BULGARIAN FMCG RETAIL MARKET

A snapshot of how Nielsen views the latest developments in Bulgaria

May 30th, 2013Sadanski, Bulgaria

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What is happening out there?

How this reflects to the consumer behavior?

How this reflects to the consumer behavior?

WHAT WE WILL COVER TODAY

The state of the overall FMCG trade of Bulgaria vs. Europe

Development of product categories

Development of store formats

Does this affect the psychology of consumers?

Are shoppers changing behavior? How do they adapt?

What does this consumer behavior mean for us?

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TOTAL EUROPE: STILL ON GROWTH BUT WITH A DIVERSE PICTURE NORTH/CENTRAL VS. SOUTH

Total FMCG Value Growth

YEAR 2012

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5(*):Austria, Belgium, Czech Rep., Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, UK.

1,0% 3,4% 3,6% 2,1% 3,1% 3,9% 4,5% 4,5% 4,2% 3,5% 3,0% 3,1%

1,0%

0,9%

0,0%

0,2%

2,1%

0,6%

0,7%

0,2%

-0,8%-0,4% -0,2%

0,2%

2,0%

4,3%

3,6%

2,3%

5,2%4,5%

5,2%4,7%

3,4% 3,1% 2,8%3,3%

2010 2011 2012 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Volume change Unit value change Nominal Value Growth

EUROPE OVERVIEWErosion of volume growth in 2012 – market is driven by inflation. Slight positive growth in Q1.

Source: Nielsen Growth Reporter

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-1,4%

1,0% 0,6%

-0,6%

1,8% 1,9%0,9%

0,2% -0,2%

-3,5%

-4,2%

0,0%

-3,9%-4,9%

-3,9%

-0,5%

1,7%

-0,3%

-4,9%-3,2%

0,6%

-4,5%

-3,1%

-2,0%

0,4%

1,9%

-0,5%

2010 2011 2012 Dec-Apr 11 Apr-Aug 11 Aug-Dec 11 Dec-Apr 12 Apr-Aug 12 Aug-Dec 12-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Volume change Unit value change Nominal growth

BULGARIA FMCG MARKET DYNAMICSSome positive signs shown in 2012 but not consistent enough

Source: Nielsen Growth Reporter

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BULGARIA TOTAL FOODAfter a stabilized 2012, sharp volume decrease in DJ’13 returns the market to clear negative. Volume uplift in FM’13 smoothens out the negative trend

5,1 4,9 4,5 4,2 4,73,7

6,6

1,4

-0,7-0,1 -1,4

2,3

-2,4

-6,0

-3,9-5,0 -5,3 -5,6

-5,0-5,9

-0,1

1,7

-0,7

1,1

-5,1

1,7-0,9

1,0

-0,4 -1,0 -0,9-1,3

0,7 1,2 1,0

-0,7 -0,3-2,8

-0,8

FM 2011

AM 2011

JJ 2011

AS 2011

ON 2011

DJ 2012

FM 2012

AM 2012

JJ 2012

AS 2012

ON 2012

DJ 2013

FM 2013

-8

-6

-4

-2

0

2

4

6

8

Unit value change Volume change Nominal Value Growth

Source: Nielsen Retail Measurement Services

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-0.8%-3.0%

-4.2%

1.5% 0.8%

-4.0%-2.5%

-1.5%

6.8%

1.1%

-6.7%TOTAL FOOD &

BEVERAGESCONFECTIONERY SHELF STABLE

PRODUCTSBABY FOOD &

DRINKSSNACKS CHILLED

SPREADSDAIRY ALCOHOLIC

DRINKSHOT BEVERAGES COLD

BEVERAGESBEER

0.2%

3.4%

-2.2%

3.0%

9.1%

5.1%

-0.3%

2.8%

0.2%

-1.1%

-6.5%TOTAL FOOD &

BEVERAGESCONFECTIONERY SHELF STABLE

PRODUCTSBABY FOOD &

DRINKSSNACKS CHILLED

SPREADSDAIRY ALCOHOLIC

DRINKSHOT BEVERAGES COLD

BEVERAGESBEER

Value Growth vs. Year 2011

VALUE AND VOLUME GROWTH IN FOOD 2012Snacks & chilled are the top growing categories but confectionery is the real winner due to its importance

Volume Growth vs. Year 2011

Source: Nielsen Retail Measurement Services

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4.9%

0.7%

6.2%

17.3%

10.6%

2.6%

PERSONAL CARE HAIR CARE ORAL CARE BABY CARE BODY & FACE CARE GROOMING

Value Growth vs. Year 2011

VALUE AND VOLUME GROWTH IN PERSONAL CARE 2012Bigger categories such as Hair Care & Grooming present marginal growth, whereas smaller ones achieve further penetration

