Over the last five years the Russian OTC market has expanded at an average pace of 25% per year. It will continue to grow rapidly in the coming years to double in value by 2012, powered by growing domestic demand for more expensive OTC drugs and consumer’s rising purchasing power.

$7bn in five years

The Russian OTC market was worth $3.35bn in 2006 at retail prices, thus, expanding by 153% on its 2002 value, as disclosed in the newest report “OTC Russia 2007” published by PMR. To compare, the Polish retail OTC market was worth approx. $2bn last year, which means it expanded by slightly more than a fifth in the last five years. Between 2002 and 2006 the Russian market expanded at a CAGR of 26% while the Polish at less than 5% – the comparison speaks volumes of the scale of the OTC boom in Russia.

According to PMR, the OTC market in Russia will grow in value to approx. $7bn at retail prices in 2012. Its robust growth will be fuelled by rising domestic demand for OTC products, growing purchasing power of Russian consumers and upbeat forecasts for the Russian economy in the near future.

Upper shelf products preferred

According to the report’s authors, in recent years Russians have come to care more about their health and appearance. They have also come to prefer more expensive OTC preparations. The percentage share of more expensive drugs, with prices ranging from $5-$10 and $10-$20 per package, in total OTC market has close to tripled in the last five years. At the same time, the market share of the cheapest preparations, those which cost less than $2 per package, manufactured by domestic firms, has fallen by half.

This phenomenon reflects the stability of OTC sales volume. The annualised growth in the number of packages of OTC drugs sold per year has been minimal over the last five years, of less than 3%. The Russian’s greater attentiveness towards health and beauty is also reflected on the Russian market of dietary supplements, which in the past few years has expanded even more rapidly than the OTC market. As in Poland, the dietary supplements market still represents a minor share of the OTC market – around 11% (in Poland approx. 17%). PMR anticipates that this market will continue to expand strongly also in the coming future.

Foreign players dominate

The Russian OTC market is dominated by foreign companies which last year generated 75% of OTC sales. The foreign players comprise primarily global concerns with larger advertising budgets than local firms. In 2006 only one Russian firm, Pharmstandart, was listed among the top 20 OTC makers in Russia. The situation has been fairly stable for the past four to five years, during which 17 of the top 20 OTC players have stayed put. Yet last year ushered in a change at the helm of the ranking. In 2006 Novartis moved to first from among the top 20 players with an 8% market share, thus, moving ahead of Sanofi-Aventis which had occupied the top spot for the previous four years.

Interestingly, the dietary supplements market is dominated by domestic firms, reflecting Russian consumers’ preference for dietary supplements that comprise natural products. Russians believe that domestic makers deliver the most natural products.

More information on the OTC market in Russia can be found in PMR Publications’ latest report, “OTC market in Russia 2007. Development forecasts 2007-2012”.

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