Okay. Thanks. All right. Let's go ahead and get started here. First off, welcome, and thank you for making it out to sunny and lovely Anaheim, California. For those of you who I haven't met yet, I'm Matt Gugino, Vice President of Investor Relations here at Danaher. Before we get started, forward-looking statements, not going to read these. They're here for you to reference. Just on the agenda for the day, first, going to have Tom come up here. He's going to talk a little bit about and give an overview of Danaher. I know some of you know more about the story than others, so thought it would be a helpful frame for the day. We'll then have our dental team come up, give an overview of the business, of the market, and then dive a little bit deeper into our business strategy.
After that, we're going to do a Q&A session after the formal presentations. We're going to keep that to just dental Q&A. We'd ask that you keep any broader Danaher questions to Tom and Dan, either offline or at the baseball game later tonight. After the Q&A, we're going to do some product demos, some hands-on demonstrations. We have four product demos set up for you. Opportunity for you to see what some of these do. What you have on the back of your badge is a number. It's one through four. That'll be what group you're in for the product demo. You're going to meet right next door in the room you had lunch in to get set up for your tour. With that, I think we'll go ahead and get started. Let me introduce Tom Joyce.
Thank you, Matt, and good afternoon, everyone. Thank you very much for joining us today. As Matt outlined a bit on the agenda, I think we've got a terrific day set up for you. I think you'll see today our dental platform and the great progress I think we've made over the last 10 years in building a business that is gaining share through the use of DBS. That's making terrific headway in penetration in high-growth markets. A business that is really taking advantage of the changing landscape around digital dentistry, and overall, I think has tremendous prospects for growth and gains in profitability in the years ahead. Some of you are probably more familiar with the corporation and our makeup perhaps than others. So I'll just take a minute or two to give you a frame on what makes up the Danaher Corporation.
We think of the business in five key segments, environmental segment, our test and measurement segment, our dental segment, where we'll obviously spend today, our life science and diagnostic segment, and our industrial technologies segment. The five segments are made up of nine strategic platforms, each of them with tremendous strengths and opportunities in their own right. Each of these built over the last 25 years or so, and each of them, I think, with extraordinary possibilities for growth and profitability as we go forward. The portfolio has evolved over the last couple of decades, and in a minute, I'll share that evolution with you. But as we've built the portfolio, I think we've seen the advantages and demonstrated the advantages of scale.
We've seen scale in the way we've deployed DBS, as our platforms have learned from one another and shared best practices, as we've gained the benefits of scale through procurement and the leverage that comes from the cost savings associated with pulling our purchases together. We've seen the advantages of scale when it comes to talent and our ability to move talent from platform to platform, clearly evidenced by, I think, the progress that we've made at Beckman Coulter as one example, where we've been able to leverage talent built in other platforms. We see the advantages of scale throughout our businesses in the high-growth markets, where one business has helped another incubate from a small start into much larger footprints in high-growth markets from China to Latin America and beyond.
Finally, we've seen the advantages around capital allocation and the way we've been able to deploy capital across a cycle into the best opportunities that present themselves in markets around the world. I mentioned the evolution of the corporation. This slide starts in 1989. I guess not so coincidental that Matt and Dan, and the team chose to anchor this slide in the year that I started at Danaher. A very different Danaher, as you can tell from this slide. A much smaller business, a more industrially-oriented business. A corporation with margins, gross margins in the 30%s, a minimal presence in the high-growth markets.
You fast-forward to today and you see a business that's 20 times the size of the Danaher that I joined, with gross margins in the 50%s and expanding those gross margins year- on- year, an expanding presence in the high-growth markets, and a strong and growing set of businesses in the aftermarket. So a tremendous amount of progress, and I think great prospects, again, for the years ahead. All of this is anchored in the Danaher Business System. The core values of the corporation begin with our customers. When customers talk, we listen. The first of our core values. In support of driving great value to customers, we put the best team on the field because we recognize our second core value is the best team wins.
That team, challenged every day, is there to drive continuous improvement, to listen to the voice of the customer, their needs for quality, delivery, and cost, and innovation, and ensure that we're creating great value. We know that customers demand innovation, and therefore, innovation defines our future, the fourth of our core values. Finally, as we bring those four values together, we recognize that shareholders ultimately benefit because we compete for those shareholders every day. So the Danaher Business System is a customer-centric, process-oriented, results-driven business system that has been the fundamental underpinning of the great progress the corporation has made over that period of evolution that you've just seen. Today, you'll learn about how our five strategic priorities for 2014 course through the dental platform. Damien McDonald will share with you how we are gaining share via DBS.
He'll take you through some of the tools that have been developed here in the dental business and been borrowed and used extensively from other Danaher companies to help us grow here in dental. Vicente Reynal will help you to understand how we're winning in high growth markets and how that changing landscape around digital dentistry is something that we're taking advantage of through tremendous levels of innovation. We're strategically deploying capital in this platform and have for a number of years. Over the last 10 years, we've done 24 acquisitions. Henk van Duijnhoven will help you see those acquisitions and how they've contributed to the growth of the platform. Finally, as we've built that scale, we harness it in a very Danaher-like way without losing the very important opco-centric model that's been important to our progress for so many years.
So with that, I'm going to introduce Henk van Duijnhoven. Henk is a Senior Vice President at the Danaher Corporation. Henk has done a terrific job of leading our dental business for the last few years. He's going to share with you the key macro drivers that make this platform as attractive as it is. He'll help you understand the evolution from an inorganic perspective, and I think to set the stage for the growth and innovation stories that you will hear for the rest of the day today. Henk?
Thank you, Tom. Good afternoon. Let me see the clicker. So, this afternoon, you actually have a couple of people standing up here, and for those of you who follow soccer, is anyone following the World Cup? Hopefully, you do. So we got an Australian, a Spaniard, and you can guess where I'm from. We feel pretty good at this moment. Group B is sorted out, so on to better things. But on a more serious note, the dental platform. We built the dental platform starting in 2004 with the first acquisition of KaVo. Since then, we've really built out both from a product perspective, both into equipment and consumables, as well as geographically into a true global dental player. We have 50% of our sales come out of North America, 25% comes out of Europe, and importantly, almost 20% now comes out of high-growth markets.
