Good morning, everyone. My name is Thomas Bernhard Schroto. I'm the Director of Investor Relations here at Sonova, and it's a pleasure to welcome you to Sonova's 9th Annual Investor and Analyst Day. Like everything else, in 2020, this event has been affected by the global pandemic, and we're holding this as a virtual event only. Despite this, interest has been unprecedented, and we've had a record number of around 200 people sign up to join the live webcast.
I'm convinced that we will have an exciting few hours ahead of us discussing Cinnober's strategy, the Phonak Paradise platform as well as selected initiatives in our Audiological Care and our Hearing Instrument business. Now in order to make this event more interactive, there will be 2 live Q and A sessions, where you have the opportunity to dial in over the phone and ask questions into the room. There will be a short break ahead of those Q and A sessions, and we will provide you with the dial in details and give you a chance to dial in. Please note that the presentations themselves will not be broadcast over the telephone. Now for those of you who don't plan to ask any questions, you can just remain on the webcast for the entirety of the event.
And finally, please bear with me for the disclaimer. Just as a reminder, this presentation is for marketing purposes only and does not constitute an offer to sell or a solicitation to buy any securities. And with this, it's my pleasure to pass the word on to Arnd Kaldowski, CEO of Sunnova, who will run you through the details of the program.
Thomas, thank you very much for the introduction. Good morning, everyone. Welcome to the Investor and Analyst Day 2020. Sadly, we don't have you with us, but I know you died in. So thanks for doing this.
Thanks for spending the time in your busy days and listening into our update here. As you may remember, 1.5 weeks ago, we had the opportunity to update our guidance for the first half year as well as giving a guidance for the second half, and I think both were positive in the reception in the marketplace due to the good numbers. Today, we'll be more focused on the strategic initiatives we're driving, so less of a number exercise, but really want to dive in deeper and help you understand where we're heading and what progress we're making. I have a couple of my colleagues with me throughout the morning here. I want to briefly introduce them.
Martin Grider, who is leading the HI marketing, will join. And later on, Fabian Muller, our Launch Program Manager for the Paradise, will be joining us via a video we have prerecorded to dive deeper into the Paradise, its features and benefits, also the initial excitement in the marketplace, but also information on how we launched the product during a pandemic to get the maximum benefit. Then after the Q and A and the break, Christophe Frahn, who was up last year already, will join us with regard to an update on the Audiological Care business and how we're progressing on our journey towards the omnichannel model. And last but not least, Claude Diversey, who is leading our wholesale business, will be with us to share an update on how we're doing on the wholesale front, how we're driving commercial execution. And then Sandy Brandmeier, who is leading our U.
S. Wholesale business, will be with us via video because during the COVID, she couldn't come over, but she will share the progress we're making in the U. S. In the wholesale business. So certainly a broad range of topics, hopefully enough for you to stay in tune here and being excited about the more insights and details.
From a timing perspective, every section has a 30 minute time slot. And as Thomas was pointing out, we have a quick break before we go into the 2 different Q and A sections. The first one should be around the first two topics we're covering, and then the second one should be around the last two topics as well as the event overall, the content we shared in the event. I'll voice over how we handle the logistics when we get to those sections. So allow me to dive into an update on the market as well as how we're doing with regard to our Sonova strategy.
But first, let me highlight that when we look at us and think from your vantage point, we think we continue to be an attractive opportunity for an investment. Clearly, an attractive market with strong secular growth drivers and still a lower penetration than we would hope for, for the people with a hearing loss.
But I think important to note also
that if it comes
to innovation and how we can elevate what we bring to the consumer, there's lots of runway to, on the one hand, improve the hearing performance as much as we've come a long way over the last years to still get the people to hearing better in different situations. But then with new technologies emerging and getting to the size in which we can integrate them into a hearing aid, really having an opportunity to broaden the benefits we bring to the consumer. From our market position, we're in a good position, you know that. We are broadly based with regard to the broadest reach in terms of the value add we do in the industry with our vertically integrated business model, good market share positions in the 3 different segments we're serving. And from a financial perspective, sound financials, good profitability, still opportunity to improve further, strong cash flow as well as cash position.
And I think as you've seen during the COVID pandemic and the results we shared 1.5 weeks ago, opportunities to navigate our P and L very effectively even in times when the revenues are low. Now there was a lot of discussion about how is the market doing, and I think we all were quite concerned when COVID started. We didn't know how deep the hole is, and we didn't know how long it will take to recover. And I think it's fair to say that we all have experienced a faster recovery than what we initially thought. Wanted to share some data here, at least from 3 markets where monthly data is available to give you a firsthand opportunity to see how those curves have emerged.
I think it's fair to say that other Western markets follow pretty much a similar pattern. And what you can see on the curve, clearly a very low level of consumer demand in the 1st months of the COVID crisis in April, but then a good gradual improvement May, June and getting back to good levels in June, July in Germany already into positive territory. Canada turned positive in July. The U. S.
Is a little behind, partially because of the BA, but I think we also see somewhat lower traffic on the private market than what we've seen in Europe, and I think that's fair given the different infection scenario there. But clearly, coming back quickly here until the August, September time frame, you could argue on the curve there's a little bit of an overshoot if you look at the July in Germany, perhaps a little bit in the July in Canada. So we need to see how much of this is pent up demand and how much of this is sustainable for the remainder of the year, but clearly, a fast recovery here. Now the second discussion we have often with some of you is how much is this driven by existing customers versus new customers? And how much did you invest into the marketing spend side?
And we want to be reasonably transparent here so that you have a chance to gauge the situation while we're operating in this new territory here. Probably the first point to make for the ones who are not that close to our industry, our sales cycle is anywhere between 4 weeks to 4 months depending on the regulations in the market. So from the first moment we see somebody or have an interaction with somebody until they really have purchased the device and we can recognize the revenue. Big difference in between there. In some markets, you have up to 2 months of a time where you have the hearing aid with you, but you have the right to give it back without any pay.
That would be Germany as an example. So keep that in mind when you're judging the marketing investment over the curve here with regard to the new customers. Now on the right hand side, we're sharing the Audiological Care Own retail business numbers. And the light blue is the existing customers defined as people who purchased a hearing aid 5 years ago or people who were already in the sales process at some point of time and we can reactivate by reaching directly out to them. The dark blue is the new customers coming out of proactive lead generation to the outside of the world.
Now the red curve is the marketing expenses. And so I think the first one to note, clearly, in April, May, we and I think that's fair for the whole industry went very significantly down on our marketing spend and marketing investment into leads because it was clear people are not coming to the store. But what you can see is somewhere in the July, August, September, we're starting to pick up momentum here and get back closer to the levels we had before. Now if you look on the split between existing and new customers, clearly in April, particularly May, a low level on the existing customers on the new customers, sorry. Keep in mind, this is also at low absolute numbers.
So really a small number of new customers we're generating, but you can see that this is starting to gradually step up towards the normal level we had in the year before with the investments we're doing on the marketing side. So key takeaway, we could benefit from existing customers in a down moment, but we're really able to reactivate new customers in a very nice way. I want to give a quick overview on where we stand in the cochlear implant business. It's not on the agenda to a large extent because Vicki, who is leading this for us, was here with us last year after she was 1 year with the company. And therefore, there's not a lot longer section on CI.
But clearly, on the CI side, we have 2 challenges this first half year or had challenges. The one, COVID the second one, and that's more Sunnova specific with our voluntary field corrective on the cochlear implant side, it takes longer to recover. On the cochlear implant side, it takes longer to recover. And I think that's logical because at the end, the service gets provided in a hospital. And we all know that the hospitals are keeping significant capacity free in order to be able to navigate COVID patients coming in.
So 75% to 90% of the hospitals in the Western world are doing implants today, but some of them are doing them on a lower level than before and probably just focusing on the pediatric market. So clearly, a slower market recovery there. With regard to our field corrective action, we shared in February that we have a new device, but we only have the regulatory approval for the new device in approximately 40% of the markets measured in revenue we're addressing. We obviously worked on this, and now we're at 93%. There's a couple of smaller countries where it takes longer to get regulatory approvals, but almost there with regard to being able to achieve reach in the whole world.
The second one, we were quite busy convincing and reconvincing customers who were concerned about the field corrective action on reengaging with us. And the sales team has done a great job being with those customers, helping them to understand the quality of the device, why we have to do that field corrective action. And the good news, at this point of time, 95% of the customers have repurchased from us. So I think clearly a headwind in the first half year for our cochlear implant business, but getting back to fighting strength here at the end of the first half year. So how did we navigate the COVID situation before I get to a quick recap on the numbers we shared 1.5 weeks ago?
I think we all had to respond very fast because in the middle of March, we were hit by COVID. It was clear to us that with the lockdowns in retail as well as our target group being elderly consumers, we really will be looking at least at the beginning at a very low level of revenues. But first and foremost, we focused on health and safety for our employees and the customers, put the right measures in place to keep the engagement up, but also be able to productively operate as a company. At the same time, we rolled out the right measures in the retail stores where we are the retailer. We even provided some of our wholesale customers with safety equipment where it wasn't that easy for them to get by at the beginning of the pandemic to really help them being active in trying to drive some business here.
But then given the low revenues, clearly, we had to protect the core. And it first started on the cash flow management and the liquidity side. You've seen us bring out 2 bonds, but at the same time being very thoughtful on where we could reduce our cost base very quickly with a strong profitability compared to what we had on the top line for the first half of the year. Now we're in what we call drive rebound since about June to July, and that required us to rethink how do we reach customers if you can't go to the store because some of the wholesale customers didn't accept people visiting them. How do we think about our product launches and all that?
So clearly, we took the right actions, I think, already early in our Q1 and retraining our sales force to be able to have effectiveness in virtual touch sales interactions. And that's still the predominant part of our reality today because many customers still do not want to have extra people coming to the store. Product launches, we discussed a lot in some 1 on ones and some questions and questionnaire sessions here in interaction with me. The Unitron Discover, which was slated for April, will be delayed by 2 months. But June was a good target because the European market started to open up quite nicely.
And then Phonak Paradise, we launched on time, on content in August. We obviously had continued to invest on the R and D front and I think have, in addition to bringing out the product, done a great job with regard to how do we engage with the consumers. And Fabienne and Martin will go deeper on this later. The last one, you've seen that ramping up the lead generation at hopefully the right point of time. Clearly, I think, ahead of the market and with good results here, as you can see from the recovery of the new consumers.
So swift and decisive measures taken, which ultimately allowed us to share the updates we did faster than anticipated market recovery, also driven a good sales performance on our side from our point of view, and then really a strong profitability performance based on the cost measures we put in place, but also the productivity initiatives we already had put in place in the year before. In numbers, just a recap for the ones who weren't on the call and didn't go as deep, we updated our guidance to achieving 79% of revenues compared to prior year. Q1 was just 59%. So you can see we're almost at the level in the Q2 as we were in the year before. And while we have 30% less EBITDA, we're still expecting to be a 15% profitability margin for the first half, so full half year with the COVID, again underlining the good work on the cost side.
Now from the go forward, we believe we're going to end in profitable growth in the second half of this year with a growth between 4% to 8% and a profitability growth of 20% to 30%, both in LC compared to prior year. So again, a good growth and an over performance on the profitability side. Now a couple of caveats when you think about this guidance. We're assuming with that guidance that there's a continued improvement in the marketplace as we've seen until now. We have not factored in a significant governmentally driven lockdown in any of the major markets.
So that's one to watch out for. And we know that the infection rate situation is fluid. On the midterm demand, we're pretty good with regard to the current product mix and the prices. So we have not yet seen any negative impact from the macroeconomic situation, but we are on the watch out for that and obviously something to carefully observe, but good price realization, good product mix at this point of time. And then on the FX side, I think it's important to note that the Swiss franc, particular versus U.
S. Dollar, is not in our favor right now. And you have to, in Swiss franc, assume a 4% headwind on the top line and a 10% headwind on the bottom line. So that was how we navigated through the COVID crisis and the results so far. I think a strong explanation mark behind the our ability to operate.
Let me quickly go to the strategy here, which is the second part, and I want to focus more on what we do for the future. And I think the first one you will recognize, the charge looks unchanged. We made a small change, just a small one, and that one we would have probably done even independent of COVID. Now you may think that, that's weird because everybody talks about what does COVID change. And believe me, we talk about it all the time.
But we also observe the consumer behavior. If there was one big concern coming out of the COVID and more move towards a virtual interaction, what we have seen is that while this went up a little bit on the remote fitting in the early months, we're now almost back to normal levels. And if I say it went up, it was still low single digit of the fitting interactions being done remote versus in person. Now that doesn't mean we don't think the world is going to go there over time. Therefore, we feel good about our strategy, and you will see that when we talk about omni channel, particularly on Christoph's side, which we think it's going to come, but it's not going to be a fast change.
It is something we can manage and actively manage as we go through that transition over the many years to come. So from a strategy perspective, clearly, in our market, you have to lead in innovation if you want to drive above market growth. For us, it's important to be in the lead in audiological performance and the consumer experience. And the paradise is a big explanation mark behind that coming on the heels of a successful Marvel. We want to get closer to the consumer but be flexible over time in the offering to what's the consumer so that he or she can choose how they want to interact no matter where they are in the consumer journey, and that's the omnichannel audiological care network.
On the wholesale side of our business as well as on the cochlear implant side, where we are a B2B play, it is important to extend the reach geographically. It's important to have the right value add towards the customer, and they're very different if you think about a large retail chain versus an independent. And it's important to us to hone our skills on the commercial execution side. And Claude and Sandy will talk about all of those in their section. Now the 4th point on our growth strategy vectors here is investing into high growth developing markets.
