Vietnam economicoutlook doom_or_boom_march5

Boom or Doom in Vietnam in 2009?

March 2009


Agenda

• Setting the scene and Vietnam outlook

• Consumer behavior over Tet 2009

• Vietnamese consumer concerns and thoughts on the
economy. How are consumers reacting?

• How could Vietnamese consumer behavior change in the
6 months

• Key findings & implications

• Driving growth in 2009

Vietnam – Boom or Doom Confidential & Proprietary
March 2009 Page 3
in 2009? Copyright © 2008 The Nielsen Company

Research design
• Nielsen Omnibus
– Urban (HCM & HN): Monthly
– Urban & Rural: Quarterly

– Sample Size: 300
– HCM 150, HN 150

– Fieldwork: 15 – 24 Jan, 2009

– Methodology
– Face to face recruitment & interview
– Pen and paper administration

– Criteria
– Male and female (50/50%)
– Aged 18 to 50
– All SEC/income levels

• Nielsen Retail Audit up to December 2008

March 2009 Page 4

Setting the scene

• Vietnam has one of the fastestexpanding economies in the world
(second only to China) with growth averaging 7.5 % a year since
2000.
– November 2008
th th st
– 9 most confident consumers globally (declined from 7 ranked in 1
half 2008)

– Total FMCG (6 cities)
– + 20% value growth in Dec 08 vs year ago (+35% June to Oct 2008)
– + 4% volume growth in Dec 08 vs year ago

– 2008 AT Kearney report
– Vietnam most attractive retail market (ahead of India, Russia, China & Egypt)

March 2009 Page 5

Vietnam’s GDP growth has been strong
Vietnam Real GDP Growth % 2003 2008
Vietnamese
9 8.4 8.5 Government
8.2
7.8 Forecast, March 5,
8 2009
7.3
7 6.5
6.2
6

5

4

3

2

1

0
2003 2004 2005 2006 2007 2008 2009

•Real GDP growth %

Source: 2003 2008 figures from Asia Development Bank

March 2009 Page 6

In 2009 Vietnam GDP growth will slow to…

• GDP growth fell in 2008:
6.2% vs. 8.5% in 2007
• IMF predicts Vietnam’s
GDP growth in 2009 will
slow to 5%, whilst the
Vietnamese Government
predicts between 6.57.5%
(By comparison, IMF predicts
world growth to slow to 0.5% in
2009)
• Vietnamese Government
preparing a stimulus package
Source: IMF up to $6billion which is equal
to around 7% of 2009 GDP.

March 2009 Page 7

Vietnam inflation peaked in August and has since
slowed Vietnam CPI YOY 2007 February 2009

30 28.3 27.9
27.6
26.8 27.0
25.2
24.2
25
21.4
19.4 19.9
20
17.5
15.7
14.8
14.1
15

10 8.5

5

0
J a a l

A ly
il

em r

br 9
M y

e m t

br 8

Ju

Ja r

M
em
ct

ch

ch
ay

ry
ec ber
O er
ne

s

e

be
pr

Fe 0
Fe 0

r
t

Ju

Se ugu

N ob
b
ua

ua
to

M
ar

ar
n
n

A
07

pt

ov
20

D

Source: IMF, ADB and Bloomberg News

March 2009 Page 8

Inflation returning to manageable levels in 2009
Vietnam CPI YOY % 20062010
*2009, 2010 forecasts
25 23

20
May be reforecast lower
in coming days (March)
15
11
10 8.5
7.5 7

5

0
2006 2007 2008 2009 2010

Source: 20062007 data from IMF and CIEC: 20082010 IMA Asia Brief December 2008

March 2009 Page 9

Vietnam Outlook

• Vietnam’s attractiveness is high & growth opportunities
are abundant

• Vietnam’s potential to develop and grow remains

• Half the population is under 30 years old = lower cost of
labor + high consumption demand will help fuel growth

• Tourism grew in 2008 4.3mil tourists (up 100,000 v.
2007); $3.5bil revenue (up 7% YoY)

• Trade and budget deficits are high but expected to drop in
2009

March 2009 Page 10

Consumer behavior over Tet 2009

March 2009 Page 11

Average spend over Tet in HCM around VND
3.5 mil…but almost VND 5 million in Hanoi.