You will see today that that is one of our key strategic thrusts, where we've been investing quite a lot of time and energy and focus with some real good results out of that. We serve pretty much any end user that practices dentistry, whether that is the general dentist, the dentist that hopefully you go to at least once a year for a checkup and more, whether they are group practices. You see more and more larger groups that operate tens, if not hundreds, of practices. We serve the specialist, importantly, whether that's an orthodontist or an implant doctor, a periodontist or an endodontist. We all provide them with products and services.
And last but not least, we play in special markets or institutional customers, such as dental schools and universities, where we have an opportunity to early influence the future dentists that are going to be graduated, whether that's the government, the military, or other parts of the government that we serve through a broad set of products and services. We're a $2.1 billion platform today, nicely profitable at 15%. And ultimately, what we are trying to do is to really provide better clinical outcomes for clinicians and improving patients' lives as a result. A little bit more background on the market. Some of you probably know this very well, others maybe not as well, but dental is a $15 billion market. It's roughly 2/3 is consumables, both general consumables and specialty consumables, and 1/3 is equipment, and it continues to be a very fragmented market.
We compete in both equipment and consumables, and you will see some of the key competitors here at the bottom of the slide. Most of the other competitors are more focused on either equipment or consumables. You will see here that we play in a broad set of applications, but importantly, what we have started to see, and it's really accelerating now, is that the way a clinician practices their workflow is changing. And it's really changing because the digitization of the actual clinical workflow is now really starting to accelerate. It started with digital imaging, 2D and 3D digital imaging, but you now see an acceleration of the use of intraoral scanners, using that upfront digital data to really diagnose and then treatment plan a patient.
So before you actually really get going with the actual treatment, lay out an entire treatment plan such that you can plan what the outcomes are. And importantly, the consumables that go with that are increasingly customized consumables for that very specific patient, and we have a unique play there by being both in equipment, software and consumables to tie that all together. In terms of macro drivers for our industry, some very favorable drivers, luckily, an aging population in the developed world, an aging population that wants to retain their natural teeth and/or prosthetic versions of those natural teeth. Teeth were maybe not meant to last as long as maybe some people live nowadays, and that really drives an increasing need in dental procedures.
Secondly, in high growth markets where we see the rising middle class, and when people get into that middle class, one of the first things they want to do is get access to dental care. Typically, the lower incomes, whether you look at a place like Brazil or China, have no access to dental care, but as soon as they get into the middle classes, they will want to get that dental care. First, sort of the more basic versions of that, and then typically, people want to get their smiles back because often that's a way to get into better jobs and higher income levels. The third trend here is the digitization of the actual dental practice, and what I mean by that is the actual clinical workflow.
The front office of a dentist has already been digitized to a large degree, and that is not what I am talking about here. It is really the digital clinical workflow that is really changing the way dentists practice their work. Then last but not least, cosmetic dentistry, both in the developed and in the developing markets, where people really want to have beautiful looking smiles. A lot of these procedures, whether that is orthodontistry or implants, those are often not reimbursed by the government, so those are good procedures for us to be involved with. A little bit about the evolution of our platform. We started back in 2005 with the first acquisition of KaVo, which was mostly an equipment business. You can see here, 90% equipment at the time, $600 million in turnover, and profitability that was slightly above breakeven.
Since then, we have really broadened both our product portfolio and our solution set, but also geographically have broadened quite nicely and we are now a $2.1 billion business with better gross margins. Importantly, much higher profitability at 10 percentage points higher than where we started, and a business that is more exposed to the high growth markets. How did we get there? This is an evolution of the acquisitions that we have done over time. As I said, we started with KaVo, and when we started with KaVo, we started to learn more about this market, and we quickly saw that digital dentistry and digital imaging was really starting to evolve quite rapidly there.
We did a number of acquisitions in that very space with Gendex, DEXIS, and i-CAT, and we quickly built out a large capability in digital imaging, which has positioned us well to play on that trend of the digitization of the workflow. In 2007, we had the opportunity to acquire Sybron. With that, we got the Kerr and Ormco brands and created really a sizable position in the consumable space. One of the places that you sit in here is one of the learning centers that we have now built out for the entire KaVo Kerr Group, but that was part of that Sybron acquisition we did back then. We have continued to invest in more digital technologies with SOREDEX, Instrumentarium, and created more imaging capabilities.
We have also tucked in a number of other things, including our Implant Direct joint venture, where we are a majority stakeholder, which is our position in implants, and we have also supplemented this with more acquisitions in high growth markets. For example, you see our dental complex, which was a dealer in Russia, where we are now the market leader in orthodontistry in Russia. We continue to have a very active pipeline in the business. Larry, Tom, and Dan keep me busy with trying to look at opportunities. We have closed two smaller opportunities here to date, and we certainly hope to have more here shortly in the dental space. That brings us to today. We got a great portfolio of both equipment and consumables with leading brands. Typically, the brands and the sub-segments we play in, we have number one or number two position in that sub-segment.
We continue to invest quite heavily in R&D and innovation. We've increased our R&D spend since 2008, when I started in the dental business, by 25%, and we're now on a very good rhythm and cadence to bring out 20 + new products every year. You can see there, since the beginning of 2012, we actually brought 60 new products to market. What is important in dentistry is that you really not only bring out just a number of new products, but that you really have some breakthrough. I think a couple that I just like to highlight is the i-CAT FLX. You will see some of that later in the demos.
The i-CAT FLX is really a leading product in 3D digital imaging, where we can take an entire picture of an entire skull at radiation levels that are very low, similar to 2D imaging. In orthodontistry, we have a business that is Insignia, where we customize the brackets and the wires specifically for a patient, as an example of that changing clinical workflow. In the implant business, we have a number of prosthetic solutions that are really unique to the industry. We have continued to invest in our global reach. A number of years ago, we were under-penetrated in high-growth markets. Over the last number of years, we've driven up that high-growth markets percentage of sales to 18%, and we're well positioned to now also enjoy that growth that is there in places like China, Russia, and Brazil.
