Transcript Slide 1

INSIGHTS • IDEAS • RESULTS
Crisis 3.0
October 22nd 2014
Russian GDP
GDP per Capita (Current $)
Crisis 2.0
16,000
+5.8%
14,000
+24.4%
12,000
+27.9%
+24.3%
Crisis 1.0
10,000
+31.6%
8,000
6,000
4,000
+3.7%
-26.4%
+30.1%
+29.9%
+1.6%
-9.7%
-1.7%
-9.1%
-5.4%
-1.0%
+0.2%
-33.0%
+3.5%
+33.1% +13.0%
-27.5%
+18.6%
+38.1%
+25.3%
2,000
0
Source: World Bank
•
GDP per Capita in 1999 was 51% below 1997 levels.
•
GDP per Capita in 2009 was 26% below 2010 levels.
•
GDP per capita at the lowest point of Crisis 2.0 (2009) was 6.5 times higher than
during the depths of Crisis 1.0 (1999).
•
In 2013 GDP per capita was 11 times higher than during the depths of Crisis 1.0
(1999).
Crisis 1.0
•
Declining productivity, an artificially high fixed exchange
rate between the ruble and foreign currencies, and a
chronic fiscal deficit were the reasons that led to the crisis.
The cost of the first war in Chechnya also contributed.
•
Two external shocks, the Asian financial crisis that had
begun in 1997 and declines in demand for crude oil and
nonferrous metals, hit Russian foreign exchange reserves.
•
On 29 July, the Duma refused the crisis program and the government was forced to rule
via Presidential decrees. Yeltsin replaced FSB Chief Nikolay Kovalyov with Vladimir Putin.
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By 1 August 1998 there was approximately $12.5 billion in debt owed to Russian workers.
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On 14 August 1998 the exchange rate of the Russian ruble to the US dollar was still 6.29.
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On 17 August 1998, the Russian government devalued the ruble, defaulted on domestic
debt, and declared a moratorium on payment to foreign creditors.
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Russian inflation in 1998 reached 84 percent and welfare costs grew considerably. Many
banks were closed down as a result of the crisis.
•
$5 billion of World Bank and IMF aid was estimated to have been stolen. The Russian
Federation was reckoned by the IMF to have been collecting only a tiny proportion of its
tax receipts. Nonetheless, in early 1999 the Duma increased income tax to 45%.
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It was devastating.
Crisis 2.0
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The first global financial crisis since 1929.
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The U.S. Senate's Levin–Coburn Report concluded that the
crisis was the result of "high risk, complex financial
products; undisclosed conflicts of interest; the failure of
regulators, the credit rating agencies, and the market
itself to rein in the excesses of Wall Street."
•
Largely caused by the US financial services industry – and other developed economies.
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Effects were felt by all economies.
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It was (and remains) difficult.
Crisis 3.0?
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IMF predicting only 0.2% economic growth for Russia in 2014.
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Oil prices have fallen by $10+ a barrel in the last month.
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Inflation in September at the highest level for 3 years.
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Capital flight in 2014 likely to exceed $100 billion.
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Ruble has lost 20% of value versus $ since the beginning of the year.
•
Huge state bailouts are needed by Russian companies who are denied access to western
capital by sanctions.
•
Sanctions may be damaging the German economy – further reducing demand for Russian
energy products.
BUT
•
Unlike 1998/9, the Russian economy has run a surplus for the last 14 years.
•
Unlike 1998/9, GDP per capita in Russia starts from a much higher base.
•
Crisis 3.0 is likely to happen and is unpredictable but will probably be more like 2009 than
1998/9.
BUT
•
The future of sanctions is unpredictable, based on political decisions.
Two Questions
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What will happen to different Russian markets segments during the forthcoming crisis?
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What will happen to demand – and pricing – for advertising time and space?
SO
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Investigate what DID happen in 2009
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Monitor consumer attitudes during crisis period
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N=550, pre-existing internet panel
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4 waves
March
2009
April
2009
May
2009
September
2009
Growing overall optimism during the period
29%
Crisis has been overcome
and economic situation has
started to improve
Sept 09
1. Q: What is your opinion on the level of crisis
in the Russian economy?
