Recovery in the West, Deterioration in the East

The first quarter of 2010 shows a positive trend in nominal value growth rates in most countries, which was driven primarily through volume growth improvement. France’s 2.4% year-on-year nominal value increase was the result of inflation while Portugal’s 4% volume growth and Spain’s 3% volume growth can both be attributed to a decline in deflation. Hungary and The Czech Republic were the poorest performers in the region, reporting nominal value declines of 3.5% and 3.2% respectively.

With a marginal reduction in shopping trips in the first quarter across Italy and Germany and flat overall spending per trip in the top five European countries (Germany, Italy, France, United Kingdom and Spain), shopping behavior is stable, but shows no significant improvement.

However, the economic turmoil reached Eastern Europe with a 12-month lag. In the latter part of 2009, these eastern markets severely deteriorated with volume decreases occurring in Latvia, Lithuania, Russia, Serbia and Ukraine. Albania, Bosnia and Macedonia remain the positive exceptions. With this sudden and delayed worsening in the east, a steep upturn will now be necessary to return to full recovery.

Europe Total View Q1 2010

Positive Growth Trends
Across Europe, nominal value growth continues to climb, increasing to 4.1% in the first quarter of 2010, a 1.2 percentage point gain over the fourth quarter 2009. The steady gain in volume coupled with latter unit value growth has kept Europe on an uphill trend with momentum continuing to build from the low point in the third quarter of 2009 when nominal value plunged to 2.6%.

The volume growth rate accelerated in most countries: Norway (7%), Finland (5%), Sweden (4%), Portugal (4%), Slovakia (4%), Austria (3%), Ireland (3%), Italy (3%), Spain (3%), Belgium (2%), Poland (2%), Switzerland (2%), Denmark (1%), France (1%), Germany (1%), Netherlands (1%) and U.K. (1%). Both volume and unit value declines were reported in Hungary, Czech Republic and Greece.

Country Analysis—A Divided Europe
The latest quarterly Europe Growth Reporter measuring volume and value sales in the fast moving consumer goods industry across markets in Europe is showing encouraging signs of improvement with all but four countries measured recording positive volume trends, which have helped drive increases in nominal value growths across the region. Unit value, however, shows an even split, with increases reported in eight countries and declines shown in eight. Four countries report flat unit value.

Turkey shows the most significant spike in unit value, increasing 21% since last year, which has unsurprisingly lead to volume decline (-1%). Russia has experienced double digit growth in unit value (+11.4%) once again and here volume declines remain significant (-7.2%), though they are slightly improved from Q4 2009 (-8.7%). The Nordic countries of Norway and Finland report the greatest increase in volume, rising 7% and 5% respectively, driven by deflation in Finland and low unit value growth in Norway. Sweden also reported low unit value growth although volume growth was lower here at +4%.

About the Nielsen European Growth Reporter
This report compares overall market dynamics (value and unit growth) in the fast moving consumer goods sector across Europe. It is based on the sales tracking Nielsen performs in every European market, and covers sales in grocery, hypermarket, supermarket, discount and convenience channels.

The report is based on the widest possible basket of product categories that are continuously tracked by Nielsen in each of these countries and channels, and this edition reports on week two of 2010 through to week 14 of 2010.

“The post Christmas hangover was longer and deeper this year with snow and ice disrupting shopping patterns, resulting in fewer shopping trips being made.  Where shoppers did carry on shopping however, some spending was bought forward into the week ending 9^th January as consumers stockpiled.   As a result, sales in the following 2 weeks were more subdued.  Many seasonal lines also came off promotion and this would have impacted sales.  Retailers will need to encourage shoppers to keep spending over the next few weeks to lift momentum,” said Mike Watkins, senior manager retailer services at Nielsen.

“The ‘big freeze’ has highlighted some unusual shopping trends: in the 3 weeks ending January 16, sales of salt increased 128 percent overall and 185 percent in convenience stores.  Cat litter was widely recommended as an alternative to grit and sales of this jumped 31 percent during the snowy weeks.  Meanwhile, sales of basics like tea (+10%), coffee (+8%) and soup (+16%) also grew as shoppers stocked up and battened down the hatches.  Convenience stores also benefited from shoppers and commuters staying at home and treating themselves to breakfast.  Sales of eggs were up 33 percent, bacon up 24 percent, sausages up 33 percent and hot cereals up 39 percent.  And rather heartwarmingly, we looked after our wildlife – sales of bird food shot up 73 percent,” said Watkins.

