Vietnam Grocery Report

2011 Update
1

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Vietnam Today
Navigating the Current Landscape

Market Landscape
A Challenging 2011

Inflation
Value for Money Key for Consumers

Growth Opportunities
The Importance of the Three Is:
Investment Identity Innovation 2

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Market Landscape
A Challenging 2011
Economic growth is moderating due to short-term macro and micro challenges Growth slows across categories
Inflationary pressures have generated uncertainty in consumer, business confidence

Increasing stratification of consumers: Premium buyers maintain while the middle is squeezed

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Challenges arose in late 2010 and bloomed in 2011

Retail Sales Growth

GDP Growth

Inflation

Unemployment

FDI Growth

Trade Deficit

29 %

12 %

21 %

16 %

17 %

7%

09

10

09

10

09

10

09

10

09

10

09

2011 Growth Estimation

22.6% 6.1% 15% <5% 10% 12%
4
= indicates health; = indicates challenges

Source: 2011 Estimation by Vietnam government; GDP Growth, Inflation, CIEC: 2008-2009;Vietnam GSO Copyright 2011 The Nielsen Company. Confidential and proprietary.

10 %
10

5%

7%

3%

3%

8%

Various economic shocks have affected consumer confidence

Retail electricity prices increased by 15%

Fuel prices increased by 18%

Gas retailers increased prices by 4%

ASIA Average

106

Source: Nielsen Consumer Confidence Online Survey Q1 2011 Press Articles Copyright 2011 The Nielsen Company. Confidential and proprietary.

Vietnams retail market attractiveness has slid further

GRDI Rank 2008: 02 2009: 06 2010: 14 2011: 23

2011 GRI country attractiveness

6
*) Based on weighted score of market attractiveness, market saturation and time pressure of top 30 countries
Source: AT Kearney Analysis Copyright 2011 The Nielsen Company. Confidential and proprietary.

Still a high-growth FMCG market, but inflation has tempering effect

Regional Summary FMCG Growth Q1 2011

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Consumption slows in some categories. Are too many costs being passed onto consumers?
Top 10 categories 6 Cities TT Value and Volume growth Q1 2011 vs. YAG

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Inflation
Value for Money Key to Consumers
As purchasing power is affected, spend for necessities only is now the consumers motto Consumers are becoming more driven by promotions
Upsizing continues in Household, Personal Care and Food categories

Private Label is expected to become the next big consumer trend in the coming years

Copyright 2011 The Nielsen Company. Confidential and proprietary.

81%

of people are cutting spending on Unnecessary items

10
*) Unnecessary items are subject to each respondents perceptions

Source: Nielsen Personal Finance Monitor June 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Post-Tet 2011 price increases seem to have a big impact, but consumers still spend on core items
23.0%

Vietnam CPI: Annual & YOY

7.5% 8.5% 6.9% 9.2% 9.7% 9.5% 8.7% 8.8% 8.7% 8.2% 8.2% 8.9% 7.6% 8.5% 11.1% 11.8% 12.2% 12.3% 13.9%

17.5%

2006 2007 2008 2009 2010 Total Total Total Total Total

Jan 2010

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2011

Feb

Mar

Apr

significantly

96% said prices

increase somewhat/ significantly
*Q.24 27; Tet 2011 = Feb11

Products for own consumption (entertainment, eating out), but not those for children & family

Impact

Household purchasing power reduced somewhat/

60%

11

Source: GSO, Nielsen Omnibus March 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Business leaders and consumers both expect more purchase on promotion in the near term
Consumers claims
Reduce the number of visiting shops

Business Leaders opinions

59 51
Trade down to cheaper products

Purchase more on promotion Not buy some 'non-essentials'

2
41 41

64 51 50 12 41

Choose to buy more products on promotion Reduce number of products per purchase
Visit shops/ grocery stores near home to save cost Buy more Vietnamese goods Choose the shops where there are cheaper prices

44
Buy bigger packs to save money

33 26 9

Purchase more local/ Vietnamese brands Buy less / smaller packs of the same products Change channel to save money

32 31 32 10 27 22

S1-2011

S2-2010

12
Q.33 - 16

Source: Nielsen Omnibus March 2011; Nielsen Business Barometer 1st H -2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Vietnam has highest promotion sensitivity in Asia at 87%. More than half of consumers seldom change stores but actively search for promotions
Vietnam Promotion Sensitivity
100% 5 13 75% 16 4 9 21 Promotion rarely changes my brand choice

