Emerging Markets Global Forces White Paper Mar 2012

7/31/2019 Emerging Markets Global Forces White Paper Mar 2012

1/10 Copyright 2012 The Nielsen Company.

EMERGINGMARKETS,

EMERGINGOPPORTUNITIES



Overview

Consumer condence has driven market rallies, lited corporate prots, toppled politicalregimes, closed banks and ueled protests. Now, it is re-shaping the global economy, moving theconsumer center o gravity urther east toward Asia and south toward Latin America.

Geography alone no longer denes emerging markets-consumer trends do. Trends like thedominance and expanding infuence o women shoppers, the rise o a global middle class, anaging population and mobile media convergence. However, more is unknown than known

about these segments and this report is intended to deliver singular insights into each areao opportunity. Despite dierences between developed and emerging nations, consumersuniversally enjoy unprecedented choice, power and infuence over brands.

A changing world requires changing approaches. Successul companies will need to adopt morefexible business models, manage risk across countries, balance local and global considerations,reconsider the role o emerging markets and continue to monitor the pulse o the globalconsumer as the pace o change rapidly increases.

Emerging Markets,Emerging Opportunities

James Russo,

VP Global Consumer Insights, Nielsen


3/10 Copyright 2012 The Nielsen Company. 3

HighlightsIn 2009, between 75 and 100 percent o global consumersagreed they were in the grips o a recession according to theNielsen Global Omnibus Survey. Just two years later, emergingmarkets had re-ignited their economic engines while WesternEurope, Japan and the U.S. continued to struggle against nancial

headwinds. The actors contributing to emerging market growthare maniold, including:

Marketvitality.M-commerce growth coupled with overall adspending changes, shited unds to emerging markets wherethe LATAM, Middle East, Arica and Asia-Pacic regions realized17 percent, six percent and 13 percent growth respectivelyaccording to Nielsens Global Adview Pulse Report.

Populationgrowth. Emerging market populations areexploding, with the 3.3 billion people in key emergingmarketsi dwarng the 854 million residents within keydeveloped countriesii.

Emerging: Brazil, China, Egypt, India, Malaysia, Mexico,Russia, South Arica, Thailand, Turkey

Developed: Canada, France, Germany, Italy, Japan, Korea,Spain, UK, USA

Productinnovation.Overseas innovation tracked by Nielsenuncovered a change in ocus or new product testing activity.Over a three year period, emerging market innovationincreased by 100 percent, driven by Arica (+131 percentgrowth) and BRIC countries (+173 percent growth).

Purchasingpower. More than hal o global purchasing powerresides in emerging markets, where Gross Domestic Product isexpected to grow at a rate 50 percent greater than developedmarkets rom 2011 to 2016 according to the InternationalMonetary Fundiii.

Womenconsumers.Women control some $20 trillion peryear in annual consumer spending and determine 80 percento buying decisions according to the Deloitte Touche Tohmatsuconsulting rmiV.

Middleclass. By 2020, more than half of the worldspopulation will be considered middle class according to theOECD Development Centre.

Youngpopulations.Age dierentiates younger emergingmarket populations rom the older inhabitants o developedcountries-more than one-quarter o emerging marketconsumers are 14 and youngerV.

Consumerconnectivity.Connectivity denes the globalmarketplace and ubiquitous mobile phones have becomeembedded in the consumer DNA, representing the most rapidlyadopted technology in history. There are 5.3 billion mobilesubscribers globallyVi, more than 70% o the global population.



DiscussionFor most of the 20th century, industrialized nations like theU.S. and Japan were major orces driving economic growth. Ina dramatic paradigm shit, emerging markets now are expectedto take the lead, thanks to an average annual gross domesticproduct [GDP] growth rate roughly 50 percent higher than

developed markets per the International Monetary Fund. Whatdiers this time around is that growth is being driven by a newconsumer. Global consumption patterns moved directionallywith GDP growth rates, hitting seven percent by the secondquarter o 2011.

Consumer spending increases sourced primarily rom the Asia-Pacic countries [APAC] accounted or 62 percent o growth,ollowed by Western Europe at 19 percent, Eastern Europe atnine percent, Middle East/Arica at ve percent and the U.S./Canada at our percent. Despite the geographic power shit, astudy by The Economist ound that ewer than hal o globalcompanies believe they have a good understanding o emergingmarkets, and ewer than 20 percent say they are ready to ullycompete in such markets.

The Female FactorFour principal factors dene the global consumer marketplacetoday. One o the most powerul orces-women-alreadyrepresent the biggest emerging market on the planet, and theirglobal income is expected to grow by more than $5 trillion overthe next ve years. Although the economic role o women is

evolving around the world, many marketers have ailed to ullyacknowledge the new, expanded emale role.