May 09
26%
April 09
17%
March 09
 Level of optimism about Russian economy
among population continued to grow into
September:
People who thought the worst was already
over continued increasing and reached
63%
0
34%
31%
We are at the height of the
crisis and it will not get worse
26%
• +6% vs May and +29% vs March
0
Share of “true” optimists who were
confident that the crisis had finished more
than doubled between March and
September to approach 30%
37%
44%
Crisis just started. Worse
times are ahead
57%
66%
0%
20%
40%
60%
80%
%
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: March’09, April’09, May’09, Sept’09
 It resulted from the ruble continuing to
strengthen together with oil price rises and
dollar weakness
But still there was a high level of uncertainty
Hard to answer
1. Q: What is your opinion on the 2nd wave of the
crisis in Russia?
23%
2nd wave will not
happen
24%
It will be at the end
of 2010
7%
It will happen in the
beginning of 2010
27%
it will happen at the
end of 2009
19%
0%
5%
10%
15%
Crisis has been overcome 4% 10%3%
We are in the height of the crisis
22%
Crisis just started
27%
20%
25%
53%
22%
8%
45%
30%
29%
22%
27%
11%3% 15%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
it will happen at the end of 2009
It will happen in the beginning of 2010
It will be at the end of 2010
2nd wave will not happen
Hard to answer
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: Sept’09
There was a high level of uncertainty
regarding the likelihood of a 2nd wave of the
crisis:
Around half of respondents thought that it
would happen in autumn 2009 (19%) or at
the beginning of 2010 (27%)
But almost a quarter of people were
confident that there would be no 2nd wave
 Among people confident that crisis was over,
more than half were sure that there would be
no 2nd wave.
And vice versa, among people thinking that
worse times were still ahead, about 70%
were expecting a 2nd wave of the crisis in the
near future
More confident in their financial future
Q: Please, evaluate your expectations of your
financial situation in 2009
Sept 09
32%
10%
35%
22%
May 09 6%
24%
33%
30%
April 09
6%
23%
34%
33%
Mar 09
5%
21%
0%
29%
38%
2%
7%
4%
Confidence in their financial future also continued
to grow in September, correlated with increases in
overall optimism
The number of people who expected an
improvement in their financial status increased
to over 40% by September
Respectively “pessimists”, people who expect
worsening of their financial status, reduced to
24%
8%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Significantly improve
Slightly improve
will be slightly worse
Significantly worse
Do not change
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: March’09, April’09, May’09, Sept’09
How did this growth of optimism affect
expenditure patterns and purchase
behavior?
Russians were very careful with their expenditure
1. Q: How does the financial crisis in Russia
influence your attitude to money?
6
7
7
n/a
5
 Spending money more carefully stayed high
at 44%, twice the pre-crisis level in
November 2008
6
32
28
Nothing changed
32
 There were few changes in attitudes to
expenditure by September compared to
spring
30
51
14
11
14
I try to invest money,
to gain more
Sept 09
14
May 09
14
April 09
5
I try to spent all
money to avoid
devaluation
3
2
Mar 09
4
7
Nov 08
44
51
I try to spent money
more carefully
45
47
21
%
0
5
10
15
20
25
30
35
40
45
50
55
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: March’09, April’09, May’09, Sept’09
Prices increases were the biggest crisis issue
Question: Which negative crisis consequences have you or members of your family faced lately?
Unpaid holidays
People were gradually adapting to the
crisis:
Prices increases were the most
widespread problem though there was
some reduction over time.
All other issues did not demonstrate
significant changes.
