Declining Consumer Nation?

GBA March 5, 2012

2011 Declining Consumer Nation? agenda

Economic overview 2010-2011 Consumer confidence Evolution of wealth

Branding trends
Retail de-evolution The luxury goods myth A shift & decline in advertising Summary

2012 forecast

Ralf Matthaes Regional Managing Director

2010 vs 2011 year in Review

Measure
GDP Inflation Trade deficit Exports Imports FDI Retail spend*

2010
6.78% 11.75% US$12.4 B US$71.6 B US$84.0 B US$18.6 B US$78.0 B

2011
5.89% 18.13% US$9.6 B US$96.4 B US$105.8 B US$10.9 B US$95.0B

Ralf

2012 est.
6.0% 10%

US$12-14 B
US$95 B US$115 B US$14B US$?B US$800 M 14%growth 0%

Ad spend
FMCG Value FMCG Volume Tourism Consumer confidence

US$726 M
21%growth 9% 5.0 M 78 index

US$760 M
16%growth 1.4% 6.0 M 83 index

6.5 M
75 index
Source: GSO / TNS / Kantar Media

* VN Retail Association not sure if accurate

2009 Revenue sources of income

Base: GDP = US $94.84 Billion

FDI

Exports

2011 GDP estimated at US $105 Billion USD If exports continue to climb, this may mitigate the declining FDI picture in Vietnam.
Source: GSO

Consumer Confidence 2010-2011

2011 Outlook - Consumer Confidence

100 Consumer confidence has seen a steady increase 89 since 2010 to 83 points 80

78
83 64

100

89 89
80

78 78 64 64

60

79 76

60

40
40

20
20

0
2008
1

0
2009
2

2010

01/2011
4

09/2011

Source: TNS Consumer Confidence Index

Consumer overview of Vietnam's next 12 months

Q: In the next 12 months would you think that the following will be better, the same or worse than they are now?

Vietnamese consumer seem fairly buoyant with regards to Vietnams overall outlook for the next 12 months, except for cost of living / dong devaluation and pollution, which was consistent with 2009 / 2010.
Source: TNS VietCycle 2011 Urban only

Will you spend More Less Same in 2012

Almost 50% note spending less / month to the end of the year than they spent in the 1st 7 months, with only 7% spending more. The poor will spend more, as inflation rips into their wallets
Source: TNS VietCycle 2011 Urban only

On What will you spend More-Same-Less than 2011

Education Health care products / services Food & beverages products Household utilities House hold care products

Personal care products

Transportation Communications Entertainment & dining out

Personal equipment
Home appliances

Education spend shows the strongest growth for 4 years running

Source: TNS VietCycle 2011 Hanoi / HCMC

Urban Consumption of FMCG

CONSUMTION TRENDS AMONG HIGHEST PENETRATION CATEGORIES*
AVG. VALUE GROWTH

2010 2011
14.2

18.8

AVG. PRICE GROWTH

2010 2011

9.2 15.8

AVG. VOLUMEGR OWTH

2010
1.4

8.9 SEM 1'10 vs SEM 1'09 SEM 1'11 vs SEM 1'10

2011

Vietnamese are buying much less than in the past due to inflation and a slowing economy
*Biggest categories: 24food and non-food categories with >60% penetration in first 6 months of the year = 60% of FMCG total market value
Source: Kantar Worldpanel Vietnam Household Panel Urban 4 key cities (HCMC, HANOI, DANANG, CANTHO)

Total Expenditure & Savings HCMC & Hanoi

2011

81
84 81 91 88 86 83
0% 10% 20% 30% 40% 50% 60% 70% 80%

19
16 19 9 12 14 17
90% 100%

2010

2009

2008

2006

2001

1999

Total expenditure

Savings

Until the global economic meltdown, Vietnamese savings Total expenditure Saving were dropping year on year. Now caution is the word.
Source: TNS VietCycle 1999-2011

The Evolution of Viet-Wealth

2008 2009 2005 2011-2012 1998 1988

GDP per capita evolution USD

In USD
1,400

1,300
1,200

1,266

1,300

1,125 1,024

1,000

835
800

725 552 402 440

600

400

289

Income Doubled

200

Income Doubled
1995 2000 2002 2004 2006 2007 2008 2009 2010 2011 Est. 2012 Est.

