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Group Management Report

 

1. Economic basis for the Group

1.1 Overall economic development in 2015: The global economy catches its breath

In the past financial year, the global economy expanded noticeably: Although China recorded a slight decline in growth, its growth rate remained considerable, while the economies of the United States and the United Kingdom developed strongly. In contrast, the eurozone enjoyed only moderate growth: many countries in this region were still suffering from high rates of debt, while low inflation restricted companies’ income.

In the Eurozone, gross domestic product was up by 1.5 percent. According to the German Institute for Economic Research (DIW), moderate inflation rates, an increase in income in real terms and increasing employment rates were all indicators for this, although development trends varied considerably from region to region. Meanwhile, indicators such as the positive consumer mood and the increase in vehicle registrations suggest that consumers remained confident.

Overall, the consumer climate in Europe as a whole developed positively, attaining 12.2 points in December, its highest level since March 2008 (16.8 points). According to GfK’s surveys, the first quarter saw a steep rise from 3.7 points in January to 10.6 points in April, before the precarious situation in Greece and the worsening of the refugee crisis resulted in a certain drop in propensity to consume. In the fourth quarter, however, the increasingly positive economic data gave rise to a more optimistic and consumption-friendly mood among consumers. 

Most Central and Eastern European economies once again enjoyed noticeable growth in the past year. Growing domestic demand, low inflation rates, falling unemployment and increasing incomes almost automatically gave rise to growing consumer confidence. Russia was an exception to the rule, as its gross domestic product, investments and incomes in real terms all shrank notic­e­­ably. In the DIW’s opinion, it probably cannot be expected to return to growth until 2017.

According to the International Monetary Fund (IMF), the macroeconomic indicators for the Middle East and for Southern Africa point to weaker economic development. The reasons for this include the falling prices of oil and other commodities as well as political conflicts in some countries.

The United States economy continued its moderate growth in 2015. Since unemployment fell by almost one percentage point within a year and inflation was low, private consumption was a major driver of growth. Therefore, imports enjoyed somewhat stronger growth than exports. In mid-December, the U.S. Federal Reserve introduced the expected interest rate reversal, increasing the base rate by 0.25 percent. After years of a policy of low interest rates, this decision constituted a break in monetary policy.

If the US interest rate reversal leads to an unexpectedly severe deterioration of external financing conditions, countries with high current account deficits could find themselves in a difficult situation. According to DIW experts, these include many emerging markets in which high levels of private debt could prove to be unsustainable. 

In Brazil, the economic slump turned out to be more severe than expected. Falling commodity prices also had a negative impact on economies such as Mexico, where growth was lower than expected in light of decreasing oil production and lower economic growth in its neighboring country, the USA.

In China, growth was increasingly fueled by rising consumer spending. Falling purchasing managers’ indices suggested that the industrial sector shrank slightly, while the services index signaled clear growth. Meanwhile, exports were hampered by overcapacity, a decline in China’s pricing competitiveness and limping economies in key sales markets.

growth of real gross domestic product  in percent, percentage points

In Japan, efforts to boost the economy through an expansive monetary policy and state spending programs have so far failed to bear any noteworthy fruit. Corporate investments and private consumption increased slightly, while exports remained virtually unchanged. However, a weak yen resulted in marked increases in the margins and profits of export-oriented companies.

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
2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017
Eurozone 0.9 1.5 1.5 1.7 0.4 0.1 0.9 1.4 11.6 10.9 10.4 10.2
excluding Germany 0.4 1.5 1.6 1.7 0.3 0.0 0.8 1.4 13.8 13.1 12.3 11.8
France 0.2 1.1 0.9 1.4 0.5 0.2 0.9 1.3 10.3 10.5 10.6 10.5
Spain 1.4 3.1 2.7 2.4 – 0.2 – 0.5 0.5 1.5 24.5 22.1 19.6 18.2
Italy – 0.4 0.7 1.2 1.4 0.2 0.1 0.7 1.4 12.7 11.9 11.0 10.6
Netherlands 1.0 2.0 2.1 2.2 0.3 0.2 0.8 1.4 7.4 6.9 6.4 6.2
United Kingdom 2.9 2.4 2.3 2.1 1.4 0.1 1.1 1.7 6.1 5.5 5.3 5.3
USA 2.4 2.5 2.6 2.6 1.6 0.2 1.7 1.7 6.2 5.3 4.8 4.6
Japan – 0.1 0.5 0.5 0.5 2.8 0.8 0.9 1.1 3.6 3.5 3.8 3.8
South Korea 3.3 2.6 2.9 3.0 1.3 0.7 1.6 2.2 3.6 3.5 3.0 3.0
Central and Eastern Europe 3.0 3.4 3.1 3.2 0.3 – 0.3 1.2 1.8 8.4 7.4 6.8 6.4
Turkey 2.9 3.3 3.3 3.8 8.8 7.7 7.6 7.4 9.9 10.2 9.9 9.6
Russia 0.7 – 4.1 – 0.4 0.8 7.9 15.4 7.3 5.3 5.2 5.7 6.3 6.2
China 7.3 6.8 6.5 6.3 – 0.6 – 0.5 – 0.4 1.3 3.8 3.8 3.8 3.8
India 7.2 7.2 7.0 6.9 4.3 2.0 4.8 5.7
Brazil 0.1 – 3.4 – 2.6 0.8 6.3 8.5 6.8 6.0 4.9 7.1 8.5 9.8
Mexico 2.3 2.5 2.6 2.7 4.0 2.8 3.2 3.6 4.8 4.5 4.8 4.8
Industrial countries 1.8 2.0 2.1 2.2 1.4 0.3 1.4 1.6 7.0 6.4 6.0 5.8
Emerging countries 5.3 4.4 4.8 5.1 2.4 2.8 2.7 3.5 4.8 5.0 5.2 5.2
World 3.8 3.4 3.6 3.9 2.0 1.7 2.2 2.7 5.7 5.6 5.5 5.5
Source: DIW Winter Baselines 2015

