The rise of White-Label Clear Aligners Segment in Europe
White Label segment grew at +67% versus Global Clear Aligner Category (+45%) in FY 2021
In the current article, you will not discover any research concerning the category’s major consumer brands’ performance in FY 22. In recent weeks, we have covered analytics about how the major direct-to-consumer (DTC) brands performed in H1’22 (see article preview here). Not just that, we have also shared our findings about how leading doctor-directed clear aligner brands are navigating the troubled waters, especially against the present economic headwinds.
In the current article, we would try to focus on the performance of different segments within the clear aligner space. In other words, we will focus on the category segments (like White Label) that continue to thrive in H1’22, whereas their larger peers incl. flagship brands like Invisalign and SmileDirectClub grow negatively on sequential basis.
Fast forward to Q3’22, global dental services market (not excluding global clear aligner market) continues to be dominated by strong economic headwinds, FX risks, inflationary pressures and global supply chain disruptions. That’s not all, H1’22 witnessed COVID-19 lockdowns across major cities in Mainland China – negatively impacting the consumer demand.
In the wake of the above developments, the global clear aligner market continues to recalibrate itself – leading to the rise of new commercial and go-to market models, reshaping the global category:
Invisalign revenues (NASDAQ: ALGN) continued to struggle in Q2’22 – even growing negatively by 1.3% on sequential basis in H1’22. Not just that, the brand’s outlook for the remaining FY 22 still remains highly uncertain.
Direct-to-consumer (DTC) brands continue to lose value as category leader SmileDirectClub’s (NASDAQ: SDC) market cap declined by 90 percent LTM. SDC also witnessed negative growth of 17% in Q2’22 on sequential basis. Other DTC brands are trying to re-invent their go-to market strategy by either completely exiting the DTC business (like Candid aligners), or by transforming themselves into a doctor-directed business (like Straumann Group’s DrSmile and PlusDental brands).
DSOs specializing in offering clear aligner treatments have occupied centerstage, especially in recent years. In US, DSOs like Smile Brands Inc. and Smile Doctors continued to rake in upwards of USD 1.7 billion in combined revenue during FY21. Not just that, CareCapital backed Spanish-DSO Impress successfully raised USD 125 million in Series B funding, beating our previous estimates. We believe that it’s a capital-intensive business wherein financial leverage continues to be very high (10x), often accompanied by low free cash flows (FCF).
The DIY aligner space continues to remain a niche segment – largely because of the low penetration of enabling technologies like 3D printer equipment (low-single digits) at dental offices. With the exception of Specialized orthodontists, 3D printing equipment still hasn’t 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.
An often-overlooked segment, White Label clear aligner category continued to grow high- double digits in H1’22 (even though the white label aligners’ segment does not exceed more than 4% of the global clear aligner market). In the next part of this article, we will talk about how a Düsseldorf- based company is re-inventing the White Label segment.
K Line Europe: Europe’s largest OEM manufacturer in Clear Aligner Space
In the heart of Europe, a little-known manufacturer K Line Europe GmbH continues to revolutionize the white label clear aligner space. With more than +2.5 million aligners produced off its manufacturing line in the last few years, the company has developed a strong know how in the clear aligner production processes.
This strong knowhow and process optimization strategy not only helped the company to survive in recent years, but also allowed the company to grow +200 percent in FY 20/21 alone. Recently, K Line Europe also entered into the intraoral scanning category – closing the loop with another upcoming software application that will simulate treatment outcome for patients who’re considering clear aligner treatment – enabling patient education and higher patient conversion ratio.
The company’s production capacity exceeds 5000 aligners in a single day and spans more than 3.5 K square meters with more than +150 strong workforce globally. The company has announced that its target is to reach a capacity of 10,000 aligners per day by end of this year.
Furthermore, K Line Europe has developed a new disruptive technology named 4D tech in the clear aligners and branded it under ClearX. The company has claimed that the aim of introducing this technology is to cut plastic consumption through using a shape-memory aligner that could replace more than one aligner. This product will be added soon to the OEM services the company provides its clients.
The FDA approved clear aligner manufacturer positions itself as an attractive proposition for not only dental clinics/DSOs based in North America as well as Europe, but even dental labs who are looking for a clear aligner manufacturing partner.
insightsZ estimates that K Line Europe currently captures more than 70 percent market-share of the European white label clear aligner market. This makes the little-known manufacturer as one of the most respected brands in the B2B space – basically even giving a monopolistic status to the manufacturing giant, ensuring that the company can leverage the scale and unit economics, to meet the toughest QA standards with the right price-point for dental offices.
We estimate that there are other 4-5 manufacturers operating in the white-label clear aligner space in EU. However, all of these brands combined still don’t contribute more than 30 percent market share of the European white label clear aligner market. However, at a global level, we have identified four major white label brands, none of which come close to the K Line Europe’s recent success in the local European market.