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Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
Key Learnings and Trends for Future Growth
June, 2017
SURVIVING THE STORM
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AGENDA
Provide a perspective on the
landscape of the 2nd half of 2017
Highlight the “future” trends
For profit growth in Latin America
Trace the key drivers of FMCG
growth beyond pessimist consumers
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% OF VARIATION
DOLLAR EXCHANGE
ANNUAL INFLATION
% OF ACTIVE POPULATION
PERCEPTIONS INDEX 2016
VS. 2014:
+ MORE CORRUPT
- LESS CORRUPT
= UNCHANGED
BEATEN DOWN ECONOMY FRAMED, THE START OF 2017
Source: Dollar Exchange, Inflation and Unemployment: Latin Focus (April, 2017) | Corruption: International Transparency (2016)
7
7
10
9
7
6
6
5
12
10
10
9
9
7
6
4
BR
VE
CR
CO
AR
PE
CL
MX
2014 2016
UNEMPLOYMENT CORRUPTION INFLATION
2016 vs.
2014
AR 87%
VE 59%
MX 41%
CO 26%
BR 22%
PE 12%
CL 10%
CR 2%
2016 2016 vs.
2014
VE 702.6
AR 41.0
LATAM 30.1
BR 6.3
CO 5.7
MX 3.4
PE 3.2 =
CL 2.7
CR 0.8
HIGHLY CORRUPT
0 – 9
10 – 19
20 – 29
30 – 39
40 – 49
50 – 59
60 – 69
70 – 79
80 – 89
90 – 100
VERY CLEAN
+
+
-
+ +
+
-
=
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CONSUMPTION HAS BEEN AFFECTED BY CHANGES IN THE LAW
Source: Colombia: National Tax and Customs Office | Mexico: Center for Public Finance Studies | Chile: Ministry of Health
* Label seals were directly taken from the Government’s web pages of Chile and Mexico
TAXES FOOD AND BEVERAGE LABELING*
JANUARY 2017
GENERAL VAT FROM 16% TO 19% EXCEPT:
BEEF CHICKEN EGGS MILK BOOKS MEDICINES
CO
LO
MB
IA
JUNE 2016
CH
ILE
PROHIBITED
TO SELL IN
SCHOOLS
ADS CANNOT
BE DIRECTED
TO >14 YEARS
MAY 2016
ME
XIC
O
JANUARY 2017
ME
XIC
O
CIGARETTES HIGH CALORIE
BEVERAGES
AND BEERS
ENERGY
DRINKS
FLAVORED
DRINKS
30.4%
TO 160%
26.5%
TO 53%
25% +$1 PER
LITER
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% OF VARIATION
DOLLAR EXCHANGE
INFLATION Q1 2017
% OF ACTIVE POPULATION
ELECTIONS IN 2017 OR 2018,
MAY AFFECT CONSUMER
CONFIDENCE IN A POSITIVE
MANNER
IN SPITE OF 2016 RESULTS, 2017 HAS A PROMISING START
Source: Dollar Exchange, Inflation and Unemployment: Latin Focus (April, 2017) | Corruption: International Transparency (2016)
Elections: Latin American Strategic Center for Geopolitics
11
8
11
9
6
7
4
13
11
9
9
7
6
4
BR
VE
CO
AR
CL
PE
MX
Q1 2016 Q1 2017
UNEMPLOYMENT CORRUPTION INFLATION
Q1 ‘17 vs.
Q1 ‘16
MX 8%
CR 5%
AR 5%
CL -2%
PE -2%
CO -4%
BR -13%
Q1 2017 Q1 ‘17 vs.
Q1 ‘16
VE 744.7
LATAM 33.7
AR 32.6
MX 5.4
CO 4.7
BR 4.6
PE 4.0
CL 2.7
CR 1.6
GOVERNORS (2017)
PRESIDENTIAL (2018)
LEGISLATIVE (2018)
PRESIDENTIAL (2017)
PARLIAMENTARY (2017)
LEGISLATIVE (2017)
PRESIDENTIAL (2017)
LEGISLATIVE (2017)
PRESIDENTIAL (2018)
LEGISLATIVE (2018)
PRESIDENTIAL (2018)
GOVERNORS (2018)
PARLIAMENTARY (2018)
REGIONALS (2018)
MUNICIPALS (2018)
PRESIDENTIAL (2018)
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Souce: Latin Focus, April 2017
Country economic growth
(Real GDP annual average %)
2012-2014 2015-2017 2018-2020
1.8 2.6
4.4 3.8
-0.4
4.7
1.0
4.9
3.8 3.6
-2.3
2.2 2.4 1.9
1.0
3.6
-7.4
-0.4
1.2
3.6
2.5 2.3
3.2 2.7
3.1
4.1
0.5 1.2
2.7 3.3
THIS REFLECTS FOR A POSITIVE OUTLOOK FOR 2018
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BUT, CONSUMER NEGATIVE PERCEPTION PREVAILS The perspectives are less positive than expected.
OF THE LATINOS
THINK THEIR COUNTRY
IS IN AN ECONOMIC
RECESSION
CONSUMER CONFIDENCE INDEX
LATAM Q4 2016 (Vs. Q4 2015)
83% LATAM (vs. 83% )
96% 90% 86% 85% 78% 75% 57% (vs.96%) (vs.94%) (vs.89%) (vs.76%) (vs.79%) (vs.88%) (vs.61%)
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4.0
-2.0
6.5 3.8
3.1
-7.5
PRODUCING A FMCG REGIONAL SLOWDOWN
Source: Nielsen Retail Index | Weigthed Volume and Weighted Price % Variation | Rolling Year JFM ‘17 vs. JFM ‘16
Price increases through the region are playing a key role.
