cover of FAS corporations and has invested around Rs70 million for its 4 outlets – two in Lahore and two in Islamabad – to date.

According to Anwar, majority of the coffee outlets in the country fail to acknowledge the various types of coffees. “People stick to a couple of types and know relatively little about the wide range available.”

To run the business more efficiently, coffee shops have to offer other beverage categories, snacks and other food items. “Coffee shops are rapidly growing but the actual coffee culture will take time to form a consumer base.”

The sales of such coffee shops, according to an estimate, are growing in between 20-26% annually. The surprising bit is actual coffee sales constitute less than 50% of the total. Anwar said Coffee Planet witnesses the same trend.

Anwar has to follow specific standards of their parent company, adding that it pushes their cost higher than their competitors as he pinpointed a reason behind the lack of huge profits.

Anwar said the machinery is costly and skilled labour is hard to find. “We have to take the help of foreigners to train our local staff to provide a unique taste in all of our products,” Anwar said.

But despite the low profits, the future strategy Anwar has is quite aggressive. They are looking to launch two more shops in Lahore and Islamabad, whereas another eight coffee shops are planned in other cities. The approximate cost of a coffee shop, according to Anwar, is Rs15 million.

the writer is a staff correspodent

Entrepreneurs and small enterprises need help

KARACHI: 

How many times has one driven through Boulton Market and other areas in Karachi to find skilled labour sitting on the roadside with their tools. All these people – from painters with brushes to carpenters with saws – represent small enterprises.

They sit in hope that someone looking for maintenance or repair work would hire them. Unfortunately, anyone looking for skilled labour has no way to decide which one of the dozens sitting there, differentiated by very little, is experienced and more skilled.

To help them find a solution to their problem is not rocket science — especially in today’s tech-savvy world. All one really needs is a programme similar to the “Trip Advisor” where users, after checking out of a hotel or eating at a restaurant, go online and update their experience through a portal. It then rates these services on a five-star scale. When these people go on their next trip, they just search for places rated four-star or above. Why can’t the same method be applied here?

There is an urgent need for a similar portal, where people can go online and select a worker based on his rating. The workers in turn could register with the agency, give five percent as service charge to become part of the system and, instead of sitting on a street, wait in a hall with other workers for a telephone call. Their wages would also be set proportionally to their skill level. This way, better workers would earn higher wages and get hired more frequently.

Barriers in the way of small enterprises

However, there are still many other challenges and barriers facing these people.

Unfortunately, this section of society suffers from neglect. An organisation called, “SEEDS Venture” has carried out an in-depth research to identify operational difficulties facing these “small enterprises”, costs that could be avoided and how to enhance their sales and profitability.

As per their research, major obstacle to the growth of small entrepreneurs is inflation and instability in the city due to frequent strikes.  Intervention needed to enhance their sustainability and scalability include,

1. Training and mentoring sessions to enhance business acumen: Most have received no formal education but have good business acumen and any formal guidance and training will instigate growth and sustainability.

2. Interest-free loans to facilitate expansion: Lack of financing is the key reason for lack of growth and scalability. Banks and microfinance institutions must work with these small enterprises and create win-win situations.

3. Introduction of technological innovation: Using technology-based solutions such as mobile marketing and social media can provide new avenues for growth and sustainability.

4. Subsidising the cost of power: Rising fuel prices and erratic electricity is a barrier to growth. Government can provide creative solutions by offering subsidy to only those who agree to document their accounts.

5. Provision of licences for mobile vendors: Marginalised enterprises who cannot afford a shop are victims of extortion. Local authorities need to bring them under the fold of the formal economy by issuing area-specific licences.

6. Provision of better parking facilities: Areas without proper parking discourage customer visits. If older markets cannot be fixed, all parking at new places should be better planned.

7. Decreasing the tax burden on small-scale enterprises: Taxes are a part of life. Key would be to have tax polices that help reduce the burden during the early stages until they become stable.

