Vietnam Grocery Report 2011

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Copyright © 2011 The Nielsen Company. Confidential and proprietary.

Vietnam Grocery Report 2011 Update

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Vietnam Today Navigating the Current Landscape

Market Landscape A Challenging 2011

Inflation Value for Money Key for Consumers

Growth Opportunities The Importance of the Three I’s:

• Investment • Identity • Innovation

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Copyright © 2011 The Nielsen Company. Confidential and proprietary. Copyright © 2011 The Nielsen Company. Confidential and proprietary.

Market Landscape A Challenging 2011

§ Economic growth is moderating due to shortterm macro and micro challenges

§ Growth slows across categories

§ Inflationary pressures have generated uncertainty in consumer, business confidence

§ Increasing stratification of consumers: Premium buyers maintain while the middle is squeezed

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Challenges arose in late 2010 and bloomed in 2011

= indicates health; = indicates challenges

Source: 2011 Estimation by Vietnam government; GDP Growth, Inflation, CIEC: 20082009;Vietnam GSO

2011 Growth Estimation

6.1% 15% <5% 22.6% 10% 12%

09 10 09 10

21 %

09 10

5 %

09 10 7 %

12 %

09 10

3 %

09 10

8 %

10 %

16 %

17 %

29 %

3 %

7 %

Retail Sales Growth

GDP Growth Inflation Unemployment FDI Growth Trade Deficit

5


Gas retailers increased prices by 4%

Fuel prices increased by 18%

Retail electricity prices increased by 15%

ASIA Average

106

Various economic shocks have affected consumer confidence

Source: Nielsen Consumer Confidence Online Survey Q1 – 2011 Press Articles

6


Vietnam’s retail market attractiveness has slid further

GRDI Rank

2008: 02 2009: 06 2010: 14 2011: 23

Source: AT Kearney Analysis

*) Based on weighted score of market attractiveness, market saturation and time pressure of top 30 countries

2011 GRI country attractiveness

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Still a highgrowth FMCG market, but inflation has tempering effect

Regional Summary FMCG Growth Q1 2011

Source: Nielsen Retail Audit

8


Consumption slows in some categories. Are too many costs being passed onto consumers?

Top 10 categories – 6 Cities TT Value and Volume growth Q1 2011 vs. YAG


9


Inflation Value for Money Key to Consumers

• As purchasing power is affected, “spend for necessities only” is now the consumer’s motto

• Consumers are becoming more driven by promotions

• Upsizing continues in Household, Personal Care and Food categories

• Private Label is expected to become the next big consumer trend in the coming years

10


81% of people are cutting spending on Unnecessary items

Source: Nielsen Personal Finance Monitor – June 2011

*) Unnecessary items are subject to each respondent’s perceptions

11


PostTet 2011 price increases seem to have a big impact, but consumers still spend on core items

$ 96% said prices increase somewhat/ significantly

60% Household purchasing power reduced somewhat/ significantly

Products for own consumption (entertainment, eating out…), but not

those for children & family

Impact

*Q.24 – 27; Tet 2011 = Feb’11

Source: GSO, Nielsen Omnibus March 2011

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Q.33 16

Source: Nielsen Omnibus March 2011; Nielsen Business Barometer 1 st H 2011

Consumer’s claims Business Leader’s opinions

9

26

33

44

51

59

Choose the shops where there are cheaper prices…

Buy more Vietnamese goods

Visit shops/ grocery stores near home to save cost…

Reduce number of products per purchase

Choose to buy more products on promotion

Reduce the number of visiting shops

Business leaders and consumers both expect more purchase on promotion in the near term

13


Vietnam has highest promotion sensitivity in Asia at 87%. More than half of consumers seldom change stores but actively search for promotions

11 10

55 56

16 21

13 9

5 4

0%

25%

50%

75%

100%

2009 2010

Promotion rarely changes my brand choice

Only buy promotions when I already like the brand

Regularly buy different brands because of promotions

Seldom change stores but when shopping, actively search for promotions

Change stores based on best promotions offered

Base: (2009 n=1466) (2010 n=1464)

87%

Source: Nielsen Shopper Trend 2010

Vietnam Promotion Sensitivity

14


Food and Beverage categories have seen the sharpest price increases…

+ 20% + 11 to 19% + 1 to 9% 0%

Average Price Index of FMCG Categories – YTD Apr’11 vs. YTD Apr’10


Unit price index: unit price of Top items contributing 50% per category value and existing over last 13 periods in 6 cities.

