Inflight Magazine of Brussels Airlines

Business trends

Boyd Farrow rounds-up what’s happening in the business world across Europe

Drawing board

Money matters

Finland’s Nokia, the world’s top mobile phone maker, has stunned the industry by admitting it is thinking of entering the crowded laptop computer business. Nokia’s chief executive Olli-Pekka Kallasvuo told Finnish national broadcaster YLE: “We are looking very actively also at this opportunity,” confirming rumours that it is seeking a partnership with a Taiwanese company.

“We don’t have to look even at five years from now to see that what we know as a cellphone and what we know as a PC are in many ways converging. Today we have hundreds of millions of people who are having their first internet experience on the phone. This is a good indication,” said Kallasvuo.

His comments came days after the Mobile World Congress in Barcelona, where several laptop makers unveiled plans to enter the smartphone market. Acer, the world’s third biggest computer brand, announced plans for eight smartphone devices alongside handset news from Hewlett Packard, Toshiba and China’s Lenovo.

Nokia’s pre-eminence is already under threat from Apple’s iPhone. Madrid-based Telefónica Europe reported a 5.9% rise in full year sales to €14.3bn, thanks to its UK division O2, which enjoyed a
10.6% rise in annual sales, largely thanks to the iPhone with UK sales over one million.

Upgrade your trip

Green light for technology

Business travellers to Berlin will soon be spared the cost of unwanted lattes in internet cafés or pricey sessions in hotel business centres. The city is planning to provide free wireless internet access for the whole of central Berlin, using antennae mounted on traffic lights. A three-month pilot will be launched in the next few weeks, providing free wi-fi access for two areas around some of the city’s most famous streets: Unter den Linden and Friedrichstraße and Kurfürstendamm and Tauentzienstraße. If successful – in other words, if the traffic lights don’t go crazy – coverage will be extended to the whole of inner Berlin, an area of some 92 km2.

The scheme was mooted first three years ago by the city’s government as a way of making Berlin more attractive as a place to live and work. However, it ran into difficulties because of disagreements over the technical details. Initially the wireless antennae were to be mounted on street lamps, but the urban development experts decided that such an arrangement was incompatible with the existing cityscape.

Radar

Bags of opportunity

Many financially battered Russians are drowning their sorrows – but not in vodka. Russia, the world’s largest tea importer, is expected to bring 187,000 tonnes of tea into the country this year (5% more than last year) as consumers shy away from more expensive pick-me-ups.

According to Ramaz Chanturia, head of Rusteacoffee, which represents the country’s tea and coffee packaging companies: “The financial crisis will shift demand to traditional tea from juices, energy and other fashionable and expensive drinks.” However, Chanturia is not entirely overjoyed by this, lamenting that the quality of his favourite drink will take a tumble.
Russia, which grows hardly any of its own tea, has ingeniously built up its domestic tea-packing industry by doubling import tariffs on tea bags and lifting a 5% tariff on loose tea.

The country hopes to boost tea exports, as well as consumption, this year as a similar demand trend has emerged in cash-strapped neighbouring countries. Rusteacoffee estimates that exports may rise by up to 2,000 tonnes.

While many companies are scaling back their operations in the recession, one continues to build on success. Danish toy company Lego recently reported that net profits increased to €181m from €138m a year earlier, while revenues rose 17% to €1.27bn. But the company’s renaissance isn’t simply down to the fact that its multicoloured bricks are relatively cheap treats for cash-strapped parents. Lego has aggressively pursued product licences and enjoyed much success with its Batman, Harry Potter and Indiana Jones building-block sets.

In January it signed a new license deal with Walt Disney Co and will introduce its first building-block sets based on a Disney Pixar animation movie in 2010. Ironically, the toymaker faced a cash crisis earlier this decade when children went gaga for movie spin-off toys and video games.

Then Lego dismantled more than 1,000 jobs after huge net losses in 2003 and 2004. Recently it re-acquired factories in Hungary and the Czech Republic, whose output helped propel Lego’s share of the global toy market to a record 3.6% last year.

Chief executive Joergen Vig Knudstorp says the company expects to increase its share further this year, as revenue will grow between 3% and 7% amid a “moderate decline in the overall market”. Lego, founded in 1932, is owned by Kjeld Kirk Kristiansen, a grandson of its founder and worth about €5bn.

