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The State Of The Nation

Prepared by Luke Reaper For The Marketing Society 26th FEBRUARY 2009

IMAGE HERE INTO GREY AREA.


The Agenda

 Who we are – past, present and future  Climate Perceptions: are consumers coping?  Continuing and emerging trends  Is it all doom and gloom?

2


Who we are – Past, Present & Future

3


Record Population Growth in Recent Years 6.5 6.0 5.5 5.0 4.5 4.0

By 2016 we are forecast to hit over 5 million (at the moment!)

3.5 3.0 2.5 2.0 1.5

2.8 million Historic low

1.0 0.5 0.0 18 41 18 51 18 61 18 71 18 81 18 91 19 01 19 11 19 26 19 36 19 46 19 51 19 56 19 61 19 66 19 71 19 81 19 86 19 91 19 96 20 01 20 06 20 08 20 11 20 16 20 21 20 26 20 31 20 36

Mil.

Current population stands at 4.4 million

4


Components of Population Change 110

Persons (thousands)

90 70

Natural increase Natural increase

50 30 10

Population Populationchange Change

-10

Net mMigration igration Net

-30 -50 2636

3646

46-51 51-56 56-61 61-66 66-71 71-79 79-81 81-86 86-91 91-96 9602

0206

07

08

Intercensal period

Natural increase outstripped net migration and contributed to just over half (54%) of the population increase in the year to April ’08. Also lower mortality rates nowadays.

5


2009 Forecast Net Migration Emigration/Immigration 80s

90s

00s

110 90 71.80

70

55.10

50

41.30 32.80

30 0

19.20

-30

-2.00 -23.00

26.00 17.40 17.30

32.00 30.70

38.50

8.00

7.40

10 -10

67.30

-0.40

-4.70

-0.19

-22.90

-41.90 -43.90 -50.00

-50 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

ERSI Forecasting a 2009 net migration figure of -50k, with 25k inwards and 75k exiting. This would be the highest net migration since 1989.

7


Long Term Population Change (‘000s) 1986 - 2016 Population Census Ageing population: 20-25% of population will be aged 65+ by 2041

1986

1996

2002

20-29 age bracket to shrink by 4-6% over the next 10 years (decline in births now impacting)

CSO Projection (M2FI) 2006

2008

1024.7

864.4

859.4

912.0

632.7

25-34 35-44 45-54 55-64 65+ Total Dependants Dependency %

617.9

641.5 617.5 506.1 421.5 309.3

520.0

412.0

562.9 480.4

722.4 623.4

783.6 652.3

587 827.0

+9%

820

+5%

647.0

+4%

518.0

+6%

646.0

+3%

847.0

705 584.0

521.8

543.3

407.0

431.2

466.0

291.8

351.6

384.4

413.9

436.0

468.1

481.7

536.0

3,621 1,237 35%

3,917 1,264 32%

4,240 1,333 31%

4,422 1,394 32%

4,686 1,493 32%

5,094 1,695 33%

+4.3%

+10.5%

+8.7%

-

+2.2%

+8.2%

+8.2%

-2.3%

591

282.2

3,540 1,409 40%

Pop growth %

617.4

496.1

+6%

957.0

632.9

15-24

2016 1049.0

827.4

0-14

2011

% Change ’08 vs 06

8


Number of Households 1987 – 2006 ‘000

1469

1450

1350

1319 However, household size has declined.

1250

1227

1123

1150

1029

1050

987 950 '87

'88

'89

'90

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'06

Source: HBS (CSO)

The number of households stands at 1.469 million (2006 census), a 31% increase over a 10 year period. Has had implications for many household related categories. However, we are not going to see such record growth in the future.

9


Growth In Smaller Households 1986 - 2006 1986

1996

2002

2006

744 639 499

1 /2 people

379

% Ch ’06 vs ‘02

+16%

(50%)

(48%)

(44%)

(39%)

+9% 3 / 4 people

5+

Total

302

371

466

509

(31%)

(33%)

(35%)

(35%)

295

253

226

217

(30%)

(23%)

(17%)

(15%)

976 Growth

1123 +15

1332 +19

1470 +10%

-4%

+10%

11


Death Rate per 1,000 Population 1986 – 2007 • •

Rate per ‘000

10

9.5 9 8.5

Impacting on traditional lifestages They are being stretched and redefined

9.5 9.1 8.8 8.9

8.9

8

8.9

8.9 8.7

8.8 8.6

8.7

8.5

8.6 8.5

8.2 7.8 7.5 7.2

7.5 7

7.0 6.6 6.5 6.5

6.5

19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07

6 • • •

As a result of long-term falls in mortality rate, people are living longer. Thus a customer for life takes on a new meaning It’s estimated that 1 in 4 of the population is now on long term medication Increased strain on our healthcare system

14


Unemployment Rates 2008

% of labour force 20 17 18 16 14

14

While the Q3 QNHB in 2008 had a jobless figure of 160k, the latest estimates are over 195k people and climbing.

