The oral health of part of the Italian population is worsening as consequence of more than one year of healthcare access restrictions, procrastination, and waiver to dental care. At the same time, the market of aesthetic dentistry is rapidly growing.
Key-Stone’s researches have compared these phenomena, through the analysis of a sample of over 4,000 Italians who were interviewed in three different periods: before the total lock-down, after the most acute phase of the pandemic, and in the period following the vaccination campaign against Covid-19.
These surveys show a recovery of lost accesses, a greater attention paid to hygiene, aesthetics, and prevention, as well as an increase in the gap between patients who can afford dental care and those forced to undergo dental extraction.
The end of the state of emergency and the slow return to normal allow for an initial analysis of how much Covid has affected dental treatments and, consequently, Italians’ oral health. Key-Stone carries out at least once a year now studies on the population representing target patients going to Italian dental practices (average age between 20 and 75 years).
The recurrent nature of these analyses made it possible to study the time span from the end of 2019 – before Covid-19 pandemic – to the immediate post-lockdown and the period following the vaccination campaign. The results highlight a gradual return to normal, despite the awareness that the virus circulation is still high.
Thanks to a study carried out in collaboration with the Italian Society of Periodontology and Implantology, when the lockdown of spring 2020 took place there was a worsening of Italians’ oral health. In particular, gums and caries problems, as well as accidents related to prostheses and the impossibility of solving ruptures have emerged. This situation coincided with the reduction in the clinical activity of the practices, which were only able to take care of urgencies.
In the phase following the lockdown measures, there was a strong recovery in dental performance. The abrupt closure of the clinics had discontinued treatments being performed or planned in that period. Treatment plans with advance payments meant that professionals hadliquidity to resume their activity with and were able to treat their already acquired patients.
The situation has currently stabilized, so some considerations can be made based on data analysis.
First of all, in light of the outcomes of the last research conducted in January 2022 on a sample of about 1,800 patients, there is an increase in oral hygiene sessions and check-up visits. These two activities together make up approximately 50% of the dental practices’ performance.
The reason for this data can be related to three main factors:
Patients’ greater attention to oral health;
Culture of prevention promoted by dental hygienists and dentists;
Management of periodic recalls leading to greater patient loyalty to the clinic.
Moreover, it is necessary to focus on the data referring to carried-out treatments (caries and devitalizations) to note how almost the entire activity of the practice (87%) – in terms of number of treatment – is focused on prevention and small treatments.
Another interesting fact is the increase of treatments related to aesthetics, such as bleaching (+24% compared to 2018) and transparent aligners (+130% compared to 2018). It should also be considered that many patients see professional oral hygiene as aimed at aesthetics, rather than at prevention.
In addition to these findings, sales data referring to materials used for the “polishing“ after oral hygiene confirm the trend growth, registering a +16% compared to 2018 sales, with a significant increase precisely for “prophy powders” with a +30%, compared to 2018.
Problems affecting access to care
It is also interesting to point out – but this time with a negative meaning – the considerable increase in patients claiming to have undergone tooth extractions (+7%), compared to the pre-Covid period. These are mainly patients with low education level and belonging to a low-income social group. This data confirms the economic difficulties preventing part of the population to access oral care and rehabilitation, since the increase in extractions does not correspond to an increase in prosthesis, which remain rather stable, compared to the pre-Covid period.
Honestly, it is hard to predict the future of the sector.
The current geopolitical situation does not allow forecasts to be made. However, we can certainly say that the market has recovered to 2019 levels, the population go again to the dentist and the number of accesses lost during the period of total lockdown and post-lockdown – when patients were afraid to go to the dentist- are recovering.
Even on the economic front, the signs are not that bad. Despite the difficulties, workers seem to have saved their jobs; the pandemic and the collapse of consumption have made it possible to save money, which many people seem to want to invest in the improvement or restoration of their oral health.
Anyway, the data making us think the most refer to the reduction of almost 20% of access to dental offices during 2020, which – together with the procrastination of some treatments – has significantly worsened the average health condition of Italians. In particular, this happened for untreated inflammatory situations, such as gingivitis, which was reported by large part of those who have faced dental problems, with direct consequences on the increase of need for extractions and periodontal care in general.
Problems of malocclusion for two out of three Italians
Almost two out of three Italian adults affirm to have dental malocclusion or misalignment problems. The demand for clear aligners in dental clinics is already booming.
This is demonstrated by an extensive market study carried out by Key-Stone Research Institute, which integrated data both from industry and dental practices.
