Russia's budding biotechnology market (2002)

Russia's budding biotechnology market (2002)

Currently, over 65 percent of the market for biotechnology products in Russia is made up of imports. While the growth of the pharmaceutical and dietary supplements market in Russia is slowing, the demand for biotech products in agriculture and food processing is growing fast. The environmental protection sector receives the lowest level of financing, and it is mostly occupied by domestically made biotech products. Due to continuing growth of its consumer market and the historical strength of Russian science, Russia has strong potential both as a producer and a consumer of biotechnology products.

The estimated capacity of the world biotechnology market has reached $200 billion a year. Russia accounts for about 0.5 percent of the world biotechnology market. Expert estimates of the current Russian biotechnology market range from $1 billion to $1.4 billion. Foreign suppliers and manufacturers occupy some 65 to 70 percent of this market, while Russian company sales amount to $300–360 million (about 30 percent). The optimistic forecast of the Russian agriculture biotech market potential is $2.5–3 billion per annum.

The growing sectors for application of biotechnology products are dietary supplements, pharmaceuticals, agriculture, food processing, and environmental technology.

Estimates of the dietary supplements (nutritionals) market in Russia range from $1.4 billion (Plekhanov Academy) to $1.9 billion (expert appraisal in mass media). Russian products occupy 65-70 percent of the market, and foreign products have 30-35 percent by quantity, but the value of the foreign producers’ market share is inversely proportional—about 60 percent. Currently, there are more than 2,000 manufacturers of dietary supplements (DS) in Russia. Expert forecasts say that the growth of the market will slow down significantly in the near future, and competition will increase.

According to research of the Plekhanov Academy of Economics, the ratio of female to male consumers of DS is 60:40 (formerly 75:25). The age of active consumers is 30 to 55; middle and lower income groups are the most active. Distribution of DS products is handled by multi-level-marketing companies (about 60 percent of the market in value terms) and through traditional channels: manufacturer–wholesaler–retailer. The retailers for the traditional distribution system are drugstores, chains of health-related product outlets, single kiosks, and stalls. Consolidation of retailers in the western part of Russia is increasing—15 companies control about 80 percent of retail sales, and eight of them are chains.

The number of products is growing rapidly. Between 1997 (when certification and registration procedures for DS were introduced) and December 2001, the Russian Sanitary Inspection Agency received 3,973 applications for DS and granted 2,665 certificates.

The most popular DS products in Russia are those with pharmacological effects. Although in the early years of DS manufacturing most products were generic in their applications, currently producers are trying to produce DS for specific health problems. The products with growing popularity are: immune system boosters, anti-stress, cancer protection, sedatives, digestion and bowel improvement, and sport supplements.

Environmental protection is one of the most poorly financed areas of the Russian economy. Although there is an enormous need for new, efficient environmental technologies in Russia, financial constraints limit opportunities for U.S. imports. Russian biotech products and processes currently occupy the biggest share in this market segment due to their low prices. The following sectors of biotech applications for the environment show growth potential: treatment of oil spills, ethanol and methane production from industrial and agricultural waste (including bio-reactors), bio-rehabilitation of soil and water, and biotechnology in rare metal extraction.