Issue 04 | 2022 allianzgi.com Grassroots Research® Market Monitor Autonomous-vehicle technology – Frozen food market – China Athletic footwear and apparel trends– California US Property market – South Korea IT spending – Global Out-of-home media advertising – Australia Autonomous-vehicle technology – California To gauge the timeliness of broader As to the factors distinguishing market autonomous-vehicle (AV) adoption in leaders from other companies in this California, Grassroots commissioned industry, they reportedly include funding interviews with sources knowledgeable and financial underpinning, techno- about the industry. Among those who logical expertise, substantial progress provided estimates, broader adoption already made, the ability to integrate is expected in an average of 9 years, all the different technologies and do it with a range of 5–15 years, while those better than others, deployment/testing who did not provide estimates said the with significant mileage already, and time frame is too distant, with many the ability to build consumer confidence factors still in play, including technology, in the brand. political and societal acceptance, the a positive impact of COVID-19: 17% said regulatory environment, liability and When asked about the negative an increase in online shopping due to insurance, federal guidance, and an impact of COVID-19, 56% of sources COVID-19 could lead to a greater focus urban environment not adapted to AVs. cited minimal or no impact, as the time on AVs for delivery services, 6% said frame for AV technology is so long, and the shortage of drivers for trucking and Meanwhile, 17% of sources expect 33% said the fact that there was less public transportation could stimulate regulations to be passed in California to or no testing during the short initial AV adoption in these industries, and allow AVs on the market in an average phase of the pandemic has not had a 6% said the virtualization of work as of 6 years, 11% said it is already happen- major impact, while 22% said supply a result of COVID-19 could enable AV ing or will happen very soon, 6% said chain issues could have an impact, companies to attract the best talent regulations will evolve incrementally, 6% and 17% said a recession or weaker from a much wider pool. said technology is ahead of regulations, economy could reduce investment in AV and 61% were unsure of the time frame. technology. At the same time, 28% cited Value. Shared.

Market Monitor Property market – South Korea IT spending – Grassroots commissioned interviews Meanwhile, the reduction of real Global with representatives of real estate estate taxes, lower interest rates, agencies in Seoul, South Korea, to and an increase in loan variety and examine the underlying demand supply reportedly could trigger a rise for housing, understand the drivers in housing transactions by lowering and check the current availability of tax burdens and increasing financial financing. For the rest of 2022, 100% support for consumers interested in of sources expect housing prices to buying and selling houses. increase due to economic factors and At the same time, 87% of sources cited sociopolitical changes, such as the minimal impact on property demand post-pandemic situation and incoming as a result of recently rising interest Yoon administration. One commented, rates, as a single factor is not enough To assess the current spending “I expect to see more demand and to deter most consumers, while 13% environment for IT and the pace of AI sales due to the Yoon administration’s cited significant impact, as many young adoption, Grassroots commissioned housing policies. I think that housing consumers do not have much dispos- interviews with IT decision makers prices will increase.” able income. One source said, “As long at companies in the US, Europe and In addition, 100% of sources said as people continue to see the future Asia. Forty-six percent of sources demand both for buying and selling potential of the real estate market, expect their 2022 IT budget to homes is up in 2022 vs. 2021 due people will continue to buy houses increase 6% or more vs. their 2021 to changes brought on by the Yoon despite the high interest rates.” IT budget, while 34% expect a administration as well as the reduction 1%–5% increase, 5% expect a 1%–10% in pandemic-related restrictions. decrease, and 15% expect it to remain flat. In addition, 48% expect their 2023 IT budget to increase 6% or more vs. their 2022 IT budget, while 32% expect a 1%–5% increase, 4% Frozen food market – China expect a 1%–10% decrease, and 15% expect it to remain flat. To assess the sales growth potential of all segments due to widespread COVID- Meanwhile, 30% of sources said frozen food products in China, Grassroots related lockdowns and logistics issues, macro uncertainties have increased commissioned interviews with distributors although sales of hotpot ingredients and their company’s willingness to spend as well as store managers at large-scale traditional rice- and flour-based products on IT projects for 2022 in the past supermarkets. Sources’ overall sales of decreased less than sales of other prod- 90 days, while 28% have lowered frozen food increased slightly in 1Q 2022 ucts due to greater popularity. Indeed, their IT budget. Indeed, 34% said the vs. 1Q 2021, led by hotpot ingredients due sales of hotpot ingredients, traditional Russia-Ukraine war has increased to popular flavors and the winter weather. rice- and flour-based products, and other their company’s budget for 2022 Indeed, sales of hotpot ingredients, frozen food products reportedly are down IT spending, while 14% said it has traditional rice- and flour-based products, an average 4%, 8% and 11%, respectively. decreased their budget. In addition, and other frozen products reportedly Looking ahead, sources expect sales of 36% of sources said higher interest increased an average 6%, 2% and 0%, hotpot ingredients and traditional rice- rates have increased their company’s respectively. One source commented, and flour-based products to increase budget for 2022 IT spending, while “Overall sales of frozen food increased an average 11% and 5%, respectively, in 18% said they have decreased their slightly in 1Q 2022 vs. 1Q 2021. Hotpot 2H 2022 overall vs. 2H 2021 due to the budget. Among those who said ingredients have been leading sales easing of COVID restrictions and the macro events have affected willing- growth … mainly due to the popularity of popularity of the products, while sales of ness to spend on IT projects, 35% said hotpots as well as colder-than-normal other frozen food products are expected their overall IT budget increased 6% winter weather.” to remain flat due to lower popularity or more in the past 90 days, while At the same time, sources’ sales of frozen and the recessive economy. 35% said it increased 1%–5%, 11% food are down in 2Q 2022 vs. 2Q 2021 in said it decreased 1% or more, and 18% said it remained flat. (Cont. on page 3) 2

