Just a few years ago, a major bank predicted that Indonesians would, on average, earn US$3,000 per capita by 2020. At the beginning of 2011, Indonesia hit that mark, beating the prediction by nearly a decade. While other countries in the region and around the globe have been affected by significant economic uncertainty, Indonesia’s economy is running at full bore, with a rapidly expanding middle class that is now the third-largest in the world. At 48 percent of the population and accounting for 44 percent of all FMCG spending in the country, middle class consumers are shaping today’s retail scene. Recently, during its 35^th Annual Marketing and Media Presentation in Jakarta, Nielsen provided nearly 1,000 clients and stakeholders with a snapshot of what Indonesia’s middle class is doing in terms of media usage and shopping patterns, and how companies can reach them effectively.

While all income groups have benefited from Indonesia’s accelerated growth, the middle class has enjoyed the most rapid advances in terms of spending increases and quality of life improvement, and increased demand in a range of consumer categories from home electronics and appliances to health and beauty products. The Indonesian middle class prefers to combine the convenience and fresh offerings found through traditional retail channels such as wet markets with the price-savings and expansive product offerings of the modern trade.

What are middle class Indonesians buying?
Some key facts about middle class shopping trends that retailers and manufacturers need to consider include:

• Fresh food makes up 37 percent of their monthly spending. Ice cream, noodles, and biscuits are the biggest movers thanks to product innovations.
• Value for money is key for nearly all (97%) middle class shoppers.
• 88 percent of middle class consumers said they want to experiment with brands.
• More than half (53%) shop in a modern trade outlet twice a month.
• They tend to visit the minimarket closest to their home, but promotions can disrupt their regular routine: 90 percent are looking for stores “with attractive and interesting promotions.” They also desire a diverse assortment of goods, friendly service and a comfortable environment.
• Mini-markets see the highest levels of spending, followed by supermarkets, with traditional retailers still highly important for fresh foods and the location convenience they offer.

What are middle class Indonesians watching?
Indonesians of all income levels love to watch TV, and nearly all (95%) middle class homes own a TV, with 96 percent watching programs every day. Other traditional media such as radio and newspapers are also popular, but are increasingly being consumed online, a trend driven primarily by Indonesian youth.  Internet usage and mobile phone ownership are surging, each increasing every quarter. Mobile penetration is already high, and purchase intent for smartphones is strong. These devices are fast becoming the primary platform for a variety of activities, such as watching video, accessing the Internet and connecting to social networks, opening a space for marketers and content providers to focus their efforts to include mobile in their content distribution. Nevertheless, relevancy and convenience to the consumers remain key to mobile content distribution.

Key media usage trends for middle class Indonesians include:

• Middle class Indonesian households watch an average of 4.5 hours of TV a day. Sports programming is the most popular, followed by drama series and other entertainment genres.
• Local content is appealing to middle class, which is why each city has its own newspaper.
• Almost a quarter (22%) of middle class consumers have Internet access, and spend 1.5 hours a day accessing the internet.
• Nearly three-quarters of middle class consumers in major cities (71%) have a mobile phone, with almost half saying they use the devices to access the Internet. More than one-third (35%) have a smartphone.
• Indonesians love social networking: 94 percent are connected to social networks, and 89 percent have a Facebook account.

Reaching the middle class
Given the abundance of opportunities in the marketplace, how can retailers, manufacturers, marketers and media companies connect with the middle class consumer? In a number of consumer goods categories, innovation has proven to be a growth engine. For example, in the ice cream category, the number of new varieties has surged by nearly 32 percent, with single packs the driver of sales. Volume sales of snack noodles surged 92 percent in the past year, thanks in large part to new flavors and a repositioning of the category (what used to be seen as a basic meal now is a great, convenient snack). The instant coffee market has expanded, and middle class consumers contributed 71 percent of volume growth within that category.  In contrast, categories that presented few innovations saw slower growth.

