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1

Prevailing 2013 Economic & Consumer

Trends

Ralf Matthaes

Regional Managing Director

Cambodia | Laos | Myanmar | Vietnam

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THE GOOD, THE BAD, THE UGLY

2012 / Q.2 2013 macro economic overview

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Un-real estate market

No movement in the real-estate market

Commercial rents have fallen up to 40%

Until the real estate market recovers, Vietnam will continue to struggle

3

The Ugly

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The Ugly

Source: TNS CCIP – 2008 – 2013 urban only

Consumer confidence has dropped due to domestic economic woes

The State Bank of Vietnam reported that at the end of March this year Vietnam's bad debts ratio amounted US $9.6 billion U.S = 8.6% total outstanding credit. Vietnam’s 100 largest state enterprises are indebted about US $50 billion, or more than one third of GDP. Source: Reuters

Bad debt will cause havoc in the near future

Consumer Confidence (%) Bad Debt

89

64

78 79

68

56

0

20

40

60

80

100

2008 2009 2010 2011 2012 2013

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The Bad

Source: GSO

Bankruptcies are a sign of the times, but also a measure of Vietnam’s

bubble popping

Bankruptcies Tourism (Million)

39,000

49,000

54,000

2010 2011 Q.2 - 2012

5.0

6.0

6.65

2.6

2010 2011 2012 Jul-2013

Tourism is flat, down from 19% growth, and should have negative

growth in 2013

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GDP Growth - Bad…or Good?

Source: GSO

GDP = 4.9% slow down of growth actually has positive effects

6.78%

5.89%

5.03% 4. 9%

2010 2011 2012 Jul-2013

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The Good

Source: GSO

Exports are Vietnam’s saving grace = US $72 Billion end July

Trade Deficit = a sign of fiscal responsibility or lack of growth?

71.6

96.4

114.6

72.2

2010 2011 2012 Jul-2013

12.4

9.6

0.3 0.7

2010 2011 2012 Jul-2013

Exports (US Billion) Trade Deficit (US Billion)

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The Good

Inflation is in check, but will it remain, as typically Q.4 sees a spike

Source: GSO

Advertising spend looks to grow at a healthy 19%

11.75%

18.13%

9.21%

6.81%

2010 2011 2012 Jul-2013

726M 760M

900M

625M

2010 2011 2012 Jul-2013

Inflation (%) ATL Ad Spend (US Million)

Source: Kantar Media

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TNS Consumer Confidence Poll

© TNS

Source: Vietnam Economic Times

9,097

17,855

60,271

16,345 17,200

11,559 13,013 11,900

2006 2007 2008 2009 2010 2011 2012 Jul-2013

New Investment Implemented Capital

A Rebound?

New Foreign Direct Investment

The Good

© TNS 2013

Smartphone Ownership

10

42

35

27

19

Global Emerging Asia Vietnam 2013 Vietnam 2012

Growth of smartphone ownership – Vietnam

B1. Device ownership

Local Report 2013 - Vietnam

Base: All respondents – Global 37698 | Emerging Asia 3491 | Vietnam 500 | Male 250 | Female 250 | 16-21 100 | 22-30 125 | 31-40 125 | 41-50 100 | 51-60 50

+42%

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TNS Consumer Confidence Poll

© TNS

Automotive Sales

11

24,166

26,691

Jan - April 2012 Jan - April 2013

+10.5%

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2013 YTD Economic indices scorecard

Ugly = 3 - Real Estate – Confidence – bad debt

Bad = 3 - Bankruptcies - FMCG growth – Tourism

Good = 5 - Modest shift towards recovery

YTD 2013 is a mixed bag, some ugly, some bad, some good

Good time to invest for the future

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Prevailing 2013 Consumer Trends

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Source: TNS CCIP – 2008 – 2012 urban only

Consumer confidence has dropped due to domestic economic woes

Consumer Confidence (%)

89

64

78 79

68

56

0

20

40

60

80

100

2008 2009 2010 2011 2012 2013

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Recession impact

SEC differences are stark

Education, life stage impact views & involvement

A-B: relatively safe & stable in the “storm”, yet conscious of what’s happening around/ to poorer people

D-E :are doing it tough; it’s really tough in E- managing a family on 3 million VND a month

“too much stress, the

worry always sticks in my

mind, we don’t even have time to feel happy or

relaxed…”

“I don’t feel

much different. I don’t feel the

impact of economic crisis

on me”

vs

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Is your present job is safe or not?

