071009 Vn Consumer Future [tns]

Gaining the competitive edge Vietnam – Post WTO

Ralf Matthaes Managing Director TNS Vietnam

AMCHAM October 11, 2007

Gaining the competitive edge - AGENDA Looking at Asian trends to predict Vietnam’s potential – Post WTO Asian / Vietnamese Population Trends Asian / Vietnamese Wealth Trends Asian / Vietnamese Consumption Trends Asian / Vietnamese Attitudinal Trends

Vietnam’s Media landscape – Post WTO Print Radio TV

Rural consumers – The next great opportunity GDP vs population Who is the average rural family Ownership comparison – urban vs. rural

12 Changing trends

Looking at Asian trends to predict Vietnam’s consumer future – Post WTO Vietnam

Population Trends

Asia’s Population

Asia = 3,137,500,000

Population in Million

Chindia

China / India 77% on the Asian population

Indonesia

246

Japan

127

Philippines

90

Vietnam

85

Thailand

65

Korea

49

Malaysia

25

Taiwan

23

Hong Kong Singapore

(60% of global pop.)

Vietnam = 2.7 % of Asia

7 4.5

Vietnam is home to Asia’s 6th largest population *Population estimated in 2006 *Source: GeoHive (www.xist.org/earth/)

2400

Vietnam has Asia’s 2nd youngest population Vietnam

38

19

21

Philippines

38

20

22

13

8

14

6

India

35

20

22

17

6

Malaysia

35

19

24

16

6

Indonesia

34

China

27

Thailand

27

Taiwan

24

Singapore

23

S Korea

23

Hong Kong

19 18

16 0%

30

18

28

14

30

0-14

15-24

21

11

24

10

14 21

60% 25-39

40-59

80% 60+

57% of Vietnamese are under 25 years old Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/)

9

23 29

40%

7

21

20

20%

9

19

27

15

7

20

27

18

15

17

26

19

19

Japan

23

100%

Vietnam’s population growth rate Population Growth % Philippine

1.8

Malaysia

1.78

Singapore

1.42

Indonesia

1.41

India

1.38

Vietnam

1.20

Thailand

0.68

Taiwan

0.61

China

0.59

Hong Kong

0.59

Korea Japan

0.42 0.02

Vietnam has a sustainable & healthy population growth rate Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/)

Vietnam has the 2nd largest family size Australia

60

New Zealand

58

Japan

10

39

Hong Kong

11

38

Taiwan

31

Singapore

30

China

29

Thailand

29

Indonesia

15 23 26 17 20

21

37

19

Malaysia

Philippines

11

56

S Korea

Vietnam

10

47

15

43

13

56

1 - 2 persons

3 - 4 persons

5 + persons

As Vietnam begins to urbanize family sizes shall decrease Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/)

Page 8

Vietnam has the 3rd largest female working pop. 79.2

China

88.8 77.7

Thailand

89.7

Female(%)

77.3

Vietnam

83.5 Male (%) 59.7

Korea

79.9 59.5

Indonesia

Philippines

Malaysia

Taiwan

84.7 52 82.6 51.9 81.4 51.2 76.2

Female consumers will become more and more important Employment%: *Data estimated in 2003 *Source: Asian Development Bank (ADB)- Key Indicators 2005 (www.adb.org/statistics)

Number of Household - Millions 400 372.10 350 300 250

206.30

200 150 100 50

58.60 48.50

25.20 17.30 17.20 17.10 7.50 7.20 5.60 2.20 1.50 1.00 an d Si ng ap or e

Ze

al

HK w Ne

In dia In do ne sia Ja pa n Vi et na m Ko re a Th ai la nd Ph ilip pin es Au st ra lia Ta iw an M al ay sia

Ch ina

-

Vietnam has the 5th most number of households in Asia, making Vietnam very attractive for Investment **Source: GeoHive (www.xist.org/earth

Vietnam has Asia’s smallest urban pop. 100

99

82

76

69 47

Singapore

Hongkong

66Cities

N.Z.