MEXICO
3.3 2.9
3.1 4.2
JFM ‘16 JFM ‘17
BRAZIL
-2.5 -6.1
7.8 10.1
JFM ‘16 JFM ‘17
CHILE
3.1 1.7
6.3
3.6
JFM ‘16 JFM ‘17
COLOMBIA
5.1 7.0
JFM ‘16 JFM ‘17
ARGENTINA
31.8 33.2
JFM ‘16 JFM ‘17
COSTA RICA
-0.3
4.1 1.1
-3.8
JFM ‘16 JFM ‘17
PERU
1.5 3.8
JFM ‘16 JFM ‘17
Incluir datos de
todas las regiones
Volume Change Price Change #
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2.2
-1.7
1.4
-0.4
-4.6
▼
▼
▼
AR BR* CL CO CR MX* PE
WHICH VARY ACROSS CATEGORIES AND MARKETS
Source: Nielsen Retail Index | % of Volume Weighted Variation | RY Mar ‘17 VS. RY Mar ‘16
VOLUME WEIGHTED VARIATION – RY Mar ‘17 VS. RY Mar ‘16
-6.8
-4.0
-8.8
-8.0
-9.7
-5.6
-9.6
-8.7
-5.5
-5.8
-0.5
-0.1
-6.1
-2.0
-4.4
3.2
1.9
9.0
1.6
4.8
1.1
2.0
6.1
1.9
2.3
-2.6
0.6
4.1
-0.6
3.7
NON IMPULSIVE
FOODS
IMPULSIVE
FOODS
NON ALCOHOLIC
BEVERAGES
PERSONAL CARE
HOME CARE
FO
OD
N
ON
-FO
OD
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼ - Decelerated Category | % Of Volume Weighted Variation RY Mar ’16 vs. RY Mar ’15
* Additional historical trend is unavailable due to Brazil and Mexico database enhancement.
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
HOW DO WE UNPACK
THE SLOWDOWN IN LATAM?
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CAUTIOUS
CONSUMER
CHANNEL
SHIFTS
VALUE
FOR MONEY 1 2 3
KEY ACTIONS TAKEN DURING “CRISIS”
Low Price brands
Retail Brands
Large Sizes / Multipacks Quality of life
becomes secondary
Saving Mode
Don’t spending more
than they earn
Emerging Channels
Diminished Loyalty
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CONSUMERS ARE CHANGING THEIR SPENDING
Source: Nielsen Consumer Confidence Index (Q4, 2016)
CONSUMERS CHANGED THEIR SPENDING TO SAVE ON
HOUSEHOLD EXPENSES COMPARED TO LAST YEAR
91%
87%
79%
78%
77%
75%
73%
69%
VE
BR
LATAM
AR
CO
MX
CL
PE49% spend less on new
clothes
46% cut down on out-of-
home entertainment and
take-away meals
40% try to save on gas
and electricity
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PHARMACIES WITH SALES
SPACE
PHARMACIES W/O SALES
SPACE
CONVENIENCE
WHOLESALERS ONLINE RETAIL
TRADITIONAL
DISCOUNTERS
CHANNELS ARE BLURRING ACROSS LATAM
24H
%
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TRADITIONAL TRADE STILLS AS THE MAIN CHANNEL
Source. Nielsen Universe data sample and Average of ACV
More than
of FMCG Sales
Stores, which represent
in LatAm
Impulsive
Food &
Beverage
77%
Rest of the
Portfolio has
been decreasing 23%
FMCG
Value Sales
SHOPPER MISSIONS
37% Daily Supply
38% On the go
13% Urgent Item
ME PARECE QUE STILL Y
REPRESENT VAN SIN LA S FINAL
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SHOPPER NEEDS ARE OPENING RETAIL OPPS
Source: Nielsen Global Retail Growth Strategies Report
PROXIMITY ASSORTMENT LOW PRICES
93
%
94
%
93
%
When the prices increase…
38% of Latinos are willing to shop in Discounters and C&C
LOOKING FOR
CONVENIENT
LOCATION
AVAILABILITY OF
PRODUCTS THAT
THEY WANT
(REGULARLY
IN STOCK)
LOOKING FOR
THE LOWEST
PRICES
OVERALL
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INCREASE OF EMERGING CHANNELS DUE TO CRISIS Based on consumer needs, not necessarily at a cheaper price.
NUMBER STORE INDEX VS. 2010
132
143
113
125
2010 2011 2012 2013 2014 2015 2016
BRAZIL
201
132
100
260
2010 2011 2012 2013 2014 2015 2016
MEXICO 198
200
131
2010 2011 2012 2013 2014 2015 2016
COLOMBIA
99
144
123
113
2010 2011 2012 2013 2014 2015 2016
CHILE
124
145
134
2010 2011 2012 2013 2014 2015 2016
CAM
117
122
99 96
2010 2011 2012 2013 2014 2015 2016
ARGENTINA
Convenience Gas Stations UTT+DTT* Pharmacies & Drugstores UTT + DTT Superettes 100-400 m2 UTT + DTT Small Supermarkets 400 – 1000 m2 UTT + DTT
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INCREASE OF EMERGING CHANNELS DUE TO CRISIS Based on consumer needs, not only a cheaper price.
