Ashok Sethi, TNSDecember 2007

Asian Consumer Trends

2

Consumer trends

Asian Markets

Demographic and socio-economic trends

Environmental trends

Changing consumer mind-set

Asian MarketsAsian Markets

4

Asia - 12 relevant marketsChina and India tower over the others (77% on the Asian population)

1,316

23

49

90

65

246

25

85

4.5

7

127

1,100

China

Taiwan

Korea

Philippines

Thailand

Indonesia

Malaysia

Vietnam

Singapore

Hong Kong

Japan

India

Population in Million

*Population estimated in 2006*Source: GeoHive (www.xist.org/earth/)

But can China really be considered as one market?

5

Several provinces of China are larger than many other Asian countriesIn reality Asia has 40+ markets – most with a population of 10 million+!

Region Population (M) Region Population (M) Region Population (M)

India 1100 Hubei 57 Malaysia 25

Indonesia 246 Zhejiang 49 Gansu 26

Japan 127 Korea 49 Inner Mongolia 24

Henan 94 Guangxi 47 Taiwan 23

Shangdong 92 Yunnan 44 Xinjiang 20

Guangdong 92 Jiangxi 43 Shanghai 18

Philippines 90 Liaoning 42 Beijing 15

Vietnam 85 Heilongjiang 38 Tianjin 10

Sichuan 82 Guizhou 37 Hainan 8

Jiangsu 75 Shaanxi 37 Hong Kong 7

Hebei 68 Fujian 35 Ningxia 6

Thailand 65 Shanxi 34 Qinghai 5Hunan 63 Chongqing 28 Singapore 5Anhui 61 Jilin 27 Tibet 3

6

Asian markets

Guangdong, Jiangsu and Shandong each have a GDP which is:not very far from that of Indonesia

higher than that of Thailand and Malaysia

Shanghai alone has a GDP which is almost equal to that of the Philippines

Demographic and SocioDemographic and Socio--economic trendseconomic trends

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1. The Greying Consumer

0

4

8

12

16

20

1975 1980 1985 1990 1995 2000 2005

China

Hong Kong,ChinaIndia

Japan

Indonesia

Malaysia

Philippines

Singapore

Thailand

Vietnam

Korea, Rep.

% of population over 65 years

Source: World Bank

9

1. The Greying ConsumerThe emerging “grey market”

A new emerging market of 60 years+ with considerable buying power:With unique physical and emotional needs

Implications exist on product design, formulations, packaging

Special store and shelf design

ApparelTravel packages

Health care products

Elder care servicesTelecommunication products

10

2. Urbanisation

10

30

50

70

90

1975 1980 1985 1990 1995 2000 2005

China

India

Japan

Indonesia

Malaysia

Philippines

Thailand

Vietnam

Korea, Rep.

Source: World Bank

% Urban population

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2. UrbanisationImplications

This group of recently “urbanized” presents a unique market as their needs are special and are neither represented by the urban nor the rural consumers.

This migrant population:Has special financial needs (sending money back home, no social security)

Unique social and emotional needs as a result of living away from the family

Entertainment needs

12

3. Rising Incomes and expenditure

Household final consumption expenditure per capita (constant 2000 US$)

0

5,000

10,000

15,000

20,000

25,000

1975 1980 1985 1990 1995 2000 20050

500

1000

1500

2000

2500 Japan

Korea, Rep.

Malaysia

China

India

Indonesia

Philippines

Thailand

Vietnam

Source: World Bank

* Note: Left Axis for Japan and Korea Rep., right axis for all other contries

Asian economies growing at 7%+ per annum as compared to global growth of only 3%

13

2253 2366 2476 262235872027

25773496

4283

77038472

942210493

11759

709 922 1221 1578 1926 2090 2162 221032552936

784

68606280

1700

5854542551604839

-5

1995

3995

5995

7995

9995

11995

13995

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Rural Household per capitadisposable income

Urban Household per capitadisposable income

Value (RMB)

3. Rising Incomes and expenditureRate and quantum of increase different for urban and rural

Source: National Statistics Bureau, China

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3. Rising Incomes and expenditureImplications

In rural areas, as consumers are lifted out of poverty, it creates additional market for low priced, Bottom of the Pyramid (BOP) products.