87%

Only buy promotions when I already like the brand

50% 55 25% 56

Regularly buy different brands because of promotions

Seldom change stores but when shopping, actively search for promotions 11 10 2010
(2010 n=1464)

0% 2009
Base: (2009 n=1466)

Change stores based on best promotions offered

13

Source: Nielsen Shopper Trend 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Food and Beverage categories have seen the sharpest price increases

Average Price Index of FMCG Categories YTD Apr11 vs. YTD Apr10 + 20% + 11 to 19% + 1 to 9% 0%

14
Unit price index: unit price of Top items contributing 50% per category value and existing over last 13 periods in 6 cities.
Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

 and consumers are more open to change their shopping behavior in categories with higher prices
Do shopping behavior changed due to price increase? Beverages HH Care Personal Care
Dairy Food Product

15
*) Q.29; Base : 300 (all respondent)

Source: Nielsen Omnibus March 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Consumers are likely to stay with their brand in several categories, either consuming less or trading off the amount by buying bigger pack sizes
Beverages Food
8 30 27 7 22 61 40 72 79 86 54
8 16 39 19

Dairy
8 18

Personal Care
15 12 5

HH Care
26 17

Substitute to other products Consume less - less expensive brands

50 72 59 84 29

29

Consume less - same brands Consume less - more expensive brands Same amount - smaller pack size

38

37

81

78 7
30 31
Same amount - larger pack size
Same amount - more expensive brands Same amount - cheaper brands

11 12
Ready-To-Drink Tea Instant Coffee
Cooking Oil Instant Noodle

28 14
Shampoo Adult Milk (*) Bar Soap

6
Liquid Milk (UHT) Infant Formula (*)

10
Facial Cleanser

17
Toothbrush Toothpaste Household Cleaner Laundry Product

Carbonated Soft Drink

Energy Drink

Consume more

16
*) Q.29B; Small base-read with cautions for Infant Formula & Adult Mik

Source: Nielsen Omnibus March 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Value for money: Upsizing is the key trend in Food, Household Care and Personal Care categories
Fish Sauce
(Big > 750 ml)

MSG-Boullion
(Big >=900g)

Laundry
(Big >=3kg)

Shampoo
(Big >500ml)

17
36 cities TT, data ending Marl11

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Upgrading trend continues in some Personal Care and Home Care categories
Moisturizer Deodorant Fabric Softener

18
Pricing segments based on average price index vs. category average

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Private labels are gaining ground, especially for Food, Paper Products, Household and Personal Care
Key Private Label Categories

PRICE
Price of private label is 15 30% lower compared to brands

Private Label Awareness

19

Source: Nielsen Shopper Trend 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Vietnamese consumers are generally open to private label products

73%
Believe private label quality is just as good as quality of leading brands

75%
Associate store image with private label quality

20

Source: Nielsen Global Online Survey Q32010, Nielsen Shopper Trend 2011, Press Article Copyright 2011 The Nielsen Company. Confidential and proprietary.

Growth Opportunities
The three Is Investment, Identity, Innovation
Investment the rural market accounts for 47% FMCG value with limitless potential to be unlocked. Modern trade contributes of total FMCG value with increasing importance across categories.

Identity the brand power of Vietnamese products backed by local manufacturers activation and strong consumer preference.

Innovation Market is getting complex with new and inventive products. Those that meet consumers key need-states in new ways will likely stand out.

21

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Opportunity: Investment Vietnams Rural Consumers

22

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Business leaders temper growth expectations, still see market opportunities

Expected company growth rate in next 12 months Key factors contributing to expected company growth
Increased consumer demand in your existing categories/ industry Expansion to secondary cities/ rural areas Expansion to modern trade channel
Expansion to new categories/ industries
45 76

91%
30 24

25%+ 20% - less than 25%

18

72

20

15% - less than 20%

10% - less than 15%

43

24 28

5% - less than 10% Less than 5%

Increased marketing expenses Improved business conditions in Vietnam overall Improved business conditions in your industry overall
31

21 12 7 2 2010 2nd half 3 6 2011 1st half

14

12

23

Source: Nielsen Business Barometer 1H - 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Reaching rural consumers is the next big opportunity

Annual Average Income Per Capita USD

Total population

1,200

158%
800

FMCG % turnover
400

177%

Sales of FMCG categories such as Laundry and Toothpaste

2002

2004 Urban

2006 Rural

2008

24

Source: Nielsen Retail Audit, GSO Copyright 2011 The Nielsen Company. Confidential and proprietary.

