Euromonitor Emerging markets

1. Emerging Market Consumers: A comparative study of Latin America and Asia-Pacific Euromonitor International ESOMAR Latin America 2010

2. Table of Contents Emerging markets and the global recession Demographic dynamics Income inequality and the rise of the middle class Spending priorities Consumers in 2010 and beyond

3. Image for 2010 Emerging markets and the global recession

4. 2010: Recovery is driven by emerging markets -9 -4 1 6 11 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 %realGDPgrowthoverprevious quarter,annualized 2009: 89 2010: 17 Number of countries expected to see negative real GDP growth Emerging economies World Advanced economies Real GDP growth: % growth over previous period, annualised Source: IMF

5. Winners and losers -10.0 -5.0 - 5.0 10.0 15.0 Italy EU-27 United Kingdom France Germany Argentina Japan South Africa Australia Canada USA South Korea Russia Turkey Mexico Saudi Arabia Brazil Indonesia India China 2009 2010 Annual % real GDP growth in G20: 2009-2010 Source: IMF 5

6. Latin America Recovery in Latin America is not homogenous across countries. Commodity-exporting countries (Brazil, Chile, Colombia and Peru) are expected to perform better in the region, while commodity importers face a slower recovery. Real GDP growth in selected markets: 2008-2009, Growth over previous period Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Argentina 1.2 1.8 1.3 -0.5 0.1 0.1 0.1 na Brazil 1.8 1.2 1.4 -3.4 -1.0 1.4 1.7 2.0 Chile 1.8 1.9 -1.3 -2 -0.7 -0.3 1.1 na Colombia -0.4 0.6 0.2 -1.3 0.1 0.8 0.2 na Mexico 1.2 -0.4 -0.1 -1.9 -6.9 0.3 2.5 2.0 Source: National statistics Note: Data are seasonally adjusted

7. Brazil Brazil’s economy suffered a contraction in 2009, largely as a result of slowing global demand for Brazilian exports, particularly of raw commodities. Nonetheless, the economy has rebounded owing to the strong capital inflows and good policy management by the government. The unemployment rate in Brazil dropped to 6.8% in December 2009 returning to the same level recorded in December 2008. Growth of private consumption fell during 2009, but is supported by low borrowing costs, tax cuts and aggressive government spending. 4.7 4.1 9.9 3.7 4.5 8.6 0 2 4 6 8 10 12 Real GDP Growth Inflation Unemployment Rate 2010 2011 Selected macro-economic indicators: 2010-2011 Source: IMF/ILO/National statistics

8. Mexico The recession in Mexico ended in Q3 2009. This was a reflection of the improvement in industry and services caused by the revival of external and domestic demand. Swine flu alone cost the country more than US$2 billion. The recession in the USA led to a sharp drop in exports and remittances and the recovery is dependent on the strength of the US manufacturing sector. Consumer spending fell by 8.0% in 2009 owing to tighter credit, a drop in wages and remittances. Spending should begin to rise again in 2010, increasing by 1.8%. 4.0 3.5 6.3 4.7 3.0 5.7 0 1 2 3 4 5 6 7 Real GDP Growth Inflation Unemployment Rate 2010 2011 Selected macro-economic indicators: 2010-2011 Source: IMF/ILO/National statistics

9. Asia Pacific Asia recovered from the downturn faster than other regions owing to the highly effective policy responses taken by governments. While deflationary pressures and a strong yen could stifle Japan's recovery, China continues to display a strong recovery backed by robust growth in private demand. Real GDP growth in selected markets: 2008-2009, Growth over previous period Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 China 10.6 10.1 9.0 6.8 6.1 7.9 9.1 10.7 India 2.0 0.8 2.2 -0.3 1.4 2.5 3.0 na Indonesia 1.8 1.7 1.5 0.2 1.1 1.3 1.5 1.5 South Korea 1.1 0.4 0.2 -5.1 0.1 2.6 3.2 0.2 Vietnam 7.5 5.7 5.9 5.7 3.1 4.5 5.8 7.4 Source: National statistics Note: Data are seasonally adjusted. Data for China and Vietnam are year-on-year and are not seasonally adjusted

10. China China’s growth continues to remain buoyant aided by a strong rebound of exports, robust growth in private demand and continued increases in foreign investments. Domestic spending is driven by the stimulus package and the relaxation of restrictions on bank lending. Concerns about asset price bubbles still persist. Timely monetary tightening will not only help sustain growth but also avoid overheating. 10.0 3.0 4.5 9.7 3.5 4.5 0 2 4 6 8 10 12 Real GDP Growth Inflation Unemployment Rate 2010 2011 Selected macro-economic indicators: 2010-2011 Source: IMF/ILO/National statistics

11. Indonesia Indonesia's economy performed better than that of many other large Asian countries in 2009 thanks to its large domestic market and relatively modest dependence on exports. The government has been introducing a range of more liberal policies to boost economic activity, investment and employment.  Unemployment fell to 7.9% at the end of 2009 – the lowest rate in nine years.  Good harvests have boosted farm incomes and commodity exporters are benefiting from the surge in China's infrastructure investment. 4.8 6.2 9.4 5.0 5.4 9.1 0 1 2 3 4 5 6 7 8 9 10 Real GDP Growth Inflation Unemployment Rate 2010 2011 Selected macro-economic indicators: 2010-2011 Source: IMF/ILO/National statistics

