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.
We are all asking ourselves “when” we will return to normal life after this pandemic, but although this is the most pressing issue, the most disturbing question is probably “how” this hypothetical normality will be.
The pandemic impact
Perhaps also for this reason, all over the world we speak more and more often of “new normal”, namely that phase, which will probably last for years, characterized by at least three influencing variables coming into play:
the management of the endemic phase of the virus
the new logics of socialization
the great economic crisis ahead of us.
These three points certainly don’t need much comment. As regards the management of the endemic phase, it is rather obvious that the timing for achieving herd immunity, the real effectiveness of vaccines also against any other variants, the modalities and programming for periodic boosters are all factors affecting both behavior and social organization. In the workplace, remote work will in any case be more frequently exploited and business travel limited (a return to the level of air traffic recorded in 2019 is expected not before 2025). Certain economic sectors will suffer the impact of the pandemic for a long time, for example those most affected by remote work, which will become regular practice even for just a few days a week (with an impact on services related to commuting, food services, etc.), or the retail trade, if we consider the enormous impact of the development of e-commerce and its inexorable acquisition of market shares. At the same time, some areas will also considerably grow, such as IT, pharmaceuticals, delivery services, etc. There will also be sectors strongly supported by the European Recovery Fund, but these too will only allow the development of specific sectors, according to each national Government’s plan, whose fundamentals are based on ecological transition, digital transformation, employment and smart, sustainable and inclusive growth, measures looking to the next generation, including education and skills development, etc.
As anticipated, not all sectors will have the same support. The dramatic collapse of gross product, production, and export, as well as the significant rise in public debt, will take years to return to 2019 levels. Unfortunately, the only aspect we are sure about is the uncertainty regarding these factors.
Despite everything, as we will see here following, the dental sector can be considered as central and essential to the health of the population.
Let’s see then throughout this article some thoughts on the impact of the pandemic in Italy and on the probable recovery dynamics occurring in the dental sector.
My job, as head of the Key-Stone research institute, is to collect, process and analyze data, but I am often also asked to produce forecasts and strategic guidelines. Well, over this year my writings, interventions and seminars have been numerous, however, I have always explained the serious lack we have faced, that is the uncertainty due to the total absence of past data. This aspect makes it impossible to work on mathematical models, moreover, there are just few similarities with past pandemics, since in the last serious ones the social and healthcare context was totally different.
Nonetheless, in this catastrophic year, Governments, international organizations, the biggest world strategic consultants, all research institutes (including Key-Stone), companies and associations, have begun to collect and catalog qualitative information and quantitative data, developing economic forecasts and theories on the post-Covid-19 recovery.
Also in relation to the Italian dental sector, we can count on numerous researches and studies carried out this year, and thanks to this contribution I would like to share some food for thought, by explaining what we believe the steps to recovery will be, in terms of demand for dental services.
As I have already had the opportunity to write, the current crisis arises from an interruption in interconnections. During the three-month lockdown, we were prevented from moving, from consuming, although there would have been financial possibilities, in theory. But even later, until today, if we give up buying and consuming certain products or services, it is often not because of a shortage of money, but rather because of an objective unfeasibility connected to social distancing policies. In addition to that, we must take job uncertainty into account, another dominant word in recent months; an uncertainty that now affects many millions of Italian families, especially considering those who work in sectors heavily affected by the pandemic (travel, tourism, food service, non-food retail trade, etc.).
But what happens in consumption, when we are faced with a phase of uncertainty or, worse, of real or imminent worsening of the family economic situation? First, all those spending decisions that are deemed unnecessary or simply not indispensable are postponed. Unfortunately, among these, we also find the expenses for dental services.
Analysis of the short-term impact on dental treatments
In November 2020, Key-Stone interviewed 1,200 Italian families and it emerged that one in four Italians, aged between 20 and 74, would have renounced the dentist, except for urgent needs, until the end of 2021. These are 13 million Italians, whose uncertainties due to the pandemic are now added to their traditional economic and cultural problems. The percentage rises to about 40% for those who have had or think they have precarious employment and economic situation because of the pandemic. However, considering that a part of the population would have renounced the dentist anyway (most of them because of structural economic reasons not attributable to Covid-19), 61% of these undoubtedly attribute this choice directly to the pandemic, because of the consequent worsening of their economic situation or for fear of being infected. On the other hand, a positive note comes from the segment of children and adolescents: according to Key-Stone’s research, the intention to give up on treatments is reduced in the case of children aged between 6 and 19, whether it deals with more expensive treatments -such as orthodontic ones- or checkups and routine treatments. In conclusion, the real effect of the pandemic would cause a reduction in the demand for dental services estimated around -13%, at least one billion less in dental expenditure and therefore in lost revenues for the sector.