There are reasons or this dichotomy. In developed markets,women asserted their rights and gained power in a gradual,evolutionary manner. In emerging markets, the change has beenrapid and abrupt, leading to higher stress levels and leavingmarketers awash in its wake, trying to comprehend the shitingneed states o women.

Source: 2Q2011 Growth Reporter

Driven by spending in emerging markets

2Q2011 Growth Contribution

19%

Western

Europe

9%EasternEurope

USA/

Canada

5%

5%

APAC 62%

MEA



What Works or WomenThe best approach or marketers is to identiy womens needsand align product benets to address those needs, which mainlycenter around a desire or convenience and individuality. TheNielsen Women o Tomorrow study ound that while 60 percento women around the world elt stressed out, that sentiment was

even more pronounced in emerging markets. For example, some87 percent o women in India said they elt stressed.

Stress related to time- and budget constraints creates the needfor convenience products that are value-priced. Firms seekinga blueprint or success in marketing to women can leveragethe U.S. game plan. Incorporating convenience attributes likeproducts to go, single portions, nutraceutical ormulas andcause-related tie-ins all resonate with women.

A cautionary note when shaping advertising or women:trust is paramount, and women consumers value personalrecommendations over paid advertisingvii. This act has led tothe emergence of the so-called Mommy Bloggers, who wield

unprecedented infuence over their peers with respect toproduct purchases.

Coke and Dove both have earned recognition or emale-orientedad campaigns that emphasize individuality, relevant social topicsand convenience. Almost all income growth in the last 15 yearsin the U.S. has derived rom women.

A Bulging MiddleThe second major trend dening the path o global marketing isthe emerging middle class. Two billion people will be classied asmiddle class by 2030, with almost 80 percent o them residingin emerging markets. Dening and marketing to the middleclass poses an intriguing challenge to marketers, because thedenition o middle varies so dramatically.

The World Bank denition of middle class differs by countrybased on earning power, ranging rom an annual mean income o$46K in the U.S. to $3K in India, and includes the comparativelymeager earnings between $10 and $20 a day on average.

Such a wide range in income underscores the pointthat marketers should not think o the middle class as ahomogeneous, collective body that can be addressed as a unit.Marketers need to operate globally but think locally when it

comes to package and product innovation.

The marketing implications or reaching the middle includethe need to tailor product, packaging and pricing approachesto refect the local market, adjusting to the variances in mediachannels, culture, tastes and spending power. A middle classamily in the U.S. may be deciding between a 50 or 55 inch

HDTV, while a middle class amily in India can now aordpremium rice.

Age GapsThe third major trend impacting the course o global marketingis the age gap between developed and emerging nations. Indeveloped countries, only 16 percent o the population isage 14 or younger; in emerging countries, 26 percent o thepopulation alls into the 14 and younger age cohort. Conversely,in developed countries, more than 17 percent o the populationis over age 65, while a slight six percent o the emerging

country population sits in the over 65 age bracket. This contrastunderscores the astounding act that emerging nations aregrowing 30 times aster than developed countries.

By 2023, the aging population will have the entire U.S. looking alittle grayer. Germany and Japan already bow under the burdenof supporting large senior populations, with France and U.K. onschedule to join the ranks o elder-weighted societies by 2016.

Gray MattersWhile collectively the elderly population comprises a large andeconomically powerul market segment, individually, these

consumers are less attractive due to smaller households, lowerspending levels per trip and a higher deal propensity than theiryounger counterparts.

To capture the spending power o this age cohort, marketersneed to start paying attention to the unique need states o theover-50 demographic. Smaller households call or smaller orsingle portion sizes. Aging bodies benet rom supplementsadded to ood. Package design changes directed at this audienceinclude larger ont sizes, higher contrast color schemes andrelatable, age-appropriate photos to enhance product appeal.



Mobile ImpactThe ourth actor impacting emerging market development isconnectivity, enabled principally by mobile phones. On track toovertake PCs as the most common web access device by 2013according to the Gartner Groupviii, mobile phones represent thesingle most powerul uniying device in developing nations,

doing double duty as both a personal and commercial consumerlieline. More than three-quarters o the emerging worldpopulation owns a mobile phone, contributing to the 5.3 billionmobile subscribers worldwide.

It comes as no surprise that near-ubiquitous mobile penetrationsupports a robust and growing M-commerce economy, oneexpected to reach $119 billion by 2015 ix. Associated mobile adrevenues should more than double each year, skyrocketing to animpressive $21 billionx.