Last year, we made a big push to really bring all these dental businesses closer together with the emergence of the KaVo Kerr Group. I'd like to play a little video on how we did that.
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Pretty neat, huh? A lot going on there. Coming back to the KaVo Kerr Group, we serve a broad set of end users here, starting on the left-hand side there with the hygienist. Importantly, we have really meaningful brands in pretty much all of these segments that we serve. For a hygienist that will use instruments as well as material to clean your teeth, Kerr and KaVo are two very important brands. For the GPs, that is the same, but some GPs are starting to place implants, or maybe some GPs are performing endodontic procedures, and we have a number of products there that are particularly well-suited to that GP.
As you move to the right on your slide here, and you get into the specialist segment, you see more and more prevalence of digital imaging and image capture up front to do that treatment planning and customizable consumables. You see them more and more as you get into the specialty segments. Then on the very right-hand side, we bring a large set of brands to our end users, and we often go to larger accounts with really a full suite of products where we can provide a large set of the solutions that these accounts look for. That is a real benefit to really do that as one team. Couple of other highlights on the KaVo Kerr Group.
So, we are pooling this together, so we are doing marketing as well as going to trade shows and other events where we really pool the entire KaVo Kerr Group and all of our brands together. As I have mentioned, as we work on that digitization of the workflow, it is important to us that we bring multiple disciplines together to really find optimal solutions for that changing workflow. In high growth markets, we go to market typically as one team. Our China business or Russia business or Brazil business has one GM, has one back office, one finance function, HR, and other back-office functions. In the front office, we typically specialize as needed. A lot of these markets do not necessarily evolve the same way as what we have seen in Western Europe and North America.
Our ability to really adjust our go-to-market to the specific market needs, whether that is in China, Brazil, or Russia, is important here. Acting as one team really has given us a tremendous advantage. Lastly, we do a fair bit of continuing education for dentists in the developed world, but also in the high-growth markets world. Even more important in the high-growth markets, and Vicente will highlight that some more. In North America alone, we run 100 courses a year. We have over 5,000 dentists that come to these courses. They might be in orthodontics with our Damon forum, where we bring in 1,000 clinicians all at once. Those are great opportunities to also showcase and teach these clinicians about our digital imaging capabilities or other products.
Similarly, we do over 40 implant courses a year at Implant Direct, and those are great opportunities to really showcase multiple products because these clinicians do not only place an implant, but they have a need for digital imaging and other instruments to really perform these procedures. An example of how we worked with a large customer is, we have been working quite closely with the University of the Pacific, who have recently built out a complete new dental school. We work very closely with the dean, and the way that UOP is really teaching dentistry today is really very different than what they used to do. We have completely revamped their first-year curriculum by changing the way students learn how to practice dentistry in a simulation mode, and we have really helped them to do that in a better way.
We couldn't have done that if we didn't have such a broad set of solutions that we could bring to that problem. Couple of other highlights here. In terms of talent, I have been working in the dental business since 2008, and we have never felt as good about the talent in our business than today. We really started to plan for our talent, both in terms of assessment, what we have, and what we need over time, a lot more critically a number of years back. With the result that today, our internal fill rate, that is one of the core value drivers of Danaher, is over 75% in dental. What that means is I can now fill the senior jobs in my dental team 75% of the time or more from the talent that I have in my team.
You will see Vicente and Damien stand up here a little bit later. Both Vicente and Damien grew up in the dental business and now have much larger jobs. The Ormco business is run by Patrik Eriksson, and it is a similar story. We brought him in. He did some other things, and we have been able to get him to run the Ormco business. So we feel a lot stronger about our talent in dental today. There is really a parallel story here as we have been building out our high-growth markets capabilities, where you need real strong teams in places like China, Brazil, and Russia, and other markets. When we really started that was really a strategic thrust that we started with roughly four years ago.
In the beginning, we either needed to go steal some people from other Danaher companies, and Tom and others were so gracious to get a few people over. But we cannot continue that because other Danaher companies will need some people from us as well. What you see now in China, where we have over 200 associates on the street, we really now have good processes and capabilities to really fill those talent needs from within, which in turn, hopefully I can keep a lot of them for myself in dental, but I know that over time, I will need to export a few of those as well. From an operating margin perspective, I think those of you who have followed us a little bit longer, I think know quite a lot about this.
We have been on a pretty steady course here to expand our operating margins, balance that with some good growth. In the last three years, we have expanded over 350 basis points, so more than 100 basis points a year, and we are now up to 15% profitability. We have done that by taking quite a bit of structural cost out, over 10 facilities closed, and we have done that by really focusing on our material purchases and really being smarter about how and what we purchase, and that took out another $40 million of cost. We have expanded those 350 basis points while we have been investing more in R&D, and the investments in high growth markets, as you can well imagine, you first need to invest a little bit before you get some of that revenue growth back.
So we have really had to balance that, but I feel pretty good that we have been able to do that now consistently for a number of years and are up to 15%, and I certainly think that there is more to come here. From a new product perspective, we have invested more in new products, and I can confidently say that we can now launch 20 + meaningful products every year. As I said, those products cannot only be smaller products. You need to bring something really new and different every once in a while. Two examples here on the slide, the DEXIS CariVu is an imaging device without radiation that can give you a picture of the entire enamel structure, so the upper part of your tooth, everything that sits above the gum line.
You can see that product a little bit later, but it is really a novel technology to help a clinician detect tooth decay and cracks and other issues that a tooth might have. Our i-CAT FLX, a leading full field of view 3D imaging device with radiation levels that are the lowest in the industry. High growth markets. We have a whole section on high growth markets, but let me just give you a couple of highlights here. We are really focused on six markets here. That is China, Brazil, and Russia, but also Turkey, the Middle East, and Mexico for areas of focus for us to really drive significant growth. We have been investing quite heavily, over 300 people added on the street over the last couple of years.