Vietnams GDP doubled between 1995 & 2005 & again between 2005 - 2011
Source: GSOVN 1995 -2010

Evolution Declared Monthly Household income - Urban

VND Million A+ = 15.0 Plus A = 13.5 15.0 B = 6.5 13.5 C = 4.5 6.5 D = 3.0 4.5

1999

2011
10 A+

16 Mill Population

1.6mil

E = 2.0 3.0
F = less than 2.0

A B C D E

1.4mil

5 10
21 29 33

46

B
C

7.4mil

21 9

3.4mil

D E F

1.4mil

3 F 1

500

200

Wow, holy &*^%$#&* = what a difference 12 years make

Source: TNS VietCycle 2011 Hanoi, HCMC, Danang Can Tho only

Gross National Income - 2009-2010 (USD)

Vietnam has surpassed Indonesia and should surpass the Philippines in the next 5 years
Source: TNS South Asia network

National Purchase Power Parody (USD)

Due to constant inflationary pressure Vietnam lacks behind in terms of PPP in South Asia

Branding trends

Key urban FMCG trends

I worry about my health more than ever before - 89% I worry more today about food safety 95%

HEALTH
I prefer to beverages I can drink from the container - 72% I prepare food the require little preparation - 63% agree

CONVENIENCE

SOPHISTICATION

I buy products of good quality, even if more expensive 90% Higher price products means higher quality 55%

Source: Kantar Worldpanel

Most preferred promotion (%)

Discounted price

Free gift with purchase

Get free Sweepstake/Lucky product/sample draw prizes with multiple purchase

Monetary gift

As the economy slows and inflation soar, discounted prices are the preferred promotions
Source: TNS VietCycle 2011 Urban only

Influencers & promotions - We agree

My family members usually I often try new products influence my selection of before my friends do brands

I am more likely to buy brands for which promotional offers are available

Family still strongly influences brand selection, as does promotions

Source: TNS VietCycle 2011 Urban only

Brand loyalty we are less loyal

I stick with my main brand it is tried and trusted

I switch brands a lot just to try

Over the years consumer have become less loyal to brands, but need a reason to switch
Source: TNS VietCycle 2011 Urban only

The origin of brands

The country of origin is Vietnamese brands are I prefer local Vietnamese more important than the as good as international brands brand name brands

Vietnamese brands have caught up to International brands in the minds and wallets of consumers
Source: TNS VietCycle 2011 Urban only

Top of Mind foreign brand awareness Top 5 of 2011 Top 5 of 2008

Foreign brands are dominated by Technology and Japanese brands

Source: TNS VietCycle 2011 Urban only

Top of mind Vietnamese brand awareness Top 5 of 2011 Top 5 of 2008

Vietnamese brands are dominated by FMCG brands. Honda & Unilevers OMO have ingrained themselves as VIET BRANDS into consumers psyche
Source: TNS VietCycle 2011 Urban only

Retail De-evolution?

