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Wave 7 2nd Half 2012

Title of Presentation
Copyright Copyright 2011 2010 The The Nielsen Nielsen Company. Company. Confidential Confidential and and Proprietary. proprietary.

Agenda

AEC opportunities & challenges Growth Expectations Key issues faced by you & your peers
External economic & social impacts Consumer behavior Corporate strategic direction & plans

Setting the scene


A snapshot into the economic environment in Vietnam

Executive insights Research design

2nd Half 2012

Research Design
Nielsen Vietnam Business Barometer
Senior Leaders of manufacturers in Vietnam
October to November 2012

Nielsen Global Consumer Confidence Study


On-line survey around 58 countries August 10 September 7 2012

Nielsen Retail Audit Data


Data as of Q2 2012

Macro Economic data


Vietnam Govt. Statistics Office Media articles

2nd Half 2012

Getting ahead of the changing consumer


1 Vietnam is still growing and in some cases world leading growth despite poor recent PR over 40% of companies performed better than expected Inflation is less of an issue and now its down to competition and expansion Growth of the middle class and opportunities

Creating value-based pricing proposition

5 6 7

Its about access to internet, not about the hardware Distribution is still king We all know about AEC, but little action has been undertaken

2nd Half 2012

Setting the Scene

2nd Half 2012

2nd Half 2012

A challenging 2012 but government forecasts are certainly improving and inflation has reduced as an issue
GDP YOY
8 7

GOVERNMENT PLAN 2012

GDP 66.5%

CPI 10%

6 5 4 3

YTD Aug 2012

GDP 4.4%

CPI 12.2%

2 1 0 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12

22.2 23.0 22.4 21.6 19.8 18.1 17.5 19.8 20.8 13.9 13.3 12.2 Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec11 11 11 11 11 11 11 11 11 11 11 11

17.3 16.4 14.2 10.5

8.3

6.9

5.4

5.0

Jan- Feb- Mar- Apr- May- Jun- Jul- Aug12 12 12 12 12 12 12 12

CPI YOY
Source: Vietnam General Statistics Office
2nd Half 2012

Vietnam retail market drops out of top 30 countries for attractiveness by A.T Kearney. Inflation, high real estate price and business procedures are still big concerns.
VIETNAM Ranking

1 6 14 23

2008 2009 2010 2011

Policy & Procedure

Human Quality of Resources supply chain Source: A.T. Kearny 2012 GRDI

Low purchasing power

Source: A.T. Kearney


2nd Half 2012

but Vietnam is seeing phenomenal growth in the FMCG market compared to other markets
FMCG MARKET DYNAMICS REGIONAL SUMMARY Q2, 2012

2nd Half 2012

Source: Nielsen Retail Audit

Despite economic challenges, significantly more companies managed to beat their business target this year.
Business performance compared to overall target
100% 28 80% 6 18 17
Somewhat better

14 23

Significantly better

60%

17 31 58

20

On par with target

40%

32

31
Somewhat worse than target

20% 17 18 0% 7

38

17
Significantly worse than target

2010 2nd half 2011 1st half 2011 2nd half 2012 2nd half
2nd Half 2012 Q5: Looking back at your businesss performance from the beginning of the year until now, how well do you think your business has been doing compared to your overall targets?
Base: ALL RESPONDENTS

Key Issues Faced by Your Peers


1. 2. 3. External Economic and Social impacts Consumer Behavior Corporate Strategic Direction & Plans

2nd Half 2012

External economic & social External Social and impact Economic Impact

2nd Half 2012

Significant shift in behavior is forcing us to be more mobile than ever before. 2011 1st half
1) Inflation (68%) 2) VND devaluation (68%) 3) Ability to pass on price increase (50%) 4) Competitive pressure/ activity/ growth (32%) 5) Low GDP growth (14%) 6) Logistical challenges (10%)

2011 2nd half


1) Inflation (59%) 2) Competitive pressure/ activity/ growth (41%) 3) VND devaluation (41%) 4) Global Economic Crisis (24%) 5) Wages growth (24%) 6) Ability to pass on price increase (18%) 7) Labor force skill shortage (18%) 8) Low GDP growth (18%)

2012 2nd half


1) Competitive pressure / activity / growth (57%) 2) Inflation (48%) 3) Low GDP growth (35%) 4) Labor force skill shortage (35%) 5) VND devaluation (26%) 6) Ability to pass on price increase (26%) 7) Global economic crisis (22%)

7) Petrol Prices (9%)

8) Wage growth (9%)

8) Logistic challenges(17%)

2nd Half 2012

Q12: Which of the following issues concern you in terms of the impact they Source: Nielsen Business Barometer may have on your business? Rank the top three (3) issues that concern Base: Respondents in Auto, FMCG, you where 1=most concerned, 2= second most concern and so on. Telco, Travel, Pharma -n=23

But are our concerns aligned with consumers?