Average spending at Tet VND 000s (Household usage and gifts)

3,720

2,950
2,690

850 813 959

0.00
Household Gifts

Total (n= 300) HCM (A) n= 150 HN (B) n= 150 ABCSig @95%CL

Q23, Q24: How much do you usually spend on Tet holiday for household
Base: All respondents (n= 300) Nielsen Vietnam Omnibus 2009 usage, for gifts?

March 2009 Page 12

Almost 50% spent less this Tet compared to previous
years

Spending at Tet (Household usage and gifts)

100% 1 1 1
9 9 8

80%
36
43 45
60%

40%

45 54
41
20%

0% 4 3
Total (n= 300) HCM (A) n= 150 HN (B) n= 150

ABCSig @95%CL
Much less A little less Same A little more Much more
Q17: Compared to previous years, how much money are you spending in
Base: All respondents (n= 300) Nielsen Vietnam Omnibus 2009 the lead up to this Tet holiday?

March 2009 Page 13

Why did consumers spend less this Tet?
Consumers claim things are more expensive and they have
less money to spend.

Reasons for spending less this Tet

Things are now more expensive 74 71 82

My family has less money to spend 39 35 49

I must save more, be more cautious in 21 22 18
spending

Everyone is cutting down their expenses 20 21 18

I'm afraid the economy will be worse next 2
13 18
year

I have no/ little salary increase this year 13 19
% %
%
HN (B) n= 82
Total (n= 148) HCM (A) n= 66

Q18: What are the main reasons you are spending less in the lead up to
Base: Those spending less (n= 148) Nielsen Vietnam Omnibus 2009 this Tet holiday compared to previous years?

March 2009 Page 14

One third of households spent less on key FMCG
categories…except Food.

Changes in Spending at Tet

Household Gifts
Beer 34 53 12 1 23 38 10 30

Confectionery 31 59 9 1 20 52 7 21

Beverage 33 57 9 1 18 39 6 37

Clothing 30 56 14 2 7 3 87

Food 19 69 11 1 8 10 1 80

Tobacco 32 60 7 1 6 24 4 66

Others 11 75 5 10 13 19 9 60

Less than 1 year ago Same amount as 1 year ago More than 1 year ago Don't know

Nielsen Vietnam Omnibus 2009 Q21: On this Tet, is the amount you purchase less, the same or more
Base: All respondents (n= 300) HCM= HN= 150 than you did on Tet holiday 1 year ago for household usage? For gifts?

March 2009 Page 15

Leading up to Tet 2009 consumers spent less on
eating out, going to bars/coffee shops and
entertaining at home
Changing in spending

Travelling overseas 83 15 2
1

Travelling within Vietnam 27 45 22 6 1

Hold parties/ eating at home 3 39 51 7

Going to pubs/bars/coffee shops 9 15 55 20 2

Going to movies/ concerts 24 30 30 15 1

Eating out 2 7 62 28 1

Don't usually spend on this Did not spend on it this year I spent less I spent the same amount I spent more

Nielsen Vietnam Omnibus 2009 Q35: How you have spent on each of the following entertainment
Base: All respondents (n= 300) HCM= HN= 150 activities in the lead up to Tet holiday, compared to previous years?

March 2009 Page 16

Consumers claimed to spend less on all channels,
particularly Modern trade & wet markets over Tet

Spending at Retail channels

Total HCM HN
23 63 14 28 57 15 9 81 11
Grocery stores

Wet market 35 58 7 34 58 8 38 59 3

Modern trade 38 57 5 36 60 5 46 48 6


Spending less on this channel Spending the same on this channel Spending more on this channel

Nielsen Vietnam Omnibus 2009 Q36: How are you spending on each of the following retail channels in
Base: All respondents (n 300) HCM= HN= 150 the lead up to Tet holiday, compared to previous years?

March 2009 Page 17

Overall 80% of consumers said they did not change pack
sizes for Tet given tighter economy.

Total HCM HN

2% 1% 5%
14%
18%

29%

66%

80%
85%


No, I have not changed the size of the packs Yes, I tend to buy smaller packs Yes, I tend to buy larger packs
ABCSig @95%CL
Nielsen Vietnam Omnibus 2009 Q37: Overall have you changed the size of the packs you have been
Base: All respondents (n= 300) HCM= HN= 150 purchasing in the lead up to Tet, compared to previous years?

