Nielsen Business Barometer - Wave 5 - English

Wave 51st Half 2011

1

Copyright © 2010 The Nielsen Company. Confidential and proprietary.

Title of PresentationCopyright © 2011 The Nielsen Company. Confidential and Proprietary.

1st Half 2011

Agenda

Setting the

Key issues faced by you & your peers

Growth expectations

1st Half 2011

Research design

Executive insights

Setting the scene

• A snapshot into the economic environment in Vietnam

• External economic & social impacts

• Consumer behavior

• Corporate strategic direction & plans

Research Design

Methodology

Online interviewing

Senior leaders of manufacturers & suppliers in Vietnam

Target Respondents

1st Half 2011

Fieldwork

Sample Size

Total sample N= 33

March to May 2011

Nielsen Vietnam Business Barometer– Senior Leaders of manufacturers in Vietnam

– Total sample N=33– March to May 2011

Nielsen Retail Audit Data– 6 Cities– All income levels

Nielsen Global Consumer

Confidence Study– Conducted Mar 2011

Research Design

1st Half 2011

– All income levels– Data to March 2011

– Conducted Mar 2011– Global online study in 55 countries

Macro Economic data– Vietnam Govt. Statistics Office– Press articles

Nielsen Vietnam Omnibus– HCMC & Hanoi (N=150/city)– All income levels – March 2011

Sample Profile

Key Metrics

Respondent Job Function

Sales9%

Marketing33%

MD / CEO58%

1st Half 2011

Company type

Industry Pharma12%

Multinational79%

FMCG58%

Finance15%

Pharma12%

Others15%

Local21%

Executive Insights• In 2011, business leaders are less positive about the economy and cautious in their outlook:– Nearly 2/3 of manufacturers claim that business conditions are now worse than a year ago

– Only 1/3 believe in an improvement of business conditions; whilst majority say that current situation will remain the same in the next 6-12 months

• In line with macroeconomic challenges, inflation and VND devaluation rank at the top of business leaders’ concerns.

• Despite the first challenging quarter, majority of business leaders

1st Half 2011

• Senior leaders are still optimistic about the next 6-12 months:• 90% of companies are expecting double-digit growth, driven by increased consumer demand and business expansion plans

• Almost no cut-back on advertising spend

• Trends toward savings and buying on promotions are expected to continue, as consumers cope with price increases.

• Despite the first challenging quarter, majority of business leaders claim to have managed to achieve their target so far.

Setting the Scene

1st Half 2011

Growth continues, yet inflation remains the major challenge…

Increased rate of GDP +6.78 +5.43

Total increased retail sales of goods & services

+24.5 +22.6

2010 vs2009 (%)

Q1’ 2011 vs Y.A. (%)

1st Half 2011

Sources: Main indicators 2010 and Q1 2011, GSO; Consumer Confidence, Nielsen Global Online Survey; FMCG Growth, Nielsen; Vietnam Retail Audit.

Increased rate of total export turnover +25.5 +43.7

Increased rate of total import turnover +20.1 +23.8

Increased rate of average CPI +9.19 +12.79

85

109

101

119

88

10398

2730

40

50

100

120

140

Global crisis bringing down confidence. Lower inflation brings down value growth

Prices stabilize; Economic recovery drives rise in consumer confidence and consumption

Inflation and VND devaluation pulls down confidence and FMCG growth

…and the key culprit behind economic instability and consumer confidence volatility

1st Half 2011

21

16

24

21

23

27

20

18

11

42

5

10 9 9 8

13

0

10

20

30

Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1' 11

0

20

40

60

80

Consumer Confidence Index FMCG Value Growth YA CPI

Gas retailers increased price

by 4%

Fuel increased by +18%

Macro and micro economic impacts in latest 3 months…

Retail electricity price increased

by +15%

1st Half 2011

Four VND DevaluationsIn the past two years

Trade deficit of $9.5B

Vinashin Collapse“what other state-owned firms are in trouble?”

by +15%

Nevertheless, various forecasters remain positive about the country’s economic growth

Economic growth in Vietnam is expected to average 7.2% a year in 2011-15, underpinned by strong growth in consumption, investment and exports.

