HAVAS GROUP CHINA Market Update nCoV February 21 2020 Content 1. Situation update 2. Immediate consumption impact 3. Media consumption impact 4. Economic outlook 5. Outlook key categories 6. Media market implications 7. POV & recommendation 2 Situation update 3 2019nCoV outbreak situation • The government continues to increase control and investment. In addition to the three new concentrated hospitals, more than 10 temporary hospitals are also under construction. • China has introduced the potential specific medicine, American Remdesivir for clinical use. It has shown positive results in some patients. • As of Feb 20th, China has reported 74,677 infections and 2,121 casualties. 1,049 cases have been confirmed outside China and the virus has spread to 25 countries. Outside the Hubei providence, some areas including important economic regions, Shanghai, Beijing, Guangdong have achieved zero or few rate of infection in 5 days. • Many companies have extended the back-to-office time to February 23, and some will not open until the end of February. But most companies have already resumed work remotely since February 10. Controls are expected to be revoked in most provinces in March, social activities will gradually restore then. 4 Consumption impact 5 Consumption impact differs per category. After the outbreak: products for immediate enjoyment and (health) security to increase Source: Kantar 6 Clear reduction of outdoor activities during the outbreak. Dining out, travel, and out of home entertainment will rebound sharply During outbreak After outbreak Source: Kantar 7 During the outbreak different FMCG characteristics: stock up goods increase, socially non-necessities decrease Category sales growth rate in Tmall, 2020 CNY Bubble size - GMV of 25th Jan – 6th Feb influence Non-necessities Non-necessities Short-term Stock （Social Activity) （Household) Necessities up goods 0% Oral Care Dry food Body Care Wine Vege Dairy Meat Instant food Bai Jiu Spirit Beer Beverage Egg Household cleaner Confectionery Grain 316% 25% Pet food Skin Care Regular online penetration Regular Baby food 50% -50% 0% 50% 100% 150% Category growth rate vs. last year same period Sources: Bain & Alibaba 8 Learning from SARS: stock up goods and necessities will return to normal after outbreak, non-necessities to see retaliatory consumption 2003 retail YOY growth rate by category Q2 SARS outbreak Short term stock up Fast return to normal Retaliatory consumption Apparel Medicine Food Liquor & tobacco Household Beauty cleaner Beverage Sources: Bain & Alibaba 9 Retail: offline is facing 20-50% turnover drops while online shows a booming momentum, especially O2O Offline channel is facing heavy challenges, Especially, O2O platform gain while online see good momentum attraction during the epidemic >20% >50% Supermarket E-Commerce User: +97% ~50% >2X Frequency: Traditional O2O +15% small shop Beverage category as proxi Source: Bain, Kantar 10 Media consumption impact 11 Media consumption shifts and shows digital and TV benefiting from people spending more time at home • With estimated 50 million people having been quarantined at home across China, digital and TV are clearly the key media channels benefiting from a surge of media consumption. With the extension of CNY holiday and restrictions the consumption of TV and online entertainment including TV series, movies & games have gone up significantly. • During the CNY period the overall daily TV audience size went up from 690 million to 718 million, also viewing time and rating increased significantly. TV Daily Rating Viewing Time (Mins) TV Daily Audience Size 2020 Spring Festival (7Ds) 13.5% 194 718 2019 Spring Festival (7Ds) 11.4% 164 690 • TV has become the key shared media for families to stay updated on information about the novel coronavirus, particular in lower city tiers. • All TV stations’ broadcasted more content skewed towards news (8.8% of total content, increased by 1.5% vs the last year CNY period). News mentioning “n-COV combat”, ”anti-epidemic”, ”we stand together” etc. accounted for 10% of total news programs broadcasting time. • The rating of CCTV and PSTV CNY gala has reached a peak of recent years and news programs have attracted higher audiences. Also OTV viewing time has increased significantly. During the extended CNY holiday, TV and OTV providers met the increased demand and showed a refreshing media vitality. 12 TV rating spike as people spend more time at home The COVID-19 outbreak leads to a remarkable rise in TV ratings Reach of TV has risen significantly, especially in Tier2 and lower tier cities. 