That said, it remains early days in mobile channel developmentor media and purchasing purposes. Representing unamiliar tur,many advertisers struggle to leverage the power o mobile as a

communications and transaction medium. Currently, eight o tenonline advertisers lack a mobile-riendly web site optimized tothe unique requirements o the small screen. Mobile marketingcampaigns should become an integral part o every integratedmarketing plan.

App-propos or ProftBy focusing on the upper segment of the online purchase funnel,marketers can deploy mobile to educate consumers, deliverprecisely-calibrated oers, infuence decisions at the point opurchase, capture eedback on product perormance and osteran ongoing relationship with the shopper. The catchphrase or

consumer packaged goods marketers should be theres an appor that.

Social networking has circled the globe, credited by many orenabling the Arab Spring and creating the brand ambassadorphenomenon. Blogging, Tweeting and Facebooking brandadvocates write product reviews and post unsolicited evaluationsbased on personal interaction with products-good or bad.A Nielsen sampling o 10 markets around the world conrmedthat social networks and blogs are top online destinations.

Smart strategies revolutionizing the retail experience

Shoppers now canlocate more than

100,000 items

in Meijer Supercenters

MobileCoupons.com

Walgreen s Innovative

Scan to Rx RefillPeapod Mobile App

Text-message serviceto alert customers when their

delivery driver is due to arrivewithin 10 minutes

Peapod Mobile YouTube Facebook Twitter



Common ConcernsWhether emale, middle class, elderly or tech savvy, many othe issues top-o-mind with consumers around the globe areshared, although the rank order changes between developed andemerging market consumers. For example, on the nancial front,the economy tops the list in developed markets, ollowed by

utility bills and jobs. In emerging markets, jobs take the top spot,ollowed by ood prices and the economy.

Rising ood prices aect emerging markets disproportionately,elevating the ood share o household expenses in Pakistan,Kenya, Indonesia and Nigeria into the 40 percent range. Foodaccounted or more than 30 percent o household expenditures

in Egypt, India and China. In Russia, Brazil, Mexico and Chileood costs represented a 23 percent or greater share ohousehold spending due to price escalation. Conversely, theU.S, Canada and the U.K. saw modest single digit increases inood-related household expenditures.

A common thread that cuts across countries and demographicvariables is value. Consumers are more concerned about whatthey get or their money and how well it meets a need, than thenominal product cost. This value orientation should hold up evenas more shoppers join the ranks o their countrys middle class.

Source: USDA

PAKISTAN KENYA

INDONESIA

CHINA

CHILE

FRANCE

SPAIN

UK

MEXICO

BRAZIL

GERMANY

ITALY JAPAN

AUSTRALIA

CANADAU.S.

RUSSIA

NIGERIA

INDIA

EGYPT40%

46% 45%

43%

33%23%25%

38%

35%

24%

28%

14% 14% 14%

13%11%11%

9%7%

9%

Food prices are highly important in Emerging markets, where its share of HH incomes is high

Food Share of Household Expenditures



Payment PlanningWhen asked about plans or the coming year, globalconsumers in developed nations intend to save on gas andelectricity, switch to lower-priced grocery brands, cutdown on take-away meals, spend less on new clothes andreduce telephone expenses.

Emerging nation consumers share the top concern aboutcutting back on energy costs, but rank the need to reducetelephone expenses second highest in importance, ollowedby, ewer take-away meals, purchasing less expensive grocerybrands, less away-rom-home entertainment and ewerclothing purchases.

Not quite a bunker mentality, but consumers exercisecaution with their purchase behavior, looking or ways tosave without sacricing quality or eliminating goods. Savingstrategies dier by market with shoppers in the U.S. andChina avoring coupons, while European shoppers preer bulkbuying. Understanding consumer attitudes and behaviors in

an increasingly diverse, demanding and connected world willrequire more data, more sophisticated analytics and moreglobal expertise.

Source: Nielsen Global Omnibus Survey, 4Q2011

WHATS NEXT

DEVELOPED

SAVE ON GAS &ELECTRICITY

SWITCH TO LOWER

PRICED GROCERY

BRANDS

CUT DOWN ON TAKEAWAY MEALS

SPEND LESS ON NEWCLOTHES

REDUCE TELEPHONE

EXPENSES

EMERGING

SAVE ON GAS &ELECTRICITY

REDUCE TELEPHONEEXPENSES

CUT DOWN ON TAKEAWAY MEALS

SWITCH TO LOWER

PRICED GROCERY

BRANDS

REDUCE OUT OF HOMEENTERTAINMENT/SPENDLESS ON NEW CLOTHES

Whats next for the global consumer



From Fixed to FlexibleEstablished market economies remain rooted in the iconicphilosophies o the 20th century Industrial Age, heavily weightedtoward xed elements such as brick and mortar architecture, setpricing, traditional media and well-dened distribution networks.