Key-Stone analyzed the phenomenon thanks to an extensive survey, carried out on a representative sample of 2,878 Italians, aged between 20 and 50 years, representing more than half of the national population.
The study shows that 55% declare problems of malocclusion, already corrected in adulthood with orthodontic braces in 19% of cases. For that matter, this is a share also confirmed by plenty of international literature.
Malocclusion: the Italians’ perception
The Italians’ perception about this problem is very interesting, as well as the great desire to solve it. These aspects were investigated on over 1,000 individuals, that is 36% of the sample who reported a malocclusion yet untreated (at least 8 million people in the age group investigated).
60% complain of dental misalignment, considering it to be minor
34% consider the problem as moderately severe
6% consider the misalignment as very evident
The age group between 25 and 35 years is the most sensitive to the issue, judging the imperfection generally to be more evident.
Impact on the aesthetic and functional levels
Malocclusion mainly concerns aesthetics and, according to the interviewees, it worsens their appearance in 90% of cases, albeit with different levels of perceived severity.
Anyway, the problems mentioned by the sample are not only aesthetic. The survey provided for the possibility of reporting different symptoms (multiple choice):
in 28% of cases, difficulties in chewing were mentioned
in 28% of cases, gum problems emerge
difficult oral hygiene, as disclosed by about one third of the sample
orthopedic and postural issues, albeit to a lesser extent
only 20% do not report any functional problems related to malocclusion
The propensity to solve the problem
Although with different degrees of motivation, 72% of the sample affirmed to be interested in correcting their malocclusion or misalignment. In particular, half of them (36% of total respondents) show a high motivation. Translating this into numbers, it deals with over 3 million Italians, mostly women – twice as many as men – with a significant greater interest as the evidence of the defect increases. The strong propensity to correct their smile exceeds 50% for those who complain of a very evident misalignment and, more generally, it is over 40% among those who have both aesthetic and functional problems.
Restoring a perfect smile with the aligners
Among those wishing to correct their smile, 62% would prefer to use a transparent aligner system. For another 30%, the type of device does not matter, but it would be very important to them to solve the problem of dental misalignment. It is above all those who present more serious dental conditions who want to solve the problem, regardless of the type of medical device the orthodontist will suggest.
Limits and forecasts
Slightly more than 70% of the interviewees have already considered the possibility to consult a dentist to solve the problem, but the economic barrier is the most named brake in accepting orthodontic treatments in the short term, particularly during this time of uncertainty due to the pandemic. Nowadays, part of the population is, in fact, more cautious when taking into consideration expenses likely impacting on the family budget.
In any case, 6% have already decided to go to the dental office to solve the problem and, if the doctor evaluates positively the need to carry out the alignment orthodontic treatment, it can be estimated that almost half a million people could undergo corrective treatments soon.
Over 150,000 treatments with aligners in 2021
According to Key-Stone researchers, this figure is consistent with the measurements carried out by the research institute itself, specialized in the dental sector at international level. In fact, data coming from industry and dental practices indicate that in 2019 over 80,000 treatments with aligners were carried out (in the vast majority of cases on adults). In 2021, over 150,000 treatments will be carried out, which is twice the previous figure, after having experienced an evident slowdown in growth in 2020, due to the pandemic.
According to Key-Stone’s estimates, this is an investment for Italians which will exceed 300 million Euros by 2021 and will continue its double-digit growth in the next few years.
Patients treated with aligners
Motivation for treatment
Within the starting sample, 200 cases involving subjects who recently underwent orthodontic treatment with transparent aligners were also studied. The goal is to evaluate the reasons leading them to the treatment and the overall perceived experience.
Considering the 200 patients treated, it emerged that the psychological component is absolutely dominant in the motivation for treatment:
44% in fact stated that they wanted to solve the discomfort first of all with themselves
35% claimed that they wanted to improve the relationship with others, showing a social discomfort as well.
In general, the experience and perception of the treatment outcome are very positive, with 34% of treated patients affirming to have achieved a better result than expected and, undoubtedly, beyond the initial expectations. The main factors causing satisfaction are:
first of all, the competence and interpersonal skills of the clinician and of the clinic staff in general
the final result, on average very satisfactory
comfort and transparency as distinctive elements of the treatment.
Overall, over 85% would re-undergo the treatment and recommend it to friends and family. This means that, in addition to the strong interest of a part of the population in solving their misalignment, the positive experience of friends and relatives generates a driving force in the sector, fostering positive references and organically stimulating the demand.
