Youth Translate Consumer World to Parents

Toy Shop

Two thirds of Vietnams population are under 35.

Changing attitudes leave vast generation gaps where children are far more consumer savvy than their parents.

Exponential Growth of Middle Class in Metropolitan Vietnam

The middle to upper class across Vietnams key cities has grown 26% points over the year 2000. With that comes an onslaught of advertising, a new world of brand choices and the outlets to shop for those brands; retail environments that were distant dreams just four years ago. 3

Getting your brands on the shelf is no easy task once you move away from key cities. In fact, your definition of shelf may need changing!

Wide Disparities in Economic Opportunities

With an annual GDP averaging 7% in recent years Vietnam is growing rapidly, but the rate varies dramatically by city and province. Six key cities account for 40% of the urban population. Yet urban Vietnam represents just over a quarter of Vietnams 81 million people. Reaching the Vietnamese consumer is not always easy. 4

Economic and Demographic Perspectives

81 Million People
Surface area: 330,000 km2 North Mountains and Midlands Red River Delta North Central Coast

54 ethnic groups Kinh account for 88% GDP/capita: US$532 (2005) Inflation 8.2% (2005) Unemployment 5.1% (2005) GDP 2005 Growth Total : 8.4% Construction : 10.8% Manufacturing : 13.1% Agriculture : 4% Services : 8.5% 6

South Central Coast Central Highlands South East Mekong Delta

Shaped by
Years 111BC-939AD 1535 1802 1858 1860 - 1945 1945 1945 - 1954 1954 1959 1965 1973 1975 1976 - 1979 1979 Major Events Chinese occupation European Jesuits/Traders French Given Trading Concessions France invades Vietnam French occupation Ho Chi Minh declares the formation of the Democratic Republic of Vietnam French reoccupation finally defeated in battle of Dien Bien Phu in 1954 Geneva Convention 17th Parallel division of Vietnam US Military Advisors in the South US Marine Corps Lands in Da Nang Signing of Paris Peace Accord (US / North Vietnam) Fall of Saigon - Reunification of Vietnam Implementation of an unified socialist society Vietnam defeats Khmer Rouge, eradicating incursions inside its borders and liberates Cambodia China invades Vietnam and is quickly repelled

Great Progress
Years Major Events

1986 1987 1988 1990 1991 1994 1995 1997 1999 2000 2001 2002 2003 2004 2005 2006

Doi Moi (renovation) Congress - Open Door Policy Reforms Foreign Investment Law liberalises market access Decree 10/CP Extensive Agricultural Reform Vietnam is the world's 3rd largest exporter of rice Ban on TV Advertising lifted US Embargo lifted Vietnam joins ASEAN Vietnam becomes world's second largest exporter of rice VAT introduced. Foreign investors allowed to pay wages in local currency Private Enterprise Law US Bilateral Trade Agreement Tourism booms - Vietnam A Safe Destination Net Foreign Direct Investment Reaches US$1.5 billon Boosts Trade & FDI ASEAN Trade Fair, Vietnam Expo Exports grow 22% Significant investments from Intel and Microsoft. WTO Accession?

44 Billion US$ Economy in 2004

Vietnam Per Capita GDP
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% $100 1.0% 0.0% 2000 2001 2002 2003 2004 2005 $0 6.1% 6.4% 5.8% Per Capita GDP (USD) GDP Growth (%) 6.9% 7.8% $600 8.4% $500

$532 $469 $496

$400

US$

$403

$418

$443

$300

$200

Excitingly Young
0-14 30+ 100 90
81 81 82 83 83 84 85 85 86 87 87 88 88 89 89 90

15-29 % Under 30

Young Population
(Millions)

80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Asian Demographics www.asiandemographics.com

35 57% 24

36

37

38

39

40

41

42

43

44

45

47

48

49

50

50

57% 57% 56% 56% 55% 55% 54% 54% 53% 52% 24 24 24 24 24 24 24 24 23 23

52% 51% 50% 50% 49% 23 22 22 22 22

22

21

21

21

20

20

20

19

19

19

19

18

18

18

18

17

10

But Not Highly Concentrated

% Total Population 100% 25% 80%

Urban Concentration
% Urban Population 100% 45% 2% 2% 2% 2% 55% 2% 2%2% 2% 2% 3% 3% 42% 3%
Other Urban Rach Gia Comm. Vung Tau City Qui Nhon City Buon Ma Thuot City Nha Trang City Dalat City Can Tho City Long Xuyen Comm. Ha Long City Da Nang City Hai Phong City Bien Hoa City Ha Noi City HCMC