March 2009 Page 18

Consumers are paying more attention to price than
before…40% in HCM & 28% in Hanoi

Total HCM HN

12% 2%
16%

28%

44%
51%

37%

70%
40%


Always conscious of price Paying more attention to price than before Just buy what I need, regardless of price
ABCSig @95%CL
Nielsen Vietnam Omnibus 2009 Q39: Overall what would you say about your consciousness towards the
Base: All respondents (n= 300) HCM= HN= 150 price of goods in the lead up to Tet compared to previous years?

March 2009 Page 19

Vietnamese consumer concerns and thoughts on
the economy

March 2009 Page 20

It’s not doom and gloom in Vietnam.
45% say Vietnam’s economy is worse than 6 months ago. Only 55% say world
economy is worse.

Vietnam’s economy The world’s economy
100% 100% 0
3 4 5 7
20
15 14
25 23 33
80% 80%
14
24
28
60% 60%
27 31 18

37

40% 40%
37
37
35 30 48
20% 20%
29
18
10 13 14
0% 2 0%
Total (n= 300) HCM (A) n= 150 HN (B) n= 150 Total (n= 300) HCM (A) n= 150 HN (B) n= 150

A lot worse A little worse Same A little better Don't know ABCSig @95%CL

Q30, Q31: How would you rate the Vietnamese economy/ other major
Base: All respondents (n= 300) Nielsen Vietnam Omnibus 2009 economies around the world, compared to 6 months ago?

March 2009 Page 21

Consumers believe Global Economic Crisis is driving
inflation and unemployment in Vietnam

Impact on Vietnam Nature of impact Reasons for Negative evaluation

11%

Most important drivers (overall) %
12% Inflation 51
86 Unemployment 46
Causing crisis to Vietnam's economy 18
Causing Vietnam's export to decline 14
Causing currency to devalue 14

77%

11
Yes No Don't know
2

Nielsen Vietnam Omnibus 2009
Don't know Positive Negative

March 2009 Page 22
Base: Those saying Vietnam’s economy is impacted (n= 247) Q32, Q33, Q34: Impact of other economies on Vietnam

Food price increases is the biggest concern for
consumers
Consumers’ General Concerns

Price increase in daily food 6 33 61

Pollution 8 38 54

Price increase in petrol 10 38 53

Future of my children 1 11 37 51

How to develop own business
12 39 49

How to take care of my children
1 10
1 42 46

Low increase in salary
8 47 46

Saving
8 54 38

Global economy
3 16 52 29
Not concerned at all Somewhat not concerned Neutral Somewhat concerned Very concerned
Nielsen Vietnam Omnibus 2009

March 2009 Page 23
in 2009?
Base: All respondents (n= 300) HCM= HN= 150 Copyright © 2008 The Nielsen Company
Q40: To what extent are you concerned about the following?

How are consumers reacting?

How could Vietnamese consumer behaviour change in the
6 months

March 2009 Page 24

Overall FMCG growth rate has slowed since mid 2008, but
volume is still up by 4.5% v. 2007 and value growth is above
20% YOY Total Defined FMCG Volume & Value Growth : Vietnam Total 6 Cities

43.5

38.7
38.1
36.2
35.1
33.8 33.5
32.6
30.7
28
27.0
26.2
24.2

20.1 20.6

17.9

14.8 14.2
13.4 13.2
11.7
11.1

5.6
4.1

JAN07 FEB07 MAR07 APR07 MAY07 JUN07 JUL07 AUG07 SEP07 OCT07 NOV07 DEC07 JAN08 FEB08 MAR08 APR08 MAY08 JUN08 JUL08 AUG08 SEP08 OCT08 NOV08 DEC08

Volume Sales Volume Growth v.s YA Value Growth v.s YA

Nielsen Vietnam Retail Audit 2007 2008

March 2009 Page 25

Beverages growth has remained strong whereas
growth for other departments has tapered
60.0
FMCG Department Volume % Growth vs YA (Vietnam Top 6 cities) 60.0