Top 5 supplier / manufacturer concerns


1) Competitive pressure/ activity/ growth 2) Inflation

Top 5 consumer concerns

1) Increasing utility bills (gas, electricity, water...) 2) The economy

3) Low GDP growth 4) Labor force skill shortage

3) Job security

4) Increasing fuel prices

5) VND devaluation

5) Health
Base: All Sample

Base: Respondents in Auto, FMCG, Telco, Travel, Pharma

Which of the following issues concern you in terms of the impact they may have on your business? Rank the top three issues that concern you where 1=most concern, 2=second most concern, etc...

2nd

Half 2012

Source: Nielsen Business Barometer & Global Consumer Confidence survey Q312

Consumer Consumer behavior Behavior Consumer Behavior Consumer Behavior

2nd Half 2012

Hardship continues, forcing consumers to further manage expenses


Shopping frequency
39%

Actions to save on household expenses


Save on gas & electricity 70%
64%

Weekly

Cut down OOH entertainment

63%
Spend less on new clothes 63% Delay upgrading technology (e.g. PC) 53%

59%

Every 2 weeks
36%

2011
Source: Nielsen Shopper Trends Study 2012 Base: All Supermarket shoppers (n = 1500)

2012

Cut down telephone bill 51%

Source: Nielsen Global Consumer Confidence Survey, Q2 2012 (n=438)

2nd Half 2012

85% of consumers worldwide say that rising food prices are impacting their choice of grocery purchases
Source: Nielsen Global Shopping Report August 2012
Copyright 2012 The Nielsen Company. Confidential and proprietary.

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Economy is a key concern in developed and developing countries with Vietnam high on food prices
Developed Asia
2011- Q4 2012- Q1 Utility Bills Utility Bills

Developing Asia
2011- Q4 2012- Q1 Economy Economy TH

AUS

2011- Q4

Job Security Economy

What Are Your Top Concerns in the next 12 Months?

SK

2011- Q4 2012- Q1

Job Security Job Security

2012- Q1

PH

2011- Q4

Economy Economy

TW

2012- Q1

APAC

2011- Q4 2012- Q1

Economy Economy

MY

2011- Q4

Economy Economy 2011- Q4 Economy Economy

HK

2012- Q1

2011- Q4
2011- Q4 Economy Economy

Economy Economy

2012- Q1

IND

2012- Q1

SG

2012- Q1

2011- Q4 2012- Q1

Food Prices Food Prices

VN

Source: Nielsen Consumer Confidence Survey


Copyright 2012 The Nielsen Company. Confidential and proprietary.

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Thailand consumer trend

Two extreme trends observed in Thailand in 2011: Value for Money and Premiumization

Value for Money

More economy segment, local brands with lower price points attracting consumers

Premiumization

Consumers are willing to trade up to products with value-added benefits and the right proposition eg. health/ wellness

Affordable Premium

Premium products made more affordable through new innovations/ variant strategy to encourage consumers to trade up
19

Copyright 2012 The Nielsen Company. Confidential and proprietary.

and this trend exists in Vietnam with different shopping behavior depending on the category

Household care 55%: Buy bigger


packs to save money

Personal care 41%: Purchase more


on promotion

Food & beverage 36%: Change channel


to save money

Milk

Tobacco

41%: Purchase more 27%: Not buy some


on promotion 'non-essentials'

50%: Purchase more


on promotion

27%: Buy bigger


packs to save money

36%: Purchase more on 27%: Buy bigger


promotion packs to save money

23%: Buy less /


smaller packs of the same products

36%: Trade down to


cheaper products

27%: Change channel 32%: Buy bigger packs


to save money to save money

27%: Change
channel to save money

23%: Change channel


to save money

32%: Change
channel to save money

27%: Purchase more


local/ Vnese brands

27%: Purchase more


local/ Vnese brands

2nd Half 2012

Q16b.Over the next 6- 12 months, how do you anticipate Vietnamese consumers will change their purchasing behavior towards each category below?

Business leaders in multinational companies are concerned that the buy Vietnamese trend will impose negative impact on their business.