Vietnam ranks 8th in the A.T Kearney Global Services Index, 2011 report (measured by Financial attractiveness, Business

Environment and People skills &

availability)

1st Half 2011

Economic Intelligence UnitAT Kearney

Vietnam can curb inflation this year if the country successfully implements Resolution 11

ADB at 44th Annual meeting in May 2011

Key Issues Faced by Your Peers

1. External Economic and Social impacts2. Consumer Behavior3. Corporate Strategic Direction & Plans

1st Half 2011

External economic &

social impactExternal Social and

Economic Impact

1st Half 2011

Economic Impact

Almost two thirds of business leaders believe that business conditions in Vietnam have deteriorated versus last year

Business Conditions in Vietnam (Now vs Year Ago)

3041

40

638

54

5

60%

80%

100%

Improved significantly

Improved somewhat

1st Half 2011

Q6a: Compared to the same time last year, do you think business conditions in Vietnamhave improved or deteriorated?

3 2 2 3

24

9 12

61

30

30

38

0%

20%

40%

60%

2009 2nd half 2010 1st half 2010 2nd half 2011 1st half

Remained the same

Deteriorated somewhat

Deteriorated significantly

More optimism was felt with business conditions in their own industry

Business Conditions in your industry (Now vs Year Ago)

30

2825

24

712

6

32

11

60%

80%

100%

Improved significantly

Improved somewhat

1st Half 2011

Q6b: Compared to the same time last year, do you think business conditions in your industryhave improved or deteriorated?

3 3 6

30

1922

33

33

39

38

30

0%

20%

40%


Remained the same



Inflation and VND devaluation are top concerns of business leaders

1) Competitive pressure /activity / growth (69%)

2) Ability to pass on price increase (55%)

3) Inflation (49%)

4) Labor force skill shortage (39%)

2010 1st half

3) Inflation (56%)

4) Labor force/ skill shortage (29%)

1) Competitive pressure/activity / growth (68%)


2010 2nd half

1) Inflation (68%)

2) VND devaluation (68%)


4) Competitive pressure/ activity/ growth (32%)

2011 1st half

=

Source: Nielsen Business

Barometer

Base: All respondents

Q12: Which of the following issues concern you in terms of the impact they may have on your business? Rank the top three (3) issues that concern you where 1=most concerned, 2= second most concern and so on.1st Half 2011

6) Low GDP growth (14%)

skill shortage (39%)

8) Others (VND devaluation, Govt.’ regulations, Govt.’s support

for local brands (12%)

5) Wages growth (18%)

7) Impact of corruption (14%)7) Global Economic

Crisis (10%)

skill shortage (29%)

8) Others (Government regs, currency depreciation (10%)

6) Wages growth (12%)

5) Petrol prices (22%)

6) Logistical challenges (10%)

activity/ growth (32%)

8) Wage growth (9%)

5) Low GDP growth (14%)

7) Petrol Prices (9%)

=

Consumers also feel the pressure of price increases

Top 5 supplier / mfr concerns

1) Inflation

2) VND devaluation

3) Ability to pass on price increase

Top 5 consumer concerns

1) Health

2) Increasing food prices

3) Increasing utility bills (gas, electricity, water...)

$

$

1st Half 2011

Source: Nielsen Business Barometer & Nielsen Omnibus March 2011

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...

4) Competitive pressure/ Activity /growth

5) Low GDP growth

(gas, electricity, water...)

4) Job security

5) My children's future/ welfare

$

About two thirds of the interviewed companies have experienced double-digit input price increases

12

6

12

3

60%

80%

100%

30% and higher than

25 - less than 30%

20 - less than 25%

15 - less than 20%

10 - less than 15%

Change in input prices

1st Half 2011

363

24

30

0%

20%

40%

2011 1st half

10 - less than 15%

5 - less than 10%

Less than 0% (negative)

No change

Don't know/ No answer

Q12c: Have you seen any change in input prices for your products? If yes, how much?