Since their debut on the market – in the late 1990s and early 2000s – it was evident that invisible aligners would revolutionize the world of orthodontics or at least make significant changes in the way we mean it.
First of all, this is due to the fact that in the aligners market the weight of services is greater than the weight of products, which is the opposite of what happens in traditional orthodontics.
Aligners vs traditional orthodontics
The graph below shows the progressive increase in the weight of aligners over the years, compared to traditional orthodontics (brackets, bands, wires, etc): in 2011 it was 27%, while in 2019 it exceeded 60%.
Furthermore, although the market is still dominated today by a large player – deserving the credit for having introduced the “Invisalign system” all over the world and for having built a previously nonexistent market -, other players from the orthodontic domain joining the market could change some dynamics.
Some of these companies, in fact, have a strong know-how in both digital and orthodontics. The business will therefore tend to shift the focus from the appliance to the planning system. The clinician will work with an increasingly integrated single digital system, which will let him approach orthodontic treatments (either with aligners, traditional solutions or hybrid ones) according to the complexity of the case and his/her level of competence (orthodontist or GP).
The offer of aligners: a “liquid market”
The offer varies widely: from the multinational corporation already operating in the dental sector and specialized in orthodontics (range extension), to the company focused on other specializations such as implantology (range diversification); from the local manufacturer with centralized production to the dental laboratory (sometimes organized in the form of a network), equipped with all the technologies necessary for the production of aligners.
We are therefore facing a “liquid market“: the boundaries between organizations and along the supply chain are becoming blurred. It is a business in which manufacturers and laboratories with different levels of production centralization operate and compete. On the one hand, there are companies featuring a centralized and industrialized production system where the structure of the processes is controlled, repeatable and organized process design. On the other hand, there are more local companies or those characterized by peripheral organizational and process dynamics.
Penetration of the aligners technique
A first survey carried out by Key-Stone in October 2020 on a sample of 400 generalist dental practices to evaluate the penetration of the technique and the main brands revealed a 79% of respondents who claim to suggest – even occasionally –aligners to their patients, even if only occasionally. Please consider that this percentage was 61% in 2018, according to a previous study in the same topic.
A more in-depth analysis of the most used brands shows how the laboratories supply channel covers 28% of the dental practices procurements (although only 10% exclusively). Through the analysis of the brands mentioned by those clinicians supplied by laboratories, it emerges that most of them refer to in-house handcrafted productions.
The aligners market in Italy in 2020
It is estimated that more than 80,000 caseswere performed in Italy in 2020, excluding purely handcrafted processes, which were not taken into consideration in the research conducted by Key-Stone at the end of 2020 on the aligners market in Italy. The market value is estimated at just under 85 million Euros (at sell-out level, at value to the dentist and VAT excl.), leaving out purely handcrafted manufacturing.
The growing trend in Italy
The most relevant growth was recorded in 2019, thanks to both Invisalign’s entry into the world of GPs and the commercial development of some companies relying on a very extensive sales network.
In fact, aligners deserve credit for making orthodontics “accessible” also to general dentists. Accurately supported by an excellent tutoring service, increasingly advanced and intuitive softwares, training courses and marketing activities made available by companies, dentists have decided to expand the range of treatments offered to their patients.
In the research conducted by Key-Stone at the end of 2020, the main positioning drivers emphasized by companies in their value proposition were analyzed as well. From this study it emerged that, in addition to the transparency and comfort of the aligners (now essential conditions), the positioning drivers are:
duration of treatment: if too long, the patient’s compliance decreases, as well as the revenue of the dental practice. If we consider the concept of time as applied to logistics, the companies are striving to reduce the time involved in planning treatments, manufacturing and shipping aligners to customers.
the service offered in different areas. Companies have invested enormously in assisting dentists in the design and set-up phases, but also in training (classes, webinars, presentations, certifications, etc.) and consulting, making available to the dentists teams of clinicians and / or specialized technicians throughout the treatment period.
the treatment planning and management software and the data sharing platforms can be owned by the company and therefore developed and implemented internally or multi-client, then purchased from external providers (3Shape, Age Solution etc.) and sometimes adapted to specific needs.
technological innovation represents a real differentiation driver. Companies of the sector with an industrial approach generally have a processes organization which is a great competitive advantage per se. Moreover, technologies available to manufacturers, due to the large investments required, are generally not found in laboratories or small companies: the gap on production quality is therefore widening.