Impact of local brands on business


100%

25
80%

20
Significantly improve our business

20
60%

25 13 60

Somewhat improve our business

40%

Do not impact our business

20%

Somewhat deteriorate our business

38
Significantly deteriorate our business

0% 2012 2nd halfTotal 2012 2nd halfMultinational companies

Q16a: To what extent do you think the consumer trend of Purchasing more local/ Vietnamese brands will impact your business in the next 12 months? 2nd Half 2012

Corporate Strategic Direction and Plan

2nd Half 2012

Mobile phones will overtake PCs as the most common Web access devices by 2015

Source: Gartner
Copyright 2012 The Nielsen Company. Confidential and proprietary.

23

Mobile phone penetration in Vietnam has increased dramatically in the last few years; this has also spurred internet access via mobile network
Vietnam Malaysia No. of cellphones (per 100 people) Thailand Indonesia Philippines

3G
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: World Bank


Copyright 2012 The Nielsen Company. Confidential and proprietary.

24

Most businesses spend less than 10% of their total budget on ATL and BTL activities.
Spending on Above- The- Line and Below- The- Line activities compared with total spending

ATL activities
<10% 10-20% >20% Do not spend 3 14 23 60

BTL activities
<10% 10-20% >20% Do not spend
4 9 23 66

Q12a & b. Please give an estimate of how much your company spends on Above-The-Line and Below-The-Line activities compared with total spending.
2nd Half 2012

As a result we are seeing an increasing investment towards internet spending

2011 1st half


N=33
TVC Point-of-SaleMaterials (POSM) In-store banners/posters Newspaper / Magazine (print) Outdoor posters / Billboard Internet Others

2011 2nd half


N=55

2012 2nd half


N=35

42% 14% 11% 10% 7% 5% 5%

Internet TVC Newspaper / Magazine (print) Others In-store banners/posters Outdoor posters / Billboard Point-of-SaleMaterials (POSM)

20 % 16 % 11% 8% 6% 5% 4%

TVC Point-of-SaleMaterials (POSM) Internet

30 % 21% 16 % 9% 9% 9% 5%

Others In-store banners/posters Newspaper / Magazine (print) Outdoor posters / Billboard

Q14: For the last 6 months, which of the following media channels has your company utilized for advertising? As a breakdown amongst all of the media channels you chose, please provide an estimated % to the extent your company has spent on those channels for the last 6 months? 2nd Half 2012
Base: All Respondents EXCEPT Media respondents

Apart from the traditional forms of media, Online and Mobile advertising continues to gain more attention.
T2B (increase): B2B (decrease):

37% 16%

60% 6%

19% 0%

37% 6%

13% 9%

6% 3%

69% 9%

31% 16%

100%

13

6 19 31

13

6 25

13 31
Increase significantly Increase Somewhat

80%

31 47 16

3
41 27 59 56

60%

16

Remain the same

40%

16 6
28 66

Reduce somewhat

20%

41 31 28

6 3
19
Radio

53

Reduce significantly No spending on this channel

6 3
13
Internet Mobile Phone

0%
TVC

6 6

Point-of-SaleOutdoor posters In-store News Materials banners/posters paper/Magazine (print)

Q15: Over the next 6- 12 months, how do you anticipate your company's spending on the following media channels for advertising? 2nd Half 2012
Base: All Respondents EXCEPT Media respondents

Growth Expectations

2nd Half 2012

Mixed outlook towards business conditions in Vietnam, with more than one third feeling less optimistic about the conditions in the next 6-12 months.

Expectations on business conditions


100%

7 30 38

2 29 26

Improved significantly

80%

Improved somewhat

60%

34 36 48

Remained the same

40%

43
20%

Deteriorated somewhat

28 10 2 2010 2nd half 21 5 2011 1st half 2011 2nd half

37
Deteriorated significantly

0%

3 2012 2nd half

Q7,: Over the next 6 to 12 months, do you believe that business conditions in Vietnam & your industry are more likely to improve or deteriorate? 2nd Half 2012
Base: ALL RESPONDENTS

Nevertheless, more than two thirds of business leaders still look forward to double-digit growth.

