Danaher’s Dental segment
Danaher’s Dental (DHR) segment, a $2.7 billion business, provides a wide array of dental consumables and equipment and services used in cosmetic dentistry and to treat dental ailments. Danaher entered the dental business through the acquisition of KaVo and Gendex in 2004. It expanded the breadth of its offerings by acquiring Sybron in 2006 and Nobel Biocare in 2014. Some of the products sold by this unit include implants and dental prosthetics, orthodontic bracket systems, treatment units, and digital imaging systems and software.
Competitive advantages of Danaher’s Dental segment
The dental industry is dominated by solo practitioners who are cautious about changing equipment brands due to additional training requirements. Companies like Danaher, which has an expansive and entrenched installed base, benefit from these switching costs. In fact, 60% of Danaher’s dental revenues are recurring in nature. However, certain commodified product categories within the segment have few barriers to entry and no training impediments. This limits the pricing power of Danaher due to increased competition. Danaher’s dental margins have historically been limited to below 15%. Dentsply Sirona (XRAY), Carestream Health, and 3M (MMM) are some of Danaher’s key competitors in this market.
Drivers in the dental equipment industry
The potential drivers for Danaher’s dental sales include the dental needs of an aging population in the United States and, recently, China. The prosperity from China’s economic progress and growing awareness is likely to pressure its ramshackle healthcare (XLV) system into servicing the growing needs of the Chinese population. The rise of digital dentistry (IHF) has been rapid in recent times, as a lack of skilled technicians in laboratories has increased the adoption of automated solutions. Digital dentistry offers three main advantages: increased efficiency, accuracy, and predictability of outcomes. These advantages have increased adoption rates overwhelmingly in its favor.