Australia

Taiwan

Japan

will swell just like in China

55

48

43 29

Malaysia

Korea

40

Indonesia

Source: Country Statistics Offices

Philippines

China

India

29

Thailand

27

VN

Population Insights Large, Young & Growing population Smaller household sizes Large female working population Huge urban migration

More focus on… Young consumers Female consumers Smaller size products Demand for services Building loyalty & consumer commitment

MUCH MORE COMPETITION & PRICE DISPARITY

Wealth Trends

40,000 36,260

35,390

GDP per head In USD

35,000

30,000 27,320 27,150 25,390

25,000

20,000 16,480 15,110

15,000

10,000 5,150

5,000

2,750

1,700 1,290

1,190

740

730

In di a

C hi na In do ne Ph sia ilip pi ne s V ie tn am

a M n al ay si Th a ai la nd

iw

Ta

K or ea

HK

Ja pa Ze n al an S in d ga po re N

ew

A

us

tra

lia

-

Vietnam’s GDP/ per capita has increase seven fold in the past 15 years

The emergence of an urban middle class

21

2006

55

14

2003

7

1999 0%

24

36

12

2001

SEC Scale A = US $1,001 + B = US $1,000 - 501 C = US $500 - 351 D = US $350 - 251 E = US $250 - 151 F = US $150 below

50

32

56

31

62

20%

40%

SEC AB

60%

SEC CD

80%

100%

SEC EF

Monthly declared household income

The middle class in Urban Vietnam will drive consumersim Source: TNS VietCyle – N = 2000 Urban

My standard of living

VC-20060 2

VC-2004 2 5

40

37 Much lower than today Equal to today Much higher than today

51

5

49

6

Somewhat lower than today Somewhat higher than today

Vietnamese are still very optimistic about their economic futures Source: TNS / Gallup - Voice of People Survey

Wealth Insights Developing Middle class Larger spend contribution from urban areas Electronic banking & E-commerce will help stimulate economy More discretionary spend & Smaller household sizes More focus on… The middle class Luxury goods Mass high quality products at better price points Modern trade – easier distribution Technology to save time and money

Wealth segments will create greater marketing polarization in terms of wants, needs, aspirations and affordability

Consumption Trends

Asia’s Media Spend Growth – 2006 40

23 18

Vietnam 7

India 6

China 5.2

15

Indonesia

4

4

3

Malaysia

Thailand

Philippines

5.2 4

Hongkong

Korea

Australia

N.Z.

Singapore

-2.4

-2.5

Japan

Taiwan

Vietnam is experiencing a Media bonanza, which will slow down Source: TNS AP offices

FMCG Growth in Asian Countries (%) 20

11

4

3 2

1

Vietnam is experiencing the fastest FMCG growth in Asia -8 Urban Vietnam

National China

National Thailand

National Taiwan

National Malaysia

Total FMCG – Value Growth Rate (%) - Year 2006 vs. Year 2005

National Korea

National Philippines

Asia’s Fast Food Penetration Local & Foreign FF purchase in past week – urban only

99 73

65 55 40

39

10

Philippines

Malaysia

China

Indonesia

Thailand

VN

India

Though changing, Vietnamese still love their Pho! (88%)

Mobile Phone Ownership - Urban 2006 100

Singapore

98

94

Taiwan

Hongkong

93

Korea

88

Japan

80

75

Australia

N.Z.

90 79

78 70 58

30 13

Thailand

Philippines

Malaysia

China

VN

Indonesia

Bye Bye Bamboo telephone, we’re getting connected, like the rest of Asia Own personal mobile phone – urban only

India

Internet Usage – In-home 88

85

Autralia

37

80

Japan

N.Z.

78

Korea

71

70

70

Singapore Hongkong

Taiwan

35 30

20 19

18 10 5

Thailand

China

Malaysia

VN

Philippines

India

Indonesia

Growth in internet usage will be key to catching up to the rest of Asia In-home email account - Urban only

Retail environment in Asia - 2006

Direct Sales Traditional Trade

n pa Ja

a

Modern Trade

M

al

ay

si

an iw

a re Ko

a

60

54

Ta

Th

ai

la

nd

es Ph

ili

pp

in

m na et Vi

As

ia

12

34 in

33

Ch

48

55

51

82

Though still small, modern trade will grow substantially in Vietnam

Consumption Insights Technology savvy consumers will leap frog technology Ad spend shall increase but become less effective Consumption will continue to increase, but products & services will need to better fit Vietnamese tastes and needs Retail outlets will become new battle ground for FMCG Thus, more focus on… Technology New Advertising mediums Stronger focus on retail Better understanding of new consumer segments

INNOVATION & CONSUMER EXCELLENCE & UNDERSTANDING WILL BE KEY TO SUCCESS

Attitudinal Trends

Vietnam happiest nation in Asia Viet Nam N=989

49

United States N=1192

39

Philippines N=1198

38

Singapore N=1509

29

Japan N=1321

29

India N=1968

43 54

Very happy

10 1 21

5

74

5

67

10 0%

5

61 48

12

Korea N=1200

12 1

66

21

China N=996

61

49

26

Indonesia N=995

71

19

78 20% Quite happy

40%

3 11 2

60% Not very happy

80%

100%

Not at all happy

Vietnam’s economic turn around has had a profound Positive effect on Vietnam’s population – Will it Last? Source: World value survey