OPERATION ASSORTMENT
SOURCE OF GROWTH
Process Simplicity and cost efficiency:
• Exhibition
• Suppliers Negotiation
• Logistics
• Merchandising
• Services (eg. No Parking)
• Cash Payments
• Less quantity… but key sku’s
• Strong presence of Private Label
• Offering the best prices or the lowest
out of pocket (smaller packages of
leader brands)
• Proximity is Key
• Strategic expansion plans
• High and Medium SEL consumers are starting
to consider them as options
• Absorbing key missions from Traditional Trade
(Urgent Item and Daily Supply)
• Grabbing volume from Traditional Trade and
Hypermarkets
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
50% ARE SWITCHING TO CHEAPER
GROCERY BRANDS
OF LATINOS
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LATAM BR CL MX CO PE AR CR
LOOK FOR CHEAPER BRANDS
Source: Nielsen Retail Index | % Variation of Volume Sales | T. Categories, T. Private Labels, T. Low Prices | RY Mar ‘17 vs. RY Mar ‘16
Retail and Low Price Brands have more opportunities.
-2.9
-6.1
1.7 2.9
-2.0
0.4
-7.3
4.1 5.6
9.6
-0.8
9.6
18.4
30.5
6.0 5.4
14.2
11.6
6.6 8.0
9.9
2.5
10.4
T. CATEGORIES T. RETAIL BRANDS T. LOW PRICES
% Variation Volume Sales per Country
RY Mar ‘17 vs. RY Mar ‘16
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NEW REGIONAL BRANDS AND PRODUCT LAUNCHES
ACCELERATE THE GROWTH AND REACH OF LOW
PRICE BRANDS
Source: Nielsen ScanTrack | Launched products in Low Price Brands and Retail Brands | Total Brasil (Supermarkets, C&C and Pharmacies) | YTD 2016 vs. 2015.
48% OF THE GROWTH OF LOW PRICE AND RETAILERS BRANDS COMES FROM NEW BUYERS
In 2016, 58
new low price
brands and
private labels
were
launched…
And 2.190
new products...
51 were from
regional
manufacturers
or retailers
distributed in
148
categories.
Being on
average
cheaper than
the category
average
GROWTH OF 28% IN THE
NUMBER OF CHEAP BRANDS
ITEMS AVAILABLE ON THE
MARKET
FOOD BASICS
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9.6
17.8
51.4
21.2
24.4
AR BR* CL CO CR MX* PE
OPPORTUNITIES TO DEVELOP RETAIL BRANDS
Source: Nielsen Retail Index | % of Volume Weighted Variation | Private Labels | RY Mar ‘17 VS. RY Mar ‘16
RETAIL BRANDS
VOLUME WEIGHTED VARIATION – RY Mar ‘17 VS. RY Mar ‘16
2.7
2.0
32.0
4.5
4.7
23.5
-9.0
13.1
17.0
-4.9
2.5
-2.9
-14.1
-11.5
3.5
0
0
0
0
0
-
13.2
37.3
14.0
11.8
34.9
3.1
45.6
119.9
25.8
NON IMPULSIVE
FOOD
IMPULSIVE
FOOD
NON ALCOHOLIC
BEVERAGES
PERSONAL CARE
HOME CARE
FO
OD
N
ON
-FO
OD
Some countries are more open to buy retail brands from any category.
▼ - Decelerated Category | % Of Volume Weighted Variation RY Mar ’16 vs. RY Mar ’15
* Additional historical trend is unavailable due to Brazil and Mexico database enhancement.
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
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AR BR* CL CO CR MX* PE
KEY TO HAVE A LOW PRICE OPTION
Source: Nielsen Retail Index | % of Volume Weighted Variation | Low Price Tier Brands | RY Mar ‘17 VS. RY Mar ‘16
LOW TIER PRICE BRANDS
VOLUME WEIGHTED VARIATION – RY Mar ‘17 VS. RY Mar ‘16
-5.9
2.6
-0.8
10.1
-0.5
-2.6
-9.0
58.6
-4.1
2.2
5.2
71.2
2.0
6.3
18.1
-3.3
3.1
-2.5
6.1
19.7
2.3
14.6
8.1
1.4
7.1
9.7
11.6
-1.1
4.3
34.9
0.7
-4.2
8.3
0.5
NON IMPULSIVE
FOOD
IMPULSIVE
FOOD
NON ALCOHOLIC
BEVERAGES
PERSONAL CARE
HOME CARE
FO
OD
N
ON
-FO
OD
In the face of this environment, low price brands are a clear option for Latinos.
▼ - Decelerated Category | % Of Volume Weighted Variation RY Mar ’16 vs. RY Mar ’15
* Additional historical trend is unavailable due to Brazil and Mexico database enhancement.
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
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▼
▼
▼
▼
-11.1
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CONSUMERS ARE SENSITIVE TO PRICE INCREASES
Source: Nielsen Retail Growth Strategies Report
If prices of FMCG increase by up to 10%, WHAT WOULD YOU DO?
20% 45% 35%
BUY THE SAME
QUANTITY AT THE
HIGHER PRICE
BUY LESS QUANTITY
AT THE HIGHER PRICE
I WOULD NOT BUY
THE CATEGORY AT
THE HIGHER PRICE
MX – 21%
VE – 21%
PE – 21%
BR – 47%
VE – 47%
MX – 46%
CO – 48%
AR – 41%
CL – 39%
PE – 41%
Latinos are willing to reduce or eliminate their consumption.