You will hear a little bit later that we are not only trying to build commercial muscle, but also create more localization capabilities to better serve the specific needs of that market as all of these markets develop a little bit differently. Here and there, we have been able to deploy some capital, and we certainly plan to do more of that in these high growth markets to really build strong positions over a long period of time. In summary, we have built a very strong and leading dental business over the last 10 years. We started with KaVo, 23 acquisitions on top of that. We now have the broadest product portfolio in the industry, and we think that that is very important, especially with consumables and equipment when we see that conversions of the clinical workflow, and we are very well-positioned to benefit of that trend.
Our brands typically have the number one or two position in each one of their subsegments, and we think we are well-positioned around the world to also benefit from those markets that are naturally going to grow faster. In terms of macro drivers, it is fairly simple. There is an aging population that will have a higher need for dental care. The high growth markets and a rising middle class that can afford dental care is a long-term growth driver for us. The digitization of the workflow, and last but not least, an increasing need for aesthetic procedures that do not have any government reimbursement typically involved. From a DBS perspective, and again, Damien will come back to DBS, but we are consistently deploying our lean capabilities to get our margins up.
We are deploying our growth tools to get the growth up, and as I mentioned here earlier, our talent processes are working well in dental. Bringing that all together now under the KaVo Kerr Group and trying to provide better clinical outcomes for clinicians and improving patients' lives. I think we are well-positioned for the future, and I think with that, I am going to turn it over to Tom.
Thank you, Henk. Henk and the team have done just a terrific job over the last several years of building out the portfolio and executing very well now under the integrated brand umbrella of the KaVo Kerr Group. Deepening the talent bench, investing in new products, and investing in the high-growth markets. Vicente Reynal is going to come up now and share with you about how we are driving that growth in the high-growth markets. Vicente runs the largest of our businesses in our dental platform, Dental Technologies. Vicente?
Thank you, Tom. Good afternoon. Being obviously from the Spanish team, best of luck to the Dutch guys because let's see, the fourth time is a charm. They try already three times in the finals and never made it. I'm going to walk you through the high-growth markets, and particularly, I'm just going to tell you about some of the strategic initiatives that we're pursuing in these markets to continuously accelerate the expansion and penetration that we're seeing in these obviously highly critical, important markets.
It's also important just to know that just not too long ago, we were less than a $100 million business in the high-growth markets, and this year, we expect to be at more than $400 million at the end of 2014, all by having a very laser-focused approach to these critical six countries and six regions that play particularly a big role for the dental space, primarily because of a lot of the macro trends that we're seeing. China, obviously, for example, is a market that is developing, clearly, obviously all of you know, developing very rapidly. Where it's expected over the next couple of years that the medium-income family or medium-income population is going to reach 300 million people.
Obviously, all of them are going to be looking for new dental work, new smiles, better oral health care, and that is where we believe we can play, obviously, a very key role in those markets. It is not only that, but obviously the return on investment that we have made in the high-growth markets has been very crucial for us, where we have been able to obviously achieve a 20% CAGR over that period of time. As I mentioned, some of these megatrends in the high-growth markets are obviously quite important for us to be able to develop these key strategies that I'm going to walk you through and give you some examples as to what we're doing and how we're doing. But some of these trends they vary geographically.
But what we have done is actually picked the main common themes and then be able to create some of those core simple, very simplistic strategies that then we're executing locally in some of these markets. The ones that I want to maybe call attention to you is the lack of dental knowledge, the increasing number of dental students, and the different regional preferences. The first two are very critical cornerstone of our strategy in terms of how we educate current clinicians, how we educate the future dentists that are going to be in these markets. And then we do it obviously with the purpose of improving the oral health as well, and obviously having better treatment and clinical outcome for the patients that those doctors are treating.
On the last on these regional preferences is one where we believe we have a great opportunity at KaVo Kerr Group in the sense that with our global footprint, we're able to localize. We're able to create innovation locally in a lot of these markets, innovation that is all around being able to create products that get sold locally, as well as expanding in these regions. I'll give you some example of some of the things that we have done in that space. As I alluded, these kind of common themes are creating the strategy that we view it as being a four-pronged approach. We start with the market coverage. Henk talked a lot about the investment that we're making, over 300 ft on the street in these kind of key core six regions. We go as one team.
We have one local general manager, one local leader that actually sells the equipment and the consumable together in those markets. Then, once we have this feet on the street in this market, then we're able to also expand the region and be able to have a vast majority, vast, large, great dealer network that will obviously allow us to increase our reach. End-user education, I'm going to give you a couple examples of what we have done in China and Russia. I think this is one where our core expertise is being widely used to be able to attract incredible talent of clinicians to be able to learn a lot about our products, but then most important, us being able to teach them new techniques and new ways on how they can improve the clinical outcome of the treatments that they perform.
Product localization, I will give you an example on what we're doing specifically in Brazil. But obviously, this is also very important for us as we just also open a factory in China. The example I'm going to show you about Brazil is going to be very similarly applicable to what we're going to be doing in China. There's obviously pretty exciting results what we saw in Brazil and that we know we're going to be able to replicate here in China shortly. Then last but not least, obviously equally important, is the deployment of capital in terms of how we're going to be able to increase whether market coverage, user education, or product localization. The acquisition that we made in Russia was particularly one that it played very key on the upper two.
We obviously increased very rapidly our market coverage by having a great presence in St. Petersburg and Moscow, then expanded with a dealer network outside those two cities. With that acquisition, we were able to obtain a very great clinic that today we are using for educating over 3,000 dentists every year. Commercial investment, that market coverage, I think this slide speaks by itself by showing that in China, we have increased our sales and marketing headcount by more than six times. Obviously, Brazil, very respectable, twice, and Russia more than three times in just a period of 2.5 years.
