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Group Management Report

 

1. Economic basis for the Group

1.1 Overall economic development in 2016: Decline in growth rate

Stagnating global trade, weak propensity to invest and increasing political instability put the brakes on economic momentum over the past year. At 3.3 percent, global economic growth declined to its lowest level since the onset of the global financial crisis.

World Bank analysts cite a combination of factors to explain this: Weak growth, low inflation, dampened propensity to invest and modest increases in productivity in developed economies. In addition, political uncertainties must also be factored in. Consequently, growth in mature markets declined to 1.6 percent (–0.5 percentage points versus the prior year). The economic slump was accompanied by a further slowdown in global trade.

In the United States, the economy recovered following a weak first half of 2016 and closed in on full employment status. In the United Kingdom, domestic demand was stronger than expected. This softened the blow of the shock Brexit vote. Overall, private consumption in the Eurozone was a major supporting factor in the economic recovery. Employment levels rose steadily in parallel to low energy prices, leading to an increase in real available income. This situation is in total contrast to Japan, where even private consumption stagnated on account of weak salary developments. Consumer prices fell once again.

The Emerging Markets and Developing Economies (EMDEs) grew at an average rate of 3.4 percent. However, there were clear differences between countries which export commodity and those which import them. While countries which export commodities achieved average growth of just 0.3 percent, those which import commodities registered economic growth of 5.6 percent on average – this discrepancy reflects a landscape of cheap commodities prices, solid domestic demand and a friendly macroeconomic climate in general.

Growth in China fell slightly more than had been anticipated by the majority of experts on account of continued political stimuli. Chinese economic growth slowed further in the prior year. According to official government statistics, the growth rate amounted to 6.7 percent. This is the lowest value since 1990. In 2015, the world’s second-largest economy recorded growth of 6.9 percent. During the peaks of the previous decade, this value was occasionally as high as 14 percent. In contrast, countries such as Argentina and Brazil in Latin America are in the throes of recession. Turkey fared just as badly: Following the political disruption, the country had to deal with a significant drop in tourism revenues.

1.2 Market research industry: Stable growth, volatile currencies

In last year’s industry outlook, we maintained a skeptical view of the year ahead and agreed with the saying attributed to Confucius that only those who expect nothing of the future can avoid disappointment. The latter part of this assessment proved to be spot-on, at least. Contrary to the expectations of distinguished experts, sales in our industry grew by a sizable 3.5 percent worldwide in 2015 to total US$67.9 billion.

Real gross domestic product, consumer prices and unemployment rates in the global economy

in percent
Gross domestic product Consumer prices Unemployment rate
Change in percent compared with the previous year Change in percent compared with the previous year in percent
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018
Eurozone 1.9 1.6 1.5 1.6 0.0 0.2 1.2 1.3 10.9 10.1 9.6 9.3
excluding Germany 2.1 1.5 1.5 1.6 – 0.1 0.1 1.1 1.3 13.8 12.8 12.2 11.9
France 1.2 1.2 1.3 1.5 0.1 0.2 1.2 1.4 10.4 10.1 9.8 9.7
Spain 3.2 3.2 2.2 2.1 – 0.5 – 0.4 1.2 1.4 22.1 19.6 17.9 17.0
Italy 0.6 0.8 1.0 1.2 0.1 0.1 1.0 1.0 11.9 11.4 10.9 10.9
Netherlands 2.0 1.9 1.8 1.9 0.2 0.2 1.0 1.1 6.9 6.2 6.2 6.0
United Kingdom 2.2 2.0 1.0 1.8 0.0 0.6 2.6 2.0 5.3 5.0 5.5 5.5
USA 2.6 1.6 2.4 2.6 0.1 1.2 1.9 2.0 5.3 4.9 4.5 4.4
Japan 0.6 0.7 0.5 0.5 0.8 – 0.3 0.1 0.4 3.4 3.2 3.2 3.2
South Korea 2.6 2.9 2.6 2.7 0.7 0.9 2.0 2.7 3.6 3.6 3.0 3.0
Central and Eastern Europe 3.7 3.0 3.4 3.5 – 0.4 – 0.3 1.1 1.6 7.3 6.3 5.8 5.4
Turkey 4.0 3.0 2.7 3.1 7.7 7.7 7.6 7.4 10.3 10.7 11.4 11.2
Russia – 3.7 – 0.7 1.2 1.9 15.5 6.7 4.5 4.1 5.6 5.6 5.6 5.5
China 6.5 6.5 6.2 5.8 – 0.6 0.5 2.5 4.5 4.1 4.1 4.1 4.1
India 7.4 7.3 7.0 6.9 1.0 3.3 6.0 6.1
Brazil – 3.9 – 3.1 0.4 1.5 9.0 8.5 5.7 5.7 8.3 11.2 12.4 10.6
Mexico 2.6 1.9 2.2 2.3 2.7 2.7 3.3 3.2 4.4 4.2 4.8 4.8
Industrial countries 2.1 1.6 1.8 2.0 0.2 0.7 1.6 1.6 6.3 5.9 5.6 5.5
Emerging countries 4.5 4.6 5.0 5.0 2.9 3.0 3.9 4.8 5.3 5.6 5.7 5.5
World 3.5 3.3 3.6 3.7 1.7 2.0 2.9 3.5 5.8 5.7 5.7 5.5