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PRICE INCREASE BEHAVIOR VARIES PER COUNTRY
34
33
31
42
44
48
50
55
54
37
30
31
ALCOHOLIC
BEVERAGES
IMPULSIVE
FOODS
NON ALCOHOLIC
BEVERAGES
NON IMPULSIVE
FOOD
OTC
MEDICATIONS
PERSONAL
CARE
ARGENTINA
36
44
39
50
45
50
51
43
43
29
33
28
BRAZIL
32
36
36
45
38
47
56
55
51
32
45
31
CHILE
34
33
31
42
44
48
50
55
54
37
30
31
COLOMBIA
28
38
39
51
44
49
58
50
41
27
27
26
MEXICO
31
39
40
47
42
48
61
50
44
26
35
30
PERU
32
40
37
51
53
56
58
49
46
25
17
17
VENEZUELA
Alcoholic Beverages and Impulsive Food purchases are at risk
Buy less quantity at the higher price I would not buy the category at the higher price
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Level of price elasticity measure
% of companies
National 61% 50%
Store format 9% 0%
Customer 17% 17%
Brand 65% 67%
City 17%
Category 52% 33%
33%
SKU 48% 67%
Packing size 30% 50%
Channel 57% 83%
Region 39% 67%
Others Winners
28%
27%
-1%
-9%
20%
19%
16%
-11%
-19%
1%
PRICE ELASTICITY MUST BE STRATEGICALLY PLACED Winners in LatAm are measuring at more granular level.
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Companies that improved returns on trade
investments in the past 2 years
% of companies
SEEKING HIGHER ROI ON PROMO INVESTMENTS
65%
Winners Others
+6%
71%
Factors that contributed to improve the returns on your trade
investments
% of companies
Impact of macroeconomic
factors on shoppers
0%
45%
Major change in allocation
of funds among customers 50%
55%
60%
50%
Change in consumer
reaction to low prices
43%
86%
Greater focus on
measuring ROI return
40%
29%
Change discount level required
to achieve same sales increase
Major change in
types of promotions
71%
71%
-12%
36%
21%
11%
-16%
-40%
Strategically allocating funds and focusing on ROI.
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WHAT TO EXPECT?
WHAT’S NEXT?
Beyond the comfort zone: Niche Markets segmentation
Focus on digital as a cost reduction strategy
Excelence on Execution Standards (In store and online)
A STRUGGLE FOR PROFITABILITY
Discounted channels grow in salience
Price wars & value seeking further intensified
Price strategies at a minum level (Store, Sku, etc.)
Promotional Intelligence
FRAGMENTING
CONSUMER DEMAND
Savings mindset to (deal-seeking) watchful consumption
Growing comfort with high-quality, well-positioned PL
Packaging options will be key to maintain the
consumption
BOTTOMING OUT MAKES WAY FOR
SOFT REGIONAL RECOVERY
Recovery led by Brazil, Argentina and Peru
Volume growths expected to rise modestly
Local factors still considerably important
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
COST CUTTING IS NOT THE
ONLY STRATEGIC CHOICE FOR
PROFIT GROWTH
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DIGITAL
ECOSYSTEM
PREMIUM
CONSUMERS
HEALTH AND
WELLNESS
LOYALTY &
SEGMENTATION 1 2 3 4
KEY TRENDS FOR GROWTH IN LATAM
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
DIGITAL
ECOSYSTEM 1
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139
69
35 28
18 18 14
4
BR MX AR CO VE PE CL CR
EVERYDAY AND EVERYWHERE
Million of Internet Users 2016
% of Total Population by country
68% 56% 79% 59% 62% 59% 80% 87%
Today and tomorrow even more, Internet Users will be omnipresent.
300
MILLIONS Mobile Users
450 by 2020
322
MILLIONS Facebook Users
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IS IT RELEVANT FOR MY BUSINESS? Digital Strategy implies a holistic approach.
360°
Sales
Impact
2. PURCHASE
Physical Retail
100% of Population
Online Retail
51% of Population
1. PRE - PURCHASE
Looked up product information
Checked/ Compared prices
Searched for
deals/promotions/coupons
Checked stock availability
48%
41%
33%
19%
3. POST - PURCHASE
Like' / Tweet / Comment on a
product or store in social media
Click online and e-mail
advertising
Use social media to help make
grocery purchase decisions 32%
11%
7%
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11
4.2
4.6
5.1
5.5
6.4
7.4
7.3
7.7
7.9
7.9
8.2
8.3
8.5
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
FUTURE CONSUMERS ARE DIGITAL NATIVES
Argentina Brazil Chile
Colombia Costa Rica Mexico
22.9% Millennials
7.9
4
5
6
6.4
7
7.9
8.6
8.2
7.9
8.4
8.2
7.2
7.3
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
24.7% Millennials
11
4.9
5.8
6.7
7.1
7
7
7.5
8
7.8
7.2
6.9
6.6
6.5
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
23.3% Millennials
7.4
3.9
4.9
5.9
6.6
6.6
7.5
8.1
8.4
8.5
8.3
8.3
8
7.6
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
25% Millennials
9.5
3.9
5.3
6.3
6.3
6.4
7.3
8.1
8.5
8.5
8
7.4
7.4
7.1
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
25.1% Millennials
6.6
3.2
4
4.8
5.9
6.8
7.3
7.7
8.3
8.9
9.3
9.2
9
9
65+
60 - 64
55 - 59
50 - 54
45 - 49
40 - 44
35 - 39
30 - 34
25 - 29
20 - 24
15 - 19
10 - 14
5 - 9
0 - 4
24.9% Millennials
Millennial and Z Generations will close the gap in Online Shoppers.
