CHANGING CONSUMER PROSPERITY - THE IMPACT OF WEALTH FRAGMENTATION ON THE CONSUMER ENVIRONMENT - Nielsen
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CHANGING CONSUMER PROSPERITY THE IMPACT OF WEALTH FRAGMENTATION ON THE CONSUMER ENVIRONMENT Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 1
CONSUMERS FEEL
FINANCIALLY FITTER
Markets around the world have faced fluctuating economic conditions in
recent years, with many economies experiencing varying degrees of growth
or recession. Amid these unpredictable conditions, many experts expected an
uptick in consumers’ financial situations and millions of consumers to join the
middle class. Conversely, many commentators questioned whether economic
progression was proportionate, pointing to growing wealth gaps in many
markets. The pundit catchphrase “haves and have-nots” points to a growing
divide, where the rich are getting richer and the poor are getting poorer,
despite country economic performance.
The Nielsen Changing Consumer Prosperity report reveals consumers’
sentiment toward their financial situations and explores the behaviour and
impact on spending, and how this has changed over time.
58%
GLOBAL CONSUMERS FEEL THEY ARE
FINANCIALLY BETTER OFF
THAN THEY WERE FIVE YEARS AGO.
¹ Source: Nielsen Global Premiumization Study 2018
Globally, the majority (58%) of consumers feel that they are in a better
financial position than they were five years ago, but there is also a sizeable
proportion of consumers who feel that they are only in survival mode, with
sentiment differing considerably by region and country.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 2
FINANCIAL WELLBEING DOES
NOT EQUATE TO WEALTH
Asia-Pacific consumers feel the most optimistic about their financial situation, while 70% reporting
that they are in a better position today compared with five years ago. Europeans are the least
positive, with only 37% of consumers saying they are currently in a firmer financial position.
The findings highlight significant disparities in consumer sentiment across global markets, with
many consumers feel that their personal economic circumstances have improved in recent years,
numerous others believe they are faring worse.
CONSUMER PERCEPTIONS ABOUT THEIR FINANCIAL WELLBEING ARE STRONGER IN
DEVELOPING MARKETS
GLOBAL 58% 23% 19%
ASIA PACIFIC 70% 18% 12%
EUROPE 37% 32% 31%
AFRICA / MIDDLE EAST 52% 21% 27%
LATIN AMERICA 50% 21% 29%
NORTH AMERICA 46% 33% 21%
BETTER OFF ABOUT THE SAME WORSE OFF
¹ Source: Nielsen Global Premiumization Study 2018, “Compared to five years ago, are you financially better or worse off today?”
Nearly one in five global consumers (19%) believe they are in an inferior financial position compared
with recent years, with regional differences regarding deteriorating financial standing following a
similar pattern to the regions where consumers feel more prosperous. Asia-Pacific consumers have
the lowest incidence of consumers feeling worse off, while Europe records the highest.
19%
GLOBAL CONSUMERS FEEL THEY ARE
FINANCIALLY WORSE OFF
THAN THEY WERE FIVE YEARS AGO.
¹ Source: Nielsen Global Premiumization Study 2018
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 3
MORE POSITIVE MONETARY
MINDSET IN DEVELOPING
MARKETS
Seven of the top 10 markets recording the most positive sentiment toward their financial
situation hail from Asia-Pacific, and six of the 10 least positive markets are in Europe. It is worth
noting, though, that many of the countries recording an improvement in financial wellbeing are in
Eastern Europe.
TOP 10 MARKETS
BETTER OFF WORSE OFF
BETTER OFF WORSE OFF
BIGGEST CHANGE BIGGEST CHANGE
VIETNAM 86% HUNGARY +21% GREECE 56% TURKEY +13%
CHINA 81% POLAND +14% UKRAINE 45% EGYPT +13%
INDONESIA 75% BULGARIA +14% BELARUS 42% ARGENTINA +13%
UNITED ARAB
INDIA 74% SLOVENIA +14% ARGENTINA 41% +6%
EMIRATES
COLOMBIA 72% SPAIN +13% JAPAN 40% SINGAPORE +4%
PHILIPPINES 71% IRELAND +13% RUSSIA 38% INDONESIA +4%
ROMANIA 61% ESTONIA +12% FRANCE 36% THAILAND +4%
PAKISTAN 60% HONG KONG +12% EGYPT 36% SAUDI ARABIA +3%
MALAYSIA 59% PORTUGAL +12% TAIWAN 35% TAIWAN +3%
THAILAND 57% COLOMBIA +12% FINLAND 35% AUSTRIA +3%
¹ Source: Nielsen Global Premiumization Study 2018 and ² 2016
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 4
There is an array of economic and social factors that can be examined to interpret why consumers
have responded as they have in the various markets, but often, only loose or inconsistent
relationships can be drawn with consumer sentiment. Changes in average wage growth, income
distribution, discretionary income and inflation can provide useful context for understanding
changes in consumer attitudes, but the averages belie the fragmentation of changing consumer
fortunes, and cannot precisely account for why consumers feel they are better or worse off, and
more importantly, how they are shifting their spend based on their perceived circumstances.
