While this growth is impressive, seven countries still recorded declines in ad spending in the second quarter of 2009, including South Korea (-17%) and Taiwan (-16%).

“Although declines in advertising activity were still evident across free to air TV, newspapers and magazines in a number of markets, there were clear signs of a reversal of contracting activity.    In the more dynamic markets of China and India, both of which saw sharp cutbacks in advertising activity in the first quarter, advertising bounced back strongly with double digit growth over the same quarter in 2008,” said Richard Basil-Jones, Managing Director, Asia Pacific at Nielsen.  “Positive economic signs across the region suggest that the recovery to pre-financial crisis advertising activity may occur earlier than industry observers had forecast at the beginning of the year.”

On a year-to-year basis, ad spend was up 9 percent, reaching an estimated $112 billion (US).  Television was the only main media to record growth (10%), while newspapers and magazines showed modest declines (-1% and -3%, respectively).

Value has become a main focus for Asian shoppers, partly driven by the economic situation and partly as a result of increased retailer activity focused around price and promotions. According to Nielsen’s Asia Pacific Retail and Shopper Trends 2009 Report, more than 70 percent of shoppers claim to have become more price sensitive compared to last year. The effect: shoppers are more inclined to buy only what they need, spending their money on essentials rather than on treats or what they now consider ‘nice-to-haves’. They’re also consciously trying to cut down on the quantity purchased and are actively seeking out products on promotion.

Over the course of 2008 in Asia, grocery markets continued to show volume growth, led by India (+9%), China (+9%) and Vietnam (+18%), with only Taiwan (-7%) experiencing a decline in sales. Value sales increased by double figures in many markets on the back of high inflation for key food categories. But with inflation falling in all markets, we have seen value growth drop sharply in 2009, although overall volume growth in many markets has held up reasonably well with shoppers not cutting back significantly on grocery categories.

Traditional trade continues to lose share

As expected, the traditional counter service trade continued to lose share in Asia, with overall share of trade dropping another percentage point to 47 percent in 2008. At the same time, the absolute number of traditional grocery stores in the region grew by one percent to over 12.3 million stores. In most developed countries, traditional store numbers fell by five percentage points or more. In Korea, where traditional store numbers dropped by nine percentage points, the share of trade decreased from 15.9 to 13.9 percent, while in Taiwan the traditional trade now accounts for just over six percent of sales, having lost 1.5 percent share in the last 12 months.

The retail landscape looks very different in Southeast and South Asia, however, where traditional store numbers actually grew year on year, and even though share of total grocery sales continues to decline slowly, the majority of shoppers in all markets continue to shop at this trade channel. The traditional channel continues to meets shoppers’ needs for everyday convenience, personal service and affordability – being able to buy the smallest sizes and quantities.

Growth of small modern trade outlets

Globally, many large retailers such as Wal-Mart, Tesco and Carrefour have embraced a multi-format strategy that includes the development of smaller neighborhood stores. Similar growth in small modern trade outlets is also being seen across Asia, with mini-markets/small supermarket store numbers increasing by 17 percent in 2008 to over 100,000 stores.

Indonesia has led the way over the last 10 years and in 2008 more than 1,500 new stores opened, taking the total to over 10,500. These stores now account for more than 16 percent of total packaged grocery sales. Shoppers in Indonesia are continuing to embrace the convenient location, relatively good service and acceptably low prices offered at mini-markets.

Retailers in China are also investing in this store format, with store numbers growing by 22 percent in 2008 to more than 70,000 stores, accounting for more than three-quarters of all modern self-service outlets.

In South Korea we are also seeing the leading Hypermarket operators expanding into small supermarket formats, or ‘Super Supermarkets’ as they are known in South Korea. Samsung Tesco is now operating over 150 SSM Homeplus Express stores and E-mart is planning to open 30 or 40 small, 300 square meter E-Mart Everyday stores. The expansion of these large chains into the small store arena has led to concerns regarding competition with small store owners, and the South Korean government is considering introducing a bill to regulate the opening of small supermarkets.

“In the previous Nielsen Global Consumer Confidence survey conducted in March, we were seeing the first signs that as far as the world’s consumers were concerned, the recession had bottomed out. Three months later, they’re starting to embrace the idea of recovery – which is a major turning point,” said Jonathan Banks, Business Insights Director, The Nielsen Company.