Solutions for input price increases

53

87

Improve productivity to

lower production costs

Increase product price

to a reasonable amount

Most have passed on input price increases to consumers, and many have also looked at productivity improvements

1st Half 2011

Q12d: How do you cope with input price increases?

7

10

13

33

Others

Reduce production

Choose lower cost

materials and supplies

Accept lower profits

Majority of manufacturers have so far managed to achieve their target, although overall performance is less positive than 2010

26

17

18

14

28

6

23

23

60%

80%

100%

Significantly better

Somewhat better

Business performance compared to overall target

1st Half 2011

Q5: Looking back at your business’s performance from the beginning of the year until now, how well do you think your business has been doing compared to your overall targets?

4 27

25

12

17

18

30

40

32

58

0%

20%

40%


On par with target

Somewhat worse than target

Significantly worse than target

Mixed outlook towards business conditions in Vietnam, and only one third of business leaders believe it will improve

72

38

30

46

37

4036

4 7 115

10 6

58

5

60%

80%

100%Improved significantly

Improved somewhat

Vietnam Your Industry

1st Half 2011

Q7, Q8: Over the next 6 to 12 months, do you believe that business conditions in Vietnam & your industry are more likely to improve or deteriorate?

1 4 2 2 2 639 10

21

7

16 121520

25

43

48

37

4037

36

0%

20%

40%

2009 2nd

half

2010 1st

half

2010 2nd

half

20111 1st

half

2009 2nd

half

2010 1st

half

2010 2nd

half

2011 1st

half

Remained the same



Consumer behavior

ConsumerBehavior

Consumer Behavior

1st Half 2011

Consumer trend of savings and buying on promotions is expected to continue

2011 1st half

41

49

44

Purchase more on

promotion

Buy bigger packs

to save money

Purchase more

local/ Vietnamese

brands

2010 1st half

35

51

41

Trade up to more

premium/indulgent

products

Buy bigger packs

to save money

Purchase more on

promotion

2010 2nd half

41

64

50

Trade down to cheaper

products

Not buy some 'non-

essentials'

Purchase more on

promotion

1st Half 2011

Q16: Do you anticipate that Vietnamese consumers will change their purchasing behaviour next 6 to 12 months?

22

22

22

37

Trade down to

cheaper products

Trade up to more

premium/indulgent

products

Not buy some

'non-essentials'

Change channel to

save money

promotion

10

12

22

31

Buy less / smaller

packs of the same

products

Not buy some

'non-essentials'

Change channel to

save money

Purchase more

local/ Vietnamese

brands

products

27

32

32

41

Change channel to save

money

Buy less / smaller packs of

the same products

Purchase more local/

Vietnamese brands

Buy bigger packs to save

money

products

Confectionery, Health & Beauty and Beverages are likely to be

impacted the most by the trend

2010 1st half

44

44

50

Confectionery

Household

products

Health &

beauty

Beverages

35

53

60

Dry grocery

Household

products

Dairy

Beverages

2010 2nd half 2011 1st half

45

60

40Beverages

Health &

beauty

Confectionery

1st Half 2011

Q17: Which industry do you think will be impacted the most?

3

14

19

22

28

36

OTHERS

Dry grocery

Frozen food

Dairy

Tobacco

products

Confectionery

2

7

21

26

30

35

OTHERS

Tobacco

products

Frozen food

Confectionery

Health &

beauty

Dry grocery

5

20

25

25

35

Tobacco

products

Dry grocery

Dairy

Household

products

Frozen food

Corporate strategic direction &

planCorporate Strategic Direction and Plan

1st Half 2011

Direction and Plan

Rural market remains an important growth engine, and continues to attract manufacturers’ investment

58

1725

12

53

18

60%

80%

100%

Increase significantly

Increase somewhat

Neither increase nor decrease

Rural areas to drive company growth

1st Half 2011

Q22: In the next 12 – 18 months, to what extent will you look to rural Vietnam areas to drive your company growth?