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CREATE YOUR OWN E-COMMERCE STRATEGY How to navigate the new Digital landscape?
8,154 10,894
14,239
18,853
23,663
29,830
36,909
45,434
53,974
64,378
74,761
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1.9% 3.1%
Physical Retail Online Retail
LatAm Online Sales
(Billions USD)
910% In 10 years
2016
2020
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NO MATTER WHAT INDUSTRY YOU BELONG TO…
44% 43% 40%
37% 35%
30%
27%
24% 22% 22%
14%
11% 10% 9% 9%
8% 6%
% of Latinos who ever purchase the product via online
FASHION TRAVEL EVENTS ELECTRONICS BOOKS
& MUSIC IT & MOBILE VIDEO GAME
RELATED BEAUTY &
PRESONAL CARE
How to navigate the new Digital landscape?
RTE & RTD
DELIVERY FURNITURE
RELATED
HEALTH
CARE CHILDREN
RELATED
PET
RELATED
ALCOHOLIC
BEVERAGES HOUSEHOLD
CARE PACKAGED
FOOD
FRESH
GROCERIES
EVEN FOR FMCG…
Checked or compared prices
between physical stores 40%
Looked for product information 38%
Searched for the best deals,
coupons or promotions 33%
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FUTURE IS NOT UNPREDICTABLE Large retail companies are betting on LatAm… are you?
28% 26%
19%
26%
23%
27%
23%
28%
6% 6% 4%
0% 2% 0%
2% 2%
15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 16Q3 16Q4
Online Offline
China % Growth Value Sales vs. Year ago. Top 5 Most popular online Retailers
in Latin America Number of unique visitors (in millions)
Mercado
Libre 50.54
B2W Digital 18.68
Nova
Puntocom 18.52
Amazon 17.01
Buscapé 14.9
Walmart 13.45
Alibaba 12.93
Apple.com 12.01 50% CHINA’S INTERNET
PENETRATION
2017
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
ANY DOUBTS?
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LOCAL RETAILERS OFFER MORE THAN ONE OPTION How to navigate the new Digital landscape?
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BUILD YOUR UNIQUE 360° STRATEGY How to navigate the new Digital landscape?
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EASY TO USE APPS ARE VALUED
The big players understand digital consumers.
AMAZON APPLE
STORE PRIVALIA LINIO LIVERPOOL BEST DAY UBER
GENERAL TECHNOLOGY FASHION GENERAL DEPARTAMENTAL TRAVELS TRANSPORTATION
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BET ON BUILDING A DIGITAL ECOSYSTEM
92% 90% 88% 85% 82% 80% 78% 76% 74% 72%
8% 10% 11% 13% 14%
14% 13%
11% 9%
8%
4% 6% 9% 13% 16% 20%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Traditional Ads Other Digital Ads Mobile Ads
% of Advertising Expenditure in Latin America % Media ROI Idex
(LATAM TV ROI = 100)
97
83
90
106
72
124
207
149
130
112
Latam
Colombia
Argentina
Brazil
Mexico
Online Ads Off Line Ads
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THERE ARE OPTIONS TO BE EXPLORED
RETAILER ADS
SOCIAL MEDIA
MAIL ALERTS ONLINE CONTENTS BANNERS POP
CONECTIVITY
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IMPLICATIONS DIGITAL ECOSYSTEM
• Need to invest in the best technology available
• Invest in Client Service (Refunds and Returns and Doubts)
• Devlop efficient Delivery or Pick-up methods
• Forget partnerships with the .com leaders
• Be creative and proactive with your loyalty plans info
• Understand online behaviors of your current and potencial consumers
• Understand your online shopper motivators and preferences
• User Understanding: How to improve their experience on web pages and
Apps? EASY EASY EASY!
• Offering an incentive to move to online (Better prices, No cost delivery, etc)
• Spread the Ad Spending into profit pools and channels
• Build you brand not only sales via story telling (Creating content marketing)
TECHNOLOGY
RESEARCH
ADVERTISING
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
PREMIUM
CONSUMERS 2
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EVIDENCE OF PREMIUM CONSUMERS IN LATAM Avoid the mistake of targeting all as average consumers.
MEDIUM HIGH – HIGH INCOME
POPULATION DESPITE OF CRISES
99-FORBES Billionaire Ranking
Top 10 in Mexico
FOR INNOVATIVE
NEW PRODUCTS
vs.44% Global
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CONSUMERS ARE DEMANDING SPECIFIC BENEFITS Avoid the mistake of targeting all as average consumers.
Higher Quality / Safety Standards
Superior Function or Performance
Organic or Natural Ingredients
Environmentally Friendly
Socially Responsible Products
57%
50%
49%
48%
39%
Latinos are willing to pay for...