In Nielsen’s latest survey, which polled 14,029 online consumers in 28 countries late in June, 71 percent of respondents thought their country was in recession – a positive reduction of six points from a high of 77 percent when the survey ran in March 2009.

“The BRIC and Asian markets have recorded the greatest jumps in Consumer Confidence Indices in the past three months,” noted Banks. “Consumer confidence in India jumped 13 Index points, and climbed 9 points in Japan, South Korea, Hong Kong and Indonesia. Consumer confidence rose 8 Index points in Taiwan and Brazil, and 7 points in Singapore, Turkey, Russia, Philippines and the UK. The only exceptions to this upswing were in the USA and New Zealand, which held flat in the second quarter, with Germany the only country to register a decline of one Index point,” said Banks.

Even in the market registering a small decline – Germany – there are encouraging signs that a recovery is imminent. According to the Nielsen survey, nearly one in three Germans (29%) said the recession would be over in the next 12 months, compared to only 22 percent three months ago. One in three Germans also thought “now is a good time to buy the things they want”, indicating a renewed willingness to spend on discretionary items. Thirty-eight percent described their personal finances as “good” for the next year.

“This is one of the strongest indicators of a global consensus among consumers that the worst is over, and that finally, there is light at the end of this long tunnel. And consumers in emerging and Asian markets are clearly of the view that they are driving in the recovery lane now,” added Banks.
The latest Nielsen Confidence numbers are a welcome return to positive, confident territory for consumers in the developed Asian markets of South Korea, Taiwan and Japan, who have been battling economic inertia and political instability for several quarters.

“Asian consumer confidence appears to have been boosted through successful government economic stimulus packages that were speedily and effectively implemented at the onset of the global recession,” noted Banks. In the world’s second largest economy, the Japanese government implemented tax breaks, introduced cash deductions and subsidies on new car purchases, as well as providing cash payment and premium gift coupon schemes to stimulate spending.

“As well as expanding credit terms to small and medium sized businesses, in Japan there are even incentives to purchase eco-friendly household appliances as part of the government’s new environmental policy, and national toll prices for motorways have been discounted to encourage domestic tourism,” observed Banks.

Stock market gains in the BRIC and Asian markets have also had a major impact on consumer confidence,” said Banks. More than any other region, stock markets in Asia have rallied and property prices are starting to regain their pre-recession values. Russia’s stock market is up 60 percent from the start of the year and Taiwan is up over 50 percent. Brazil and Singapore’s stock markets have gained around 40 percent in the past six months and the South Korea and Hong Kong stock markets are up over 30 percent. With stock market gains so intrinsically linked to consumer confidence in Asian markets, it’s no surprise that Asian consumers are most confident about a receding recession, led by Hong Kong (-14 pts), Taiwan (-13 pts), Singapore and Japan (-12 pts), India and China (-10 pts).

“Positive economic news and growing consumer optimism in the past few months have definitely led consumers in these markets to believe that economic recovery will come sooner rather than later,” said Banks. According to the Nielsen survey conducted in March this year, 28 percent of Singaporeans said they expected their recession to end within 12 months – last month this number rose to 39 percent. UAE consumers also share this sentiment. In March, 32 percent of UAE consumers thought the recession would be over within a year but in June 43 percent said they expected the recession to be over before the middle of 2010.

Latest Nielsen data also shows that consumer confidence in the UK – a country that has suffered one of the most dramatic downturns in consumer confidence in the last year – is on the rebound, climbing 7 Index points in the second quarter. “UK consumers are getting the hang of consuming less. People with jobs – still the overwhelming majority – now have more disposable income as they reduce spending on big-ticket items like cars and holidays. With mortgage interest rates at their lowest levels, savings rates are increasing quickly and this has increased financial confidence,” said Banks.
“Consumers know that recovery won’t happen overnight but there has certainly been more good news than bad in the past few months,” noted Banks.

The decline in constant bad economic news in the media has directly impacted on the topics consumers are talking and blogging about. According to Nielsen Buzzmetrics, Nielsen’s service for measuring online conversations, the number of online discussions, or” buzz”, in the UK mentioning the word “recession” dropped around 60 percent between late March and late June this year. “People’s obsession with the recession has switched to how to live and spend more moderately in a new economic era,” said Banks.