Some future trends
A phenomenon that we are witnessing and that Key-Stone will try to monitor in the future is the “direct to consumer” business model, which involves physical stores or solutions that are directly delivered to the patient’s home, thus bypassing the dental office. In the USA, their diffusion has been successful, while in Europe the legislation on devices is more stringent, so the business model designed is different.
There is no doubt that artificial intelligence applied to orthodontic planning tools and the implementation of the digital workflow with the use of suitable technologies fosters these phenomena, making it nowadays possible to perform:
virtual rendering of the treatment progress and outcome
design and production of the appliances
supervision – even remotely – during therapy
analysis and re-processing of the results for continuous improvement as well as for statistical purposes.
The Italian dental sector has experienced decades of flourishing growth. In recent years, price competition and stagnant consumption have led to an abrupt slowdown in the sector development. Despite this, the heterogeneous composition of the business makes it possible to intercept excellent improvement opportunities for certain types of products. Let’s find out which ones.
Here below is a detailed analysis of what has been the development of the Italian dental sector in the last few years before the pandemic outbreak, an event that has changed the dynamics and logic taking place in various sectors. The aim is to highlight the factors deeply influencing the dental sector and the opportunities for development, according to the characteristics and performance of the business itself.
GDP and birth rate: factors impacting the dental sector
We cannot talk about 2019 without considering the previous period which the 2019 has been the expected outcome of. Many will remember, with a combination of concern and hope, that ten years ago the still vivid and persistent post Lehman Brothers crisis from September 15, 2008 was there, an event that led to the so-called “great recession”. The signs of this crisis are still present today with effects that have lasted longer than one could imagine; a sort of “structural crisis”, a juxtaposition of terms that is clearly an oxymoron. A never overcome crisis, which has mainly concerned Italy. I will borrow the report from the CPI Observatory of the Università Cattolica of Milan, which tells us how these recent years before the pandemic crisis that affected the world have been, from the point of view of economic development, the worst since the Unification of Italy. Two factors have been the most relevant ones and both concern the dental sector, albeit in different ways: the slowdown in GDP and the collapse of the birth rate.
With regard to the former, GDP grew on average at a rate of half of the previous decade’s one (despite the collapse of 2008) and less than in the 1940s, the most difficult years because of the devastation of World War II. There is no doubt that this slowdown in the economy has directly impacted the behavior of Italians, not only because of the more limited spending capacity of a significant share of the population but also and especially for the social effects related to job insecurity, fragility of savings and general uncertainty felt by the population about the future, emphasized by the very precarious political situation.
The collapse of the birth rate
From a demographic perspective, however, Italy has begun its population drop process in 2017, like never before, and the trend is estimated as intrinsically structural. But the aspect we need to focus on is the real collapse in the birth rate, with just over 4.9 million births in the last decade and over 5.5 million in the previous one; a total of 600,000 fewer children born in the decade, in other words, a decreased birth-rate of 11%. This is a problem which is definitely worsening: if we take as an example 2019 over 2009, the decreasing birth-rate exceeds 24%, with less than 430,000 births compared to 578,000 in 2009.
Italy experienced its first population decline only in 2017, thanks to the demographic balances originating from migratory phenomena. In fact, Italy is a country that has aged, economically stuck, and whose social stratification has experienced the compensation for its natural demographic reduction through migratory flows.
All these aspects have had a huge impact on the dental system, too. This is because the sector is in fact a world at the service of the population to cure pathologies and to meet functional and aesthetic needs. But it is also a sector in which over 90% of patients pay out of their own pockets and in which the socio-economic and socio-cultural aspects are of significant importance.
The dental sector trends from 2010 to 2019
To briefly take stock of these past ten years, let’s go back for a moment to the beginning of the analyzed season. In 2010 the country was slightly recovering after the terrible two-year period caused by the international crisis, two years during which the flow of patients to the dental practices had decreased (about one million fewer), anyway it was possible to witness a modest recovery. The real “tragedy” occurred at the end of 2011, when we ended up on the brink of default and the famous maneuver – metaphorically called “tears and blood” – of the newly formed Monti’s government threw Italians into despair and concern, thus inducing the collapse of consumption, above all because of the lack of confidence. 2012 and 2013 turned out to be very bad years also from the dental sector perspective; Key-Stone researches, but also other institutes, confirmed a drop of about 3 million patients. Moreover, Istat recorded an important reduction in the average expenditure for dental care among Italians (1.5 billion less in 2013 than in 2011). The dental products and equipment segment also suffered a severe slowdown and, for the first time ever, the dental market (intended as products and equipment) experienced recession: it had never happened before.