2011

Vietnam

# 23 Global destinations for most attractive emerging

Retail markets
A slide of 11 places since 2010 and 6 more since 2009 and 6 more since 2008

A.T. Kearney

CHANNELS VALUE SHARE ON FMCG

TRADITIONAL TRADE IS STILL DOMINATING THE VIETNAMESE RETAIL LANDSCAPE BUT MODERN TRADE CONTINUOUSLY GAIN GROUNDS

MAT Q2 2011

20

62

12

2005

15

61

15

Modern Trade

Street Shops

Market

Other Channels

Total FMCG excluding gift

Source: Kantar Worldpanel Total FMCG Household Panel - 4 key Urban cities (HCMC, HANOI, DANANG, CANTHO)

26
Kantar Worldpanel

TURNING HYPER-SUPER
MORE URBAN SHOPPERS VISIT HYPER-SUPERMARKETS NOWADAYS AND DEVELOP THEIR PURCHASE HABITS

Spend loyalty

12%
(2007)

16%
(MAT Q2/2011)

per year

41 32

125 12 16 76

2007

MAT Q2/11

2007

MAT Q2/11

2007

MAT Q2/11

Monthly Penetration in Hyper-Super (%)

Average Visits per year in Hyper-Super

Average Spend per visit in Hyper-Super

Source: Kantar Worldpanel Total FMCG Household Panel - 4 key Urban cities (HCMC, HANOI, DANANG, CANTHO)

27
Kantar Worldpanel

Frequency

The Luxury Myth

% of populations which have bought luxury items in last 12 months

*Luxury item here is defined as valued over VND 10,000,000

2008

2011

10

14

Slow growth indicates that luxury is still well out of reach for most consumers
Source: TNS VietCycle 2011 Urban only
30

What does Luxury mean to Vietnamese consumers

Q: Which of the following statements describe what is luxury to you?

Luxury is mostly associated with price and quality, which varies somewhat from more developed countries where, exclusivity and decrement are key drivers
Source: TNS VietCycle 2011 Urban only
31

How we define luxury

Q: Which of the following activities do you consider to be luxury?

Dining out at 5-star restaurants/hotels

Travelling for pleasure abroad

Playing golf

Shopping at boutique venues

Living in a high-end apartment

Staying at 5-star hotels/resorts

Having membership to VIP club

5 star hotels / restaurants / overseas travel and Golf are seen as key luxury activities However boutique shopping and overseas leisure travel are gaining preference
Source: TNS VietCycle 2011 Urban only
32

Top 5 Top of Mind luxury brands

Q: When thinking of luxury brands, what brand comes to mind first?

Someone who owns luxury brands

Or is.

Source: TNS VietCycle 2011 Urban only

33

A shift & decline in advertising

2010 vs 2011 Ad spend breakdown

Jan June 2011

Magazine 6.2% Newspapers 10.3%

Radio 0.2%

MEDIA TYPE TV RADIO NEWSPAPERS MAGAZINES

Cost 283,166,942 613,793 33,101,965 21,122,459

Internet 3.5%

Jan-Jun 2011

$338,005,159

TV 79.7%
Total spend in A-T-L advertising in 2011 was US $761 Million, or a slight increase of 3% from 2010.

Source: TNS - Kantar Media 2011

% using at least once a day

Vietnam
TV

(Global)
95% (54)

Digital

42%

(32)

Newspaper

40%

(61)

Radio 22%

(14)

Magazine 6

(36)

Digital Media consumption has surpassed Press in 2011

Source: TNS Digital life 2011

The Essence of Vietnamese Media

cant live without HCMC

70%
19% 9% TV INTERNET NEWSPAPERS

will use more in the future HCMC

53% TV INTERNET NEWSPAPERS

HANOI
61%
31% 9%

HANOI
39% 46%

30%
12%

11%

TV still is a must have and the most trusted media source in Vietnam, though less in Hanoi
Source: TNS VietCycle 2011 Urban only

Reach of Media - 2010

Past Week Reach (%)
100

80

TV Internet

60

Newspaper Radio

40

Magazine

20

0 15-19 20-24 25-29 30-34 35-39 40+

Youth are heavy surfers and will become the mainstay of internet advertising in the future
Base: Males and Females aged 15-54 across all 4 major cities (Ho Chi Minh City, Hanoi, Da Nang and Can Tho) Source: Kantar Media MHS Week 1-52, 2011

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Ralf.matthaes@tnsglobal.com

www.tnsglobal.com