It’s a new era in Indonesia: global capital markets have recovered significantly since the financial crisis of 2008, and in 2010 the GDP grew 6.1 percent and GDP per capita hit US$3,000, according to the IMF World Fact Book. If the experiences of China and South Korea are any indication, that income level marks the start of accelerated growth, with strong demand across a range of commercial sectors such as automotive, health, insurance and travel. Manufacturers of fast-moving consumer goods (FMCG) can also expect to experience stronger growth this year; a new retail audit conducted by The Nielsen Company found that industry to be growing at twice the pace of the economy in 2010.

As consumers saw economic conditions improve, they tended to adjust their purchasing habits, increasing their willingness to spend money or becoming more adventurous by buying in categories they had never before considered. Some consumers used products more frequently or “traded up” to more premium versions of products they use.

Upper class consumers seek premium products
Consuming “regular” products is no longer enough for upper-class shoppers, and they are now seeking products that provide them with greater benefit and added value. Nielsen’s home panel reported that household spending for health and lifestyle categories has increased since 2009. As time is also a concern for these consumers, products that provide them with convenience will see growth.

Nielsen observed three categories that experienced growth by answering the needs of the upper class: lifestyle, health and convenience.

1. Hair conditioners: By offering convenience with their leave-on product, manufacturers of hair conditioners saw value sales grow 68 percent in 2010. The “Leave On” variant offers practicality, though the price is more than twice of regular hair conditioner.
2. Liquid Milk: Sales grew 18 percent, with brands promoting health-related benefits such as low/non-fat, added calcium, probiotic qualities and kids nutrition.
3. Toothpaste: Although it is already purchased by nearly all households in Indonesia, the sales value for this category still recorded 10 percent growth, driven mainly by medicated segments which grew 17 percent in 2010. The new variants promise stronger teeth, sensitivity reduction, calcium, anti-bacterial, natural and herbal.

Middle and lower class consumers buy products that are considered premium
As the upper class is seeking more benefits, the middle and lower class consumers are starting to buy products that they used to consider premium. Nielsen observed three categories (Cheese, Frozen Meats and Baby Diapers) that experienced increases in the number of household purchases.

1. Smaller packages of cheese have opened to the mid-lower income segment. The category experienced 13 percent growth in sales value in 2010, with the annual sales value of smaller pack size doubling in 2010.
2. Household spending for frozen fish/meat experienced a 23 percent increase in 2010 among the middle class and 32 percent among the lower class.
3. Diaper single packs posted 93 percent growth in sales in 2010, with the variant providing affordability and convenience to middle-lower consumers.

The growth in these categories was also influenced by other factors, such as driving availability in more outlets and spending more in advertising to increase awareness and drive purchases. Nielsen’s retail audit found that both cheese and baby diapers have increased their availability by expanding the number of outlets in which they could be bought by 17 percent and 9 percent, respectively. Advertising spending in all six of these categories grew at rates higher than 2010 total advertising growth: Hair Conditioner (+22%), Liquid Milk (+52%), Toothpaste (+35%), Cheese (+32%), Frozen Food (+39%) and Diapers (+70%).

To grow in this new era, FMCG manufacturers need to adapt to these changes in consumer behavior by driving:

1. Innovation, by understanding the need-gaps of upper class consumers, especially in area of convenience, health and lifestyle.
2. Accessibility, by understanding purchase behavior of middle to lower class consumers and ensure availability of smaller pack sizes at the right price.
3. Portfolio management, by having the right product portfolio to meet different consumer purchase motivations and providing the right level of support.

A relief from the heat came in the form of increased consumption of soft drinks in Russia, which increased 24% since last year. Despite experiencing low levels of consumer confidence since last year, the market is now one step away from changing to positive dynamics as signs of recovery are beginning.

Dwight Watson, Managing Director, Nielsen Russia

Unlike its booming and optimistic BRIC neighbors, Russia has been experiencing the lowest level of consumer confidence. The deepest decline was registered in April 2009 that affected the consumer packaged goods (CPG) market. The drop in sales reached its lowest point in Q4 2009, when the total CPG retail volume decreased by almost 10%.

According to preliminary data, the Russian CPG market is one step away from changing to positive dynamics. For the first time in the past year and a half, the non-food sector reported positive growth in July 2010. The food-sector is still behind, but due to stable growth of basic products, and the jump of sales in seasonal products, the recovery process is speeding up.