Now in our segment, that's a little bit more of a long term play because today, the vast majority of the revenues are still made in the developed markets. But if you think about the time line, pick a number between year 5 10, it's clear that China as an example will be an important part of the hearing instruments market. And so we're making the steps it takes on the wholesale as well as on the audiological care side to participate in that growth, develop the market and then in the long run, participate in what we expect to be a large market in our segment. And Christoph will come up with a couple of new information about how we think about that on the Audiological Care side. The continuous process improvement and structural optimization, you heard us talk about, I think you see it beautifully at play at this point of time, the way we navigated COVID, but at the same time, the way we think about the margin expansion over the next half year.
I think you also see that we're in a good position to be able to do some organic investments where perhaps other people would have gone more for an acquisition or so. And I think you'll find a couple of places in the different presentations where you say, wow, they're building organic capability in order to go where the puck is going, right? So for us, this is an important part. If we have that ability and we think we have, we're in a good position to improve the margins, but at the same time, invest into the growth. And then M and A is an option depending on opportunities arising, but given our balance sheet, clearly, we're in a position where we could do something if that would be the right thing to do.
I want to dive deep on 2 of those and leave the rest to the colleagues. So just a quick comment on the leading innovation. I think we're standing for innovation at this point of time. I think Marvel has gotten us to this place in a very strong way over the last 2 years. Now it's important to say that was a great step forward, strong hearing performance, strong connectivity, we're the only one who can connect to all phones still today as well as the rechargeability as well as more and more activity with regard to applications people can connect with a device through with through their cell phone.
And I think that's clearly the direction we have to continue to push. But we're in a beautiful position. While Marvel was still the strongest product in the market, we could replace it with an even stronger product, which we named the Paradise. And I would take a lot of confidence out of somebody who still has the leading product in the marketplace. If they come out with a new one, I would think it's significantly better than the one they already had in the place.
So that's where you want to be, right? Now going around the clock here with regard to how we think about the device and how it evolves over time. You heard me say hearing performance still super important and still lots of runway. You see significant improvements in the Paradise. But then comfort and fit is important.
And there are some factors and other things, but also Bluetooth connections and the tap control we brought with the Paradise are important to note here. Apps and connectivity are increasing in their importance. And with Paradise, we're adding more and we're broadening what we have. And then we talked about additional functions, which get us closer to what we have coined the healthy living companion. And I think with Paradise, we're making the first step with a motion sensor, which allows improvements of the hearing performance, which also allows improvements on the comfort and fit.
And I think it's starting to build the capability in the device, which we can use for many other things down the road. So great progress with the Paradise on the back of a well established position with the Marvel. Now the second one I want to share, and that one will not come back while the paradise comes back in a couple of minutes here with far more proof points, is the journey on the structural optimization side. And I think you remember that in the last two years, we had, let's say, smaller, medium sized activities to improve not just the efficiency, but also the agility of our infrastructure. And both is important.
And you heard us talk about that post many acquisitions, there's here. We were investing around $30,000,000 in restructuring dollars with the objective to get $17,000,000 in run rate cost. Those $17,000,000 are realized by now on that part of the margin lift you see in the second half of the year. But then with the COVID and the uncertainty, not just on how long and how deep is the COVID situation, but also midterm, there are some headwinds on the economics and the price points, which we haven't seen yet, but still important to be ready. We said we want to accelerate initiatives we had in mind because you heard us talk about there's more we want to do than the first 2 years we did.
And so we really used the opportunity, rallied the troops and came up with the different elements of our improvement for this year. You can see anything from a footprint reduction to processes and organizational design. And overall, we came up with a plan which will help us improve the run rate by CHF 50,000,000 to CHF 70,000,000 on the cost side. We will invest €40,000,000 to €60,000,000 on the restructuring. The biggest part of it is the streamlining of the Audiological Care point of sale side.
Christoph will talk more about it, but I just want to give you the cliff note version here. It's not about reducing access to consumers. We continue to expand reach. But as you can imagine, in a network like ours with 3 and 5,000 stores, you may have some stores which are closer together than you need. And if the utilization is low, you want to go drive the utilization by making sure you have access to the consumer database, but you're taking one of the stores out.
Now overall, we're making good progress on the plan. We're not yet at the midpoint, but getting there. That was what we had planned. There's a couple of things which are easier to do, which we focused in the Q1. There's a couple of long term items, which are more in the second half.
But overall, we feel confident about that plan and the ability to execute on it. A last point I want to bring forward here because it's increasingly on our mind, and I know it's increasingly on your mind. And that's the question on how do you navigate a company from a corporate responsibility perspective and how do you make sure you're good citizen in all those different dimensions. And I would put them under ecological, social and governance. Now first, as I report out, I think we're doing well if we look on the different indices and benchmarkings we participate in.
As you can read them here, 4 of the major ones, and all of them were in the best 10% of the companies who get rated in the health care sector overall. So I think a good starting point and good work over the last couple of years. But we know there's more to be done. So I want to share just briefly 2 focus areas. And as you can imagine, you need to work on many different things in order to improve your overall perception and, let's say, standing in the world.
But on the social side, one of the metrics which is super important for us is how we develop the talent within ourselves. I think it's important for the talent because they see an opportunity to grow and to grow their careers. But at the same time, it's important for us because we reduce the risk. When you bring too many people from the outside, that can be disturbing. So you see we stepped up from 50% around in the years before, which is an okay number, but not great.
I think 67% gets you more into the zone where you should be. And particular focus from us proactively to higher levels of the organization move talent to different functions, to different businesses so that people have operated in ideally CI and wholesale and in retail makes them a stronger leader as well as between different countries because cultural sensitivity and understanding is important. The other focus area, the environmental side. For us, big progress on the CO2 equivalents. You can see about 21% improvement relative to the size of the business and quite some significant investments we're doing there, but they're in the P and L.
And we had quite some focus on getting renewable energy in the form of solar panels in Asia, but also we have built a new building in Switzerland for our 2nd largest R and D site, which is energy autonomous. So just some examples here on us putting the money where the mouth is with regard to ESG. Last point I want to make before I hand over, just that you don't get confused. We gave a guidance for the second half, but we do believe that this is an attractive market and we're in an attractive position. So without making any change at this point of time, we do believe in our midterm guidance.
Obviously, there's ins and outs we have to calculate next year relative to this year's baseline, and we will do that in a proper way. But don't miss the point. Longer term, we believe that we can continue to grow above market, and we can add profitability to the bottom line through margin expansion. So in short, a solid first half year performance, reflecting a strong recovery of the market, but a good execution on our side, a faster rebound than expected on the HI side with our expectation to be in a profitable growth environment in the second half. The strategy remains by and large unchanged.
We will make adjustments where required, but it has helped us well, and I think it's still the right strategy for the post COVID time and the structural optimization initiative is well on track. And with that, I would like to hand over and invite to the stage, Martin Griede, our Head of Marketing for the Hearing Instruments Business. Thank you.
Thank you, Arnd. Good morning, everybody. I'm delighted to be here today to share with you the details of our recent Paradise platform launch by rediscovering the wonders of sound with you. But before I do this, let me circle back to our hugely successful Marvel platform and share with you how we have been able to deliver double digit growth every single month since we launched Marvel up until we got hit by COVID. Now it started by a razor sharp focus on clear and rich sound.
We delivered the best first fit experience in the industry and delivering loved first sound. Then we combined it with breakthrough innovation around connectivity, where we provided universal connectivity to each and every user in the industry connecting to any Bluetooth enabled device. And we combine this with smart applications delivering significant and interesting consumer benefits. And we coupled it with our tried and tested lithium ion rechargeable technology. So how did we how were we able in detail to deliver double digit growth, not just in year 1, but also in year 2?
Well, it starts by a powerful platform launch with key innovations, which we did back in November, Lovett's First Sound. Then a couple of months afterwards, we doubled down by expanding our portfolio and introducing our T coil versions, again driving growth. And then most importantly, and that was really new for Cinnova and new for our industry, we had a major platform upgrade 1 year into our launch. We called it Marvel 2.0. We again expanded our portfolio, adding more form factors, taking it into pediatrics and taking it into the BTE segments.
But then more importantly, we added some significant innovation after 1 year. We added Roger Direct, which allowed to connect Roger seamlessly to every single hearing aid out there without an adapter. We also relaunched our MyPhonak app 3.0 version with significant improvements. And these innovations allowed us after 11 months to sell more than 1,000,000 Marvel hearing aids. That's truly amazing.
And then at the end of the cycle, we again launched the Marvel into our ITEs and we launched it into our Severe to Profound category. And these categories today, despite COVID, are still delivering double digit growth. And then throughout the 2 years, we had a lot of campaigns. We had a strong TV campaign in the beginning. We had a lot of digital activities ongoing and underpinned also by continued releases of studies and claims supporting the benefits of Marvel.
And this allowed us to sell more than 2,000,000 Marvels on this platform, again something which has never been achieved before. Now why am I telling you all this? Because obviously, this has been a great success formula. And we're going to repeat this with Paradise by again bringing some significant innovation to the market on this platform a year from now. So now let's move on to Paradise and let me talk about all the wonderful innovations we have within Paradise.
And let me start by the core or the jewel of Paradise, which is our new Prism Chip. And let me share with you a little video what the Prism Chip does. Wow, what an amazing tool and what a powerful technology. What are some of the key features of this amazing prism chip? Well, we've doubled its memory and that helps.
That enables us to deliver new sound quality features and enables us to improve our universal connectivity. Then we've also added for the first time a new motion sensor, our ultra low power triaxle accelerometer and this one enables new motion sensor hearing features and enables our innovative tap control. And so by combining these two things and this core chip, we have been able to take hearing performance and sound quality to the next level with Paradise. So now with no further ado, let me dive right into Paradise and share with you the launch and the fascinating campaign we have developed for this Paradise launch. Indeed, there is nothing like the Sound of Paradise.
This wonderful campaign is also being underpinned by a 7 Wonders of Sound contest, where we are asking consumers to upload a video of their favorite and most loved sound. Then we have local contests in the markets and then a global contest to pick the 7 wonders of sound locally and globally. So now let me hand over to Fabian Muller, who is our Launch Program Manager for Paradise to share with you all the details of this exciting platform. Fabia joined us about 3 years ago. She has an engineering degree from ETR in Zurich.
Prior to joining us, she worked with Drager and with HOKOMA, and she is one of our rising female talents in the organization. So Fabia, over to you.
I am honored to introduce to you today, Phonak Audioparadise because there's nothing like the sound of paradise. That's a bold statement, is it not? The sound of paradise? How did we take the best selling universally loved hearing aids from Phonak to the next level? We started by listening, by listening to the core needs of our consumers.
What do they truly want from their hearing aids? And how can we make their daily lives even better? They told us they need to be able to communicate better in quiet when they're having those intimate conversations with their loved ones. Conversely, they also want to be able to communicate easily in a noisy environment. For example, at a family gathering where kids are shouting and there's a lot of laughter and stories at the table.
In all cases, they want the sound to be natural, not artificial. And all of that packaged in a hearing aid, which can be adapted to their changing hearing needs and which is easy to handle. So you can see sound quality and ease of use are very important to our consumers. This brings me to the key innovations of Phonak Aldeo Paradise, delivering on those core needs of the consumer. With Ardeo Paradise, we made a huge step forward in sound quality and added new hardware, new processing and new features.
And this enables unrivaled sound quality. In order to empower our customers and consumers, we expanded our offering in the digital space. This enables the customer and the consumer to tailor their journey with our personalized digital solutions. And last but not least, Paradise offers universal connectivity with more Bluetooth connections and easy tap control. And of course, we are still truly made for all.
Unrivaled sound quality, still the core of the hearing aids. We wanted to especially address 3 key consumer needs that they want to hear better in quiet, communicate easier in a challenging and noisy environment and their demand for most natural sound quality. We have identified 3 key situations for the consumer, which we wanted to improve and develop the corresponding features for it. These features are part of the new Autosens OS 4.0, which is developed with artificial intelligence and is a perfect orchestration of our existing and new features to create the best personalized setting to support a variety of the consumers' communication needs and lifestyle. The first situation is having a conversation in a quiet environment.
The feature we developed for this specific situation is called speech enhancer. It is meant for those quiet moments when your partner whispers loving words or you're having an important conversation with a friend in the quiet of your living room. Isn't it also so important to understand exactly what's being said in those situations? Well, speech enhancer is an adaptive feature that is designed to enhance the peaks of speech in quiet up to 10 dB. 10 dB may be translated to the difference between a quiet whisper to sound more like normal volume for the consumer.
And hence, the feature speech enhancer provides the consumer with better speech intelligibility and less listening effort. 2nd, the consumers request a better solution when they're trying to have a conversation in a loud environment, such as a restaurant, a bar or maybe the playground. It can be really difficult to understand what is being said when there's background noise. And that's where the feature dynamic noise cancellation comes in, which works with a directional beamformer and helps the consumers in those tough situations. We have up to 4 dB improvements in signal to noise ratio in challenging environments.
4 dB doesn't sound like much, you might ask yourself, but 4 dB can make the difference for the consumer between an environment that feels challenging and noisy and a comfortable one. We were able to show that dynamic noise cancellation provides the consumer with better sound quality and less listening effort when there's background noise. Because we want our consumers to enjoy these types of environments, such as a family gathering or a restaurant setting. The 3rd new feature is the motion sensor hearing, which leverages the data we get from the new motion sensor, which is built into the hearing aids. Now imagine the situation when the consumer is trying to have a conversation with a friend whilst taking a leisurely stroll through the park.
