Starbucks Gets Frothy In Asia As Europe Goes Flat

Starbucks, which has been criticised for not paying enough corporation tax in the UK, has reported better than expected sales in the US and increasing growth in Asia.

The coffee chain saw net earnings, which is one way of measuring profits, hit $432.2m (£268m) in the three months to the end of December - up 14% on a year earlier.

Customers in the US, its top market, spent more than expected during the economically turbulent winter holiday season.

Overall revenue jumped almost 11% to $3.8bn (£2.48bn) during the quarter, which is the best sales period for Starbucks.

It also reported stronger-than-expected sales in Asia despite economic uncertainty worldwide, offsetting unexpected costs including the bill for cleaning up after Superstorm Sandy.

Sales at established shops were up 11% in the China/Asia Pacific region.

Global sales at stores open at least 13 months were up 6%, however, Starbucks' Americas business contributed 75% of total revenue for the fiscal year that ended September 30.

Starbucks also said it sold more than 150,000 of its domestic coffee machines, most of them through specialty retailers.

Executives said the machine will continue to be a major revenue driver in the coming months and years.

However, the chain's bosses joined industry peers in adopting a cautious stance for the new year, largely because of concerns that this month's US payroll tax increase could depress consumer spending.

The US and Asian boost comes as sales were down by 1% in Europe, the Middle East and Africa.

Last November, Starbucks in Britain found itself in the middle of a tax avoidance row and a number of customers started to boycott the brand over its transfer pricing to other units abroad.

The angry backlash was prompted by the revelation that Starbucks paid only £8.6m UK corporation tax in the past 13 years, despite sales of £3.1bn in the country, as a top executive was grilled by MPs over so-called tranfer pricing.

It has since said it expects to pay around £10m in UK corporation tax for each of the next two years - but critics slammed it as a donation and HM Revenue and Customs reacted negatively to the gesture.

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Horsemeat Scare: Waitrose Pulls Burgers

Waitrose has become the latest supermarket to remove beefburgers from its shelves as a result of the horsemeat scare.

The company said it had taken frozen burgers made by Dalepak, one of the firms at the centre of the horsemeat contamination investigation, off sale "as a precaution" when it had its accreditation suspended.

Ten million burgers have been taken off supermarket shelves across Ireland and the UK as a result of the scandal when it was revealed some lines sold by Tesco, Aldi, Lidl and Iceland were discovered to have contained traces of horsemeat.

In a statement, Waitrose said its burgers had since been tested and were found to be 100% beef.

"As a consequence we are 100% confident in the integrity of our supply chain," it said.

"The ingredients in our burgers are simple with all meat traceable back to British farms that we know.

"Our technical team visited the Dalepak site last week and were happy that our products were produced to our high specification and separately from other companies' products (ours are produced at 6am before other any other burgers)."

The ABP Food Group, one of Europe's biggest suppliers and processors, stopped work at its Silvercrest Foods plant in County Monaghan, Ireland, after tests last week revealed contamination in frozen burgers.

Tests had already shown that Silvercrest Foods and another of the company's subsidiaries, Dalepak Hambleton in Yorkshire, supplied beefburgers with traces of equine DNA to supermarkets, including one product classed as 29% horse.

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Apple Overtaken By Exxon As Most Valuable Firm

Apple has been overtaken as the most valuable company in the world - by its old rival Exxon Mobil - after the iPhone and iPad maker saw its stock price fall.

Exxon Mobil is now the largest US publicly-traded company by market value - roughly a year after losing the title to Apple.

Apple's stock has kept on declining since it released its earnings report on Wednesday.

It dropped 2% on Friday to $441.30 (£279.36) for a market capitalisation of $414.5bn (£262.4bn).

Exxon Mobil, meanwhile, gained 13 cents to $91.48 (£57.91) and has a market capitalisation of $417bn (£264bn).

Apple's earnings results suggested that its phase of fast growth - which is rare for a company of its size - may be coming to an end.

