THE AGE OF ASEAN CITIES FROM MIGRANT CONSUMERS TO MEGA CITIES

Copyright 2015 The Nielsen Company. Confidential and proprietary. TODAY S PRESENTER Regan James Leggett Regan.leggett@nielsen.com Regional Director, Client Services Southeast Asia, North Asia and Pacific Nielsen 2

Copyright 2015 The Nielsen Company. Confidential and proprietary. POLL 2: IN 2025, ABOUT HALF OF ASEAN S POPULATION WILL LIVE IN A: RURAL VILLAGES AND SMALL TOWNS B: SMALL CITIES /LARGE TOWNS: <500K C: MIXED DENSITY CITIES: 500K 1M D: MID DENSITY CITIES: 1 5M E: SUPER & MEGA CITIES: 5M + 7

Copyright 2013 The Nielsen Company. Confidential and proprietary. UNDER DEVELOPED OR OVERBURDENED? Both exist in Southeast Asia LANDSCAPE 5M+ 1 5M 500K 1M <500K RURAL High-density Rich vs.. poor Overburdened infrastructure Boom cities: demand does not outpace infrastructure and development Business moving to new centres for lower costs; invigorating other industries Small infrastructure projects small schools and medical Hubs to rural outposts Limited infrastructure Supply issues Disease and hygiene challenges 9

Copyright 2013 The Nielsen Company. Confidential and proprietary. LARGE TOWNS AND RURAL REIGN GROWTH: IN BIG CITIES, OFF A SMALL BASE v IT S NOT A SIMPLE EQUATION -6.3M +35.6M +16.7M +17.7M 2% 18% 32% 51% -0.9M 5% 10

Copyright 2013 The Nielsen Company. Confidential and proprietary. CONSUMER STRATIFICATION CONSUMER STRATIFICATION MILLENNIALS AGE SILVER TIDE LOW INCOME WEALTH MILLIONAIRES SINGLE UNIT HOUSEHOLD SIZE FAMILY UNIT RURAL LOCATION URBAN LOW LIMITED EDUCATION ACCESS TO TECHNOLOGY HIGH 24/7 TRADITIONAL/ MODERN TRADE ACCESS TO PRODUCTS E-COMMERCE 13

Copyright 2013 The Nielsen Company. Confidential and proprietary. POLL 3: WHICH CONSUMER ENVIRONMENT IS YOUR ORGANISATION FOCUSED ON TODAY? (You can choose more than one option) A: RURAL VILLAGES AND SMALL TOWNS B: SMALL CITIES /LARGE TOWNS: <500K C: MIXED DENSITY CITIES: 500K 1M D: MID DENSITY CITIES: 1 5M E: SUPER & MEGA CITIES: 5M + 14

Copyright 2015 The Nielsen Company. Confidential and proprietary. ASEAN 2025: WHERE ARE YOUR BEST BETS? Southeast Asia city tiers Lampang 2025 Monywa Nay Pyi Taw Mandalay Bago Vientiane Udon Thani Hue Yangon Baguio City Da Nang Angeles City Mawlamyine Nha Trang Manila Lipa City Batangas City Nakhon Ratchasima Rayong Bacolod Phnum Pénh Vungtau Iloilo City Cebu City Can Tho (Phnom Penh) Krung Thep (Bangkok) Iligan Butuan Hat Yai Chon Buri Kota Bharu Davao City Kota Kinabalu Kuala Terengganu Cotabato General Santos City Ipoh Sandakan Medan Kuantan Seremban Batam Kuching Manado Pekan Baru Pontianak Samarinda Padang Jambi Balikpapan Bengkulu Hà Noi Bandar Lampung Hai Phòng Palembang Jakarta Bogor Semarang Cirebon Malang Benjarmasin Ambon Makassar (Ujung Pandang) Surabaya Denpasar Mataram Based on U.N. Population Projections 16

Copyright 2013 The Nielsen Company. Confidential and proprietary. WHICH CITIES ARE YOU OPPORTUNISTIC ABOUT? CEBU BANGKOK MANADO MEDAN JAKARTA HUE JOHOR BAHRU BACALOD MANILA YOGYAKARTA SURABAYA JAMBI KOTA KINABALU CHON BURI CIREBON HO CHI MINH CITY 17

OUR COUNTRY LEADERS WOULD LOVE TO CONTINUE THIS CONVERSATION WITH YOU..