In addition to innovation, other trends seen among Indonesia’s middle class consumers include:

• Kids playing a role in modern shopping: 95 percent said that they “hardly ever refuse” the invitation from their kids to go to the minimarket.
• Convenience is key: today’s middle class consumers are pressed for time, with the demands of work and family life. Products that make life a bit easier are clear winners.
• Appeal to the fact that they are smart shoppers: Indonesians know how much items cost and where they are located in the store. Retailers must create a welcoming environment, promote value for money and win customers’ loyalty.
• Connect with consumers: they are increasingly online, and they discuss brands and products in that space. Retailers must strive to engage with them on social networks.
• Be relevant: tailor marketing – especially online and mobile campaigns – to consumers and their need-states.

Country by country, peak viewing times vary somewhat:

• South Korea has the latest viewing peak, with the highest proportion of viewers (26%) tuning in between 10pm and 11pm
• New Zealand and Australia have the highest proportion of viewers tuning in at any particular time – on average, 40 percent of New Zealanders and Australians watch television between the hours of 8pm and 9pm, closely followed by the Philippines with 39 percent
• New Zealand has the highest number of viewers outside of the 8pm to 9pm peak time – between 7pm and 8pm 39 percent of New Zealanders tune in to their televisions and the 6pm to 7pm time slot also enjoys around 35 percent of New Zealand viewers
• Malaysia has the largest proportion of late night viewers, with one quarter of Malaysians still watching television between the hours of 11pm and midnight
• Filipinos are the most likely to tune in to daytime television – more than one in five (22%) watch television between 12pm and 2pm.

“Third quarter was volatile and challenging for global economies and financial markets amid stagnant U.S. unemployment figures and a worsening euro zone debt crisis,” said Dr. Venkatesh Bala, Chief Economist at The Cambridge Group, a part of Nielsen. “A recessionary mindset is growing among consumers as more than half say they are currently in a recession—up four percentage points from last quarter and seven points from the start of the year. The result is continued spending restraint for discretionary expenses, which is expected to continue into the next year.”

The survey tracks consumer confidence, major concerns and spending intentions among consumers in 56 countries. Consumer confidence levels above and below a baseline of 100 indicate degrees of optimism and pessimism. U.S. consumer confidence dropped one point to an index of 77. Consumer confidence also fell by one point last quarter in China from 105 to 104 and one point in Germany, Europe’s largest economy.

Economic and job security concerns mount
In the latest round of the survey, conducted between August 30 and September 16, 2011, the economy re-emerged as the top concern among 18 percent of online consumers around the globe. The economy last topped concerns in Q4 2010, before it was replaced by worries over increasing food prices in the first half of this year. Job security follows close behind for 14 percent of consumers, rising five percentage points from three months ago. Managing a work/life balance, increasing food prices and concerns about health round out the top five most stressful issues for respondents.

“Driven by a stalled job market and uncertainty about the future course of the global economy, concerns over job security and other economic risks rise to new heights in the third quarter in many parts of the world,” said Dr. Bala. In North America, one-in-three are concerned about the economy—up seven points from second quarter and more than one-in-10 (12%) are worried about job security—an increase of five points from three months ago.

In Latin America, concerns over job security (15%) and crime (12%) took a slight edge over the economy (11%). In Middle East/Africa, while job security retained the top spot in this region, the quarter-on-quarter increase is noteworthy—jumping nine points to 20 percent up from 11 percent in second quarter. In Asia Pacific, the economy (18%) and job security (15%) rose eight and seven points, respectively.

For more detail and insight, download Nielsen’s Q3 2011 Consumer Confidence report.

The strong growth in FMCG sales value in 2010 has continued into the first half of 2011, but this is increasingly being driven by inflation as volume growth has slowed down.