2014 brought a certain recovery, that I called “the renaissance of the dental sector” on the occasion of an important conference organized by UNIDI, with a real boom in performance and accesses to dental practices in 2015. However, it was clearly a sort of “technical rebound”, due to the fact that hundreds of thousands of families had postponed important but not urgent oral treatments, especially of prosthetic and orthodontic nature; a variety of services that gradually diluted, leading to a new slowdown in growth, even if the market has not experienced other drops in terms of number of patients and volume of services since then. There has been a reduction in consumption to almost stagnation in the last two years, but without reaching the level of recession.
The situation is different for dental clinics, whose sector continues to witness a progressive reduction in revenues despite the slight increase in number of treatments; this is due to different reasons, which we could summarize in a more competitive market characterized by price contraction and a substantially “healthier” population than in the past. This is a topic that must be explored in terms of possible future developments not only of market values, but rather also of the variety of services and patients in the decade that has just begun.
But let’s go back to the past ten years, because if what has been explained so far has had an important impact on the sector of consumption of dental products, closely linked to the flow of patients to the dental practice, the world of technologies has experienced a completely different trend, deeply influenced by two main drivers: digital revolution and fiscal incentives on investments.
While the abrupt appearance of digital technology can be considered a structural factor, the role of tax incentives is more related to the cyclicity of economy (even if it was protracted, I would say dragged for a couple of years further than expected), which has impacted the professional market with a real cyclical trend, typical of businesses stimulated by short-term legislative measures.
The role of services in the professional dental market
Generally speaking, however, the domestic sector has suffered greatly due to the overall economic trend (the flourishing of the dental industry is, in fact, closely linked to exports) and to the slow social and cultural transformation of the country. For this reason, if we look at the total added value provided by the professional dental sector (including consumables, equipment and services), we note how the total increase in business is only 14%, if compared to 2010 values, little more than what obtained with the GDP (at current prices). However, this figure is not completely honest.
During the analyzed period, in fact, the professional dental sector has been enriched with services: the industry began to produce customized medical devices (aligners instead of brackets; prosthetic structures instead of alloys and ceramics), to which the progressive computerization of dental practices and the greater need for technical assistance must be added.
Well, if we look at the total added value of products and equipment only, excluding services, we can picture in the same graph how, during this period, the overall added value of the sector (net of services) is only 7%, far lower than the overall GDP trend.
Impact of digital equipmentand centralization of customized medical devices
Let’s now approach in more detail the trend characterizing the main product families, highlighting how what we just described here above is confirmed by the evolution of the different markets. To perform this trend analysis, we used fixed-base 2010 trends, precisely in order to study the period as a whole and not just individual years which, as we have seen, are the result of particular situations.
The market segmentation applied in this occasion brings to light the fact that some sectors have proved to be particularly dynamic more than others, and which, if not isolated, they may mislead the evaluation of the overall sector trend. Dynamics totally influenced by the so-called “digital revolution”. As a matter of fact, digital technologies, in addition to having had a fundamental impact on the modernization of dental practices and laboratories, have also played an important role in terms of materials (in particular Cad-Cam) and have implicitly allowed the enormous development of a new market, that of custom-made devices such as prosthetic structures and, of course, orthodontic aligners, which have quintupled their value in ten years.
The graph shows, like the previous ones, the accumulated trend with fixed basis. In general, the trend of the lines in the graph allows us to observe both the slight decrease in the two-year period 2012-2013 and the signs of recovery from 2014. In particular, we observe the enormous impact of digital technology and centralization of customized medical devices (digital flow prosthetic structures and orthodontic aligners) beginning in 2015.
For a more in-depth quantitative analysis, it is very useful to adopt a trend indicator technically called CAGR (Compound Annual Growth Rate); it is in fact the average trend rate recorded during the years under examination which gives a precise idea of the real trends.
The chart gives us the chance to observe how in the more traditional domains of the market only the classic “consumables” have grown with positive sign, amounting to around 1% on average per year. On the other side, albeit for different reasons, the more traditional equipment, implantology and orthodontics sectors are falling. With regard to these last two product lines, it should be remembered that the negative figures are not only due to the possible reduction in consumption – therefore to a possible decrease in demand – but also to dynamics causing the progressive reduction of the average prices.
In conclusion, as anticipated, the Italian dental sector development has slowed down in a probably irreversible way due to dynamics of price competition and stagnation in consumption. Despite this, it is possible to detect development opportunities, in particular in the domain of services for the dental practice and for the laboratory.