12-Weeks to January 23, 2010 Share of Grocery Market Spend by Retailer and Value Sales % Change

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.

“Helping marketers measure the effectiveness of advertising using Facebook has been a priority for us and working with Nielsen helps us continue doing just that. Marketers have responded positively to BrandLift studies in the U.S. and we know marketers in the U.K. will also benefit from a better understanding of how people react to their online campaigns,” said Stephen Haines, Facebook’s U.K. Commercial Director.

“The power and scale of Facebook’s community provides a unique platform for research and this offering complements the portfolio of tools available to marketers in the U.K. with simple and fast insights on brand advertising. Facebook and Nielsen are committed to changing how people think about online advertising, particularly looking beyond direct response to the effectiveness of the Internet for brand-oriented campaigns. To do this we intend to quickly build up a body of work in the UK to provide local benchmarks to supplement those already available from studies done in the U.S.,” said Louise Ainsworth, EMEA Managing Director, of Nielsen’s online division.

So far, more than 70 studies have been conducted in the U.S. across the Fast Moving Consumer Goods, Retail, Media & Entertainment, Technology, Telecom, Financial and Automotive sectors. These studies revealed swift changes in brand ‘lift’ metrics such as awareness, especially for products and brands that are new or less well known. Not every advertising campaign resulted in a change in consumer attitudes; however 97 percent of studies saw statistically significant lift on at least one key brand lift metric while 85 percent of studies saw increases across at least two key metrics.

Nielsen data shows that Facebook had a 10.2 percent share of display-ad views in the U.K. in 2009, up from 6.4 percent in 2008. At the start of 2010, almost 60 percent of Britons active online visited the site, which accounted for just over 17 percent of all UK time on the Internet.

Download the Facebook and Nielsen U.K. press release.

UK Digital Download Sales
According to the recorded music industry trade body, the BPI, digital downloads account for 98 percent of UK single sales. Unsurprisingly, download sales for the song each guest star performed on the X Factor results show increased as, mostly, it coincided with the digital release of that single or album. However, tracks already available before to buy before the show also had large hikes in sales.

Four of the five guest stars who sold the most UK downloads of their song during the week following their appearance are TV talent show discoveries. Leading the way was Cheryl Cole, from Popstars: The Rivals winners Girls Aloud, who sold over 221,000 copies of her single “Fight For This Love” in the week after her performance. Cole was followed by 2008 X Factor finalists, Alexandra Burke (145,320) and JLS (86,725). After the Black Eyed Peas (79,706), 2006 X Factor winner Leona Lewis was fifth with 67,404 sales of “Happy” – her first of two 2009 finals performances.

An X Factor performance had a huge effect on tracks already available to buy. Shakira benefited most from appearing on the show, selling 358% more copies of “Did It Again” the week after the show compared to the week before – even though the track was available for purchase 5 weeks earlier. Michael Bublé’s “Cry Me a River” had already been available for a week before his appearance, via the album, but he benefited from a 323% increase in sales the week after the show. Leona Lewis’ performance of “Stop Crying Your Heart Out” – her second performance during the 2009 finals – contributed to a 215% increase in sales even though the track had already been available, via the album, for a month.

Online Buzz
For almost all the 18 guest stars promoting a track on the X Factor, online buzz in the UK increased after their performance. Only George Michael, Rihanna and Bon Jovi saw a decrease in online mentions or “talkability.” The eight most buzzed about stars during the fortnight around their appearance were all female, lead by previous X Factor winners Leona Lewis, around her “Happy” performance, and Alexandra Burke.

Just as the stars discovered by TV talent shows sold most digital download sales, they tended to benefit most in terms of increases in online buzz levels (87 percent average increase) around their X Factor performance than their counterparts who rose to fame through traditional avenues (45 percent). Susan Boyle (139 percent) and JLS (138 percent) benefited most in terms of increased buzz levels during the week commencing the Sunday of their performance, compared to the week before. Alicia Keys (130 percent) and Whitney Houston (114 percent) were the “traditional” artists with the greatest increase in levels of online buzz.
Radio Airplay
Westlife were the only guests for which the show was the debut airing of the song – all the others had their song broadcast on the radio for varying periods of time before their X Factor performance.

The most radio plays the week of a performance correlated almost identically with the most download sales – being dominated by the “TV talent show” guest stars. Cheryl Cole led the way (3,082 plays) followed by Alexandra Burke (2,748) and JLS (2,554). Leona Lewis’ “Happy” was fifth (2,069) but behind Whitney Houston (2,284) not the Black Eyed Peas.