60% 14% 40% 10% 8% 20% 6% 0% 23% 9%

32% 23%

Source: General Department of Statistics

11

Urban Wealth Continues To Grow Strongly

Increasing Wealth - Urban Economic Class
(N=5,000 6 Key Cities)

100% 90% 80% 70% 60% 50% 32 40% 30% 20% 10% 9 0% 2000
Source: CI Economic Monitor

40

34

27

24

24

18

E (~ Less than US$150) D (~ US$150 - US$299) C (~ US$300 - US$499)

29 32 30 18 20 22 20 24 18 13 5 2001 14 7 2002 16 8 2003 17 8 2004 11 2005 31 30

B (~ US$500 - US$999) A (~ US$1,000+) (Monthly Household Income Equivalents)

19

% Urban Households

12

17% Receive Money From Overseas

51%
(HCMC 67% Hanoi 23%)

17% Receive Money

(more in HCMC than in Hanoi)

Quarterly or more often 26%

14%

Have Relatives Overseas

30%

1 or 2 times/ year 37% Less often 37%

10%

10% (HCMC 4% Hanoi 31%) Source: CI Shopper

Around 1/5 of households receive supplementary income from overseas increasing their spending power substantially; Estimate: more 3 billion USD annually

13

Demographic Profiles and Economic Development Behind Trends in Vietnam

Young population profile ABC economic class experienced a 26% point hike over 2000 2 million households are now middle class and above Highest concentration in key cities Economic development visible in GDP growth, infrastructure development and residential property boom Increasing affluence leads to changes in consumption Increasing affluence leads to changes in lifestyles Increasing affluence leads to changes in marketing scope Disposable income and time increasing desire to experience new opportunities

14

Consumer Perspectives

Affluence Impacting Lifestyles

Increase Health awareness Greater focus on diet Increasing focus on healthier beverages Increasing focus on mental development over physical development Annual check ups Fitness and gym use Better nutrition Demand for improved private healthcare Awareness assisted by bird flu and SARS Increase in Education demands Enrolment of dependents in foreign language schools Demand for private kindergarten, secondary schools and universities Increased propensity to send children overseas for University education Increased International Awareness Increased travel demand largely within SEA region

16

Trends Impacting Technology And Finance

Consumers are increasingly tech savvy Internet penetration and speed PC penetration rapid increase Frequent use of SMS Consumers begin planning finances Finances move beyond living expenditure to investments Savings and plans evolve around own home property demands Banking, private insurance, ATM services escalate

17

Extremely Optimistic

I Believe...
(N=1,000 Aged 15-64 in HCMC and Hanoi)

Improve

Stay the same

Worsen

my total family income in the next 6 months will...

30

61

business conditions in the next 6 months will

68

22

10

0%
Source: CI Express

20%

40%
% Aged 15-64

60%

80%

100%

18

Increasingly Tech Savvy

I Enjoy
(N=1,000 Aged 15-64 in HCMC and Hanoi)

Everyday
Exercise 38

Weekly

Monthly
11 1 9

Less often

Never
40

Watch video at home

23

24

25

22

Send SMS

21

61

Suffing the Internet

14

63

Send e-mails

12

67

Plays sport

12

2 4

76

Go to a supermarket 1

22

37

31

10

Source: CI Express

19

Modern Conveniences Prevail

Durables Owned - HCMC and Hanoi

120

Total
98 98 86 95 86 89 81 67

100

86 74 65 59 46 39 34 34 25 26 13 26 10 2 2 Computer 2 25 13 1 0 0 0 Car 47 42 57

80

60 45 40

56

20

13

0 Refrigerator Washing machine Mobile phone Air conditioner

Source: CI Economic Monitor

20

Financial Services Poised for Growth

Financial Services Used - HCMC and Hanoi

30

Total
24

A
23

25

20 15

18 15 14 11

17

15

10

9 8 5 7

10

6 3 2 1

0 Insurance plans Bank Account Credit/Debit Card

Source: CI Economic Monitor

21

Success Defined by Job and Networked Critical Increasingly Open Minded

I Think
(N=1,000 Aged 15-64 in HCMC and Hanoi)

