Gaining the competitive edge Vietnam Post WTO Ralf Matthaes Managing Director TNS Vietnam AMCHAM October 11, 2007
Gaining the competitive edge - AGENDA Looking at Asian trends to predict Vietnam s s potential Post WTO Asian / Vietnamese Population Trends Asian / Vietnamese Wealth Trends Asian / Vietnamese Consumption Trends Asian / Vietnamese Attitudinal Trends Vietnam s s Media landscape Post WTO Print Radio TV Rural consumers The next great opportunity GDP vs population Who is the average rural family Ownership comparison urban vs. rural 12 Changing trends
Looking at Asian trends to predict Vietnam s s consumer future Post WTO Vietnam
Population Trends
Asia s s Population (60% of global pop.) Population in Million Chindia Indonesia Japan Philippines Asia = 3,137,500,000 246 127 90 China / India 77% on the Asian population 2400 Vietnam Thailand Korea Malaysia Taiwan Hong Kong 85 65 49 25 23 7 Vietnam = 2.7 % of Asia Singapore 4.5 Vietnam is home to Asia s 6 th largest population *Population estimated in 2006 *Source: GeoHive (www.xist.org/earth/)
Vietnam has Asia s s 2 nd youngest population Vietnam 38 19 21 13 8 Philippines 38 20 22 14 6 India 35 20 22 17 6 Malaysia 35 19 24 16 6 Indonesia 34 19 23 17 7 China 27 18 26 20 9 Thailand 27 19 27 19 7 Taiwan 24 18 27 21 11 Singapore 23 15 30 24 10 S Korea 23 18 28 21 9 Hong Kong 19 14 30 23 14 Japan 16 15 20 29 21 0% 20% 40% 60% 80% 100% 0-14 15-24 25-39 40-59 60+ 57% of Vietnamese are under 25 years old Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/)
Vietnam s s population growth rate Population Growth % Philippine Malaysia 1.8 1.78 Singapore Indonesia India 1.42 1.41 1.38 Vietnam 1.20 Thailand Taiwan China Hong Kong 0.68 0.61 0.59 0.59 Korea 0.42 Japan 0.02 Vietnam has a sustainable & healthy population growth rate Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/)
Vietnam has the 2 nd largest family size Australia New Zealand Japan 56 60 58 10 11 10 S Korea Hong Kong 39 38 15 11 Taiwan Singapore 31 30 26 23 China Thailand 29 29 20 17 Indonesia 21 37 Malaysia Vietnam 15 19 47 43 Philippines 13 56 1-2 persons 3-4 persons 5 + persons As Vietnam begins to urbanize family sizes shall decrease Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/) Page 8
Vietnam has the 3 rd largest female working pop. China 79.2 88.8 Thailand 77.7 89.7 Female(%) Vietnam 77.3 83.5 Male (%) Korea 59.7 79.9 Indonesia 59.5 84.7 Philippines 52 82.6 Malaysia 51.9 81.4 Taiwan 51.2 76.2 Female consumers will become more and more important Employment%: *Data estimated in 2003 *Source: Asian Development Bank (ADB)- Key Indicators 2005 (www.adb.org/statistics)
400 372.10 Number of Household - Millions 350 300 250 200 206.30 150 100 50 58.60 48.50 25.20 17.30 17.20 17.10 7.50 7.20 5.60 2.20 1.50 1.00 - China India Indonesia Japan Vietnam Korea Thailand Philippines Australia Taiwan Malaysia HK New Zealand Singapore Vietnam has the 5 th most number of households in Asia, making Vietnam very attractive for Investment **Source: GeoHive (www.xist.org/earth
Vietnam has Asia s s smallest urban pop. 100 99 82 76 69 47 40 Singapore Hongkong N.Z. Australia Taiwan Korea Japan 66 Cities will swell just like in China 55 48 43 29 29 27 Malaysia Indonesia Philippines China India Thailand VN Source: Country Statistics Offices
Population Insights Large, Young & Growing population Smaller household sizes Large female working population Huge urban migration More focus on Young consumers Female consumers Smaller size products Demand for services Building loyalty & consumer commitment MUCH MORE COMPETITION & PRICE DISPARITY
Wealth Trends
40,000 35,000 36,260 35,390 GDP per head In USD 30,000 25,000 27,320 27,150 25,390 20,000 15,000 16,480 15,110 10,000 5,000 5,150 2,750 - Australia Japan New Zealand Singapore HK Korea Taiwan Malaysia Thailand 1,700 1,290 1,190 740 730 China Indonesia Philippines Vietnam India Vietnam s GDP/ per capita has increase seven fold in the past 15 years