8. Raising the profile of small-scale entrepreneurs: Being an integral part of the country’s economy, they need help to be portrayed as essential for the country’s growth.

If Pakistan is to eradicate poverty and strengthen itself economically, it cannot afford to ignore sustainability and scalability of small-enterprise entrepreneurs. These enterprises have the potential of crippling or stimulating the economy; they are a source of income for two-thirds of the population. Small enterprises represent the common man on the street trying to make a living and they need our help.

Mandzukic makes his mark as Lewandowski is left in the blocks

The Croatia striker scored the winning goal in the Supercopa de Espana as his replacement at Bayern Munich failed to find the net against Wolfsburg

COMMENT
By Stewart Weir

Someone will eventually switch off the accompaniment. Up until then, the transfer market’s version of musical chairs will continue apace, although some have already grabbed their seats.

Three who have already settled for the season ahead are Chelsea’s Diego Costa, the man who replaced him at Atletico, Mario Mandzukic, and in turn Robert Lewandowski, the latter replacing Mandzukic at the head of the Bayern attack.

Over the space of 24 hours, that triumvirate were collectively involved in serious competition for the first time this season, giving fans and pundits an opportunity to compare their respective strengths, styles and ultimately how they fit into their new surroundings.

Everyone will have their own take on who did best. But on goals scored, Costa and Mandzukic edged Round 1 thanks to hitting the back of the net.


MARIO OFF THE MARK | The Croatia star celebrates after firing Atletico in front
In in the case of Mandzukic, it was the solitary goal which gave Atleti a 1-0 win on the night and a 2-1 aggregate victory over arch-rivals Real Madrid to hand Diego Simeone’s team the first domestic silverware of the season, the Spanish Super Cup.

Simeone, unsurprisingly, was full of praise for the Croat. Then again, in heaping plaudits upon Mandzukic, Simeone was complimenting himself on what a good signing he’d made to replace Diego Costa.

Most experts believed Atletico had worked a good deal in selling Costa to Chelsea for 40m Euro, while spending 22m on hiring the services of the Croatian marksman.

Against Madrid, two minutes into his competitive derby at the Vicente Calderon, Mandzukic had won over the fans. The winning goal against Real Madrid has that effect on people. But it was the manner in which the 28-year-old scored that suggested he could come close matching Costa’s haul of 36 goals last term.

Mandzukic pressurised Raphael Varane, his wayward attempted clearance flicked on by Antione Griezmann who outjumped Sergio Ramos, enabling Mandzukic to latch on to the knock down. He will hit better shots, more powerful attempts: but such was a accuracy and direction of his low effort, it beat Iker Casillas’s right hand to hit the bottom corner. A goal, virtually from nothing, but a goal just the same.

However, just a pleasing for his coach and team-mates, was Mandzukic’s overall play up front, holding up possession, involving others breaking from midfield, and the ‘nuisance factor’ that kept Ramos and Verane occupied throughout.

Compare that to the man who took his place at the Allianz Arena, Robert Lewandowski.


TOO HEAVY FOR LEWY | The Pole's touch takes him too close to Max Grun's outstretched arms
The Polish international, a free agent when he departed Dortmund, did contribute, playing a neat one-two to set up Arjen Robben for Munich’s second in a 2-1 win over Wolfsburg.

But in the scoring stakes, Lewandowski - looking to achieve something like the strike rate Mandzukic achieved at Bayern (33 goals in 54 appearances) drew a blank. It wasn’t for the lack of trying or opportunities. As the saying goes, he did everything but score.

In the first half, Lewandowski, the Bundesliga’s leading scorer last term with 20 goals, missed one opportunity from close range, unable to get a shot off as the ball tangled beneath his feet. Later in the half, his acrobatic high-kicking volley produced and equally acrobatic stop from Wolfsburg keeper Max Grun. Close, but no Bundesliga debut goal for the German champions.