12. Demographic dynamics Demographic dynamics

13. A tale of two regions Latin America Asia- Pacific

14. Stark differences in major markets 2010 Total population Median age % aged 0-14 % aged 65+ Fertility rate Largest city China 1.3 billion 38.8 years 16.4% 9.7% 1.8 Shanghai - 12.0 million Brazil 195 million 28.8 years 25.6% 6.8% 1.8 Sao Paulo – 11.4 million Source: UN/National statistics

15. Income inequality and the rise of the middle class

16. Fundamental differences in income distribution between the two regions Gini Index Asia Pacific: 0.413 Latin America: 0.500 Average household income: Asia Pacific: US$11,159 Latin America: US$16,254 Households with an annual income over US$15,000: Asia-Pacific: 7.3% Latin America: 33.2% Source: National statistics

17. Income inequality in Latin America impacts on the size of the middle class 34% 31% 29% 28% 27% 24% 24% 23% 23% 22% 21% 19% 0% 5% 10% 15% 20% 25% 30% 35% 40% %ofhouseholdswithanincomebetween 75%and125%ofthemedianincome Middle class households: 2009 Source: National statistics

18. It also means the Latin American rich are richer than the Asia-Pacific rich - 25,000 50,000 75,000 100,000 Vietnam India Indonesia Pakistan Bolivia Philippines Turkmenistan Thailand China Kazakhstan Azerbaijan Ecuador Argentina Colombia Peru Chile Malaysia Mexico South Korea Taiwan Brazil Venezuela US$ per household Average disposable income of decile 10 households: 2009 Source: National statistics

19. With some startling extremes - 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 Kazakhstan Pakistan Azerbaijan Taiwan Chile Indonesia South Korea India Vietnam Venezuela Mexico Turkmenistan Argentina Thailand Bolivia Philippines Malaysia China Ecuador Peru Colombia Brazil The ratio of a decile 10 income to a decile 1 income: 2009 Source: National statistics

20. Spending priorities

21. Income inequality has a huge impact on spending patterns - 2,000 4,000 6,000 8,000 10,000 12,000 Latin America Emerging Asia US$perhousehold Average spending of a decile 5 household: 2009 Necessities Discretionary spending 52%  A middle income household in Latin America spends 44% more than the equivalent household in Emerging Asia  Despite this, the proportion of budget devoted to necessities is similar: 49% in Latin America and 52% in Emerging Asia 49% Source: National statistics

22. How does the spending of the rich compare? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% China Brazil %oftotalhouseholdexpenditure Average expenditure of a decile 10 household: 2009 Alcoholic Beverages & Tobacco Food & Non-Alcoholic Beverages Miscellaneous Goods & Services Hotels & Catering Education Leisure & Recreation Communications Transport Health Goods & Medical Services Household Goods & Services Housing Clothing & Footwear Source: National statistics

23. And the poor? 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% China Brazil %oftotalhouseholdexpenditure Average expenditure of a decile 1 household: 2009 Alcoholic Beverages & Tobacco Food & Non-Alcoholic Beverages Miscellaneous Goods & Services Hotels & Catering Education Leisure & Recreation Communications Transport Health Goods & Medical Services Household Goods & Services Housing Clothing & Footwear Source: National statistics

24. Consumers in 2010 and beyond

25. Technology & Communications

26. Emerging markets increasingly plugged in 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 2010 2015 2020 Internet Users Asia Pacific Latin America

27. Staying connected on the go 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000 2010 2015 2020 Mobile Phone Subscriptions Asia Pacific Latin America

28. Health & Wellness

29. Better living through nutrition 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 2009 2014 Health & Wellness China - RMB mn

30. Better living through nutrition 0 25000 50000 75000 2009 2014 Health & Wellness Brazil - R$ mn

31. Focus on prevention and dietary gaps Vitamins and Dietary Supplements RMB mn 0 10000 20000 30000 40000 50000 60000 70000 80000 China 2009 2014 Vitamins and Dietary Supplements Rs mn 0 5000 10000 15000 20000 25000 30000 35000 40000 India 2009 2014

32. Focus on prevention and dietary gaps Vitamins and Dietary Supplements R$ mn 0 500 1000 1500 2000 2500 3000 Brazil 2009 2014 Vitamins and Dietary Supplements Mx$ mn 8200 8400 8600 8800 9000 9200 9400 9600 9800 Mexico 2009 2014

33. Eco-Awareness

34. Translating awareness into sales  Competitive pricing  Packaging redesign  Concentrated products  Communicating benefits

35. Retail evolution

36. Expansion of chained retailing – Asia Pacific Asia Pacific Outlets 2009 Outlets 2014 Hypermarkets 4048 6786 Supermarkets 124477 154445 Discounters 1043 1545 Small Grocery Retailers 11349185 11608480 Food/Drink/Tobacco Specialists 3747283 3803238

37. Expansion of chained retailing– Latin America Latin America Outlets 2009 Outlets 2014 Hypermarkets 1770 2129 Supermarkets 9940 11111 Discounters 21636 22554 Small Grocery Retailers 1592974 1658011 Food/Drink/Tobacco Specialists 395421 412058

38. Internet retailing: a new frontier for shoppers 0 200 400 600 800 1000 1200 -100 0 100 200 300 400 500 600 China India Argentina Brazil Mexico 04-09PercentageValueGrowth 09-14 Percentage Value Growth

39. Mary.Tabion@Euromonitorintl.com E U R O M O N I T O R I N T E R N A T I O N A L Q&A