The next frontier - NOMURA · The next frontier Asia: How to reach 2.5b consumers Ted Hurley FMCG Client Leadership Nielsen Greater China. The world’s most confident consumers Consumer

1

Copyright © 2011 The Nielsen Company. Confidential and proprietary.

Ted HurleyFMCG Client Leadership

The Nielsen Company, ChinaApril 2011

China’s lower city tiers:

The next frontier

Asia: How to reach 2.5b consumers

Ted Hurley

FMCG Client Leadership

Nielsen Greater China

The world’s most confident consumers

Consumer Confidence Index

78

91

99 10198 97

107

79

86

92 9390 90 92

8084 85

87

81 81 83

60

65

70

75

80

85

90

95

100

105

110

Q1 2009 Q3 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011

Asia Global Average US

Asian countries make up 10 of the top 15 most

confident


99

120

127 129 129 131 131

104

115 116119

115 116 116

96

107111 113 114

120

110

89

101

108 109104

100

108

70

80

90

100

110

120

130

140

Q1 2009 Q3 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011

India Indonesia Philippines China


28

7 711 10

48 8 11

62

61

12

63

6965 57 57

62 55 53 4954

4735

10

54

7

19 24

22 2331

31 34 34 34

4149

50

24

11

3 3

23 2 2 3

5 6

38

5

IN SG MY CN AU HK TH ID PH VN TW NZ KO AP

Excellent Good Not so good Bad

Job confidence is strongHow do you feel about your job prospects in the next 12 months?


Indian consumers are now ready to spend $$Is now a good time to buy the things that you want and need?

8 5 4 2 4 62 3 2 3 3 2 1 3

53

48 4745 41 38

4034 34 31 29

24

12

36

34

4138 44 45 46 50

50 49 53 5462

37

46

4 58 7 9 8 6

1111

11 12 10

48

11

IN ID AU HK SG PH TH NZ CN MY TW VN KO AP

Excellent Good Not so good Bad


AP Average

5

1

26

38

41

59

25

45

10

40

33

37

14

2

5

21

27

34

39

40

41

63

40

24

5

11

25

38

59

2

38

32

3741

38

44

48

4

14

21

28

39

62

2

Putting into savings

Holidays / vacations

New clothes

Out of home entertainment

Investing in shares of stock / mutual funds

New technology products

Paying off debts / credit cards / loans

Home improvements / decorating

Retirement fund

I have no spare cash

Don’t know/undecided

%

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Still a saving culture


Inflation is a major concern

12

10

7

8

7

7

6

3

4

3

3

2

1

1

1

2

2

16

11

10

10

8

8

7

5

6

4

3

3

1

20

1

2

1

1

1

1

Increasing food prices

Work/life balance

The economy

Increasing utility bills (electricity, gas, heating, etc)

Health

Increasing fuel prices

Job security

Childrens' education and/or welfare

Parents' welfare and happiness

Global warming

Political stability

Debt

War

Crime

Terrorism

Lack of understanding of other cultures

Immigration

Tolerance towards different religions

Tolerance towards other countries’ values

Other concern

No concerns

%

Biggest concern

Second biggest concern

AP Average


I use social media sites to help me make purchase decisions

81 7769

64 6252 50 50 48 46 44

18 17 15

60

19 2331

36 3848 50 50 52 54 56

82 83 85

40

VN CN TH PH ID MY HK IN TW KO SG AU JP NZ AP

Average

%

Yes No

The rise of social media

2011/6/14 Confidential & Proprietary

Copyright © 2009 The Nielsen CompanyTrust in Advertising Page 9

Word of Mouth drives sales (or takes them away)

93 93 93 93 92 92 91 91 90 8985 84

80

89

47 7 7 7 8 8 9 9 10 11

15 1620

11

96

0

10

20

30

40

50

60

70

80

90

100

NZ IN MY PH SG AU ID CN TW HK KO TH VN JP AP

%

Trust completely/somewhat Don't trust much/at all

I trust recommendations from people I know

Confidential & Proprietary

Copyright © 21 The Nielsen CompanyField dates 8/3/10 – 28/3/10 Page 10Consumer Confidence Survey – Q1 21

Half of Asians access the internet through their mobile phones

5854

51

4644

39 38

30 2826

24

19

13

48

66

ID CN PH IN SG MY TH VN JP HK AU KO NZ TW AP

Average

%

Which of the following activities have you done on a mobile

phone in the past 30 days? (Go online)

2011/6/14 Confidential & Proprietary

Copyright © 2009 The Nielsen CompanyTrust in Advertising Page 11

But mobile advertising isn’t working yet

43 42

3430

28 27 2523 23 22 20

17 1512

26

57 58

6670

72 73 7577 77 78 80

83 8588

74

0

10

20

30

40

50

60

70

80

90

100

IN VN PH JP SG ID TW CN TH NZ MY HK KO AU AP

%

Trust completely/somewhat Don't trust much/at all

Base : All respondents n=7072

I trust advertising that I receive on my mobile phone


Spending money online is still in its infancy

63

25

63

40 41

54

19

6371

56 5752 50

34 35

22

34

25

36 33

20

30

2419

27 2631 33

34 31

9

26

10

18 19 16

27

9 7

9 11 10 11

19 22

512

25 6 8

16

2 27 4 6 5

10 10

1 3 1 1 16

1 2 1 1 2 32 11

1

AU CN HK ID IN JP KO MY NZ PH SG TH TW VN AP

Average

%

Less than 5% Between 6% and 10% Between 11% and 25%

Between 26% and 50% Between 51% and 75% Greater than 75%

What is your online shopping % of total monthly spending?