Italian consumers have also become more optimistic, showing a strong gain of 7 Index points – their highest Nielsen Consumer Confidence Index since the second half of 2007. “Our survey supports recent Italian government figures which indicate that consumer confidence is returning to the Italian economy. In the last three months, Italian consumers’ concern for job security and the economy fell by 4 percentage points respectively, while average supermarket prices fell 0.2 percent in June 2009, indicating that consumers are less concerned about rising food bills than they were two years ago,” said Banks. The rise in consumer confidence in Italy has also been positively impacted by the government’s stimulus policies and the significant decline of negative economic coverage in the media. Online discussions mentioning the word “recession” have decreased by 35 percent this year according to Nielsen.

Globally, job security and the economy remained consumers’ top two concerns in life but even the level of these concerns has abated in the last three months and recorded declines of two and four index points respectively.

Toward the end of 2008, the global downturn was adversely impacting advertising spending throughout many key markets around the world, with Europe and the Americas struggling more than others.  The exception to this was Asia Pacific (APAC), which appeared to be relatively impervious to the worst of the downturn. Beginning in late 2008, and escalating as the first quarter of 2009 unfolded, the majority of APAC markets were finally succumbing to declining economic conditions with substantial declines in advertising activity. Hand-in-hand with consumer confidence declining further in the new year, most APAC countries witnessed substantial ad spend cutbacks; although still not resembling the severity of those experienced in some other regions.

“While the flow on effect of the financial meltdown on individual countries’ advertising was beginning to bite across several markets late in 2008, it is the sobering results for the first quarter of 2009 which present a clearer picture of how advertising expenditure across the region was faltering. Main media measured across all markets, defined by Nielsen as free to air TV, newspapers and magazines, stalled at 0 percent growth compared to the first quarter of 2008. Even China, the juggernaut of advertising growth globally over recent years, was not immune to the faltering economic outlook, recording just 2 percent growth over the same period in 2008 and recording 17 percent growth in the fourth quarter of 2008,” said Richard Basil-Jones, Managing Director for Asia Pacific, Nielsen Media International.

“Although six markets recorded declines in the fourth quarter of 2008, overall growth was 10%; however, with nine countries now in decline in 2009, the zero growth in ad spending was not unexpected. On a slightly more positive note, all “other media” tracked by Nielsen across various countries (radio, outdoor, pay TV, cinema and other combined) posted an overall 1.3 percent increase in Q1 2009,” he added.

 Nine countries recorded declines in Q1 ‘09 ad spend versus Q1 ‘08:

• Thailand        -1% 
• Malaysia        -3%
• New Zealand  -4%
• India             -6%
• Australia        -11%
• Singapore      -14%
• South Korea   -19%
• Taiwan          -22%
• Hong Kong     -5%

Just three countries showed growth in Q1 ‘09 ad spend versus Q1 ‘08:

• Indonesia (20%)
• China (2%)
• Philippines (8%)

Other key findings:

•  Across the twelve markets monitored, a total of US$23.5 billion was spent on advertising in Q1 ‘09
• A total of US$109.16 billion was spent on “Main Media” advertising in the 12 months to March ‘09 (+9%) YOY, with television comprising 71 percent of expenditures.
• FTA Television ad spending grew 9 percent YOY; with six countries posting double-digit growth as four countries recorded declines.
• Newspaper ad spending recorded a modest 2 percent growth YOY, even though the medium experienced declines in six countries.
• Magazine ad spending, despite declines in 7 countries, increased 2 percent YOY, with high double digit growth in 4 countries.
• Radio dominated the “all other media” tracked by Nielsen, with a 51 percent share of spend and a 5 percent increase YOY.

“The effects of the global financial crisis have certainly caught up with the ad sector in this latest quarter, especially in North America and Europe where virtually all of the territories we reported on recorded negative growth,” said Ben van der Werf, managing director, Global AdView at Nielsen.  “Even China, which usually sees a boost in ad spend during the Chinese New Year, posted subdued growth for the quarter.”

All four major media types – newspapers, magazines, TV and radio – posted drops in ad spending, with print media leading the decline.  Magazines fared the worst (-17.4%) followed by newspapers (-9.1%).   In North America, magazine ad spend was down 22.2 percent, while newspapers were off 15.6 percent.

