slow growth Volume growth continues, but slows in third quarter Nielsen European Growth Reporter

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1 Consumer Insight Delivering consumer clarity November slow growth Volume growth continues, but slows in third quarter Nielsen European Growth Reporter By: Jean-Jacques Vandenheede, European Business Insight Director CI SUMMARY: Drawing on Nielsen s unique data assets and geographical footprint this report compares overall market dynamics (value and unit growth) in the Fast Moving Consumer Goods sector across Europe. Based on the widest possible basket of product categories that are continuously tracked by Nielsen in each of these countries and channels, the third quarter 2009 is showing nominal growth, which has slowed since last quarter the lowest growth over the last 18 months. Executive Summary The third quarter of 2009 has shown nominal growth at 2. the lowest growth over the past 18 months. Inflation is decelerating, recording a low 1. 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 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. This edition of the Nielsen Growth Reporter also includes additional analysis on countries in central and eastern Europe, and therefore covers a total of 35 markets the most extensive study of its type available. For more information, please contact Jean-Jacques Vandenheed at jean-jacques.vandenheede@nielsen.com November

2 Emerging optimism? Consumer confidence sees a significant rise globally as shown in the latest Nielsen Global Consumer Confidence survey. Nielsen Consumer Confidence Index Global Average H 05 2H 05 1H 06 2H 06 1H 07 2H 07 1H 08 2H 08 Q Q Q 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 Q 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 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). November

3 Total European View Fast Moving Consumer Goods Market Dynamics 6.2% 6.7% 6.6% Volume change Unit value change Nominal growth 4.6% 3.9% 3.1% % 5.8% % 2.6% 2.1% 1.3% Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Nominal Volume Growth Growth has been upheld by continued modest volume growth of +1% for the third quarter of 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 Q when it reached 6.. November

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. Unit value Volume growth Value growth 11.3% 3% Quarter 3, 2009 Growth Rates per Country versus Q % 5.8% 5.9% % 0.5% 1.2% 1.3% 2.2% 2.6% 1.5% 3% 3% 3% 2% 2% 1% 0.9% 3% 2% 1% 0% -0.5% 3% 2% -1% -1% 0% 0% 1% 2% 1% 2% -2% -2% -1.2% % -1.6% -1.3% -1.2% 0% -5% -1% -1% -2% -3% -2% 0% -1% -2% -3% -6.6% -5.6% -5.5% Slovakia Ireland Czech Rep. Germany Greece Italy Portugal Denmark Switzerland Spain Hungary Finland France Austria Belgium UK Netherlands Sweden Poland Norway 8% Turkey 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. November

5 Country Analysis Central and Eastern Europe Latest period growth rates per country 12% 1% 1% 1% 1% 1% 1.8% -10% -6% -5% -1% -12% -5.7% -0.7% -10% -10.8% -9.1% -4.5% Unit value Volume growth Value growth 18.7% 17.6% 12.0% 27% 9.6% 11% 2.5% 3.0% 9% 2% 1% 10% 0% 3% 7% -1% -8% Latvia Lithuania Croatia Estonia Israel Bulgaria Macedonia Slovenia Serbia Albania Bosnia Ukraine 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. November

6 Western Europe Central & Eastern Europe Austria, Belgium, Czech Rep, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, UK Albania, Bosnia, Bulgaria, Croatia, Estonia, Israel, Latvia, Lithuania, Macedonia, Romenia, Russia, Serbia, Slovenia, Ukraine 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 28 of 2009 through to week 40 of Glossary Nominal value growth: Percentage change in value sales (expenditures) as measured by the total basket of reported product categories i.e. overall value growth Unit value growth ( price change): Percentage change in the average retail price per unit in the total basket of reported product categories i.e. price inflation/ deflation The unit of volume in the basket varies by category (e.g. litres, kilograms, tonnes etc) The change in average price per unit may result from: Price changes of individual products Change in the mix of purchased products; more or less expensive products, more or less promotions, etc. Channel switching; more or less purchases in discount stores, or hypermarkets, or convenience outlets, etc. Product or channel mix changes may be induced by price change or may just be the result of market dynamics. The unit value growth reflects how consumers experience cost of living in their actual grocery shopping behavior. Volume growth: Percentage change in purchased volume (quantity) of products The three components are related: Value Growth = Unit Value Growth * Volume Growth About The Nielsen Company The Nielsen Company is a global information and media company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence, mobile measurement, trade shows and business publications (Billboard, The Hollywood Reporter, and Adweek). The privately held company is active in more than 100 countries, with headquarters in New York, USA. Copyright 2009 The Nielsen Company. All rights reserved. Nielsen and the Nielsen logo are trademarks or registered trademarks of CZT/ACN Trademarks, L.L.C. 09/534