1 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

THE EMERGING MIDDLE CLASS IN ASIA AND THEIR

CHANGING VALUES

Michael Mueller, APAC COO , GfK Asia June 2015

2 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

http://www.unicef.org/sowc2012/urbanmap/

2010 2050

By 2050, it is estimated 75% of world population will be living in

urban areas

3 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

1.8 3.2 4.9

Emerging Middle Class – some global numbers first

According to the OECD Development Center,

the size of the middle class1 worldwide could increase from …

1 OECD, defines middle-class as those with daily expenditures between USD10 and USD100 per person in purchasing power parity terms

4 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Source: Kharas, Gertz. The New Global Middle Class: A Cross-Over from West to East. Wolfensohn Center for Development at Brookings

18%

10%

36%

28%

6%

10%

2% 8%

22%

54%

5%

7%

6%

14%

66%

2009 2020 2030 Global regional distribution of the Middle Class (all regions = 100%)

We will see an explosion of the Middle Class in Asia

5 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Brand building becomes fundamental in

emerging markets to

remain competitive

New touch-points to engage consumers

are on the rise and

need to be tackled

Mindset &

Lifestyles are changing and starting

to drive purchase decisions

and consumption

More wealth and

urbanization are leading to

new aspirations and in turn

Changing values

These megatrends are driving changes across 4 areas which we

will talk about today

6 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Changing Values

7 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Thrift

Sex

Modesty

Working hard

Pleasure Retribution

Nature

Cultural purity

Simplicity

Knowledge

Self interest

Adventure

Curiosity

Fulfilling work Material security

Duty

Individuality

Excitement Being youthful

Tradition

Preserving

environment

Self reliance

Freedom

Traditional gender roles

Enduring love

Authenticity

Social tolerance

Enjoying life

Beauty

Honesty

Open mindedness

Social responsibility

Health and fitness

Learning

Ambition

Power

Friendship

Having fun

Family

Social stability

A varied life Equality

Wisdom Romance

Wealth

Internationalism

Respecting ancestors

Faith

Creativity

Status

Stable relationships

Helpfulness

Looking good

Leisure

PL

EA

SU

RE

PE

OP

LE

P

OW

ER

T

RA

DIT

ION

Personal Values can be allocated into a ‘Values Space’ enabling powerful analysis:

ValueScope | The GfK Consumer Trends Values Space

8 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Roper Reports Worldwide 2014 (mixed mode trend, core 20 countries) *Urban is defined as in a city (in and out of city center, central district or downtown), rural defined as in a suburb,

small city or rural area.

Asian Middle Class consumers have an "Achiever" DNA!

Total Global Asia Pacific Markets

Suburban/Rural

16

12

13

13

11

18

17

Urban

14

11

10

8

16

31

10

Hedonists Survivors Socialrationals Nurturers Traditionalists Achievers Selfdirecteds

26

10

Urban

10

10

8 5

22

41

4

13

10

19

14

9

Suburban/Rural

9 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015 Roper Reports Worldwide 2014 (mixed mode trend, core 20 countries), Roper Reports Worldwide 2013 (mixed mode, core 21 countries – including TH), Largely Urban markets

12 18

3 1 1 9

2

27 16 40

67

36 26

30

12 10

25

18

29

14

44 9 15

6

2

3

8

2

12 12

8

5

7

9

4 11 12

10

4

16

13

15 16 17

8 4 8 20

3

Total Global Australia China* India Indonesia Japan Thailand

Selfdirecteds Achievers Traditionalists

Nurturers Socialrationals Survivors

Hedonists

The achiever mindset dominates in Urban Asia

10 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Rapid development in Asia fuels a change of values

Roper Reports Worldwide 2014

Power Tradition

Pleasure People

Power Tradition

Pleasure People

2000 2005 2010 2012 2014

Power Tradition

Pleasure People

Power Tradition

Pleasure People

Example: Urban China

11 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Rapid development in Asia fuels a change of values

Roper Reports Worldwide 2014

Power Tradition

Pleasure People

Power Tradition

Pleasure People

2000 2005 2010 2014

Power Tradition

Pleasure People

Power Tradition

Pleasure People

Power Tradition

Pleasure People

Power Tradition

Pleasure People

Example: Urban India

12 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Mindset & Lifestyle

13 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Roper Reports Worldwide 2014 (mixed mode, core 20 countries); Roper Reports Worldwide 2013 (mixed mode, core 21 countries – including TH), 1 China 2013 figures

7.8

5.7

India

4.6

Thailand

Indonesia

36.7

45.3

50.6 7.0

36.3

50.9 7.6

4.9 37.3

45.3 5.5

Global

China

Japan

Australia

Mean # of hours per week spent working, commuting (among those employed full-time)

Work is a big part of life for many Asia MC consumers

Working a paid job Commuting

48h

14 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Roper Reports Worldwide 2014 (mixed mode, core 20 countries); Roper Reports Worldwide 2013 (mixed mode, core 21 countries – including Thailand), China 2013 figures