Particularly in China, has been one where we started with obviously a commercial team, then very rapidly started expanding our dealer partner network, where over the past couple of years, as well as similarly as we were increasing our feet in the street, we were rapidly increasing our dealer network by more than double that. We went from less than 60 distributors to now having over 150 and be represented in 35 cities in China.
Whereas if you look back four or five years ago, we were primarily only represented in the big cities in Beijing and Shanghai. Obviously a very rapid acceleration of the investments that we are making that are paying off great results in China and in a lot of these high-growth markets.
Obviously, investing in the commercial teams, expanding the dealer network, then what we also do is invest in improving the service capabilities that we are doing while we expand the dealer network. Obviously, in Brazil, great example where we have increased our service capability by more than 40% in just a period of two years. End user education, as I mentioned, is one of the very crucial things that we do in the high-growth markets. I think if you remember, Henk mentioned that in North America, we have trained about 5,000 dentists per year. In China alone, you can see that over a four-year period, we trained over 100,000 dentists. More than 20,000 dentists being trained every single year.
Obviously, very incredible rapid acceleration in how we are deploying the educational level on how to utilize, obviously, our equipment, our consumables, but then more important, show them specialized techniques on how they can improve the clinical outcome and the patient lives with the use of our products. China is also a very particular interesting market where obviously is evolving very rapidly, and we are adapting to the needs of the market in terms of deploying the education. I was just in China a couple of weeks ago where we had an event at one of the largest dental shows, and we were in an auditorium probably obviously three times this size. They had about 500 dentists, probably medium age was about mid-40s. Very young, energetic group of dentists. At the same time, we were live streaming that training.
In that case, it was an endodontic training, so very highly specialized training. On the screens, on the big screens, we were showing WeChat. WeChat is the Twitter for China, where then we were able to create a very unique social network while we were obviously deploying some very unique training. This is what some of the new trends that a lot of the clinicians in the China market are obviously looking for, new ways on how they can learn and educate and obviously collaborate with their peers and create a lot of the peer teaching that they're looking for. In Russia, slightly different. In Russia, we adapted to the needs of that market. One market where it is obviously dependent on high education, and the clinicians and the dentists, they want to be tied very closely to universities.
Our strategy kind of vary from that perspective in the sense that then we partner with the core 30 universities to be able to be inside the schools, inside the universities, and have, in some respects, our own mini clinics where we could actually put students and future dentists through those clinics so they can learn more advanced techniques and then obviously be able to learn how to utilize a lot of the new technologies that we're developing and obviously launching in the high-growth markets. It's not only the partnership that we did with a lot of these universities, but we also created an Ormco orthodontic school, which was basically a two-year advanced program where we were doing a hands-on, a theoretical seminars and training, where obviously just even last year, we graduated over a couple hundred doctors through that program and that degree.
I mentioned before that also in Russia, we have a clinic that we use as an interdisciplinary way of teaching dentistry. In this clinic, we do implantology, orthodontics, prosthetics, general dentistry, and orthodontics, all with the purpose of doing a lot of the hands-on seminars and hands-on training that allow us to teach doctors new techniques and new ways of improving the patient clinical outcome. Last year, we were able to treat, to train, and show a lot of, I think it was about close to 2,000 new clinicians put through the clinic to be able to learn how to do new techniques and new things in the dental space. I mentioned that product localization, how we can adapt to the regional preferences is obviously highly critical and highly important.
Brazil has been a great example of that, where early on. We have been in Brazil for now over 30 years, and very early on, it has been a very local sales and service organization. Over the past few years, we have done a lot of investments in the research and development team, where now we have more than 25 R&D engineers dedicated to really develop products for the local market. So it's developed in Brazil, made in Brazil for the Brazil market. What that has shown is great acceptance in the sense that the revenue, about 70% of the revenue that we make in Brazil is actually from products that have been designed and made in Brazil for the Brazil market.
Obviously, this shows great advantage for us because we are very uniquely positioned compared to others that do not have this kind of manufacturing presence and ability to create the innovation in the Brazil market, which is obviously a very critical dental market in the world. This allows us to have a really big competitive advantage. We are able to, because we produce products in Brazil, obviously not have to pay the duties and the tariffs that are required when you import product from other countries. As I mentioned, a couple of weeks ago, also while in China, we cut the ribbon of our new factory in China. We are planning on replicating the same model that has been very successful in Brazil to be able to do that in China. We are already established an R&D organization in China.
Now obviously we are in the works of being able to create and develop these innovations and be able to produce some product that is basically made in China for China. As we like to say, obviously, showing some of the strategies is one thing, but showing the execution and the results is obviously quite more important for us. This shows just some of the results that we have been able to accomplish by focusing on these key markets with a very simple approach and simple strategy. Obviously, not to undermine the great execution, but showing some great, terrific growth numbers here in the sense that China growing over 30%, Brazil 10%, Russia 25%, and obviously seeing a very sustainable growth momentum based on some of these initiatives that we are doing.
Obviously, we are very excited with the simple strategy that we have, with the great execution that the team is doing, and obviously, most important, with the great results that we are able to achieve in these markets that we believe are in the, when you aggregate the high-growth markets, in the high single-digit growth markets. I guess, in summary, to sum it up, we obviously believe high-growth markets is a very key role, a very important market for us. You can see growth rates are very important. The return on investment that we are having in these markets is incredible. We are going to continue to invest in these commercial teams to continue accelerating the growth that we are seeing here.
Most important, we are going to continue to do these localization of the products that we have, as we did in Brazil, as we are going to be doing in China, and as we will continue to do, as we believe that there are other markets that we need to pursue the same. We believe we are very well-positioned for the high-growth markets, and we will talk to you here soon again. Thank you.
As I think you just heard, attractive market dynamics, improved commercial coverage, a focus on end-user education, and product localization. A great formula for long-term success, growth, and profitability in the high-growth market. We are very excited about the prospects. Obviously, terrific results thus far, but frankly, plenty of room and plenty of runway ahead on our journey into those markets. We are coming up on a break. We are going to take that break right now. We are a bit ahead of schedule, so we are going to extend from what was scheduled to be about a 15-minute break to a 20-minute break. That would put us right about 2:40 P.M. here on the West Coast. We would ask that you be back in your chairs about then. Right as we come back from break, there will be a video that you will see.