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… and consumers are more open to change their shopping behavior in categories with higher prices

*) Q.29; Base : 300 (all respondent)

Food

Dairy

Prod

uct

Person

al

Care

HH

Care

Beverag

es

Source: Nielsen Omnibus March 2011

Do shopping behavior changed due to price increase?

16


11 12 14

28 8 16

6

19 7

10 17

30 31

72 79 86

54

38 37 81

39

78

40 50 72 59 84 29

29

27 30 22

8 15

12 5

26 17

8 8 7

61

18

Carbo

nated So

ft Drin

k

Ready

ToDrin

k Te

a

Energy

Drin

k

Instan

t Coffee

Instan

t Noo

dle

Coo

king

Oil

Liqu

id Milk (UHT)

Infant Formula (*)

Adu

lt Milk (*)

Sham

poo

Bar Soa

p

Facial Clean

ser

Toothp

aste

Toothb

rush

Laun

dry Produ

ct

Hou

seho

ld Clean

er

Substitute to other products

Consume less less expensive brands

Consume less same brands

Consume less more expensive brands

Same amount smaller pack size

Same amount larger pack size

Same amount more expensive brands

Same amount cheaper brands

Consume more

Consumers are likely to stay with their brand in several categories, either consuming less or trading off the amount by buying bigger pack sizes

% Beverages Food Dairy Personal Care HH Care

Source: Nielsen Omnibus March 2011

*) Q.29B; Small baseread with cautions for Infant Formula & Adult Mik

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36 cities TT, data ending Marl11


Value for money: Upsizing is the key trend in Food, Household Care and Personal Care categories

MSGBoullion (Big >=900g)

Laundry (Big >=3kg)

Shampoo (Big >500ml)

Fish Sauce (Big > 750 ml)

18


Upgrading trend continues in some Personal Care and Home Care categories

Deodorant Fabric Softener Moisturizer

Pricing segments based on average price index vs. category average


19


PRICE Price of private label is 15 – 30% lower compared to brands

Private Label Awareness

Key Private Label Categories

Source: Nielsen Shopper Trend 2010

Private labels are gaining ground, especially for Food, Paper Products, Household and Personal Care

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Vietnamese consumers are generally open to private label products

Source: Nielsen Global Online Survey Q3’2010, Nielsen Shopper Trend 2011, Press Article

75% Associate store image with private label

quality

73% Believe private label quality is just as good as quality of leading

brands

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Growth Opportunities The three “I’s”– Investment, Identity, Innovation

• Investment – the rural market accounts for 47% FMCG value with limitless potential to be unlocked. Modern trade contributes ¼ of total FMCG value with increasing importance across categories.

• Identity – the brand power of “Vietnamese products” – backed by local manufacturers’ activation and strong consumer preference.

• Innovation – Market is getting complex with new and inventive products. Those that meet consumers’ key needstates in new ways will likely stand out.

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Opportunity: Investment

Vietnam’s Rural Consumers

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Business leaders temper growth expectations, still see market opportunities

Source: Nielsen Business Barometer 1H 2011

2 6 7 3

12 21

28

20

30 24

24

18

2010 2nd half 2011 1st half

25%+

20% less than 25%

15% less than 20%

10% less than 15%

5% less than 10%

Less than 5%

Expected company growth rate in next 12 months

12

14

31

43

45

76

72

Increased consumer demand in your existing categories/ industry

Expansion to secondary cities/ rural areas

Expansion to modern trade channel

Expansion to new categories/ industries

Increased marketing expenses

Improved business conditions in Vietnam overall

Improved business conditions in your industry overall

Key factors contributing to expected company growth

91%

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Reaching rural consumers is the next big opportunity

FMCG % turnover

Total population

Sales of FMCG categories such as Laundry and Toothpaste

Source: Nielsen Retail Audit, GSO

Annual Average Income Per Capita – USD

0

400

800

1,200

2002 2004 2006 2008

Urban Rural

177%

158%

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Rural Vietnamese save a substantial portion of their income

North West / North East North: 462,000 VND

Central: 377,000 VND

South: 571,000 VND

How Much Per Month?