85
93
92
92
89
95
92
86
90
93
90
87
94
89
AR
BR
CO
MX
CL
VE
PE
Higher Quality / Safety Standards
Superior Function or Performance
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LATAM BR CL MX CO PE AR CR
REFLECTED ON PREMIUM FMCG PERFORMANCE
Source: Nielsen Retail Index | % Variation of Volume Sales | T. Categories, T. Private Labels, T. Low Prices | RY Mar ‘17 vs. RY Mar ‘16
-2.9
-6.1
1.7 2.9
-2.0
0.4
-7.3
4.1
7.7
15.6
8.9
3.9 3.4
1.5
12.9
20.4
T. CATEGORIES T. PREMIUM
% Variation Volume Sales by Country
RY Mar ‘17 vs. RY Mar ‘16
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12.1
2.4
11.5
-0.5
-1.9
0.2
-1.0
3.0
0.6
12.6
6.7
3.7
-0.3
10.8
-5.7
AR BR* CL CO CR MX* PE
MARKET OPPORTUNITIES TO DEVELOP PL’S
Source: Nielsen Retail Index | % of Volume Weighted Variation | Private Labels | RY Mar ‘17 VS. RY Mar ‘16
PREMIUM BRANDS
VOLUME WEIGHTED VARIATION – RY Mar ‘17 VS. RY Mar ‘16
9.8
1.4
-1.6
-3.6
-3.6
0.4
-11.8
-1.8
-2.1
0.7
9.5
-0.2
17.5
9.0
-7.8
2.5
-6.5
16.4
-4.8
7.1
NON IMPULSIVE
FOOD
IMPULSIVE
FOOD
NON ALCOHOLIC
BEVERAGES
PERSONAL CARE
HOME CARE
FO
OD
N
ON
-FO
OD
Some Countries are more open to buy PL in any category.
▼ - Decelerated Category | % Of Volume Weighted Variation RY JFM ’16 vs. RY JFM ’15
* Additional historical trend is unavailable due to Brazil and Mexico database enhancement.
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
▼
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PREMIUM CONSUMERS BEYOND FMCG The rely in Latin America exists.
Retail
Meeting
Places Services
Electronics
& Mobile Beauty
Care
Fashion
APPLE PRODUCTS
PENETRATION 2016
16
14
11
8
7
6
5
CHILE
MEXICO
LATAM
COLOMBIA
VENEZUELA
PERU
ARGENTINA
U$ 790 iPhone 7 vs.
U$295 average
price of high level
smartphones
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PREMIUM AFFORDABLE IS A KEY OPPORTUNITY Latin American Consumers are Aspirational.
Why are you buying Premium Products?
23%
24%
26%
32%
37%
Shows other people I amSuccessful
Makes me feel successful
Makes me feel good
Shows other people I havegood taste
Makes me feel confident
U$8.05 VS. U$3.22 (REGULAR CINEMA)
+150%
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PREMIUM AS A PROFITABILE STRATEGY
6% Volume Sales Variation
MAT Apr ‘17 vs.
MAT Apr ’16
Mexico
% Volume Growth Contribution 47.5% 34.5% 3.6% 12% 1.1% 1.0% 0.3%
Avg. Price USD $13.03 $29.77 $32.65 $43.74 $41.86 $70.99 $176.64
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6 GUIDELINES FOR DISCOVERING, DEVELOPING &
DEPLOYING PREMIUM PRODUCTS
Source: Nielsen Webinar | |Putting a Premium on Innovation: Best Practices for Launching Pricier Products | 2016
Create a
highly
differentiated
offering
Ensure the
product lives
up to the
promise
Make the
package looks
like a million
bucks
Price it
right
Align the
execution
with the
proposition
Provide
long-term
support
1 2 3 4 5 6
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IMPLICATIONS PREMIUM CONSUMERS
• Focus on the 360-degree brand experience for premium offerings: the path to purchase, the media
connections, and the post-purchase customer service.
• Consider a balance between your portfolio through innovation, diversifying your core business with
affordable premium and premium offerings based on customer and shopper understanding.
Key Considerations to Innovate in Premium:
• Understand the strengths and limitations of your brand (existing equities, etc.) when deciding how to
approach premium opportunities.
• Uniquely resolve a real consumer struggle.
• Delight with the product experience and ensure that any downsides are acceptable at a premium price
point.
• Optimize the package design to reflect “premium-ness” and other key equities relative to the
competitive set.
• Optimize to find the ideal price point based on competition and what the market can bear.
• Activate in a way that amplifies the product’s unique proposition, and plan to provide strong media
support for at least two years.
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
HEALTH AND
WELLNESS 3
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HEALTH AND WELLNESS More as a lifestyle than only a consumption trend…
Life Expectancy
has increased
23% Will be older than 60 in
2050 vs. 11% in 2016
Obesity is a key
health concern
Proactively seeking
of being Healthy
58% Overweight Adults
More than 250 Million
80% Actively making dietary
choices to prevent diseases
Insufficient Public
Health Systems
Main Causes of Death in Older Population: Cancer, Cardiovascular & Metabolic deceases
Chronic Deceases derived from Obesity: Diabetes (11%), High Blood Cholesterol (48%) and Hypertension (29%)
More presence of Vegetarians, Flexitarians, Gymnasiums, Nutritionist, Healthy Retailers, etc.
Increase in Private Health Services expenditure
19% Don’t have access to
Health Coverage
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CONCERNS ABOUT FUTURE WELLBEING
62% 62% 56% 55% 50% 63% 61% 60% 53% 48%
Losing ability for basicneeds (feed self, bathe self,
dress self)
Losing mental agility Being a burden to familymembers or friends
Losing physical agility Having enough money tolive comfortably
Global LatAm
What do Latinos worry about when aging?
