US Online Vitamin Company iHerb Invests US$100 Million Into Russian Market

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The US-based iHerb online store, which specializes in sales of vitamins, dietary supplements and health and beauty goods, plans to invest US$100 million in Russia in construction of robotic distribution centers, support and promotion of Russian products export and improvement of the service for Russian customers, the company has stated.

“iHerb will allocate US$100 million during the next two years for further improvement of the Russian customer services. Funds within the framework of the planned amount will be directed to such spheres as support and expansion of product export by Russian manufacturers, partnership with Russian logistics companies, expansion of in-house technology development center operations, and construction of robotic distribution centers. Investments will enable the company to quicker and more efficiently develop required health and personal hygiene goods to customer houses in line with the iHerb mission,” the company said.

These are first large-scale investments of the company in Russia.

Although trends towards healthy nutrition, active lifestyle and natural ingredients are gaining ground in Russia, most products positioned as health and wellness products remain niche. However, the reduced sugar trend continued to gain ground in Russia, supported by government discussion of proposed excise taxes on sugary drinks. Consumer awareness of the role of sugar in diet and its negative impact on overall health support increasing sales of ‘better for you’ beverages.

Health and wellness packaged food and beverages in Russia continued to be led by major multinational and international players with the resources for development and innovation. Domestic manufacturers have now begun to expand into organic food, with local producers launching organic baby food within the new guidelines.

Modern grocery retailers remained the leading distribution channel for health and wellness packaged food and beverages in Russia. Although store-based retailers account for the overwhelming majority of sales share, internet retailing is growing, albeit slowly. Despite the growing impact of wider societal trends in health and wellness, towards reduced sugar and naturalness, unit price remains of primary concern to Russian consumers. Organic packaged food is set to see a surge in popularity in light of new legislation, whose proponents predict will increase both domestic production and consumer confidence.

The Russian market in this area is of significant interest to Indian businesses, although they remain somewhat behind the curve at present in investment.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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