This slowdown has occurred despite the fact that the number of stores available to consumers has expanded. Modern trade stores expanded by some 13 percent in 2010, particularly in the smaller store formats, such as mini-markets and convenience stores. Convenience stores gained significantly in Thailand, Taiwan and Korea while mini-markets/small supermarkets grew strongly in Indonesia and Malaysia as shoppers embraced them as more convenient shopping destinations.  Traditional trade stores held their ground and are still a significant presence in many Asian countries, particularly in rural areas, and will remain so for the foreseeable future.

If inflation continues to remain an issue and the global economic situation deteriorates further, we are likely to see shopper behavior revert back to what it was in 2009.  This could be relatively good news for grocery retailers in developed Asian markets where consumers may cut back on out-of-home expenditures and spend more on eating at home. In these markets we actually saw the strongest volume growth of the decade for groceries in 2009.  In the developing markets, the impact is more likely to be negative as mid and lower income shoppers are forced to cut back spending on non-necessity products.

Whatever happens with the economy in the next 12 months, shoppers’ increased focus on finding a good deal is unlikely to change, as retailers continue to try and win the battle for shopper loyalty by offering them better value. Other trends to watch include:

• The developing markets of Vietnam, Indonesia, China and India will continue to show good growth and will be the primary focus for retailer investment in new operations and store development.

• From a channel perspective, the growth of smaller formats is likely to continue to meet shopper’s needs for convenience although any significant downturn in the economic situation is likely to put pressure on convenience stores with their focus on impulse/non-necessity categories.

• While online sales remain low in most Asian countries, we will continue to see grocery retailers in the region investing in developing their Internet presences, both in terms of selling products and actively communicating and building relationships with their shoppers via social media.

• Strong smart phone growth will also increase the opportunity for retailers to actively interact with a wider shopper audience, and new apps are sure to be an area of innovation over the next few years.

These trends are part of Nielsen’s latest Retail and Shopper Trends Report (Asia Pacific, 2011) which is available upon request.

When considering new and flexible retail formats for grocery shopping, specific preferences emerge when it comes to particular online delivery options, according to Nielsen’s 2011 Global Online Survey of more than 25,000 Internet respondents across 51 countries. While more than half (52%) of global online consumers say they are likely to place a grocery order online if it is delivered to their homes, less than one-third feel the same if they are required to pick up the online order curbside (27%) or via a drive-thru window (30%). Interestingly, more consumers—just over one-third (36%)—say they are willing to pick up an online order inside the store.

The online shopping/home delivery option is most embraced by consumers in Asia Pacific, where more than three-quarters (77%) say they are likely to take advantage of this option, which contrasts sharply with one-fifth of North Americans (20%) and one-third (35%) of Europeans. “The main resistance in developed countries in Europe and North America is primarily due to the high volume of grocery stores that are available,” said Jean-Jacques Vandenheede, Director Retailer Industry Insights, Nielsen. “In Asia Pacific, fewer physical stores and a very digital consumer base equal a fertile distribution channel for online.”  About half of respondents in Middle East/Africa (48%) and Latin America (51%) indicated they are likely to shop for groceries online for home delivery.

Using hand-held scanners to record purchases while shopping to avoid waiting on checkout lines was welcomed by half of global online consumers. While interest is again highest among Asia Pacific consumers (60% interested and only 14% unlikely to try it), in each region, more consumers indicated they are likely to try it than not.

For more detail and regional insights, download: Shopping & Saving Strategies Around the World.

By far, North Americans are the mostly likely to make a shopping trip to stock up on groceries, with 60 percent of North American consumers indicating their primary reason to make a trip is to stock up on staples. By contrast, 18 percent say they make a trip to pick up a few items, and just seven percent say they shop when they run out of something at home. “The impact of high gas prices in the U.S. has prompted consumers to combine errands and trips,” said Hale. “This trip consolidation has resulted in a reduction in small grocery trips in the U.S.”