A growing sense of national pride Philippines N=1200

87

Viet Nam N=989

11 21

78

United States N=1184

72

India N=1896

71

Indonesia N=995

20 24 22

48

Singapore N=1508 China N=952 Japan N=1258 Korea N=1198

36

17 0%

61

56

23

14 38

61 20%

40%

Quite proud

80%

4

Not very proud Not at all proud

4 19

60%

Very proud

61

50

26

4 62

45

44

2

Question :How proud are you to be [Nationality]? 1 Very proud 2 Quite proud 3 Not very proud 4 Not at all proud

3 100%

Economic development, success in sports and technology, development of local entertainment, realisation of own importance leading to higher pride Source: World value survey

Asian traditional values Indonesia N=983

93

Korea N=1043

7

92 87

13

Viet Nam N=959

86

14

India N=1917

85

15

66

Singapore N=1469

34

56

China N=863

Needs children Not necessary

63

15 0%

World Values Survey

44

37

United States N=1144

0 Not necessary 1 Needs children

8

Philippines N=1182

Japan N=917

Question :Do you think that a woman has to have children in order to be fulfilled or is this not necessary?

85 20%

40%

60%

80%

100%

Looking again at China & India, it appears that certain Vietnamese values will decline in the future Source: World value survey

Question :With which of these two statements do you tend to agree? A. One must always love and respect parents. B. Parents must earn love and respect 1 Always 2 Earned 3 Neither World Values Survey

Respect for Parents 99.3

Viet Nam N=993

0.7

94.5

5.5

Philippines N=1196

94.0

6.0

Singapore N=1505

93.0

7.0

Korea N=1200

92.2

7.8

China N=993

Indonesia N=987

90.2

9.8

India N=1924

88.8

11.2

77.2

United States N=1191

22.8

71.6

Japan N=1143 0%

20%

40%

28.4

60%

80%

100%

Due to Asian Confucian family values, respect for parents should continue to be strong for years to come Source: World value survey

Always Earned

Attitudinal insights Happy Nation that will become less happy due to higher expectations Family will become less important while chasing the economic dream Further emancipation of women Parents advise will become less important National pride is very strong, this may erode Religion not seen as important but may see upswing due to above eroding values With such a young population, expectations will sky rocket

Attitudes will become more demanding & self centered

Vietnam’s Media Landscape

Vietnam Media Landscape - Print Media 713 daily and periodical publications

77% urban population read last week

All major newspapers also online

Ownership: State-owned

Source: TNS Media Vietnam

Vietnam Media Landscape - Radio 288 local FM stations 11 national radio stations (VOV) Hundreds of radio transmitters - rural 36% daily listenership in 6 largest cities Ownership: State-owned One foreign owned Radio – Zone FM

Source: TNS Media Vietnam

Vietnam Media Landscape -Television 1 national TV station (VTV) 1 Terrestrial Digital TV - VTC 65 local TV stations Mode of delivery: Free-to-air broadcast Cable Satellite dish antenna MMDS/DTH Cable providers: 6 Ownership: State-owned Some foreign involvement expected soon Source: TNS Media Vietnam

More choices to watch - Hanoi 14.0 12.0

13.0

Domestic channel Foreign channel

11.5 10.3

10.7

Number of channels

10.0 8.0 6.3 6.0 4.0

4.5

4.0

2.0 0.0

0.0 2001

2005

2006

Foreign programming has already gained preference in Hanoi on a short 3 years Source: TNS Media Habit Survey, 2001-2007

2007

More choices to watch - HCMC 25.0

20.0

Domestic channel Foreign channel

20.2

16.5

15.0

Number of channels

13.2

10.0

5.0

10.1

9.4

5.0 2.6

0.0

0.0

2001

2005

2006

2007

In contrast, though catching up, local TV is still preferred in HCMC Source: TNS Media Habit Survey, 2003-2007

Total TV viewer-ship By consumption

250

Minutes viewed

TTV

Cab/sat TV

200

Free2Air TV

150 1st half 2003

1st half 2004

1st half 2005

1st half 2006

Satellite & Cable TV are beginning to challenge, Free to Air programming Source: TNS TV Audience Measurement, 2003-2007

1st half 2007

The bigger the share the higher the loss TV rating of HTV7 in HCM City

Vietnamese TV viewers are becoming much more demanding Source: TNS TV Audience Measurement,2003-2007

Media spend grew by 40% from 2005 to 2006 But, how effective is it?