Not surprisingly, the automotive category recorded the largest loss in ad spend – down 19.9 percent – followed by financial services (-16.7%) and clothing (-15.7%).

Read the full Global Ad Spend press release.

INDONESIA

Leading the group was Indonesia, where ad spending increased 19 percent in 2008 over the previous year, and all four quarter showed growth.

The top 10 ad spending categories combined represent 77 percent of all main media spending in Indonesia.  The office equipment/computers/communications category led spending in value terms and posted 53 percent growth on a year-to-year basis.   Medicines/pharmaceuticals and toiletries & cosmetics were laggards in the top 10, posting no growth in ad spend for the year. As in other Asian countries, telecom brands dominated the top 10 advertisers, with Excelcomindo – GSM Card leading the way.

MALAYSIA

Malaysia came in second, with ad spending up 12 percent for the year. The fourth quarter did experience a slow-down, with increases at just 2.4 percent versus the same period a year earlier.

All ten of the top ad spend categories – -which account for 64 percent of all Malaysia media activity – registered gains. Retail, the top category by value, recorded 24 percent growth, while pharmaceuticals posted 32 percent growth.  Financial ads posted the lowest growth of the top ten, eking out just a 2 percent increase.  The three largest advertisers, which represented 57 percent of the total top 10 activity, were telecoms, led by Celcom.

PHILIPPINES

Coming in third was the Philippines, which posted 11 percent growth across all media.  Ad spending remained solid over the year, showing a slight slow-down in the fourth quarter.

The top ten categories represent almost half of all main media advertising, and is led in value terms by hair shampoos/hairdressing products.  That category, however, showed a decline of 7 percent in ad spending compared to 2007.  The biggest growth – 61 percent – came in the proprietary drugs/other than vitamins and tonics category.  Of the top ten brands advertised in 2008, five were hair care and two were dental hygiene products, with Colgate Maximum Cavity Protection toothpaste leading the way.

SINGAPORE

Moving west to Singapore, ad spending finished 2008 with 7 percent growth, although spending actually declined in the fourth quarter after three previous quarters of consistent growth.

Entertainment, the top category in value terms, showed 18 percent growth for the year. Education showed the most improvement – 21 percent – while retail was the only declining category in the top ten (-1%).  The leading advertiser was Courts, a retailer, followed by Tiger Beer/Asia Pacific Breweries.

THAILAND

The only country in Southeast Asia to show a decline in ad spending in 2008 was Thailand, which was affected by the slowing economy and civil unrest.  Ad spending was down 3 percent compared to 2007.  Only the second quarter showed any growth, a relatively modest 4.6 percent.

Only two categories of the top ten showed any growth – motor vehicles and non-alcoholic beverages.  The top category in total spent was skin-care preparations, which recorded a 6 percent decline on a year-to-year basis.  Skin care, autos and communications products dominated the top ten brands advertised in the year, with Ponds Facial Skincare Product leading followed by PTT Public Co., a gas company and Toyota pickups.

Main media, defined by Nielsen as free to air TV, newspapers and magazines, increased 13 percent in 2008, while all other media (radio, outdoor, pay TV, cinema and other) posted an 8 percent increase for the year.

In 2008, three markets recorded declines in ad spend versus 2007, while another posted no growth:

• Taiwan (-11%)
• South Korea (-8%)
• Thailand (-4%)
• New Zealand (0%)

Meanwhile, five countries showed solid double-digit growth:

• India (29%)
• Indonesia (19%)
• China (17%)
• Malaysia (12%)
• Philippines (11%)

Other key findings from Nielsen’s research:

• A total of US$115.2 billion was spent on advertising in the twelve markets monitored.
• A total of US$108.4 billion was spent on “Main Media” advertising, with television comprising 70 percent of expenditures.
• Television ad spend grew 15 percent. Only three countries recorded declines in TV ad spend, while five countries posted solid double-digit growth in this category.
• Although Americans are being deluged with stories of newspapers closing, cutting back and filing for bankruptcy, the medium recorded 9 percent growth, with declines in four countries.
• Magazine ad spends, while still comparatively small, increased 10 percent, with India leading the way.
• Radio dominated “all other media” with a 47 percent share of spend and a 12 percent increase for the year.

Over the next few days, Nielsen Wire will dig deeper into the numbers for Australia and New Zealand, East Asia, Southeast Asia and India.