And what of Diego Costa. Having ended his time in La Liga injured, including an ineffective Champions League appearance, and an equally unproductive trip to the World Cup with Spain, many locals around Stamford Bridge pondered just how this same man could have scored all those goals for Atletico.

They did not have long to wait for the answer. Against Burnley in Chelsea’s opening league outing, Costa scored. Against Leicester City on Saturday, Costa doubled his tally for the campaign. Indeed, the OPTA statistics at the time showed he’d had two shots this season, and scored on both occasions. Efficiency or what?

Criticised while out in Brazil, again it was his soon-to-be former coach Simeone who defended the prolific front man. If the Spanish midfield didn’t pass through the channels that Costa ran, how was he supposed to score?

With either Hazard, Oscar, Willian, Matic, Schurrle, Ramires or Fabregas providing the supply chain at any given time for Chelsea, Costa isn’t going to be lacking in opportunity.

So, while Mandzukic and Costa have contributed, Lewandowski awaits his first goal. I think it can be confidently predicted however, that will change ...

Di Maria could cost Manchester United €188m

The Old Trafford club have made a breakthrough in their pursuit of the Real Madrid winger, with negotiations set to continue on Sunday

By Paul Clennam

Manchester United may have to spend a staggering €188 million to wrap up a deal for Real Madrid forwardAngel Di Maria.

Madrid coach Carlo Ancelotti has confirmed the player will leave the club this summer and it is understood United have edged closer to the signing of the Argentina international, who is keen to link up with Louis van Gaal.

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And the Old Trafford club are facing a significant outlay if they are to secure the signature of the 26-year-old winger.

Madrid are aiming to receive somewhere in the region of €80m and €90m for Di Maria, though the initial fee paid by United could be lower with bonuses and add-ons supplementing the deal.

Di Maria, meanwhile, could pocket a €6m signing-on fee and sign a five-year contract worth close to the €375,000-a-week wage earned by Wayne Rooney.

United have secured just three signings this summer, bringing in Ander Herrera from Athletic Bilbao for around €35m, left-back Luke Shaw in a deal which could rise to €38m, and €20m for Argentina defender Marcos Rojo.

After a disappointing transfer window so far, the pressure is on Old Trafford executive vice-chairman Ed Woodward to complete a move for Di Maria.

Indeed, Woodward is understood to be desperate to seal the signing of the winger, who has been a target for United over several weeks.

Di Maria has moved ever closer to a Madrid exit as the start of the new season in Spain has approached.

The winger was not in the squad for the second leg of the Spanish Super Cup defeat to rivals Atletico, and Madrid boss Carlo Ancelotti has confirmed the player has said his goodbyes ahead of his departure.

"Di Maria has not come here to train, just to say goodbye," he told reporters. "It's not official yet, but everything is being sorted. We thanked him for what he has given the club and we wished him good luck.

"I have had a very good relationship with Di Maria. He has done a fantastic job at Real Madrid. We are able to replace him very well.

"It was his decision, because the club did everything possible to keep him, offering everything we could to have him here. He decided otherwise, so good luck to him."

Negotiations to complete the deal are set to continue on Sunday

Apple iPhone6: Redesign gives rise to supply hiccup

TOKYO: 

Suppliers to Apple Inc are scrambling to get enough screens ready for the new iPhone 6 smartphone as the need to redesign a key component disrupted panel production ahead of next month’s expected launch, supply chain sources said.

It’s unclear whether the hiccup could delay the launch or limit the number of phones initially available to consumers, sources said, as Apple readies larger-screen iPhones for the year-end shopping season amid market share loss to cheaper rivals.

But the issue highlights the risks and challenges that suppliers face to meet Apple’s tough specifications, and comes on the heels of a separate screen technology problem, since resolved, in making thinner screens for the larger iPhone 6 model.