Vietnam’s Rural Consumer

Why Rural Vietnam becomes more & more important? 4 Key Urban Cities

Still plays a vital role in the economy

Population (%): 9.9

Lots of information available

GDP (%): 25.6

Battlefield with fierce competition

Secondary Cities

The next engine of growth, but limited

Population (%): 13.6

Limited information available

GDP (%): 11.9

Battlefield in the near future

Rural Locations

The future mass engine of growth

Population (%): 76.5

No full insights available at the moment

GDP (%): 62.5

1st entry advantage for manufacturers

the sixth sense of business™ `

42

What are the available consumers in each region? (available consumers are those with monthly income > 1.5mln VND) 42% with income > 1.5mln VND

Low Income: 7%

62% population aged 14-55 Total available consumers: 17mln

Rural

Low Income: 58% Medium Income: 39%

Medium Income: 53% High Income: 40%

Urban

High Income: 3%

Low Income: < 1.5 mln VND per month Medium Income: 1.5-4.5 mln VND per month High Income: >4.5 mln VND per month

93% with income > 1.5mln VND 62% population aged 14-55 Total available consumers: 5mln

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

43

Understanding an average Rural family… Household Size

100% traditional trade vs. 14%

4 members vs. 4.6 in urban

Shopping Habits

Employment

Modern Trade in urban

Farmer/ Shop Owner vs. employee & self-employed in urban

Rural

425,000 VND vs. 681,000 VND in urban

Monthly FMCG Spending

Monthly Income

1.5-3 mln VND vs. 4.2 mln in urban

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

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Durable Ownership – FMCG Impact Items Most of rural households are now using electronic cooker. However, there is still a big gap with urban families in make-life-easier products 10% vs. 49%

Rural vs. Urban 30% vs. 78% 92% vs. 96%

Washing Machine Refrigerator Electronic Cooker

1% vs. 13%

53% vs. 88%

Microwave Oven

Gas Cooker Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

45

Durable Ownership – Communication Impact Items Color television nowadays becomes a necessity in rural. Radio is also very popular while telephone and computer are still limited.

95% in rural vs. 97% in urban

45% in rural vs. 82% in urban

32% in rural

Color Television

vs. 4% in urban

9% in rural

Telephone

vs. 41% in urban Radio/ Cassette

Computer Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

46

Durable Ownership – Luxury Items There’s also a big gap in ownership of high-tech equipments between rural and urban households

2% in rural vs. 22% in urban

vs. 42% in urban

Video Recorder/ Player

Air Conditioner

3% in rural vs. 34% in urban

Still Camera

28% in rural

9% in rural vs. 35% in urban

Hi-fi / Music System

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

47

Sector Ownership Mobile phone already reaches 33% rural population while Internet is still at the very infant stage there! Motorbike ownership is mostly at the low & medium range below 15mln VND one unit Technology

Banking & Finance

Automotive

Mobile phone: 33% in Rural vs. 66% in Urban

Insurance: 7% in Rural vs. 9% in Urban

Motorbike less than 10mil VND: 40%

Bank account: 6% in Rural vs. 35% in Urban

Motorbike 11-15mil VND: 31%

ATM card: 4% in Rural vs. 20% in Urban

Motorbike 16-39mil VND: 13%

Internet: 1% in Rural vs. 45% in Urban

Motorbike in Urban: 92%

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households the sixth sense of business™ `

48

12 Major Trends Of Change

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49

Upgrading needs

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Question: For each of the following aspects, indicate how important it is in your life. % saying “very important” on a four point scale. World Values Survey

Family and Work China Korea Philippines

Family

Indonesia Viet Nam Work

Singapore India Japan United States

0

20

40

60

80

100

Vietnamese are working harder to improve their lives, Changing family dynamics and time spend with kids Source: World value survey `

the sixth sense of business™

51

Convenience

Convenience the sixth sense of business™ `

52

Sales growth per channel (%) Direct sales

34 14

Mordern trade Streetshop

11

All Channels

11

Market Specialty

8 7

Though still small, modern trade will grow substantially in Vietnam Changing shopping habits and the Vietnamese shopping list the sixth sense of business™ `

53

Indulgence (Health consciousness)

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Two forms of malnutrition

%

Obesity

12% Malnutrition

2007

Wealth has decreased malnutrition, but indulgence has Changed eating habits and increased obesity Source: Study on nutritional status & physical activities of children 6the sixth sense of business™ 11y.o – NIN & Nestlé `

55

Status

Men’s care (displaying wealth) the sixth sense of business™ `

56

Luxury Goods penetration 42% urban

22% urban

Air Conditioner

34% urban

Luxury goods are permeating into a 3rd of Vietnamese urban households, Changing entertainment habits

