Quality and Reliability
Switzerland Remains an Attractive Location for Chemical and Pharmaceutical Companies
The Swiss chemical industry has been dominated by worry and uncertainty in 2015. In 2011, the industry was severely affected by the downturn in the global economy and the revaluation of the Swiss franc. At the beginning of 2015 there was a further major revaluation, whose effects are still unforeseeable. This may cause imports to suffer as Swiss chemical and pharmaceutical companies import almost all of their raw materials. In 2014, about a quarter of all Swiss imports were industry products from Germany.
In the opinion of the bank Credit Suisse, the Swiss pharmaceutical and chemical industries are highly competitive and many companies in the sector are world market leaders. Due to its high productivity, leading global position in research, geographically diversified exports and demographic development, the sector has excellent potential for growth in Switzerland.
The medium-term outlook is very good. However, because the sector is heavily dependent on exports, the state of the international economy and resultant export prospects are of primary importance for short-term market development.
During the past four years, the sector has been greatly influenced by the interventions around the value of the Swiss franc (CHF). Above all in 2011, nominal production and exports were considerably reduced. The floating of the exchange rate in 2015 again presented the sector with major challenges. At mid-2015, it is not yet clear how the de facto devaluation of the Euro by 15 to 20% will affect turnover and foreign trade.
The latest surveys by the Federal Statistics Office in 2012 show that in Switzerland, there are:
- 14 petrochemical companies with 944 employees,
- 710 chemical companies with 31,900 employees,
- 247 pharmaceutical companies with 40,000 employees, and
- 787 companies with 23,000 employees that produce rubber and plastic products.
One of the fastest-growing areas of Swiss industry is the chemical and pharmaceutical sector, where the share of the pharmaceutical industry has increased over the past few years. In the period from 1995 to 2011, production in the chemical industry showed an average annual growth of 12.4%, whereas industry as a whole grew by only 2.8% per year. According to Credit Suisse, in 2013 the gross domestic added value of the chemicals segment was € 5.3 billion ($5.8 billion). The pharmaceutical sector accounted for € 19.4 billion ($21.3 billion) and the plastics industry for € 2.3 billion ($2.5 billion).
The Swiss chemical industry is strongly oriented toward foreign trade and its leading companies are among the largest global players. In 2014, the segment was responsible for more than 40% of the total Swiss income from exports. However, nearly all raw materials have to be imported, and more than 80% of these materials come from the EU. Domestic companies concentrate on the production of life-science products. These include pharmaceuticals, vitamins, agrochemicals and diagnostic products.
Imports of chemical products have increased considerably in recent years, and in 2014 – calculated in € – these imports grew strongly (+3.9%) in comparison with 2013. Especially strong growth was noted for inorganic chemicals (+9%) as well as medical and pharmaceutical products (almost +6%). With a share of approx. 52%, the latter was once again by far the most important import category.
Almost of a quarter of Swiss chemical imports originated from Germany in 2014. As in previous years, Germany occupied first place among the most important supplier countries, ahead of Ireland, Italy and the USA. The German share was especially high in the “Plastics in forms other than primary forms” (SITC 58; 54%) and in “Dyes, tannins and paints” (SITC 53; 48%) segments. However, as has been the tradition, the majority of German goods supplied were pharmaceutical products.
Swiss chemical exports greatly exceed the imports by the sector. Over 2014 as a whole, exports amounted to € 70 billion ($77 billion). Nominally and in Euro, this was 7% more than in 2013. Medical and pharmaceutical products accounted for more than 70% of exports.
One of the most important drivers of growth and the largest market segment of the Swiss chemical sector is the pharmaceutical industry. Health services have a stabilizing role in Switzerland, particularly in times of crisis, as is shown by developments over recent years. In 2013, total costs amounted to € 60 billion ($66 billion). According to calculations by the economic research center KOF, health expenditures increased by 2.1% in 2014. For 2015 the institute estimates growth of 2.8% and expects further growth of 3.7% for 2016.
Accordingly, the sale of medicines will probably increase, at least in terms of quantity. Demand is being driven by the continued aging of the population and increasing life expectancy. In contrast, prices are under great pressure, as many previously patented preparations are now coming onto the market as cheaper generics.
Nominal medicine sales at manufacturers’ selling prices rose by only 0.1% to € 4.1 billion ($4.5 billion) in 2013; the growth in quantity was 1.0% (to 210 million packages). For 2014 and 2015 the trade association Interpharma expects a stagnating market as a result of price reductions, in spite of the introduction of a large number of new medicines.
Two segments show a positive development: In 2013 the market for prescription-free medications (OTC/over the counter) accounted for approximately € 610 million ($671 million) or 14.8% of total medicine sales in Switzerland. In comparison with the previous year, sales of OTC preparations increased by 3.6%. In 2013 the quantity of prescription-free medicines increased by 3.4% to 87.5 million packages.
Generics covered by health insurance achieved a volume of € 475 million ($523 million) in 2013. Therefore, in comparison with the previous year, the increase in sales amounted to 6.7%. In terms of quantity, generics increased by 8.1%. Since 2003, the value of this segment has more than quadrupled.
Cleaning Agents and Toiletries Segment
According to estimates by consumer goods consultants Nielsen, toiletries and cosmetics with a value of approx. € 1.8 billion ($2 billion) were sold in Switzerland in 2014 (nominal change in comparison with the previous year: -1.1%). The slight reduction in demand has now continued for four years in succession. According to the Swiss Cosmetics and Detergents Association (SKW), the only segments which showed slight growth were oral hygiene and baby-care products.
Natural cosmetics and cosmetics oriented to target groups continue to be a trend. Specially tailored products are booming. Overall, goods with natural ingredients are in demand. Nutriceuticals (functional foods enriched with supplements) are popular in Switzerland.
In 2014, the Swiss market for soaps, detergents and cleaning agents was similarly tight. Only liquid detergents showed increasing sales figures, as one of six market segments. Overall, turnover fell by about 1% to approx. € 627 million ($690 million). According to the SKW, environmental properties are becoming increasingly important for cleaning agents. Organic, biodegradable products and detergents that clean efficiently at lower temperatures are becoming increasingly popular.