Cupertino, California-based Apple has scheduled a media event for Sept. 9, and many expect it to unveil the new iPhone 6 with both 4.7 inch and 5.5 inch screens – bigger than the 4-inch screen on the iPhone 5s and 5c.

Two supply chain sources said display panel production suffered a setback after the backlight that helps illuminate the screen had to be revised, putting screen assembly on hold for part of June and July. One said Apple, aiming for the thinnest phone possible, initially wanted to cut back to a single layer of backlight film, instead of the standard two layers, for the 4.7-inch screen, which went into mass production ahead of the 5.5-inch version.

But the new configuration was not bright enough and the backlight was sent back to the drawing board to fit in the extra layer, costing precious time and temporarily idling some screen assembly operations, the source said.

Output is now back on track and suppliers are working flat-out to make up for lost time, the supply chain sources added. Japan Display Inc, Sharp Corp and South Korea’s LG Display Co Liminted have been selected to make the iPhone 6 screens, the sources said.

Representatives for those three suppliers, and for Apple, declined to comment.

Wider impact

Apple is known to make tough demands on its parts suppliers for new iPhones and iPads as it competes to create designs, shapes, sizes and features to set it apart and command a premium price in a fiercely competitive gadget market.

This can cause glitches and delays, including screen problems that crimped supplies at last year’s launch of a high-resolution version of Apple’s iPad Mini.

It also highlights the danger for suppliers of depending too heavily on Apple for revenues, creating earnings volatility.

Earlier this month, Japan Display, said to be the lead supplier for the new iPhone panel, said orders for “a large customer” – which analysts said was Apple – arrived as expected, but shipments may be delayed in the July-September quarter.

Supply chain sources had previously said challenges with the new iPhone’s screen in-cell technology, which eliminates one of the layers in the LCD screen to make it thinner, caused a delay in the production of the larger 5.5-inch version. One display industry source said the in-cell issues had now been resolved.

Samples sent: US to assess potential of Pakistan’s shale gas reserves

ISLAMABAD: 

Pakistan has sent samples of shale gas to the United States to determine the prospects of reserves of this untapped energy source following encouraging estimates given by the US Energy Information Administration (EIA), officials say.

According to the EIA assessment, Pakistan holds massive shale gas reserves estimated at 51 trillion cubic feet (tcf), close to the conventional gas reserves of 58 tcf.

At present, the government is conducting a study with the technical assistance of US Agency for International Development to prove the presence of huge shale gas deposits in the country.

Sources disclose that USAID has provided $1.8 million in technical assistance for undertaking the study. “Some samples have been sent to the US and research work will be completed in one year,” an official said, adding they were also looking for adopting US technology.

Washington is also imparting technical training to Pakistani officials and employees and engineers of public sector oil and gas companies.

The Ministry of Petroleum and Natural Resources has sent a summary to the Economic Coordination Committee (ECC) of the cabinet, seeking the go-ahead for initiating a pilot project to search and consume the shale gas potential. The move is aimed at gradually bridging the yawning gap between demand and supply of energy.

Shale gas is natural gas that is found trapped within shale formations. It has low permeability compared to conventional reserves, that’s why it does not come out easily and a specific amount of investment and pricing are required to encourage its exploitation.

At present, Pakistan is not producing shale gas and needs to undertake significant initial work to tap this energy resource.

The US, after the discovery of massive shale gas deposits there in recent years, has become a gas-exporting country. In future, reports say, it will experience a boom in shale oil production as well and will become the largest oil producer.

Officials point out that Pakistan will offer $12 per million British thermal units (mmbtu) to gas exploration and production companies under the pilot programme, a price that is close to the cost of gas to be imported from Iran under the Iran-Pakistan pipeline project.

“A policy framework has been prepared and its approval will be sought from the ECC in its upcoming meeting,” an official of the petroleum ministry told The Express Tribune.

According to the official, exploration companies have already found some traces of shale gas during the search for conventional gas as 10% to 12% of shale gas appears on upper faces of conventional gas.