Chile
69%
Mexico
65%
Argentina
65%
Brazil
64%
Colombia
65%
Peru
65%
Brazil
60%
Mexico
53%
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CONSUMERS ARE CHANGING DIETARY HABITS Proactively adhering to special diets.
41%
34%
23%
20%
15%
10%
9%
7%
3%
2%
1%
Low fat
Sugar conscious
Low sodium
Low carbohydrate
Lactose free or dairy free
Flexitarian
Wheat free or gluten free
Vegetarian
Vegan
Kosher
Halal
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THESE BEHAVIORS ARE TRANSLATED INTO SALES
Source: Nielsen Retail Index MAT September 2016 vs. 2015 % Weighted Volume sales growth | Global Survey Global Healthy Eating Report 2015 – Ingredient Trends Q3 2016
HEALTHY INDULGENT
Mexico
Categories % Volume Sales Growth
4.2% 0.0%
Argentina 2.3% -1.0%
Costa Rica 11.3% 2.8%
Colombia 4.2% 1.8%
Chile 2.8% 2.5%
Peru 1.4% 1.3%
Brazil -5.5% -8.0%
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FMCG has many examples of healthy products positive performance.
Gluten free Number of Categories 15
59% + items vs. 2015
Since 2012 +143%
Protein Number of Categories 17
14% + items vs. 2015
Since 2012 +133%
Organic Number of Categories 56
33% + items vs. 2015
Since 2012 +91% MEXICO
COLOMBIA
BRAZIL
Lactose Free +33% Avg. Volume Sales vs. 2015
0%
Light +115% Avg. Volume Sales vs. 2015
Lactose Free +83% Avg. Volume Sales vs. 2015
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A FULL 360° HEALTH INVESTMENT
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Developing Services, Technology and investing in short term and long term Partnerships.
SPONSORSHIP OF HOLISTIC SOLUTIONS FOR HEALTHY CONSUMERS
I often visit the store for the additional services they provide
NOT AVAILABLE, BUT I WOULD USE AVAILABLE, AND I DO USE
54%
20%
Health Clinic Services Pharmacy Services Cooking Classes
22%
36%
13%
35%
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CORPORATE RESPONSIBILITY Be ahead of legal obligations, showcase your social commitments.
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IMPLICATIONS HEALTH AND WELLNESS
• Partner with consumers and shoppers in their quest for healthier lives, they expect
manufacturers and retailers to support them in this endeavor.
• Aging consumers, patients under medical care, health conscious population and
special diet consumers are huge potential markets.
• Consumers want transparency and choice to make better food decisions.
• Educate and engage consumers with this theme via associations, government partnerships and technology developments. Be truly invested and transparent.
• Medical, Financial, Beauty and health, Nutrition and Entertainment services will be the way to reach current and potential consumers.
• Manufacturers have opportunities to create specialized food which could be enriched in fiber, with low sodium, fat or sugar, etc.
• Retailers must make their facilities more accessible and provide more service options in one location.
POTENTIAL CONSUMERS
HEALTH STRATEGY
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
LOYALTY &
SEGMENTATION 4
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STRATEGIC EXECUTION IS KEY TO GROWTH Brands and Retailers should review their Implementation via Segment at a base level.
Creating or Maximizing
the ROI of your
Loyalty
Programs
Moving from Global or
Country Strategy to
Regional and
Store Strategy
Move from Basic Demographic
Segmentations to
Shopper
Segmentation
Mix of Consumer and Shopper Knowledge,
Dynamic Micro-segmentation and In store execution
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LOCAL BRANDS HAVE BETTER PERFORMANCE
Source: Nielsen Retail Index (RY 2017) – Manufacturers that represent 60% of LatAm Basket | Nielsen Local vs. Global Brands study (Q3.2015)
26% 27%
9% 9%
65% 64%
Y1 Y2
GLOBAL
REGIONAL
LOCAL
VALUE IMPORTANCE AND VARIATION %
63% prefer to buy local brands,
because they support local businesses
(vs. 59% Global)
54% say that local brands
are more in tune with their personal
needs / tastes
(vs. 53% Global)
71% say that global brands
are generally more expensive than local
brands
(vs. 63% Global)
IN LATAM:
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+7%
+12%
+12%
Current economic environment favor local brands.
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LATIN AMERICAN CONSUMERS PREFER LOCAL
Source: Nielsen Local vs. Global Brands Study (Q3.2015)
15%
12%
20%
17%
23%
20%
19%
14%
19%
26%
29%
34%
30%
66%
60%
57%
54%
53%
52%
50%
49%
48%
39%
38%
37%
36%
MILK
WATER
YOGURT
JUICE
TEA/COFFEE
ICE CREAM
COOKIES/BISCUITS
CANNED VEGETABLES/TOMATOES
INSTANT NOODLES/RICE
CRISPS/CRACKERS
SWEETS/CHOCOLATE
LAUNDRY DETERGENT
MULTIPURPOSE CLEANERS
GLOBALLY PRODUCED BRAND ORIGIN IS NOT IMPORTANT TO ME LOCALLY PRODUCED
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WHICH VARY ACROSS BASKETS
Source: Nielsen Retail Index | LatAm | % Share of Global, Regional of Local Brands per Basket | 2017
54.9 53.9 46.7 46.5
82.4 70.7
52.0
10.1 12.1 17.4
5.9
1.8
3.9
8.9
35.0 34.0 35.9 47.6
15.8 25.4
39.1
NON IMPULSIVEFOOD STUFFS
IMPULSIVE FOODSTUFFS
NON ALCOHOLICBEVERAGES
ALCOHOLICBEVERAGES
PHARMA PERSONAL CARE HOME CARE
GLOBAL REGIONAL LOCAL
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REASONS FOR LOCAL BRAND PREFERENCE
Source: Nielsen Global Brand Origin Report
47%
34% 31%
27% 21%
Better Value for Money On Sale / Promotion Positive Previousexperience
Flavor is better National pride
Venezuela
53%
Argentina
39%
Chile
38%
Chile
36%
Venezuela
35%
Mexico
36%
Peru
32%
Colombia
35%
Peru
34%
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What is most important to you when choosing local over global brands?