The economic impact of the pandemic on the dental sector proved to be dramatic but only during the first phase, which developed from March to May 2020 and in which government measures of lockdowns had often included the closing of dental practices. In this article, we will identify the trends in the dental industry for the consumable products and how these very trends can also help us better understand the dynamics of the demand for dental services.
Before discussing the trends that characterized the year of the pandemic, an introduction must be given explaining some of the market concepts that are taken for granted in the industry and distribution world but which could be less known by dentists and non-commercial operators.
First of all, it must be considered that the sector is divided into two large segments:
While the consumption of products is directly correlated with the number and type of dental treatments, therefore, the demand, investments in equipment are strongly conditioned by the climate of confidence and trust of dentists and dental technicians.
Remaining in the field of consumables, another much more technical issue concerns the difference between:
the retail business (also called “sell-out”), which refers to the purchases of dental practices and laboratories
the wholesale business (also called “sell-in”), which refers to sales through the distribution channel such as dental dealers.
It is true that the two businesses are directly related because as the demand for retail products increases, there is a demand by distributors for supply from manufacturers, however, this correlation is not always in sync because it largely depends on the stock of the dental dealers. This is exactly why sell-in and sell-out do not always move in sync and the purpose of this article is to also analyze how the pandemic has affected these two businesses in a different way.
Impact on demand
Here in Europe, we find ourselves in a condition where precise data regarding the demand for dental services are missing, but the real possibility to analyze the evolution of the numbers and types of dental treatments is to evaluate the trends in the purchases of consumer dental products by dentists.
Therefore, if we consider the evolution of the consumption by dentists during the pandemic (excluding products mainly related to Covid-19, such as those for hygiene, PPE, and disposables in general), we can acquire a fairly clear idea of what the demand for dental treatments was. Even if dentists had possibly reduced their inventories during the period of greatest financial stress, in the long term of a year, the consumptions (of products such as impression materials, cements, restorative products, endodontics, anesthesia, etc.) are strongly correlated to the influx of patients to clinics and so we can declare that the trend curves relating to the business of consumable products can be very similar to those of the dental sector in general.
The Italian and Spanish markets
Currently, the Key-Stone research institute, specializing in dental research at a global level, measures the dental retail markets through the “Sell-out Analysis” research in just four European countries (Italy, Poland, Portugal, and Spain) but with the advent of the pandemic, in particular for the Italian and Spanish markets, a monthly analysis was carried out, based on the sales data of a sample of dental dealers covering over 70% of sales in each of the two countries (the total sales of 2019 of the panel of dealers exceeded 500 million euros in Italy and 220 million euros in Spain).
As we can see in Figure 1, which indicates the monthly trends of the two countries, the evolution of the business activity is quite similar. The trends presented are those of the accumulated value up to December, also indicated as “year to date”, while for January and February 2021 the so-called MAT “Moving Annual Total” is indicated, namely, the 12 months “March 20-February 21″ vs ” March 19-February-20 “, which we would consider the true first full year of the pandemic compared to the previous 12 months.
It is worth noting that these are two countries that have had a very similar digression of the pandemic in terms of timing and with respect to the political choices of confinement, and unfortunately, for the incidence of infections and deaths concerning the population. Italy activated a total lockdown 10 days before Spain did but, apart from this, the similarities are very high. Even dental and welfare systems are the same, with a weight of over 90% of the private sector, even though the DSO (Dental Service Organizations) channel in Spain, namely that of the dental chains, carries a greater weight than in Italy.
As can see in Figure 1, referring to the trend in the consumption by dentists, excluding products related to Covid-19, while Spain had already started the 2020 year with a slight decrease, which was a mere 2% in the first two months, Italy instead registered a growth of 2% in the same period. This issue is very interesting since the two markets experienced, and continue to experience, their own development dynamics regardless of the pandemic. Italy was in a stagnant or slight growth situation and Spain was already suffering from a recessionary condition linked mainly to a crisis situation that had emerged in the DSO channel, in particular, with the sudden closing of an important brand. Overall consumptions in Spain were therefore already in decline and, following the lockdown, the business recovery continues to hover around 3 points lower than in Italy.
