Specialist
Executive at Reach Dental Equipment Service LLC
Agenda
- Key trends and drivers in the dental distribution sector, focusing on players such as Henry Schein (NASDAQ: HSIC), Patterson (NASDAQ: PDCO) and Benco
- Core product pricing and supply chain dynamics
- Distributor-supplier dynamics across business sizes
- Opportunities for product portfolio expansion and cost reduction potential from technological innovations to distribution processes
- E-commerce threat to traditional channels and Amazon’s potential for further market disruption, focusing on entry barriers and penetration prospects
Questions
1.
What are some of the most important trends and developments you’ve been following in the dental supplies distribution market over the past year or so?
2.
Could you discuss the accelerating consolidation in the dental practice industry and the increasing aggregation of DSOs [dental service organisations]? How is this affecting distribution of dental equipment and supplies?
3.
How are supply chain inefficiencies and macroeconomic inflationary pressures impacting the dental product pricing environment? Do you think there will be any deflated demand as a result? To what extent can price increases be passed on to customers vs absorbed by the bottom line?
4.
For DSOs who use a distributor, how much pricing pressure is there on the distributor when a DSO acquires its customer? How does negotiation leverage for DSOs vary by size?
5.
How common is it for DSOs to bring distribution in-house via direct relationships with suppliers? Is insourcing becoming increasingly prevalent, and how exposed are some of the main distributors to this headwind?
6.
You mentioned distributors will have to relieve some of these pressures by reorganising their cost structures. How are you assessing the cost reduction opportunity from utilising technology to create efficiencies in the sourcing process? Could you outline some use cases here and how viable an avenue is this to relieve pressure on the bottom line?
7.
Could you discuss distributors’ relationships with dental manufacturers? What’s important to understand about the typical length, pricing and stickiness dynamics for distributor-supplier relationships?
8.
Could you elaborate on the margin profile across core dental distribution product offerings? How does profitability compare across consumables, speciality dental, orthodontics, endodontics and any other core products? What are typical margin difference across supplies, equipment and technology services?
9.
How important are adequate incentives for a distributor’s sales team to commercial success?
10.
Henry Schein has made it a priority to invest in its sales force. Do any of the major distributors such as Henry Schein, Patterson and Benco have a substantial leg up in commercial efforts, and why?
11.
Could any other levers be pulled to offset margin compression in the core distribution business as players try to relieve some of the pricing and competitive pressures we discussed?
12.
How do players such as Schein, Patterson, Burkhart and Benco’s business models, customer relationships and market shares compare? Are there any key areas of differentiation to note here?
13.
How do you juxtapose Henry Schein and Patterson’s respective proprietary manufacturing arms? Patterson has recently invested a lot in this area. How do they stack up in relative breadth of offerings, product quality and pricing?
14.
How are you assessing the shift towards e-commerce? How might this disrupt the landscape for dental distribution? How much could online sales uptick steal demand away from traditional dental distribution channels?