DISPOSABLE INCOME CHANGE HAS A SLIGHT RELATIONSHIP WITH CONSUMER SENTIMENT
86%
81%
75% 74%
72% 71%
61% 60% 59%
57%
51%
32% 33%
29%
27%
22% 22% 21%
14%
12%
VIETNAM CHINA INDONESIA INDIA COLOMBIA PHILIPPINES ROMANIA PAKISTAN MALAYSIA THAILAND
BETTER OFF THAN 5 YEARS AGO AVG. DISPOSABLE INCOME GROWTH 2014-2018
Source: ¹ Nielsen Global Premiumization Study 2018, ³ Economist Intelligence Unit - disposable income growth, average monthly
wage growth (2014 – 2018)
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 5FIRMER FINANCIAL FOOTING
DOES NOT MEAN MORE
PURCHASING POWER
The absence of robust connections reminds us that consumer sentiment is intrinsically rooted in
consumer experiences and circumstances. For example, if a consumer in one market improves
their financial situation by a small amount to allow them to provide essentials to their family
for the first time, they may be more inclined to respond positively than a consumer in another
market who has gained more, but whose lifestyle has not changed significantly, even though they
are more prosperous.
While the majority of consumers express better financial wellbeing, their improving situations
have not necessarily enabled them to spend more freely.
15%
GLOBAL CONSUMERS FEEL THEY ARE
ABLE TO SPEND FREELY.
¹ Source: Nielsen Global Premiumization Study 2018
Only 15% of global consumers, relative to over half (58%) with improved financial status, feel
they can spend freely. The majority (53%) say they live comfortably, and are able to buy some
things just because they want them. Nearly a third (31%) of consumers say they only have enough
money for food, shelter and the basics.
FAVOURABLE FINANCIAL WELLBEING DOES NOT MEAN MORE PURCHASING POWER
19% 23% 58% 32% 53% 15%
WORSE ABOUT BETTER AFFORD LIVING ABLE TO SPEND
OFF THE SAME OFF THE BASICS COMFORTABLY FREELY
¹ Source: Nielsen Global Premiumization Study 2018, Percentage of global consumers
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 6RETAIL TRANSFORMATION
IS TWOFOLD
Nielsen’s Global Markets Retail Leader, Pedro Manosalva, believes consumers’ perception of their
personal financial situation plays a role in influencing the shape of the retail landscape. Across
the global geographies, the contrast between consumers who only have enough for the basics
and those who are comfortable and able to spend freely, in many ways mirrors trends observed
in the retail sector channels.
IN EUROPE, WHERE HALF THE CONSUMERS CAN ONLY AFFORD THE BASICS, THERE IS
WIDESPREAD SUCCESS OF DISCOUNT RETAILERS AS CONSUMERS SEEK OUT LOWER PRICES AND
PROMOTION. WHILE IN LATAM, LOW AND PREMIUM PRICED SECTORS ARE GROWING, SIGNALLING
SHIFTING CONSUMER SPENDING ABILITY AND NEEDS.
Pedro Manosalva, Nielsen Global Markets, Retail Leader
EUROPEAN DISCOUNTERS WIN SHARE OF RETAIL SALES WITH LOWER PRICES
SHARE
20,7% 21,4% 22,0% 22,4% 23%
2013 2014 2015 2016 2017
⁴ Source: Nielsen Retail Measurement Services, Europe
LATIN AMERICA RETAILERS APPEAL TO CONSUMERS THROUGH VALUE AND PREMIUM OFFERINGS
CHILE - TOTAL FMCG 0.8% MEXICO - TOTAL FMCG 8.3% COLOMBIA - TOTAL FMCG 1.6%
13,7% 14,4%
8,7% 8,4% 13,1%
2,3% 7,5% 6,8% 2,5%
5,8%
-3,2% -1,1%
LOW MEDIUM PREMIUM RETAIL LOW MEDIUM PREMIUM RETAIL LOW MEDIUM PREMIUM RETAIL
TIER TIER TIER BRANDS TIER TIER TIER BRANDS TIER TIER TIER BRANDS
% VALUE GROWTH
⁵ Source: Nielsen Retail Measurement Services, Latam
The growth evident in many markets at opposite ends of the price scale is often at the expense
of mid-tier products and pricing. Typically, growth in the low-tier sector is driven by local
players, discounters and private label, while top-tier growth is driven by smaller, specialist and
niche manufacturers—but in many cases, both movements have been at the expense of large
multinational manufacturers who have traditionally served the mass market in the
mid-priced range.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 7GROCERIES GAIN WALLET
SPEND AHEAD OF ALL ELSE,
EVERYWHERE
Trends reflected in the retail channels and price ranges are not the only areas where consumers
are altering their behaviour. Consumers are proactively, due to changing aspirations or priorities,
or reactively, due to factors such as inflation, adapting their overall wallet allocation on fixed
and discretionary expenses. The largest proportion of global consumers (44%), consistent across
all geographies, indicate that over the past five years the amount they spend on groceries
has increased. This is followed by additional spend on technology and communications (38%),
education (34%), travel (33%) and healthcare (32%).