15.5 13.2 11.5

12

Feb estimates

10

8.3

8 5.5

6

3.9

4

4.4 4.4 4.6

4.9 5.4

6

9.6 10.4%

6.9

Jobless rate could hit 12-15% in 2009

2 at e im

Ja n

20 09

es t

De c

Ju ne Se pt

h ar c M

Ja n

'0 7

'0 6

'0 5

'0 1

'9 9

'9 6

'9 3

'9 0

'8 6

'8 3

0

2008 Average for ’08 was 6.3 The unemployment rate does not take into account reduced working hours up to 3 days a week, etc as does the Live Register

15


However the Live Register has Higher Figures 327,861 on the Live Register in Jan 2009 (monthly increase of 12%) 143% increase in redundancies in Jan ’09 compared to Jan ‘08

Persons on live Register

327,681

339,000

Total Persons (Feb 354,400)

289,000 268,586

238,240

Irish Nationals

240,217

263,527

239,000 197,992

201,756

199,776

181,449

189,000 166,363 160,543

160,138

218,710 199,003

166,873 168,477

158,752

154,961 145,677

142,180

144,642

c. 64k non-Irish Nationals (almost 20% of all persons on the Live Register, driven by those from the EU Accession States)

139,610

139,000 Month

2005 (1)

2006 (1)

2007 (1)

2007 (6)

2008 (1)

2008 (3)

2008 (5)

2008 (7)

2008 (9)

2008 (11)

2009 (1)

2008 * The Live Register is not designed to measure unemployment. It includes part-time work e.g. seasonal & casual workers who work up to 3 days per week

16


Economic Status Number of Workers in Household 1987

Two+ working

23.6

‘94/’95

‘99/’00

‘04/05

26.8 35.8

35.7

34.7

33.0

14.9

15.1

One working

43.2

Pensioners Unemployed Other households

11.1

38.3

13.3

11.4

8.6

10.6

12.9

4.2 10.5

2.8 13.5

Prime driver of increased wealth Source: HSB/CSO

17


Other Key Demographic Changes 

Smaller families… average number of children per family declined from 2.2 (1986) to 1.4 in 2006.

Cohabiting couples are the fastest growing type of family unit. In addition, almost two-thirds of these are couples with children.

Muslims the third largest religion (after Catholicism and Church of Ireland) – 32k.

More flats, apartments and bedsits … now 148k+* (1.77 million housing units in total).

*Source Census 2006

18


Other Key Demographic Changes

Increased urbanisation… but in towns rather than cities (Dublin, Cork, Limerick). While all counties in Leinster increased the highest growth.  Will people try and retreat to the cities?

Postponing of commitment to traditional family structures.

19


Other Key Demographic Changes

Ireland – still a cultural melting pot. It is difficult to estimate percentage of foreign nationals still in Ireland. Estimates place numbers at 10-12% (with about one-third under 25).

Divorce on the increase (up 70% between 2002 - 2006)… 9% now separated/divorced (2006).

20


Volume & Value of Retail Sales (All business combined)2003-2008 (Index 2000 = 100) Up to Dec 2008 Index 150 143 140

Value 132

131 130 121 124

120 114

Volume

116

109

113

110 109 101

100 '03

104 '04

'05

'06

2008 a bad year and set to continue

'07

'08

Year

21


Retail Sales Value & Volume: Annual Change Dec ’07 vs. Dec ‘08

Hardware, paints and glass Pharmaceutical, medical and cosmetics Household equipment Textiles and clothing Footwear and leather Books, newspapers, stationery Food, beverages and tobacco Electrical goods Furniture and lighting Motor trade Bars