Chinese consumers spend a lot of time online

talking about product quality

62

46 44 44 41 39 38 38 34 34 33 30 29 28

49

38

54 56 56 59 61 62 62 66 66 67 70 71 72

51

CN VN IN SG PH MY AU NZ HK TW JP ID TH KO AP

Average

%

Yes NoI am more likely to share (Tweet, review, etc.) a negative rather

than positive product experience online

Confidential & Proprietary

Copyright © 2010 The Nielsen CompanyField dates 08/03/10 – 28/03/10 Page 14Consumer Confidence Survey – Q1 2010

Chinese consumers are most likely to want premium brands

24

6 819 23

9 915

2014 10 11 7

14 10

58

49

67

59 53 78

60

60

64

62 67

49 6038

55

18

45

25 22 2413

3024

1625 22

4034

48

35

AU CN HK ID IN JP KO MY NZ PH SG TH TW VN AP

Average

%

Very much Somewhat Not at all

Mass market cosmetics are just as good as premium, expensive alternatives

15


China & India: Next steps for growth

16


What is FMCG (Fast Moving Consumer Goods)?

17


Strong FMCG growth continues in China

18


India FMCG growth +20%

0

20000

40000

60000

80000

100000

120000

140000

160000

Yer 08 Year 09 Year 10

OTC

Non-Food

Food

(19%)

(15%)

(25 %)

(14%)

(19%)

(20 %)

118,765

142,538

Rs. Crores

(19%)

(20%)

(19%)

Source: Nielsen RMS; All India (U+R), Figures in ( ) indicate growth over YA

19


Chinese consumers are getting older

Impacts on :

push up housing demand;

push up wedding consumption;

Increase the nation’s propensity to consume

Push up health care, retirement, insurance and

other grey hair economy

China population (aged 20-29)

0

50

100

150

200

250

300

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

mn

The Indian consumer in the new decade

and the Aadhaar number 2020

Indian consumers are just getting started

India is experiencing

multiple

transformations…

A younger country

The largest pool of the

youngest people: India

will add 12 million

young people to its

working population

every year for the next

ten years

By 2020 India will

have the youngest

income earners in the

world

21


Only 7% of retailer chains can be found in both provinces

Among all Nielsen audited categories, only 44% share the same leading brand

Shandong - GDP 10.1%• Main language: Mandarin

• Local dialects: Ji Lu, Jian, Zhongyuan

• Culture: Han, Hui

• Diet: traditionally wheat and soy

based

Guangdong – GDP 12.4% • Main language: Cantonese

• Local dialects: Various dialects are

spoken

• by 60 million people

• Culture: Miao, Yao, Hui, Han, She

• Diet: traditionally rice based

7

China is not one country but a continent

2222

INDIA: Behind, but getting better

Consumer Speak: Changes in last 3 years Rural

Infrastructure related 54

Roads have been made 36

Electricity has come 8

Water available 6

Housing construction increased 7

Source: Nielsen

7 812

15

2119 2023 24

28

0

5

10

15

20

25

30

2004-05 2005-06 2006-07 2007-08 2008-09

Govt Expenditure Rural FMCG Sales

Consumers strongly echo the

infrastructure story

Source: GoI; Rs. ‘000 Crore

23


China & India: Together, over 10m stores

(*Nielsen Defined China, excluding villages, non covered regions, non covered channels)

India

China

Indonesia

Philippines

Thailand

Sri Lanka

Korea

Malaysia

Taiwan

Australia

Vietnam

New Zealand

HongKong

Singapore

Around 3.3 million*

Data Source: The Nielsen Company

Page 24 Copyright © 2010 The Nielsen Company. Confidential and proprietary.

24

Title of Presentation

Channel Share of Monthly FMCG ACV (RMB)

Data Source: Nielsen Retail Census

In China: 100,000 modern stores bring over 50% of sales

25


To succeed in China, brands need to spend $$ in the stores

26


Chinese expect variety, but price is still #1

27

Just the beginning

India Modern v. Traditional stores

24%

5%

35%

81%

95%

10%

Visited last week FMCG Sales contribution Growth v. Last Year

Modern Traditional

28

In India, distribution is the #1 challenge

29

Standing out on the shelf is difficult

Source: Nielsen

30

Plenty of time to catch up

Years for Modern

stores to reach 20-30%

of FMCG sales

10 10

12

9

China

Thailand

Brazi

l

Poland

31


Perception

China consumption growth is driven by

rich consumers in top tier cities (Beijing,

Shanghai, Guangzhou, Chengdu,

Hangzhou, Nanjing…)

32


Reality

• China growth is being driven

by lower tier consumers, and

the western region.