A more even distribution of shopping trip missions is reported in Europe, where 37 percent say they stock up on grocery trips, one-in-five (21%) shop when needing a few essential items, and 25 percent make a quick shopping trip when they run out of something at home. “Retail trip missions in Europe are dictated by store infrastructure,” said Jean-Jacques Vandenheede, Director Retailer Industry Insights, Nielsen. “In countries where shoppers have a high density of stores to choose from, such as in Italy or Germany, shoppers tend to shop more often. In countries that are dominated by hypermarkets with less retailer availability, stocking-up is the more dominant shopping pattern.”

Conversely, stocking up for groceries is less common in Asia Pacific, Latin America and in the Middle East/Africa where roughly one-in-five consumers say that is the primary reason for the shopping trip. Across both the Asia Pacific and Middle East/Africa regions, about one-third of online consumers say a quick trip for needed items is the primary reason for shopping trips (32% and 33%, respectively). A similar, but slightly smaller, number say trips are made to purchase a few essential items (28% of trips in Middle East/Africa and 29% of trips in Asia Pacific). Similarly, in Latin America, the most commonly reported reason for making a shopping trip among one-third of respondents is to pick up a few essential items and one-quarter say they make a quick trip to replenish.

For more detail and regional insights, download: Shopping & Saving Strategies Around the World.

Reported use of coupons is greatest in North America (65%) and Asia Pacific (55%). The United States (66%), China (67%) and Hong Kong (65%) are the three leading markets for reported coupon use as a way to save money.

“About 80 percent of U.S. households use manufacturer coupons across all retail outlets, which is up slightly from 2009 to 2010,” said Todd Hale, SVP Consumer & Shopper Insights, Nielsen. “But coupon usage is concentrated—70 percent of 2010 manufacturer coupon purchases came from just 13 percent of coupon-using households. These coupon enthusiasts are big spenders across the total store and are young, more affluent and have large households.”

“In China, 35 percent of hypermarket sales in key cities are sold on promotion—a stable contribution over the past two years,” said Peter Gale, Managing Director Retail Sales, Nielsen Asia Pacific and Greater China. “In most Asian countries, simple price cut promotions are the main promotional vehicle supported by direct mail leaflets and newspaper advertising.”

While 38 percent of European consumers indicate using coupons to save, there is wide variation within the continent. While at least half of consumers reported coupon use in several western and southern European countries, such as Belgium and Portugal (63%), Greece (55%), France (53%), and Spain (50%), in other markets, particularly in northern and Eastern Europe, coupon use is much less prevalent. “Belgians are the record holders in terms of coupon redemption, but in countries like Germany or the Netherlands, their usage is very marginal,” said Jean-Jacques Vandenheede, Director, Retail Industry Insights, Nielsen Europe. “Many retailers in Europe are rather reluctant towards that practice.”

In Latin America and in Middle East/Africa, reported coupon use is much less common as a saving strategy. Only 25 percent of consumers in Latin America and 18 percent of respondents from Middle Eastern/African markets report using coupons. “In the Middle East, price cuts is the most popular promotional vehicle used by retailers along with volume discounts,” said Bassel Adel, Director Retail Services, Nielsen Middle East, North Africa, Pakistan. “However, consumers are gaining a greater awareness of leaflets, which are driving store visits and prompting retailers to actively advertise promotions in newspapers.”

For more detail and regional insights, download: Shopping & Saving Strategies Around the World.

The study shows that while factors relating to value and price are important drivers of where to shop and what to buy, retailers and manufacturers who offer good values—whether through sales and promotions or via larger-sized economy packaging—stand to gain the most from consumers who continue efforts to stretch their money in a tough economy.

The preference for value over lowest prices in retailer choice was found to be true in Asia Pacific, Europe, Latin America, and North America, while slightly more Middle East/Africa respondents preferred lowest overall prices (59%) to good values (54%). Other attributes rated as “highly influential” by more than half of global online consumers were convenient location, great sales/promotions, well-stocked shelves and high-quality fresh produce.

Bigger is Better & Quality is Key
Commodity and raw material costs continue to rise, squeezing profit opportunities for producers and brands. For CPG manufacturers and retailers seeking direction on consumer demand, the study found a clear preference for strategies that increase value—even in the form of more expensive overall package prices.