He wouldn't need a beam former to the front because the friend is hardly walking backwards in front of him, but next to him. And with the new motion sensor hearing, we can detect whether the consumer is walking within 6 steps and then seamlessly steer the microphone mode and the dynamic noise cancellation setting to accommodate to the situation walking and talking. More than 70% of consumers agreed that motion sensor hearing feature leads to a better speech understanding and a better over listening experience for conversations whilst walking. For the first time, we adapted our proprietary fitting formula and we are proud to present to you APD 2.0, our new adaptive Phonak Digital. This new processing algorithm and pre calculation is designed to establish an ideal first fit, which we all know is so important.
A good first fit acceptance is crucial for the adoption of the potential client, isn't it? The APD 2.0 is also designed to provide a naturalness of sound, which as we know is one of the core needs of the consumers. In a dedicated study, we were able to show that APD 2.0 leads to significantly reduced listening effort in noise for mild to severe hearing loss groups, as shown in the graph on the right. Our consumers have also expressed core needs along the lines of ease of use. They want their hearing aids to be adapted to their changing hearing needs, whether that is done by themselves or as a hearing care professional.
And they want devices which are easy to handle and to adjust. So let's have a look at our 2nd pillar, the personalized digital solutions. The audio Paradise devices empower the consumers to tailor their experience along the consumer journey. Thanks to our digital solution touch points, this can now either happen at the hearing care professional's clinic or Ripley. And on top of that, the consumer can adjust additional personalized settings within the My Phonak 4.0 app.
Performing a hearing test is often one of the first steps in the consumer journey. The new Hearing Screener 2.0 is a convenient day to do a simple screening without requiring consumers to visit the clinic. The consumers get their estimated hearing loss results and are guided to take the next steps. The hearing care professional obtains the estimated results in dB hearing loss separately for the left and the right ear in a more detailed report, and he also has the have a look at the 3 new features in the MyFonic 4.0 app. The remote control now has a feature to personalize the noise cancellation when the consumer is in a noisy environment.
The consumers can now adapt how much noise cancellation they want or how much of the background noise shall still be present. With the Hearing Diary 2.0, the hearing care professional can set goals and tasks for the consumers as well as their partner. The consumer can now evaluate the progress towards the personal goals and share feedback with their hearing care professional. And last but not least, the audiogram direct can now be used during a remote support session. The hearing test is done directly through the hearing aids.
An audiogram direct is designed to check a client's hearing during a follow-up session, but it can also provide a starting point for new remote fitting for clients who are temporarily unable to get to the clinic. On the hearing care professional side, we now have the client dashboard 2.0, where the hearing care professional can help create tasks and goals for the consumers and their partners within the Hearing Diary 2.0. The client dashboard is also used to display the feedback of the consumers and their partner as well as the hearing aid usage. It is designed to improve the overall satisfaction and build a strong relationship between the hearing care professional and the consumer. In the last couple of years, smartphone ownership has increased drastically.
Smartphones have revolutionized the Internet and how we live our lives. No longer is a phone relegated to just phone calls or streaming media. Smartphones are used to shop, keep up to date with sports and the weather, navigate, get the news and thousands of other functionalities critical to our daily lives. The surge in popularity of voice assistance, for example, Siri, has shown voice is a convenient user interface for the Internet. And already last year in 2019, the average household in the U.
S. Had an estimated 11 connected devices according to a study from Westcott Auditor. So connectivity is no longer enough. People are not just connected with a single device or one brand of device. A hearing aid is no longer just a hearing aid.
It must serve as means to interact with a variety of other devices in the environment seamlessly and effectively. This is not connectivity. This is universal connectivity, our 3rd pillar. With Phonak Paradise, we will have more connections, easier access to Bluetooth functionalities and of course, we are still made for all. Made for all.
Yes, we don't just allow direct connectivity to iPhones, maybe a couple Android phones. Phonak Paradise allows direct connectivity to any cell phone regardless of the brand or operating system. Our hearing aids are truly hands free, just like Bluetooth wireless headsets. The hearing aids utilize their built in microphones to pick up the consumer's voice for phone calls. A call can be heard ringing directly in the hearing aids and can be accepted with a simple double tap on the pinna.
This can be done at a distance from the mobile phone, for example, while a consumer is positioned on the other side of the room. We want our consumers to have a device which is easy to use and fits their lifestyle, especially when increasingly more and more people will have multiple devices at home they want to connect to and are also using voice assistant apps more and they want basically everything on tap. Paradise is introducing new Bluetooth connectivities to ensure the hearing aids of today keep up with the Bluetooth needs of tomorrow. Paradise is the first hearing aid that allows 2 active Bluetooth connections at the same time. This means that the consumer can, for example, connect his tablet and his mobile phone at the same time.
Now imagine a situation where a consumer is watching his favorite Netflix show on his tablet with his idea of Paradise hearing aids, But all of a sudden, his daughter calls him on his mobile. Having the tablet and the mobile phone connected to the hearing aids, he can seamlessly switch between watching his show on the tablet and picking up the phone call without having to reconnect. A simple double tap on the pinna takes him straight to the call with his daughter. Now how's that for ease of use? In addition, Phonak Paradise allows 8 possible pairings to different Bluetooth devices.
So the consumer can pair his mobile phone, his work phone, his laptop, his daughter's tablet, his tablet, his e reader, that's only 6. So he would still have 2 more possible pairings. Maybe you've also noticed that I said the consumer can pick up the phone call via double tap on the pinna. That's right. Due to the motion sensor, which is built into the hearing aid, the consumers can now accept and end calls via double tapping instead of scrambling for their phones or searching for the button on the hearing aid.
Do you know any other hearing aid that can do that? Us neither. In addition, the consumers can now also easily pause and resume streaming or even tell Siri to order more milk for the fridge. Super easy, right? Phonak Paradise is the world's 1st and only hearing instrument to offer speech enhancement, motion sensor technology, tap control and universal Bluetooth connectivity.
It is innovation with a purpose. And the power of this innovation unleashes a truly spectacular consumer experience. The consumer's first experience with Paradise in the hearing care clinic needs to deliver the wow, immediate acceptance, smiles, nodding and laughter. And then we want them to report back with more wow moments when they're on the move, when they're in really challenging real life listening environments. And we want them to be able to listen in quiet with as little effort as possible or understand everything that's being said in tough situations when there's background noise.
These are the kind of experiences that will make a difference in the life of our consumers. And if our consumers are happy and satisfied, it's also good for the business of our customers, the hearing care professionals. Less time making adjustments, fewer follow-up visits, more consumers saying yes to new technology and fewer asking if they can return them. Our consumers shall be able to universally connect to and stay connected to, let's say, their iPhone and their iPad, for example. Enter the phone call with a double tap of the ear, pause and resume streaming, ask Siri for directions to the restaurant, all without ever touching the phone.
How's that for Truly Hands Free? Well, with Paradise, you can do all of this. It stands in a class of 1. After the last few months we've all been through, it's so refreshing to be talking about new and exciting innovation for a change. And those of you who know Vonage will also know we are extremely conservative about our claims and sound recordings.
But if you're less familiar with us, some of this may sound too good to be true. So Martin Grieder will show you later what the independent press said about Paradise. Respectfully, we think you too will be rather blown away.
Wow. I'm sure you agree with me that we've been able to pack in very exciting innovations into our Paradise platform. I am most excited about all the innovations we have done in the area of hearing performance and sound quality, allowing us to truly take Paradise to the next level of the heels of a very, very successful Marvel platform. Back in August, we launched a full rig portfolio into the market with 2 battery powered hearing aids and 2 rechargeable hearing aids. And in both versions, we have a non and a T coil and a non T coil version.
And the reception so far in the market has been very, very positive, and the conversion rates are taking picking up very nicely. In terms of launch, obviously with COVID, we have to think in innovative ways how we launch this product into the market since physical events were not possible. And so we decided to create engaging immersive and high quality virtual events, which we then conducted in the local markets. We have had more than 8,000 people attend in 14 different countries, which is far more than we would have ever been able to get with our physical events. So thanks to this innovative approach in launching Marvel, we have been able to reach many more existing and potential customers.
A point in case, Germany, they managed to reach 4 times more customers at their virtual launch event and they have been able to reach 4 times more customers at their virtual training events. So this has been a great success and obviously, again, something we will repeat in the future, probably combining virtual events and physical events in order to have the best of both worlds. Coming back to the comment Fabia made about the feedback in the market. The feedback in the market so far has been overwhelmingly positive from our HCPs who have really taken up this paralyzed hearing aids really quickly, driving great conversion, but also from our end consumers giving us very positive feedback on the device, but also the independent press. All these people have reviewed our hearing aids, have carried them, have tested them and have said they could not believe how you could actually deliver a better hearing aid than Marvel, but each and every one confirmed that with Paradise, we have succeeded to just do that and to take Marvel to the next level in terms of sound quality and hearing performance.
So in summary, let me summarize the key takeaways of this Marvel platform sorry, of this Paradise platform. So Phonak Audeo Paradise is the world's first and only hearing instrument covering speech enhancement, motion sensor technology, tap control and universal Bluetooth technology. Paradise delivers unrivaled sound quality, exceeding already a strong predecessor, Marvel, and we have a number of claim studies to back this up. We have launched a full range of rig devices from day 1 in the market, and we have a captivating and engaging campaign, including a social activation contest with the 7 Wonders of Sound. And we have been able to reach much more customers through our virtual launch events.
So all in all, we are off to a very good start. And in light of all this innovation, we truly believe that with Paradise, we will be able to continue the success story of Marvel. Thank you very much.
Martin Faier, thank you for introducing us to the exciting Phonak Paradise. Also thank you for sharing us the initial impressions from the marketplace in the quotes, but also the positive conversion rates we see. As you would have expected, we're on time with our first two sessions here. I want to guide through on how we're going to go through the next 40 minutes. There'll be a 10 minute break, where the people who want to potentially ask questions need to get out of the webcast, dial in on the numbers shown here.
The ones who do not want to ask questions, you can stay on the webcast. The benefit of that is you will continue to see the video and hear the questions and the answers. We couldn't do this for the ones who want to ask questions, so they will be only on audio, and we'll take a 10 minute break here. Thank you. Welcome back to the first of our Q and A sessions.
The ones on the screen can see, I have Hartwig Gravener, our CFO, with us. Due to the rules with regard to physical distancing, We don't have everyone here, but if there's questions which lead us to Martin and Fabia's section, they are close by. We would bring them up on stage to answer those questions. With that, I think we're ready for the first questions.
The first question comes from Pataki Maia from Kepler. Please go ahead.
Yes, good morning. Thank you for taking my question. I would start with 2 quickly, please. Arndt, maybe there has been, as you had on the slide, the high number of attendants on the launch events. And we can clearly see also from some of your competitors that the fact that a lot of it is virtual allows for a greater customer reach.
Now do you think that the pandemic or the situation as we have it today could offer a unique opportunity for those companies who have a new product in the market in order to gain new customers because it's probably easier to get people to attend virtual? That will be my first question. And then the second question is with regards to Paradise. And you've displayed on the slide that there is you can check your hearing and then you get like an estimated hearing loss result based on that check. And I was wondering, do you have any data how this is comparable with a real hearing test?
Thank you very much.
Maja, thanks for opening the question session here. We think about the launch as being an interesting experiment. I think it's great to have the broader reach. I think it's fair to say if somebody comes to an event, you can go deeper and you have more captivity. So I think in the sum, it's probably same outcome.
Perhaps it's a little bit more it's early innings for us to know what that means with regard to the success of going after competitive accounts. But I think it's fair to assume it offers you the opportunity to at least have an initial contact easier. But I think from the conversion rate, I think we need to observe this and probably know better in 2 to 3 months down the road. With regard to the hearing aid, the question, Jacqueline, if you can join us and help us with the specific answer.
So yes, my name is Jacqueline, and I'm an audiologist. And regarding the hearing screener, So this one is just meant to provide an estimated hearing threshold. So if a hearing loss has been detected, then it's the first stepping stone to making connection to that hearing care professional and further evaluate what their hearing loss is and their hearing needs are. So it's making that first connection. And so keep in mind, it's an estimated and because everyone's devices are going to be different, the type of earphones they're using.
So certain calibrations has to go into that. But it's a stepping stone. We also offer Audiogram Direct. And with Audiogram Direct, this is using the fitting software Phonak Target. And this is just quite different than a diagnostic tool, because this is using the actual hearing instrument.
So the diagnostic tool is the full test battery to look at the whole hearing system. And then the hearing care professionals together with the client has determined what was the best hearing aid for this client. Then with the hearing aid and the correct acoustic coupling, then they can recheck those thresholds using the actual devices and do some extra fine tuning to really personalize the hearing aids to that client. And so now we have, this using Phonak target. So you can do this locally in the clinic.
And you can also now do this during remote support in the event that the client is not able to come into the clinic. So I hope that answers your question.
Yes.
Thank you very much.
Thank you very much. Arnd, just a follow-up quickly. Some companies claim that the customer loyalty during the pandemic is incredibly high. And so I was just wondering, is that something that you experienced as well? Or do you think that this is a headwind in gaining new accounts during that time?
Or do you really think that the virtual reach could be stronger than the loyalty? Thank you.