Value of Sales

Volume of Sales

Long term Annual % change Dec ’07 v Dec ‘08

Long term Annual % change Dec ’07 v Dec ‘08

-18.0 -1.2 -19.6 -10.3 -10.7 -10.6 1.5 -22.5 -16.3 -16.5 -5.4

-19.8 -3.5 -20.1 -5.3 -4.6 -14.1 -2.4 -21.6 -16.0 -14.9 -9.8

Source: CSO

23


Negative Inflation for First Time Since 1960 % Annual Change

5

Jan ’09 Negative Annual % Change + = Lower prices for consumers - = Margins lower, can affect jobs

+4.3 +4.0

4

3

+2.5

2 +1.1 1 -0.1

0 Sept '08

Oct '08

Nov '08

Dec '08

Jan '09

Ulster Bank’s Pat McArdle expects CPI to remain negative for all of 2009, going below minus 4% in several months – impact of further rate reductions and as recession bites.

24


Most Notable Changes in the Year Impacting on Our Negative Inflation All Items -0.1% Food & Non-Alcoholic Beverages

3.0

Alcohol & Tobacco

6.9 Clothing & Footwear

-6.9

Housing/Water/Electricity/Gas etc.

-7.9 -1.1

Furnishings/H/H equipment

Health

-4 Communications Recreation

5.8 Transport 0.7 0.5

Education Restaurants & Hotels Misc Goods & Services

5.6 3.3 7.7

Factors impacting: • Lower mortgage rates, petrol and diesel prices • Drop in home heating price • Household equipment prices down • Increase in health and car insurance premiums pushed up miscellaneous goods & services Source: CSO

25


Rich Man – Poor Man Disposable Income – Household Data Household Quintiles

94/5

1999/2000

2004/05

Bottom Quintile

102

140

201

2nd

195

291

424

3rd

304

469

704

4th

448

681

1057

Top Quintile

740

1177

1826

Total

358

552

842

Gap between Rich Man – Poor Man has actually increased over the above 10 year period Source: Household Budget Surveys

26


Section One:

Climate Perceptions: How are Consumers Coping?

27


What Are We Doing Less Of?

Doing ‌ Nowadays

More

Going out to a restaurant for a meal 2%

Going out for a drink 2%

Using garage forecourt shops to buy food or 2% groceries

Using local shops like Centra, Supervalu

10%

Same

Less

46%

51%

59%

38%

67%

29%

66%

22%

30


What Are We Doing More Of?

Doing ‌ Nowadays

More

55%

Buying items on special offer Using discount stores like Aldi & Lidl

Drinking at home Using public transport

40%

47%

Buying shops own label products Using major supermarkets

Same

48%

43% 26% 21% 14%

51% 63% 68% 78%

Less

2% 2% 4% 9% 9% 5%

31


Continuing & Emerging Trends

32


Continuing & Emerging Trends Consumer Reactions to the Recession are in a Constant State of Flux Fear

Denial Guilt

Some are living in a state of FEAR (e.g. job, mortgages etc.)

Some are doing well still and have a sense of GUILT

Many are still in DENIAL, not wishing to believe that things could get worse

However, is the nightmare of meltdown more Dublin and Rest of Leinster?

33


Continuing & Emerging Trends We have moved from this inspirational leader

To‌.

So what are we searching for?

34


Continuing & Emerging Trends Need Companies That Care 

In these ‘ugly’ times, people crave empathy, sympathy and comfort.

A longing for organisations that care.

Implications for Business 

Customer service will become increasingly important to retain share. However, this is often an area cut in hard times.

Brands need to build even deeper relationships with customers in times of strife.

Consumers have the internet in this recession – hence the need to sympathise and interact with customers will never be greater. Online forums, talk shows etc. will be the soapbox of the consumer.

Customers are likely to start answering back more – something we Irish have been very poor at!

35


Continuing & Emerging Trends Rediscovering Home 

This is a continuing trend, but is likely to be amplified in the coming months.

Part relates to a redefining of values and part due to practical financial concerns.

Implications for Business 

Catering for this home market has much opportunity.

Remember people who are used to a high standard of living are likely to get cabin fever… they will need entertainment.

The values of home do not necessarily have to be boring or dull.

36


Continuing & Emerging Trends Search For ‘Real’ 

We have been searching for this since the Celtic Tiger began!

In hard times consumers increase their search for what truly makes them happy as they reevaluate their lives.