In terms of increased radio airplay, Mariah Carey was, by far, the biggest beneficiary of an X Factor performance with a 297 percent increase in plays of “I Want To Know What Love Is” – despite the song having its first UK radio play 12 weeks earlier. Alicia Keys followed, with a 72 percent increase in plays of “Doesn’t Mean Anything,” its debut airing being seven weeks earlier. Third was Susan Boyle, with “Wild Horses” benefitting from a 71 percent airplay increase, six weeks after debut.

Jean Littolff, Managing Director, Nielsen Music Control, says: “The X Factor results program is a major marketing vehicle for established stars – particularly for those discovered through the TV talent show medium itself. This type tends to have most activity in terms of download sales, online buzz and radio airplays post performance. However, the greatest impact in terms of changing levels of activity pre vs. post performance is for artists who have travelled a more traditional route to fame.”

• For more information, download the full UK press release on the X-Factor.

“People are still shopping around the major supermarkets, hunting out the best deals.  The most recent Nielsen research also suggests that family shoppers remain cautious, which may be taking the edge off current sales.  Indications are that shoppers could be holding back until the middle of December, which could result in a massive last week of trading,” said Mike Watkins, Senior Manager, Retailer Services at Nielsen.

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.

“While these results are encouraging, consumers in most parts of the world remain cautious about spending their money, and are increasingly moving to value channels.  At the same time, retailers are selling more on promotion.  It’s likely these trends will continue until economic recovery has solidly taken root,” said James Russo, Vice President, Global Consumer Insight at The Nielsen Company.

Nielsen Economic Current Key Indicators
Country	Trend	Aug-09	Sep-09
Brazil		1	1
Canada		2	2
China		2	2
France		3	2
Germany		3	4
Hong Kong		2	2
India		1	1
Italy		3	3
Spain		3	3
Taiwan		3	1
United Kingdom		2	2
United States		3	3
Source: The Nielsen Company 1=Very Strong Growth >/= +5%; 2 = Growth between +1 and +4%; 3 =Neutral Between -1 and +1%; 4 =Negative between -1 and -4%; 5 = Very Negative

Country by Country Highlights

• U.S. – Consumers continue to be skittish about the recovery and their willingness to spend money.  Store brands, value channels and buying on promotion all showed growth as manufacturers continued to step up incentives and deals.
• Canada – Volume and value sales grew in September 2009, with strong growth in the number of retailers selling on promotion.  Unit sales rebounded as price increases stabilized at 2 percent.
• France – Volume and values sales showed some growth, but with confidence dropping in the September survey, French shoppers actually reduced their shopping frequency.
• Germany – Volume sales remained neutral, while value sales recorded a small decline.  Germans continue to watch their Euros as their confidence in the economy has dipped.
• U.K. – Volume sales improved, and premium brands returned to growth.  Consumers were taking advantage of the strong promotions on offer, shopping more frequently and spending more per trip – despite slightly decreased consumer confidence.
• Italy – Italian consumers cut back the frequency of their shopping trips, but spent more per trip, taking advantage of retailer promotions and switching to store brands.  Volume was up, but value sales were down.
• Spain – Spaniards remained neutral in their spending habits, but did start shopping more frequently for the first time in nine months.
• Brazil – All indicators show that Brazil has returned to levels prior to the global economic crisis.  Volume and value sales were up, and shoppers were feeling confident: shopping frequency and spend per trip both increased.
• India – Volume and value sales indicators each posted better than 5 percent growth, and Indians are feeling very optimistic about the economy and finances.
• China – While retail sales were relatively flat, growth is now apparent in modern trade outlets, which may be the first sign of fast moving consumer goods sales recovery.
• Taiwan – Volume and value sales increased solidly for the first time in nine months.
• Hong Kong – Increased consumer confidence has driven growth of volume and value sales.

The Buzz
In an analysis of blog buzz in seven countries, Nielsen found that online discussions about the global recession have leveled off as consumers have accepted the “new normal.” At the same time, however, mentions of recovery have not gained traction, and actually declined in the most recent week reviewed.

“It seems as if people are accepting the new reality of an ever present recession, which through our analysis of online buzz illustrates that despite a dip in recession discussions in the spring, that they have now leveled off but not subsided completed. Perhaps it is not on the front burner for all consumers as it was in 2008 thru mid 2009, but definitely still on the back burner where it continues to impact consumer decisions,” concluded Russo.

• Download the Nielsen Economic Current.