75%

How Many Households Save?

Monthly Average Saving Amount – Mean score

HCM 1,373,180 VND

Hanoi 992,834 VND

•Source: Nielsen Rural Syndicated 2010

Where Does it go?

Keep at home: 87%

Buy gold: 7%

Savings Account: 6%

Foreign currency: 2%

Buy insurance: 2%

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Opportunities seen in categories where penetration is still low

100 100 100 100 100 99 97 96 94 88 87 86 85 81

75 74 71 71 69 59 59

54 46 46 45 44

35

24 15 13 11

6

0

20

40

60

80

100

DETER

GEN

T

DISH WASH

ING LIQUID

SHAMPO

O

TOOTH

PAST

E

FISH

SAUCE

MSG

INSTANT NOODLE

S

COOKING OIL

SANITARY NAPK

INS

CSD

BEE

R

COLD

/FLU

BISCUITS + SN

ACKS

RTD

TEA

FABRIC ENHANCER

/ SOFTEN

ER

BOUILLO

N GRANULES

CIGARETTE

S

SOY SA

UCE

RTD

MILK+FLA

VORED

MILK

COFFEE

(INHOME CONSU

MPTION)

HAIR CONDITIONER

COFFEE

(OOH CAFE)

MOBILE PH

ONES

FRUIT JUICES

HOUSE

HOLD

CLEANER

VITA

MINS (ADULT)

FACIAL CARE

DEO

DORANT

TONIC FOOD DRINK

INFA

NT MILK

DIAPE

RS

INFA

NT CER

EAL

Total Rural Vietnam – Used in past year

•Source: Nielsen Rural Syndicated 2010

Base: All respondents (n=4200)

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Opportunity: Investment

Modern Trade

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Modern Trade: increasing in number of stores and importance

Modern Trade (exclude Metro – Cash & Carry) Store Numbers ACV Contribution

National : 752 → 826 National : 11% → 13%

Source: Nielsen Retail Census 2009 and 2010

29


Higher contribution to monthly grocery purchase categories like Food, Household and Personal Care

Total Ho Chi Minh + Hanoi; Data ending Apr 2011; MT exclude Saigon Coop


30


Market is dominated by local players, with more presence from international players

5

3

50

21

16 3 22

15

7

15

13 14 13 5

2

101

44 Super Market Food store Convenient store

STORE NUMBER OF KEY PLAYERS UPDATED TO APRIL 2011

Source: Nielsen Retail Census 2010

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There is still scope to develop for Modern Trade Vietnam benchmarked to other Asian countries

China Malaysia Thailand Indonesia Vietnam

64%

88%

53%

63%

46%

70%

13% 16%

37%

China

Shanghai

Malaysia

Kuala Lum

pur

Thailand

Bangkok Vietnam

Hanoi HCMC

Indonesia

Jakarta

Greater

66%

43%

Source: Nielsen Retail Census 2010

Share of trade for Modern Trade channel

32


Opportunity: Identity

Vietnamese Brand

33


HCMC Ha Noi

I would probably purchase more Vietnamese goods

I’ve already been purchasing more Vietnamese goods

I would definitely purchase more Vietnamese goods

62% 49%

Not sure if I would purchase more Vietnamese goods

28% 34%

8%

2%

2%

14%*

90%

Source: Vietnamese Goods Trend Nielsen Study 2011

83%

Consumers’ perception of local goods changes for the better, representing a solid growth opportunity

* Significantly higher

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Local goods are appreciated for a variety of reasons

HCMC Ha Noi Consumer’s association toward Vietnamese Goods Consumer’s association toward Vietnamese Goods