12 Before VS After 75 74 Tier1：+57% 11 Tier2：+67% 11.2 72.5 Others：+74% 10.7 71.7 10.1 71 10 9.8 70 10.1 9.7 68.9 67.6 9 65.8 65 8 7.8 63.5 64.5 7.3 63.2 64.4 62.9 62 62.1 7 7.1 60 6 6.16 56.9 5.8 5.75.9 5.2 5 56.3 5 4.9 55 55.8 4 3 50 (2020/1/1 - (2020/1/5 - (2020/1/12 - (2020/1/19 - (2020/1/26 - (2020/2/2 - (2020/1/1 - (2020/1/5 - (2020/1/12 - (2020/1/19 - (2020/1/26 - (2020/2/2 - 2020/1/4) 2020/1/11) 2020/1/18) 2020/1/25) 2020/2/1) 2020/2/8) 2020/1/4) 2020/1/11) 2020/1/18) 2020/1/25) 2020/2/1) 2020/2/8) Tier1 Tier2 Others Tier1 Tier2 Others Source: Infosys, Target:P18-45, Period:2020/01/01 – 200/2/08, Timeslot: All Day Tier1 including（BJ、SH、GZ、 SZ）,Tier2 including almost Provincial capital 13 PSTV’s share is on the rise Due to its unique and high quality resources, PSTV’s share is on the rise. 2020 Jan Channel% 35 32.3 CCTV(National coverage) 30 21 Channels 25 PSTV(National coverage) 21 20 51 Channels 15 15 PTV(Provincial coverage) 257 Channel(including BJ/SH/TJ/CQ) 10 5.1 5 LTV(City coverage) 1032 Channels 0 CCTV PSTV PTV LTV Jan Source: Infosys, Market: 57 Markets, Target:P18-45, Period:2020/01/01 – 2020/1/31, Timeslot: 1800-2300 14 Top 5 CCTV channels see strong ratings due to the outbreak • CCTV1 and CCTV 13 increase their channel shares • Although share of Hunan STV is still ahead of the rest because of the news content. provincial STVs, audience shift to CCTV channels after the coronavirus pandemic. This results in top 5 STVs drop on shares. Channel Before After Channel Before After CCTV1(GENERAL) 2.3 4.2 83% Hunan STV 5.9 4.4 -25% CCTV6(MOVIE) 3.4 3.5 3% Zhejiang STV 4.0 3.1 -23% CCTV13(NEWS) 1.3 3.4 162% Jiangsu STV 4.4 2.8 -36% CCTV3(VARIETY) 1.7 2.0 18% Dragon TV 4.2 3.6 -14% CCTV4(INTERNATIONAL) 1.4 1.8 29% BTV 3.3 2.9 -12% CCTV PSTV Source: Infosys, Market: 57 Markets, Target:P18-45, Period:2020/01/01 – 2020/2/08, Timeslot: 1800-2300 15 Top TV programs in Jan 2020 Drama • During Jan of 2020, Hunan STV should be the winner in drama field. Hunan STV Hunan STV ZhejiangSTV Dragon STV Jiangsu STV 下一站是幸福 大明风华 决胜法庭 新世界 还没爱够 Ave Rtg 1.74 Ave Rtg 1.70 Ave Rtg 1.52 Ave Rtg 1.33 Ave Rtg 1.32 01 02 03 04 05 Variety • CCTV-1’S Spring Festival Gala is No.1, “Chinese Idol” still have high rating performance variety show on STV. CCTV-1 CCTV-1 Drogan STV- Drogan STV- Hunan STV- 鼠年春晚 元宵晚会 春节晚会 中国梦之声 春节大联欢 Rtg 5.5 Ave Rtg 3.1 Ave Rtg 2.0 Ave Rtg 1.9 Ave Rtg 1.7 01 02 03 04 05 16 TV - Program update Hot documentary 中国医生 Chinese Doctor Period: 2020 Jan. 27th – Feb. 24th Episodes: 9 Media: IQIYI Introduction Coinciding with the outbreak of Coronavirus in China, netizens have developed a strong interest in the great career of doctors, and have developed great admiration for doctors in the process of watching this documentary. The documentary, which truly shows the status quo of the medical profession, was greatly sought after by netizens during the quarantine. Source: https://mydramalist.com/49977-ipartment-5 Accessed 20 Jan. 2020 17 TV - Program update Hot drama 上古密约 Ancient conspiracy Period: 2020 Feb. 11th – Mar. 30th Episodes: 36 Cast: 吴磊、王俊凯、宋祖儿 Media: IQIYI、Mango TV、Hunan STV Introduction Five thousand years ago, they were brother and sister. In order to join forces to lock the demon, Baili Hongyi sacrificed himself and sealed Jiuying in his body. Sishen also sealed his spiritual power and memory, so that this legend would never disappear in history. Only "autumn god" An Tingfeng, because of the love of not give up, did not completely seal their spiritual strength and memory, eternal, immortal, become a lonely soul. Therefore, in this life, he planned to release the evil beast Jiuying and return the world to chaos in order to put down the unbearable weight of life and die. Source: https://mydramalist.com/49977-ipartment-5 Accessed 20 Jan. 2020 18 TV - Program update Hot variety 朋友请听好 Listen to Me, My Friend Period: 2020.2.19 Episodes: 12 Cast: 谢娜、何炅、易烊千玺 Media: Mango TV Introduction: He Jiong invited his long-time host partner, Xie Na, and several other friends to set up a radio station on a rooftop in a community. They are collecting letters and stories across the country for their radio program. 19 TV - Program update Hot drama 大唐女法医 Miss Truth Period: 2020 Feb. 14th – Mar. 30th Episodes: 36 Cast: 周洁琼、李程彬、裴子添、蓝博 Media: IQIYI、Youku、Tencent Introduction This drama is adapted from the novel of the same name of sleeve Tang dynasty, told about ablative and wealthy female Ran Yan in order to find out the truth of her mother suicide.