I think it is probably a little harder to convince a customer if you meet them for the first time if you do that virtually versus when you're in person. So I would have the same sentiment. I think the countermeasure as you've seen in the virtual launch event, but also when you heard me talk about the virtual reach out we do, you can imagine if somebody does a virtual call as a rep, he or she can do many more calls in a day than when they travel around, gives you that broader reach. So I think we would believe it's about the same opportunity because we don't know better, yes? But I think we see good progress on our activities to drive competitive accounts as we had before just by the higher frequency of interactions, although being more often virtually.
The next question, please.
The next question comes from Michael Jungling from Morgan Stanley.
I have a few questions. Firstly, on Paradise, can you comment on which channels you see the most success? Is it with the retail, independents or with the chains and networks? And on the success, if you can also comment on which geographies Paradise is working the best for you? Secondly, on competition, which hearing aid brand is providing the stiffest competition of switching out a hearing aid in favor of Paradise?
And question 3 is, given that you've been now quite successful sort of post the peak of COVID in achieving good sales, is there a need to go into a different sales force configuration, meaning that sales and marketing costs going forward could come down in favor of cheaper online marketing tools? Thank you.
Michael, thanks for the questions. So first, with regard to the Paradise impact, I think we're seeing good reach and good conversion across the different geographies. I think we launched at certainly different times off by 1 or 2 weeks. We started in Germany and U. S, so they're a little further on the conversion.
Just keep in mind, you really need to work on the customer side after the launch event 1 by 1 to convince them about the product. But I couldn't detect that one geography is a lot higher than the other. I think from the channel perspective, clearly, a lot of interest on the independent side and good recognition there. We obviously start first with the ones who are closer to us before we move to the competitive accounts to make sure they convert and we get the ground swell in the marketplace. I think from the large retail, it depends on is the product going there already.
As you can imagine, with an account like which has a private label that may be somewhat delayed on when they get access to the technology depending on their own timing. So I think we're further on the independence, but really more based on the, let's say, launch timing and when product is available. I think from the question on where is it harder or easier to unseat in a competitive account, I think I would first say if somebody has also new product out as much as we're doing well with our products, probably a little harder there than somebody who has a product out which is a year old or 2 years old. I think the second one is, I think, we're positioning very clearly around a premium performance with regard to hearing performance and other elements. So we're clearly fishing more in that segment where you would expect one other competitor to be more positioned around.
And I think that's where you see more of the share activity going on when we come out with a new high end device. With regard to the sales and marketing side and the cost there, I think on the B2B side, we have not yet contemplated if this all leads to we will make a change to our go to market model and reduce the number of reps or other things. I think as you hear me voiceover, over, it's great you have more reach, but ultimately, particular, our target customers on the independent side do appreciate the relationship. And relationship is hard to replenish if all interactions are online or virtual. So in that regard, I think we're all looking Michael, that last year, we went actually higher on the number of salespeople we have.
We think that was a good move. And so we feel good about what we did and not an immediate change here.
Thank you.
Thanks.
The next question comes from Kit Lee from Jefferies. Please go ahead.
Thank you and good morning. I have 2, please. I guess, firstly, just want to be more on Care. I guess, what have you learned so far this year in the future? It sounds like the adoption rate is still pretty low despite you having the technology to do through the pandemic period as well.
I guess, what are some of the barriers for more customers to use remote fitting? And whether you can address those barriers going forward? And my second question is on the PRADISE launch. Can you just talk about sales in the 1st 2 months versus the same period last time when you launched the mother product? Thank you.
Yes, you're welcome. Thanks for the question. I think from the remote fitting side, we shared that in July, and the story hasn't changed. I think we came into COVID at a very low rate of remote fittings happening, And this is not for us not trying and make technologies available and training audiologists. We're really not holding back.
And I know our competitors are also supporting the audiologists on that journey. But we're talking about low single digit percentage of all fittings done being done remote. And we can see that only few of the audiologists are adopting the technology. When we're in peak of the pandemic, meaning people had to make choices if they go to store or don't leave the house, I think we did see a pickup. We're in the 4 to 5 times as many, but you're still in the low single digit to at max mid single digit.
And since we reopened the stores on a broad basis, again, this number is coming down. So out of that, we're not taking it's not going to happen over time. I think it's a long journey. People need to adjust their consumer journey. Christoph will talk a little bit about it.
The consumer needs to get used to it. The audiologist needs to get used to it. It's, I think, an important offer over time. But we're with the technology to some degree ahead of the conversion here in the marketplace. On the second one
Can I just sorry, can I just follow-up on that? So do you think it's more of an awareness issue? I guess, is the technology good enough today and it's more about building awareness with eulogies and the customers or is technology still bottleneck for the milk seating?
Yes, I would answer on the awareness side. I think it's pretty clear on the B2B side to our customers that we have that offering. And especially at the beginning of COVID, we proactively offered that and offered training for audiologists on how to use the technology. We really wanted to help them to have some of their business back. And the same in our own audiological care or retail, where we obviously don't have the challenge that we need to kind of push a little bit against the audiologists standard practice.
But even on the consumer side, when we offer it over the phone, you can do this in a remote fitting. We send you the UIs and we do the initial fitting even over the phone in the countries where that's possible. The moment you said, but you can come to the store and we have safety measures in place, they showed up in the store. So in that regard, I don't see this as an awareness issue because it was very broadly used by our customers as well as by our own retail with regard to trying to get momentum in the marketplace during COVID. So I think it's a very relevant test for us from the willingness of the consumer at this point of time.
On the launch of the Paradise versus the Marvel, I don't want to say exact numbers. I think we feel very good about the momentum we're seeing. Clearly, September already had a positive impact in there, more to come. I think one of the words of caution is always that the audiologists tend to use the new device for a couple of their consumers and then they wait for the feedback after 4 or 6 weeks when they have worn it and we're still in that phase. But I think if you compare to a normal product launch, take the Marvel and to be long before, we're probably in the same zone.
I think the Marvel was a very unique situation, the ones who are closer to us, in all honesty, in the year before, we started to have real issues with the B Direct from a competitiveness perspective. In that regard, it's not the same as a paradise against baseline, but here we come with a paradise on top of a successful Marvel. In the other case, we came with a successful Marvel on the top of not so successful B Direct. So I would say we're clearly on plan here with where we want to go.
Thank you.
The next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead.
Good morning and thank you for taking my questions. I have 3 please, if that's all right. My first one is just actually in the very short term, curious how you're thinking about the Costco KS contract and your willingness to introduce new technology there. And I guess if you can comment, Arndt, if this if cost cokeus was assumed within your guidance for the second half of the year, that would be helpful. My second question is on the Paradise product cadence from here.
So I was slightly surprised to hear Martin mentioned in his prepared remarks that you were already thinking about the next generation Paradis 12 months from now. Just kind of curious what you're thinking is on such a short product timeframe. I guess we are so early into the launch, slightly surprised to hear you talk about that. So if you can comment on the rationale behind it and maybe tell me if I misunderstood what he was saying, maybe I did. And my last question is just a financial one, which is on the midterm guidance.
I know you alluded, we need to have the right base from which to grow. If you can give us a sense for what you think that base is, that would be very helpful as we think about the midterm forecast. Thank you very much.
Veronika, thank you for the questions. I think on the Costco side, quote unquote, the good news if you think about the second half year, while we can't unveil the exact months, but in general, the COSCO contract comes up for renewals on a 20 month time frame, so not impacting the next 6 months here. The and with your question with regard to technology, as you would imagine from a major customer, they would expect that we're expanding our technology offering if we don't leave them too long behind. So in that regard, I think that answers hopefully the Cosco answer. Thanks for asking on the Paradise.
We and Martin had no intention to say that we're going to replace Paradise in a year. I think he wanted to make the point that if you look at the Marvel launch, we had a strong offering out of the gates, but with some incremental capability we added like the Roger Direct and also the MyPhonak app, which got a significant improvement, also in that case, bringing the T Coil to the product, we really had significant advancements to the Marvel platform to give it a second notch if you think over 2 years. So think about the Paradise the same way that there'll be a strong launch, which is now. We plan with the product for 2 years. But in between, there's an opportunity to get back to the audiologists and say, look, there's advancements significant advancements to the product, but it's clearly not just a 1 year cycle.
It's a too good secondarily the investment is too high on that side.
The third question? 3rd question was about the base for the midterm guidance requiring a base out of this fiscal year, hello, Veronika Harte speaking. This is obviously for us to have to having to assess how pent up demand and COVID generally COVID impact has with hindsight, when the time comes in spring 2021, when we have to talk about that, Then with hindsight, we will be able to say how our present fiscal year was impacted by those two factors. And so we will then have a better read and have then to assess what does that mean for a year over year for 2021, 2022. So that's what we meant.
Thank you, Hartwig. Let me maybe ask just a follow-up to that base comment. I guess, ordinarily, you would have grown 7% to 11% this year. I mean, is the base from which we should be thinking of the midterm guidance higher than what you're going to deliver this year? Or I think there is this kind of debate, is it yet a lost year?
Or are you going to catch upon it and grow from the base that you would have had anyhow? I guess that's really what I'm trying to ask.
Yes. I guess, Veronika, we are at the risk of speculating at this point in time. There is too much COVID volatility that would allow us to make a firmer statement here at this point in time. It could be that it's a lost year. It could be that actually you can straight line basically over that year, given that as of current, we find that the underlying consumer behavior is relatively stable.
But it's early days, I believe, to talk about, but maybe Arnd, you want
to amend here. Yes. I'd be slightly more positive. I don't know if it is all going to be easily made up against the 711 you said. I appreciate you had us at 7 to 11.
Our midterm guidance tends to be 5% to 7%. But no matter what of that, I think there is an increased demand for hearing aids out in the world and people are looking for those. I think we need to factor in there may be some economical headwinds, particularly in the U. S. Out of the economy.
But I would say my expectation right now would not be it's a completely lost year, but it's going to be somewhere in the middle to what's the more positive scenario.
Understood. Thank you both.
You're welcome. We do one more question.
This
comes from Oliver Metzger from Commerzbank. Please go ahead.
Good morning. Thanks a lot for taking my questions. 2 I have. The first one is, you mentioned that growth in year 2 was driven by Marvel 2, but there was also some 2 major positive factors, in particular it was VA market check gains and the Costco win. So I'm confident about the successful Paradise launch 1st year.
But how do we evaluate the possibility to repeat such an unusual good performance in the 2nd year? That's my first question. My second one is on your slide with market and business update. You can see that basically from July to August, all markets go down. So do you think that the pent up demand had only a comparatively small effect?
Or how do you explain the sequential decline momentum from July to August?
So on the 2nd year on the Paradise, first, let's go to the 1st year, which I think will be a good year. I think in the combination of things we're have started to establish at Sonova with regard to how do we get growth in the 2nd year. I think it's a combination of what you do from product as well as Claude will talk more about that from a commercial execution perspective. So I think we're directionally on the plan in which in the 2nd year we still have growth compared to prior products because we don't just only sit on the product side. I think incremental capabilities will give little bit of a lift.
Yes, there was VA and yes, there was a Costco decision in there. But I think we're planning with being able to balance better than historically between the 1st year and the 2nd year, given the measures we're putting in place and how we play the cards. I think on the pent up demand side, really difficult to get definitive answers and numbers out of that. I would take the confidence out of the German and the Canada numbers that we were in positive territory in both 2 months and in Germany in 3 months. We're not seeing at this point of time a stepping back in the markets.
We see a continued good momentum in the different markets. So I think it was probably a little over pronounced in those curves there. So I think there is an element of pent up demand. I would think it's longer than a month in the system. Okay.
Thank you.
The next question comes from David Arlington from JPMorgan. Please go ahead.
Hi, guys. Thanks for the questions. A couple, please. So firstly, obviously, some markets are looking potentially more at risk of another lockdown than others. I just wondered how you're planning for that.
And related to that, just wondered if you've seen any evidence that patients were coming in perhaps earlier than they would normally, maybe over the summer, to avoid coming in over the winter period? And then secondly, just in terms of structural cost savings, how should we be thinking about those dropping through versus reinvestments? And if you are looking to reinvest, where do you think the biggest areas for reinvestment are? Thank you.
Thank you for the questions. I think I'll leave the second one to you, Hardwick, so that we share a little bit of the load here. With regard to the potential of lockdown, it's hard to say. I think you have equal information as we probably even better. Therefore, our guidance for the second half was without substantial governmentally driven lockdowns and restrictions.
I think I don't want to speculate beyond because everybody on the phone has their own expectation there. I think with regard to people coming earlier just because of the fall, I don't see that as a very realistic scenario. I think that people come, particularly the ones who have a reimbursement situation coming up where they get over their 5 year, they come and they come. I think also taking a lot of confidence out of the weekly curves I see with regard to sales orders and appointments. So at the moment, it's pretty steady in the market with regard to week over week performance.
So not as up and down as
you would imagine. Yes. On your second question, first of all, it's great that you clearly recognize that we are doing the structure improvements not just to protect the bottom line or improve the bottom line, but also to have the funding to reinvest into growth. And I would say in order of importance, but equally, would say all they are important, it's innovation. So it's continued funding of R and D that goes in a broader range of beyond what has been maybe 10 years ago, where it was mostly hardware, now it's software, it's apps, it's interaction, it's new technology coming into the hearing aids like sensors, etcetera.