On Thursday, the stock saw its biggest one-day percentage drop since 2008.

Apple's market capitalisation has now fallen by about $250bn (£158bn) - roughly the market value of Google - since hitting a high last September, when the stock traded above $700 (£443).

Exxon Mobil runs the Mobil chain of petrol stations as well as refineries

Apple first surpassed multinational oil and gas firm Exxon in the summer of 2011.

The two companies swapped places that autumn, until Apple surpassed Exxon for good in early 2012 before their latest reversal of fortunes.

"Apple was clearly a momentum stock," said Kim Forrest, a senior equity research analyst at Fort Pitt Capital Group.

"Whenever the numbers behind momentum stocks stop, the momentum players are out and the stock tumbles."

Nevertheless, Apple still managed to ship a record 47.8 million iPhones in the December quarter, up 29% from a year earlier.

However, that lagged behind the 50 million phones that analysts on average had projected.

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Exclusive: City Plots Move For RBS Branches

By Mark Kleinman, City Editor

Some of the City's leading investment institutions are exploring a takeover bid for more than 300 bank branches which Royal Bank of Scotland (RBS) is under orders from Brussels to sell.

I have learnt that major investor groups including Schroders and Threadneedle Investments have been approached about participating in a bid proposal being put together by Canaccord Genuity, the City broking firm. Fiske, a smaller broker, is also understood to be working on the project.

The news could add fresh momentum to an auction that looked to have lost traction after Nationwide, Britain's biggest building society, declared that it had no interest in acquiring the 316 branches.

RBS had agreed to sell the business to Santander UK, the Spanish-owned lender, for about £1.6bn, but the deal fell apart amid a dispute about the complexity of the IT systems associated with the branches.

The structure of a vehicle that would be used by a City consortium to acquire the branches is unclear. One option being considered would be to launch a form of accelerated initial public offering, which would involve creating a shell company to buy the RBS operations and sell shares to the institutions over a rapid timetable.

None of the institutions approached about the deal has formally committed to participating yet, but people close to RBS confirmed that the putative consortium had been given access to a data room allowing it to examine financial information about the branch network.

One of the difficulties with selling the branches to a City consortium would be that the network comes with little by way of infrastructure and so would require significant investment to develop into a standalone bank.

According to figures from RBS, the franchise, which carries the Williams & Glyn's name, consists of almost £19bn in assets, 250,000 small business customers, 1.8 million retail customers and about 5,000 employees. In the first half of 2012, it generated an annualised operating profit of £372m.

A number of senior City figures are under consideration as a potential chairman of the business if the institutions' bid progresses.

It is conceivable that the institutional investors could join forces with a private equity bidder for the branches. Two buyout firms, Apollo Management and JC Flowers, have submitted a joint offer, while Corsair Capital, whose advisers include the former trade minister, Lord Davies, is also interested.

Virgin Money, which bought Northern Rock from the Government just over a year ago, has signalled that it might bid but the level of its interest is unclear.

Any buyer is unlikely, however, to pay more than half the £1.6bn offered by Santander, a price which itself had been reduced during two years of talks between RBS and the Spanish-owned bank.

RBS has been set a deadline to sell the business by the end of this year by the European Commission, but that timetable is unlikely to be met.

Executives at the bank would prefer to sell to an existing competitor in order to shorten the sale process but are likely to have to ask Brussels for more time.

The Office of Fair Trading today spared the banking industry from a full competition inquiry into the sector, but warned that the personal current account market required significant change and that it plans to revisit the issue in two years' time.

RBS declined to comment on the progress of the auction, which it has codenamed "Project Rainbow".

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Hovis And Oxo Boss Heads For Exit

By Mark Kleinman, City Editor

The South African executive parachuted in to restore the health of Premier Foods, the owner of Hovis bread and Mr Kipling cakes, is poised to quit after less than 18 months in the job, Sky News has learnt.

Britain's biggest branded food manufacturer, Premier Foods has asked headhunters to identify a successor to Mike Clarke during the coming months. Russell Reynolds Associates is understood to have been appointed to oversee the search.

