NATURAL INGREDIENTS AND RAW MATERIAL MARKET IN RUSSIA: OVERVIEW
Demand for natural ingredients and raw material for the production of dietary supplements, medicines and cosmetics in Russia shows growth
The Russian market for dietary supplements is the main driver of growth in demand for natural ingredients and raw matetial and represents one of the most dynamic and rapidly growing segments of the pharmaceutical market. Despite the challenges of 2022, it maintained a high growth rate. We will discuss the specifics of the Russian dietary supplements market, natural cosmetics market, and prospects.
Current Position In The Dietary Supplement Market
The Russian dietary supplement market is unique in that it has several sales channels, including pharmacies, marketplaces, online sales from manufacturers' websites, and food retailers. This makes it difficult to assess the volume of sales, as it is challenging to track the volume of product sales. The SRO "Union of Manufacturers of Dietary Supplements" reports that sales through pharmacies exceeded 100 billion rubles in 2023. Marketplace sales are estimated at 27 billion rubles.
The dietary supplements market is growing rapidly. Over the past 4-5 years, it has grown by 15-20% annually. There are several reasons for this trend. Firstly, the number of people leading a healthy lifestyle and monitoring their health is increasing annually. Secondly, the coronavirus pandemic also played a role: several dietary supplements were included in treatment protocols. Thirdly, sales volumes grew thanks to the launch of e-commerce sales of dietary supplements. Moreover, this channel has become the fastest growing sales channel: in just three years (from 2020 to 2023) it has increased more than 20 times. At the same time, the pharmacy sales segment remains the most transparent and controlled segment. New items are introduced into the product range only after obtaining a certificate of state registration (SGR), and products are subject to selective control.
The Russian dietary supplements market saw an annual decrease in the share of domestic products until 2019. In 2016, Russian products accounted for almost 60% of the market. By 2019, that figure had dropped to just over 52%. However, by 2023, the market share of Russian dietary supplements (59%) had reached the 2016 figures.
Current Position In The Natural Cosmetics Market
In 2023, the volume of production of natural cosmetics in the Russian Federation increased by 65% compared to 2022. This represents a growth of 1 billion rubles, from 1.5 billion to 2.5 billion rubles. Experts at the Center for Macroeconomic Analysis and Regional Forecasting of Russian Agricultural Bank have analyzed data from the digital platform Svoe Rodnoe and provided the following data.
The majority of natural cosmetics are various care products, including shampoos, lotions, and other hair products, as well as powders, protective creams, and other similar products. Hair products demonstrated the highest production growth, with an increase of 63%. Powders, cream powders, and face lotions also saw significant growth, with increases of 44% each.
The overwhelming majority of natural cosmetics on the Russian market (98%) are produced domestically. At the same time, a number of components for its production (primarily natural extracts) were sourced from abroad, including from European and Asian countries. Consequently, following February 2022, a number of manufacturers were compelled to identify new partners in this field. Cooperation with Chinese and Indian suppliers enabled us to meet some of our needs.
Another significant challenge is in selling products with COSMOS Natural and Organic certificates. The Ecocert company, which provided these certificates, suspended its operations in the Russian Federation, making it impossible to sell goods under these marks. However, this issue was swiftly resolved. In response to the suspension of Ecocert's work in Russia, local companies producing natural cosmetics established their own industry association (One) with the authority to issue a similar COSMOS OneProof certificate.
Trends and Prospects 2024
The trend of growing demand for dietary supplement will undoubtedly continue in 2024. Russian citizens are taking them throughout the year, not just during the fall-winter-spring season when the incidence of acute respiratory infections is on the rise. This is confirmed by the results of sociological surveys. The RBC media shows that 33% of respondents purchase two to three dietary supplement products, 23% purchase four to five types, and 11% purchase six to seven varieties.
Another trend for 2024 is the redistribution of the dietary supplements market depending on their form. For example, chewable lozenges and powders have become increasingly popular over the past year, accounting for about a quarter of the market. It should be noted that not only dietary supplements for children, but also vitamin and mineral complexes, as well as narrowly focused products and mono-vitamins are produced in the form of chewable lozenges. This form is also convenient for everyday use: it does not need to be taken with water.
Demand for supplements based on probiotics, collagen, and protein will be high as early as the first quarter of 2024. These products are relevant not only for athletes and those who regularly attend the gym, but also for people suffering from underweight or protein deficiency. The powder form of protein allows not only to make cocktails based on it, but also to add it to familiar dishes.
In 2024, we will undoubtedly see a further increase in demand for natural extracts, which are used both in the production of dietary supplements and natural cosmetics. The market of dietary supplements and natural cosmetics shows high growth rates, and manufacturers must increase the volume of production of such products to meet demand. Chinese and Indian companies, which have a wide range of various natural extracts suitable to produce dietary supplements and cosmetics, are well-positioned to cooperate with Russian companies in this area.
Another area of cooperation with foreign companies is the launch of new joint products on the Russian market. The combination of Chinese and Indian manufacturers' experience in developing these products with the understanding of the Russian market and customer preferences of domestic companies will undoubtedly lead to successful results.
Value Of Joining the Pharmtech & Ingredients Exhibition
Participation in industry events is a highly effective way to promote products and find new partners. One such event is the largest exhibition of equipment, raw materials and technologies for pharmaceutical production in Russia and the EAEU, Pharmtech & Ingredients. In 2023, the exhibition was attended by 10,011 specialists from 69 regions of the Russian Federation and 38 countries, including over 1,000 representatives of companies involved in the production of dietary supplements and cosmetics. 38% (3,808 guests) were interested in the Raw materials and ingredients for the production of drugs, dietary supplements and cosmetics section. This section is among the top four most sought-after sections of the exhibition, according to this indicator.
The exhibitors confirm the efficiency of this way of solving business tasks.
"Our company Vidya Rus (India) supplies natural plant extracts and raw materials. When we first decided to participate in the Pharmtech exhibition, we received many customer contacts. Now, 4 years later, we have good sales. The exhibition has helped the development of our business in Russia.", - says Narendra Kabra, Vidya Rus (India).