 

1.2 Market research industry: Mixed results

The hope, already widely held prior to the end of the year, that the market research industry would be able to return to a major phase of growth after years of weak growth in sales (+ 0.7 percent in both 2013 and 2012 respectively) was not fulfilled. The worldwide sales of the market research industry grew by just 0.1 percent to a total of US$ 43.86 billion in 2014. While traditional drivers of growth such as the markets of North America, Europe and countries in the Asia-Pacific region may, at best, have maintained a stable performance or even have undergone a decline in sales, the industry saw growth primarily in the Middle East (+ 9.1 percent) and Africa (+ 2.6 percent). These are the most important findings of the 2015 ESOMAR industry report, which analyzes the trends and figures reported for the industry in 2014. With 4,900 members from 130 countries, including GfK, ESOMAR is the leading global organization of the market research sector.

Observation at a regional level produces a highly varying picture. After the United States had a temporary postrecession year of growth in 2013 and was a key driver of worldwide growth, classic sales grew by only 0.1 percent in 2014. An extraordinary effect was produced by the fact that for the first time, industry statistics for America expanded to include two additional sectors, namely, Speciality Services and Analytics, sales from which increased by 2.3 percent in 2014. This statistical extraordinary effect caused the figures for the American market to “explode” by almost 20 percent. All in all, the USA grew an additional 0.5 percent, wherein companies from the media industry, at 22 percent, constituted the highest paying customer group.

The neighboring state of Canada had to contend with a sharp decline in sales of 7.9 percent following its strong growth in 2013. In a generally depressed market environment, qualitative market research has managed to remain relatively stable. South America reported an overall moderate contraction in its budget (– 0.3 percent), while Brazil, the largest market on the continent, reported significant growth of 6.6 percent. In Uruguay, elections constituted a source of increasing demand and, at + 17.5 percent, it occupies the top spot in the ranking of the fastest growing markets in South America.

The bad news from Europe is that the continent’s market research sales have declined further. The good news is that the decline in its sales of – 0.9 percent decreased by almost half in comparison with the previous year (– 1.4 percent). Upon closer examination, an extreme range of variation can be observed on a regional level. In the UK, where market researchers generate almost one third of their sales through international projects, sales collapsed by 10 percent, while crisis-ridden Greece suffered a decline of 2.5 percent. The sharpest decline in the market was reported in Austria, at – 12.8 percent. However, growth was reported in Germany, Spain, Italy, the Netherlands and Belgium, which, with + 13.3 percent, recorded the highest growth among Europe’s top 15 countries. Results were positive in young EU member states such as Bulgaria (+ 16.9 percent), Romania (+ 28.5 percent) and Cyprus (+ 76.4 percent), whose governments, contrary to commonly held fears, recovered their budgets.

Mixed news also from the Asia-Pacific region: Of the continent’s three largest markets, which together generate 68 percent of the market research industry’s sales, only China reported growth. The People’s Republic overtook Japan during the period to reach fifth place in the ranking of the world’s largest market-research regions. While Japan is still caught up in a recession, Australia has had to battle with commodity prices, lower interest rates and an unfavorable US$ exchange rate. All in all, the market has continued to grow at a rate of 1.7 percent, generating a total sales volume of US$6 billion.

In contrast, Africa is speeding from record to record. With the exception of Kenya (which has suffered from terrorist attacks and a slump in its tourism industry as well as in public spending), every market was able to report inflation-adjusted growth. In South Africa, which, with sales of US$ 222 million is the continent’s largest market by far, the industry grew by 6.1 percent despite a contracting gross national product.

The Middle East shows a more differentiated picture: Every year since 2010, the Gulf States have reported constant growth in market research sales (2014: + 12.2 percent adjusted for inflation). In Israel, sales grew by 19.5 percent adjusted for inflation, while in Egypt and Iran, the third and fourth largest markets in the region, sales contracted by 4.8 percent and 7.0 percent respectively.

Global market research turnover 2014

The expansion of American statistics by including two market research segments also had some mild effects on the ranking of the top 10 market research companies. Its market share amounted to 45 percent of the entire industry’s sales. According to the criteria of the AMA Gold Rankings, GfK occupies fifth place among the world’s largest market research companies.

 

 

Top 10 of the market research industry
2014 Ranking 1) Company 1) 2013 sales 2014 sales Market share
US$ million 1) US$ million 1) in percent 2)
1 Nielsen Holdings, USA 6,045.0 6,288.0 14.3
2 Kantar, UK 3,389.2 3,835.0 8.7
3 IMS Health, USA 2,544.0 2,600.0 5.9
4 Ipsos, France 2,274.2 2,219.9 5.1
5 GfK, Germany 1,985.2 1,932.0 4.4
6 Information Resources, USA 845.1 954.0 2.2
7 Westat, USA 582.5 517.4 1.2
8 dunnhumby Ltd., UK 453.7 481.4 1.1
9 INTAGE Holdings, Japan 435.5 415.4 0.9
10 Wood MacKenzie, UK 374.2 0.9
1) 2015 AMA Gold Global Top 50 Report published in the ESOMAR Industry Report 2015;
2) Own calculations, market share based on global market research sales in 2014 of US$ 43,86m (ESOMAR Industry Report 2015)

There was little change in market research methods. Despite a slight decline, quantitative market research continues to constitute three quarters of the world’s demand for market research. It is likely to be surprising for many that the share of online surveys contracted by one percentage point to 23 percent.

General