Mr Clarke's exit is not yet certain, and people close to Premier Foods cautioned on Friday that he could yet decide to remain with the company, although he is already understood to have been approached about a number of management roles at other UK-based companies.

If he does decide to step down, Mr Clarke's departure could be announced within weeks. It would come in the middle of an effort by the company to repair its finances after a disastrous few years during which Premier Foods almost collapsed under a mountain of debt.

In recent months Mr Clarke has orchestrated the sale of its sweet pickles and table sauces business, which included the Branston pickle brand, for £92.5m; its sweet spreads and jellies business, which included Hartley's, Robertson's and Sun-Pat, for £200m; and its vinegar and sour pickles unit, which included the Sarson's brand, for £41m.

It has effectively hoisted a 'for sale' sign above its bread division, the company's most significant operation following a restructuring that saw Goldman Sachs brought in to sound out prospective buyers, along with the closure of two bakery sites in the UK.

It also emerged this month that poor harvests had forced the company to abandon its policy of buying only British wheat, turning to European grain to make up the deficit.

Premier Foods continues to own some of the most popular products in British kitchens and is now pooling its marketing muscle behind a portfolio of what it calls 'power brands', which include Ambrosia, Loyd Grossman and Oxo.

Mr Clarke was poached by Premier Foods from Kraft Foods Europe, part of the group which bought Cadbury in a controversial deal in 2010, in July 2011. In his role at Kraft he was responsible for managing a business with revenues of $13bn, 58 manufacturing sites and 25,000 employees. Before that, Mr Clarke worked at The Coca-Cola Company and Reebok, the sporting goods manufacturer.

He arrived at Premier with a strong financial incentive to rebuild the group, but is understood to have become disillusioned with the scale of the necessary balance sheet restructuring.

When he joined, one analyst called his job "the toughest in European grocery". Premier Foods, which employs about 9000 people and has annual revenue of about £2bn, has shed thousands of jobs during Mr Clarke's brief tenure as he battled to repair the company's finances.

Last week, the company issued a trading update which said that its sales performance in the final quarter of last year was in line with board expectations, prompting Mr Clarke to say: "While the market continues to be challenging, I'm encouraged by the progress we have made in 2012. This provides a solid platform to continue our growth momentum in 2013."

Premier Foods has a suitable successor already working for the company, according to food industry analysts, who pointed to Geoff Eaton, chief operating officer, as the most likely internal candidate to replace Mr Clarke, who was paid almost £2.3m last year. Mr Eaton previously ran Uniq, the dairy producer. The search to replace Mr Clarke is also understood to include external candidates.

A Premier Foods spokesman declined to comment on the hunt for a successor to Mr Clarke, who also declined to comment.

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Gatorade Removes 'Fire Retardant' Chemical

The makers of Gatorade are removing a chemical also used in fire retardants from the sports drink after an online campaign by consumers.

Gatorade said it would stop using brominated vegetable oil (BVO) - patented as a chemical to prevent flames from spreading - in its citrus-flavoured drinks in the US.

"While our products are safe, we are making this change because we know that some consumers have a negative perception of BVO in Gatorade," company spokeswoman Molly Carter said in a statement.

BVO is used as an emulsifier, meaning it keeps the flavouring distributed evenly rather allowing it to settle on the top, in a number of brands of soft drinks in the United States. It is banned from food in Europe and Japan.

More than 200,000 people had signed on to an online petition launched by a Mississippi high school student urging Gatorade to stop using BVO.

Claiming victory, 15-year-old Sarah Kavanagh said: "When I went to Change.org to start my petition, I thought it might get a lot of support because no one wants to gulp down flame retardant, especially from a drink they associate with being healthy.

"But with Gatorade being as big as they are, sometimes it was hard to know if we'd ever win.

"This is so, so awesome."

However, Ms Carter said the move was not a response to the campaign and had actually been planned by Gatorade, a subsidiary of PepsiCo, for some time.