According to Nielsen’s latest European Growth Report, the third quarter of 2009 has shown nominal growth at 2.4%—the lowest growth over the past 18 months. Inflation is decelerating, recording a low 1.4% in the third quarter. The inflation rate almost halved compared to the start of the year and is down 0.8 points compared to the second quarter 2009. Deflation has been recorded in 10 markets.

Europe experienced a modest volume growth of 1% in the third quarter, down 0.9% compared to the prior quarter. However, this growth is still ahead of the United States. Volume growth rate is accelerating in the nine countries.

The Big 5 European economies (France, Germany, Italy, Spain, United Kingdom) are showing a mixed picture. Several Eastern European countries (the Baltics, Bulgaria, Croatia, Czech Republic, Ukraine) report a severe volume growth drop over the summer.

Emerging optimism?

Consumer confidence sees a significant rise globally as shown in the latest Nielsen Global Consumer Confidence survey.

Consumer Confidence rose in 45 out of the 52 countries compared to six months ago. After hitting its lowest point of 77 index points in April, confidence began to recover due to massive global stimulus plans in the second quarter.

Nielsen’s latest survey, which polled 30,500 online consumers in 54 countries in early October 2009, showed that global consumer confidence is rebounding, jumping 9 index points in the last six months to 86 since the Q1 2009 survey. Brazil and key Asian markets are posting double-digit increases in consumer sentiment, while the U.S. recorded its first increase in consumer confidence since 2007. Despite this renewed sense of optimism, actual behavior remains restrained; many consumers remain skittish about spending their money, and in some countries, spending habits appear to have changed permanently. Hong Kong posted the largest consumer confidence increase in the third quarter compared to Q2, up 14 points from 79 to 93 index points, followed by South Korea (+13 points) and Brazil (+12 points).

Total European View

Nominal Volume Growth

Growth has been upheld by continued modest volume growth of +1% for the third quarter of 2009. Although this is a decline of 0.9% compared to the second quarter, European volume growth is still ahead of the U.S.
The volume growth rate is accelerating in the following countries: Austria, Belgium, France, Netherlands, Norway, Portugal, Spain, Sweden, and the U.K.

The Big Five European economies are showing a mixed picture. While Italy and Germany are experiencing deflation and volume decline, continued volume increases are occurring in France, the U.K. and Spain (which is offset by slowing inflation).

Several Eastern European countries report a severe volume growth decline over the summer. Ukraine and Bulgaria have had double digit inflation, Croatia and the Czech Republic are experiencing deflation, and a difficult economy has hit the Baltics.

Value Growth

Unit Value growth continues to fall, dropping to 1.3% in the third quarter. This is a significant reduction compared to the highs of Q3 2008 when it reached 6.4%.

Country Analysis – Western Europe

The latest quarterly Europe Growth Reporter measuring volume and value sales in the fast moving consumer goods industry across markets in Europe is showing encouraging signs of improvement with more than half the countries showing positive volume trends.

As the chart above demonstrates, the leading Western European growth countries are Turkey, Norway, Poland, Sweden, the Netherlands, the U.K., and Austria. After a remarkable Q2 recovery, Poland demonstrates a significant drop in volume and nominal growth in the third quarter. After four consecutive negative quarters, France’s volume growth is positive, recording 0.6% for the quarter. Ireland continues its overall negative trends, and Portugal, Spain, and Switzerland all see negative price growth in the third quarter.

Country Analysis—Central and Eastern Europe

The chart above demonstrates growth rates for countries in Central and Easter Europe. Ukraine’s rampant inflation continues, with a unit value growth of 27% (an improvement over last quarter’s 31%) and volume growth at -8%. Bulgaria is experiencing double digit inflation, while Croatia is seeing deflation, and the Baltics (Estonia, Latvia, Lithuania) are facing a difficult economy.

• Download Nielsen’s European Growth Report

So what are Brits doing with their smartphones?  Mobile web browsing was the fastest growing activity, with 10.4 million using that function in the third quarter, up from 8.8 million in the second quarter.  Downloading applications was the second fastest growing activity, with 1 million new users in the third quarter to 4.1 million.

“Although there have been sizable increases in the take-up of new mobile technologies such as video and location-based services, they remain niche forms of behavior,” said Edward Kershaw, Vice President of Mobile Media at Nielsen.  “The era of the handset as a truly multi-media device on a mass-market level lies somewhere on the horizon, and the key for companies to successfully harness mobile lies in a realistic understanding of what activities people on a large-scale are actually doing with their handsets now.”