Source: DIW Winter Baselines 2016

However, a somewhat more sober view must be taken of this increase in light of the significant shifts in currencies. Once inflation and currency effects are taken into account, sales growth only amounted to 2.2 percent in 2015. Latin America, for example, reported a second consecutive year of growth in 2015, at 10.7 percent, but after currency effects and inflation have been considered, the result is a sales decline of almost 20 percent. In their annual industry study, ESOMAR analysts stated that “exchange rates played a prominent role this year” (with 4,900 members in 130 countries, ESOMAR is the most important association for our industry). The African market also recorded slight growth when based on local currencies, but following conversion into U.S. dollar, this in fact equates to a marginal sales drop of 0.5 percent.

In Europe, sales in the market research industry increased for the first time since the financial crisis. Assuming stable exchange rates, the industry grew by 3.3 percent when compared with 2014. The greatest individual growth was achieved in Bulgaria (+ 46 percent) and is attributable to greater demand and above all the availability of additional market research instruments. Further boom markets (inflation-adjusted for inflation) include Slovenia (+ 10.9 percent), Spain (+ 8.0 percent), the Netherlands (+ 6.9 percent), Slovakia (+ 5.9 percent) and Turkey (+ 5.6 percent). The three strongest European markets, the UK, Germany and France, are at the same time in the world’s top five. In contrast, sales declines were recorded in Cyprus (– 22.0 percent), Switzerland (– 12.8 percent) and Russia (– 13.5 percent), where increased state regulation of international companies as well as stricter requirements for patient data constrained business performance.

In the world’s biggest market for market research, the United States of America, spending on research into consumer desires increased by a significant 3.0 percent in 2015. This was above all allocated to the areas of media and entertainment (21 percent of expenditure), pharmaceuticals (19 percent) and consumer goods such as food, drink and confectionery (18 percent).

In the Asia-Pacific region, Myanmar achieved sensational growth of 49.7 percent after the country and its economy opened up to the world again. The biggest individual market in the region continues to be China (+ 2.5 percent growth on the previous year), followed by Japan (+ 1.4 percent).

As previously mentioned, the Latin America region suffered most severely under the effects of inflation and currency fluctuations. For example, the nominal growth of 23.6 percent in the Argentine market becomes a minus of 6.5 percent once currency depreciation is taken into account. In the neighboring country of Brazil, the economic crisis unsurprisingly led to an inflation-adjusted decline in market research expenditure of 13.4 percent.

Following growth of 2.6 percent in 2014, Africa suffered a slight decline to – 0.5 percent in the subsequent year. In South Africa, the biggest market on the continent, greater digitization and expansion into new industries led to sales growth of 2.3 percent. Overall, Africa maintained its 1 percent market share of the global market research budget.

There were some slight shifts in the area of market research methods to the detriment of quantitative research. At 70 percent of spending, it is nonetheless still the largest field in market research (down three percentage points on 2014). The sales share of qualitative research has remained constant, at 16 percent, while all other methods cumulatively increased from 11 percent to 14 percent.

A look at the leading market research companies reveals how globally the market leaders have now structured their business. The top 25 generate more than half of all sales outside of their respective domestic markets. GfK continues to be fifth in the global ranking.

Top 10 of the market research industry

Ranking 2014 sales 2015 sales Market share
2015 1) Company 1) US$ million 1) US$ million 1) in percent 2)
1 Nielsen Holdings, USA 6,288.0 6,172.0 13.9
2 Kantar, UK 3,835.0 3,710.0 8.4
3 IMS Health, USA 2,600.0 2,921.0 6.6
4 Ipsos, France 2,219.9 1,980.9 4.5
5 GfK, Germany 1,932.0 1,712.6 3.9
6 Information Resources, USA 954.0 981.0 2.2
7 dunnhumby Ltd., UK 481.4 970.5 2.2
8 Westat, USA 517.4 509.6 1.1
9 INTAGE Holdings, Japan 415.4 375.7 0.8
10 comScore, USA 325.2 368.8 0.8

1) 2016 AMA Gold Global Top 50 Report published in the ESOMAR Industry Report 2016;
2) Own calculations, market share based on global market research sales in 2015 of US$ 44,350m (ESOMAR Industry Report 2016]

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