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SAME COUNTRY - DIFFERENT LOCAL PREFERENCES
Source: Nielsen Retail Index | Index Average Country vs. Volume Sales by Area | Mexico (RY May ‘17) – UTT | Brazil (RY May ‘17) – Self Services + Smaill Retailers
BRAZIL MEXICO
WHISKY
419
BEER
262
248
VODKA
131
RUM
TEQUILA
115
217
AGUARDIENTE
100
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MEZCAL
200
BRANDY
VODKA
193
AREA I
RUM
422
AREA V
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BOOSTING RESULTS VIA STORE SEGMENTATION
Higher efficiency if you account just for a few selected stores.
4% (RIGHT) STORES NOT REACHED –
20% UPLIFT
9% (RIGHT) STORES REACHED
INDIRECTLY – 13% UPLIFT
80% SALES
30% STORES
RIGHT STORE
$ OPPORTUNITIES BY
REACHING THE RIGHT
STORES
Store Information and
Transactional Zone
Shopper
Understanding
Store Sales
Potential
2 3
1
STORE SEGMENTATION
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Source: 2015 LatAm GCCB Survey: Nielsen & McKinsey analysis
ONE CRITERIA IS NEVER ENOUGH
POS segmented by
growth potential and
portfolio needs.
50% + VS. Average
growth
Store segmentation criteria
# of criteria used to segment stores
9 6
Winners Others
1.5x
50
67
33
67
50
50
6
29
6
35
29
29 Typical consumption
occasions
Socioeconomic level
of the area
Profitability
potential
Quality of
the relationship
Potential share
Share at the store
100
67
50
71
47
35 Physical store
characteristics
Own sales
at the store
Channel
Forward looking criteria
Current performance
44%
32%
27%
38%
29%
15%
20%
21%
21%
Criteria used to segment stores
% of companies that chose each criteria
Spread
Winners Others
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COLLECT DATA TO BE USED AS A COMPANY ASSET Using Loyalty Programs information to target and taylor Ad strategies.
Discounts or Free Product (71%)
Free Shipping (62%)
The most valued rewards between Latinos
REVENUE GROWTH
MARGIN
OPERATIONS
Atract and retain consumers
Grow breadth of relationship
Increase size of transactions
Increase purchase frequency
Targeted promotions
Higher pricing elasticity
Loyalty barriers to competition
Customer focused innovation
Local, format and assortment
optimization
LOYALTY PROGRAMS
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IMPLICATIONS LOYALTY AND SEGMENTATION
• In this new landscape, success will come from a mixture of consumer and shopper
understanding, dynamic Micro-segmentation and In store execution.
• Local behaviors and preferences will continue to drive market consumption, therefore
manufacturers and retailers have to be proactive and flexible in order to build loyal
consumers and catch new regional consumers.
• Move to regional or store strategy in order to reach your key potential consumers. No more
Global Strategies!
• Focusing on the stores with the highest potential. Smart Segmentation.
• Use forward looking criteria (e.g. relationship quality, share, growth potential) to segment
fragmented trade stores focusing on growth potential and portfolio needs.
• Select key accounts strategically focusing on growth and profit margins, actively managing
growth and profitability trade-offs.
• Create smart loyalty plans in order to boost the revenue sales and obtain the best
information from your clients for strategic consumer segmentation and maximize the ROI.
• Big Data Analytics will be key to success.
PERSONALIZATION
SEGMENTATION
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.
LET’S RECAP:
THE SLOWDOWN AND THE
KEY TRENDS FOR GROWTH
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DIGITAL
ECOSYSTEM
PREMIUM
CONSUMERS
HEALTH AND
WELLNESS
LOYALTY &
SEGMENTATION 1 2 3 4
KEY TRENDS FOR GROWTH IN LATAM
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SURVIVING THE STORM
• In spite of a positive outlook, Latin American consumers’ negative perspective prevails,
therefore they will continue moving in saving mode. In order to face the FMCG slowdown
challenge, manufacturers and retailers should have smart offerings for these cautious
consumers.
• There are several pockets of growth and horizontal opportunities. Manufacturers can
emerge on the right side of opportunity with short-term actions (eg.: understanding and
developing specific portfolios for emerging channels, reducing promotion wastes and
running price elasticity analysis) and revisiting their medium to long-term strategic thrusts
in the key trends of growth (eg.: readiness to take on a digitized FMCG path to purchase,
reviewing their 360° strategies to attract premium and healthy consumers or high level
of execution standards via store and consumers segmentation).
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute.