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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 potential – Post WTO
Asian / Vietnamese Population Trends
Asian / Vietnamese Wealth Trends
Asian / Vietnamese Consumption Trends
Asian / Vietnamese Attitudinal Trends

Vietnam’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 consumer
future – Post WTO Vietnam
Population Trends
Asia’s Population (60% of global pop.)
Population in Million Asia = 3,137,500,000

Chindia China / India 77% on the Asian population 2400

Indonesia 246

Japan 127

Philippines 90

Vietnam 85
Vietnam = 2.7 % of Asia
Thailand 65

Korea 49

Malaysia 25

Taiwan 23

Hong Kong 7

Singapore 4.5

Vietnam is home to Asia’s 6th largest population


*Population estimated in 2006
*Source: GeoHive (www.xist.org/earth/)
Vietnam has Asia’s 2nd 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 population growth rate
Population Growth %
Philippine 1.8

Malaysia 1.78

Singapore 1.42

Indonesia 1.41

India 1.38

Vietnam 1.20

Thailand 0.68

Taiwan 0.61

China 0.59

Hong Kong 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 2nd largest family size
Australia 60 10

New Zealand 58 11

Japan 56 10

S Korea 39 11

Hong Kong 38 15

Taiwan 31 23

Singapore 30 26

China 29 17

Thailand 29 20

Indonesia 21 37

Malaysia 19 47

Vietnam 15 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 Page 8


**Source: GeoHive (www.xist.org/earth/)
Vietnam has the 3rd largest female working pop.
79.2
China 88.8

77.7
Thailand 89.7
Female(%)

77.3
Vietnam
83.5
Male (%)
59.7
Korea 79.9

59.5
Indonesia 84.7

52
Philippines 82.6

51.9
Malaysia
81.4

51.2
Taiwan 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)
Number of Household - Millions
400 372.10

350

300

250
206.30
200

150

100
58.60 48.50
50 25.20 17.30 17.20 17.10
7.50 7.20 5.60 2.20 1.50 1.00
-
dia

sia

e
sia

es
a

nd

lia
ina

an

HK

or
pa

re

an
na

pin

ra
la

iw

ay
In

ne
Ch

ap
Ko
Ja

al
ai
et

st

Ta

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ilip
do

ng
Th

Ze
Vi

Au

M
In

Ph

Si
w
Ne
Vietnam has the 5th most number of households in Asia,
making Vietnam very attractive for Investment
**Source: GeoHive (www.xist.org/earth
Vietnam has Asia’s smallest urban pop.
100 99
82 76 69
47 40

Singapore Hongkong N.Z. Australia Taiwan Korea Japan

66Cities 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
GDP per head In USD
40,000
36,260
35,390
35,000

30,000
27,320 27,150
25,390
25,000

20,000
16,480
15,110
15,000

10,000

5,150
5,000
2,750
1,700 1,290 1,190
740 730
-
Th a

a
re

Ph sia
Ze n

am
s
ea

nd
lia

na
M n
HK
in d

ne

di
si
pa

a
an

po
tra

la

hi
or

iw

ay

In
ne

tn
pi
Ja

al

C
ai
ga

Ta

ie
us

al

ilip
do

V
A

In
S
ew
N

Vietnam’s GDP/ per capita has increase seven fold in the past 15 years
The emergence of SEC Scale
A = US $1,001 +

an urban middle class 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 Somewhat lower than today


Equal to today Somewhat higher than today
Much 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 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 National National National National National National
Vietnam China Thailand Taiwan Malaysia Korea Philippines

Total FMCG – Value Growth Rate (%) - Year 2006 vs. Year 2005
Asia’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
100 98 94 93 88
80 75

Singapore Taiwan Hongkong Korea Japan Australia N.Z.


90
79 78
70
58

30

13

Thailand Philippines Malaysia China VN Indonesia India

Bye Bye Bamboo telephone, we’re


getting connected, like the rest of Asia
Own personal mobile phone – urban only
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

Growth in internet usage will be key


to catching up to the rest of Asia
In-home email account - Urban only
Retail environment in Asia - 2006

Direct Sales

Traditional Trade

82 Modern Trade

51 55 54 60
48
33 34
12

a
ia

es

an
a
nd
m

n
si
in

re

pa
As

na

in

iw
la

ay
Ch

Ko

Ja
pp

ai
et

Ta

al
Th
Vi

ili

M
Ph

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 71

United States N=1192 39 54 61

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
Question :How proud are you to be [Nationality]?
1 Very proud
Philippines N=1200 87 11 21 2 Quite proud
3 Not very proud
4 Not at all proud
Viet Nam N=989 78 20 2

United States N=1184 72 24 4 Very proud

India N=1896 71 22 62
Quite proud
Indonesia N=995 48 45 61
Not very proud
Singapore N=1508 44 50 61

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
Question :Do you think that a woman
has to have children in order to be
Indonesia N=983 93 7 fulfilled or is this not necessary?

0 Not necessary
Korea N=1043 92 8 1 Needs children
World Values Survey

Philippines N=1182 87 13

Viet Nam N=959 86 14

India N=1917 85 15 Needs children


Not necessary
Japan N=917 66 34

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


Question :With which of these two statements do you tend to agree?

Respect for Parents A.


B.
One must always love and respect parents.
Parents must earn love and respect
1 Always
2 Earned
3 Neither
World Values Survey

Viet Nam N=993 99.3 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


Earned
Indonesia N=987 90.2 9.8

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 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 -Television
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
Some foreign involvement expected soon
Source: TNS Media Vietnam
More choices to watch - Hanoi

14.0
13.0

Domestic channel
12.0 11.5
Foreign channel 10.7
10.3
10.0
Number of channels

8.0
6.3
6.0
4.5
4.0
4.0

2.0

0.0
0.0
2001 2005 2006 2007

Foreign programming has already gained


preference in Hanoi on a short 3 years
Source: TNS Media Habit Survey, 2001-2007
More choices to watch - HCMC

25.0

Domestic channel
20.2
20.0 Foreign channel
16.5

15.0 13.2
Number of
channels

10.1
9.4
10.0

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

Cab/sat TV
200

Free2Air TV
150
1st half 1st half 1st half 1st half 1st half
2003 2004 2005 2006 2007
Satellite & Cable TV are beginning
to challenge, Free to Air programming
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 Rural
Consumer
Why Rural Vietnam becomes more & more
important?

4 Key Urban Cities Still plays a vital role in the economy


Population (%): 9.9 Lots of information available
GDP (%): 25.6 Battlefield with fierce competition

Secondary Cities The next engine of growth, but limited


Population (%): 13.6 Limited information available
GDP (%): 11.9 Battlefield in the near future

Rural Locations The future mass engine of growth


Population (%): 76.5 No full insights available at the moment
GDP (%): 62.5 1st entry advantage for manufacturers

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What are the available consumers in each region?
(available consumers are those with monthly income > 1.5mln VND)

42% with income >


1.5mln VND
Low Income: 7%
62% population aged
14-55 Medium Income:
53%
Total available
consumers: 17mln
Rural High Income: 40%

Low Income: 58%


Urban
Medium Income:
39% 93% with income >
1.5mln VND
High Income: 3%
62% population aged
14-55
Low Income: < 1.5 mln VND per month
Medium Income: 1.5-4.5 mln VND per month Total available
High Income: >4.5 mln VND per month consumers: 5mln

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households
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Understanding an average Rural family…

Household 4 members
vs. 4.6 in urban
Size

100% Farmer/
traditional Shopping Shop Owner
Employment
trade vs. 14% Habits vs. employee &
Modern Trade in self-employed in
urban urban

Rural

425,000 Monthly
Monthly 1.5-3 mln
VND vs. 681,000 FMCG VND vs. 4.2 mln
Income
VND in urban Spending in urban

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households
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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
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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
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Durable Ownership – Luxury Items
There’s also a big gap in ownership of high-tech equipments between rural
and urban households

2% in rural 28% in rural


vs. 22% in urban vs. 42% in urban

Air Conditioner Video Recorder/ Player

3% in rural 9% in rural
vs. 34% in urban vs. 35% in urban

Still Camera Hi-fi / Music System

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households
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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% Insurance: 7% in Motorbike less than


in Rural vs. 66% in Rural vs. 9% in Urban 10mil VND: 40%
Urban
Bank account: 6% in Motorbike 11-15mil
Internet: 1% in Rural Rural vs. 35% in Urban VND: 31%
vs. 45% in Urban
ATM card: 4% in Motorbike 16-39mil
Rural vs. 20% in Urban VND: 13%
Motorbike in Urban:
92%

Source: TNS Vietnam Rural Pilot Survey & TNS Worldpanel Vietnam – % of households

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12 Major Trends
Of Change

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Upgrading needs

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Question: For each of the following aspects, indicate
how important it is in your life. % saying “very important”

Family and Work on a four point scale.


World Values Survey

China

Korea

Philippines Family

Indonesia

Viet Nam
Work
Singapore

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

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Source: World value survey
`
Convenience
Convenience

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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

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Indulgence
(Health consciousness)

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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-
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11y.o – NIN & Nestlé `
Status
Men’s care
(displaying wealth)

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Luxury Goods penetration

22% urban 42% urban

Luxury goods are


DVD
permeating into a
Air Conditioner
3rd of Vietnamese
urban households,
35% urban
34% urban Changing
entertainment
habits

Home Entertainment
System
Still Camera

the sixth sense of business™ 57


Source: TNS Vietnam
`
Rural Pilot Survey - % of households
Female Emancipation
Health & Beauty

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Ideal female occupation

“Unlike my mother’s time, women now aspire to be more


26
independent by working & earning money in order
to have their own income instead of being housewives”
21%

18
16

14
12
11 12
10
10

7 6
6 5 5

Business manager Look after the family / Business owner / Teacher Doctor/ pharmacist
home entrepreneur

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
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Innovation
Innovation

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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
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Source: TNS VietCyle
`
– N = 2000 Urban
Differentiation

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Vietnamese youth are flexing their creative
flair
“Short hair “Being dynamic is a key to success”
styles look
dynamic &
fashionable”
“Wearing different style of
clothes is a way to make
myself differentiated”

Youth are Changing, just to be different


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Urban
Migration

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Vietnam has Asia’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

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Source: Country Statistics
`
Offices
Technology savvy

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Technology embracers
100

84

80
74
68

60 58
53
49

40
40

26
24
21 22
20 17 16

1 1
0
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
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Source: TNS VietCycle
`
Media fragmentation

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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

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Cost of Living in New York = 100 - 2006
Philippines 43

India 45

Vietnam 62
Malaysia 68
Thailand 69
Indonesia 76
China 80

Taiwan 85

New Zealand 86
Australia 106
HK 107
Singapore 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 the sixth sense of business™ 71
**Source: GeoHive (www.xist.org/earth/)
`
Fading traditions

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A Historical Perspective on the Future
What genre of music do you prefer?

Total 12 5 44 40
Economic
Boom

15-19 22 7 66 5

By age
20-24 24 5 49 23
ing
Economic fad
a r e
reform ns
25-34 5 5 43
ditio 47
T ra
Post –war
Baby Boom
35-45 5 3 28 64

The lean
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
years
Western Asian Vietnamese pop Vietnamese traditional

Vietnamese pop music is a reflection of modern culture,


Identifying how traditions will Change in the future
Source: TNS VietCycle
Summation

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Summation

Population shifts will impact both spending


power & consumer needs

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`
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”

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`
Summation

Youth culture will need to be embraced, while


managing expectations to ensure
sustainability

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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
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…and so have we….

FSA / TNS 1996 TNS 2006


…and so have I….

Hanoi, Jan. 1994 HCMC, Oct. 2007


Thank You / Cam On!
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