Reasonable price

Wide variety

Is the brand suitable for me

Trustworthy brand

Attractive promotion

Attractive packaging

Good quality

Good guarantee

Safe ingredients

Premium brand

39%

35%

35%

25%

25%

22%

20%

18%

17%

13%

32%

54% *

42%

35%

52% *

38% *

26%

52% *

30% *

26% *

* Significantly higher; Base: All respondents (n= 300); Q.28a


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* Significantly higher; Base: All respondents (n= 300); Q.27

"Made in Vietnam" on the label

The logo of "High quality Vietnamese goods" on the label

Vietnamese brand name

the note "Made in Vietnam" on the label (64%)

Vietnamese brand name (56%)

Vietnamese labeling (ingredients, instruction,...) (53%) *

the logo of "High quality Vietnamese goods" on the label (46%)

the logo of "High quality Vietnamese goods" on label (82%) *

the note "Made in Vietnam" on the label (78%) *

Vietnamese brand name (57%)

100% Vietnamese manufacturer (44%)

If label says ‘Made in Vietnam’ it can be viewed as a local brand, despite international origins


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…which explains such a strong preference for Vietnamese goods across FMCG categories

Household care products

Non alcoholic beverage

Personal care products

Confectionery

Milk/ Dairy products

Alcoholics

Top Box

4% 4% 92%*

9% 34% 57% 19%* 24% 57%

1% 18%* 81%

20% 31%* 49% 13% 24% 63% *

21% 25% 54% 15% 17% 67%

9% 20%* 71% 8% 17% 75%

1% 10% 89% 4% 7% 89%

* Significantly higher; Base: All respondents (n= 300); Q.29

Prefer Vietnamese goods

Prefer International goods

No preference

HCMC Ha Noi

Source: Vietnamese Goods Trend Nielsen Study

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Opportunity: Innovation

Product/Marketing Innovations

38


Categories are becoming complex with more new products


147 Beverage

143 Household Care

1,346 Personal Care

662 Food & Milk

0

2,000

4,000

6,000

8,000

10,000

Food Personal Care Household Care

Beverage

MAT 2YA MAT LY MAT TY

Active SKUs – MAT 3 Year Trends New Variants in Last 2 MATs

Data ending April 2011

39


Innovation helps products stand out in a crowded landscape


Sunsilk Cocreations

Nano Complex

Extra chewing gums

Microgranules

Knorr Gia vi Hoan Chinh

Mixed ingredients

Chinsu Toi Ot

Prepared fish sauce

Downy 1 Lan Xa

One wash P/S White Now

Blue foam for instant white teeth

Minute Maid Nutri Boost

Milkbased Juice

Ikun

Carbondinated RTD Tea

CloseUp

Hot and Icy toothpaste

Comfort Sang Tao

Flower & Fruit Sense

New Combination

40


‘Goodforheath’ products with natural ingredients across food and personal care are preferred by consumers

Source: Nielsen Omnibus March 2011, Nielsen Retail Audit

Vietnamese consumers listed Health as their top priority

Kotex Panty liners

Green Tea extract

Nam Ngu Fish Sauce:

Clean fish sauce

Vfresh Fruit Juice

Naturally good

TH True Milk

Truly natural

Lifebouy Body Soap

Natural bitter melon

http://www.masanfood.com/chinsu/product.php?id=49&cid=11

41


CocaCola Live Positively Campaign

Source: Press articles

Going “green,” environmentally friendly products and initiatives are an emerging trend for manufacturers and retailers alike

2011 Green consumption month in CO.OP Mart

http://www.bigc.vn/LinkClick.aspx?link=161&tabid=156&language=vi-VN

42


Food for Thought Food for Thought

How to navigate through the short How to navigate through the short term challenges term challenges and gain in the long and gain in the long term? term?


43


• In the face of current economic conditions, it is critical to understand what VALUE VALUE means to consumers

Promotion Pricing Large pack sizes

Expansion to

secondary/ rural areas

Expansion to modern trade

channel

‘Vietnamize’ your brands

Brand portfolio

Food for Thought

• Continue to invest to secure longterm growth future for your brands:

44


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