Then it's on the marketing and lead generation side. So very clearly on our retail business, and Christoph Frey will probably also touch on this later, it is multichannel marketing and lead generation where we can still do great strides and we are investing in very web based digital lead generation there. It requires quite some effort. There's also a little bit on the wholesale side really in certain aspects. But clearly, on the wholesale side, there's also much stronger aspect on how we run our feet on the street, both quantity and quality and how we run the processes.
So those are important areas that we are investing in.
Thank
you. The next question comes from Daniel Please go ahead.
Yes, hi. Oso Ferring from my side. On Slide 30, you talked about the sound quality, the 10 decibel improvement for quiet situations and the 4 decibel improvement for noisy environment. Can you tell me how much that was for Marvel so that I can see the difference? And the second question is the Paradise rig style, which is now fully rolled out.
How much does that account globally in the meantime? I guess it's increasing every year, but if you can give us a certain ballpark number. And last question quickly, restructuring cost of €40,000,000 to €60,000,000 How is that spread between first half and second half? And maybe you said that in the past, but I forgot. Thanks.
Yes. Maybe Daniel, quickly taking the last first and then defer to my colleagues. The we are currently in the process of taking stock. So we will see how much it is in the first half. But there will be an overweight for the second half.
The measures have kicked off very nicely. We're very happy with the progress, but there are kind of lumpy milestone effects when IFRS determines us to account for those. So bear with us for another 5 weeks and we'll know exactly. Maybe, Jackie?
Hello. So I'm happy to answer the questions about the hearing performance features and how they differ to Marvel. So we touched on the first one, we have the speech enhancer. So the goal of speech enhancer is to enhance the peaks of signals a quiet situation. So what it's looking at is, and a very calm situation.
So being in an office, being in the living room, it's looking at the speech signals and providing an extra SNR, so signal to noise ratio up to 10 dB. And this is not something we had in Marvel. So it's very specific to those quiet situations and it's looking at a very specific input level. So it's based on input level. The other aspect is we have dynamic noise cancellation.
So dynamic noise cancellation is a more aggressive noise reduction and it works in combination with the hearing aid microphone mode. So in your speech and noise or in your speech and loud noise situations, so think of a restaurant, a cafeteria. So it's a more aggressive noise reduction. And plus the client can personalize this even further in the MyPhonak app. And this is not something we had before in the Marvel products.
Does that answer your question?
Yes. Okay. Thanks.
All right. Thank you.
Danny, quickly on how Paradise starts to penetrate our portfolio. Obviously, it's one of our brands. It's at this point chiefly in wholesale. And so it is a step by step rollout that we have here. Generally, as you know, our rig product is around 60% between 60% and twothree of our volume.
And so and Phonak, we don't disclose this. It's a clear overweight of our portfolio. But I guess you can directionally find out that it is just like you saw it with Marvel 2 years ago, it is taking it step by step, so it's not all just in one go. But big steps have been taken in the 1st couple of weeks, further growing also with the penetration and the changeover between the old and the new platform.
Thank you. I think we stop here with a question. We have another Q and A session at the end of the program, but I want to stay on time and then take another half an hour later. With that, Hartwig, thanks for joining us. And I want to introduce Christophe Fon, who's leading our Audiological Care business.
Christophe is with us around 4 years. So he'll be on the journey with the Arginova acquisition and now post the ArduNova acquisition on how we're evolving our audiological care with a particular focus on how we're increasing reach through augmenting the consumer journey. And as you heard me say, many things for many consumers, it's the same as it was before, but we see the first ones engaging on an omnichannel journey. And I think Christophe has lots of updates here to share with you. Christophe?
Thank you very much. Thank you, Arndt. Hello, everybody. I will guide you through the dedicated strategy of Sonova Audio Physical Care standing alone business today. Let's move to immediately the presentation.
So here, you don't see a lot of changes compared to what you have seen last year in terms of titles. But I will probably, looking at this expression of the strategy, cluster it in 2 different groups. 1, as a recurring element of the strategy where we see the continuous improvement, we see also the strategic network expansion and the profound expertise of medicalization, what we discussed, we see very much the opportunity for ourselves to move on the DNA of Sunnova, which is a premium level of quality of product, a premium level of service. And that will create differentiation into the market. Then there is 2 other groups which are extremely interesting today, which is a consumer access, which is the omnichannel strategy and the strategic network expansion.
Those clusters existed already in the strategy presented 1 year ago, but we see now with the change and acceleration on consumer behavior, a clear need to accelerate also the execution of our strategy on those topics. And this is what we do. Flexible consumer access means we have to have utmost expertise into the understanding of the consumer behavior and into the data, into the consumer evolution. When it moves to omnichannel strategy, it's all about what is a consumer journey. We have seen, especially now with the COVID situation, the consumer journey in many other businesses, not in our industry, but parallel industry or FMCG type of industry, a very profound change of consumer behavior in term of buying, in term of looking for information.
And that give us the opportunity because we had already the building blocks to accelerate the strategic implementation into our business. When it comes to the strategic network, for sure, when you move, and I will go in more detail into that, into an omnichannel proposition, it means basically you say to the consumer, you can buy product in the store, you can buy product online, you can circulate across these different propositions. So it means also your geo coverage of stores should be adjusted to this consumer evolution. Let's move on. If for the ones that had the presentation last year, you see a first important dimension that was not there last year, which is China.
You clearly see here that we have a blue on the Chinese country, on the Chinese continent, And we have to cover that. We are I'm going to cover that on our first steps in China, very interesting first steps. You have also 2 other dimensions into that, and that has been clearly accelerated via the current situation, the current pandemic. It's we moved faster into our e commerce development, and I just commented on the e commerce development, you will see that in the presentation. We had some activities on non hearing instrument, e commerce based on historical element in different markets.
We have been moving that to centralization, to harmonization and acceleration into market. We'll cover that in the presentation. Moving now to the performance of the business. It's probably not meant to say, but it looks like a very successful performance of business. When you look at and we isolate for sure the March performance because we all know what happened in March.
But out of that, we see clearly that we had a strong acceleration. So just as a reminder, we did the acquisition of AudioNova in 2016. So I would say those numbers are net of us the acquisition impact. You see clearly here the growth of the overall business in 2019 2020 going to high single digit performance for the business. And what we did over the journey is very much we get to complete brand harmonization into the different market.
We restructured we had 2 different difficult markets with U. S. And Netherlands for different reasons. We have structured successfully those 2 markets into the journey, and those two markets are now delivering growth and productivity to the overall system. We improved significantly across the world in store execution and this work on harmonization of the store execution.
We have developed and I was introducing the concept last year of urban spoke models, this world offering bigger store, the way to address and to show typically the expertise to the end consumer. We'll cover that with a specific presentation today. We went also to intensify, sorry, the bolt on and the greenfield over the years. Out of the restructuring, we have been significantly growing into store opening and acquisition. And finally, we started this journey already 2 years, 3.5 years ago.
We are halfway into what we call beyond, which is IT backbone. It's not only the IT backbone. It's also some element of the front office, the CRM and the call center management are also under this global umbrella. We moved already this beyond into some country execution with good success, and now we are accelerating the rollout of this new IT system for the full organization. Moving a bit back to history.
So in 'sixteen, we did the acquisition of Odeonova. We were working in 2018, 2019 into the legacy. So we still had back in time 2 different blocks. 1 was Connectering and all the brands we had in the group and 104 was Odeonova. We have been over 'nineteen, 'twenty doing the full harmonization.
So today, what we have, it's only one very consistent network. We are using different brand in the different market, gears in Germany, Lapeyre in Belgium and so on. We are having systematically the same product range in all the markets of the group, carrying 2 brands, Phonak for the premium segment and AudioNova brand, which is our private level, leveraging technology of Unitron for the rest. This, when we look back to the performance and compare to what was the ambition with integration of Odeonova, we are above our targets in many aspects. We have been growing significantly above market growth in all our markets, And we get, through the benefits of the vertical integration, to 95% above harmonization of share of wallet for the product.
So this is a very good success and happy to be in that position. Moving now to the omnichannel and what we mean by omnichannel strategy. It was very interesting in the equation the logic of the question related to awareness came multiple times. And that's exactly what it's about when you start this omni channel journey. You don't start the omni channel journey by the first appointment.
You start with consumer awareness. That makes sense. Strategically, in a market where the need is largely superior to the demand in terms of consumers, there is an action needed to create awareness, digitization awareness. It's also related to the store. It's also action to insurance company or ENTs, but you want to create this part of this Home In China strategy is the awareness.
Also what you want to achieve here is to fit very well to the consumer demand in term of journey. And on this consumer demand in term of journey, if you think about it, we are not the one defining what should be the consumer journey or should be the touch point because consumer exposed to many of our many different consumer journey when they buy online, also category of products, when they go shopping for sports goods and so on. They have different journey. This, they are becoming on this journey expert of it. So we have to follow this consumer evolution.
We have to follow this journey and give at least the same proposition for the consumer journey. We talk a lot about also in the question the remote fitting. The remote fitting in the omni channel journey is only a little part of the omni channel journey. It's a reality. And just to give you a few numbers, at least the way we believe or we think about it, it's, as Arnd said at the beginning, only single mid digit will be mid single digit will be the number of consumer having 100% digital journey for the category.
And it's not the case today, but probably it will be the case in future. What is more interesting also looking at the economy of the mechanism is when you project that into 50% of the customer will use at some time this omnichannel and digitization journey. So not using the store means a large free of capacity into the store focusing to the conversion for the end consumer. It means increasing the productivity of the system. It means also giving more comfort to the end consumer in term of circulation via the store and the online.
So it's beneficial in term of consumer loyalty. It's also directly beneficial term of economy and P and L Management. And this is what we are aiming to and doing with this implementation of omnichannel across our businesses. Moving now to a very important element that we have been developing, specifically for the moment in Berlin, but that will be rolled out to multiple countries with a strong focus first in Europe. We wanted to develop extremely good understanding and capacity on lead generation.
It means the upper part of the funnel. For that, you need 2 things. You need to understand the consumer evolution, the script, the consumer data, the nature of itself And you need also to understand exactly what are the pre sales elements, how you trigger the consumer to get into the funnel. This, it's a strong capacity you need to develop, and we have been developing this capacity, specifically in Berlin, in kind of stand alone business, a bit protected for the rest of the industry because the profile of those particular employees are very specific. That's why also it's in Berlin for the moment.
This started midyear last year and has been accelerating now with the new development of the market with absolutely great success. So great success led to it was dedicated to Germany. Now we are holding this capacity and capability to the rest of Europe with, on the long term, the ambition to have a system for the world, probably dedicated per continent and so on. That's not the point today, but we have been extremely successful, successful in term of number of leads, also successful in terms of cost per lead. We have seen months after months cost per lead really going down.
Why? Because you create more expertise in how you leverage, how you understand the consumer, how you convert the consumer. We have seen also different changes, and that's super important. We'll come back also in the world offering on those ones, a change of consumer profile. By addressing differently the consumer, you are addressing a new segment of consumer.
A new segment of consumer, it means you increase the awareness. Increasing the awareness, you increase also addressing the customer which are in demand and not which are in need, sorry, and not in demand. And this is what we do at the beginning, but this is what we do with this particular formula. Then and this is very much related to COVID, we have been accelerating significantly our e commerce proposition. So as I said as the introduction, we had e commerce in some markets, and we acquired 18 months ago a company named Odilo, specifically for the French market and few other markets.
What had been done during this period, so we started the journey in April. It's a strong acceleration. We moved this e commerce proposition under the brands. We have in the market to 11 markets. And we, at the same time, accelerated the presence of Odilo to 6 markets, including market as Spain where we are not.
And that's very interesting because that's giving us different size of opportunity. 1 is on our own e commerce, leveraging the brand of the different market. We are increasing the value per consumer because it's not only to sell earring instrument to the consumer, it's also to sell other different level of service and connectivity, Roger product and so on. This is on our consumer base. The role of Odilo and Orisyo, it's to add to this consumer base a new consumer base.
It's not only it's a business and generating profit, high level, by the way, but it's also to address consumer data, which are not Sonova data consumer in terms of hearing instrument because selling battery, hearing protection, protection for babies and so on, you are not addressing 1 Sonova consumer, you are addressing the market. And this is what we do. We saw dealers. That's why we have those 2 pillars. We have the pillar leveraging our own database, selling more to our consumer and the pillar addressing this non Sonova consumer in other product, but also with intention to bring them home to Sonova product in the long term.
It's a data management principle. As you see here, we are going to get to an acceleration. It's already high, 11 out of 20 countries, 6 out of 20 countries for ODDI, but at the end of the day, will be a full coverage. Very fast, by the way, we are opening new market on monthly basis. Now I will move to China.
And I know China, it's always high level of attention into this industry and for good reason. Arndt, as I said at the beginning, that we'll not be a global player without being in China. It's another way to say it. China is a growing market for sure. No question on the market size, and I will not develop the market size today of China.
I think it's kind of obvious for everybody. What is important in China, it's and the complexity of China for all of us, it's how to address the Chinese market, how to strategically address the Chinese market. It's always possible in China to have a little bit there and a little bit there, but doesn't help the logic of how we address the Chinese market. We took the decision to create this full omnichannel implementation into the Chinese market from day 1. And this is our strategic statement for China.
Why? Because, yes, there is retailers and there is multiple retailers. And by the way, we have an agreement with 320 stores, 2 main retailers, which is the beginning of this journey, into the Chinese market. And we have access via this partnership to the end consumer and end consumer and follow-up the end consumer evolution. But what is more important, we signed 2 agreements, 1 with Tencent and the other one with Alibaba Health.