50.0 50.0

40.0 40.0

31.3
30.0 30.0

21.7
20.0 20.0
18.6

14.5
13.0
10.0 10.0
8.5 7.8
6.7
5.7
3.8

0.0 0.0
JAN08 FEB08 M AR08 APR08 MAY08 JUN08 JUL08 AUG08 SEP08 OCT08 NOV08 DEC08
4.8 4.1

10.0 10.0

FMCG Per sonal Care House hold Care Food Beverage Cigarette

Nielsen Vietnam Retail Audit 2008

March 2009 Page 26

Fast Food and CSDs potentially the hardest hit in the next 6
months amongst Food categories, according to consumers

Total spending

Foods and drinks (in general) 5 21 67 6
26%
Fast foods 4 18 42 31 5
60%
Carbonated soft drinks
12 46 36 4 2
58%
Milk products
1 9 32 50 9
41%
Vegetables
10% 1 9 78 11 1

Do not spend money on this Will spend significantly less than usual
Will spend a little less than usual Will spend the same
Will spend a little more than usual Will spend significantly more than usual

Q43: Please tell us about your spending behavior in the next 6 months,
Base: All respondents (n= 300) Nielsen Vietnam Omnibus 2009 regarding the following categories?

March 2009 Page 27

All nonfood categories will be impacted in next 6
months according to consumers
Total spending

Shopping (in general) 12 54 29 5
66%
Household items 7 25 40 23 4 1
65%
Electronic items
7 23 48 19 3
71%
Facial care
17 24 33 23 3
57%
Clothes
11 47 36 6
58%



March 2009 Page 28

Vietnamese consumers also expecting to spend
less on utilities in next 6 months
Total spending

Utility (in general) 2 5 41 47 4 1

46%

Electricity 6 49 41 4

55%

Fuel 5 44 49 3
49%

Phone bills 11 48 37 4
59%



March 2009 Page 29

Decrease in spending on entertainment likely in next 6
months
Total spending

Entertainment (in general) 2 28 48 20 4

76%
Traveling (domestic) 27 48 20 4 2

68%
Traveling (overseas) 81 13 4 1
17%
Cinema 32 32 24 10 2
56%
Going out (clubbing/ karaoke/...) 7 38 37 17 1
75%
Newspapers/ magazines 3 17 29 50 1

46%



March 2009 Page 30

Key findings
• Vietnam’s Economic Impact on FMCG
– Overall Vietnamese consumers are more confident compared to other countries.
– 37% of consumers said they will NOT spend less this year as most are concerned
with price increases.
– FMCG growth rates have slowed slightly…but are still stronger relative to most
other countries
• More than half intend to spend less in next 6 months on Fast Food, CSD and
nonfood categories
• Majority think global economic crisis is having a negative impact on
Vietnam…but not all consumers!
– Particularly inflation & unemployment
• Biggest concern for consumers is the price increases for daily food
• Consumers intend to spend less on eating out & going to bars / coffee shops
• Overall Vietnamese consumers more price conscious and understandably
more cautious…particularly for non essential items… but they are still
positive!

March 2009 Page 31

Warren Buffet said “By year end, investors of all stripes were
bloodied and confused, much as if they were small birds that
had strayed into a badminton game.”

But… he wasn’t talking about Vietnam!

• Whilst Vietnam is not immune to the global economic and financial
woes, we don’t know how or if Vietnam will be hurt

• Vietnam has been recognized with Full Market Economy Status by
Australia and New Zealand before the 2009 March ASEAN summit

• Many growth opportunities exist in Vietnam TODAY

March 2009 Page 32

Driving growth and market share in 2009

• Significant growth opportunities remain in Vietnam for most FMCG categories
• Companies who continue to invest and innovate will secure a strong long term
future when the economy improves
• Now is a time to build brands and consumer loyalty. Cutting advertising and
promotion spending will dilute your brand equity. In a developing market like
Vietnam think long term, not short term
• During tougher economic times it is critical to offer value to consumers – remind
them why your brand should be part of their household repertoire
• Many high growth opportunities exist in Vietnam – evaluate your current
distribution coverage to identify new channels or geographies to drive growth
• Focus on big wins – rationalise your range to maintain a focused offer to best
meet the needs of each key consumer segment
• Continue to invest to secure a strong long term position for your brands.

March 2009 Page 33

Thank you

March 2009 Page 34

Vietnam economicoutlook doom_or_boom_march5

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