At the upper end, rapid increases in income and consumers catapulting into the HNWI (high net worth individuals) category, are boosting the market for luxury products in Asia

In the middle, increasing white collar jobs and service industry jobs are lifting BOP and lower middle class consumers to well groomed middle class, creating market for mid level discretionary products.

15

4. Emergence of the independent female consumer Traditional concept of “housewife” does not exist in most of Asia

75.8

22.4

48.7

50.3

49.6

64.0

48.6

45.8

51.2

87.8

55.1

67.4

74.1

79.2

80.9

84.7

79.9

55.7

China

India

Taiwan

Korea

Philippines

Thailand

Indonesia

Malaysia

Vietnam

Female(%)

Male (%)

Employment%:*Data estimated in 2005*Source: Asian Development Bank (ADB)- Key Indicators 2007 (www.adb.org/statistics)

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5. Smaller families Smaller families – with distinct marketing implications

Average numbers per household2.7

3.3

3.3

3.3

3.5

3.8

3.8

4.4

4.4

4.8

4.9

5.4

2.6

2.7

3.2

3.2

3.5

3.5

3.6

3.8

4.7

3.3

5.0

5.3

Japan

Korea, Rep.

Hong Kong

Taiwan

Singarpore

China

Thailand

Indonesia

Malaysia

Vietnam

Philippines

India

2003

2006

Source: The Economist

EnvironmentalEnvironmental trendstrends

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1. Environmental awareness Evidence of increasing concern across Asia …

Pollution and global warming are now touching the lives of the people. Concern is no longer merely academic – and is increasing sharply.

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1. Environmental awareness Evidence of increasing concern across Asia…

Sources: Grey Group study

Ave

3.4

3.3

3.3

3.3

3.1

3.1

3.0

2.8

2.8

2.7

2.6

I would be willing to pay 10% more for groceries/products that are more environmentally friendly

15

10

15

15

22

26

28

41

44

38

51

38

54

54

55

58

56

55

47

46

55

42

34

33

27

27

18

17

14

11

9

6

5

13

3

4

3

2

1

3

1

1

1

2

0% 20% 40% 60% 80% 100%

New Zealand

Japan

Hong Kong

Singapore

South Korea

Thailand

Malaysia

Indonesia

Philippines

Chinese mainland

India

Strongly agree Somewhat agree Somewhat disagree Strongly disagree

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1. Environmental awareness “Environmental-friendly” products likely to find increasing favour

Phosphorus-fre

e~Eco-friendly is the new status symbol!

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2. Internet and Web 2.0 Several Asian countries are at par with the West. Penetration in China is also very high in large urban areas.

48 9 10

1318

4448 50

61 6367 66 67 68 70

Indi

a

Indo

nesi

a

Phi

lippi

nes

Chi

na

Thai

land

Vie

tnam

Spa

in

Mal

aysi

a

Fran

ce

Ger

man

y

Taiw

an

Japa

n

Sin

gapo

re

Sou

th K

orea

Hon

g K

ong

US

A

Past month internet usage %

Source: Internet World Stats

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8.0%

32.2%36.8%

47.6%53.4%

0%

10%

20%

30%

40%

50%

60%

National, 6+ yrs 36 cities, 15+ yrs 4 cities, 15+ yrs 4 cities, 15-44 yrs 4 cities, 15-44 yrs,MHI RMB 2000 or

aboveSource: CNNIC / CNRS

2250 26503370

45805910

68007950

87009400

1030011100

1230013700

16200

0

4000

8000

12000

16000

20000

2000.12 2001.06 2001.12 2002.06 2002.12 2003.06 2003.12 2004.06 2004.12 2005.06 2005.12 2006.06 2006.12 2007.06

(0,000) users

Internet population: China is the home to the second largest internet population in the world!