GROCERIES TOPS THE LIST WHERE CONSUMERS ARE SPENDING MORE OF THEIR MONEY
GLOBAL ASIA PACIFIC EUROPE
GROCERIES 44% GROCERIES 46% GROCERIES 39%
TECHNOLOGY /
COMMUNICATION 36% EDUCATION 44% UTILITIES 33%
TECHNOLOGY / HOUSEHOLD
EDUCATION 34% COMMUNICATION 43% GOODS 27%
TECHNOLOGY /
TRAVEL 33% TRAVEL 43% COMMUNICATION 25%
RENT /
HEALTHCARE 32% DINING OUT 40% MORTGAGE 25%
AFRICA / MIDDLE EAST LATAM NORTH AMERICA
GROCERIES 50% GROCERIES 47% GROCERIES 33%
HOUSEHOLD
EDUCATION 47% GOODS 38% UTILITIES 30%
TECHNOLOGY / TECHNOLOGY /
COMMUNICATION 42% COMMUNICATION 33% HEALTHCARE 26%
RENT /
HEALTHCARE 40% EDUCATION 32% MORTGAGE 22%
HOUSEHOLD
GOODS 39% HEALTHCARE 29% TRAVEL 22%
¹ Source: Nielsen Global Premiumization Study 2018. Top 5 categories consumers are spending more on vs. 5 years ago. Options:
Clothing – Video/Music – Entertainment/Leisure – Travel – Dining Out – Home Improvements – Utilities – Groceries – Household
Goods - Rent/Mortgage – Healthcare – Education – Technology/Communication – Childcare – Servicing Debt
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 8Rising spend on technology and communication is also common across all regions, as the scale
and utility of connectivity continues to influence the lives of consumers around the world. Paying
more for education, travel and healthcare is specific to certain regions and markets as macro
change drivers unfold at differing rates in different areas.
Region and market individuality reflect the diverse conditions, circumstances, priorities and
aspirations of consumers around the globe. In Asia-Pacific, the growing spend in discretionary
areas points to rising confidence, ability and willingness to spend. Asian consumers called out
more spend allocated towards travel and dining out over the past five years.
In Europe and North America, the presence of utilities and rent/mortgage payments in the top
five areas illustrates tight financial conditions where the cost of living is putting a strain on many.
Rising spend on healthcare in North America is indicative of the aging population where older life
stages have impacted spend. Conversely, the immense young generation in Asia and Africa result
in education spend featuring highly, within the top five areas, where spend has increased.
In many areas inflation is a core component of the cost. High inflationary markets and
environments with foreign exchange volatility, particularly in Africa and Latin America, have
resulted in relatively higher scores for the essential groceries and household goods.
Copyright
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distribute. 99TRADING ON UP IN
ELECTRONICS, APPAREL
AND PROTEIN
While consumers are typically cost-conscious and look for bargains, there are categories where
they are willing to pay a premium. Globally, the key categories where consumers are willing
to trade up include: personal electronics (42%), clothing/shoes (40%), cosmetics (31%), dairy
products (30%) and meat/seafood (29%). These categories highlight both extrinsic and intrinsic
consumer drivers for premiumisation.
GLOBAL CONSUMERS ARE WILLING TO PAY A PREMIUM FOR PERSONAL ELECTRONICS
AND CLOTHING
GLOBAL ASIA PACIFIC EUROPE
PERSONAL PERSONAL
ELECTRONICS 42% ELECTRONICS 49% CLOTHING / SHOES 33%
PERSONAL
CLOTHING / SHOES 40% CLOTHING / SHOES 45% ELECTRONICS 32%
COSMETICS 31% COSMETICS 38% MEAT / SEAFOOD 31%
DAIRY PRODUCTS 30% JEWELLERY 35% COFFEE / TEA 27%
MEAT / SEAFOOD 29% DAIRY PRODUCTS 34% DAIRY PRODUCTS 24%
AFRICA / MIDDLE EAST LATAM NORTH AMERICA
CLOTHING / SHOES 43% CLOTHING / SHOES 44% MEAT / SEAFOOD 30%
PERSONAL PERSONAL PERSONAL
ELECTRONICS 39% ELECTRONICS 42% ELECTRONICS 29%
MEAT / SEAFOOD 31% MEAT / SEAFOOD 35% CLOTHING / SHOES 27%
HAIR CARE 31% HAIR CARE 32% COFFEE / TEA 25%
DAIRY PRODUCTS 29% DAIRY PRODUCTS 32% DAIRY PRODUCTS 22%
¹ Source: Nielsen Global Premiumization Study 2018. Top 5 categories consumers are willing to pay a premium for (spend more
than the category average price)
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 10Nielsen’s head of Sales and Marketing Effectiveness, Laura McCullough, believes that the local
nuances present rich opportunities for retailers and manufacturers to hone in on premium
attributes within specific categories. In categories where consumers are more cost conscious,
retailers tend to promote heavily to catch the attention of consumers, and position themselves as
value players.