As that video wraps, Damien McDonald will be here to share with you the investments that we are making and the progress we are making using the tools of DBS to drive share gains. Damien is the president of our professional consumables business, and he will be here with you right after break. Thanks. We will see you then.
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You tear up just a little bit. This is one of the videos that we use internally with all our associates and some of our channel partners, and it's a really important indication about what we are as KaVo Kerr. It's more than just hitting the numbers. For the products that we invent and make and sell, we make a difference in patients' lives, and it's a very important part of who we are, not least of which is changing a patient's self-esteem. This is a really important part of our message, and I think what differentiates us from a lot of the other players out there. I'm going to talk a little bit about DBS and how it makes a difference and why it's been a part of why we've been winning in the market.
Hopefully, at the end of this, you will have a greater appreciation of how DBS has been working in the dental group. It is easy for us to just head towards lean as part of DBS. When Tom spoke about this being a critical part of the five strategies for the company, what we have done in dental is really apply and evolve beyond lean. Henk talked about what this has done for leadership. I want to focus on the growth part of this and how that makes a difference for us and why it has been so critical. Really, it has been about growth. DBS has allowed us to grow. We have used the tools to grow gross profit.
This has then allowed us to grow our investments in R&D, grow our investments in sales and marketing, all at the same time, pretty much keeping G&A flat and still being able to grow operating profit. You can see, the last five years, 450 basis points. We have really accelerated that the last couple of years, so we are really pleased with how this application of DBS is allowing us to grow, not only in revenue but also in operating profit. Each one of our operating groups, I think, has got a great example of this. You are going to see a lot of these over the next couple of hours as we do the workshops and the hands-on aspects.
I am going to dive a little bit deeper into some of these, but I think where DBS has really led us to a greater understanding in terms of growth of workflow. We have made a real difference. You will see this in the Ormco group with the Lythos intraoral scanner, but then how that ties and links to Insignia and what that means for controlling front-end image that you get in the first instance right through the treatment planning. Thinking about workflows and how you run a whole workflow has been really key to Ormco. You will hear how Implant Direct has really had a fundamentally unique product offering, unique packaging, and a unique value with their go-to-market, and how that is creating a very different opportunity for us in implants. Then you will see how this links to the i-CAT.
Again, what I hope you get out of the workshops is how all of these things link together and how being KaVo Kerr is making a difference to us. I am going to spend time talking about two innovation-centric applications of DBS and then two process and commercial execution aspect of DBS, and I think these are really important examples about why we are making a difference. No greater example on the innovation front about being KaVo Kerr than the SonicFill. SonicFill, many of you have heard us talk about, was a really innovative collaboration between the KaVo side, who were great at handpieces, and the Kerr side, who were great at chemistry. The unmet need here was that when a doctor does a very big restoration, it is, for the patient, quite time-consuming and secondly, quite uncomfortable.
Every time you do a deep filling, you had to change instruments in and out and layer the filling. SonicFill was the first product, and still the only product, that allows you to do that in a single fill. You can do a 5 mm restoration in one fill, and you will see this in the demonstration, how quick this is and what a difference this can make. What we are really excited about is not only is this unique, but we have still got so much runway. We commercialized this in 2011 in the U.S. We still have huge opportunity in terms of penetration with the handpiece placement and the subsequent tip. The tip is the consumable. We have got a long-trailing revenue here with the tip piece and the handpiece. We have also got this huge opportunity internationally.
I think many of you know we have talked about, we just launched in China, Japan, and Korea. These are huge markets for us, where we are seeing incredible market acceptance. We think this unique technology from a collaboration between the two companies is really going to drive tremendous revenue opportunity for us in the restorative space. Let us talk another part of innovation and how this is making a difference. Scans, typical at a dentist, 2D image. You are all very familiar with that. They are flat images. Couple of things that result with that. One, it is not a true representation of what you need to repair. Secondly, they are often not very good resolution. Lastly, it is very hard to interact with them. As we use our voice of customer tools, all of these things really came to the fore.
Said, "Okay, well, if the world is digitizing, how do you make a difference?" You need something that is interactive, something very easy to use, something that is high resolution, and that has a very quick scan time. The i-CAT FLX was our response to that opportunity, and we have been very pleased with it. It is our fastest-growing imaging product. We have been able to create a product that has all of the things that the voice of customer asked us for, and at the same time, as Henk said, deliver this with a radiation dose roughly what a 2D image would be. Again, the results, I think, show in the market acceptance. Let me focus on some applications of DBS on the sales and marketing side. Many of you at the Videojet day would have heard a lot about transformational marketing or transformative marketing.
This is one of the great aspects of DBS, template and replicate. Videojet templated this, and we are replicating it now in our group. We look at our consumables market and say, "There are three things we need to do." One is we need to find new customers. They are a hugely fragmented base. In the U.S., for example, there are 120,000 GPs. How do you get to them? How do you have a conversation with them? Second thing is, how do you get them to buy more? The third thing is, how do you not lose them? These are consumable businesses. There is a tendency to churn, but what you need to do is have a high touch, low-cost op model to be able to get to them, let them trial something, and then respond to that.
So we've templated the Videojet aspects of their business into our customer lead generation. And so the finding new customers has been a really huge opportunity for us and the Discover Kerr program. A lot of people had never used a Kerr product. So we've created a lead generation program using email addresses. Again, templating the Videojet model. Secondly, we've been selling more to customers. So once you have them as part of your universe, how is it possible to cross-sell? How is it possible to start a broader conversation? And we've been using CRM and some unique mapping software to drive our sales force into better conversations. So, "Oh, you've purchased a SonicFill? Let's talk to you about TF Adaptive for the endodontic procedures." "Oh, you're using our bonding agent.
