Prevailing 2013 Economic & Consumer Trends Ralf Matthaes Regional Managing Director Cambodia Laos Myanmar Vietnam 1
THE GOOD, THE BAD, THE UGLY 2012 / Q.2 2013 macro economic overview
The Ugly Un-real estate market No movement in the real-estate market Commercial rents have fallen up to 40% Until the real estate market recovers, Vietnam will continue to struggle 3
The Ugly 100 80 60 40 20 0 Consumer Confidence (%) 89 78 79 64 68 56 2008 2009 2010 2011 2012 2013 Bad Debt The State Bank of Vietnam reported that at the end of March this year Vietnam's bad debts ratio amounted US $9.6 billion U.S = 8.6% total outstanding credit. Vietnam s 100 largest state enterprises are indebted about US $50 billion, or more than one third of GDP. Source: Reuters Consumer confidence has dropped due to domestic economic woes Bad debt will cause havoc in the near future Source: TNS CCIP 2008 2013 urban only
Bankruptcies 39,000 49,000 The Bad 54,000 5.0 Tourism (Million) 6.65 6.0 2.6 2010 2011 Q.2-2012 2010 2011 2012 Jul-2013 Bankruptcies are a sign of the times, but also a measure of Vietnam s bubble popping Tourism is flat, down from 19% growth, and should have negative growth in 2013 Source: GSO
GDP Growth - Bad or Good? 6.78% 5.89% 5.03% 4. 9% 2010 2011 2012 Jul-2013 GDP = 4.9% slow down of growth actually has positive effects Source: GSO
The Good Exports (US Billion) Trade Deficit (US Billion) 114.6 12.4 96.4 9.6 71.6 72.2 0.3 0.7 2010 2011 2012 Jul-2013 Exports are Vietnam s saving grace = US $72 Billion end July 2010 2011 2012 Jul-2013 Trade Deficit = a sign of fiscal responsibility or lack of growth? Source: GSO
Inflation (%) 18.13% The Good ATL Ad Spend (US Million) 900M 726M 760M 625M 11.75% 9.21% 6.81% 2010 2011 2012 Jul-2013 Inflation is in check, but will it remain, as typically Q.4 sees a spike Source: GSO 2010 2011 2012 Jul-2013 Advertising spend looks to grow at a healthy 19% Source: Kantar Media
The Good New Foreign Direct Investment 60,271 A Rebound? 9,097 17,855 16,345 17,200 11,559 13,013 11,900 2006 2007 2008 2009 2010 2011 2012 Jul-2013 New Investment Implemented Capital Source: Vietnam Economic Times TNS Consumer Confidence Poll TNS
Smartphone Ownership Growth of smartphone ownership Vietnam 42 35 +42% 27 19 Global Emerging Asia Vietnam 2013 Vietnam 2012 B1. Device ownership Base: All respondents Global 37698 Emerging Asia 3491 Vietnam 500 Male 250 Female 250 16-21 100 22-30 125 31-40 125 41-50 100 51-60 50 Local Report 2013 - Vietnam TNS 2013 10
Automotive Sales +10.5% 24,166 26,691 Jan - April 2012 Jan - April 2013 TNS Consumer Confidence Poll TNS 11
2013 YTD Economic indices scorecard Ugly = 3 - Real Estate Confidence bad debt Bad = 3 - Bankruptcies - FMCG growth Tourism Good = 5 - Modest shift towards recovery YTD 2013 is a mixed bag, some ugly, some bad, some good Good time to invest for the future
Prevailing 2013 Consumer Trends
Consumer Confidence (%) 100 80 89 78 79 60 64 68 56 40 20 0 2008 2009 2010 2011 2012 2013 Consumer confidence has dropped due to domestic economic woes Source: TNS CCIP 2008 2012 urban only
Recession impact SEC differences are stark Education, life stage impact views & involvement A-B: relatively safe & stable in the storm, yet conscious of what s happening around/ to poorer people D-E :are doing it tough; it s really tough in E- managing a family on 3 million VND a month I don t feel much different. I don t feel the impact of economic crisis on me vs too much stress, the worry always sticks in my mind, we don t even have time to feel happy or relaxed
Is your present job is safe or not? Employment fears on the rise leading to more caution, less spend Jan-13 63 32 5 Aug-12 68 20 12 Present job is safe Chance of unemployment Don't know Source: TNS 2013 VCCI Urban only
Forecast in the next 12 months Value of the 2013 Consumer Confidence index = 56 25 40 24 8 21 2012 Consumer Confidence index = 68 5 45 34 14 1 Employment 12 39 29 17 3 6 38 30 23 3 The cost of living 11 34 34 18 3 4 25 41 26 4 Vietnam's economy 9 40 18 24 8 1 5 29 35 30 2 My personal 6 15 48 22 9 2 12 48 33 6 Foreign investment 3 24 26 30 4 13 2 17 38 32 3 8 Far worse A little worse Same A little better Far better DK Consumer confidence index has dropped a massive 12 points in just 6 months, driven by consumer fears across most indices - not reassuring Source: TNS 2013 VCCI Urban only 17
