Prospects of IPOs for Russian Dietary Supplement Manufacturers: Market, Trends, and Risks

The Russian market for dietary supplements is showing steady growth: experts estimate that by 2024, its volume will exceed 150 billion rubles, which is 12-15% above pre-pandemic levels. The main drivers of growth are an increased demand for health and immunity, as well as an active policy of import substitution – today, domestically produced supplements account for approximately 70-80% of the market. This creates a favorable environment for promising issuers in the dietary supplement market and attracts investors’ attention to the segment. The capital market in Russia has demonstrated record activity in 2024, with 19 IPOs completed, and the healthcare and pharmaceuticals sectors are among the leaders in the number of placements. In such conditions, investments in IPOs of food supplement companies are viewed as an interesting opportunity for portfolio diversification – provided that thorough fundamental analysis and assessment of the company are conducted.

Growth Drivers and Market Fundamental Analysis

The positive dynamics of the dietary supplements market are underpinned by demographic and social factors: the proportion of the elderly population is increasing, the incidence of chronic diseases is rising, and patients are increasingly seeking preventive solutions. The COVID-19 pandemic has further intensified the trend towards strengthening immunity and awareness of nutraceuticals. Meanwhile, Western sanctions and import restrictions have weakened competition from foreign brands (Herbalife, Amway, Bayer, etc.), giving local producers a chance to increase production and strengthen their positions. According to Rosstat, the production of dietary supplements in 2024 grew by more than 20%, and recent studies indicate that the number of producers has increased by a third over the past five years, reaching about 1,300 companies. The dietary supplement segment already exceeds the range of pharmaceuticals by five times, and competition is particularly high: there are over 14,000 product names with a relatively small share of the top 20 companies (approximately 60% of the market by revenue).

Fundamental analysis of the industry also reveals risks: the dietary supplement sector remains highly competitive, often featuring opaque players, and product quality can vary significantly. Increasing government requirements—mandatory labeling through the “Honest Sign” system, stricter supplier checks, combating misleading advertising, and potential prescription regulations for certain supplements—add uncertainty. Nevertheless, large companies with strong management and reliable quality controls can expect higher returns. Valuation of such companies is usually based on revenue and EBITDA growth, as well as customer base characteristics and brand awareness. For investors, clear financial indicators are crucial: currency revenue, profitability, debt burden, and resilience of the business model amid macroeconomic fluctuations.

Key Issuers and IPO Strategies

Among potential issuers, the greatest attention is drawn to the largest manufacturers and contract factories of dietary supplements. For example, “Bionovations”—a company specializing in contract manufacturing of dietary supplements for well-known brands—stands out as one considering public placement in the medium term. Large pharmaceutical company “BinnoPharm Group” (part of AFK Sistema), known for producing “Sputnik V” and a wide range of drugs and dietary supplements, is also preparing for an IPO: its revenue in 2023 amounted to 32.5 billion rubles, and the company's strategists emphasize growing investor interest in Russian pharmaceutical assets. Another example is “Ozon Pharmaceuticals”—a generic manufacturer from the Samara region—that announced IPO plans for the fall of 2024. In the narrower biotech segment, companies like “Betuvax” (vaccine “Betuvax-CoV-2”) and “Promomed” are mentioned; although they are more focused on biopharmaceuticals, their IPOs demonstrate a general interest in profile assets.

The IPO strategy for such companies typically includes increasing the share of “transparent” business, completing marketing studies, and strengthening the balance sheet. A significant portion of the IPO proceeds is expected to be directed towards expanding production capacities and R&D. For instance, “Ozon Pharmaceuticals” stated its intention to use the raised funds to implement its long-term strategy and reduce debt burden. Additionally, issuers promise to adhere to market principles: a lock-up period for major shareholders and a stabilization mechanism for quotes, attracting institutional investors.

Regulatory Barriers and Risks

The regulatory environment is one of the key factors of uncertainty. Recently, the Russian dietary supplement market has undergone a series of changes: mandatory accounting of products has been introduced through the “Honest Sign” system (with individual labeling), advertising regulations have been tightened (banning outdoor advertising by “alchemists” and esotericists), and laws restricting unscrupulous manufacturers are being discussed. Furthermore, since 2023, melatonin supplements have been withdrawn from pharmacies at the initiative of Rospotrebnadzor. Collectively, this means that the risks for issuers are linked not only to market competition but also to possible legislative surprises. Investors should consider “regulatory risks”—increasing administrative control may impact profitability and the speed of new product launches. On the other hand, in the long term, establishing order will improve market quality and become a competitive advantage for serious players who are prepared for high standards.