Experts suggest that Pakistan has consumed around 40% of conventional gas reserves and shale gas is the most viable option to meet growing energy needs.

A study conducted by a group of exploration and production companies says the production of shale gas will be economical at about 80% of the price of Brent crude, but this will have to be brought down to 70%.

Apart from shale gas, the government is also planning to drill 400 wells in the next four years in an effort to enhance the country’s oil and gas production.

Though in the past one year new gas deposits had been found, total production of the country stood at almost the same level at four billion cubic feet per day because of depletion of reserves in old fields.

According to officials, the country has added 500 million cubic feet of gas per day (mmcfd) from new finds, but a quantity more than that has been depleted. Therefore, the impact of additional 500 mmcfd is not reflected in overall production.

However, oil output has risen to near 100,000 barrels per day compared to 74,000 barrels per day earlier.

Rupee-dollar parity:‘Policymakers comfortable with correction’

KARACHI: 

The value of the rupee against the dollar decreased 60 paisa in the interbank market on Thursday to close at Rs100.30, with the rupee-dollar parity crossing Rs100 in both open and interbank markets.

After undergoing an unprecedented appreciation of 8.8% between December and July in interbank, the rupee has lost 1.93% value since the beginning of the current month alone.

“The current movement in the exchange rate is due to heightened (political) uncertainty. Hopefully, things will go back to being relatively normal once it goes away,” State Bank of Pakistan (SBP) Director Monetary Policy and acting chief spokesman Dr Hamza Malik said while speaking to journalists at the SBP head office on Thursday.

Referring to the on-going sit-in by an opposition party in front of parliament, Malik expressed hope that the political turmoil in Islamabad would be a ‘short-term blip’.

“Underlying fundamentals of the economy are strong,” he added.

He said the central bank typically has estimates of the expected inflows and outflows of dollars for the next few weeks. Any sudden movement in the exchange rate, while data about the expected flows point to the opposite direction, alerts the SBP immediately, Malik noted. He said the SBP intervenes in such situations by “talking to the market” in order to quell the panic.

SBP holding itself back

However, the continuous slide of the rupee against the dollar suggests that the SBP is holding back this time around. SBP-held foreign exchange reserves were only $5.3 billion in March when it reportedly injected liquidity into the market to strengthen the rupee.

In contrast, SBP-held reserves currently stand at $8.9 billion as per the data released on Thursday. Yet analysts believe there has been no such intervention.

Speaking to The Express Tribune, Standard Chartered Bank Senior Economist Sayem Ali said the SBP has not intervened in the foreign exchange market despite possessing higher foreign reserves.

“(It) indicates that the policy makers are comfortable with the correction in the foreign exchange market,” he said.

Ali also disagreed with the assessment of the SBP director that fundamentals of the economy were strong. Noting that the recent dollar rate movement is driven primarily by sentiments, he said the fundamentals of the economy were already indicating that a correction was due in the foreign exchange market.

“In the monetary policy statement, the SBP clearly highlighted the sharp appreciation of the rupee’s value (against the dollar) and the overvaluation of the real effective exchange rate (REER) index as a concern, leading to a widening trade deficit,” he noted.

Given the government’s estimate of inflows of nearly $9 billion in the financial/capital account and foreign debt repayments of $6 billion in 2014-15, Standard Chartered Bank estimates the exchange rate will be Rs104 to a dollar by December.

Speaking on condition of anonymity, a commercial banker said banks were buying the greenbacks from the interbank market at any given rate in order to sell them on to their clients.

“Liquidity is tight, but the SBP isn’t providing us with any cushion.  I suspect the finance ministry wants the SBP to stay away and let the dollar slide to Rs101. It’s playing politics,” he said.

The value of the dollar will come down by Rs2-3 within a week of the resolution of the political conflict, he added.

Published in The Express Tribune, August 22^nd, 2014.