Possible future needs
In this context, Key-Stone explored the topic in depth, trying to understand which areas of need are most felt by the population and which is the expected procrastination time for treatments.
First of all, it is worth remembering that the citizens interviewed do not always have the clinical skills to be able to judge their own needs in terms of dental services, moreover the climate of trust can change suddenly depending on the overall pandemic situation and on personal experience.
The research conducted confirmed how a certain fear for infection, but above all economic and employment uncertainty has pushed part of the population to postpone non-urgent dental care. This situation is also quite usual in times of famine, crises when confidence in the future decreases. In fact, it is normal for people to prefer to solve basic needs (in our case pain or urgent functional problems), neglecting other expenses that may be postponed.
By re-processing the data coming from the research, we have extrapolated the percentage of adult population claiming to be likely in need of certain dental therapies and treatments, even if not in the immediate future.
In Figure 1 we can see a ranking of the main treatments, first of all, fillings then oral hygiene, concerning almost half of the interviewees, immediately followed by extractions, implants (with consequent prostheses), and traditional orthodontics. There are fewer esthetic needs, such as veneers, or treatments with aligners.
Intention to postpone dental treatments
To the same people who stated possible future needs, we asked if they thought to be treated soon or if they would have preferred to postpone dental care as later as possible, or even to give it up. In Figure 2, we can see how the intention to postpone dental treatments is higher for those rated as more expensive. It is slightly surprising that some treatments more related to esthetic needs have a rather high procrastination rate even though patients who manifest these needs have medium-high levels of education and income.
Map of the potential needs and the intervention priority
By matching the results of the potential needs with the intervention priority (i.e. the reverse of the intention to postpone), it is possible to have a clearer representation (Figure 3) of the therapeutic areas that could be most affected in the short term, a period that we could probably frame up to the end of 2021.
The areas of implants and prostheses will probably have greater difficulties in recovering in the short term, while others -more related to restoration– could move faster towards a normal condition. The situation of orthodontics is peculiar, since for adults it may present a certain slow recovery, while as regards therapies for children (not shown in this chart), a much smaller crisis is expected, as explained here following.
However, the scenario just outlined depends on the type of the dental practice patients, considering their average socio-economic level, the working sector of their families and the geographical areas where they live, in the event that the local economy is particularly affected by the effects of the confinement measures.
The dental treatments are essential
At the same time, this research reveals some very important information, already widely emphasized in the media, namely that 30% of those who during the phase of total confinement (March-May 2020) had problems with their teeth or mouth without having been able or willing to go to the dentist, reported a worsening in their oral situation. The numbers coming from the research carried out by Key-Stone for SIdP at the end of the lockdown period speak for themselves: over 10 million Italians had problems with their teeth and gums during the ten-week confinement and about 3 million state that the situation has worsened because of the impossibility to go to the dentist. It is therefore unquestionable that dental treatments must be considered essential.
We are therefore dealing with a sector, and indeed also a market, where the fundamentals are solid, where long-term structural crises cannot be foreseen, but which can contract or expand based on economic and social external phenomena, which lead to the postponement of certain treatments in particular periods.
Medium-long term recovery dynamics
According to the main theories on post-pandemic recovery, we must consider that after a first phase of giving up certain goods, especially services (which are generally postponed in the process of hierarchizing personal and family expenses) by part of the population, there will be a physiological long-term settlement (probably for at least a year) during which the population, gradually emerging from economic hardship or uncertainty, will resume even the most expensive treatments. In the meantime, it should not be forgotten that, unfortunately, some of those who have delayed oral care for too long will have a more compromised oral situation. Following this recovery, however, the demand for services should settle at slightly lower levels, following the trend that was already taking place in the three-year period 2017-2019. In this analysis, the observation of what happened during the great recession 2008-2013, with an exceptional recovery in dental care in the following two-year period 2014-2015 and the subsequent slowdown in growth up to the stagnant or slightly declining situation reported by ISTAT in 2018 and 2019, helps us a lot. As far as dental care is concerned, even the first phase of lockdown resulted in a strong recovery in summer 2020. It was very intense and short-lived, due not to the citizens’ waivers, but to the numerous tratments interrupted between March and May.