The new version of Gatorade, which will be available in the coming months, is replacing the BVO with an ingredient called sucrose acetate isobutyrate, which Ms Carter said will maintain the flavour and taste of the drinks.

Concern about BVO grew in 2011 after an article in Scientific American by scientists called for a reassessment of its safety.

Some soda binge-drinkers "have needed medical attention for skin lesions, memory loss and nerve disorders, all symptoms of overexposure to bromine," the magazine said.

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UK GDP Falls By 0.3% In Last Quarter

How GDP Is Compiled Really Matters

Updated: 10:21am UK, Tuesday 27 November 2012

By Ed Conway, Economics Editor

I've covered economics for a decade or so, but I confess that until very recently I didn't really know what GDP really is.

I mean, like most of you I knew it was the broadest and most widely-used measure of our economy's health - that it determines whether we're officially in recession or not (two or more quarters of shrinking GDP equals a recession).

I knew it was the sum of everything spent, earned or made in Britain.

What I didn't know was how it's actually put together.

I guess I vaguely assumed - and I don't think I'm entirely alone - that the Office for National Statistics had some kind of electronic hotline into British business, some privileged access to their numbers, which in turn became the Gross Domestic Product number.

Turns out I was monumentally wrong.

For it transpires that GDP - that big number we're all so focused on, the figure that tells us whether we're in a recession or booming, that can end a political career and swing an election - is actually a big, big survey.

I know this because earlier this month I spent some time in the ONS headquarters in Newport with the team who put together this most significant of all numbers.

For the first time, they allowed cameras into their offices to show how GDP really comes into being - and the genesis might well surprise you.

At this point it might be worth explaining why this matters so much: there is arguably no other number out there that can swing the financial markets quite so much, that can influence Britain's feelgood factor, that dominates the headlines and strikes fear into politicians.

And yet there are many people who question whether we can really rely on the numbers.

Some economists argue that the GDP figures in recent months have painted a far more negative picture of the UK economy than is actually the case.

Some argue that Britain never really experienced a double-dip recession - but that this reality will only ever be confirmed many years into the future when the ONS revises those initial estimates.

So how GDP is put together really matters. And it all starts with the pounds in your pockets.

The first estimate of GDP is created from data collected in surveys of tens of thousands of surveys from businesses around the country - whether they're manufacturers, construction firms, retailers or others.

Each month a large sample of them is asked by the ONS to tell them their turnover (how much money is going through the till), along with a few other industry-specific questions which form part of the retail sales, manufacturing output and other releases.

The turnover number is what matters from the perspective of GDP. They fill the relevant questionnaire in and post it to the ONS (they can also submit the data through an automated telephone system).

When those envelopes arrive there the questionnaires are scanned and the numbers go into the ONS' systems.

The problem is that by the time that first estimate needs to be produced, the ONS only has 44% of the relevant data (the rest arrives in dribs and drabs over the following months, hence later revisions). In particular, the ONS only has early responses for the final month of the quarter.

So there are some pretty big gaps to be filled, and the ONS has to make some estimates about what the other data will eventually say when it comes in.

It relies for this on computer models, backed up by assumptions and calculations from the ONS staff themselves. After they make these calls they meet and discuss them in so-called "balancing meetings" - the statisticians ask each other whether the data are reliable and their assumptions have foundation.

During this entire period, those GDP assumptions and the ultimate figure are kept locked up (quite literally - there are safes into which they are put) such that only a dozen or so statisticians actually know the number before it comes out.

So far as anyone knows, there has never been a leak of a number as sensitive as this from the ONS. But 24 hours before the figures are published, selected ministers and officials also get a look.

The figures are revised again a month after that initial release, and then again a month later. During that period, more information has come in from quarterly surveys which measure families' and businesses' incomes, and other spending data.

As I said, GDP can be measured in terms of what we spend, what we earn and what we make - they should all add up to the same number, since what one person buys another person sells. And the extra data furnishes that initial estimate and, occasionally, contradicts it.