A KEY WATCH-OUT IS TO AVOID FEATURING PRODUCTS THAT CONSUMERS ARE WILLING TO PAY
A PREMIUM FOR, OR DISCOUNTING MORE THAN CONSUMERS ARE EXPECTING. IT’S IMPORTANT
THAT PROMOTIONS ARE MATCHED TO THE NEEDS OF LOCAL CONSUMERS - PRICE ELASTICITY
ANALYSES SHOW WHAT CONSUMERS ARE WILLING TO PAY.
Laura McCullough, Nielsen Global Markets, Sales and Marketing Effectiveness Lead
Examples of where the promotional environment does not efficiently reflect consumer sentiment
towards price, brand and willingness to spend are distinct in the United Arab Emirates (UAE) and
Saudi Arabia (KSA). These two markets feature with the countries reflecting the biggest slump in
financial standing, and are some of the most price sensitive markets globally.
COUNTRIES MOST SENSITIVE TO PRICE CHANGE (EVERYDAY ELASTICITY) INCLUDE THE
UAE AND SAUDI ARABIA
D
D
IA
LAN
AN
AB
INA
A
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I AR
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ZEA
IA
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SPA
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U.K
SW
ITA
CH
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BR
AU
UA
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-1,5 -1,6
-2,0 -2,0 -2,0 -2,0
-2,1 -2,1 -2,2
-2,3 -2,3
-2,4 -2,4
-3,0
⁶ Source: Nielsen Price and Promotion, Everyday Pricing Analytics 2017-2018, Average of 36 countries. Price elasticity is the relationship between price and
volume. On average, a 1% price increases yields a 1.5% decline in volume. Country elasticities provide an indication of relative sensitivity only as not all
brands/sku’s will have the same price elasticity.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 11IN THE UAE AND SAUDI ARABIA 60% OF PROMOTIONS CANNIBALIZE BASE SALES, ONLY 40%
OF PROMOTED VOLUME IS INCREMENTAL
INCREMENTAL SALES
14% 40% EFFICIENCY
PROMOTED SALES
35% SUBSIDIZED SALES
21% 60% INEFFICIENT
TOTAL PRODUCT SALES
100%
BASE SALES
NON PROMOTED SALES NON PROMOTED SALES
65% 65%
⁷ Source: Nielsen Price & Promotion studies, Promoted vs Non Promoted Sales, KSA & UAE 2017-2018
Nielsen’s head of Sales and Marketing Effectiveness, Africa and Middle East, Terence Colle, points
out that this has resulted in consumers becoming conditioned to shop in a high frequency,
discount environment, where a large proportion of promotional investment is wasted.
47% OF FMCG ITEMS IN THE UAE ARE SOLD ON DISCOUNT. IT IS CLEAR THAT NOT ALL PRODUCTS
RESPOND AS WELL TO PROMOTION. CONSUMERS ARE MORE EXCITED ABOUT SOME PRODUCTS
AND PROMOTIONS THAN OTHERS, IT’S IMPORTANT TO KNOW WHICH THESE ARE.
Terence Colle, Nielsen Africa and Middle East, Sales and Marketing Effectiveness Lead
As in the Middle East, there are similar instances around the globe that highlight different
sensitivities, and where changing prosperity and attitudes to spending must be taken into account
when evolving strategic elements like pricing, promotion and assortment. Understanding which
categories and products consumers are more willing to pay a premium for, as well as identifying
those where they are not, is critical.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 12CEILING FOR PREMIUM
PRODUCTS NOT MATCHING
PRICE PERCEPTION
Looking at the categories that consumers are least likely to pay more for there are variations by
region, however, two categories feature most consistently; carbonated beverages and tobacco.
Consumers view products in these categories as value purchases, or they do not associate them
with sufficiently differentiated attributes to account for a price premium. Historically, categories
and products that have low involvement and investment have been the domain of retail brands
or private label, as they provide a natural entry point for consumers looking for more accessible
price points. This, however, has changed as retailers expand their private label footprint into
broader ranges of products and categories, and many have introduced premium tier private-label
offerings, attractive to consumers at the lower end of the premium pricing spectrum.