Thirst Quenchers
One major contributor to this growth can be attributed to the hot summer weather and the increase in soft drink consumption compared to last year. The National Urban Retail sales volume of carbonated sweet drinks (CSD), ice tea, juices, and Kvass grew by 24% in total, compared to July 2009. And the results were even 8% higher than in pre-crisis July 2008.

The fastest sales dynamics is observed in comparatively young segments such as Kvass (fermented non-alcoholic beverage made from stale dark sourdough rye bread)—where growth was also fueled by consumers’ excitement about the innovative launches. This traditional national drink became an absolute champion with 89% volume growth. Carbonated sweet drinks—the largest segment of the market—grew by 19% in volume and mineral / drinking water rose by 33% in 19 major Russian Cities.

Return to Growth
Although other tracked CPG market categories did not report such high growth, the negative trend is bottoming out and we anticipate a return to volume growth. However, recent price increases taken in September are concerning, which could contribute negatively to consumers who need to continue tightening their spending belts. Manufacturers and retailers must address consumer’s need for value in order to drive category sales and market share and ensure success moving into 2011.

Nielsen’s latest Russian Market Tracker Pulse report on consumer packaged goods sales in Russia for the first half of 2010 details the market performance trends throughout 2009–2010. The quarterly tracker is based on Nielsen’s Retail Measurement data across categories from major segments such as packed food and beverages, personal care, home care, cigarettes, pet food—audited by Nielsen on the National Russia geography and contains Nielsen’s fast-moving consumer goods (FMCG) index, food and non-food indices, which contain information on nominal and volume sales dynamics and average price change.

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Overall, consumers worldwide remained cautious regarding pace and sustainability of the recovery as dollar and unit volume remain near neutral levels (in the -1% to 1% range). A summary of spending trends in 15 key countries is outlined below. The full report, State of the Global Consumer is available for download.

Longer term, with 30 of 31 countries showing positive ad spending in the in the 2nd quarter of 2010, global consumer spending may receive a boost in the back end of 2010 and 2011 as consumers remain focused on promotional activity.

Country-by-Country Consumer Scorecard

United States
Low U.S. consumer confidence is reflected in continued spending restraint as consumers continue to reduce overall shopping trips and spending even with better prices and increased promotion support. Detailed North American Review.

Canada
Consumers are still focused on value, shopping more at discount retailers and buying more on promotion. National brands are a key driver of promotions, which are currently outperforming private label. Detailed North American Review.

France & Spain
Volume and value shares are growing in the 1-4% range. In France, consumers are spending more per trip, but they are not shopping more frequently. The opposite is true in Spain where consumers are shopping more frequently (despite high unemployment rates), but not spending more per trip.

Germany & Italy
Volume and value shares are declining as shoppers are not shopping more frequently and are not spending more per trip.

United Kingdom
Volume shares are neutral, but value shares are up. Shoppers are shifting to value channels to save money.

Austria & Switzerland
Volume and value share show no significant change from three months ago. Store brands and value channels are on the decline, but retail promotions are up.

Brazil
Volume growth continues as items sold grew 4.1% in volume, with an emphasis on beverages, which grew 7.3%, followed by perishables at 6.5%.

Taiwan
Taiwan’s fast-moving consumer goods market remains positive, mainly driven by personal care categories where cosmetics are a leading department with close to 20% growth. In food and beverages, nutritional supplements outperformed the total market.

Hong Kong
Value growth is ahead of volume trends with growth being driven by non-food vs. food categories such as baby products, which continue strong sales.

India
Fast-moving consumer goods growth was revived in Q2 2010, fueled by double digit growth of food categories. Innovations in terms of smaller trial packs coupled with heavy promotions and new application products dominated the market scene. Modern trade channels dominate, which is driven by the market leaders.

China
Consumer confidence in China has now reached a high point (index=109). As such, fast-moving consumer goods sales continue to grow and accelerated consumer spending is reflected across both food and non-food categories.

• Download State of the Global Consumer.

Just one year ago, consumer morale hit an all-time low, and concern for job security and the economy were at the top of peoples’ minds.  With the economy strengthening and consumers feeling better about their job prospects and state of personal finances, work/life balance and health are once again key issues. 