Copyright 2015 The Nielsen Company. Confidential and proprietary. Rural is such a large piece of the Vietnam pie and cannot be ignored. This consumer is changing and doing so fast. They are increasingly well educated, have higher levels of disposable income and are more aware of trends in the market than ever before. These guys know what they want. NIELSEN VIETNAM MD VAUGHAN RYAN 19

Copyright 2015 The Nielsen Company. Confidential and proprietary. We are seeing some blurring of rural and urban as not only rural consumers migrate to small towns and larger cities but the connectedness between centers grow between rural and large towns but also large towns and cities. Transport veins into Bangkok have become economic corridors that allow cheaply sourced goods from the surrounding area to come in and this is being repeated in some of the tourist hubs in other areas. We believe it is continuing the growth of small urban and rural economies and part of the reason that the penetration of things like smart phones and the internet will continue to rise in these areas. NIELSEN THAILAND MD SURESH RAMALINGAM 20

Copyright 2015 The Nielsen Company. Confidential and proprietary. In terms of where there will be spending power growth over the next 10 years, we are seeing investment flowing into the cities of 500k-1m (Bacolod, Cagayan de Oro City, and Iloilo City) and 1M -5M (Cebu city Davao city Zamboanga city) and into some of the smaller provincial cities (Baguio, Dagupan, Lipa and Naga). The BPO s (Business process outsourcing) are driving this initially and we expect that this may have a knock on effect to other industries and businesses increasing the GDP of these smaller cities. NIELSEN PHILIPPINES MD STUART JAMIESON 21

Copyright 2015 The Nielsen Company. Confidential and proprietary. Malaysia has had a number of infrastructure projects started and completed in the last 5-10 years and many businesses have been able to enter new cities and areas on the back of this. Although there have been numerous national projects I think the smaller cities and of course KL have received much of the benefit from these investments as they are more connected and accessible to each other. NIELSEN MALAYSIA MD RICHARD HALL 22

Copyright 2015 The Nielsen Company. Confidential and proprietary. If you look at the list of cities in the 1M to 5M and even those in the 500k-1M bracket what is noticeable is that many of them are the provincial capitals and are acting as centers of commerce, industry and business for the smaller cities, towns and rural areas surrounding them. The big retailers are also using these as distribution centers to get their products into the less populated areas as they have not yet gone into the urban centers of less than 300K and 500K. This will be the next wave of investment. NIELSEN INDONESIA MD AGUS NURUDIN 23

Copyright 2015 The Nielsen Company. Confidential and proprietary. The limited amount of space in these smaller units means that some of them do not have the traditional kitchen or food preparation facilities as they are typically equipped with small open concept kitchen. It is not only changing the way people in these environments approach FMCG and move away from cooking at home - apart from heating food - it is also influencing pack size choices and storage options, and it is transforming the way people socialize, their transport choices, furniture, technology and so on. People are increasingly living fast paced onthe-go lifestyles and are starting homes that are accessible to work, transport hubs, restaurants and other amenities. The space challenges may even discourage larger families from living in high density areas and thus drive a demographic skew to the young and aged singles and couples. NIELSEN SINGAPORE & MALAYSIA MD JOAN KOH 24

Copyright 2013 The Nielsen Company. Confidential and proprietary. HOW DO YOU WIN IN A DISPERSED ECONOMY? Take the early mover advantage focus on small Innovate to the needs of each tier Differentiate strategies to connect Reach new consumers in new regions in new ways Adjust tier 1 offering for uniqueness 25

Copyright 2015 The Nielsen Company. Confidential and proprietary. THANKS FOR JOINING US! Download our report Click-through url: http://www.nielsen.com/content/dam/nielsenglobal/apac/docs/reports/2015/nielsen-age-of-asean-cities.pdf 28

Copyright 2015 The Nielsen Company. Confidential and proprietary. THANKS FOR JOINING US! Click-through url: http://www.nielsen.com/apac/en/insights/reports/2015/the-age-of-asean-cities.html Download our infographic 29