CONSUMERS ARE LEAST WILLING TO PAY A PREMIUM FOR TOBACCO AND
CARBONATED BEVERAGES
GLOBAL ASIA PACIFIC EUROPE
CEREAL 11% CEREAL 12% CEREAL 8%
FROZEN DINNERS / FROZEN DINNERS /
MEAL STARTERS 11% SALTY SNACKS 11% MEAL STARTERS 7%
CARBONATED
SALTY SNACKS 11% BEVERAGES 11% SALTY SNACKS 7%
CARBONATED CARBONATED
BEVERAGES 10% PET FOOD 10% BEVERAGES 7%
TOBACCO 6% TOBACCO 7% TOBACCO 6%
AFRICA / MIDDLE EAST LATAM NORTH AMERICA
CARBONATED FROZEN DINNERS / SUGAR / SUGAR
BEVERAGES 11% MEAL STARTERS 13% SUBSTITUTE 7%
FROZEN DINNERS / BABY FORMULA /
MEAL STARTERS 10% FOOD 11% CEREAL 7%
BABY DIAPERS / BABY FORMULA /
PET FOOD 9% WIPES 11% FOOD 5%
CARBONATED BABY DIAPERS /
TOBACCO 7% BEVERAGES 11% WIPES 5%
ALCOHOL /
SPIRITS 6% TOBACCO 5% TOBACCO 4%
¹ Source: Nielsen Global Premiumization Study 2018. Bottom 5 categories consumers are willing to pay a premium for (spend more
than the category average price)
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 13PROLIFERATING PRIVATE
LABEL PRESENCE
Consumer attitudes to purchasing private label products have also changed, while cost saving
remains a hefty driver of retail brand adoption, many consumers now see retail brands as worthy
alternatives to name brands.
CONSUMERS’ PERCEPTIONS OF PRIVATE LABEL QUALITY HAVE IMPROVED
GLOBAL 71%
ASIA PACIFIC 74%
EUROPE 63%
MIDDLE EAST / AFRICA 71%
LATIN AMERICA 76%
NORTH AMERICA 79%
⁸Source: Nielsen Global Private Label Study, 2016. Percentage of consumer who agree strongly/
somewhat.
The U.S. is an example of where a strong private-label presence has evolved to include tiered
pricing and premium offerings. Although there is strong growth across the private-label spectrum,
there is similarly growth in the premium and discount tiers of branded goods, with mid-tier
ranges facing growth pressure from both ends of the price scale. As a mature market, this clear
state of fragmentation between product and pricing may hold many clues for other markets
seeking a potential picture of the future.
USA VALUE SHARE AND GROWTH BY PRICE TIER
VALUE GROWTH VALUE GROWTH
+1.7% 33% +5.8% 11%
+5.3% 30% -0.9% 27%
+6.4% 19% +0.1% 26%
TIER 5 (PREMIUM)
+7.2% 10% +2.4% 18% TIER 4
+13.7% 8% +6.1% 18%
TIER 3
TIER 2
PRIVATE TIER 1 (DISCOUNT)
LABEL BRANDED
⁹ Source: Nielsen Advanced Solutions Group, USA Analytic Product Attribute (APA) database – 52 weeks to March 31st, 2018
vs. year ago
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 14In some regions, private label has also been perpetuated by well-defined strategies and
a sharp focus by retailers that recognize the diverse consumer views on spending across
different categories.
IN EUROPEAN MARKETS, RETAILERS HAVE DEVELOPED A CONSUMER RELATIONSHIP THAT HAS
MOVED BEYOND PRICE AND IS ALLOWING THEM TO WIN IN DIFFERENT TIERS AND CATEGORIES.
Mike Watkins, Nielsen U.K., Head of Retail Services
Within the discount retail model there are four clear stages evolving:
1. Retailers enter or grow when there are weak or changing economic conditions.
2. Growth is sustained by following a ‘lowest price’ strategy, supported by new store openings.
3. Share is consolidated by engaging more with customers around quality, as well as price.
4. Shopping trips and sales are accelerated through extended ranges of fresh and chilled
foods, and stores are re-imagined as modern, small supermarkets.
While remaining true to their origins of; limited range, primarily private label, proximity retailers,
with a low cost operating model.
There remain categories and markets, though, where private label has struggled to penetrate,
and in many cases these correspond with markets that are experiencing favourable development
in consumer prosperity and spending intent. In Asia, the presence of private label is relatively
low compared to other regions, and although dynamics such as strong local value players and
traditional trade need to be considered, there is no doubt that the growth of premium offerings,
and the future opportunities, can be linked to increasing wealth.
In Thailand, nearly one third (29.9%) of FMCG sales are considered premium and are growing at
the expense of mainstream and value offerings. In particular, it is the higher price bands within
the premium segment that are driving the expansion. The distribution of consumer spending in
Thailand aligns closely with consumers’ attitude to spending, with 23% of Thai consumers saying
they are able to spend freely.
IMPROVING FINANCIAL STATUS ENTICES THAI CONSUMERS TO SPEND MORE ON
PREMIUM PRODUCTS
AFFORDABLE LUXURY:
12% (+8.3%)
HIGH PREMIUM: LOWER PREMIUM:
27% (+5.1%) 48% (-2.9%)
MID PREMIUM:
14% (-2.4%)
10
Source: Nielsen Retail Measurement Services, Thailand, June 2018. Premium price index vs. category average greater than 1.2
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 15INDIA’S NEWFOUND
PURCHASING POWER AND
PREMIUM DESIRE
Fragmentation of consumer prosperity will continue to exist in many markets across Asia, and
nowhere could these changing dynamics offer such big dividends, as in India. A recent Nielsen
India report, Acing Location Strategy, emphasised the importance of understanding the diverse
range of Indian consumers in terms of their spending capability and attitudes, linked to where
these consumer groups are geographically located, together with their lifestyle attributes
and circumstances. Along with massive value and discount retail and product prospects, the
anticipated and continued growth in consumer prosperity is expected to drive opportunities
across the product spectrum.
PREMIUM SEGMENTS WILL BOOM WITH A RISE IN AFFLUENT HOUSEHOLDS DEMANDING
GLOBAL STANDARDS OF GOODS AND SERVICES, AND FROM MULTITUDES OF HOUSEHOLDS
WHO WILL BE ABLE TO EXERCISE THEIR NEWFOUND PURCHASING POWER.
As in other markets, consumers in India indicate that they are more willing to pay a premium
for certain products and not willing to spend on others. The key to unlocking premiumisation
opportunities lies in assessing consumers’ changing spending capability, identifying the retail and
category levers and understanding the consumer attitudes underpinning their behaviour
and preferences.
A myriad of factors enter into consideration when consumers distinguish a product as premium.
These range from function and performance to origin and price, all of which are essential
elements to evaluate when positioning, producing, communicating or selling a premium product.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 16PREMIUM FUNDAMENTALS
OUTWEIGH PRICE PERCEPTIONS
Globally, consumers rank high quality materials/ingredients as the leading factor that characterises a
product as premium. Function and performance, superior style and design, exceptional experience and
from a reliable brand are other important criteria cited by consumers as premium determinants. These
factors interchange across regions, indicating some geographic preference in the way consumers think
about premium offers.
QUALITY, PERFORMANCE AND DESIGN ARE FUNDAMENTAL PREMIUM FEATURES
HIGH QUALITY MATERIALS / INGREDIENTS 56%
EXCEPTIONAL FUNCTION OR PERFORMANCE 51%
SUPERIOR STYLE OR DESIGN 43%
EXCELLENT CUSTOMER EXPERIENCE 42%
WELL-KNOWN OR TRUSTED BRAND 42%
UNIQUE-DELIVERS WHAT NO OTHER PRODUCT DOES 39%
ORIGIN-BASED TRAITS (SWISS CHOC. FRENCH WINE) 36%
IT’S EXPENSIVE 33%
HANDCRAFTED/USES ARTISANAL METHODS 27%
AVAILABLE TO THOSE OF CERTAIN STATUS/EXCLUSIVITY 24%
HARD TO FIND / SCARCE 21%
¹ Source: Nielsen Global Premiumization Study 2018. Percentage of global consumers
Beyond how consumers differentiate premium product properties, there are a number of elements that
consumers are highly willing to pay extra for that provide further potential for premiumisation.
QUALITY/SAFETY, FUNCTION AND NATURAL ATTRIBUTES WILL BECOME MORE
IMPORTANT PREMIUM FACTORS
49% 46% 41% 38% 37% 30% 21%
COMES WITH HIGH-QUALITY / PROVIDES SUPERIOR CONTAINS ORGANIC / ALL ENVIRONMENTALLY FRIENDLY PROVIDES SOMETHING NO DELIVERS SOCIAL ORIGINATES FROM A
SAFETY STANDARDS FUNCTION OR PERFORMANCE NATURAL INGREDIENTS / SUSTAINABLE MATERIALS OTHER PRODUCT DOES RESPONSIBILITY CLAIMS SPECIFIC COUNTRY
¹ Source: Nielsen Global Premiumization Study 2018. Percentage of global consumers highly willing to purchase.
