Recession & Growth Opportunity

AMCHAM October 10 -11, 2012

Recession & Growth Opportunities

Economics Consumer Lessons

101 2012 overview confidence

from the past

Cause

of optimism

4 key growth opportunities

Education Healthcare FMCG On-line

Ralf Matthaes Regional Managing Director

Summary

Ralf Matthaes Regional Managing Director Cambodia / Laos / Myanmar / Vietnam

2012 Overview

BAD - OK - GOOD

FDI = US $9.5 Billion @ Q.3

71,726

28%

Source: Saigon Times weekly GSO

Bankruptcies = 53,000 @ Q.2

Also causing high unemployment especially amongst young

Source: GSO

2008 2012 Consumer Confidence Index

Source: TNS CCIP 2008 2012 urban only

Bad Debt = US $ ? Billion

The State Bank of Vietnam reported that as the end of March this year Vietnam's bad debts ratio amounted US $9.6 billion U.S = 8.6% total outstanding credit. Fitch Ratings and other independent economic survey organizations estimate = 14% or 13.3 billion U.S. dollars.
This is over 150 percent of the total capital of the entire Vietnamese banking sector of 230 trillion VND or over 11 trillion U.S. dollars.
Source: news.xinhuanet.com/english/indepth/2012-07/.../c_131728627.htm

Vietnams 100 largest state enterprises are indebted about US $50 billion, or more than one third of GDP. Source: Reuters

GDP = 4.73% @ Q.3

6.78%

5.89% 4.73%

2010

2011

2012

Slow down of GDP growth actually has positive effects

Source: GSO

Exports = US $83.8 Billion @ Q.3

18.9%
Vietnams best economic storey

Source: GSO

Trade Deficit = US $0.1 Billion @ Q.3

Trade balance 1st time in 20 plus years

Source: GSO

Inflation = 9.96% @ Q.3

45%

Critical element to future growth and success

Source: GSO

Advertising spend half year = 20% growth @ Q.2

Million

Still strong signs of growth

Source: TNS Kantar Media

# of Tourists = 13% growth @ Q.3

Source: GSO

Overseas Money Remittance = US $6.3 Billion @ Q.2

Source: GSO

Economic indices scorecard

Bad = 4
OK = 1

Good = 6

Consumer Confidence 2011-2012

Consumer overview of Vietnam's next 12 months

Q: In the next 12 months would you think that the following will be better, the same or worse than they are now?

2012 = 68

Confidence has dropped substantially in the past 12 months

Source: TNS CCIP 2011 2012 urban only

Job Security is Falling

Do you think your present job is safe, or do you think theres a chance you may become unemployed?

Job security is falling, driving consumer caution

Source: TNS CCIP 2011 2012 urban only

Consumers savings
Roughly how much of your monthly income do you save?

++

Not only savings but the percentage consumer are saving has risen sharply
Source: TNS CCIP 2011 2012 urban only

Lessons from the past

Looks familiar ?

Lessons from the past successful brands

Stuck to their values

Continued investment into R&D which enabled speedier recoveries

Took advantage to strengthen against weaker rivals

Lessons from the past successful brands

Invested into rewarding loyalty

Identified and focused on faster growing segments

Took advantage of the lowered introductory costs for successful new launches

And those who did NOT

Those in the middle were squeezed

Cost cutting through cutting back on quality eroded brand equity

Price promos almost never the answer

Key to remember...

Recessions do not hit every one the same Some companies thrive, some die Some major success stories have been products of recessions

New launches

Cause for optimism

Investor sentiment

World economy is still in the dumps and looking for growth opportunities

57% of US companies wish to expand their business in SEA 75% note Vietnam as their #1 destination for expansion in SEA
Source: AMCHAM Singapore Survey -June / July - Base = 356

As China begins to feel the pressure of a slide in exports and inflation. Vietnam as part of the China Plus 1 policy will make Vietnam more attractive for foreign investment
As inflation reduces and the banking system is straightened out, Vietnam will receive more and new FDI

1st time since 2008 there are more positives than negatives on horizon

Consumers spending in the near future?

Given the economic situation, will you be spending, less, the same, or more on each of the following items?
Education 47 46 7

Health care products/services Food & beverages products

Personal care products

46 37
32 32 52 54

43 55

12 8
15 14

Household utilities House hold care products

Entertainment & dining out Mobile, Laptop, Devices

27
25 25 52

56

16
23 17

58

Home appliances
Transportation Communications

24 24
20

55 59
65

21 17
15

More

Same

Less

Some sectors continue to see growth, whilst other continue to decline

Source: TNS CCIP 2011 2012 urban only

Education

Size of the Pie : # of students in Vietnam

Under 6 years old 6 to 18 years old - 3.6 million - 14.8 million

College & University - 1.5 million

College & vocational - 1.3 million

Total

21.2 million

Foreign language education

32% or urbanites speak a foreign language
of those 91% speak English, 6% Chinese, 3% French

over 60,000 Vietnamese studying overseas

*Source: http://www.moet.gov.vn

Education demand
Which of the following educational programs are you seriously considering for your children?

Education considering for childrens future (%):

Hanoi (18%)

Trans-national education still a ways off for most families.

Source: TNS VietCycle Education 2011
Base: n= 1,000 (total).

Education destinations
Which country would you like your childs degree to be under?

The USA is the preferred destination for overseas studies

Source: TNS VietCycle Education 2011. Q73 Base: n= 1,045 (Total).