The emergence of an urban middle class SEC Scale A = US $1,001 + B = US $1,000-501 C = US $500-351 D = US $350-251 E = US $250-151 F = US $150 below 2006 21 55 24 2003 14 36 50 2001 12 32 56 1999 7 31 62 0% 20% 40% 60% 80% 100% SEC AB SEC CD SEC EF Monthly declared household income The middle class in Urban Vietnam will drive consumersim Source: TNS VietCyle N = 2000 Urban
My standard of living VC-20060 2 40 51 5 VC-2004 2 5 37 49 6 Much lower than today Equal to today Much higher than today Somewhat lower than today Somewhat higher than today Vietnamese are still very optimistic about their economic futures Source: TNS / Gallup - Voice of People Survey
Wealth Insights Developing Middle class Larger spend contribution from urban areas Electronic banking & E-commerce will help stimulate economy More discretionary spend & Smaller household sizes More focus on The middle class Luxury goods Mass high quality products at better price points Modern trade easier distribution Technology to save time and money Wealth segments will create greater marketing polarization in terms of wants, needs, aspirations and affordability
Consumption Trends
Asia s s Media Spend Growth 2006 40 23 18 15 4 4 3 Vietnam India China Indonesia Malaysia Thailand Philippines 7 6 5.2 5.2 4-2.4-2.5 Hongkong Korea Australia N.Z. Singapore Japan Taiwan Vietnam is experiencing a Media bonanza, which will slow down Source: TNS AP offices
FMCG Growth in Asian Countries (%) 20 11 4 3 2 1 Vietnam is experiencing the fastest FMCG growth in Asia -8 Urban Vietnam National China National Thailand National Taiwan National Malaysia National Korea National Philippines Total FMCG Value Growth Rate (%) - Year 2006 vs. Year 2005
Asia s s Fast Food Penetration Local & Foreign FF purchase in past week urban only 99 73 65 55 40 39 10 Philippines Malaysia China Indonesia Thailand VN India Though changing, Vietnamese still love their Pho! (88%)
Mobile Phone Ownership - Urban 2006 1 0 0 98 94 9 3 8 8 80 75 Singapore Taiwan Hongkong Korea Japan Australia N.Z. 90 79 78 70 58 30 13 Thailand Philippines Malaysia China VN Indonesia India Own personal mobile phone urban only Bye Bye Bamboo telephone, we re getting connected, like the rest of Asia
Internet Usage In-home 88 85 80 78 71 70 70 Autralia Japan N.Z. Korea Singapore Hongkong Taiwan 37 35 30 20 19 18 10 5 Thailand China Malaysia VN Philippines India Indonesia In-home email account - Urban only Growth in internet usage will be key to catching up to the rest of Asia
Retail environment in Asia - 2006 Direct Sales 48 12 33 34 51 55 54 60 82 Traditional Trade Modern Trade Asia Vietnam Philippines Thailand China Korea Taiwan Malaysia Japan Though still small, modern trade will grow substantially in Vietnam
Consumption Insights Technology savvy consumers will leap frog technology Ad spend shall increase but become less effective Consumption will continue to increase, but products & services will need to better fit Vietnamese tastes and needs Retail outlets will become new battle ground for FMCG Thus, more focus on Technology New Advertising mediums Stronger focus on retail Better understanding of new consumer segments INNOVATION & CONSUMER EXCELLENCE & UNDERSTANDING WILL BE KEY TO SUCCESS
Attitudinal Trends
Vietnam happiest nation in Asia Viet Nam N=989 49 43 7 1 United States N=1192 39 54 6 1 Philippines N=1198 38 49 12 1 Singapore N=1509 29 66 5 Japan N=1321 29 61 10 1 India N=1968 26 48 21 5 Indonesia N=995 21 74 5 China N=996 12 67 19 3 Korea N=1200 10 78 11 2 0% 20% 40% 60% 80% 100% Very happy Quite happy Not very happy Not at all happy Vietnam s economic turn around has had a profound Positive effect on Vietnam s population Will it Last? Source: World value survey