The renewed optimism was driven largely by consumers in western China, who posted an eight point rise in confidence, helping to close the gap between the regions.  Consumers in Tier 5 locales (smaller towns, villages and rural areas) recorded a seven point increase in confidence from the previous quarter, thanks in part to a strong harvest late in the year as well as well-targeted government incentives.  All of this has translated into a renewed willingness to spend as consumers start the New Year.

“We saw a strong rebound in consumers’ willingness to spend, especially among Tier one and Tier five consumers.  Tier one consumers are more likely to be investing in stocks and bonds and planning holidays compared to people in other tier cities,” said Mitch Barns, Greater China President at The Nielsen Company. 

 Nonetheless, more than half of Chinese consumers continue to make it a high priority to put spare cash initially into savings, followed by investing in their children’s education and purchasing new clothing.

 Read the full press release.

Almost three-quarters (73%) of those surveyed said they are no longer in recession.  More than half (56%) described their job prospects as “good” or “excellent,” with 60 percent describing the outlook for their personal finances the same way.  Both of these scores represent double-digit increases since the June 2009 survey.

“This significant rebound in job confidence corresponds with the territory’s unemployment rate falling below five percent for the first time since January 2009,” said Oliver Rust, Managing Director, Hong Kong, The Nielsen Company.

After covering essential costs, Hong Kong residents still prefer to put their cash in savings and invest in the stock market. They also have increased their spending on out-of-home entertainment, new clothes and holidays.  Only spending on new technology products declined during the quarter.

Read the press release with complete findings.

Five percent of survey respondents felt that their job prospects over the next twelve months as would be “excellent” with the same number saying the same about the state of their personal finances.  That said, half of those surveyed believed that Britain will still be in recession by the end of 2010 and 70 percent said that they are adjusting their spending to save money.

Personal debt is the single biggest concern amongst Britons, with 14 percent identifying that issue, with another 12 percent identifying increasing utility bills and the overall state of the economy.  More than two-thirds of those surveyed said that they would put spare cash into improving finances by increasing savings (40%) or paying off debt (29%).  Among the areas facing spending cutbacks: home improvement, new clothing, new technology and out of home entertainment.

“We are in the foothills of what will be a slow climb out of recession.  While people are feeling ever so slightly better about job prospects and finances, an air of caution prevails.  The number of people saying they are saving is at the highest the consumer confidence survey has ever recorded, and people remain very concerned about the amount of debt they are shouldering,” said Justin Sargent, Managing Director, Nielsen Consumer UK. 

“We’re heading in the right direction.  It’s encouraging to see consumer confidence improve steadily since the survey’s low last April.  But we’ve still got a long way to go before confidence levels hit their pre-recession highs,” said Stephen Robertson, Director General, British Retail Consortium.

With an index score of 98, Canada beats the global average by 11 points and bests its southern neighbor by 16 points.  In fact, Canada is one of only two countries in the top ten outside of Asia (the other being Brazil).

“Over the past six months, Canadian consumers have stopped talking about recession and changed the conversation to recovery,” said Carman Allison, Marketing and Communications Director, Nielsen Canada.  “We’re more optimistic about our job prospects and personal finances, and are ready to open our wallets and put the recession behind us.”

So how has this renewed confidence manifest itself?  Canadians are more likely to pay off debt (39% vs. 31% globally) and much less likely to save or invest in the markets (27% vs. 49% globally).  Interestingly, the high level of confidence contrasts with the fact that 70 percent of Canadians still believe that their economy was in recession, despite the fact that the Bank of Canada declared it technically over last summer.  But 40 percent believe that Canada will be out of recession in 2010.

Concerns remain.  The top three issues were increasing utility bills, personal debt and the economy.  Canadians – and Americans – are much more worried about debt than the rest of the world (13% compared to just 7% globally).

“Even while showing faith that we are in recovery mode, Canadians are planning to retain some frugal habits. Economists expect this to be a slow recovery, so consumers will continue to seek value and look for ways to stretch their shopping dollars in the near term and perhaps even longer into the future,” concluded Allison.

Download the report on Canadian Consumer Confidence.

Norwegians posted the highest levels of confidence on the continent.  Almost two-thirds (64%) said that they thought their country was not in a recession, compared to 85 percent of European who thought their country was in recession (globally, the average was 64% thinking they were in recession).  The same percentage of Norwegians also believed that their job prospects were “good” or “excellent” in the coming year, compared to just 30 percent saying the same in April 2009.