By the way, Alibaba Health and Tencent Health has been created in March 2020, so very recently. And in term of values, they are already at super high value. Why? Because everybody knows that in China, especially the health care, will be the running part of the economy, especially now reinforced by this COVID situation. So I don't know, I'm sure you know very well what is Tencent and Alibaba, but just one second on that one.
Tencent is a combination under the same organization of Facebook, WhatsApp, Google Map, PayPal and everything related also to gaming and such. So it's more a social network type of things. They have all kind of application. And basically, in Tencent, they are covering all everything see into our world or as part of the world here in Europe in the different companies under one umbrella, leveraging 1,000,000,000 more database. The second element, which is Alibaba.
Alibaba is much closer to an Amazon type of player. And Alibaba, they have a platform named Tmall, where it's a transaction platform. But both case, Alibaba or Tencent, are massive database provider, and they are super interested to work into the health care. And we find here a common understanding of what should be done to address this particular industry in China. We started with to be active in China in 1 July 2020, so recently, but it's a journey we started last year 2019 mid 2019 with a full implementation of leadership and team in China with very strong omni channel capability in order to address this evolution of the Chinese market.
Here, we have first results, which are not just the beginning. Again, We started but are relevant in terms of number. We have received 1,600,000 clicks in our ReachOut account during the period of 3 months. We have 55,000 followers that we just accumulated into the 3 months. We have been able also to deliver in terms of appointment to our store partner, more than 1,000 appointment today for the market.
So it's working fast. It's very interesting because by understanding the database, by being able to transforming the database into conversion for stores, we are going to be one of the big player of the market. Interesting on those numbers to give you a magnitude, we are Sunnova, the number one manufacturer in term of online check-in China today just by starting this journey of omni channel 1st July 2020. So that's very interesting and that's extremely encouraging. Let me show you just the 2 application we are using under the name of World Offering and the Chinese name of World Offering, which is our expression of the expertise positioning also for the rest of the world.
So let's move to that one and let's see just how it works. So you see clearly on the left, which is more the WeChat, which is more related to full awareness. On the right, it's more on product driven. But at the end of the day, it's the same logic, is to bring consumer data to us and to convert those data into appointment, in store appointment to our partners and to develop that at large scale into the Chinese market. So very interesting beginning, very promising numbers, and it will be a very extraordinary journey, I have to say.
A lot of enthusiasm into our organization for this Chinese journey. Let's move now to a more continuous improvement profile of the organization, and I will move to the store. And you heard and we commented already that we have this store streamlining and reorganization is not we are not closing stores. We are reorganizing. So yes, part of the reorganization is we closed store and we reopened store.
On the left, It's a made up country, but you have kind of the way we could imagine covering a market means some elements of high density historically and some element with low density of store. Why? Because it has been made by different type of acquisition and so on. Moving with the restructuring to the right hand side, the market becoming more structured, so means geo coverage. I will give you a simple example.
If you are in France and if you are not in Paris and you have an omni channel proposition, you cannot say that you have an omni channel proposition because you are not in Paris. So the consumer that's coming to the online store, at certain moment, they will like to see stores and they need to see store everywhere. So you need to have store in Paris. And this is exactly what we do with this reorganization of the geo coverage of our network. It means after the resizing, we have to continue to open stores.
We are also implementing the world offering. I will come back one slide later on what is world offering for the ones that were not here last year. But it's open book type of things. World offering is a big format. Normal store is a normal store.
When you have every 10 normal store a world offering, you go to you bring the customer for a normal transaction to a normal store. When it moves to more specific, more medicalization, more expertise, you have everything in the world offering. That's one element. And the other element I will cover with the next slide. So at the end of the day, a standard market for us will be with this network coverage with some world offering stores.
So every 10 to 15 normal store, you will have a world offering. And we have already market with this. It's a digital lead capability that you will have in market and also some of element of remote fittings that you will have. Now moving to the next slide, this is worth offering. So for the moment last year, in the strategic presentation, we were about to go into the world offering.
Now we have 4, and we decided to go for an accelerating rollout of those 4, and we are opening a world offering almost every month now into the world in different markets. So learning from world offering are very much related to reduce the lead time. It's awareness, that one. We are addressing a younger group of consumers. That's very interesting because it's about awareness.
And those world offering are more in shopping, more visible to the end of consumers. So by doing that, you see clearly that those stores are attracting a different consumer group and very interested by the categories. They didn't know the category before. And in those stores, you have some picture here. It's not only hearing instrument, it's also the full journey from hearing protection to earring instrument and different test and structure to do that.
And what we see also, it's higher price point. People ready when they understand the category and they are aware about the different type of products, they are ready, 10% for the moment, it's indicative, but they are ready to pay more to have access to a premium level of product. This is for the key initiatives we are currently driving into Sonovalliurgical Care. There is more, but that's one of the key elements that are changing the way we are addressing the business, already delivering good results for some of them. So just to conclude on this one, it's basically 4 important points.
One is a fundamental one is why we exist under the Sunnova name, under the Sunnova umbrella is to create really the hearing aids strategy to deliver the highest quality of service and product to the end consumer, not only the product, also the service, also the journey. When it comes to the omnichannel journey, we know and it's not driven by our industry, but the consumer behavior is changing. And we have to be one of the first of the first in the industry to address the change of consumer journey and consumer behavior, and this is what we do. We need to understand better, and that's a lead generation factory, better on the upper level of the funnel, our consumer behavior, consumer evolution, the consumer data element, we have to have a certain level of ownership of those data to serve better at the end the consumer and to address a new category of patients that are not, for the moment, into this particular industry. It's a Category Management Act into that.
And the last one, I developed that in my presentation for sure, is to get into China in the logic of omni channel proposition, in the logic of awareness of the product and traffic generation to our partners for the Chinese market. This is what we do, and this is our focus for Audiological Care.
Arnd? Thanks a lot. Thanks for the exciting deep dive here into the Audiological Care world. Quite a lot has happened since the last year, not just COVID, but also below the hood here at Sonova. Great to see the performance 2 years in a row above the market.
But that, I think, allows us to put out our feelers on how we develop the omnichannel for our consumer group. And I think what I hear is it's a very consumer centric model where we offer choice, but ultimately all still around the medicalization and the strong service level and the strong audiological care we provide here, but clearly different in different markets and a lot of progress on the omnichannel. Thank you, Christophe.
That's why we are a big part of Cinnober.
Thanks, Christophe. With that, I'm leading over to the last section and our biggest business, which is our hearing instrument business, our wholesale business, as we call it at some time. Claude Diversey is going to join on stage here. He's leading the sales and country organization globally. He's a very long term participant at Sonova, lots of experience, but really has taken on to elevate our commercial execution on a broad base, and he will talk about it.
And then we have at least via video of Sandy Brandmeier joining, and he'll introduce her to give a deeper dive on the United States in wholesale. Claude?
Thank you.
Okay. Well, thank you, Arndt, for those kind words. Yes, Clodiverse is in charge of the wholesale globally. As you can notice from my accent, I'm the 2nd French MB member. So I will have the opportunity to butcher the English language for the next half an hour.
Jobs aside, I mean, it's my pleasure here in the next 30 minutes to explain to you how we are driving growth through commercial excellence. And to move into the next slide. I think that we all agree that technology and product innovation is absolutely vital to success in this industry. And that's our inspiration at Sunnova to be the audiology innovation leader. But at the same time, we are also equally convinced that commercial execution is instrumental to deliver above the market growth on a sustainable way.
We have defined what commercial excellence looks like in the next slide. It's about 3 different pillars. One is about go to market model, and I will deep dive into this section a bit later. The second one is about sales excellence. The third one is about marketing excellence.
And our commercial excellence is built on both 3 pillars. We've expand from a creation of awareness all the way down to the interaction that our salespeople have on a daily basis with our customer. But one key prerequisite is to have good talent on board with a good profile. Just here to let you know, we have migrated many of our salespeople from a pure audiology background to a more sales background with a more hunter type of approach. It's also important to have the right set of values and also the right process and toolkit available to convert new accounts.
And commercial excellence is really an important part of the Sonova Growth Toolbox. So let me jump into 2 important dimensions of the go to market strategy. 1 is about territory design and the second one is about segmentation and targeting. Starting with the territory design and to these 4 important pillars that we are we need to address. We have been reshaping our sales force according to those four dimensions.
1 is about having the right level of unit potential across the different territories. Territories, and we purposely took it down to 1 to 1.5 in order to have more similar size of territories. Important also is the activity level. We design an activity at ground level in order to make sure that our salespeople can spend an important time to visit new potential customers. And directionally, we are we have designed an organization where every salespeople can free up 20% to 25% of his time to visit new accounts.
Territory size is also super important because what we have also done is to redesign the territory in a way that we are getting rid of non value added task, also limiting driving so that we increase productivity. And by doing so, we were able to drive productivity by 20%. Last but not least, what is important is also to stay in close contact with customers and to avoid customer disruption by a blended approach of physical visit, but also a virtual visit within the context of COVID is very important to avoid customer churn and to stay in contact with our sales people. By doing so, I mean, we were that this initiative that we started in early 'nineteen, 'twenty was translated in an increase of approximately 20% of feet on the street in the selected geo in Europe and in the U. S.
Moving on to the second key pillar of the go to market model is about whom to target. We want to expand our market share by increasing the collaboration with our existing customers, but also with new customers. For this to happen, I mean, we need to wisely look at the time spent by our salespeople. So what we are doing is at the foundation of this is the customer segmentation, how we classify customers based on potential, based on our share of wallet, so that we can proactively drive the sales team towards competitive accounts. And by doing so, I mean, what was really remarkable was to see the growth reported in those selected geographies and in those selected accounts.
One country where this journey demonstrated its efficiency and result is U. S. Sandy Brandmeier, as Arndt mentioned, our President, Sonova U. S, will take you through the U. S.
Experience. Sadly, she cannot be with us today because of travel restriction, but we prerecorded her presentation. So over to you, Sandy.
Thank you, Claude. Greetings. I sincerely appreciate the opportunity to share our story and the performance of Sonova's U. S. Hearing instrument business.
I'm Sandy Brandmeier. I am the President of Sonova U. S. And I lead our wholesale organization. Our business contributes over $1,000,000 in annual revenues with over 1,000 associates.
I've been with Cinnober for almost 2 years. Prior to Cinnober, I spent most of my time in medical device businesses with companies such as GE and Danaher, but I also led businesses across several other industries, including education and lifelong learning. I've worked for public and privately held companies and also did a turn with a start up company. The hearing industry has been by far the most exciting, challenging and purposeful experience of my career. Over the next few slides, I'll describe our business in nutshell, talk about our go to market strategy and share how we're leveraging commercial excellence to drive performance that ultimately serves our customers with a world class experience.
Let's start with the broad market overview. The U. S. Is about a $2,000,000,000 market for hearing instruments and not accounting for COVID grows at mid single digits. We have over 21,000 hearing care professionals, audiologists and hearing aid specialists serving end users through upwards of 25,000 points of sale or locations.
We operate in a relatively complex multichannel environment, where we develop focused go to market strategies that align with the needs of specific channels. And finally, similar to other regional markets, opportunity to grow the overall market exists by improving the adoption rate of hearing instruments, especially in light of recent innovations and technological advancements across performance and connectivity spectrum. We look at our business as a landscape of partnerships across multiple channels to maximize our reach, which ultimately offers consumers a choice of market leading product, service and support. I'll provide an overview of our largest segments. We do of course do a very detailed segmentation of the market to inform finer channel strategies such as as individuals or small business owners.
This channel is growing slower than the market as there is migration to other channels. Here, we have the leading position. Another sizable channel is large retail accounts. This channel consists of retail chains, including franchises and multi location clinics across the U. S.
The channel is growing ahead of market as we see migration of independent clinics and their consolidation into large retail accounts. We have a number 2 position in the channel. Costco is a significant player within the large retail account segment and is growing twice as fast as the market. Here, we have a number one position and I'll focus my attention on this specific customer. As you might know, Costco operates with over 500 stores in the U.
S. And has gained credibility as a hearing instrument retailer. Costco members trust the Costco brand and foot traffic through their warehouses provides a steady stream of potential hearing instrument purchasers. The channel offers multiple brands to its members and we are the leading supplier. In the last 12 months, Costco has achieved record breaking performance with its Kirkland Signature branded hearing aids supplied by Sonova.
Next is the Managed Care channel. This channel represents organizations or providers that collectively offer over 3,000 insurance plans to cover the purchase of a hearing instrument. There are 7 key providers that capture 80% plus of all of the insurance plans offered in the marketplace. The goal for suppliers or manufacturers is to be on the formulary of the managed care plans offered by the managed care organizations. Currently, this channel's growth rate is 2 to 3 times the overall market, and it's driven by the aging population and the adoption of Medicare Advantage Plans.
Cenova excels with top tier status and has a number 2 position. Finally, the 4th channel is government services. This channel provides hearing healthcare to United States former and active military personnel and Native American tribes. There are over 9.50 clinics or points of sale and over 2,000 audiologists. This channel is growing slightly ahead of the market.
We have earned the leading supplier position topping over 50% market share. With these successful channel partnerships, along with specialized and dedicated go to market strategies for finer channels such as pediatrics and ENT, Sonova is able to serve hearing care professionals across channels, specifically around the underlying growth drivers and our focus strategy, using dedicated teams to drive performance and improve the customer experience. Growth in the independent practices can be attributed to 1, the growing aging population that in turn boosts demand for hearing instruments 2, innovation and technology advancements in the areas of sound quality, product usage and connectivity improvements in hearing performance leads to longer wearing time, increased satisfaction and likelihood to purchase or to upgrade to new hearing aids. These factors along with higher awareness of the technology is leading to increased adoption of hearing Our strategy is outlined by Claude, starts with understanding the customer base, their needs and behaviors and developing a street or FOS to serve our customers, win competitive accounts and gain market share. We deploy commercial excellence tools as customer targeting and sales funnel management to improve productivity and the quality of our customer interactions.