The recovery phases
In Figure 4, we can see the possible recovery phases characterizing the dental sector.
Let’s identify and analyze the six phases described in the model, and let’s make some reflections.
Pre Covid-19
The results obtained by the study about the last pre-Covid years should not be overlooked, as they are a key indicator of the sector business fundamentals. Obviously, if the clinic was under development and was in a financially prosperous position, it is very likely that it will recover more quickly, perhaps by increasing its market share, at the expense of those who already had problems in their own business, with declining results, difficulty in generating profit and financial weakness. For practices that were already having problems, the shock of this crisis could be lethal and some of them may decide to reduce their activity or close.
Lockdown
The almost total impossibility to access the clinic has had a devastating impact on their financial situation, as well as a long-term impact on the organizational system. Despite the possibility to benefit from payroll subsidies to reduce the impact of personnel expenses, during the three-month lockdown the dental practices’ owners had to incur the fixed costs, many of them by using their own resources and drawing upon personal assets, while some dentists have turned to banks for a loan. But these expenses will have to be recovered, or in any case, be returned to the family assets: it would therefore be appropriate to plan the profits for the next few years to calculate the payback times of the investment.
Technical rebound
The more-than-10-week total confinement halted an enormous amount of work, which poured into the clinics in the period May-September 2020, to carry out the suspended treatments and those for which patients had already decided. According to an accurate survey carried out by Key-Stone, the treatments remained blocked would have covered about 50 working days; the research was able to objectively affirm that at the resumption, in the second half of May, more than one billion euros treatments were resumed in the sector (more than 30,000 euros work to be completed on average per dental practice).
But it was a short-lived recovery. It must be remembered that, in the meantime, no new patients showed up for almost three months and new treatments took place only in the autumn, partially compromised by the lack of new visits in the previous period.
Prioritization needs
Since October 2020 there has been a new reduction in accessesand new patients compared to the same months of 2019, due to subsequent restrictions on mobility and increasing economic uncertainty. In this period, which will probably last until the end of spring 2021, the general performance has settled a few points below the results of 2019 and, as regards implantology, this reduction is quite important (on average -9% implants placed between October 2020 and February 2021 considering the same months of the previous year). Recovering from the emergency phase (and much will depend on how long the vaccination campaign will take), the workload will gradually increase, but for a few million families directly affected by the crisis -because of the impact on their job and financial situation- that mechanism of expenses hierarchization will be frequent, leaving part of the treatments still in difficulty. This is a phase whose duration is unknown, but observing the macroeconomic predictions made by relevant institutions, the clearest positive signs will probably occur in 2022. Those who manage a dental practice must take this aspect into account, since they could face a slowdown in recovery during this year, always compared to 2019, which is the reference year. In any case, this is a phase that will not last particularly long, but it is essential that the financial system of the clinic leaves room for a possibly extended resistance.
Physiological rebound
The procrastination of dental services for over a year generates a huge “lung” of treatments that are finally performed over a long period of time (even years), as families recover an acceptable economic situation, trust in the future and, in part, in the event that the oral condition does not worsen in terms of urgency (as anticipated, this phenomenon has already been documented in the two-year period 2014-2015). It is therefore very likely to witness an expansive cycle which, like after the “Great Recession”, could last for at least a couple of years, with undoubted advantages for those dental practices which will be able to plan their business in an entrepreneurial way, combining trust -that I often mention as a fundamental ingredient to overcome this crisis- and financial planning/control capacity, not to forget the strategic vision contributing to a successful value proposition.
New normal
There are no clear forecasts on what the health situation, social dynamics and economic weight of the different sectors will be in the endemic period.
Certainly, we cannot fall into the error of believing that the “new normal” is a return to the conditions prior to Covid-19. We are facing a radical transformation, thanks to which some fundamentals of the social organization and economic system will undergo profound changes. We all hope this evolution moves towards an improvement in life quality for an increasingly large part of the population.
In the new situation of normality, the demand for dental treatments could slow down its development following the physiological rebound resulting from the treatments procrastination (as happened in the three-year period 2017-2019). In actual fact, this may lead to what we indicate in the chart as baseline, which represents the level of demand we would probably have had without the impact of the pandemic.
Anyway, those who have worked well in recent years, investing in clinical skills, facilities, technologies, training, and entrepreneurial management, will probably find themselves in a more prosperous situation than the one in which they were before this shocking health catastrophe.
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:
consumer products
equipment.
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.
Great opportunities
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.