Expected company growth rate


100%

2 30 24

2 26

3 20 11
Don't know 25%+ 20% - less than 25%

80%

18
60%

14 10 20

20 24 28

15% - less than 20% 10% - less than 15% 5% - less than 10%

40%

17 16 16

14 17 11

20%

21 12 7 2 3 6

Less than 5%

0%

2010 2nd half

2011 1st half

2011 2nd half

2012 2nd half

Q11: What do you think your company growth rate will be for the next 12 months? 2nd Half 2012
Base: ALL RESPONDENTS

Organic growth continues to be the driver of most of our success, but how long is this sustainable?
Expected 3 key factors of company growth

2011 2nd half


Increased consumer demand in your existing categories/ industry Expansion to secondary cities/ rural areas Expansion to new categories/ industries Increased marketing expenses Mergers and acquisitions Expansion to modern trade channel Increased exports to overseas markets
23 36 52 79

2012 2nd half


Increased consumer demand in your existing categories/ industry Expansion to secondary cities/ rural areas Expansion to new categories/ industries Increased marketing expenses Expansion to modern trade channel Mergers and acquisitions Increased exports to overseas markets
9 44 53 79

74

50

26

21

21

Q11b: What do you think are the 3 key factors of growth for your company for the next 12 months? 2nd Half 2012
Base: ALL RESPONDENTS

ASEAN Economic Community ( AEC)


2nd Half 2012

Asia continues to be the growth engine


North America
West Europe

2.4%
LATAM

1.7%
MEAP

3.8%

East Europe Asia Pacific

3.5%

6.5%

4.3%
Average annual GDP growth rates in emerging markets from 2011 to 2016 is 50% higher than developed markets
Source: IMF Sept 2011, World Economic Outlook Report

2nd Half 2012

By the end of this decade the middle class in Asia will equal the middle class in Europe & North America

2nd Half 2012

Over the past ten years the middle class consumer represents the fastest growth in household expenditures
5.3 trillion US$ in new consumption

Growth in Household Consumption Expenditures1

Capital Class High Income 2.7%


Investments products Higher end goods

Consumer Class Middle Income 5.4%


Up-scaling lifestyles Discretionary spending

Subsistence living Low Income 3.9%


Core staples Infrastructure technology

Sources: Nielsen Analysis, World Bank World Development Indicators (average 1999-2008),

35
Copyright 2012 The Nielsen Company. Confidential and proprietary.

and Vietnam is set to see an enormous rise in its middle class consumer segment and spending

VIETNAM
Middle class*

8
million in 2012

44
million in 2020

95
million in 2030

Consumption*

$46
billion in 2012

$310
billion in 2020

$940
billion in 2030

* OECD Development Centre (middle class defined as households with daily expenditures between US$ 10 and US$ 100 per person)

Whilst getting excited about export and investment opportunities upon joining the AEC, companies are obviously concerned about increased competition pressures.

Benefits for Vietnamese companies


1. Exporting opportunities (21%) 2. More transparency (15%) 3. More domestic /international investment opportunities (14%) 4. Knowledge transfer(14%) 5. More FDI (6%)

Challenges for Vietnamese companies


1. More international competition (30%) 2. FDI shifts to other markets (16%) 3. Weaker languages skills (English is main language) (9%) 4. Migration of labour (9%) 5. Migration of labor to outside VN(4%)

What do you think will be the biggest benefits & the biggest challenges for Vietnamese companies once Vietnam joins the AEC? 2nd Half 2012

Thailand, Indonesia and Myanmar are considered the top three biggest threats to Vietnamese products and services.
The biggest threat to Vietnamese products/service

Myanmar (9%)
100%: Competitive pricing 33%:Strong country branding 33%: Strong international branding 33%: Lower labor cost

Indonesia (34%)
100%: Competitive pricing 42%: High product quality 33%:Strong distribution chain

Thailand (43%)
80%: Competitive pricing 53%:High product quality 27%: Strong country branding 27%: Strong international branding

Q27. Which member country do you consider to be the biggest threat to Vietnamese products/services? Q28. Why did you select this country? 2nd Half 2012

In the lead to AEC integration, companies have implemented plans around upgrading labor skills and strengthening business competitiveness domestically.
Business actions from now until 2015 AEC Integration

Train human resources Increase consumer demand in your existing categories/ industry Expand to new categories/ industries Expand to secondary cities/ rural areas Increase marketing expenses Expand to modern trade channel Increase exports to overseas markets Mergers and acquisitions

40 37 31 29 29 14 11 6

Q32. What actions have your company/will your company take from now until the 2015 AEC integration? 2nd Half 2012

Key observations What does it mean for you?

2nd Half 2012

What does it mean for you?


AEC

Managing Growth

Middle class Vietnam

Getting the message to consumers

Price as Value

41
Copyright 2012 The Nielsen Company. Confidential and proprietary.

Creating new business models

42
Copyright 2012 The Nielsen Company. Confidential and proprietary.

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2nd Half 2012

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