A growing sense of national pride Philippines N=1200 Viet Nam N=989 87 78 11 20 21 2 Question :How proud are you to be [Nationality]? 1 Very proud 2 Quite proud 3 Not very proud 4 Not at all proud United States N=1184 72 24 4 Very proud India N=1896 71 22 6 2 Quite proud Indonesia N=995 48 45 6 1 Singapore N=1508 44 50 6 1 Not very proud China N=952 26 56 14 4 Not at all proud Japan N=1258 23 36 38 4 Korea N=1198 17 61 19 3 0% 20% 40% 60% 80% 100% Economic development, success in sports and technology, development of local entertainment, realisation of own importance leading to higher pride Source: World value survey
Asian traditional values Indonesia N=983 93 7 Question :Do you think that a woman has to have children in order to be fulfilled or is this not necessary? Korea N=1043 92 8 0 Not necessary 1 Needs children World Values Survey Philippines N=1182 87 13 Viet Nam N=959 86 14 India N=1917 85 15 Needs children Japan N=917 66 34 Not necessary Singapore N=1469 56 44 China N=863 37 63 United States N=1144 15 85 0% 20% 40% 60% 80% 100% Looking again at China & India, it appears that certain Vietnamese values will decline in the future Source: World value survey
Respect for Parents Viet Nam N=993 99.3 Question :With which of these two statements do you tend to agree? A. One must always love and respect parents. B. Parents must earn love and respect 1 Always 2 Earned 3 Neither World Values Survey 0.7 China N=993 94.5 5.5 Philippines N=1196 94.0 6.0 Singapore N=1505 93.0 7.0 Korea N=1200 92.2 7.8 Always Indonesia N=987 90.2 9.8 Earned India N=1924 88.8 11.2 United States N=1191 77.2 22.8 Japan N=1143 71.6 28.4 0% 20% 40% 60% 80% 100% Due to Asian Confucian family values, respect for parents should continue to be strong for years to come Source: World value survey
Attitudinal insights Happy Nation that will become less happy due to higher expectations Family will become less important while chasing the economic dream Further emancipation of women Parents advise will become less important National pride is very strong, this may erode Religion not seen as important but may see upswing due to above eroding values With such a young population, expectations will sky rocket Attitudes will become more demanding & self centered
Vietnam s s Media Landscape
Vietnam Media Landscape - Print Media 713 daily and periodical publications 77% urban population read last week All major newspapers also online Ownership: State-owned Source: TNS Media Vietnam
Vietnam Media Landscape - Radio 288 local FM stations 11 national radio stations (VOV) Hundreds of radio transmitters - rural 36% daily listenership in 6 largest cities Ownership: State-owned One foreign owned Radio Zone FM Source: TNS Media Vietnam
Vietnam Media Landscape - 1 national TV station (VTV) 1 Terrestrial Digital TV - VTC 65 local TV stations Mode of delivery: Free-to-air broadcast Cable Satellite dish antenna MMDS/DTH Cable providers: 6 Ownership: State-owned Landscape -Television Some foreign involvement expected soon Source: TNS Media Vietnam
More choices to watch - Hanoi 14.0 13.0 12.0 10.0 Domestic channel Foreign channel 10.3 10.7 11.5 Number of channels 8.0 6.0 4.0 4.0 6.3 4.5 2.0 0.0 0.0 2001 2005 2006 2007 Source: TNS Media Habit Survey, 2001-2007 Foreign programming has already gained preference in Hanoi on a short 3 years
More choices to watch - HCMC 25.0 20.0 Domestic channel Foreign channel 20.2 16.5 Number of channels 15.0 10.0 9.4 10.1 13.2 5.0 5.0 2.6 0.0 0.0 2001 2005 2006 2007 In contrast, though catching up, local TV is still preferred in HCMC Source: TNS Media Habit Survey, 2003-2007
Total TV viewer-ship By consumption 250 TTV Minutes viewed 200 150 1st half 2003 Free2Air TV Cab/sat TV 1st half 2004 1st half 2005 1st half 2006 Satellite & Cable TV are beginning to challenge, Free to Air programming 1st half 2007 Source: TNS TV Audience Measurement, 2003-2007
The bigger the share the higher the loss TV rating of HTV7 in HCM City Vietnamese TV viewers are becoming much more demanding Source: TNS TV Audience Measurement,2003-2007
Media spend grew by 40% from 2005 to 2006 But, how effective is it?