Sept 09
Difficulty to obtain credit
0
May 09
April 09
Reduction of social package
0
Mar 09
Problems with credit payments
0
Firing
0
Sales decrease in the company
where I work
0
Delay of salary payment
0
Reduction of bonuses
0
Difficulty in finding a new job
0
Salary reduction
0
Price increases
1
0%
20%
40%
60%
80%
100%
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: March’09, April’09, May’09, Sept’09
First signs of recovery: reduction of delay of
purchase across almost all categories
100%
80%
60%
40%
20%
I am purchasing less expensive brands
I am purchasing less
I purchase only the most necessary things
I am waiting to purchase
Nothing changed in my purchase behaviour
Nothing changed: do not buy
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: November 08, March’09, May 09, Sept’09
(a)
(b)
(c)
(d)
(e)
Automobiles (d)
Home furnishing (d)
Jewelry (e)
Travel/Tourism (e)
Sit down restaurants
Home appliences (d)
Finance & Insurance (d)
Computers/Accessories
Sporting goods (c)
Satellite TV subscription
Clothing/Shoes/Accessorie
Perfumery & make-up (c)
Fast Food restaurants (c)
Alcoholic beverages &
Cosmetics and hygiene (a)
Household products (a)
Soft Drinks (b)
Groceries (a)
0%
– Low Involvement / Essential Goods
- Low Involvement / Feel Good
- Mid-level product categories
High Involvement / Long-Term Necessities
High Involvement Luxuries
Purchase habits changed by category
Likelihood to change purchase behavior
100%
80%
60%
40%
I am purchasing less expensive brands
I am purchasing less
I purchase only the most necessary things
I am waiting to purchase
Nothing changed in my purchase behaviour
Data source: OMD Snapshot, 550, on-line, Moscow
Target group: all 18-45 y.o.; Field work: Sept’09
(a)
(b)
(c)
(d)
(e)
Automobiles (d)
Home furnishing (d)
Jewelry (e)
Sit down restaurants
Home appliences (d)
Computers/Accessories (d)
Sporting goods (c)
Clothing/Shoes/Accessories
(c)
Fast Food restaurants (c)
Perfumery & make-up (c)
Cosmetics and hygiene (a)
Alcoholic beverages & beer
(b)
Finance & Insurance (d)
Household products (a)
Soft Drinks (b)
Groceries (a)
0%
Travel/Tourism (e)
20%
– Low Involvement / Essential Goods
- Low Involvement / Feel Good
- Mid-level product categories
High Involvement / Long-Term Necessities
High Involvement Luxuries
Purchase behaviour during the crisis
 September did not demonstrate major changes in purchase behaviour compared to May 2009.
Despite a more optimistic view, people still felt constrained and looked for ways to save money
Majority of consumers were still looking for ways to spend less
 Nevertheless there were some positive signs:
• If there was a sharp increase in postponed purchases in all long-term necessities and
luxury categories in the Spring, by September, the number had decreased and returned to
the level of 12 months earlier.
• The number of people who did not change their behavior slightly increased. In groceries,
this shift occurred in the spring, and by September in all other categories
• Strategy of buying less (volumes/less frequently) was the most popular for drinks (both soft
drinks and alcohol & beer) and for eating out categories
• For FMCG (groceries, cosmetics and household products) there was the highest number of
people who switched to less expensive brands, compared to other categories (10-15%
depending on category)
• The most popular strategy for expensive goods still is to postpone the purchase
(Automobiles, Home Appliances & Electronics, Furniture)
Russian Advertising Expenditure
Million Rubles (current)
400,000
+7%
+8%
350,000
+9%
+10%
300,000
+14%
250,000
+21%
+19%
200,000
150,000
+30%
+31%
100,000
50,000
+17%
+32%
+59%
+29%
0
Source: OPERA
+28%
-24%
Cinema/Indoor
Internet
Radio
Print
TV
Russian Media Inflation
Inflation (All Media)
50
+47%
40
30
+36%
+30%
+25%
+24%
20
+21%
+27%
+21%
+20%
+11%
10
0
-10
Year-on-year Price Change (%)
Source: OPERA
+8%
-5%
+13%
+11%
+7%
+6%
Conclusions
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Crisis 3.0 will probably occur but with less extreme effects than Crisis 2.0 or, especially, Crisis
1.0
•
Indeed, Crisis 3.0 may be seen as a continuation of Crisis 2.0
•
The Russian population will be very careful with their expenditure with price increases causing
the greatest problem
•
Effects will vary by product field
•
Durable and luxury items will show the greatest declines owing to deferred purchase
•
May be some trading down in necessities
•
Advertising expenditure will grow – but only at the same rate as retail price inflation –
stability in real terms
•
Some hesitancy in conclusions – sanctions will have effects – and these will be unpredictable