Quality/safety assurances and guarantees may help justify higher price points and allay discomfort in
the decision process. The rising intensity for characteristics such as organic, sustainable and accountable
are also likely to feature more prominently in the positioning of products as premium. A number of
questions do arise when considering these benefits as premium attributes. What remains to be seen in
coming years is whether these factors will become increasingly important to consumers if they are more
visible or socially endorsed, or will they simply become the cost of entry as legislation, governance and
consumer demand makes it mandatory.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 17PREMIUM PRODUCT
DISCOVERY IS DIGITAL
Trial of a new premium product is usually based on recommendations from family and friends
followed by personal research, online advertising and television advertising. Product research
is the top source of premium product trial in Europe and North America, reiterating the
regional and market variations. It is also important to note that consumers utilise a number of
channels to inform new premium product decision making. This strengthens the requirement
for multi-platform marketing and consumer touch points, and marketing strategies that include
extensive digital and social components. Web searches, peer reviews, comparison websites,
product and consumer reviews and retailer websites are valuable inputs for consumers along
their path to purchase.
RECOMMENDATION, RESEARCH AND ADVERTISING ARE IMPORTANT SOURCES FOR
PREMIUM PRODUCT DISCOVERY
46% 25%
RECOMMENDATIONS BY IN-STORE ADVERTISING
FRIENDS/FAMILY
36%
24%
RESEARCH
IMPULSE
32%
ONLINE ADVERTISING
31% 9%
RADIO /
TELEVISION ADVERTISING OUTDOOR ADVERTISING
¹ Source: Nielsen Global Premiumization Study 2018. Percentage of global consumers
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 18ONLINE RETAIL DESTINATIONS
GAIN TRACTION
When it comes to the places where consumers buy premium products, physical stores
remain the preferred channel. Sixty percent of consumers buy premium products in-store,
from a retailer in their country, so they can personally inspect and review product features
and quality. The strength of this sentiment has eased slightly (-1% since 2016), but more
significantly, the willingness to buy premium products online has increased: 45% of consumers
say they purchase premium products online from a retailer in their country, up 6% points from
2016. Consumers are also more open to buying premium products online from an overseas or
cross-border retailer; with 24% reporting they do this (up 5 percentage points). Individualised
engagement and compelling offers from brand owners online will contribute in propelling
online channels forward.
ONLINE RETAIL IS A GROWING DESTINATION FOR SHOPPING PREMIUM PRODUCTS
60%
-1 45%
+6 24%
15%
+5
IN STORE, FROM A RETAILER IN IN STORE, FROM A RETAILER ONLINE, FROM A RETAILER IN ONLINE, FROM A RETAILER
MY COUNTRY OVERSEAS / CROSS-BORDER MY COUNTRY OVERSEAS / SCROSS-BORDER
¹ Source: Nielsen Global Premiumization Study 2018. Percentage of global consumers
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 19MINDSET AND INTENT
MATTER MORE THAN INCOME
To steer premium and value strategies moving forward there are forecasts and indicators that
can guide corporate thinking and help structure additional research, insights and metrics.
While unforeseen market disruptions such as political, social, legislative or even environmental
conditions can fundamentally alter the consumer and business environment, growth in average
disposable income could be interpreted as an indication of expected consumption capability
and spending growth. This provides one way to identify markets with increased future
premiumisation opportunities (top ranked growth markets) versus those that may be more in
need of value propositions (bottom ranked growth markets). But, with examples of markets
experiencing healthy advancement in economic and income factors, while also reporting
fragmented attitudes to consumer prosperity and spending, other variables such as consumer
mindset and spending intent will need to be incorporated.
GROWTH IN DISPOSABLE INCOME CAN PROVIDE AN INDICATION OF FUTURE
CONSUMPTION POTENTIAL
>20 20% > 10% 10% > 1%
India 43% Kazakhstan 17% Australia / Brazil / Canada 10%
Venezuela 39% Hong Kong / Peru / Poland / Turkey 16% Hungary / Spain / Sweden / Ukraine 9%
Malaysia 30% Colombia 14% Ireland / Korea / Norway / Usa 8%
Egypt 28% Bulgaria / Taiwan 13% Mexico / Portugal / United Kingdom 7%
Chile / South Africa / Singapore / Austria / Denmark/ Finland / France / Greece / Russia /
Vietnam 26% Romania 12% New Zealand / Slovakia / Netherlands 6%
Argentina / Belgium / Czech Republic / Germany /
China 24% Israel 11% Switzerland 5%
Indonesia 23% Italy 4%
Philippines 22% Japan 1%
³ Source: Economist Intelligence Unit, Top 25 ranked countries 2019-2022
CONSUMERS ARE NOT BENEFITTING PROPORTIONATELY FROM INCREASED PROSPERITY. WAGE
AND DISPOSABLE INCOME INDICATORS WILL NOT BE ENOUGH FOR UNDERSTANDING FUTURE
CONSUMPTION POTENTIAL.
Regan Leggett, Nielsen Global Markets, Head of Thought Leadership and Foresight
In high growth markets, small groups of consumers will shift to higher levels of income and
consumption capability, creating opportunities for premium, niche and specialist products. At the
opposite end of the growth spectrum, premium opportunities will still exist, especially in more
mature markets such as the U.K., Netherlands, Denmark and Japan, but identifying market value
propositions will be as relevant.