When given the choice of either purchasing large value packs at a lower price per serving or smaller pack sizes at a lower cost, global online consumers voted 2:1 for the former. Thirty-six percent of global online respondents indicated they would prefer manufacturers to offer larger economy size packages, with lower prices per usage/serving. Half as many respondents (18%) said they would prefer new, smaller-sized packages at lower prices, and only about one-in-ten (12%) would prefer modestly downsized packages at the existing price level.

Roughly one-third of consumers in every region say they would prefer the larger, economy-sized packages, but the sentiment is most pronounced in North America, where 39 percent of consumers indicated a preference for value packs, 20 percent for smaller packages at lower prices, and 11 percent for modestly downsized packages at current prices. “However, in tough economic times and with wide fluctuations in commodity pricing, downsizing has been a successful strategy taken by manufacturers and retailers,” said Todd Hale, SVP Consumer & Shopper Insights, Nielsen. “To remain profitable, retailers and manufacturers have a few choices: raise prices to cover input increases, modify ingredients to make products cost less to produce or downsize.”

Consumers around the world make it clear that quality is not to be compromised. Producing slightly lower quality products, but keeping prices the same is the least favored option among consumers in all regions. Raising prices is also a strategy that consumers do not embrace.

For more detail and regional insights, download: Shopping & Saving Strategies Around the World.

As inflationary concerns continue to mount across Asia Pacific, more shoppers are turning to promotional offers for some respite from the rising prices of fast-moving consumer goods (FMCGs), according to a Nielsen study on shopper trends. Shoppers in Vietnam and Malaysia were particularly motivated by promotions, followed by shoppers in China.

In Vietnam, while FMCG retail sales grew the fastest in Asia Pacific during the first quarter of the year, a closer look at the numbers revealed that price increases accounted for the majority (75%) of that growth. Not surprisingly given that they have been hit harder by inflation than most other countries, almost 9 out of 10 Vietnamese shoppers claimed they were promotion-seekers, or those who say they will change brands on promotion, search for promotions or change stores due to promotions on offer. This represents an increase of 5 and 18 percentage points from 2009 and 2008 respectively.

Malaysian shoppers are hot on the heels of those in Vietnam, with 86 percent saying they seek promotions, up from 77 percent in 2008. For China, the increase has been more moderate: from 74 percent in 2008 to 80 percent last year. While the number of self-professed promotion-seekers increased in just about every market, one country bucked the trend: Korea. The country’s shoppers were actually less promotionally driven than the year before, with 61 percent of Koreans saying they were enticed by promotions compared to 70 percent the year before – well below the Asia Pacific average of 68 percent.

Apart from the impact of inflation, shoppers are being exposed to a greater number of creative promotional offers as retailers and brand owners step up the momentum to gain share and/or retain their customers. This level of activity is going to be the new ‘norm’ as long as inflation does not let up and as shoppers seek more value. The real opportunity however, lies in building shopper and brand loyalty.

Interestingly, while Vietnamese shoppers are most focused on promotions, they scored among the lowest in terms of price consciousness across the region. Just 56 percent of shoppers in the country say they know all the prices of items they buy regularly/know the prices of most items and notice prices changes, compared to the regional average of 60 percent.  Shoppers in India (88%) on the other hand, are the most price-conscious in the region, followed by Malaysian (68%) and Singaporean (62%) shoppers.

Male shoppers a bigger force to reckon with

As the number of male main shoppers grows steadily across the region, marketers will increasingly need to tailor their strategies to the needs and wants of this group. In particular, marketers should place more emphasis on markets like Malaysia, which currently still has the distinction of having the highest proportion of males who say they are the main shoppers for the household (37%), and the Philippines (33%).  China (32%), which saw the highest jump in the proportion of male “main shoppers” from previous levels, also warrants a good re-look.

Vietnamese males, however, are the most “traditional” compared to their regional counterparts, with only 4 percent saying they shoulder the responsibility of being the main shopper for the household, the lowest score in the region for the past seven years.