Vietnam s s Rural Consumer
Why Rural Vietnam becomes more & more important? 4 Key Urban Cities Population (%): 9.9 GDP (%): 25.6 Still plays a vital role in the economy Lots of information available Battlefield with fierce competition Secondary Cities Population (%): 13.6 GDP (%): 11.9 The next engine of growth, but limited Limited information available Battlefield in the near future Rural Locations Population (%): 76.5 GDP (%): 62.5 The future mass engine of growth No full insights available at the moment 1 st entry advantage for manufacturers ` the sixth sense of business 42
What are the available consumers in each region? (available consumers are those with monthly income > 1.5mln VND) 42% with income > 1.5mln VND 62% population aged 14-55 Total available consumers: 17mln Rural Low Income: 7% Medium Income: 53% High Income: 40% Low Income: 58% Medium Income: 39% High Income: 3% Low Income: < 1.5 mln VND per month Medium Income: 1.5-4.5 mln VND per month High Income: >4.5 mln VND per month Urban 93% with income > 1.5mln VND 62% population aged 14-55 Total available consumers: 5mln Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 43
Understanding an average Rural family Household Size 4 members vs. 4.6 in urban 100% traditional trade vs. 14% Modern Trade in urban Shopping Habits Rural Employment Farmer/ Shop Owner vs. employee & self-employed in urban 425,000 VND vs. 681,000 VND in urban Monthly FMCG Spending Monthly Income 1.5-3 mln VND vs. 4.2 mln in urban Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 44
Durable Ownership FMCG Impact Items Most of rural households are now using electronic cooker. However, there is still a big gap with urban families in make-life-easier products Rural vs. Urban 10% vs. 49% 30% vs. 78% 92% vs. 96% Washing Machine Refrigerator 1% vs. 13% Electronic Cooker 53% vs. 88% Microwave Oven Gas Cooker Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 45
Durable Ownership Communication Impact Items Color television nowadays becomes a necessity in rural. Radio is also very popular while telephone and computer are still limited. 95% in rural vs. 97% in urban 45% in rural vs. 82% in urban Color Television 32% in rural vs. 4% in urban Telephone 9% in rural vs. 41% in urban Radio/ Cassette Computer Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 46
Durable Ownership Luxury Items There s also a big gap in ownership of high-tech equipments between rural and urban households 2% in rural vs. 22% in urban 28% in rural vs. 42% in urban Air Conditioner 3% in rural vs. 34% in urban Video Recorder/ Player 9% in rural vs. 35% in urban Still Camera Hi-fi / Music System Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 47
Sector Ownership Mobile phone already reaches 33% rural population while Internet is still at the very infant stage there! Motorbike ownership is mostly at the low & medium range below 15mln VND one unit Technology Banking & Finance Automotive Mobile phone: 33% in Rural vs. 66% in Urban Internet: 1% in Rural vs. 45% in Urban Insurance: 7% in Rural vs. 9% in Urban Bank account: 6% in Rural vs. 35% in Urban ATM card: 4% in Rural vs. 20% in Urban Motorbike less than 10mil VND: 40% Motorbike 11-15mil VND: 31% Motorbike 16-39mil VND: 13% Motorbike in Urban: 92% Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam % of households ` the sixth sense of business 48
12 Major Trends Of Change ` the sixth sense of business 49
Upgrading needs ` the sixth sense of business 50
Family and Work Question: For each of the following aspects, indicate how important it is in your life. % saying very important on a four point scale. World Values Survey China Korea Philippines Family Indonesia Viet Nam Singapore Work India Japan United States 0 20 40 60 80 100 Vietnamese are working harder to improve their lives, Changing family dynamics and time spend with kids Source: World value survey ` the sixth sense of business 51
Convenience Convenience ` the sixth sense of business 52
Sales growth per channel (%) Direct sales 34 Mordern trade 14 Streetshop 11 All Channels 11 Market 8 Specialty 7 Though still small, modern trade will grow substantially in Vietnam Changing shopping habits and the Vietnamese shopping list ` the sixth sense of business 53
Indulgence (Health consciousness) ` the sixth sense of business 54
Two forms of malnutrition % Obesity 12% Malnutrition 2007 Wealth has decreased malnutrition, but indulgence has Changed eating habits and increased obesity Source: Study on nutritional status & physical activities of children 6- the sixth sense of business 11y.o NIN & Nestlé ` 55
Status Men s care (displaying wealth) ` the sixth sense of business 56