We also offer value added services to support our customers' practices, create differentiation and reward loyalty. Growth in the Costco channel is driven by total cost of ownership and Costco's value proposition to provide premium product at affordable prices. Additionally, Costco offers complementary services and support to their members, such as hearing tests, follow-up appointments, product cleaning and checkups. With a dedicated channel team, Cenova's strategy focuses on ongoing education and training and offering best in class customer support so that our customers at Costco can better serve their members. In the managed care channel, the growing aging population of the U.
S. And increasing adoption of Medicare Advantage Plans are the key drivers of growth. Medicare Advantage Plans are health insurance policies that are issued by private insurers who have been authorized to bill the Social Security Administration for approved group policies. Medicare Advantage is privately managed and each Medicare Advantage plan collects a fee from the federal government and a premium from the enrollee. In the U.
S, we also see higher employer participation in commercial insurance plans with hearing aid coverage. Commercial health care plans also include hearing aid coverage in areas such as self insured, group retirement, trusts and pension plans. Our focus in the managed care channel is around increasing awareness of our product leadership and collaborating with plan providers and healthcare leaders to provide access to Cinnober product technology to end users. Finally, in Government Services, we see continued growth in enrollment and administration of hearing aid benefits. And hearing loss and tinnitus are 2 of the most prevalent disabilities among veterans.
Commercial excellence tools and daily management of key performance metrics enable us to achieve productivity and quality goals. We have successfully collaborated with key opinion leaders to implement creative business models to improve the end user experience, such as innovating a program to provide trial devices increased capacity of the hearing clinics, so more veterans can be served. For each channel, we tailor our products, our services and our approach to meet customer specific needs while striving for excellence. Next, I would like to share an example of how we view customer engagement, how we leverage commercial excellence tools, the use of daily management of key metrics and the application of problem solving to elevate our team's performance. We map the buying journey with the customer's decision making process and engagement steps, starting from needs assessment at the bottom of the graphic to closing the sale to establishing long term partnerships.
We develop solutions specifically designed to support our customers at each stage of their buying journey, from needs assessment to product evaluation. In the graphic on the right, we have illustrated examples of sales funnel management, daily management and problem solving. The foundation of these business tools is based on simple principles of process robustness, team collaboration, visibility and accountability. The graphic depicts how we manage and measure ourselves on customer engagement from beginning to post sale, service and support. These tools help us provide organizational visibility and management of customer needs.
It fosters teamwork and collaboration with faster decision making that facilitates quick responses to our customers. Additionally, this approach enables us to accelerate the sales cycle and improves our chances of winning business. And finally, we use these process frameworks and daily management forums to coach and guide our teams. So in summary, improved understanding of customer needs and using tools and processes to proactively manage those needs helps us improve the overall customer experience, resulting in higher and higher win ratios. Commercial excellence signifies the essence of our Sonova values.
As I stated earlier in my presentation, we are the market leader in the government services channel and our market share is 37 points above the closest competitor. I'd like to briefly share our story and the steps that led to our current position. In preparation for the launch of MARVEL in the government channel, we got to work deploying commercial excellence tools. We developed an optimized coverage model for reach and frequency, and we began training our team on a funnel management process to better support customers at every stage of their buying decision making and buying process. We embrace daily management to ensure visibility and proactive management of customer needs such as training, education and now more urgently, the ability to provide remote support to the veterans.
We worked closely with key opinion leaders to improve work workflow efficiencies and launched creative business models to improve the experience for both our customers and end users. We help our customers improve in clinic capacity and enable them to improve their patient experience through remote care and fitting evaluations. In addition to offering leading product technology, we tailored our remote support solution to the needs of the VA clinics through their development phase. We conducted successful VA specific trials of audiogram direct, which we anticipate to be released in the next software version pending contract approval. This will further expand the government clinic capacity and allow more patients to be tested and fit remotely.
Internally, we have a dedicated team that is passionate about serving the needs of our military and Native Americans. And our support for this channel provides a very personalized customer experience. This focused and collaborative set of initiatives have had a significant impact on our business. Our market share has grown by 20% in the last 12 months, and we aim to continuously improve as we strive for excellence. Let's take a look at our market share more closely and see how our strategic initiatives has helped us consolidate our position in the government services channel.
We launched the channel focused commercial excellence initiatives in early 2019. This approach included all of the processes I outlined just a few minutes ago, ensuring maximum coverage and support, mapping the customer journey, applying a funnel management and agile problem solving. We followed with 3 subsequent product introductions in the last 14 months, May of 2019, November of 'nineteen and May of 2020. We were able to complement product introductions with customer training, education and responsiveness. We bring world class product solutions to our government channel, but we would not have seen this level of success without the commercial excellence initiatives.
With our customer centric approach to partnering and a continuous improvement mindset, we continue to differentiate ourselves from our competition. As I wrap up my time, what you have heard from me is derived from overarching Sonova values that permeate our organization. We care deeply about our customers and that customer centricity remains at the core of our strategy. Commercial excellence is not a project or an event. It's a journey propelled by a continuous improvement mindset.
We've built the best team in the industry and it thrives on thoughtful and disciplined execution and this constant striving for excellence will remain a competitive advantage. Thank you for the opportunity to share the U. S. Market experience with you.
All right. Thank you, Sandeep. I hope that these presentations helped you understand how we are able to drive sustainable growth beyond product innovation. And I think that the U. S.
Example is a perfect example on what we are doing in the market. So as a key takeaway, I think that commercial excellence you understood is at the core of our wholesale strategy. It's instrumental to be able to deliver above the market growth in a sustainable way beyond product innovation. Commercial excellence is not an initiative. It's a change of mindset and it's also a journey that we initiated in some countries, in Europe and in the U.
S. Last year and that we are going to expand following the same logic and process in other geos going forward. With that, thank you for your attention and over back to Arnd.
Claude, thank you very much as well as big thank you to Sandy here. Thanks for diving deeper with us into commercial excellence. Sometimes people ask me what that means because we were talking that much about product in the past, but I think it became clearer. Ultimately, in our market, it's super important to have the best technology and the best product from a customer benefit perspective, but really developing our ability to engage with our different partners on the channel side and also getting the best out of our sales and marketing activities is crucial to gain sustainably share. With that, thank you again.
Thank you. For everyone on the call and the webcast, we will take a break. We're a little ahead of time, which is good. We plan to come back at 11:50. The ones who want to potentially ask questions, please dial in through the numbers we're going to share on the screen here.
The other ones, you can see on the webcast. And again, we'll reopen at 11:50. Thank you.
My name is Charles Owens, and I am a jazz musician. When I'm on stage, I'm in heaven. There's no better place than I'd rather be than on stage playing for people. When my hearing was fading, things were muffled when being underwater and I couldn't hear people. Yes, it was kind of hard.
It almost felt normal to not be able to hear, but when I went to the ear specialist and I could say, look what I've been missing. A dream that came true. It's just like I'm in touch with so much more. I'm lucky enough to have a great hearing aid that makes my life much more complete and fulfilled, And I hope to continue playing jazz for another decade, at least.
So welcome back, everyone, to the 2nd round of the Q and A. But before we jump to Q and A, allow me on a very high level, give the highlights from our vantage point of the day and the presentations we had. I think first message, thanks to the decisive measures, but also the momentum we had built up in the organization, we're navigating the COVID-nineteen well, as you've seen from the first half year results, and I think we're good positioned to continue on that good pathway here. Secondarily, we continue to drive our strategic priorities, which haven't fundamentally changed on the innovation and the go to market side. And then the last but not least, we believe the market continues to be attractive from a growth profile and the opportunities we have to participate and win share in that market.
With that, we want to go to another half an hour on the Q and A side. There were 2 questions still open or 2 people had raised wanted to raise questions. So we'll first go to those 2 and then go to the people who have asked questions on the second half.
The first question comes from Markus Gola from MainFirst. Please go ahead.
Great. Thank you and good morning. So my first one is on your midterm growth target, but compared to the overall market. Over the past few semesters, you have structurally improved internal processes, significantly upgrade your product portfolio, right sized your retail operation and now even going to a faster growing region. But still, your organic growth guidance remains the same at 4% to 6%, which is roughly in line with the underlying market growth.
So how ambitious are these targets in your view? And what is holding you back to become more ambitious on share gains going forward? My second question is on your profitability. You have preponed a number of efficiency measures during the crisis, so you will likely leave it with a structurally higher margin level. And from this higher base, in your view, what's the potential to increase your margin even higher going forward?
And if so, what are the remaining pockets that can still significantly improve your efficiency? And my third question, if I may, is on the cochlear implants. What are your expectations here? How long will it take for this market to normalize again? And how does this impact the timing to achieve double digit margins in this segment?
Akko, thank you for the questions. So with regard to the midterm guidance, we wanted to make sure we reiterate the guidance we head out to make sure you understand this is what we see for reasonably certain if there's no significant changes. I think we have to wrap our head around together when we're getting out of the next half year and then really think fresh about our guidance and our targets on the top line side. So please look at it as wanting to reassure that we see the market in the same growth zone as well as ourselves. There's potential upwards.
We would talk about that in half a year. From a profitability perspective and where, first, probably between the lines, how do we think about it lifting it further? And then secondarily, where are the opportunities? I think if we get to the numbers we've laid out for the second half of the year, we need to think about it, and we need to see where are those opportunities. Let's first get to those numbers.
I think the higher you get in a percent profitability, the more difficult it does become. We will still have the aspiration to improve our profitability. So that much towards the question on what we may be talking about in 6 months. But I think the higher you get, the harder it will be to get more out of the system. I think there's still opportunities we see, particularly then more out of a continuous improvement perspective, also the fall through.
I think you heard us talk about we need to still carefully observe also the macroeconomic COVID outcome over a longer period of time. So I think we need to put all those together. But if you would be significantly higher than we were historically, we would still have an aspiration to improve but probably not to the same level as we did before. On the cochlea side, that's the one which is, for us, really harder to read on what the exact timing is here. I think what we're seeing is that the hospitals are really careful in keeping the capacity not used, which they think they may need if there's more patients coming in on the COVID side.
So I think here, we're clearly even stronger attached to how this is playing out. And I think until there's not a vaccine, which helps the world getting into a safer place with regard to the infection rates, I think we're going to have some headwinds here. So hard to tell on the vaccine. Everybody on the phone follows that discussion. So let me attach it to that one, and then you figure out what you think the timing of vaccine and vaccination is.
I think it's probably that time zone delay we have to get to the mid single digit EBITDA target we had. I think people may remember we set prior to COVID and the field corrective action, we want to be then this fiscal year. So you're probably somewhere a year, 1.5 years out, but really depending on how the market recovers.
Okay, great. Thank you.
You're welcome.
The next question comes from Issey Quirby from Redburn. Please go ahead.
Hi, guys. Thank you for taking my question. Firstly, thanks for the detail on online. Perhaps if you could give us any estimates as to, say, the percentage of your revenues, are they going through the online channel right now at group level or perhaps in the wider hearing aid market? And where do you see this going?
Secondly, how does SomaVA think about competition from these online direct to consumer hearing aid providers given your prowess in omni channel and remote fitting? Is this a market that Cinnova is willing to be more active in? I believe you do already have some exposure to this through Blamey Saunders in Australia. And then finally, how should we think about the 3,300 point of sale number in, say, 5 to 10 years' time, given your the shift to omnichannel? I'm trying to get a sense as well as for how many of these 200 to 300 stores that you are closing should be thought of as permanent closure on, say, a 5 year view versus how many of these stores are more of a redistribution through reopening locations elsewhere?
I think on the do you want to answer the online ratio?
So online is yet very, very, very small. So online business, and Christoph alluded to it, is mainly on accessories, typically also batteries. We have a very clear convinced we'll be very, very convinced about the channel of the audiologists who will also, for the time being, play a paramount role in our consumer interaction. So it's a very small share yet. We believe we can nurture this and there is good growth in those accessory areas.
But for the core hearing aid, there is really yet no business there. And if I
go to the Blamey and Saunders example, and that has educated us to feeling even more resilient about our incoming hypothesis that ultimately consumers want to have an interaction with a hearing care professional somewhere in the system. Even there, you're talking about in Australia, which is a large country with very low density of population, you're talking about probably 10% of the consumers who are on a journey of telephone support and remote fitting only. You talk about 40%, 50%, which are omnichannel, and you talk about 40%, 50% who only come to the store. And this is at play since many years, also with the right remote fitting support. And again, this is an Australia discussion.
Interesting though also they found ways to charge for our service, but really not seeing the for the hearing aids and the devices we do, the world moving into a pure online sale. I think you also don't see that in many other categories, including the optical side. So I think we feel reasonably robust about the omni channel. Now to the question of the network, I think the 200 to 300, that's a fine tuning of where we have opportunity because ours may have been 2 or 3 kilometers apart, right? Ultimately, I think we still need to provide enough point of sales that the people don't need to drive too far, and we need to get enough leads into those.