1. Consumers spending will be down in 2013 Consumer backlash to economic downturn will result in specific spend cuts Entertainment & dining out House hold care products Household utilities Personal equipment (mobile Home appliances (wash Transportation Personal care products Communications Health care products/services Food & beverages products Education 25 25 25 24 21 21 17 17 15 8 40 45 39 54 51 52 54 43 58 58 46 58 20 21 24 22 22 36 21 24 36 27 45 1 1-1 + 1 2 Less Same More DK Source: TNS 2013 VCCI Urban only 18
2. Mobile device as the everything hub As the availability of wireless broadband expands & the cost of advanced mobile phones drop, the mobile device will become the preferred hub for digital activity. Absolutely! DEVELOP YOUTH APPLICACTIOSN FOR YOUR BUSINESS
3. Authenticity matters Authenticity will become paramount for brands as they look to regain credibility and trust. Consumers have lost a great deal of faith in brands; they are searching for truths and clamouring for transparency. Yes! I need to know the companies where the products or services are from so I have confidence to use them GUARANTEE QUALITY / SAFETY
4. Modern trade growth is in decline FMCG Value growth Value contribution July 12 July 13 July 11 July 12 July 13 General Trade 15% 82.5 82.0 82.2 Modern Trade 19% 17.5 18.0 17.8 Generally prices at modern trade have out reached consumers pockets, while traditional trade still offers affordability and security
5. Buy / use less / conserve / save5. Value growth (%) Price growth (%) Volume growth (%) 2008-2009 18.6 18.8 0.1 2009-2010 16.7 8.5 7.6 2010-2011 16.2 13.0 3.0 2011-2012 16.0 13.9 6.0 2012-2013 Value Growth down to 11.6% and volume down to 4.8% Source: Kantar Worldpanel Urban only
Marketing trends
1. Internet as a research tool ENSURE YOU ARE DIGITAL As the value of purchases increases, the amount of research both off and particularly online also increases Source: TNS Digital life 2012
2. Promotion Impact Coupon Crazy Discounted prices are preferred promotions, driving Groupon & on-line coupon discount popularity 54 2008 2011 46 18 13 On-line Coupons I often buy stuff I don t even need right now, because prices are so cheap 8 10 10 9 8 5 Discounted price Free gift with purchase Sweepstake/Luck y draw prizes Get free product/sample with multiple purchase Monetary gift Source: TNS VietCycle 2011 Urban only
3. Media Spend driven by security of TV Media 2013 (Q1) 2012 (Q1) Difference TV 4.991.72 3.329.87 49.9% Radio 5.75 5.21 10.3% Newspaper 275.65 294.62-6.4% Magazines 174.33 189.54-8.0% 5.447.45 3.819.23 42.6% May be due to advertisers shifting form BLT to ATL for measurability but has slowed in Q.3 to 19% YTD TNS Consumer Confidence Poll TNS 26
4.Brand innovation & new product launches X-Men Manly international standard ads for men Knorr All-in-one new multiple spices for specific meals Pro Beauty New Yogurt gives you beautiful skin Kent Taste & strength control filter Non to menthol
Summary + / - 28
5 P s to consider in 2013 People / Vietnamese Mindsets VN Consumers stuck for opportunities need reason to believe Confidence down savings up Education & Health industries booming Psychological change afoot from community to self 16 million modern youth become consumers over next 10 years Product / Extension F&B is the soul of the nation 47% of spend extend portfolio Address hygiene & food safety concerns and create guarantees The word is not innovation it is NEW Product Position Convenience and price points critical to success Vietnamize or authenticate
5 P s to consider in 2013 Promotion Digital think APS / multiple entertainment media / product research Develop coupon scheme Place Review distribution GT vs Modern and urban vs rural Significant regional differences require different approaches Drive efforts in rural Vietnam Price Over half of consumers are suffering from recession Review pack type / SKU offer Discount with an explanation / Groupons Vietnamese brands are not only competing on price
2013 Economic forecast Negatives State Debt is huge Sagging consumer confidence Unemployment Slower growth & spend Reliance on cheap exports Will to address core issues? Continued slight downward trend but also elements beginning to improve Positives Vietnam still largely untapped Global / SEA investment interest Overseas remittance More competitive / Lower prices Cheaper cost of entry Certain categories growing very well
Growth summary 2013 focus Drive differentiation in offer Understand price points Drive loyalty & assurance Cross promote Be faster than competition Maximize digital reach Bottom is in sight the only way is up! 32
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