International Context and Comparison

Globally, the dietary supplement market is experiencing stable growth—an average annual growth rate of about 7% from 2020 to 2024, with the volume exceeding $160 billion (≈12 trillion rubles) in 2023. The leaders remain the USA and Europe, where major corporations (Nestlé, Pfizer, Bayer, Amway, Herbalife, etc.) control over 70% of the market. The Asia-Pacific region is noted for its particularly rapid growth (CAGR ~11%). Compared to them, Russian producers are still small in scale, but national dynamics suggest hope for an increased market share: a reduction in imports and an expansion of domestic production (including private label brands and contract brands) reflect trends similar to those in developing economies.

International experience indicates high volatility in investments within the dietary supplement segment: M&A transactions and consolidation are not uncommon in the West, and companies are often valued based on profit or free cash flow multiples, which are frequently above the average for pharmaceuticals due to higher profitability and rapid growth. A recent example is the IPO of biotech Bioversys on the SIX Swiss Exchange—successful access to foreign exchanges by Russian players demonstrates that capital is attracted to pharmaceutical/R&D projects from various jurisdictions.

Consumer Demand and Macroeconomic Factors

Demand for dietary supplements in Russia is generated through retail and online channels. According to DSM Group, pharmaceutical sales of supplements in 2024 experienced a slight decline compared to online channels: the share of marketplaces in dietary supplement sales reached about 23% (up from 19% in 2023). This indicates a migration of consumers to e-commerce, which opens additional growth opportunities for manufacturers with strong distributors. The elasticity of demand for dietary supplements relative to income remains low—despite a challenging economy, Russians continue to purchase vitamins and supplements, especially if they are perceived as disease prevention. However, high inflation and sanctions can restrain household spending, considered an important macro factor. Investors should consider that if the Russian economy slows down overall, sector growth may proceed at a less rapid pace, and profit expectations in the initial years following an IPO may be moderate.

Investor Interest: Retail and Institutional

Public offerings of shares from dietary supplement manufacturers are capable of attracting both retail and institutional investments. Both segments have already shown activity in the IPO market: in 2024, funds were approximately evenly invested by private and professional investors. However, retail investors set the tone for placements. Among them, stories related to “health and longevity,” recognizable brands, and prospects for rapid revenue growth are particularly popular. Institutional investors primarily evaluate companies based on fundamental indicators—revenue, EBITDA, profitability, management quality, and transparency of reporting. It is the institutional investors who will ensure significant demand for IPOs when they are confident in the quality of the business model. At the same time, retail (“private investors”) can soften the “drop” in quotes immediately after placement: initially, they tend toward speculative exits, as evidenced by analysis from the Bank of Russia.

In forming demand for the issuer's shares, analysts highlight two factors: the presence of a recognizable brand among consumers and prospective growth indicators. Companies that are already represented on the shelves of chain pharmacies and marketplaces can rely on reputational assets and advertising. For instance, if the brand “Alatyr” or “Liza” (names are hypothetical) is well known to a broad audience of buyers, retailers are unlikely to shun supplies of such supplements. This attracts the attention of private investors. For institutional investors, however, the IPO strategy, capital structure, and future dividend policy are more important.

Promising Investment Opportunities and Conclusion

Fundamental analysis indicates that promising issuers in the dietary supplement market have a dual profile: on one hand, high market growth rates create a favorable platform for business expansion and sales scaling; on the other hand, the sector is exposed to technological and regulatory challenges. A significant advantage for potential investors will be the integration of the company into an advanced pharmaceutical ecosystem (for example, “BinnoPharm” with powerful R&D centers) or a flexible manufacturing platform (“Bionovations”). The IPO exit strategy should consider the depth of the capital market: even amid a stable IPO boom in 2024, the total raised amount (~102 billion rubles) remained below last year’s figure. This implies that issuers with small and medium capitalization (up to 30-100 billion) may expect successful placements if they can engage “institutional investors” with a long-term growth narrative.

However, risks and uncertainties suggest diversification: concentration in one segment may be dangerous if legislation tightens or demand sharply declines. That said, the growth prospects of the sector remain substantial—at least in terms of ongoing import substitution and the popularization of a healthy lifestyle. Ultimately, investment opportunities in IPOs of Russian dietary supplement manufacturers will be determined by a balanced combination of macroeconomic factors, corporate governance, and fundamental business resilience. For both retail and institutional investors, understanding how prepared an issuer is for an IPO will be crucial: how transparent the business is, the growth rate of sales, and what steps have been taken to manage regulatory risks. Only through a systematic analysis of these aspects can the IPO exit strategy yield long-term returns in the growing but demanding pharmaceutical and nutraceutical sector.