Internet penetration: Big city penetration in China is close to Western cities

2. Internet and Web 2.0Surfing in i-cafes, at home, office or school

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2. Internet and Web 2.0 Implications

Explosion of informationConsumers make much more informed choices

Transparency critical

Web 2.0 or user generated contentAn opportunity to tap into consumer creativity

A threat if left unmonitored and ignored

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3. Growing prominence of Asia

Economic performance

Economic clout and influence

Excellence in sports

Reaching for the space!

Asia now the centre of the world!

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3. Growing prominence of AsiaA palpable sense of optimism

When people are asked “Do you think the next generation will have more economic prosperity, less economic prosperity or the same as now?”, countries around the world have diversified opinions.

44%

17%

2% 2%

73%

1% 1% 5% 6%

42%

30%

10%

44%

13% 9%

22% 20%

6%

20%

17%

27%

21%21%

28%23%

4%

28%

37%

24%

44%47%

25%

20%

2% 5%

8%

3%

13%21% 15%

17%

2% 0% 6%

24%

1% 1%1%0%

7%

1%

14%26%

2%

0%

20%

40%

60%

80%

100%

120%

CHI IND JPN KOR VNM FRA GER UK USAA lot more economic prosperity than A little more economic prosperity than The same as now A little less economic prosperity than A lot less economic prosperity than now Don't know(DO NOT READ!)

Source: Gallup International report 2006 of “Worldwide Survey Highlights lack of faith in leaders in an uncertain world”

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3. Growing prominence of AsiaIncreasing cultural influence

Feng shui, Yoga and the Korean wave

Cultural influence also ascending – including cross border influence within Asia.

Changing consumer mindsetChanging consumer mindset

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1. From affiliation to individualismConcomitant of changing demographics

Traditional marketing has always sold products in the context ofhusband/children/wife/family/friends (“buy this and be a good mother!”). However current sentiment has veered towards “I am important and deserve it!”. Consumption is now legitimate for oneself!

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2. The evolving consumer needs of individuality, connoisseurship and indulgence

Beyond status, needs of consumers have evolved towards two directions: individuality and experience

‘Bling’ (status)

‘Indulgence’(Enjoyment

and experience)

Connoisseurship(Taste and

discernment)

Trend-setter (Individuality)

INDIVIDUALITY

EXPERIENCE

CONFORMITY

OWNERSHIP

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3. Trade up & trade downStore label kitchen roll and LV bag

The same consumer displays extreme price sensitivity for one product (normally functional products of low perceived differentiation) but an extraordinary premium for another product (mostly visible consumption products or products of high perceived differentiation).Asian Luxury products market in China is forecasted to become the largest in the world in another decade or so.

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4. Health and wellness Evidence of increasing concern across Asia …

Health products and supplements are some of the most advertised products in Asia. Health clubs and fitness centers have been mushrooming across Asia.

32

5. Consumer assertivismCoke and Pepsi targeted in India. SK II in China.

Consumers determined to get the best out of the companies – and pouncing on any lapse. Tuangou, or team buying, aims to drive unprecedented bargains by combining the reach of the internet with the power of the group.

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6. From products and services to solutions and experienceImplications

Moving from functional needs to emotive needs

From functional to emotional gratifications

Hence from products to experiences

Diluting the product category boundaries

Creating opportunities for companies to collaborate

Nike + iPod Mplayer (iRiver + Disney)

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7. Ascendance of DesignImplications

From the marketer’s perspectiveDecreasing opportunities for product differentiation

At the same time a strong need to uniquely position the brand

From the consumer’s point of viewDemand to find greater value

Desire for higher gratification

As a result design reigns supreme in almost all product categories

From product, to packaging, to advertising to web design

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7. Ascendance of DesignDesign finds a role even in credit cards

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7. Ascendance of DesignAs also in packaging

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Ten important trends

Growing concerns about

the environment

Growing prominence of

Asia

From affiliation to individualism

Emerging needs of connoiseurship

and indulgence

Internet and Web 2.0

Consumer assertivism

From products to solutions and

experience

Ascendance of design

Health andwellness

Trade up and trade down

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For more details :

Ashok SethiRegional Director, Methodology and Analytics

t: +86.21.63601808ashok.sethi@tns-global.com

www.tnsglobal.com