Rural Vietnamese save a substantial portion of their income

How Many Households Save?

How Much Per Month?

North West / North East

Where Does it go? Keep at home: 87%

North: 462,000 VND

Buy gold: 7%

75%
Monthly Average Saving Amount Mean score HCM Hanoi 1,373,180 VND 992,834 VND

Central: 377,000 VND

Savings Account: 6%

Foreign currency: 2%

South: 571,000 VND

Buy insurance: 2%

25

Source: Nielsen Rural Syndicated 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

100

20

40

60

80

DETERGENT DISH WASHING LIQUID

SHAMPOO TOOTHPASTE
FISH SAUCE

MSG
INSTANT NOODLES

COOKING OIL
SANITARY NAPKINS

CSD BEER COLD/FLU

BISCUITS + SNACKS

81

RTD TEA
FABRIC ENHANCER/ SOFTENER BOUILLON GRANULES CIGARETTES

SOY SAUCE
RTD MILK+FLAVORED MILK COFFEE (IN-HOME CONSUMPTION) HAIR CONDITIONER COFFEE (OOH CAFE)

0
100 100 100 100 100 99 97 96 94 88 87 86 85 75 74 71 71 69

Total Rural Vietnam Used in past year

Opportunities seen in categories where penetration is still low

Base: All respondents (n=4200)

59 59 54

MOBILE PHONES
FRUIT JUICES HOUSEHOLD CLEANER

46 46 45 44

VITAMINS (ADULT)

35

FACIAL CARE

24

DEODORANT TONIC FOOD DRINK

INFANT MILK DIAPERS

15 13 11

26

Copyright 2011 The Nielsen Company. Confidential and proprietary. Source: Nielsen Rural Syndicated 2010

INFANT CEREAL

Opportunity: Investment Modern Trade

27

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Modern Trade: increasing in number of stores and importance

Modern Trade (exclude Metro Cash & Carry) Store Numbers National : 752 826 ACV Contribution National : 11% 13%

28

Source: Nielsen Retail Census 2009 and 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Higher contribution to monthly grocery purchase categories like Food, Household and Personal Care

29
Total Ho Chi Minh + Hanoi; Data ending Apr 2011; MT exclude Saigon Coop

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Market is dominated by local players, with more presence from international players
STORE NUMBER OF KEY PLAYERS UPDATED TO APRIL 2011

50 16 13 22 14 3 7

15

15

13

2 21

5
Super Market

101

44

Food store Convenient store

30

Source: Nielsen Retail Census 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

There is still scope to develop for Modern Trade Vietnam benchmarked to other Asian countries
Share of trade for Modern Trade channel

88%

70% 64% 53% 63%

Kuala Lumpur

43%

Jakarta Greater

Vietnam

Hanoi
16%

46%

37%

Indonesia

Shanghai

Malaysia

Bangkok

Thailand

China

13%

China

Malaysia

Thailand

Indonesia

Vietnam

HCMC
31

66%

Source: Nielsen Retail Census 2010 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Opportunity: Identity Vietnamese Brand

32

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Consumers perception of local goods changes for the better, representing a solid growth opportunity

HCMC
I would probably purchase more Vietnamese goods I would definitely purchase more Vietnamese goods Not sure if I would purchase more Vietnamese goods

Ha Noi

62% 90%
28%

49% 83%
34%

8%

2%

2%

Ive already been purchasing more Vietnamese goods

* Significantly higher

14%*
33

Source: Vietnamese Goods Trend Nielsen Study 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

Local goods are appreciated for a variety of reasons

HCMC Ha Noi

Consumers association toward Vietnamese Goods

Reasonable price Good for health (compared to Chinese products) Suit Vietnamese s features like taste, skin, hair Popular, used by a lot of people Good/acceptable quality (equal/nearly equal to imported goods) Trustworthy

Reasonable price Wide variety Is the brand suitable for me Trustworthy brand Attractive promotion Attractive packaging Good quality