% who do the following monthly or more

Cultural and emerging values drive experience seeking in Asia

71

56

56

80

82

81

80

37

51

35

69

71

67

73

61

23

64

19

60

50

60

22

29

28

50

53

66

60

26

21

18

16

64

37

50

Japan

China

Global

Australia

Indonesia

Thailand

India

Go shopping besides grocery

Eating Out

Entertain at home

Have a drink/snack outside

Go to the movies

15 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Roper Reports Worldwide 2014 and previous years (short trend, core 20 countries ), Roper Reports Worldwide 2011 (short trend, core 21 countries + Thailand)

Base : Middle Class Consumers

% who go shopping other than for groceries monthly or more

As a result, Consumerism running high, especially in China

58% of Chinese consumers

see shopping as a

pleasure, vs. a chore

53% Global

40% Australia

52% Indonesia

48% Thailand

63% Indian

61% Japan

82

76777571

67

5355 56

2723

30

2011 2012 2013 2014

China

India

Indonesia

16 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

In situations and places where safety is more of an issue, the

worries are higher

Roper Reports Worldwide 2013 (short trend, core 21 countries, including Thailand) , Base : Middle Class Consumers

36

19

54

20

74

37

71

58

39

70

40

54 52

88

63

50

74

40

90

60

86

Global Australia China Japan Indonesia Thailand India

"I worry about getting

sick from contaminated

food or drinks"

"I worry about how

safe the food

I buy is"

"I do everything I can to protect

myself and my family from

germs"

% top 2 box

Global

17 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

The Importance of Brands

18 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Brand trust and awareness are critically important to the Asian

Middle-Class

Roper Reports Worldwide 2014 (mixed mode trend, core 20 countries); Roper Reports Worldwide 2013 (short trend, core 21 countries -including TH), Base : Middle Class Consumers

61

51

67

33

78 73

95

61

50

72

29

74 74

89

Global Australia China Japan Indonesia Thailand India

It's better to buy well-

known brands because

you can rely on quality

I only buy products

or services from

a trusted brand

% agree

Global

19 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Brand loyalty is up notably in China, India and Indonesia, while

declining or staying same the in developed markets

Roper Reports Worldwide 2006 and 2014 (short trend, core 25 countries), Note: Not asked in Thailand in 2013 , Base : Middle Class Consumers

Brand loyalty has stagnated in many developed markets

consumers seem to have trade down to less expensive

brands. Many emerging markets, however, witness rising

loyalty. Brand loyalty in China rose notably since 2006

among the middle class consumers. Loyalty has also

gone up in India & Indonesia

69

44

24

50 64

58 47

24

67 82

51 53

23

72 79

Australia China Japan Indonesia India

2006 2011 2014

% top 2 box

Once I find a brand

that satisfies me,

I usually DON'T

experiment with new

ones

20 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Technology Intersection

21 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

*Roper Reports Worldwide 2013 (mixed mode, core 20countries), *Roper Reports Worldwide 2013 (mixed mode, core 21 countries – including Thailand); **Roper Reports Worldwide 2014

(short trend, core 20 countries); **Roper Reports Worldwide 2013 (mixed mode, core 21 countries – including Thailand) Base : Middle Class Consumers

Among those who have used the

Internet in the past 30 days*

15

25

20

13

16

12

12

7

4

14

6

19

15

18

17

5 1

3

3

3 3

China

Japan

Indonesia

Thailand

India

Australia

Global

Use Internet* Watching TV Listening to Radio

Mean # Hours per week

Thailand Middle-Class is most engaged with TV/Radio, while among

emerging countries Chinese Middle-Class ahead in internet access

22 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Roper Reports Worldwide through 2013-14 (mixed-mode trend, core 21 countries + Thailand) , Base : Middle Class Consumers

The middle class consumers do a multitude of things on their mobile

MAKE / RECEIVE CALLS

TEXT MESSAGE OR IM

TAKE PHOTOS / VIDEOS

PLAYED GAMES

84

87

84

82

91

100

Japan

India

Indonesia

Australia

China

Global

79

90

77

51

90

56

China

Japan

Australia

Global

Indonesia

India

67

62

84

49

40

20

46

40

58

34

36

31

Global

China

Australia

Japan

Indonesia

India

Global

China

Australia

Japan

Indonesia

India

% use in last month

23 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Technological change leads to the rise of mobile – markets like

Indonesia leapfrogging straight to mobile

Roper Reports Worldwide through 2013 (mixed-mode trend, core 21 countries + Thailand), QO6 | Base: Accessed Internet in past 30 days;

71

93

-

10

20

30

40

50

60

70

80

90

100

2011 2012 2013

Global Australia China Japan Indonesia Thailand India

% of respondents who accessed the Internet with their mobile phone in the past 30 days

Global

24 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

Achieving aspirations | Buying trust | Target communication

As consumers enter the middle class, they increasingly gravitate towards

success-driven ‘Achievers’ – brands need to try and build this into their

communication & marketing strategies

The emerging middle-class is increasingly shopping savvy & Omni channel is

becoming a reality – brands need to work towards integrated solutions to address

this new customer in an anytime anywhere way

Trust & Brand reputation is still key to the emerging middle-class in

developing markets – creating links to authenticity and genuine care for customers

will help brands develop this important element

Smartphone penetration will propel brand communications forward – brands

will need to very quickly adapt to this new screen by personalizing & optimizing

their messaging & advertising strategies

25 © GfK 2015 | Emerging Middle class in Asia and their Changing values | June 2015

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