Radar

Germans ready for scrap

Although the global car industry is mired in crisis, in Germany some brands are enjoying record sales. Volkswagen expects February sales to reach 120,000 cars, more than ever before. Opel, pretty much on death row thanks to woes at its parent GM, experienced its best month in five years this February, selling 40,000 cars. Renault-owned Dacia has even had to up production to meet demand.

The reason? Included in the Germany governments’s €50bn stimulus package is a “scrapping bonus”, which gives €2,500 to anyone who takes their old cars to a breaker’s yard provided they immediately buy a new one. Even before it became law, thousands of Germans stormed their local dealerships. “There has never been a state promotion that had such a positive effect as the scrapping bonus,” Robert Rademacher, president of the German Association for Motor Trade and Repairs, told Auto, Motor und Sport. By the time the measure was passed, almost 250,000 Germans had lined up for it. However, while people are buying smaller, more economical models, sales of larger cars have collapsed. Mercedes, Porsche, BMW and Audi are all suffering. Sales of high-end saloons plummeted by 48% in January, compared with a year before.

Not really…

On a diet

Cadbury, which last year spun off its soft-drinks arms, appears to be benefiting from its management’s sole attention on the confectionery business. Either that or we’re all comfort-eating more chocolate as the recession bites. The UK giant reported a €765m profit for 2008, up 35% on 2007, even though cocoa bean prices hit a 24-year high. Revenues were 15% higher at €6.45bn.

“We are recession resilient,” said chief executive Todd Stitzer, explaining that the company is benefiting from its customers’ preference for trusted brands in difficult times. Globally, Cadbury’s worldwide chocolate sales rose by 5% last year, with 12% sales growth in the emerging markets (which now contribute nearly 40% of total sales) compared with growth of only 4% in developed markets. UK sales, which rose 5%, were boosted by the relaunch of its 1980s chocolate brand Wispa – and innovative advertising. One ad, featuring children with dancing eyebrows, notched up more than two million views on YouTube after one TV airing.

Bizarrely, in recent years Cadbury’s sales had been driven by chewing gum: revenues rose 10% for gum in 2008, compared with 6% for chocolate.

Now this category is going through a sticky patch. Stitzer said that, while chocolate is mostly eaten at home, gum is sold at petrol stations and airports and has been hit by the travel slowdown.

Buzzing about

Bay City’s new rollers

While music fans and copyright lawyers agitate over the Pirate Bay file-sharing trial in Stockholm, another Swedish online music streaming service is attracting attention. Spotify gives legal access to millions of titles from Universal, Sony BMG, EMI and Warner as well as independent labels. The new portal, tested in the UK in February, only lets you play and listen to music – downloading isn’t possible. Users either listen to about a minute of advertising every half an hour or pay £9.99 (€11) a month to turn the ads off. In the next months Spotify is due to be activated throughout Europe. According to co-founder Daniel Ek, the music industry has realised that piracy can’t be fought with lawsuits but only by developing better instruments to give people what they want. The attraction for advertisers is that there is a guaranteed “quality” environment.

Why are we here?

Birmingham (in 2029)

Better transport, improved roads, a visual arts centre and no more “rubbish” apartments are among a wish list for the future of Birmingham city centre. The suggestions were made by more than 50 professionals from the city’s creative and business sectors at a workshop organised as part of a consultation into The Big City Plan, a blueprint of ways to transform the UK’s second city over the next 20 years. The workshop marked the end of the three-month consultation, which has seen more than 1,600 people express their views over the proposals. The ambitious plan, spearheaded by Birmingham City Council, has been described as one of the biggest regeneration and development projects of its kind in the UK.

Philip Singleton, acting assistant director of city centre development and design for the council, said the plan would promote Birmingham as a family-friendly city, building bigger homes and taking inspiration from other cities such as New York. The Big City Plan has been compared to the pioneering Highbury Initiative in 1988, which produced the blueprint for redevelopment across Birmingham city centre in the 1990s.

Traffic report

Power dressing

Despite the economic gloom, tourists still can’t resist the delights of Milan’s Via Montenapoleone and Via della Spiga. But who exactly has been doing the spending? This is remarkably easy to find out thanks to Global Refund, which gathers data from the airport office where tourists submit receipts for a tax refund. Unsurprisingly, the Italian-obessed Russians are the largest national group of Milan’s fashion shoppers, accounting for 38% of the tax-free total in 2008. Ukrainians made up 6% of the total and were also the biggest spenders per purchase. Their average receipt was €1,556, compared with €968 for Russian shoppers, €925 for US shoppers and €789 for Chinese ones. Amazingly, the Ukrainian average receipt for jewellery alone is €12,000. Overall Russians, Arabs, Ukrainians and Chinese all posted big increases in fashion purchases in 2008 versus 2007. Not surprisingly, the US took the biggest fall, dropping by 38% to just 4%. In total, Milan’s tax-free shopping increased 2% in 2008.