More than half (51%) of Nordic consumers said that it is a “good” or “excellent” time to buy the things they want and need, compared to just 31 percent of Europeans and 37 percent globally.  Swedes and Danes have a fairly poor outlook on job prospects, while Finns are quite negative: 83 percent believe prospects for the next 12 months were “not so good” or “bad.”

As for consumers’ biggest concerns, children’s education and welfare was the key concern for Danes, while Finns and Swedes were most worried about the economy.  Perhaps a sign of the optimism found there, Norwegians said their health was their biggest concern over the next six months. Despite that optimism, almost half (47%) of Norwegians and Swedes said that they would put their spare Kroner into savings, while 41 percent of Danes would do the same.  Finns, on the other hand, said they would spend their spare Euros on holidays.

Read the full report.

Some key findings include:

Advertising: Some advertisers actually increased their ad spending during the first twelve months of the UK recession (July 2008 to June 2009).  Grocer ASDA increased its spending 40 percent during this period, while the government’s Central Office of Information boosted spending by 33 percent to back campaigns about the dangers of smoking and drinking, the HPV vaccine and swine flu.  Meanwhile, a number of big brands cut their ad budgets significantly: P&G was down 15 percent, Toyota off 57 percent and Tiscali, an internet service, down 92 percent.  With the exceptions of Audi and Seat, auto manufacturers all cut spending, from Hyundai (-6%) to Lexus (-66%).

Jobs: Total job vacancies – both online and in print – dropped from about one million in January 2007 to approximately 500,000 in September 2009.  The number of jobs in IT, secretarial, construction and sales has each fallen by more than 50 percent between July 2008 and June 2009.  Positions within education, social services and hospitals/medial have been the least affected, with the latter actually showing a year-on-year growth of around two percent.

Consumers: British consumers continue to be frugal when it comes to shopping. Two-thirds said that they planned to spend less on clothes, while 59 percent said that they are looking to save on gas and electric bills.  Both of those figures are a slight improvement from surveys conducted earlier this year.

“Despite some confidence returning, a legacy of the recession will be the desire amongst consumers to continue to spend less on both grocery brands and financial service products.  Many leading brands have adapted well to this change in consumer behavior to date, but the real test will be how they cope with this intent long term,” said Nikki Williams, UK Managing Director at Nielsen’s Media division.

Read the full press release.

“It will be quite a stretch for business leaders to expect double-digit growth when Vietnam’s 2010 GDP is estimated to be at a modest 5.5 percent,” said Vaughan Ryan, Director at The Nielsen Company Vietnam.  “But the sentiment shared by business leaders shows that there is good momentum among many industries, especially fast moving consumer goods, and they’ve planned well to ride out the recession and even see growth where many businesses are copping losses.”

Competitive pressure and growth targets are business leaders’ top concerns, with 68 percent, followed by the ability to pass on price increases (45%), inflation (42%) and low GDP growth (31%).  More than two-thirds (70%) believe business conditions have improved versus a year a go, in contrast to just 40 percent who said the same in the March edition of the survey.

While there has been a lot of talk over the past year about the move towards premium products and services by the increasingly-affluent Vietnamese, 48 percent of business leaders believe that consumers will move towards purchasing on promotion and 31 percent believe consumers will “trade down” to cheaper products over the next six to twelve months.

Many businesses around the world focus on urban consumers, however in Vietnam, appealing to rural consumers – who make up more than 70 percent of the total population – is critical to renewed growth.  Almost 80 percent of businesses claim that they will look to the rural markets to further growth compared to 64 percent in the previous edition of the survey.

“Unlike the rest of the world, rural Vietnam is in many cases growing faster than urban areas.  It’s crucial for businesses to have a strong presence there.  In some cases, rural value growth rates has surpassed urban by as much as 9 percent versus a year ago in certain consumer goods categories,” said Ryan.

As a result of this optimism, advertising spending is expected to post a strong increase.  Half of all business leaders surveyed said they expected to increase ad spend (up from 39% in March).  All media are likely to benefit – TV (29%), point-of-sale materials (55%), print (27%), in-store banners (44%) and outdoor posters (20%).  Most notably, business is expected to increase ad spend online by 54 percent over the next six to twelve months.