US dominates in all regions, especially in the South

HCMC

Hanoi

Da Nang

Can Tho

Source: TNS VietCycle Education 2011. Base: n= 1,045 (Total), 289 (HCMC), 319 (Hanoi), 235 (Danang), 202 (Cantho)

I Parents preference - Local vs International school

Would you consider enrolling your children in an international school in Vietnam?

One fourth of parents is willing to enroll their children in international schools.

Source: TNS VietCycle Education 2011
Base: n= 1,090 (Total), 308 (HCMC), 329 (Hanoi), 239 (Danang), 214 (Cantho)

International schools perceived to be the most reputable (%):

01 Australian International School 02
American International School

03
American School of Vietnam

04
International School of HCMC

05
Saigon South International School

Reputation ranking of international schools by HCMC parents

06
British International School

07
ACG International School Vietnam

08
ABC International School

09
Renaissance

Source: TNS VietCycle Education 2011

Healthcare

36

MONTHLY HOUSEHOLD SPENDING ON HEALTHCARE*

How much does your household spend on the following functions in a typical month?

Estimated annual spend = US $3- 4 Billion

Growing at over 20% / yr

Spending on healthcare is miniscule in comparison to overall spending.

Source: TNS VietCycle Healthcare 2011. Base: n= 2,000 (total).

Attitudes to health top-2-box agreement (%)

My pharmacist's recommendation is just as good as my doctors

Top-2-box agreement

TOTAL

50

Chronic disease sufferers

51

Even chronic disease sufferers rely heavily on recommendations from pharmacists.

Source: TNS VietCycle Healthcare 2011. Base: n= 2,000 (total).

Prescribed vs. OTC

Percentage of overall drugs purchased that were prescription medicine (past 30 days) (%)

22%

prescribed medicine purchased in past 30 days

78%

Over the counter medicine purchased in past 30 days

Source: TNS VietCycle Healthcare 2011. Q99 Of the amount you spent on medicine, what percent of this was spent of prescription drugs? Base: n= 951 (total).

Prevalence and frequency of general pain

67%
Head pain

55%
Flu symptoms

51%
Fatigue

1.6 times per month

0.7 times per month

2.6 times per month

Frequency of suffering from general symptoms

Source: TNS VietCycle Healthcare 2011. Q80 Which of the following symptoms do you sometimes suffer from? Base: n= 2,000 (total).

Prevalence of chronic disease sufferers

Which of the following chronic diseases do you suffer from?

Almost 1 in 5 consumers aged 20-65 suffer from at least one form of chronic disease
Source: TNS VietCycle Healthcare 2011. Q83 Base: n= 2,000 (total).

Key demographic of sufferers

Which of the following chronic diseases do you suffer from?

38
31 23

17

20

Total

Female

Older

Housewives

SEC EF

Older females, housewives, from lower SECs show the highest prevalence of chronic disease

Source: TNS VietCycle Healthcare 2011. Base: n= 2,000 (total).

FMCG

Monthly household spend

Groceries Eat / drink out Total = 32% = 15% = 47%

47% of all spend is still spent on Food

Source: TNS VietCycle 2011.

Most frequented modern retail outlets

Nationally Big C followed by Metro are the most frequented outlets Note low penetration of high end venues
Source: VietCycle 2011 Base: HCMC & Hanoi

Value Growth of Modern vs other trade channels

2008-09

2009-10

2010-11

2011-12 1st half

46

Building brands for the

consumer

Digital media is the second largest media behind television

Daily users (%)

Source: TNS Digital life 2012

As the value of purchases increases, the amount of research both off and particularly online also increases

Source: TNS Digital life 2012

Vietnams consumers generally go online frequently and research brands regularly

Global
Internet Penetration 30%
% of internet users that:

Vietnam
32%
% of internet users that:

India 8%
% of internet users that: 8.8%

Go online daily

Are brand fans on SN Write about brands online Research brands online

2.0%

10.7%

12.3%

Source: TNS Digital life 2012

Driving Growth Online

67% of Vietnams online

users access the Internet every day...

31% have accessed via mobile

in the last month Once online, they are very engaged. Having a digital strategy prepared to capture consumers as they adopt is the key to capitalize A mobile component is a critical aspect of this strategy

Source: TNS Digital life 2012

Online reviews can influence brands and more than half of expect companies to contact them thereafter

(%)

% Agree

Source: TNS Digital life 2012

Activate Your Brand Online

56% of online writers talk

about their brand experience

63% seek advice on brand

usage and other related aspects Ensure ample content is available on brand networks on product usage, benefits and other related information commonly asked by consumers regularly update this and engage members of the brand community
Source: TNS Digital life 2012

LS

Dealing with the negatives

42% online readers feel a

single negative review can impact on a consumers purchase decision

Advocacy is very important and can have a

significant role in the purchase decision. Be aware of what is being said about your brand (but remember not to intrude too strongly)

Source: TNS Digital life 2012

TNS Growth Map

Activation Day TNS 2011

Growth Summary
Fundamentals of banking system / Bad Debt / State-Owned-Enterprises must be reformed and fixed quickly. Exports may be slow due to global softening of demand

FDI may be slow to return - must entice by assurances / low cost of entry
Consumer confidence slow to return unemployment, inflation and bankruptcies must be curtailed Key growth opportunities exist in Education / Healthcare / F&B / On-line Invest in consumer loyalty and guarantee both quality and core values
Source: TNS Vietnam
57

The bottom-line

We have yet to hit rock bottom. However, there are positive signs that some of the macro issues plaguing Vietnam are on the mend

Source: TNS Vietnam

58

www.tnsvietnam.vn