The ONS maintains that its record of revisions is acceptable by international standards. It points out that its surveys have far more respondents than those put together by independent competitors.

But some, most notably Kevin Daly of Goldman Sachs, argue that it has a tendency to revise the more distant history so substantially that often periods we thought at the time were slumps were actually booms.

A case in point is the early 1990s - at the time, the ONS said the UK was suffering a double-dip recession.

But by the end of the millennium it had revised its assessment - far from slumping, the UK was actually bouncing back forcefully at that point. When Norman Lamont referred to "green shoots", it turns out he was absolutely right.

Today, the GDP figures have been telling an altogether different story to the unemployment figures, which seem to suggest there never was a double-dip. Based on precedent, we are unlikely to know the definitive story for years to come.

Which implies that the ONS, and the way it puts together this most important of all numbers, will remain in the spotlight for the foreseeable future.

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BlackBerry Crumble? New Phones May Save Brand

BlackBerry's latest smartphones could see it return to glory after several years in decline, according to experts.

Parent company Research In Motion (RIM) plans to launch two handsets, the Z10 and X10 on Wednesday. Pictures leaked online purporting to be the Z10 show a touchscreen phone along similar lines to the iPhone. The X10 is believed to be more of a classic BlackBerry, with a Qwerty keyboard.

A new tablet device is also in the pipeline.

The new BlackBerry 10 (BB10) handsets and software could lead to the firm's "resurrection", one expert says, after it saw its popularity wane in favour of phones like Apple's iPhone and Samsung's Galaxy S3.

Malik Kamal-Saadi, principal analyst with Informa, who has used the device ahead of the launch, says it has high specifications that allowed users to do "good stuff in a couple of clicks", which would appeal to both businesses and consumers.

He said the new operating system (OS) on the two expected handsets was a "trump card" that could see it win back customers lost through the poor performance of the previous BlackBerry 7 phones.

"The 'experience' is very attractive for business users and consumers. BB10 has what is needed to seduce back in both developed markets (Europe and North America). I haven't seen anything like it in terms of the experience," said Mr Kamal-Saadi.

Ernest Doku, technology expert with uSwitch.com, said: "For RIM and BlackBerry, it is very much the resurrection of the BlackBerry brand.

"Consumers have been waiting a long time to see what they were coming up with. They have fallen to the wayside but a lot of signs are pointing to this being their return to relevance in the smartphone market."

But some question whether the latest BlackBerry launch, delayed from last year, is too little too late.

Russell Feldman, associate director for technology and telecoms consulting at YouGov, said: "We know that right now RIM is in a poor situation, and so there is definitely a lot of pressure for the BlackBerry 10 to deliver.

"According to SMIX UK, our consumer smartphone tracker, two-thirds of RIM's current customers do not expect to get a BlackBerry again, with most opting to switch to an iPhone.

"It needs to be a decent system to at least get critics on its side, and it then could have the potential to take share away from others. However, RIM may have left it too late."

BlackBerry was the market leader in 2007, but the launch of the iPhone and Android smartphones has reduced its market share to around 5%.

RIM is also paying for a US Superbowl advert to help promote its new products.

The event attracts one of the biggest TV audiences of the year in America and companies pay millions of dollars for advertising time.

The battle for domination of the mobile and tablet market has become increasingly heated in the past 18 months, with Apple's competitors taking it on with a series of new products.

Samsung's Galaxy smartphones have outsold the iPhone for a fourth consecutive quarter, according to recent figures.

While Nokia and Microsoft have joined forces to launch two new phones which run on the Windows operating system.

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Latest GDP Drop Puts Pressure On Osborne

A lot of people suspected the news would not be good. It turns out it was even worse than expected.

Britain's economy is shrinking once again - and far deeper into negative territory than was anticipated.

That 0.3% decline in the fourth quarter of 2012 leaves Britain's gross domestic product 3.3% shy of its 2008 peak.