We have a values gap – many have not experienced a recession, they have high expectations for living standards etc.

Implications for Business  Consumers will value the simple things, the practical over the ephemeral  A search for solidity is evident.

37


Continuing & Emerging Trends Wider Sense of Community 

On a positive note, hard times can bring people together. Our recent ‘blizzards’ were a case in point.  Sense of community is an important part of human

nature and this is even more marked in Ireland than globally. 

While Ireland always had a trend of being community oriented, this is likely to become more prevalent.

Elements which are likely to feed into this sense of community include:  Helping others less fortunate via voluntary work (albeit

not recently on the donations front).  A return to a more inward focus; Irishness, local

(looking after our own) and the sense of nostalgia about the peaceful times.

Implications for Business 

Brands can convey a relevance via tapping into the local heritage, which can convey a sense of comfort 38


Continuing & Emerging Trends Back to the Cosbys?

With the recession biting harder, our household composition could start to alter.  Moving back in with the parents (not just

themselves, but couples etc.).  Elderly relatives living with siblings.  Taking lodgers in to help pay mortgage.

Implications for Business 

Monitor those trends and show an empathy with consumers

If sufficiently large developments – cater for emerging trends

39


Continuing & Emerging Trends Redefining of Luxury    

Luxury brands will still be consumed, albeit they will be under pressure. Consumers will veer towards small indulgences, rather than excessive ones. An embarrassment about flaunting wealth will return  Lavishness will be emotionally wrong. Luxury will need to be earned (i.e. allow consumers to purchase guilt free – via quality, heritage, time, longlasting, more useful, comforting etc.). Luxury will be about helping people vent in the current climate.

Implications for Business 

Examine brands’ DNA to see the elements to leverage

40


Continuing & Emerging Trends Adaptability of Consumers 

Nothing new here?

Sure the country is in active promotion seeking mode.

But have you picked up on the following?  Increased prevalence of bartering prices down or

look for extras  Consumers texting each other regarding good

bargains found.  Usage of online to buy cheaper goods

(remember, no internet during the last recession).  Are we likely to see more disparate shopping to

get bargains?  Discounters are becoming more mainstream.

Implications for Business 

Assess your offer…note naggins are again being discussed… are we likely to see flagons return?

41


Continuing & Emerging Trends Media Consumption 

Media consumption is still high.  We are still watching TV, listening to radio and surfing the

net. 

People, while certainly interested in the news and current events as they unfold, are searching for happier times. For example programmes like: ‘The Riordans: Tea, Taboos and Tractors’ attracted an audience of 555,000.  One episode of Desperate Housewives attracted 420K.  Six Nations is also doing well, as we search for good

news and indeed inspiration.

Remember this…. 43


Is it all Doom and Gloom?

44


Positive Factors

Infrastructure has improved significantly (and Broadband to some extent)

Tax rates are low

2 million still likely to be working at the end of the year compared to only 1-1.5 million in ’80s

Mortgage interest rates declining 45


Physically we are Left with Some Lasting Achievements

Luas

Restoration of historic buildings such as: Royal Hospital Kilmainham, Dublin Castle etc.

Croke Park

The O2

Temple Bar

Dublin Airport

46


Also The New Aviva Stadium

 Recent reports – it will bring €250

million to the local economy per year.  UEFA Europa League Final to take place in 2011.  Will be aiming for other major events.

The question is – could we have done more? 47


So are we Likely to be Doing…. Less of this….

Foreign holidays

And More of this…..

Holidays at home

48


So are we Likely to be Doing…. Less of this….

Formal dinner out

And More of this…..

Takeaways

49


So are we Likely…… To seek information

But also need more of this….

50


So are we Likely to be Listening to…. Less of this….

And more of this…..

But maybe at some stage a return to….

51


So are we Likely to be Doing…. Less of this….

Hair salon

And More of this…..

Home hairdo

52


In Summary  Inaction is the riskiest response.  Protect the existing business.  In past recessions, companies that slashed marketing spend often found that

they had to spend far more than they saved in order to recover.  In softer, less cluttered media environments you can be heard louder.  Search for opportunities…consumers still spend.  Consumers need to be communicated with more and not just on a rational

level…remember Obama.  Times are a-changing so fast we need to understand and track the consumer

like never before – if you want to gain the competitive edge.  And remember, the one thing we can be certain of, is that recessions always

end.

53


Thank you

54


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