• Massive government

investment in infrastructure

• Rural consumers are entering

the consumer goods market

• Thousands of new stores

opening up every month in

lower tier cities


33


The center of gravity is changing


34


108106 105 105

107111

10095

9895 95

107108

101105

103 103

113

National Tier 1 Tier 2 Tier 3 Tier 4 Rural Areas

10 Q1 10 Q4 11 Q1二线一线全国三线四线农村

Confidence is highest in lower city tiers

+6 +7 +8 +8+6

消费者信心指数


35


The next frontier of Chinese retail growth

Source: The Nielsen Company

MAT Jan11 vs. YA FMCG Value Sales

China FMCG Value % growth (last 12 months)

15

11

18

16

15

Total China Tier 1 Tier 2 Tier 3 Tier 4/5

36


A land of opportunities

Source: The Nielsen Company

MAT Jan11

China FMCG Sales Contribution

31%

26%9%

34%

Tier 1 Tier 2 Tier 3 Tier 4/5

69%



The new Indian consumer

MobileTech-savvy

Aspirational

Impatient for

better

services

3838

Source : CMIE

Small packs… Rs

5 and Rs. 10

Price points have

grown by 100%

in Rural vs. 65%

in Urban

Source : Nielsen

Expenditure as % of income

% Growth rate of Expenditure

- last 6 quarters

Affordable Consumerism

Rural consumers wants to spend, especially if the cost outlay is small

Social Change AV hyperlink

39

91

88

79

79

78

77

77

64

9

12

21

21

22

23

23

36

Brand P Premium Cream

Brand T Premium Skin Cream

Brand W Premium Skin Cream

Brand V Premium Shampoo

Brand U Premium Cream

Brand Z Premium Chocolate

Brand Y Premium Chocolate

Brand X Premium Cream

% TT Contri % MT Contri

Indian consumers can buy premium products

everywhere

Boxed indicate Growth higher for TT than MTSource: Nielsen



Universal , all India Identification

number

Interoperable platform

Real-timeEasy identity verification

One number = one person

The Aadhaar number is an infrastructure that will help redress this imbalance

40

Can link to a bank a/c and cell phone

41


In many cases small city Chinese consumers are already paying more

Category: Feminine Care

Brand B City Key City B City/Key City

MNC 1 0.48 0.46 1.04 X

MNC 2 0.54 0.52 1.04 X

MNC 3 0.63 0.58 1.08 X

MNC 4 1.22 1.21 1.01 X

MNC 5 1.20 1.18 1.02 X

Local 1 0.60 0.42 1.43 X

Local 2 0.41 0.47 .88 X

Local 3 0.51 0.49 1.05 X

Average Price per piece (in RMB)- 2009

Source: Nielsen Retail Audit

42


Is Local

Is

Foreign

Can’t

Say

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4 Tier 3 Tier 4

Ariel Omo Rejoice Whisper Crest Colgate Olay Darlie Ponds Nivea

Is The Brand Local or Foreign.....?

Foreign or local brands? It’s doesn’t matter

43


Signs of a maturing consumer class in China

73%

72%

72%

72%

70%

69%

63%

59%

47%

35%

Shop online more to get the best prices

Not impact on my consumption, it's as usual.

Reduce the frequency of eating out, cook more often at home.

Frequent more stores to make sure I always get the best prices

Take less taxies and driving, take public transport as much as

possible.

Stay home more often and watch more TV/movies/on the internet

Stay home more often to reduce my entertainment expenses.

Reduce shopping.

Reduce or cancel travel plans.

When I am shopping in a particular store, I am constantly looking for

the best prices.

Please tell me how the current economic situation will affect your lifestyle?

[% Completely & Somewhat Agree]

Data Source: The Nielsen Company

44


Wrap up

• Asian consumers are the most confident in the world– Feeling good about their jobs, ready to spend $$

• Social media is already a part of daily life

• Word of mouth is the best way to grow your brand

• Pay attention to quality: if something’s wrong, there will be big

problems online for your product

• Trading up (buying premium)

• More consumption in India, China, Vietnam, Indonesia

• Inflation is a major concern, but no impact on sales so far

45


Wrap up

• Common key to success in China and India: penetrate

deeper by:

– Engaging with lower tier/rural consumers

– Building distribution in lower tier cities & villages

• Sophisticated Chinese consumer class

• India: just the beginning, but many are ready to spend

more money in small stores

Title of PresentationDabao Nielsen Top to Top Meeting

Thank You!

Documents

The next frontier - NOMURA · The next frontier Asia: How to reach 2.5b consumers Ted Hurley FMCG Client Leadership Nielsen Greater China. The world’s most confident consumers Consumer