2

2526

1712

58

5876

53

0%

20%

40%


Neither increase nor decrease

Decrease somewhat

Decrease significantly

Manufacturers won’t cut back their advertising spending, although intention to increase spending is less positive than 2010

Spending on advertising

45

50

36

5

179

43

2

60%

80%

100%


Increase somewhat

1st Half 2011

Q13: Over the next 6 to 12 months, how do you anticipate your company's spending on advertising to change?

2 611 11

3

9

3943

30

39

50

0%

20%

40%

60%


Remain the same

Reduce somewhat

Reduce significantly

Choice of media channels remains unchanged, and TV advertising stands out as the most dominant channel

14%

40%

15%

Newspaper /Magazine (print)

Point-of-Sale-Materials (POSM)

TVC

2010 1st half

N=56

16%

37%

15%Newspaper /

Point-of-Sale-Materials (POSM)

TVC

N=60

2010 2nd half 2011 1st half

N=33

11%

42%

14%

In-storebanners/posters

Point-of-Sale-Materials(POSM)

TVC

1st Half 2011

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?

6%

5%

7%

7%

14%

Others

Internet

Outdoor posters /Billboard


Magazine (print) 15%

7%

5%

4%

3%Others

Internet

Outdoor posters /Billboard


Magazine (print)

5%

5%

7%

10%

11%

Others

Internet

Outdoor posters/ Billboard

Newspaper /Magazine (print)

banners/posters

Senior leaders anticipate increased spending on POSMS and in-store activities. Internet appears to be a promising media platform

3

12

327

33 42

24

3018

18

36

15

3

39

69 6 615

3

55

60%

80%

100%


Increase Somewhat

Remain the same

T2B (increase): 27% 61% 18% 42% 15% 3% 55% 9%

B2B (decrease): 30% 9% 36% 15% 27% 61% 18% 58%

1st Half 2011

Q15: Over the next 6- 12 months, how do you anticipate your company's spending on the following media channels for advertising?

21

9

33

1521

58

18

559

3

6

33

15

3

12

12

15

3

327

30

24

27

0%

20%

40%

60%

TVC Point-of-Sale-

Materials

Outdoor posters In-store

banners/posters

News

paper/Magazine

(print)

Radio Internet Mobile Phone

Remain the same

Reduce somewhat

Reduce significantly

No spending on thischannel

No significant changes are expected towards modern trade contribution

Modern Trade Contribution to Sales Revenue

2011 1st half

46

15

210

27

2010 1st half

3129

13

10 13

15

2010 2nd half

Mean score 13.3 % 16.4% 13.8% 14.7% 15.1% 15.9%

2535

20

10 10

20

1st Half 2011

Q18: How important is the modern trade to your business today (as a % of your business’s revenue)? Q19: What do you expect MT (as a % of your revenue) to be worth by the end of the year?

Less than 5% (2.5) 5% - less than 10% (7.5)

10% - less than 20% (15) 20% - less than 30% (25)

30% or greater (35)

2217

1215

29

Now End of '10

23 19

2325

Now End of '10

10 10

3525

35

Now End of '11

Growth expectations

1st Half 2011

More caution is noticed with GDP growth rate expectation, whilst industry growth rate remains positive

11.3

13.6 13.7

15.1

8

10

12

14

16

%

Expected GDP growth rateExpected GDP growth rateExpected GDP growth rateExpected GDP growth rate Expected industry growth rateExpected industry growth rateExpected industry growth rateExpected industry growth rate

1st Half 2011

Q9: What do you think GDP growth rate will be for the next 12 months?Q10: What do you think your industry growth rate will be for the next 12 months?