Let's now talk to you about SonicFill." This opportunity to talk across the portfolio has become really key to us, and we've been experimenting with this. The pilot region where we did this had a 3x sales revenue opportunity versus the control group. We think that that was a really important opportunity for us, and now we're blowing that out across the rest of the country and then replicating this in a number of other geographies around the world. Lastly, how do you keep the customers? So we found new ones. We've had some great results there. Got them to buy more. Great results there. The last thing is how do we not let them drop off? And it's easier to say we'll just pay more attention to them, but how do you know who to pay attention to?
And so we've developed an algorithm where we've got a predictive model that shows either they're buying less or buying with a longer period between purchases. And this is a marker for when they might exit our purchase cycle. And then we've been able to use our inside sales or our field force. This is a lead generation opportunity to send them back in and have a different conversation with the group. I think these three things have made a fundamental difference to our organization. And I think, again, showing in our results, the application of DBS. Lastly, let me talk about the funnel management. Funnel management for us, it's a well-characterized DBS tool, and it basically is a way of saying from identifying an opportunity to closing a sale, there are five steps.
And how do you manage a customer through those stages and increase your opportunity or chance of closing a sale? The process takes some fundamental building blocks of DBS, visual management, daily management, and then applies them to this five-stage process so that you can look and track key customer events all the way through to this close. We've tried it in Dental Technologies Group. You can see the result there for the i-CAT, 30% increase in close rate, which on a high-priced item makes a tremendous difference. You can see for Pelton & Crane, the impact that we've had since applying this in the equipment side is a 15% increase in close. And it's typical to apply this sort of funnel management to a capital good. What we're also now doing, and back to the template and replicate, is applying this to the consumable side.
We are really excited about the results we are seeing there. Typical example, and one of many. Vicente talked about high growth markets in the Middle East. One of our opportunities for funnel management was applying that in the Middle East. We have increased our funnel size, the opportunities that we are looking at for commercial closure, 100% in the last two years, and we have increased our tender close opportunity by 10x.
We are seeing the application of a well-characterized tool of DBS commercially in the consumable side, again, another opportunity to show how we are winning. To wrap it up, I think it is important to understand what DBS does. What DBS and the application of the growth tools is, it is giving us a chance to grow. We are growing our sales and marketing, we are growing our innovation, and as a result, we are able to win in the market.
The whole time we have been doing that, we have been able to increase our operating profit, and we are accelerating that. I think it is a really powerful story. Hopefully, you will like the hands-on demonstrations later on, and they will give you a close and personal view of that. Thank you.
Damien, thank you. DBS at work. You see the evolution of the business system from a set of lean tools, driving margin enhancements, to those margin enhancements then being deployed using DBS tools to drive better commercial execution and exciting product innovations. One of the most exciting product innovations going on in our dental platform is in digital dentistry. I would like to invite Vicente back up. He is going to share with you a lot of the things that are going on in the platform, and I think set the stage for some of the things that you will see this afternoon when we go to the hands-on demonstrations. Vicente.
Thank you, Tom. Okay, good afternoon again. Indeed, I think this is one of the most exciting emerging trends in dental today, and obviously, very excited to show you here some of the things of what we are doing, how we are applying digital dentistry specifically to some unique workflows, the results that we are seeing, and then obviously, what is yet to come for us at the KaVo Kerr Group in this space. Let me first to kind of frame up everyone as to what traditional dentistry is.
I am sure many of you have gone to a dentist to do a restoration or orthodontic work, implant, any work that might need some sort of restoration, and the doctor typically starts with that goo and gagging feeling that you have to put in your mouth to take an impression. That takes typically anywhere between 30 to 35 minutes, right?
The doctor, from there, he creates a physical look of how your mouth looks, and then he compares that to a 2D X-ray. From there, he creates the best judgment call as to what should be the best treatment plan solution that he could offer to the patient. The doctor will actually take consumables from stock, from their inventory that obviously relies in his office, and then makes some tweaks, some modifications, and then puts that on the patient and goes back and forth in order to actually tweak that appliance or that device in order to actually create the treatment plan, as to the best of the abilities. So it's obviously typically, a very long, inefficient process with potentially subpar results. On the other hand, the way we view digital dentistry is in a very unique way.
This is the way we like to view digital dentistry. Instead of doing a physical impression, you actually start with a digital model. You're going to take later on a demo as to how we do this at KaVo Kerr Group. But you make a digital representation of how the mouth of the patient looks in probably half the time that it takes to do a physical impression. That digital file gets loaded or goes directly to the cloud to a software solution that actually allows the doctor to create a diagnosis and then the treatment plan that goes with it, to then be able to allow, produce a customizable appliance, a customizable treatment solution that then gets put on the patient.
Obviously, at the end of the day, what it does is it maximizes or improves the total workflow solution here for the patient and allows to provide a much better clinical outcome, faster treatment times. Equally important, the doctor has a very much more ability to be able to increase his productivity by the efficiencies in the workflow, but by also the combination of being able to provide a much more enhanced, customized product solution here. So at KaVo Kerr Group, the way also we like to view this, as you remember in the prior chart I showed you, take an image, you do the diagnostic and the treatment plan, and then customizable solutions. Here is what we have in terms of offerings at the KaVo Kerr Group.
You take an image, you do the diagnostic and the treatment plan on the software side, and then you offer the customizable solutions, customizable appliances that are actually applicable to that specific patient. Here's where we believe that we have a very unique position in the market, in the field, because when you look at the imaging side, which obviously that's how the workflow starts, the image capture, we have some market-leading position, number one, number two, in some of the respective technologies that we have.
Whether it is on a DEXIS intraoral sensor or Lythos scanner that we just recently launched last year, but obviously offers a very unique competitive advantage compared to other IO scanners or intraoral scanners, or whether it is our 3D X-ray cone beam CT machine that allows to have just a very unique visualization of the entire patient, with a soft tissue, hard tissue, and be able to create some unique diagnosis. From that image capture, then we also have some very unique software solutions. Insignia, and I will show you here later, a much deeper look into the orthodontic workflow.