Agree Having fun and laughing is very important to me Having a wide circle of friends is important to me My success is defined by my job Men should be the sole money provider for the family I would rather be out enjoying life than relaxing at home Newly weds should live independently from parents I want to be one of the first to have the latest new brand I enjoy getting attention from the opposite sex
Source: CI Express

Neutral 98 93 77

Disagree 2 6 20 26 33 29 33 38 7 13 17 14 17 3

67 54 54 53 45

22

23

Changing Attitudes Amongst Vietnamese Women

Enjoys learning new dishes to cook for her family Enjoys learning new dishes to cook for her family Enjoys having fun & laughing Enjoys having fun & laughing Enjoys a wide circle of friends Enjoys a wide circle of friends Success is defined by job Success is defined by job

45%
Prefers to live Prefers to live with parents when with parents when married married

55%
Prefers to live Prefers to live independently independently when married when married

Traditional and Conservative

Modern and Adventurous

Enjoys relaxing at home Enjoys relaxing at home rather than going out rather than going out
N=503 N=618

Loves going out rather Loves going out rather than staying at home than staying at home

Waits for others to try new Waits for others to try new products first; will buy later if products first; will buy later if 24 affordable affordable

Enjoys being the first to own the Enjoys being the first to own the latest brands / pampers herself with latest brands / pampers herself with luxuries luxuries

25

Household Purchasers Not Yet Modern But Heading That Way

Traditional-Modern Continuum Overall Family focus Personal presentation Cooking Purchasing adventurism Public behaviour Interest in being active International aspirations Family roles
1 2 3 4 5 6

4.7 2.4 3.5 4.0 4.8 5.1 5.2 5.9 6.9

7 8 9 10

Traditional
Source: CI Shopper - Household Category Managers

Modern

26

6 In 10 Are Working

WORKING (63%)
SELF-EMPLOYED (41%)
Small Trader/ Shop Owner

NOT WORKING (37%)

Housewife (32%)

EMPLOYEE (22%)
Factory/ retail/ domestic worker

25%
Self-employed (Not trading)

22% Professional (teachers/doctors)

11%
5%
Source: CI Shopper - Household Category Managers

27

Your Target Household Category Manager (HCM) 76% of Household Category Managers are sole purchasers / decision makers for the household and she ALSO controls the monthly budget.

76%

She Lives Through The Eyes Of Her Children Who Have A New World Of Opportunities
28

29

A Look Ahead - Kids Are Very Savvy Consumers

Kids (0-14) accounting for more than 20% of the population. Kids are brand and ad savvy often more so than their parents. They are bringing consumer news to the family. First generation born in a true market economy exposed to brands and advertising since they were born In many aspects kids are recognised as knowing more than their parents (e.g. brands, technology, ads) Due to the broader exposure as kids, they are quicker in decoding subtle messages and are amongst the highest group on the ad savvy continuum. Kids exhibit considerable pester power in many categories beyond those targeting kids

30

Kids Pester Power

Shampoo Toothpaste

1/3 ask parents to buy adult categories (> among girls 44%)
Drink for the family

Shower Cream

Electronics

Softener

Source: CI Kids Talk

31

Trends Impact on Consumption

The Vietnamese are extraordinarily optimistic! Few have experienced a step back and the majority grew up post war Metro consumers increasingly technology and financial savvy Conspicuous consumption visible and acceptable Success is imbued in pride which has to be visual or verbalised to be recognised; For example housewives focusing on self development to enable better care of family is now acceptable Individual expression through brand badges now accepted The brands I wear reflect who I am is now a prevalent attitude Youth translate the consumer world for their parents - they are more consumer and ad savvy And parents increasingly brand conscious Pester power from kids increasing beyond kids brands

32

Reaching Consumers

Mass Media Main Source For New Trends

I Learn About New Trends and Brands From...
(N=1,000 Aged 15-64 in HCMC and Hanoi)
Read about it in magazines Advertising on TV Browsing at shopping centre From chatting with friends Billboard From members of family From an in store promotion From direct mail received at home See other people with a new brand Ask store owners From sales people direct at my door Surf the internet Radio 1080 Centre Ask overseas Vietnamese Source: CI Express 3 7 11 15 22 29 32 35 47 45 43 54 51 70 86

34

Trends Impacting Media and Mediums

The media environment continues to be reshaped; DVD replaces VCR Cable TV set top boxes provide access to international channels Movie rental heavily impacts viewing Blatant branding of game shows Increase number of interactive game shows Increase number of slice of life drama series depicting reality as opposed to fantasy Increased cinema going Electronic games dominate youth activity

35

Media Perspective
No private TV channels/radio stations Digital trials under way and expanding fragmentation. Expenditure in key TV channels (83%) and publications (27%) was US$280 million in 2005. US$100 buts you approximately 1 GRP. VTV3 (national) US$110 prime HTV7 (HCMC) US$60 prime Programming barter arrangements. Production companies own as much as 50% of available spots. BHD Lasta VAC Imported programming accounts for 25% of air time; HK, Korea, China and Taiwan.

