Emergence of new categories as global clear aligner industry matures
Based on a recent survey conducted by American Dental Association (ADA), up to 60 percent of GPs are getting asked about clear aligner treatments from their patients. In recent weeks, we covered insights about the global white-label & OEM segment, which grew at +67 percent versus the broader clear aligner industry (+45 percent) during FY 21. Here’s the link to our recent article.
Leading white-label & OEM clear aligner providers are able to treat up to 65 percent of all orthodontic cases (ranging from mild to moderate complexity). This is in-line with the scope of treatment with leading DTC clear aligner brands (as a percentage of the Total Addressable Market). We expect that this figure will increase with more product innovations in upcoming years. Speaking in terms of clear aligner penetration in the US, this figure hardly exceeds 20 percent. However, speaking of penetration in the rest of world (ROW), this percentage is still in the high single-digit range of 7-8 percent only – signifying the massive untapped opportunity.
Here's a quick overview of how the global clear aligner industry has evolved in the recent years:
We have seen a significant rise in the number of providers offering clear aligner treatments and ultimately improving the treatment access.
In the last 5 years, the turnaround time of aligner delivery has reduced significantly. That is, FY 17 the average time between order placement and clear aligner delivery was as long as 3-4 weeks. Fast forward to FY 22, the average delivery time has slipped to 8-10 days for leading US clear aligner brands.
We are also witnessing that leading clear aligner brands are increasingly making claims about how fewer trays are needed to achieve the same clinical outcome as with another competitor brand.
insightsZ continues to gather + analyze data about leading clear aligner brands, by leveraging on data science to follow market signals & opines that:
The global clear aligner industry is still in its early stage and we are witnessing new players + sub-categories emerging in the space (more recently in the form of white-label/OEM brands and DIY players). We expect that this trend will become stronger in upcoming years as the industry matures.
The overall combined output of the global clear aligner industry continues to increase as more brands enter the category, while existing brands also continue to grow high-single digits on YoY basis in FY 22.
The market leader’s position (Invisalign) in terms of market share is highly stable. However, there’s a fierce battle for the second & third spots as brands continue to fight it out in the space.
As the industry matures, focus will shift from product innovation to process innovation – improving the business economics. In other words, the unit price of clear aligner treatment may decline during this period → driving higher adoption.
Why White-Label & OEM players may outperform DIY (in-house aligner manufacturing) players?
As the global demand for clear aligner treatments increases, GPs are increasingly looking for turn key solutions that will enable plug & play when it comes to offering clear aligner treatments to their patient base.
In our previous articles, we have already covered why many GPs and dental offices continue to shy away from leading doctor-directed brands like Invisalign, and are on the lookout for White-Label brands & OEM providers.
With the improvements in technology and the business ecosystem, the barriers to entry for new clear aligner providers are getting smaller. As an expected outcome, we have witnessed a series of new players entering this space, even though DIY aligner space continues to remain a relatively niche segment – that’s largely because of the low penetration of enabling technologies like 3D printing (low-single digits) at dental offices. With the exception of Specialist orthodontists, 3D printing equipment still hasn’t yet found many takers at dental offices globally. Not just that, even leading AI-based treatment planning software platforms cannot ensure the level of expertise as board certified orthodontists and specialists – presenting another barrier concerning the growth of DIY aligner category.
insightsZ predicts that DIY aligner manufacturing solutions will continue to be a very small niche in the next 2-3 years, whereas white-label and OEM providers will continue to ride the wave of high double-digit growth in the upcoming years.
Identifying winners is rather very challenging in the early-phase of the DIY and white label category. H1 '22 white-label clear aligner category continued to grow high-double digits (even though the white label aligners’ segment does not exceed more than 4% of the global clear aligner market).
Leading white-label provider K Line Europe continues to set the standard for OEM manufacturing, delivering double digit growth for FY 2022 (versus FY 2021). What’s even more impressive is the brand’s growth versus industry leading brands like Invisalign. As a result, K Line Europe has since established themselves as the leading white-label manufacturer for clear aligners in Europe, now holding just over 70% of the market share.
Not just that, white-label aligner or OEM category continues to grow at stratospheric levels whereas both DTC as well as leading doctor-directed brands scramble to capture growth in the face of new macroeconomic challenges.
Another strong rationale why DIY aligner is way more difficult to scale than one may think – that’s because it’s an uphill battle against a multitude of factors including:
● High CAPEX to enable automation
● Complex FDA/ regulatory barriers
● QA/RA and CAPA regulations
A significant advantage that White-label and OEM brands offer versus DIY solutions for dental offices is that there are no inventory issues and stock-keeping necessary, which in turn reduces the operational burden and improves the overall efficiency of the dental office.
Not just the above, there’s a strong operational know-how required to scale an in-house DIY aligner manufacturing lab. This is another reason why we believe that the white label and OEM manufacturing players will be better off than DIY aligner solution providers in the short and mid-term.
Many DTC brands work without attachments, eventually making the treatment time longer and necessitating the need for more aligner trays. The latter inevitably has a negative impact on clinical outcomes as patient adherence decreases with longer treatment journeys, compromising the outcome. That’s another area where white-label and OEM brands have an upper hand as most of the industry’s leading players are still relying on planning with a team of sophisticated and licensed orthodontists. Brands like K Line Europe and Clear Forward only use licensed orthodontists for their treatment planning to ensure safe and achievable treatments for all patients.
During our research, we found that a small percentage of dental offices were concerned about OEM branding on the clear aligner packaging – as it contradicts the dental office’s endeavor at creating and marketing their own brand. The current US FDA guidelines stipulate that the OEM manufacturers details should still be visible on the packaging. However, for the majority of dental offices, this is still not an issue simply because most OEM and White label manufacturers offer customized packaging for a small mark-up which they need for additional packaging and FDA compliance.
We have seen international brands depend on white label manufacturers to support their business needs given the full scope of end-to-end solutions including - manufacturing of aligners, end to end logistics and services, consulting, new market entry and market expansion, marketing, IT services and intraoral scanners.