Who are the most “impulsive” shoppers?

Shoppers in India (33%), Hong Kong (30%) and the Philippines (29%) stand out as the most impulsive (i.e., they usually do not plan their shopping trips) shoppers in the region.  Across the region, an average of 20 percent of shoppers say they usually do not plan shopping trips. In these markets, retailers can re-evaluate their store layouts to encourage more ‘grab-and-go’ shopping, and devise strategies that suit the needs of the ‘impulsive’.

On the other side of the coin, Korean (98%) and Taiwanese (94%) shoppers were the most likely to plan their shopping trips.

Across the countries studied, shoppers in Hong Kong are also the most prolific “top-up” shoppers, averaging 10 such trips in a month, almost twice the regional average and more than thrice the monthly frequency of their “main” shopping trips.  A similar trend can be found in Singapore, where shoppers make an average of about 8 “top-up” trips a month, also three times more than their “main” trips, and Indonesia, with an average of 6.6 and 1.8 “top-up” and “main” trips respectively.

The retail marketplace continues to evolve rapidly, presenting significant opportunities for store owners even in challenging environments. The key is as always in knowing how to best leverage these trends via marketing, promotions and even store layout and understanding the needs and desires of today’s consumers.

Water is the essence of life. So it should be little surprise that among the top brands in Indonesia is the bottled water brand whose name is a synonym for water, according to a “top of mind recall” consumer survey conducted by Nielsen in the first quarter of 2011 in Asia Pac across several categories. From still to sparkling, from flavored to fortified, there is something for every consumer of bottled water in Asia, catering to basic hydration as well as lifestyle needs.

The many attempts by manufacturers to move consumers up the mineral water value chain beyond just basic needs have generally yielded limited results, as it looks like Asian consumers still tend to prefer their bottled water “still” and au naturel. Consumers across several markets in Asia prefer “home-grown” brands; private labels are also popular, especially where consumers view this category as a commodity like sugar. In South Korea, almost all of the mineral water retail sales are domestic brands; the same trend holds true in Taiwan. Meanwhile in Hong Kong, the clear market leader is a brand produced by the local outlet of a major soft drink company.

Even as mineral water sales continue to grow, some markets are reaching the saturation point, and this has provided the impetus for manufacturers to focus their efforts in search for new growth. In Taiwan, flavored water currently accounts for just about 1 percent of total sales value. In Singapore, the market has remained stagnant between 6-8 percent over the past three years. The lackluster growth could be due to the higher price tags placed on flavored and sparkling waters, and consumers are not seeing the “pay-off” by paying extra.

The payoff for manufacturers who continue to innovate can be significant. While water with “extras” has relatively small market shares currently, the upside potential is clear. Based on Nielsen’s analysis in Singapore, flavored water only represents about 3 percent of retail sales volume, but accounts for 8 percent of sales value. In other words, one unit of sales volume will see a corresponding increase in sales value by a factor of more than 2.5 times. We found similar results when it comes to sparkling water. Imported brands command an even higher “multiplier effect.”

Manufacturers that connect with consumers by injecting marketing finesse into the equation have been rewarded with “new” growth. Take the example of a leading flavored fortified water brand that was launched in Singapore in November 2010. The brand gained almost 1 percent share of retail sales volume and a corresponding 2.5 percent share of sales value in just four months. The campaign, featuring innovative bottle packaging in a variety of flavors and catchy copy, offered to hydrate consumers while providing the nutrients they may be missing. At the same time, it provided an emotional connection with celebrities who have endorsed the product.

Going beyond the “commodity” bottled water, the sparkling and/or flavored versions can satisfy certain taste buds as well as lifestyle or emotional needs as we saw in the case of the brand in Singapore.  In addition, these “premium” waters, often accompanied by more appealing packaging and promising benefits beyond hydration, can serve to expand the category by drawing new consumers who do not currently buy bottled water.