18.8%

-3.2%

7.0%

22.4%

13.2%

-5.3%

PERSONAL CARE HAIR CARE ORAL CARE BABY CARE BODY & FACE CARE GROOMING

Volume Growth vs. Year 2011

Source: Nielsen Retail Measurement Services

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8.5%9.5%

5.6%

11.1% 11.1%

HOUSEHOLD PRODUCTS PAPER PRODUCTS HOUSEHOLD CLEANERS AIR FRESHENERS INSECT CONTROL

Value Growth vs. Year 2011

Volume Growth vs. Year 2011

6.1% 6.0%

3.1%

16.4%14.0%

HOUSEHOLD PRODUCTS PAPER PRODUCTS HOUSEHOLD CLEANERS AIR FRESHENERS INSECT CONTROL

VALUE AND VOLUME GROWTH IN HHL PRODUCTS 2012Clear progress for all categories

Source: Nielsen Retail Measurement Services

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NUMERIC EVOLUTION OF RETAILER UNIVERSESteady development of the modern trade

16.8 16.0 10.8 5.912.00

5

10

15

20

2009 2010 2011 2012 2013

# Of Retailers Growth (%) – FS > 101 sq.m.

14.4

6.010.6

12.7 12.4

21.423.6

9.2

5.912

-5

0

5

10

15

20

25

2009 2010 2011 2012 2013

# of R

etaile

rs %

chan

ge

Hyper/Supermarkets >300 sq. m. ExtraLarge Groceries 101-300 sq. m.

Source: Nielsen Census 2013

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-4.0-1.9

-3.9-5.0-4.1

-5

0

5

2009 2010 2011 2012 2013

# Of Retailers Growth (%) – FS < 101 sq.m.

-4.9

2.4 3.8

8.3

-3.9 -5.3-3.0

-6.0-8.9

1.7

-15

-10

-5

0

5

10

15

2009 2010 2011 2012 2013

# of R

etail

ers %

chan

ge

Large Groceries 41 - 100 sq. m. Med/Small Groceries <40 sq. m.

NUMERIC EVOLUTION OF RETAILER UNIVERSELarge Groceries revive at the expense of small ones who face strong losses

Source: Nielsen Census 2013

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CONSUMER CONFIDENCE IS TRENDING DOWNWARDS

90% of Bulgarians think that the country is in an economic recession at the moment

TOP CONCERNS OF THE BULGARIAN CONSUMER

Increased utility bills and job security are the highest ranked concerns of local consumers for three quarters in a row

73 74 7471 72 73 74

71 71

6461

57

0

20

40

60

80

100

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Nielsen Consumer Confidence Index

EU

BULGARIA

CCI Q1Greece – 40

Romania – 59Russia – 81Poland – 62Turkey – 83Croatia - 44

Source: Nielsen Global Consumer Survey

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43 45 45 48 49 50 51 54 55 55 57 55 59 60 60 63 67 67

58 56 55 52 50 50 49 47 45 45 44 44 41 40 40 37 34 33

0%

20%

40%

60%

80%

100%

Do not necessarily know all the prices/do not know at all the prices

Know all/most prices

PRICE AWARENESSAlthough Bulgarians used to not be as price aware as the rest Europeans, in 2013 price awareness has increased to EU median

49 51 55

51 49 45

Source : Nielsen Shopper Trends 2013

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0%

10%

20%

30%

40%

50%

60%

70%

80%Gl

obe

Hung

ary

Gree

ce

Belg

ium

Germ

any

Port

ugal

Croa

tia UK

Italy

Pola

nd

Fran

ce

Spai

n

Switz

erla

…

Bulg

aria

Czec

h

Rom

ania

Russ

ia

Ukr

aine

Switch to cheaper grocery brandsWill continue to switch to cheaper brands

HOW THEY SAVE ON THEIR HHL SPENDINGBulgarian consumers are not so eager to choose cheaper brands as a saving strategy… they are looking for value for money instead

71 43 40 77 91 31 44 75 44 62 55 47 100 57 68 59 81 66 CCI

Source: Nielsen Global Consumer Survey Q1 2013

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18

0%

25%

50%

75%

100%

EU

Bulgaria

20

10

35

28

17

11

16

32

1219

Promotion rarely change my brand choices

Only buy promotions when I already like the brand

Regularly buy different brands because of promotions

Very seldom change stores, but when shopping, I actively search for promotionsChange stores based on which one I think has the best promotions that trip

PROMOTION SENSITIVITYBulgarians continue to be loyal to the brands. Promotions are interesting but there needs to be a strong brand

Source : Nielsen Shopper Trends 2013

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A THREAT TO INNOVATIONIn 2013 we observe a decrease among innovators, possibly a result of the decreasing confidence

19%

59%

21% I seldom try new things - I find it is far better to know what you want rather than risk buying something that may not work outI sometimes buy new brands or products - but usually stick to my favourites

I love trying new things - I'm always on the lookout for new brands and products

30%

51%

19%

20132012

Source : Nielsen Shopper Trends 2013

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• Modern Trade grows steadily though not only through the large store formats –medium sized stores are winners too

• Tough environment – Bulgarian consumer becomes more price aware and less ready to try everything new

• Promotions are growing but still the Bulgarian shoppers are not trained into promo hunt

KEY POINTS AND IMPLICATIONS