5.75.3

4.9

6.1

0

2

4

6

8

Est. Next 12 months GDP growth rate All industry est growth rate

%

2010 1st half2009 2nd half 2010 2nd half 2011 1st half

Despite current economic conditions, all senior leaders still look forward to double-digit growth

Expected company growth rateExpected company growth rateExpected company growth rateExpected company growth rate

17

20

18

2131 30

24

1160%

80%

100%

25%+

20% - less than 25%

15% - less than 20%

1st Half 2011

Q11: What do you think your company growth rate will be for the next 12 months?

4 5 2 6

17 14

73

1712

1221

20

28

2423

0%

20%

40%


15% - less than 20%

10% - less than 15%

5% - less than 10%

Less than 5%

Increased consumer demand and business expansion, both in terms of geography and trade channels, are believed to be key engines of growth next year

Expected 3 key factors of company growthExpected 3 key factors of company growthExpected 3 key factors of company growthExpected 3 key factors of company growth

45

76

72

Increased consumer demand in your existing categories/ industry

Expansion to secondary cities/ rural areas

Expansion to modern trade channel

1st Half 2011

Q11b: What do you think are the 3 key factors of growth for your company for the next 12 months?

12

14

31

43Expansion to new categories/ industries

Increased marketing expenses

Improved business conditions in Vietnam overall

Improved business conditions in your industry overall

Key observationsKey Observations

1st Half 2011

Vietnam Topline

1st Half 2009

2nd

Half 2009

1st

Half 2010

2nd

Half 2010

1st

Half 2011

Nielsen Market Index Volume*

Nielsen Market Index Value**

MFR outlook of the market

MFR outlook of own industry

Volume growth is positive

Value growth remains high

Manufacturers continue to see Vietnam as a growing market

Own industry will also experience growth

1st Half 2011

industry

Advertising Spend

Hiring levels

Modern Trade importance

Nielsen Vietnam Consumer

Confidence^

* Nielsen Market Index Volume defined as unit change vs. YAGO** Nielsen Market Index Value defined as dollar change vs. YAGO

Very Strong Growth: >= +5%

Growth: between +1 and plus 4% Neutral: between -1 and +1%

Negative: between -1% and -4%

Very Negative: <= -4%

growth

MT contribution expected to increase

Consumer confidence drops due to concerns of inflation and price increases

Advertising levels are expected to increase slightly

Key observations

• Volatility in the Consumer Confidence Index have been observed lately, with a drop in Q1’ 11.

• Senior leaders show caution towards business conditions in Vietnam compared to half a year ago

• Inflation and VND devaluation are at the top of their concerns

Macroeconomic challenges, most weight on inflation and price increases in past 3 months, have impacted consumers’ confidence and business leaders’ optimism:

1st Half 2011

•Q1 performance is on target for most companies•Double-digit growth is still expected from increasing consumer demand and business expansion plans•Almost no intention to cut back advertising spend and even a slight increase in spending is expected for some companies•Most are looking at expansion into rural areas to capture growth there

Nevertheless, business leaders are doing well in terms of maintaining their investment and spending, in order to capture double digit growth in this market

Key observations

• Look into rural areas as the next frontier of growth• Effectively invest in modern trade channels• Identify new potential categories to expand into• Diversify communication platforms to include channels such as digital media

• Effectively control ever-increasing costs, for example by improving productivity

To continue to grow in the Vietnam market, or to enter the market successfully, you need to continue to spend and consolidate your advantages against rival companies

•Consumers are concerned of price increases now than ever, therefore you should be cautious in passing on price increases to them. •Alternative measures to cope with input price increases should be considered such as improved productivity and efficiency.•Consumers are seeking savings via promotions or big pack sizes, hence you should consider addressing this in a relevant way to your category and brand

In addition, timely reactions to consumer trends and understanding their price sensitivity is vital for success:

“You will either step forward into growth or you will step back into safety”

Abraham Maslow

1st Half 2011

Nielsen Vietnam

Dabao Nielsen Top to Top Meeting

Stay connected to Nielsen Vietnam

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1st Half 2011

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