So in that regard, I would expect that in 5 years, we have more point of sales than today and in 10 years, too. Now as Christoph has laid out, the form factor may change. It may be more of an experienced store. But I think in order for us to significantly grow above market, we need to go to territories where today we have zero coverage, right? So expect us to do more, probably not at the same clip as we would have done historically, probably with a good strong same store growth based on the omni channel.
Thanks.
You're welcome.
The next question comes from Chris Greitler from Credit Suisse. Please go ahead.
Yes. Thank you, operator. Good morning, Arnd and team. I have three questions as well. The first, actually, it's probably an unexciting topic, but balance sheet management.
So you raised a lot of cash at the beginning of the pandemic, stop the buyback, etcetera, and things that now normalize. And I guess now cash flow should be pretty good in the second half as well. So how do you think about kind of balance sheet management in the medium term here given you have a relatively long balance sheet, I guess, at the moment? And under what circumstances would you resume your buyback? So that would be my first question.
Yes. So Chris, hello, Hartwig here. So yes, I'm hearing this question from time to time. And I guess it makes me excited to see the rising optimism in the shareholder base. We are watching this condition obviously as well.
And when you think of how we went into the COVID situation, we had a clear total shareholder return strategy, which was around the 40s in terms of dividend ratio. It was giving share buyback room to go until around 1 times EBITDA leverage, which would be after IFRS 16 actually 1.3 times by now. And those are kind of the fundamentals that we still have in our mind where we would gravitate to under normal conditions. The executive management and the Board will collaborate in due course when we think that the crisis is really behind us and then think of how to get back in the normal state again. That's as much as we can say at this point.
Okay. Fair enough. The second question is just I wanted to come back on Marvel versus Paradigm's launch. And I'm not really sure I got the message earlier in the Q and A session. Basically, is it that kind of Marvel and Paradise?
I mean, I understand on a relative stage, obviously, kind of Marvel against Belong was kind of a big step up. And it's probably a less degree the case right now. But I mean, if I look at an undisturbed market at this stage, maybe like Germany, Canada or Switzerland, in absolute terms, is the paradise outperforming the marble kind of clearly or kind of we're talking about the same rate?
Yes. Again, it's a little hard and depending on how you define the measure, right, Because we did compare relative to the run rates the quarter before, which on the B Direct was clearly a sliding downward scale. I think we feel strongly about the paradise and what it brings. That's what we hear from the customers. Lots of customers were excited about being that being the best hearing aid they ever had in their hands, which is about the same we heard when we brought up Marvel.
So in that regard, I think, from a momentum perspective as a hearing aid versus the overall existing market, I would say it's an equal lift. It's just that we were on a downward trend before, and we were on a pretty good clip with the Marvel. But I think in general, if you look against market, it clearly is a significant step upwards.
Okay. And then the third question relates to price pressure. Kind of could you discuss whether you've experienced no kind of increased competitive price pressure at this stage in the market? I mean, 2 major competitors launching new products, etcetera. So I guess, you would expect some type of counter behavior.
Is this observable in the markets?
I think it's fair to say that over the last 12 months, people and competitors have to wrap their head around how they're competing with the Marvel. And so I think you may remember 2 years ago on the B Direct, we were standing here and we're sharing that we had to be a little bit more price aggressive. And at that point of time, we talked about for ourselves about 5% year over year, which we have to give in order to sustain volumes. So I think you see the similar behavior probably of the competition based on us being strong on the Marvel and them trying to make up the volume where they can be getting something from a sensitive from a price perspective. I think the good news throughout the COVID phase as well as our current product launch, we have not seen a change in behavior in the industry.
I think if somebody is behind, they may be tempted to give a little bit. And because we're ahead, we are seeing this being used against us, but not in a significant step function change here, Chris, with regard to price behavior in the industry.
The next question comes from Michael Jungling from Morgan Stanley. Please go ahead.
Yes, thank you. I have three questions. Firstly, on Managed Care. In the presentation, you highlighted that you have the number 2 position. Could you highlight what exactly is your share?
Who is number 1? And is there a catalyst in the next 12 months that could make you number 1? Question number 2 is on wholesale. You highlight on Slide 56 that a key strategy is to target high growth potential accounts. Could you perhaps rank the top 3 or 4 that would make that up for you?
And then finally, on China, the omnichannel approach is interesting and also what you are doing. I'm just curious whether over the next 3 years, let's say, what do you expect unit sales will be in China for you between bricks and mortar and hearing aids sold online?
So on the first one, I think, Michael, as you may remember, there's one competitor to ours who has made 2 significant acquisitions over the last 2 to 3 years to buy existing managed care intermediaries in the form of TruHearing and then a company called HCS. So that's really a very different approach than what we and others are doing. So if you remember the name of that, that's probably the one who is ahead of us. We're the number 2. And what you see when it's owned by manufacturer, they don't get to 100% of share of wallet but an over proportional ratio.
And then the rest is really, to some degree, depending on how do you develop the relationship to the insurance and how, on the other hand, do you have a product which is attractive to the independents who are on the network. So in that regard, I would not see us because of that structural difference to become the number one easily because these were significant M and A transactions which were done there, which we chose to not participate in, at least not on those price levels. And so I think being the number 2 in the free market with regard to you directly interact with the insurances being in that segment, the number 1, I think, is where we are and which we continue to drive. On the omnichannel in China, allow me to go to this one because I didn't fully get the second question. Perhaps Hartwig got it.
So on the omnichannel in China, just to be super explicit, our journey is 1 in which we do the lead generation part and then move the leads towards an existing network, which is a partner, meaning these are independent retail networks to whom we have a good relationship based on our wholesale business. And on that journey, we obviously can influence what brand gets used, and we're generating those leads for those. So on that journey, I would expect it to be all in the store. I think in China, there is a market for more simple devices today that's more penetrated by the PSAPs. I think we have to see how that works.
We're not actively pushing this. We're really interested in the higher end of the market. But responding to the specifics of the China world in which mobile lead generation is a very appropriate way to develop a market.
Yes. Michael, you asked us, I believe, the second question in the second question to give you some names of what we consider as high growth accounts that we particular focus on or invest in, in regards to our wholesale business. And I would say, I mean, you have seen us moving before into Costco. You know that we have a certain position in Amplifon. Those would be larger accounts that you're all familiar with that they are of higher growth.
But there is also a midrange in size, which depend really by market what they are. They could be entrepreneurial led. They could be led by traditionalists. And there is an overlap to the prior question that we definitely consider managed care as an area with high growth accounts. And we are, you could say, double emphasizing that we are having a keen interest to continue to track in that channel.
Patrick, can I just follow-up on that last point? It's obviously quite apparent to some of these distribution channels like Costco and Amplifon of how important they are becoming in terms of growth. And as a result, I'm just curious how you're going to deal with the incremental pricing pressure. Do you expect incremental pricing pressure as you pursue or as everyone pursues these faster growing channels? And what's the breaking point for you to say we can't do business beyond a certain level?
I think you are at a position in which the vast majority of those channels are pretty attractive from a profitability. Some are more aggressive than others. So I wouldn't say at a breaking point at this point of time, But clearly, you have to think through what's the impact if you give too much on the left and what's the impact on the right, not just in our own retail, but then also with regard to the price points we realize in other segments of the market. So I think innovation helps as the paradise coming out. The Marvel also did help on the journey.
I think other things we do with regard to emphasizing more of our brand through the online relationship we start to build with consumers. But I wouldn't say you're at a breaking point. I think you're at a place in which you need to be thoughtful on how you manage the multiple channels you have.
The next question comes from Maja Pataki from Kepler. Please go ahead.
Yes. Thank you for taking my questions. Just a quick follow-up on China. So I believe one of your competitors has mentioned Unitron NEXT, I believe, or a self fitting hearing aid that is that was primarily used for targeting China. Could you just help me understand whether that was a misunderstanding or whether that audiology care network, if we look Audiology Care network, if we look down the road maybe 5 years from now, what percentage of your retail outlooks would be the flagship stores, the world of hearing types?
And then the last question is around acquisitions, which is part of your strategy. And if you were to consider doing an add on acquisition to your current existing business model, would it be more in the type of a hearable company that you could also then feature in your world of hearing flagship stores? Or would it be more in the range of the biology side along the lines of frequency therapeutics with a drug for improving hearing loss?
Maja, thank you. So with regard to product and prototypes and things we're testing, I think we shared at some point of time that in Australia, we are trying a self fitting device called the Shift in the Blamey and Saunders context. I think it's fair to share that we're trying to see how this is working the Chinese environment. Less so from a, let's say, proactive, this is the route we want to take. But if you are exploring how omnichannel works and how many of the consumers fall into which corner.
So that's part of the, call it, experimenting prototyping of the overall omnichannel journey. It doesn't change the overall story, I think, for us overall. We think the vast majority is not a self fitting type of device even in China. I think with regard to the what we expect in revenues in 5 years out of the world of hearing, I think it's early and it depends very much on how much are we converting our network because the ones we have are working really well and have significantly higher revenues per store and good conversion rates. Christoph was singling to me while you were asking order of magnitude probably 10% in 5 years.
Keep in mind that they are meant to be the spoke the hubs in the middle of a hub and spoke system, So 10% probably makes sense here.
The question where we want to do M and A, yes.
That's a good question. I think 1st and foremost, close to the core, meaning we're really still interested in expanding our network where we don't reach consumers today. So Christophe has that monkey on the shoulder. I think new technologies, which allow us to continue to drive the wheel of leading innovation. And then there are adjacencies to observe and to think through.
I think if you'd ask me between the 2, I think perhaps not that any of them is a high priority right now, but perhaps the hearables, especially if they're helping on the mild and then you need to put a lot of technology into them. But as a situational hearing for mild hearing loss, maybe a little closer to us than the pharmaceutical side.
With regards to World of Hearing, it wasn't really related to the share of revenues. It was really more interest in your network. So 10% of overall stores could be some sort of World of Hearing flagship stores. Do I get that right?
Yes. I think it's probably 5 to 10. If I think about a hub and spoke, you're probably in the range of 10 spokes or so in order to make sense also with the medicalization you're building at the hub. And then there may be areas where the hub and spoke is not as relevant. So anywhere between 5 to 10, I think.
The next question comes from Veronika Dubajova from Goldman Sachs. Please go ahead.
Thank you for taking my questions. I have 3, please. The first one is I just actually wanted to go back to the AudioNova or Audiological Care presentation. And Hartwig, I was wondering if you can comment at all on what the margins are that you're realizing in that retail business right now. It'd be kind of helpful to understand, especially once you've done the optimization on the store count to have a sense for where the profitability sits.
So that's my first question. My second question is also on profitability and thinking about managed care. One of your peers has complained that the managed care business is fairly unattractive for them. It's something that they must do. That's how they describe it.
But from a pricing perspective and a margin perspective, it tends to be fairly dilutive. It'd be great to get your thoughts on that. And that dynamic as you see managed care grow more and more in the U. S, is this something that's going to be a headwind to margins? Or is their experience different from yours?
And then my last question is just on your desire to own brick and mortar in China. Is that something that's completely out of question? Or is that something that on a from a strategic perspective might be something you entertained over the next 2 to 3 years? Thank you.
Yes, Veronika, on profitability of our retail business, as you know, due to the vertical integration, there is no reliable way of us to really disclose numbers, and that's why they are not represented as an individual segment. But I want to tell you that when you see our structural improvement measures, and you can read it from that we are working on the store network, but also on other factors, they are absolutely in the mix. They get their fair share of attention and deliver their fair share of improvements there. And so while you see it much more clearly from our Italian competitor, you can be assured that the same level of focus is derived on margin improvement work also on our retail business, and we are very happy with what we see there. And we see a very similar margin improvement trajectory there.
That's as much as we can say kind of without referring to not reliable reference points due to
the vertical integration. Veronika, on the Managed Care side, I think you need to completely separate the wholesale perspective from the Audiological Care or Retail perspective. I think on the wholesale perspective, fair margin levels relative to the volumes you have, not out of the ordinary. Keep in mind, U. S.
Is still a higher margin business than Europe is. So all good there. I think if you get to the retail side, it is difficult for a retailer to navigate the high service levels they provide for some of the more skinny contracts. And so they really need to make a trade off where they say, you know what, I may be underutilized, happy to take on more volume if I don't need to invest in the lead generation, but they're always going to try to push to get more of the private pay business, particularly if you're a more sophisticated retailer. So I think separate those 2.
I think we have a small network in the U. S, so we can clearly see the dynamic there, not that relevant for our P and L. We're at around 200 stores in the U. S. So in that regard, but we follow the same playbook, take it where it helps some of the utilization, but really focus your energy on the private pay side.
I think with regard to China, I think China is large. And the hearing aid business right now, it's not so big in revenues, but it's large as a potential. And we're just getting started to understand beyond what we knew as a wholesaler, how this whole world between far more mobile lead generation than we see in any other place, far more engaged people who live for hours in their WeChat accounts works. We clearly have good wholesale partners, which we can leverage for now. If longer term, the right answer is we get into owning something because we see this being important to have both pieces in our hands.
Certainly, we'll think about it. Have to be careful at times in China from an M and A perspective. So but I think no decision taken. But clearly, given the size of the market, ultimately, all options are on the table.
Understood. Thank you.
So we're done with the questions. Then first, I want to thank all the presenters, but most importantly, all the people who have died in for 3.5 hours. I hope we made it worth your while. We tried to keep the sections a little shorter, but we really appreciate your interest and the time you spend with us here and wish you a good rest of the day, good weathering of the COVID pandemic with all the ups and downs we're going to see and stay healthy and safe. Thank you.