68

63

20

32

12

5

Aug-12

Jan-13

Present job is safe

Chance of unemployment

Don't know

Employment fears on the rise leading to more caution,

less spend

Source: TNS 2013 VCCI – Urban only

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5

6

4

5

2

2

45

38

25

29

12

17

34

30

41

35

48

38

14

23

26

30

33

32

1

3

4

2

6

3 8

25

12

11

9

6

3

40

39

34

40

15

24

24

29

34

18

48

26

8

17

18

24

22

30

2

3

3

8

9

4

1

1

13

Value of the…

Employment

The cost of living

Vietnam's economy

My personal…

Foreign investment

Far worse A little worse SameA little better Far better DK

Forecast in the next 12 months

17

2013 Consumer Confidence

index = 56

2012 Consumer Confidence

index = 68

Source: TNS 2013 VCCI – Urban only

Consumer confidence index has dropped a massive 12 points in just 6 months, driven by consumer fears across most indices - not reassuring

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40

25

25

25

24

21

21

17

17

15

8

39

54

51

52

54

43

58

58

46

58

45

20

21

24

22

22

36

21

24

36

27

45

1

1

1

1

2

Entertainment & dining out

House hold care products

Household utilities

Personal equipment (mobile…

Home appliances (wash…

Transportation

Personal care products

Communications…

Health care products/services

Food & beverages products

Education

Less Same More DK

-

1. Consumers spending will be down in 2013

18

Consumer backlash to economic downturn will result in specific spend cuts

Source: TNS 2013 VCCI – Urban only

+

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2. Mobile device as the everything hub

Absolutely!

DEVELOP YOUTH APPLICACTIOSN FOR

YOUR BUSINESS

As the availability of wireless broadband

expands & the cost of advanced mobile phones drop, the mobile device will

become the preferred hub for digital activity.

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3. Authenticity matters

Yes! “I need to know the

companies where the products or services are

from so I have confidence to use them”

GUARANTEE QUALITY / SAFETY

Authenticity will become paramount for brands as they look to regain credibility and trust. Consumers have lost a great deal of faith in brands; they are searching for truths and clamouring for transparency.

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4. Modern trade growth is in decline

Generally prices at modern trade have out reached consumers pockets, while traditional trade still offers affordability and security

FMCG Value growth Value contribution

July 12 July 13 July 11 July 12 July 13 General Trade 15% 82.5 82.0 82.2 Modern Trade 19% 17.5 18.0 17.8

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2012 - 2013 Value Growth down to 11.6% and volume down to 4.8%

5. Buy / use less / conserve / save5.

2008-2009

2009-2010

2010-2011

2011-2012

18.6

16.7

16.2

16.0

Value growth (%)

18.8

8.5

13.0

13.9

0.1

7.6

3.0

6.0

Price growth (%)

Volume growth (%)

Source: Kantar Worldpanel Urban only

Marketing trends

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1. Internet as a research tool

Source: TNS Digital life 2012

As the value of purchases increases, the amount of research both

off and particularly online also increases

ENSURE YOU ARE DIGITAL

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46

18

810

8

54

1310 9

5

2008 2011

Discounted price

Free gift with purchase

Sweepstake/Lucky draw prizes

Get free product/sample

with multiple purchase

Monetary gift

2. Promotion Impact – Coupon Crazy

Source: TNS VietCycle 2011 – Urban only

On-line Coupons “I often buy stuff I don’t even need

right now, because prices are so

cheap”

Discounted prices are preferred promotions, driving “Groupon” & on-line coupon discount popularity

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TNS Consumer Confidence Poll

© TNS

3. Media Spend – driven by security of TV

26

Media 2013 (Q1) 2012 (Q1) Difference

TV 4.991.72 3.329.87 49.9%

Radio 5.75 5.21 10.3%

Newspaper 275.65 294.62 -6.4%

Magazines 174.33 189.54 -8.0%

5.447.45 3.819.23 42.6%

May be due to advertisers shifting form BLT to ATL for measurability but has slowed in Q.3 to 19% YTD

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X-Men

Manly

international

standard ads

for men

4.Brand innovation & new product launches

Knorr

All-in-one new

multiple spices

for specific

meals

Pro Beauty New Yogurt gives you beautiful

skin

Kent

Taste & strength

control filter Non to menthol

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Summary

28

+ / -

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5 P’s to consider in 2013

People / Vietnamese Mindsets

VN Consumers stuck for opportunities – need reason to believe

Confidence down – savings up – Education & Health industries booming

Psychological change afoot – from community to self

16 million modern youth become consumers over next 10 years

Product / Extension

F&B is the soul of the nation – 47% of spend – extend portfolio

Address hygiene & food safety concerns and create guarantees

The word is not innovation it is “NEW”

Product Position

Convenience and price points critical to success

Vietnamize or authenticate

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5 P’s to consider in 2013

Promotion

Digital – think APS / multiple entertainment media / product research

Develop coupon scheme

Place

Review distribution GT vs Modern and urban vs rural

Significant regional differences require different approaches

Drive efforts in rural Vietnam

Price

Over half of consumers are suffering from recession

Review pack type / SKU offer

Discount with an explanation / Groupons

Vietnamese brands are not only competing on price

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2013 Economic forecast

Continued slight downward trend but also elements beginning to improve

State Debt is huge Sagging consumer confidence

Unemployment Slower growth & spend

Reliance on cheap exports Will to address core issues?

Vietnam still largely untapped Global / SEA investment interest

Overseas remittance More competitive / Lower prices

Cheaper cost of entry Certain categories growing very

well

Negatives

Positives

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Growth summary

32

Drive differentiation in offer Understand price points Drive loyalty & assurance Cross promote Be faster than competition Maximize digital reach

2013 focus

Bottom is in sight – the only way is up!

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Thank you