PURCHASING POWER & PRIORITY SPENDING

AMCHAM October 7, 2011

Agenda
Evolution of wealth

Consumer confidence & inflation

Branding trends Spending priorities Summary

Ralf Matthaes Regional Managing Director

The Evolution of Viet-Wealth

2008 2009 2005 2011-2012 1998 1988

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+

E = 2.0 3.0
F = less than 2.0

A B C D E

5 10
21 29 33

46

B
C

21 9

D E F

3 F 1

Upper middle class in Urban Vietnam now constitutes 65% of pop But only makes up about 30% of total population
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

39,000

National Purchase Power Parody (USD)

Due to constant inflationary pressure Vietnam lags behind in terms of PPP in South Asia
14,800 8,086 3,994 3,737
Philippines

3,123
Vietnam

2,000
Cambodia

Singapore

Malaysia

Thailand

Indonesia

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 - the 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

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

Branding trends

Key urban FMCG trends 2012 - 2015

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

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

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)

Spending priorities

Will you be spending more, the same or less in 2012

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

Ironically spend on many sectors seems to show growth

Source: TNS VietCycle 2011 Hanoi / HCMC

Consumers top 10 wish list for 2012!

Must haves for 2012

Washing machine Air-conditioner Laptop

33%

33%

32%

Digital Camera

Car

24%

22%

Karaoke system

LCD / Plasma TV

PC / Desktop

Smart TV

Refrigerator

21%

20%

14%

14%

12%

Source: TNS VietCycle 2011. Q46 Which of the following are 3 items you would most like to own that you do not own yet? Base: n= 2,000 (Total)

Summary

2010 vs 2011 year in review & 2012 forecast

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%

Performance

2012 est.
6.0% 10%

US$9.6 B US$96.4 B US$105.8 B US$10.9 B US$95.0B

US$12-14 B
US$99 B US$115 B US$14B ? US$800 M 14% growth 1% growth

Ad spend
FMCG Value FMCG Volume Tourism

US$726 M
21%growth 9% 5.0 M

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

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

Consumer confidence 78 index

* VN Retail Association not sure if accurate

Investment opportunities for 2012

Infrastructure
Better services for telecom/ electricity/ water/ Cable TV/ Internet / Utilities

Education
High schools, vocational training and University degrees in-country

Healthcare
Ethical drugs, maternal care, health & well being

FMCG
Food & beverage / personal care and household care Convenience & health platform / mass market / rural Vietnam price points

Electronics
Laptops, A/C, Washing machines, digital cameras

Transport Cars

Crystal Ball 2012

Major reforms required; Inflation / devaluation Finance system SoE performance FDI appeal

Key word is caution - wait & see Consumer spend will be down

Value for money is key as is quality & USP

Discover Vietnam with TNS

Ralf.matthaes@tnsglobal.com

www.tnsglobal.com www.tnsvietnam.vn
18 years of growth with Vietnam