IN POLITICS

Brigid Grauman snoops around Brussels’ corridors of power

Illustration Wilford Almoro/illustrationroom.com.au
Image Corbis

Shuffling the top deck…

The Brussels rumour mill is working overtime as speculation grows over which Commissioners will or won’t be coming back. Most people think that President José Manuel Barroso will get another five-year term, despite criticism of his low-profile (some would say lacklustre) performance ever since the financial markets went into meltdown last autumn. It’s become a rule that the Commission’s top job goes to former or serving prime ministers, and Barroso looks certain to be reappointed because no rival has so far emerged.

Some of Barroso’s present team have already jumped ship – Franco Frattini is now foreign minister in Rome and Peter Mandelson is serving as business secretary to his former labour party rival Gordon Brown. Others are pretty certain to go. Ireland’s Charlie McCreevy is likely to be heading back for Dublin and it could well be that his shoes will be filled by former Irish Taoiseach John Bruton, currently the Commission’s Ambassador in Washington.

As well as McCreevy, the Commissioners who probably won’t be reappointed include Austria’s Benita Ferrero-Waldner, Sweden’s Margot Wallström (whose thankless task has been to try to make Europeans love the EU) and Germany’s Günter Verheugen. Belgium’s slot at the Commission is likely to be filled by another former prime minister (albeit only for five minutes or so), Yves Leterme, who is expected to replace his compatriot Louis Michel.

Quite a lot of the old guard are going to stay on and a few former Commissioners, like France’s Michel Barnier, are expected to return to Brussels after a stint in national politics. The big question, though, is whether the next Barroso Commission will be a little more lively than the present one.

… and disgruntled rumblings in the lower echelons

So much for the rarefied atmosphere at the top of the European Commission, the 27-strong college of Commissioners. Now how about life further down, in the bowels of the EU’s bureaucracy? Brussels seems to be coming of age, with a new generation of bloggers who mercilessly debate the Commission’s shortcomings. A good example is b-eurocracy, which has been ranting about the pay gap between Commission staff hired over the past five years and those who climbed aboard the EU gravy train before that. The bloggers claim that the newly hired, and many others who are only on temporary contracts, sometimes earn a third of the salaries enjoyed by the old timers. “Older staffers never speak about their pay to newcomers,” it reads.

Best Brussels blog

Most of the top newspapers have their Brussels blog, and one of the liveliest is Coulisses de Bruxelles written by the French daily Libération’s Brussels correspondent Jean Quatremer. It’s been awarded two prizes: the Louise Weiss European journalism prize and the Greek Konstantinos Kalligas award for best EU coverage. The column was originally published in the newspaper until financial cuts forced it on to the net. By his own admission, the opinionated

Quatremer finds the blogosphere a particularly stimulating form of communication.

His stated ambition is to open closed doors in order to explain the daily making of Europe: “To give some flesh to an adventure that is too often seen as technocratic.” He welcomes readers’ comments as contributing to a “citizens’ debate”, but experience has taught him that it can’t be a free-for-all. Some of the comments have been so endless or so insulting that he now vets them before they go online.

Euro-TV turn off

TV is the politics of the future, right? With elections coming up in June, the European Parliament last year launched its own web TV station to try to grab the attention of Europe’s voters. especially the young. It’s been quite a big step for the usually staid civil servants who make up the European Parliament’s administration services, but it’s also drawn a good deal of flack for being both expensive and unwatchable – technical glitches that made the site crash upon launch still haven’t been ironed out.

As to costs, although the experts differ on the details, it’s clear that with the benefit of tax-payers’ money, the Parliament hasn’t stinted on its budgets. One observer, the Daily Telegraph’s Bruno Waterfield, says it costs around €60,000 for every hour broadcast, but that under 160,000 people have watched it since September.

A major part of the problem is that the EU’s own restrictive financial rules – brought in in the wake of a financial scandal at the Commission – make it hard to harness the expertise of outside experts and journalists. The result is that, when it comes to communication, Eurocrats have more opportunity to shoot themselves in the foot.

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