Still Camera

the sixth sense of business™ Source: TNS Vietnam Rural Pilot Survey - % of households `

DVD

35% urban

Home Entertainment System

57

Female Emancipation Health & Beauty

the sixth sense of business™ `

58

Ideal female occupation 26

21%

“Unlike my mother’s time, women now aspire to be more independent by working & earning money in order to have their own income instead of being housewives” 18

16 14 12 11

12 10

10 7 6

Business manager

Look after the family / home VC 2001, n=636

Business owner / entrepreneur VC 2004, n=683

Teacher

6 5

5

Doctor/ pharmacist

VC 2006, n=1009

Female consumers will become more and more important, Changing who advertisers target in the future the sixth sense of business™ `

59

Innovation Innovation

the sixth sense of business™ `

60

84% of Urban 15 to 24 youths surf weekly

2006

53

2005

47

45

2004

55

40

2001

60

28 0%

72 20%

40%

60%

Have used the internet

80%

100%

Not yet

Vietnamese youth are leading the charge for Change, with 57% of the population yet to become consumers Source: TNS VietCyle – N = 2000 Urban `

the sixth sense of business™

61

Differentiation

the sixth sense of business™ `

62

Vietnamese youth are flexing their creative flair “Short hair styles look dynamic & fashionable”

“Being dynamic is a key to success”

“Wearing different style of clothes is a way to make myself differentiated”

Youth are Changing, just to be different the sixth sense of business™ `

63

Urban Migration the sixth sense of business™ `

64

Vietnam has Asia’s smallest urban pop. 66 55

48

43 29

Malaysia

Indonesia

Philippines

China

India

29

Thailand

27

VN

Over 200,000 Vietnamese migrate into HCMC every year, looking to find the promised land

Cities will swell just like in China, Changing the economic fabric of Vietnam Source: Country Statistics Offices `

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Technology savvy

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Technology embracers 100 84 80

74 68 58

60

53

49

40

40

21 20

1

22 17

26

24

16

1

0 1999 DVD Player

2004 Flat screen TV

Personal computer

2006 Mobile phone

Video disk VCD

Technology today is all the rage, Changing all facets of communication, entertainment and commerce Source: TNS VietCycle `

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67

Media fragmentation

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68

Vietnam Media fragmentation TV is Still the King

Radio & internet advertising is growing rapidly Vietnam’s Advertising spend grew at rate of 40% in 2006, Changing how media influences everyday life in Vietnam Source: TNS Media Vietnam

Inflation

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70

Cost of Living in New York = 100 - 2006 Philippines

43 45

India

62

Vietnam Malaysia

68

Thailand

69

Indonesia

76

China

80

Taiwan

85

New Zealand

86

Australia

106

HK

107

Singapore

108

Korea

115

Japan

124 0

20

40

60

80

100

120

140

Vietnam was 38% cheaper than New York in 2006, but inflation is Changing how we will consume in the future Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/) `

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Fading traditions the sixth sense of business™ `

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A Historical Perspective on the Future What genre of music do you prefer? Economic Boom

Total

12

5

15-19

44

22

40

7

66

5

By age 24

20-24

Economic reform Post –war Baby Boom

5

49

23

ing

ad

5

25-34

5

ns

itio d ra

43

f e r a

47

T 5

35-45

The lean years

0%

3

28

10%

20% Western

64

30% Asian

40%

50%

Vietnamese pop

60%

70%

80%

90%

Vietnamese traditional

Vietnamese pop music is a reflection of modern culture, Identifying how traditions will Change in the future Source: TNS VietCycle

100%

Summation

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Summation Population shifts will impact both spending power & consumer needs

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75

Summation

Competition will increase steadily, creating more consumer sophistication

the sixth sense of business™ `

76

Summation

Wealth polarization will create clearer consumer segments

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77

Summation

Distribution will become easier, with the growth of modern trade

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78

Summation

Media fragmentation shall reduce advertising impact

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79

Summation

Attitudes will become more demanding & self centered – The “Me Generation”

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Summation Youth culture will need to be embraced, while managing expectations to ensure sustainability

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81

The changing face of consumerism As you can see, the face of consumerism has changed dramatically over the last 10 years However, please be reminded that not only the Vietnamese consumer has changed the last 10 years….

So has TNS Global…. 77 Countries

300 Offices Over 14000 employees the sixth sense of business™ `

83

…and so have we….

FSA / TNS 1996

TNS 2006

…and so have I….

Hanoi, Jan. 1994

HCMC, Oct. 2007

Thank You / Cam On! the sixth sense of business™ `

86