39% 35% 35% 25% 25% 22% 20% 18% 17% 13%

32% 54% * 42% 35% 52% * 38% * 26% 52% * 30% * 26% *

Wide range of products

Good guarantee Safe ingredients Premium brand

34
* Significantly higher; Base: All respondents (n= 300); Q.28a

Source: Vietnamese Goods Trend Nielsen Study 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

If label says Made in Vietnam it can be viewed as a local brand, despite international origins
"Made in Vietnam" on the label The logo of "High quality Vietnamese goods" on the label Vietnamese brand name

the note "Made in Vietnam" on the label (64%) Vietnamese brand name (56%) Vietnamese labeling (ingredients, instruction,...) (53%) * the logo of "High quality Vietnamese goods" on the label (46%)

the logo of "High quality Vietnamese goods" on label (82%) * the note "Made in Vietnam" on the label (78%) * Vietnamese brand name (57%) 100% Vietnamese manufacturer (44%)

35
* Significantly higher; Base: All respondents (n= 300); Q.27

Source: Vietnamese Goods Trend Nielsen Study 2011 Copyright 2011 The Nielsen Company. Confidential and proprietary.

which explains such a strong preference for Vietnamese goods across FMCG categories HCMC Ha Noi
Prefer Vietnamese goods Prefer International goods

Top Box
No preference

Household care products

1% 10% 89% 4% 7% 89%

Non- alcoholic beverage

1% 18%* 81% 4% 4% 92%*

Personal care products

9% 20%* 71% 8% 17% 75%

Confectionery
9% 34% 57% 19%* 24% 57%

Milk/ Dairy products

21% 25% 54% 15% 17% 67%

Alcoholics
20% 31%* 49% 13% 24% 63% *

36

* Significantly higher; Base: All respondents (n= 300); Q.29

Source: Vietnamese Goods Trend Nielsen Study Copyright 2011 The Nielsen Company. Confidential and proprietary.

Opportunity: Innovation Product/Marketing Innovations

37

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Categories are becoming complex with more new products

Active SKUs MAT 3 Year Trends
10,000 8,000 6,000 4,000 2,000 0

New Variants in Last 2 MATs

1,346
Personal Care

662
Food & Milk

147
Beverage
Food Personal Care MAT LY Household Care MAT TY Beverage

143
Household Care
38

MAT 2YA

Data ending April 2011

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Innovation helps products stand out in a crowded landscape

New Combination

New Technology

New Conveniences

Ikun Carbondinated RTD Tea Minute Maid Nutri Boost Milk-based Juice Close-Up Hot and Icy toothpaste

Sunsilk Co-creations Nano Complex

Knorr Gia vi Hoan Chinh Mixed ingredients

Extra chewing gums Microgranules

Chinsu Toi Ot Prepared fish sauce

P/S White Now Comfort Sang Tao Flower & Fruit Sense Blue foam for instant white teeth

Downy 1 Lan Xa One wash

39

Source: Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Good-for-heath products with natural ingredients across food and personal care are preferred by consumers

Vietnamese consumers listed Health as their top priority

Vfresh Fruit Juice

TH True Milk

Nam Ngu Fish Sauce:

Naturally good

Truly natural

Clean fish sauce

Lifebouy Body Soap Natural bitter melon

Kotex Panty liners Green Tea extract

40

Source: Nielsen Omnibus March 2011, Nielsen Retail Audit Copyright 2011 The Nielsen Company. Confidential and proprietary.

Going green, environmentally friendly products and initiatives are an emerging trend for manufacturers and retailers alike
2011 Green consumption month in CO.OP Mart

Coca-Cola Live Positively Campaign

41

Source: Press articles Copyright 2011 The Nielsen Company. Confidential and proprietary.

Food for Thought

How to navigate through the short-term challenges shortand gain in the long-term? long-

42

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Food for Thought

In the face of current economic conditions, it is critical to understand what VALUE means to consumers
Large pack sizes

Promotion

Pricing

Continue to invest to secure long-term growth future for your brands:

Expansion to secondary/ rural areas Expansion to modern trade channel Vietnamize your brands Brand portfolio

43

Copyright 2011 The Nielsen Company. Confidential and proprietary.

Nielsen Vietnam

44

Copyright 2011 The Nielsen Company. Confidential and proprietary.

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Copyright 2011 The Nielsen Company. Confidential and proprietary.