The Russian market for safety and security systems has been developing rapidly, offering great potential for U.S. companies. In 2007, the total value of the safety and security services and equipment market was $6.8 billion. Russia’s demand for safety and security systems was expected to grow 20% and reach $8.2 billion in 2008, with services totaling $6.1 billion, or 75% of the market, and safety and security equipment amounting to $2.0 billion. Annual growth in 2008 is estimated at 20% because the majority of sales were performed against contracts signed before the onset of the current economic crisis. Russia’s crisis began in October 2008 and will no doubt affect growth in 2009. In fact, the consensus view at Moscow’s February security and safety technologies forum and trade show was that the total market would decline 25% in 2009, thus dropping 10% below the 2007 levels noted in the table above.
Regarding regional segments, 60% of the market is concentrated in Moscow and St. Petersburg, 23% in the Urals Federal District, 11% in the Siberian Federal District, and 6% in the Northwest Federal District. The rest of the market is divided among the Volga, Far East and Southern Regions.
Annual market growth in the equipment segment is 12% to 30% depending on the product category. In 2007, the Russian CCTV and video surveillance segment totaled $491 million, or 30% of the equipment market, with 17% annual growth, down from 30% in 2006. It is considered the most developed and competitive segment. The size of the security and fire alarm segment was approximately $368 million (23% of the equipment market), increasing 12% to 15% annually. The intruder alarm and perimeter protection segment was also worth $368 million, also growing 12% to 15% per year. Access control systems reached $259 million, a 16% share of this market, with current annual growth of 15% to 16%. Other more minor product categories account for the remaining $132 million of the 2007 equipment segment.
Depending on the segment, the share of imported products ranges from 50% to 80%. Experts estimate that up to 80% of access control, about 50% of intruder and fire alarms, and more than 80% of CCTV systems are imported. Even locally manufactured equipment contains 60% to 80% imported components. Low cost solutions come from China, Taiwan, and Korea and are popular in Russian regions, i.e., outside Moscow and St. Petersburg. Premium systems are imported from the United States, Europe (Great Britain, Germany, France, Italy, Poland), Japan, and Israel. Both government organizations and private entities (mainly in real estate, banking, retail, and oil and gas) are the major end users of a wide variety of security equipment. Currently, there are over 300 distribution companies working in the Russian security market.
Finding a local partner knowledgeable in the industry and experienced in procurement tenders would be the shortest path to successfully entering the Russian market.
Industry specialists note that one recent trend is the convergence of information and safety and security technologies, which creates more opportunities for high quality U.S. technology exports. The IP-based CCTV segment was expected to exceed 50% growth in 2007. Color CCTV cameras will outnumber monochrome units. The best opportunities for sales of U.S. manufactured hardware are: IP-based solutions in various equipment segments, access control systems, fire/intruder alarm systems, integrated control systems, biometric equipment, identifiers and readers, antiterrorist equipment, and anti-theft systems.
The strength of the safety and security systems market is in its constant innovation and price competitiveness. New concepts and products may open new opportunities. Participation in industry events is very important in this Russian market and it also facilitates successful market entry. For example, the 2009 Security and Safety Technologies (SST) trade show was officially recognized by the U.S. Department of Commerce and accredited for the second time as a Department “Certified Trade Fair.” The event, which was held in Moscow from February 3-6, 2009, is the leading security exhibition and congress in Russia, CIS and Eastern Europe.