Schott Pharmaceuticals: the Germans build their first production facility in Russia

16 Jul '08
The long-awaited news broke on July 10 in Nizhny Novgorod. The Nizhny regional administration and Germany’s Schott Pharmaceutical Packaging, a subsidiary of the world-famous Schott AG that specializes in special-purpose glass product, signed an agreement that day on construction of a pharmaceutical packaging production facility in the region’s Bor District.

Schott estimates an overall investment at more than $90m. The NIA Nizhny Novgorod information agency reports that the first $31-32m is to be pumped into the project before 2010 with the prospects of gradual amplification within the following year to as much as $93m.

First moves and first secrets

First close contacts with the concern’s pharmaceutical division were established in the spring of 2007 when a memo of intent was signed. In October the firm announced plans to set up its pharmaceutical production in the Bor District of the Nizhny Novgorod Region. However, no details as to timeframes and investment amounts were disclosed at that moment.

In November sporadic press accounts came of Schott purchasing a 30-ha land lot near the town of Bor for prospective construction, followed by the news that the Nizhny Novgorod Investment Council operating under the auspices of the governor’s office had approved Schott’s investment application.

Also in November 2007 Prof. Dr.-Ing. Udo Ungeheuer, Chairman of the Board of Management of Schott AG, made a statement about its firm’s expansion into the Russian market. “This move is of great strategic importance to our pharma business, it will strengthen the company’s leading position and allow for pharmaceutical customers based in the Commonwealth of Independent States to be served more effectively,” Ungeheuer said.

Finally, in May and early June 2008 some unconfirmed, rumor-like web messages began trickling out that last year’s plans would be fulfilled. Marchmont sought confirmation and elucidation from a PR department at Schott AG’s HQ in Mainz, Germany.

The firm responded with willingness to comment on this event, so Marchmont was in anticipation of exclusive news coverage, but in several weeks of silence that followed optimism was muted and bewilderment came instead. A PR manager at Germany’s leading glass maker seemed to have vanished beyond email or phone reach after a promise to give Marchmont exhaustive comments.

Now we can see that silence must have been intentional and mandated as the company was gearing up for an official start of the project that was to be preceded by the signing of a contract with the Nizhny Novgorod Region. Well, the Germans’ wish to avoid putting the evil eye upon the project before it was okayed now seems reasonable.

Schott’s plans

Currently the premium quality segment of pharmaceutical vials is experiencing strong double-digit growth, therefore Schott’s decision to support the further market development by building a production site in Russia was no fortuitous. In fact, the concern has been operational in the Russian market for parenteral primary pharmaceutical packaging for years by serving Russia and the CIS from its existing facility in Hungary.

The Bor project is to be carried out in three stages, with the first to be commissioned in April 2009. Schott will start out small employing approximately 150 people. As further stages get launched, the capacity of around 300 million units of primary pharmaceutical packaging is envisioned, which will create more jobs (a number unspecified so far).

The management at Schott praises regional and local government officials who have been instrumental in selecting optimal location for construction as the chosen area can easily accommodate further expansion options to meet increased demand.

Gaining momentum

As Schott Pharmaceutical Packaging is being hailed in Russia, its parent Schott AG’s other products are already well known to Russian customers and market analysts. The prospective pharmaceutical facility is the concern’s second in Russia, and both will be operating out of Bor. In September 2007 the Schott Flat Glass Russia JV was set up to launch the production of flat glass for international and local manufacturers of ovens and refrigerators in Russia and the Baltic States.

Schott’s partner in the JV is Belgium’s AGC Flat Glass Europe, the largest stockholder at AGC Bor Glassworks, one of Eastern Europe’s leaders in auto glass manufacture. By the end of 2008 the JV plans to employ as many as 100 people as the original 70 can hardly cope with growing market demand. This fits well into the current trend that shows that demand for household appliances swells faster in Eastern Europe and the CIS than elsewhere in the world.

Michael Schuhmann, Executive Vice President of the Business Unit Flat Glass at Schott AG, was quoted as saying at an opening ceremony in September that his company was aiming to be the clear number-one supplier of flat glass for the household appliances industry in the region and planning to further expand in the Russian and CIS market. As such objectives look organic to the entire company, we can expect that its new pharmaceutical entity will be tasked to achieve about this much too.

For reference:

Schott Pharmaceutical Packaging is one of the world’s leading suppliers of parenteral packaging for the pharmaceutical industry. More than 500 production lines in 11 production sites worldwide produce more than 6 billion syringes, vials, ampoules, cartridges and special articles of tubing glass or polymer.

Schott AG is an international technology group with the main areas of focus being the household appliances industry, optics and opto-electronics, pharmaceuticals, and solar energy. It has approximately 16,800 employees producing worldwide sales of approximately $3.3bn.
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