But let us see what the trend curves of these two countries tell us. First of all, the lowest moment of the market was reached in May 2020. It should be reminded that almost all of the dental practices in both countries completely shut down, carrying out only some urgent therapies, but in the month of April, product purchases had reached minimum levels. After the reopening from the total lockdown, starting at the end of May, we had witnessed a sudden and positive recovery of the market. To explain this strong rebound in the months following the reopening of practices, however, we must consider that the average portfolio of works that remained suspended due to the lockdown was very important (estimated to be about 112 days of works to be recovered). An estimated value of treatments of about 1.2 billion Euro that was suspended in March in Italy and just under 1 billion Euro in Spain meant a true “economic buffer” useful for the relaunching of the dental business, which, however, was also able to count on the access of new patients in the practices; patients who had problems during the lockdown or who made the decision to carry out new treatments. The recovery of those months looks to be rather robust and was promptly monitored by Key-Stone through the analysis on the purchases of consumable products by dentists.
Following the first strong recovery, the growth trend returned to almost zero in the autumn and with the second wave of the pandemic, despite dental practices remaining open, the overall monthly level of purchases (November 2020 – February 2021) stabilized at around -3% in both countries. If we consider slight inflation with average increases of all prices, precisely measured through the “Sell-out Analysis” research, we can state that the level of the number of treatments during these months is about 5%-6% less compared to those of the same months of 2019 (the year 2019 was used for the comparisons) and this situation may persist at least until the health emergency ends and a substantial share of the population has been vaccinated.
Remaining on the previously discussed topic, this crisis in product consumption clearly refers to segments that are not related to the pandemic, since the enormous development of hygiene and protection products is offsetting the business of the distribution system. As mentioned in the introduction, we must consider equipment and durable goods, in general, to be a market by itself. In this article, only the trends related to consumables are being considered; a separate article should be dedicated to the equipment. Therefore, we will limit ourselves to saying that until the trust of the operators (dentists and dental technicians) is regained it will be very difficult to return to pre-Covid levels but, paradoxically, thanks to investments in new technologies and the renovations of dental centers, it will be possible to accelerate the recovery of a dental practice’s business and intercept new opportunities that this catastrophe still offers.
In particular, it can be cited as great opportunities:
the greater importance attributed to health issues by the population
the renewed centrality of the relationship of trust with the dentist
the advent of digital technology in the clinical, organizational, and marketing fields.
the financial and strategic weakness of thousands of practices.
These weaknesses are especially typical of small practices run by older dentists, generally with a less proactive attitude, with the risk of suffering the crisis in demand as well as organizational and management problems due to the adoption of new safety protocols which, inevitably, lengthen the times of occupation of the practice and reduce hourly revenues.
Impact on the industry
Now, let us return to talking about consumer products and their impact on business, this time, on that of the industry. As mentioned in the introduction, in the case of wholesale sales, the issue of warehouse inventories cannot be ignored. An analysis of 2018 financial statements of the dental dealers carried out by Key-Stone, demonstrates how inventories are worth just under 20% of the total purchases. Therefore, it is pretty standard to observe trends in the purchases of distributors which, although related to the retail sales, can show very different dynamics, especially with regards to the timing with which stocks are replenished.
What occurred during the lockdown was a true stop in the purchases of dental dealers which, in the face of serious unknown economic and financial difficulties due to the sudden block of the market, used as much as possible their stocks, and reduced purchases to the bare minimums, thus taking the risk of a reduction in the level of customer service but guaranteeing good financial resistance.
Key-Stone manages an international panel made up of the main manufacturers in the chemical consumable sector (impression materials, cements, restorations, prophylaxis, etc.), consisting of companies that had a turnover of over 800 million euro at sell-in in 2019 in Europe and it was possible to replicate the same exercise explained previously on the retail markets of Italy and Spain, by carrying out a monthly analysis of the sell-in sales in all European countries. Considering these 800 million euros, we can reasonably assume that approximately 150 million euros of the total inventories were normally stored in the warehouses of dealers throughout Europe.
The six important dental markets in Europe
In this article, we briefly present the results of the six most important markets in terms of business activities, whose total turnover in 2019 was approximately 520 million euros; these are Benelux, France, Germany, Italy, Spain, and the United Kingdom.
First of all, in Figure 2 we can see the sell-in trends on a monthly basis (trend of the month compared to the same month of the previous year, also called “Year over Year”), with a hefty collapse in purchases by distributors of all Europe (this phenomenon does not in fact concern only these countries), which in the months of April and May 2020 suffered its lowest point, after a month of January that had already started with a reduction, even though it was a technical phenomenon given the fact that the month of January is always considered quite inconstant over the years with regards to wholesale sales.
