Economic growth in emerging markets in Eastern Europe and Southeast Asia is increasingly luring analytical instrument firms to establish a deeper presence in such markets. Companies are starting to sell directly in these markets to increase contact with a growing customer base. In doing so, they strengthen their applications development and marketing efforts.

Pharmaceutical testing systems manufacturer SOTAX is taking advantage of the growing Eastern European pharmaceutical market. The firm opened a subsidiary in Prague, Czech Republic, in April to serve both R&D and manufacturing applications. A SOTAX representative told IBO that the location was chosen because SOTAX wanted to be closer to its Czech pharmaceutical customers and its Eastern European distributors. The subsidiary is SOTAX’s fifth in Europe and first in Eastern Europe. In addition to the Czech Republic, the pharmaceuticals market is growing quickly in other Eastern European nations, namely Poland and Russia, according to the representative.

Other instrument firms have recently expanded in Eastern Europe as well. In 2012, FEI opened a facility in Brno, Czech Republic, for manufacturing, R&D and administration (see IBO 8/31/12). In Poland, this year, Anton Paar established a subsidiary in Warsaw (see IBO 3/15/13) and PerkinElmer opened a customer center in Krakow (see IBO 2/15/13).

Elsewhere in Eastern Europe, BÜCHI opened an office in Moscow, Russia, in December 2012. The decision to establish an office in Moscow was due to increasing demand for raw materials, such as oil and gas, particularly from Russia, Kazakhstan and the Ukraine, according to BÜCHI Area Sales Manager Nikita Gorbachev. According to the firm, in addition to raw materials, the steel, food and chemical industries are also growing in the region. Mr. Gorbachev told IBO that countries in the Commonwealth of Independent States (CIS) have become more global and market based. “For the Ukraine, as an example, the export shares of the total gross domestic product adds up to over 50% by now, and almost neglected but interesting niches like the organic agriculture sector are growing [quickly].” An increasing number of local medium-sized firms focused on exports are part of BÜCHI’s customer base, according to the firm. “As more and more local companies are increasing investments in purchasing high quality equipment, it is of highest importance to be close to customers as well as to partners in that fast growing market region,” said Mr. Gorbachev. The Moscow office has four sales and marketing employees.

Last year, several instrument makers established operations in Moscow. Xylem opened a distribution and customer service center (see IBO 5/15/12), Bruker opened an applications and customer support Center of Excellence (see IBO 8/31/12), and Analytik Jena opened a competence center with distributor InterLab (see IBO 11/15/12). Foreign direct investment (FDI) in the CIS fell 6.5% in 2012, but foreign investment in the area should continue to grow due to natural resources and consumer markets, according to the UN’s “World Investment Report 2013.”

Turkey is another emerging market that instrument firms are targeting. PerkinElmer established an office in Istanbul in June. The office’s 20 employees provide sales and service for environmental testing, chemical and petrochemical analysis, pharmaceuticals, and food and beverage testing. The office is part of a broader global growth strategy for the company, according to PerkinElmer Turkey General Manager Marco Buonaguidi. “[The office builds] upon previous development of direct operations in different regions of the world, such as Midrand, South Africa, in November 2012,” he said (see IBO 12/31/12). In Turkey, PerkinElmer has ended its relationship with longtime distributor Tetra but maintains relationships with other distributors in the region.

Other firms have also opened subsidiaries in Istanbul. Carl Zeiss opened an Industrial Metrology subsidiary in 2008 (see IBO 12/31/08), and Anton Paar opened a subsidiary in December 2011 (see IBO 3/31/12). In 2011, Turkey’s FDI grew 77.6%, but in 2012, FDI was down 22.6%, according to Ernst & Young. However, 2012’s decline was less than Europe’s average drop of 36.1%.

Like PerkinElmer, Agilent will rely on distributors as well as sell directly through its new Vietnamese office, which opened in Ho Chi Minh City in May. The Technology Demo Center, which houses bioanalytical instrumentation, provides sales, application and support services for the Chemical Analysis and Life Sciences Groups, including applications and methodology development. “Based on our conversations with customers, partners and industry stakeholders, the Vietnamese government is actively encouraging the use of analytical instruments and putting great emphasis on research and technologies in the chemical and biotechnology industries, pharmaceutical industry and even in food safety,” said Nick Roelofs, president of Agilent’s Life Sciences Group.

Modernization and globalization have added to Vietnam’s growth potential, according to Mr. Roelofs. “The growing business opportunities and customer base [in Vietnam] have propelled Agilent to set up an office to build up local capabilities to capitalize on the rapid economic growth,” he said. Agilent also opened a facility in Hanoi in May to service electronic testing instruments.

Other firms that have recently expanded in Vietnam include HORIBA, which established an office in Hanoi for sales support in 2011 (see IBO 3/15/11), and VWR, which acquired basan Germany, a distributor of products and services for cleanrooms with a subsidiary in Vietnam, in 2012 (see IBO 4/30/12). FDI in Vietnam grew 12.6% in 2012 to $8,368 million, which was the highest growth rate since 2008, according to the UN.

Analytik Jena has also taken note of the expanding Southeast Asian market by establishing a subsidiary in Bangkok, Thailand, in February. Analytik Jena provides direct support to customers in the region but maintains relationships with certain distributors. The subsidiary expands Analytik Jena’s existing office in Bangkok, which opened in 2001. The firm decided to invest in Thailand at this time “mainly due to the increasing growth rate and to the entire positive economic development in the recent time,” said Torsten Olschewski, general manager, Analytical Instrumentation at Analytik Jena. The subsidiary employs 15 people and includes an applications lab.

Analytik Jena considers Asia its most important export market. In fiscal 2012, its sales in Asia grew 30.8% to €39.2 million ($51.6 million = €0.76 = $1). Analytik Jena defines Southeast Asia as Thailand, Vietnam, Indonesia, Malaysia, Singapore, South Korea, Cambodia and Laos. Mr. Olschewski cited food, petrochemical and environmental markets as fast growing markets. “The most profitable product will probably be our multi EA 5000 for elemental analysis in petrochemical and related products,” he added. In addition to fast growth in Thailand, he said he expected strong growth in Indonesia and Vietnam.

Another firm that has expanded in Thailand is JEOL, which opened a technical center in Thailand in January 2012 to provide support for Southeast Asia and India (see IBO 12/31/11). According to the UN report, which also included Brunei, Myanmar and Timor-Leste as Southeast Asia, FDI in Southeast Asia was increased 2.1% to $111,336 billion last year, but the growth rate was lower than 2011’s 11.4%.