TV Stations

65

Channels National Channels Regional Channels Digital Channels

Share of Ad Ex

110 4 106 12
2 channels: 66%

HTV7 (HCMC) VTV3 (National)

Literacy Publications

34% 33%
96% % of Print Ad Ex

20 Publications 4 Publications Tuoi Tre Tiep Thi & Gia Dinh Thanh Nien The Gioi Phu Nu
Web Sites

85% 54% 19% 14% 11% 10%

VN Express Tuoi Tre

Cinemas Radio Stations 57 62

National Channels Regional Channels

1 61

36

Personal Care Products Have The Maximum Share

2005 TV Ad Expeniture - Category
SHAMPOO & HAIR SETTING PRODUCT MILK (Nett) SKINCARE PRODUCT DETERGENT POWDER BEER MOBILE PHONE NETWORK
3 2 2 2 2 2 1 1 1 1 1 1 1 3 5 4 8 10

Key Category

TOOTHPASTE FABRIC SOFTENER MOTOR CYCLE MOBILE PHONE SANITARY PROTECTION SOFT DRINKS COSMETIC ORIENTAL MEDICINE CHEWING GUM FRUIT JUICES INSTANT NOODLE SOUP 0

Others account for the remaining 50% of expenditure

10

% Share of Expenditure
Source: Andi http://andi.com.vn/

37

Unilever Dwarf Other Advertisers On Expenditure

2005 TV Ad Expeniture - Advertiser
UNILEVER PROCTER & GAMBLE VINAMILK DUTCH LADY VIETNAM BREWERY COMPANY NESTLE IBC - PEPSI HONDA MEAD JOHNSON NUTRITIONALS COLGATE-PALMOLIVE VIETNAM COMPANY NOKIA LG GROUP VIETTEL-CTY DIEN TU VIEN THONG QUAN DOI MOBIFONE-VMS KC-KIMBERLY CLARK WRIGLEY'S CHEWING GUM SAMSUNG COCA COLA DIATCO ROHTO PHARMACEUTICAL CO., LTD.
16 7 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Advertisier

Others account for the remaining 56% of expenditure

0
Source: Andi http://andi.com.vn/

10

12

14

16

% Share of Expenditure

38

Trends in Communications
Advertising now dominated with lifestyle advertising Consumer testimonials in advertising replace international superstar endorsements Local brands matching international brands on price (or vice versa!) and close behind in terms of marketing savvy Cutting through the clutter is extremely hard leading to significant waste in advertising expenditures; Which 50% (US$ 140 million) of your ad spend works?

39

7 Stages of Advertising Literacy

(Mary Goodyear)

Vietnamese consumerisation is now entrenched in Classic Brand Marketing stage of the continuum.

Sophistication

4 Metaphor Consumer Benefits 3 Endorsement Functional Benefits

Stage 3 Classic Brand Marketing

Stage 4 Customer Driven Brand Marketing

Stage 5 Post Modern Brand Marketing

7 Deconstructed Advertising itself

Stage 2 Stage 1 Sellers stage Marketing 101

6 Symbolic Abstract Values

5 Lifestyle Functional + Psychological benefits

2 Hard Sell Comparative Attributes 1 Straight Sell Product Attributes

Time
40

Vietnamese Advertising Literacy

Teens, kids and white-collars are the most literate in terms of ad savvy

Super Consumers
Metro Male Trendsetters

7 Deconstructed
Advertising Itself

6 Symbolic
Metro Male Teens Abstract Values Metro Kids 5 Lifestyle Rural Male Teens Functional + Psychosocial Benefits Urban/Rural Female Teen

Low competition

4 Metaphor White Collar Adult Male Consumer Benefits Urban/White Collar Housewives 3 Endorsement Blue Collar Adult Male Functional Benefits Rural/Blue Collar Housewives 2 Hard Sell
Comparative Attributes