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 20CONSUMER PROSPERITY
PROSPECTS
Understanding how consumers think and feel about their financial situation and approach to
spending has always been important, but as the consumer environment continues to evolve
at unprecedented rates it is increasingly valuable to incorporate regional and local knowledge
about consumer sentiment. Consider these seven aspects when tapping into the current and
future consumer prosperity prospects:
HAVE A CLEAR GAUGE ON THE PREVAILING ANALYSE PRICE ELASTICITY PARAMETERS TO
1 CONSUMER MIND-SET AND SPENDING ABILITY. 5 OPTIMALLY MANAGE PRICE/PROMO STRATEGIES.
POSITION PRODUCTS, SERVICES AND PRICING ENSURE DOLLARS INVESTED PROVIDE
WITHIN THIS CONTEXT. WORTHWHILE, INCREMENTAL RETURNS.
IDENTIFY CATEGORIES & PRODUCTS WHERE AMPLIFY PREMIUM ADVANTAGES ACROSS MULTI-
2 CONSUMERS ARE LESS & MORE INCLINED TO 6 PLATFORM MARKETING, COMMUNICATION &
PAY PREMIUMS. DISTRIBUTION.
DEVELOP MARKET SPECIFIC PORTFOLIO & ACTIVATE CAMPAIGNS IN DIGITAL & E-COMM
PRICING STRATEGIES. CHANNELS TO CAPTURE ONLINE ENGAGEMENT
& SHOPPING MOMENTUM.
IDENTIFY ATTRIBUTES AND BENEFITS THAT DEVELOP A FORWARD-LOOKING VIEW OF
3 DISTINGUISH PRODUCTS AS PREMIUM. 7 POTENTIAL CHANGES IN CONSUMER PROSPERITY.
EMPHASISE QUALITY | FUNCTION | DESIGN. EXPLORE OPPORTUNITIES & CHALLENGES FOR
EVALUATE POTENTIAL IN QUALITY ASSURANCE, INNOVATION, PRICING & MARKET ENTRY.
NATURAL & SOCIO/ENVIRO.
DISCOVER WHERE TO LOCATE BUDGET/PREMIUM
4 CONSUMERS WHERE THEY LIVE, WORK & SHOP
USE GEO MAPPING INTELLIGENCE TO PINPOINT
CONSUMERS
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 21REFERENCES AND SOURCES
1. NIELSEN GLOBAL PREMIUMIZATION STUDY 2018
2. NIELSEN GLOBAL PREMIUMIZATION STUDY 2016
3. THE ECONOMIST INTELLIGENCE UNIT, DISPOSABLE INCOME GROWTH AND
AVERAGE MONTHLY WAGE GROWTH
4. NIELSEN RETAIL MEASUREMENT SERVICES, EUROPE: AUSTRIA, BELGIUM,
DENMARK, FINLAND, FRANCE, GERMANY, GREECE, ITALY, IRELAND, THE
NETHERLANDS, NORWAY, PORTUGAL, SPAIN, SWEDEN, SWITZERLAND, UNITED
KINGDOM, HUNGARY, AND POLAND
5. NIELSEN RETAIL MEASUREMENT SERVICES: CHILE, MEXICO, COLOMBIA
6. NIELSEN PRICE AND PROMOTION EVERYDAY PRICING ANALYSIS 2018: AVERAGE OF
36 COUNTRIES
7. NIELSEN PRICE AND PROMOTION ANALYSIS 2017-2018: SAUDI ARABIA, UNITED
ARAB EMIRATES
8. NIELSEN GLOBAL PRIVATE LABEL STUDY 2016
9. NIELSEN ADVANCED SOLUTIONS GROUP, USA ANALYTIC PRODUCT ATTRIBUTE
(APA) DATABASE – 52 WEEKS TO MARCH 31ST, 2018 VS. YEAR AGO
10. NIELSEN RETAIL MEASUREMENT SERVICES, JUNE 2018: THAILAND
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 22ABOUT NIELSEN
Nielsen Holdings plc (NYSE: NLSN) is a global measurement and data
analytics company that provides the most complete and trusted view
available of consumers and markets worldwide. Our approach marries
proprietary Nielsen data with other data sources to help clients around
the world understand what’s happening now, what’s happening next,
and how to best act on this knowledge. For more than 90 years Nielsen
has provided data and analytics based on scientific rigor and innovation,
continually developing new ways to answer the most important questions
facing the media, advertising, retail and fast-moving consumer goods
industries. An S&P 500 company, Nielsen has operations in over 100
countries, covering more than 90% of the world’s population. For more
information, visit www.nielsen.com.
THE SCIENCE BEHIND WHAT’S NEXT ™
Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 190147 23THE SCIENCE BEHIND WHAT’S NEXT™ At Nielsen, data drives everything we do—even art. That’s why we used real data to create this image. Copyright © 2019 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 24
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