It's deeply embarrassing for the Chancellor, who told Sky News earlier today that despite this setback it was "a reminder that Britain faces a very difficult situation.

"We have problems at home but there are also problems abroad. You can either run away from them - and the British public understand there is no overnight solution and we are heading in the right direction."

But according to the Shadow Chancellor, Ed Balls, the figures are the "moment when David Cameron and George Osborne's complacency is completely exposed".

And it leaves the UK even further shy of its international counterparts. In Canada, the US, Germany, China and plenty of other major countries, GDP has already rebounded to the level it was before the crisis.

Britain, on the other hand, remains below that peak - even five years after the crisis started.

The National Institute for Economic and Social Research defines a depression as a "period when output is depressed below its previous peak."

IMF chief economist Olivier Blanchard said Osborne needs to change his plan

By that definition, Britain is still stuck in a depression - and this depression is longer than any in recorded economic history: even the 1930s.

In the end, this is the challenge for George Osborne. Britain's total capacity to produce wealth - which is in essence what GDP measures - has diminished substantially during this crisis. That, when it comes down to it, is what lies behind the squeeze so many families are facing on their incomes.

And the economy's inability to regain meaningful growth is something that should concern the Chancellor. There is now growing pressure (even more than the significant amount there was before) for him to reconsider his fiscal plans.

It isn't merely Nick Clegg: the International Monetary Fund's chief economist, Olivier Blanchard, believes that having warned Mr Osborne multiple times that he needs to be ready to change course if the UK economy disappoints, that moment has now come.

Whether this pressure will be enough to force Mr Osborne to change course is another question. He has been so forthright about the need for austerity all the way through the crisis that it would surely be politically humiliating to do an about-turn now.

And indeed, the evidence is that the austerity practiced in the UK hasn't actually been as aggressive as the Chancellor has made it sound.

However, the Chancellor refused to answer whether he agreed or disagreed with Mr Blanchard's advice.

Pointing to alternative support from the former IMF chief economist he said: "You're going to get economists disagreeing. I'm absolutely clear: we have the right plan. It was not a plan that was going to deliver results overnight." 

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EasyJet Chair Rake In Departure Lounge

By Mark Kleinman, City Editor

The chairman of easyJet, Britain's biggest airline by passenger numbers and revenues, is to step down this summer after a four-year tussle with the company's founder over its fleet size and strategy.

Sir Mike Rake will leave one a successor has been identified, about three-and-a-half years after he took on the chairmanship.

EasyJet brought forward the announcement of Sir Mike's departure on Saturday afternoon following a leak to Sky News.

A statement had been due to be issued by the company next week but a spokesman said the company had decided to confirm news of Sir Mike's departure after its City advisers were made aware of the leak.

In the statement, easyJet said it had already started a process to recruit a new chairman.

The news of Sir Mike's intention to quit comes days after shares hit an all-time high on the back of a surge in more profitable business travellers using the airline. It also benefited from capacity cuts by rival carriers during the winter months.

That solid performance has not appeased Sir Stelios Haji-Ioannou, who – alongside a number of family members – is easyJet's largest investor.

Last week he threatened to sell his shareholding if the company proceeded with a major new aircraft order.

EasyJet is poised to join the FTSE-100 following its next quarterly review in March, which will mean that Sir Mike chairs two companies in the blue-chip index.

He is also chairman of BT, and was a leading candidate to replace Marcus Agius at the helm of Barclays following the bank's £290m fine for Libor rate-rigging.

"In advance of the forthcoming [annual general meeting] I wanted to make my position clear," Sir Mike said. 

"easyJet has by any definition enjoyed a period of success and profitable growth in the last three years. 

"As this takes the airline to the threshold of entry to the FTSE 100 it is the right time for me to stand down.

"Carolyn McCall and her management team have developed and implemented the right strategy for the airline which is already bearing fruit wth record profits, a healthy share price and strong dividends.

"The airline is now well positioned to continue to deliver profitable growth and returns for all its shareholders."

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