High competition

1 Straight Sell
Product Attributes

Nave Consumer

41

Market Perspectives

Market Perspectives

Supermarket

Wet Market

Convenience Store

Specialised Store

43

The Woman Of The House Shops Most Often At (HCMC)

# Times Purchase Per Month Reasons for Purchasing Most Often At The Outlets

Perishable Food Non-Perishable Food Beverages Household Products Personal Care Products 12

94

30

Fresh product. Competitive price. Enjoy bargaining

35

34

7 3

13

25

16

10

28

10

26

30

17

9 3

15

Trust in product quality. Clean / hygienic. Good price. Good range of products

26

36

15

7 3

14

Wet market (inside) Grocery store

Supermarket Beverage agent

Neighbourhood store Others

Others include department store, stall/kiosk around market, superstore, wholesale store, hawker trolley, pharmacy

Supermarket: higher among ABC and Younger

Source: CI Shopper - Household Category Managers

44

The Woman Of The House Shops Most Often At (Hanoi)

# Times Purchase Per Month Reasons for Purchasing Most Often At The Outlets

Perishable Food Non-Perishable Food Beverages Household Products 5

89

5 03

35

Fresh product. Competitive price. Trust in product quality. Safe Environment. Trust in product quality. Offers good price. Offers good range of products. Offers good price. Trust in product quality. Offers good range of products.

16

25

23

23

11

31

16

32

17

25

33

10

Personal Care 3 Products

23

24

37

Wet market (inside) Grocery store

Supermarket Beverage agent

Neighbourhood store Others

Others include department store, stall/kiosk around market, superstore, wholesale store, hawker trolley, pharmacy

Source: CI Shopper - Household Category Managers

45

The Death Of The Wet Market?

Current behaviour 93 22 3
Future behaviour

Perishable Food Perishable Food Non-perishable Food Non-perishable Food Household Products Household Products Personal Care Products Personal Care Products Beverages Beverages
0 20

65

27

3 4

30

32

13

11

12

49

10

10

21

26

19

16

13

14

40

17

14

10

19

32

18

15

12

14

46

15

3 12

10

21

20

29

12

38

16

23

20 40 60 80 % of Household Category Managers

100

20 40 60 80 % of Household Category Managers

100

Wet market Supermarket Neighbourhood store Beverage agent Grocery store

46

Others

Supermarkets Are The Future

With wet markets still a part of daily life, presence in this outlet is essential for salience. Shoppers typically visits the market in the morning before work and as such has limited time for involved marketing activities such as sampling and detailed product explanations. Consumers mindset favours supermarkets as the outlet of the future. Despite the fact that they currently account for approximately 20% of grocery sales today they require more attention. Small in numbers but modern trade (self service) outlets have grown in number; 47 Supermarket / Hypermarket 6 Cash and carry wholesalers 150 Smaller self service outlets Shoppers visit the supermarket less often than other channels, however, they have more time when shopping here. This extended shopping time means more opportunities to attract her attention. She uses Supermarkets As a source of information (1/3 claim they source information on new trends from this channel); and As a source of entertainment (2/3 visit shopping centres as a form of entertainment)

47

Trends Impact on Retail Environment

Supermarkets now significant sales contributor Modern trade contributions growing exponentially Clearly the shopping environment of choice Department stores, cash and carry, fast food environments proliferate Consumer increasingly entertain out of home Outlets steadily increase to meet demand for up-scale premium environments

48

Key Consumer Trends

Key Consumer Trends

Disposable income and time increasing desire to experience new opportunities The Vietnamese are extraordinarily optimistic! Few have experienced a step back and the majority grew up post war Success is imbued in pride which has to be visual or verbalised to be recognised Youth translate the consumer world for their parents - they are more consumer and ad savvy Metro consumers increasingly technology and financial savvy Modern trade FMCG contributions growing exponentially Marketers increasingly seek to access rural markets Marketers increasingly fragment markets Plethora of brand extensions to satisfy different consumer needs

50

Questions
More information at www.customerinsights.com

For More Information Contact

Customer Insights 7 Nguyen Trung Truc Street, District 1, Ho Chi Minh City, Vietnam Telephone: (84 8) 822 7727 Fax: (84 8) 822 7728 Email: info@customerinsights.com Website: www.customerinsights.com