Market Monitor (Cont. from page 2) Athletic footwear and apparel As to sources’ top IT spending trends – US priorities in 2022, they include security, cloud computing and digital transformation. Looking ahead, 65% To gauge the impact of inflation, and outerwear in the next three months, expect a mix shift in IT spending Grassroots commissioned interviews with 41% on non-athletic footwear, and 40% priorities post-COVID-19 lockdowns/ consumers in the US who shop for athletic on non-athletic apparel, while 14% are work-from-home (WFH) environment footwear and apparel. When asked their planning on spending more on athletic as things return to normal, while top concern about the future, 63% of footwear. Apparel, electronics and grocer- 25% do not, and 10% were not sure. sources said coping with inflation, 37% ies are the categories in which sources Among sources who expect a shift, said COVID-19 spread, and 35% said not expect to do the most online shopping in security, digital transformation and being able to pay rent/mortgage. In the the next three months, while jewelry, toys cloud computing are the areas seen next 30 days, 45% expect their overall and games, housewares, and accessories as the greatest increases in IT spend- spending to be about the same vs. the last are the categories in which they expect to ing priorities, while these are also the 30 days, while 32% expect to spend more do the least. areas seen as the greatest decreases and 24% less. Meanwhile, 91% of sources As to how sources typically shop for in IT spending priorities. In the event think prices of everyday goods are more branded footwear and apparel, 37% said of cuts to the IT budget, these three expensive or significantly more expensive it did not change during the pandemic, areas reportedly would be affected vs. last year. In addition, 58% said higher while 29% shopped more online during the most. In 2H 2022 vs. 1H, sources gas prices are causing them to purchase the pandemic and will continue after a full said spending has increased most significantly fewer things, 29% said some return to normal, and 19% shopped more significantly for remote/WFH technol- fewer things, and 14% cited no impact. online during the pandemic but will return ogy, cloud computing and security. Compared to last year, 43% of sources to pre-pandemic shopping patterns after In the next five years, the technology are planning on spending less on coats a full return to normal. that sources expect to have the greatest impact on their company is cybersecurity, followed by AI/machine learning and hybrid cloud. Regarding AI, 57% of sources have Out-of-home media advertising – one or more ongoing projects currently or it is already incorporated Australia in some processes or offerings, while 26% have none but plan to in the future, 8% said it is extensively To examine the advertising spending In the next 12 months, sources expect incorporated in their organization, outlook and check on spending allocation outdoor, online and social media to see and 8% have no plans to adopt AI. trends for outdoor advertising, Grassroots increasing advertising budget alloca- Among those who have one or more commissioned interviews with sources tions and become more important to projects currently, 94% said results at advertising agencies in Australia. advertisers for audience attention and from big data and AI are measurable Eighty-seven percent said forward reach, while print and TV are expected or very measurable; 90% started at advertising bookings until the end of to see decreasing allocations, as they least some last year, and 97% plan 2022 are uncertain due to economic are considered less relevant now that to start at least some this year; and factors, changes of government in an consumer attention has shifted to online. the top objective of investment is election year, new COVID-19 variants If advertising budgets were tightened, advanced analytics/better decisions, and paused spending around the end of 87% of sources said spending on outdoor followed by innovation/disruption. the financial year. In 2H 2022 vs. 2H 2019 advertising would continue to grow (pre-COVID-19), 60% of sources expect because of more creative use of the As to sources’ current mix of cloud overall advertising spending to remain workloads, it is 37% private, 32% flat, while 40% expect it to decrease, as medium and return-to-office movement, hybrid and 31% public; the expected advertisers are remaining cautious due to while 13% said it would be flat. In the next mix in five years is 37% private, 34% consumer spending still being lower than 6–12 months, all outdoor advertising hybrid and 30% public. In 2022, pre-COVID. In 1H 2023 vs. 1H 2022, 93% media are expected to grow due to the the top security priority is network expect it to increase, while 7% expect it to movement of people outdoors, events, security, followed by cloud security remain flat, citing more visibility moving and more creative focus on and broader and data security. into 2023 as COVID and economic use of the media. uncertainties dissipate. 3

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