Luxury Goods penetration 22% urban 42% urban Air Conditioner 34% urban Luxury goods are permeating into a 3 rd of Vietnamese urban households, Changing entertainment habits DVD 35% urban Still Camera Home Entertainment System Source: TNS Vietnam Rural Pilot Survey - % of households ` the sixth sense of business 57
Female Health Emancipation & Beauty ` the sixth sense of business 58
Ideal female occupation 21% 26 Unlike my mother s time, women now aspire to be more independent by working & earning money in order to have their own income instead of being housewives 18 16 11 14 12 10 10 12 6 7 6 5 5 Business manager Look after the family / home Business owner / entrepreneur Teacher Doctor/ pharmacist VC 2001, n=636 VC 2004, n=683 VC 2006, n=1009 Female consumers will become more and more important, Changing who advertisers target in the future ` the sixth sense of business 59
Innovation Innovation ` the sixth sense of business 60
84% of Urban 15 to 24 youths surf weekly 2006 53 47 2005 45 55 2004 40 60 2001 28 72 0% 20% 40% 60% 80% 100% Have used the internet Not yet Vietnamese youth are leading the charge for Change, with 57% of the population yet to become consumers Source: TNS VietCyle N = 2000 Urban ` the sixth sense of business 61
Differentiation ` the sixth sense of business 62
Vietnamese youth are flexing their creative flair Short hair styles look dynamic & fashionable Being dynamic is a key to success Wearing different style of clothes is a way to make myself differentiated Youth are Changing, just to be different ` the sixth sense of business 63
Urban Migration ` the sixth sense of business 64
Vietnam has Asia s s smallest urban pop. 66 55 48 43 29 29 27 Malaysia Indonesia Philippines China India Thailand VN Over 200,000 Vietnamese migrate into HCMC every year, looking to find the promised land Cities will swell just like in China, Changing the economic fabric of Vietnam Source: Country Statistics Offices ` the sixth sense of business 65
Technology savvy ` the sixth sense of business 66
Technology embracers 100 84 80 74 68 60 53 49 58 40 40 20 21 17 16 22 26 24 0 1 1 1999 2004 2006 DVD Player Flat screen TV Personal computer Mobile phone Video disk VCD Technology today is all the rage, Changing all facets of communication, entertainment and commerce Source: TNS VietCycle ` the sixth sense of business 67
Media fragmentation ` the sixth sense of business 68
Vietnam Media fragmentation TV is Still the King Radio & internet advertising is growing rapidly Vietnam s Advertising spend grew at rate of 40% in 2006, Changing how media influences everyday life in Vietnam Source: TNS Media Vietnam
Inflation ` the sixth sense of business 70
Cost of Living in New York = 100-2006 Philippines India 43 45 Vietnam 62 Malaysia Thailand 68 69 Indonesia China 76 80 Taiwan New Zealand 85 86 Australia HK Singapore 106 107 108 Korea 115 Japan 124 0 20 40 60 80 100 120 140 Vietnam was 38% cheaper than New York in 2006, but inflation is Changing how we will consume in the future Growth Rate estimated in 2006 **Source: GeoHive (www.xist.org/earth/) ` the sixth sense of business 71
Fading traditions ` the sixth sense of business 72
A Historical Perspective on the Future What genre of music do you prefer? Economic Boom Total 12 5 44 40 15-19 22 7 66 5 By age Economic reform Post war Baby Boom 20-24 25-34 35-45 5 5 3 5 24 28 5 43 49 Traditions are fading 64 47 23 The lean years 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Western Asian Vietnamese pop Vietnamese traditional Source: TNS VietCycle Vietnamese pop music is a reflection of modern culture, Identifying how traditions will Change in the future
Summation ` the sixth sense of business 74
Summation Population shifts will impact both spending power & consumer needs ` the sixth sense of business 75
Summation Competition will increase steadily, creating more consumer sophistication ` the sixth sense of business 76
Summation Wealth polarization will create clearer consumer segments ` the sixth sense of business 77
Summation Distribution will become easier, with the growth of modern trade ` the sixth sense of business 78
Summation Media fragmentation shall reduce advertising impact ` the sixth sense of business 79
Summation Attitudes will become more demanding & self centered The Me Generation ` the sixth sense of business 80
Summation Youth culture will need to be embraced, while managing expectations to ensure sustainability ` the sixth sense of business 81
The changing face of consumerism As you can see, the face of consumerism has changed dramatically over the last 10 years However, please be reminded that not only the Vietnamese consumer has changed the last 10 years.
So has TNS Global. 77 Countries 300 Offices Over 14000 employees ` the sixth sense of business 83
and so have we. FSA / TNS 1996 TNS 2006
and so have I. I Hanoi, Jan. 1994 HCMC, Oct. 2007
Thank You / Cam On! ` the sixth sense of business 86