Todays new economies refect the more fuid dynamism o

the Inormation Age, a fexible model dened by variablepricing, variable locations and variable distribution, deliveringproducts and services at a scale and speed unattainable underthe anachronistic xed model. Examples o fexible distributioninclude Nestles foating store traveling the Amazon, Nike pop-up stores, Coca-Cola returnable bottle kiosks and Tesco virtualstores at subway stations, conveniently catching consumers enroute to a destination.

The transition rom a xed model to a fexible model can provehighly disruptive to mature economies, as it requires jettisoninga long-held legacy system. The uptake is much more rapid inemerging nations, unettered by pre-existing investment and

precedent. This holds true especially or the adoption o newmedia technologies.

Creating new business models

Set Pricing

Boundaries

TraditionalMedia

NegotiatedPricing VariedDistribution

Points

Boundless

DemandEconomy

Traditional andNew Media

SupplyEconomy

Brick &Mortar

FIXED MODEL FLEXIBLE MODEL

+$

@+

ConclusionSuccess on a global level requires thinking dierently aboutmarkets and consumers, uncovering new insights aboutthe dynamics o a new marketplace and capitalizing on theopportunities presented by a changing world.

Growth opportunity exists where macroeconomic orces like

market expansion, retail development and technology reachconverge with consumer orces like time constraints, discerningshoppers, connectivity and individuality. Flexible, uid businessmodels characterize emerging markets, and establishedcountries will need to adapt to compete and survive. Risingrisk accompanies rapid growth and companies will ace thedual challenges o managing that risk while capitalizing on newmarket opportunities.

Another test o management skill will be the ability to deliverlocal-centric products around the world at an aordable price.However, redening emerging on the basis o demographiccharacteristics versus geography should help ameliorate that

issue. Ultimately, success as a global player resides in executingthe undamentals: understanding consumer needs and wantsand delivering products that ulll them.


10/1010 Copyright 2012 The Nielsen Company

iThe Rise o Emerging Markets Requires a New WTO, International EconomicBulletin, Carnegie Endowment for International Peace, September 22, 2011.http://carnegieendowment.org/2011/09/22/rise-o-emerging-markets-requires-new-wto/57p7

ii The World Factbook, Central Intelligence Agency, 8 Feb. 2012. https://www.cia.gov/library/publications/the-world-actbook/geos/xx.html

iii The Global Shift: Fixed-Income Opportunities in a Changing World, The HartfordMutual Funds, p1. https://nancialproessional.hartordinvestor.com/planco/om/MF5850.pdf

ivThe Gender Dividend: Making the Business Case for Investing in Women, Deloitte,January 25, 2011. http://www.deloitte.com/investinginwomen

v The World Factbook, Central Intelligence Agency, 8 Feb. 2012. https://www.cia.gov/library/publications/the-world-actbook/geos/xx.html

vi 5.3 bn Mobile Subscribers; Nearly 1bn with High-Speed Mobile Web Access:an Interview with ITU statistics chie Susan Teltscher, http://mobithinking.com/interview-susan-teltscher-itu

vii Women o Tomorrow: A Study o Women Around the World June 2011, Nielsen,Key Findings, p1. http://cn.nielsen.com/documents/Women-o-Tomorrow-whitepaper-June2011en.pd

viii Gartner Highlights Key Predictions or IT Organizations and Users in 2010 andBeyond, Gartner, Press release, January 13, 2010. http://www.gartner.com/it/page.jsp?id=1278413

ix

Shopping by Mobile will Grow to $119 Billion in 2015, ABI Research, Press release,February 16, 2010. http://www.abiresearch.com/press/3373-Shopping+by+Mobile+Will+Grow+to+$119+Billion+in+2015

x Additional Funding for Leading European Mobile Ad Serving Company MADS,MADS, Press release, November 2, 2011. http://www.mads.com/20111102_news.php

About Nielsen

Nielsen Holdings N.V. (NYSE: NLSN) is a global inormationand measurement company with leading market positions inmarketing and consumer inormation, television and othermedia measurement, online intelligence, mobile measurement,trade shows and related properties. Nielsen has a presence inapproximately 100 countries, with headquarters in New York, USAand Diemen, the Netherlands. For more information, visit www.nielsen.com.

Copyright 2012 The Nielsen Company. All rights reserved. Nielsen and the Nielsen logo are

trademarks or registered trademarks o CZT/ACN Trademarks, L.L.C. Other product and service

Emerging Markets Global Forces White Paper Mar 2012

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