Only in the month of July did we witness the first positive figures of a second-half which, with its ups and downs, continued to grow slightly. It wasn’t until the months of January and February 2021 that we were able to witness a full recovery in the purchases of dental inventories; whose growth is a very evident sign of the replenishment of the inventories.
The analysis of the cumulated sales values allows us to observe how the slight overall recovery in the second half of 2020 and the large increase in the first two months of 2021 are certainly not enough to fill the negative gap accumulated in the full year of 2020.
Figure 3 allows us to observe how, thanks to the purchases during the first months of 2020, the lowest point of the total business is indicated at the end of the first half, while the retail sales analyzed previously for Italy and Spain indicated its historical minimum levels in May. However, and once again, this is determined by the purchasing policies of dealers across Europe, who at the most serious moment of the crisis had reacted by almost completely blocking their purchases, therefore, using their inventories to respond to the very weak demand during the months of lockdown.
Despite the good performance of the channel in the first months of 2021, it is interesting to point out that in February the overall value of the last 12 months of analysis shows a trend of -16%. This signifies that, most likely, the warehouse inventories of European distributors have been restored and during the 2021 year the sell-in sales will be consistent and aligned with retail ones, net of any new extraordinary situations due to the pandemic. In any case, we have isolated the sell-in of Italy in the graph in order to closely observe the correlations with the retail analysis shown previously. Once again, the trend curve is consistent but Italy shows a worse trend than the average and its retail one, indicating the strong phenomenon of destocking in this country. In Italy, the final result of the December sell-out at -15% (see Figure 1) is better than that of Spain (-18%) but despite this, the result of the Italian sell-in is much worse than the Spanish one as shown in Figure 4 (-31% vs -20%). This is simply another sign of the large warehouse inventories that were used by Italian dealers during the pandemic. On the other hand, the sell-in of Spain is consistent with the European average trend.
For now, if we carefully look at the analysis of the results of the full year, we can see how 2020 was truly a disastrous year for the dental industry, with closure at -22% in the total of the six markets analyzed and a -17% in all of Europe, thanks to the positive performance of Russia (+6% in local currency and -8% in euro) among the other main countries not analyzed in this article.
At the end of the year, the UK and Italy are the countries with the most evident collapse and, without a doubt, the two countries that also experienced the most dramatic impact of the pandemic during the first part of 2020, with the highest incidence of Covid cases and deaths. However, apart from the health implications in these countries, a certain weakness of the distribution system and a high level of inventories had probably contributed greatly to the sharp reduction in industry sales. In the UK, even the weight of public services, heavily involved in the management of the pandemic, may also have played an important role.
In any case, in February 2021 we can already see a big recovery in all the markets. In the green bars of Figure 5, we see the result of the first two months of 2021 compared to the same of 2020 (2021 Feb. YTD) and we can observe growth rates that are not compatible with those of the retail sales but clearly related to the replenishment of inventories. However, all of this will not be sufficient to recover all the business lost in 2020: in the red bars, in fact, we can see the trend of the last 12 months (2021 Feb. MAT) compared to the overall sales of 2019 and returning again to the -16% (OVERALL) already presented in Figure 3.
However, it is worth noting there is a certain heterogeneity in the recovery: markets such as the Benelux and France in particular, indicate acceptable overall declines for the rolling year (2021 Feb. MAT), and it is likely that in 2021 they will recover the values of 2019. However, it would be useless to deny that in absence of a true recovery in retail sales, and without a robust increase in the demand for dental treatments, a slowdown could inevitably occur starting in the spring of 2021.
A new phase
There is no doubt that as soon as the pandemic situation improves, reasonably in the second half of the year, a new phase will open. However, we must not think there will be an immediate recovery because, on the one hand, there will be another new economic rebound for just a few months, due to the essentiality of the dental treatments, for which an interruption or reduction of those treatments generates a subsequent expansion phase of a certain amount, but on the other hand, we will find ourselves in the face of a medium-term scenario (from 3 to 5 years) featured by a structural economic recession, with several economic sectors in severe crisis and a very severe impact on the employment levels of all the countries of the European area, especially those that were already structurally weak from a macroeconomic point of view.
In this regard, Key-Stone is preparing a new “post-pandemic outlook” report in which more precise forecasts will be made on the future dynamics of the market, but we can anticipate that a recovery of the 2019 value levels is estimated (even in regard to implantology – which had experienced a dramatic decline – and investments in technologies) only partially in the year 2022 and fully in the year 2023 throughout Europe.