But Insignia is the only software today in the market that is able to provide customizable fixed appliances in the orthodontic market that will allow the patient to have a much shorter treatment time, less office visits, and obviously, increases the productivity of the doctor because doctor is able to charge a premium as well as be able to increase the productivity within the office. And then obviously, clearly equally important is the level of consumables. I think Henk mentioned that, a unique position that we have at the KaVo Kerr Group is the ability to be able to have very great position on some of the equipment technologies, in this case, call it the imaging side, and then on the backside, being able to have these consumable solutions that get customized via some software applications that we're able to integrate here in the dental practices.
Today, in the space of the digital dentistry, a lot of these solutions that we have today are delivering obviously some great growth. Over the past couple of years, over 35% CAGR in these solutions that we have today in the market. Let me tell you now a little bit more deep dive in terms of the digital dentistry, particularly in the workflow of orthodontics. And some of the data that you see here in the digital way, it's kind of basically our data, is how we do orthodontics with Insignia and Lythos. And this is data that it was not compiled by us. It was basically a clinical study done by UNC, where they did almost like a blind study of our technology compared to other technologies in the market. Let me first start with the traditional way.
Traditional orthodontics, you go to the orthodontist, he takes again the physical impression, creates a model, looks at the 2D X-ray machine or 2D X-ray view, picks brackets from the inventory, and then obviously places the brackets one by one, bends the wire, and then the patient goes back to the office at least 20 times to be able to either change the wire, make adjustments, move the bracket, move this, move the other one. And then obviously, a treatment plan takes anywhere between, call it, between two years to 2.5 years . It's a very long process, very inefficient for the patient, because obviously the patient has to go back and forth to the office a lot of times.
And then obviously from a doctor perspective, doctor has to keep a lot of amount of inventory of appliances in stock as well, because he needs to take from the appliances that he has to the best of his ability, be able to provide these orthodontic solution that will allow to create the smile on the patient. The digital way, the way we do it at KKG, KaVo Kerr Group on the Ormco side, is we take the IO scan. So we scan the mouth in roughly 12 - 15 minutes, upper, lower, crossbite. So we are able today to do the scanning of the mouth in much less time that it takes a physical impression. Then the doctor uses the Insignia software, which you will take a demo of that here later. Then the doctor is able to create that customizable smile for that specific patient.
The patient is able to also visualize how he or she is going to look when they are done. Then we produce customizable appliances. We make the brackets specifically for each individual tooth in the mouth of the patient. Then we provide a solution to the doctor. All the doctor has to do is just bond the brackets, put the wire, and the patient has to come to the office much less time. I am one of those Insignia users. I was actually IO scanned, so they scanned my mouth. It was actually here at the learning center back in December. My case would have taken about 1.5 to two years. Right now, we predict that I am going to be done in about eight to nine months. So obviously, we customize appliances for my smile.
I actually saw the doctor create the smile on the software, and he was able to show me a video, actually, that shows how my smile was going to look from, call it before and after. Then obviously, the other fact is that over the past, call it six or seven months, I have been only to the doctor only three times, so for just minor checkups. The difference here is that we are able to create custom treatments, so obviously provides a much more better, more effective clinical outcome. The treatment time is close to 40% less. The amount of visits that the patient will go into a dental office obviously gets minimized.
And then obviously for the doctor, he is not only able to charge a premium because obviously appliance provides faster treatment time and more efficient to the patient, but obviously he does not carry any inventory because the appliance is actually customized for that specific patient. So all in all, provides a very good equation for not only the patient for the treatment outcome, but also for the doctor in this case. As I mentioned, digital orthodontics is something that we today currently offer on the Ormco side. We call it Ormco Custom. The solution, it basically includes the digital scanner. So you have the Lythos scanner, so you are able to scan the patient of the mouth very rapidly. Then you have the Insignia digital treatment software, where the doctor is able to diagnose and create a treatment plan.
Then we produce the customizable brackets and wires that will go into the mouth of the patient. If you remember back that picture again that I showed you, we create the image, we have the software, then we create the customizable appliances, all in one comprehensive workflow that the doctor is able to understand more effectively how much money, obviously for one, how much money he is making on that patient, but also more important, it improves tremendously the outcome of the patient. What it means for us is that because of that increased value to the customer, we are able to obviously have a premium, whereas Insignia, in this case, the price of the appliances are about 2 x the ASP of what the other regular appliances that we sell in our space.
Because this solution has been so unique, today Ormco is the only one that is able to provide this solution. Our revenue in this space has been growing at a 40% CAGR over the past couple of years. That has been only in the North American market. As I mentioned before, as we expand into high-growth markets, some of these digital technologies will obviously, where we are collapsing the workflow and simplifying the workflow, where there is also some lack of dental education, obviously provides a very unique opportunity for us to be able to accelerate that growth even further. With that, I am going to show you a video here that actually represents what Insignia is, what Lythos is, hopefully you get a perspective as to what that workflow looks like.
Very impressive, simple workflow solution that achieves the ultimate goals that we want, which is faster treatment times, improving the clinical outcome, obviously enhances the productivity of that doctor. Now, that was on the orthodontic side. On what we call the implant tooth replacement side, restorative side, we are looking at a workflow in a very simplistic way as well. Once again, the traditional way, the way it is done today is you have a 2D X-ray machine, 2D X-ray view, or it could be, in some cases, a 3D, but you have to take also that physical impression. Then the doctor will then actually create some physical look of what the mouth looks. Typically, their lab or a doctor will have to create segmentation, physical segmentation of each individual tooth.
If he wants to do an implant planning, then he needs to plan that implant based on that physical model that he has, obviously, in his hand. Then once that is done, then obviously the patient comes back, they get the implant, to create the restoration, you have to go through that process again. You take another physical impression, create the physical look, then obviously make a lot of tweaking, a lot of fittings back and forth on the patient to be able to create that restoration and that solution. In our digital way, the way we view it is you start with a 3D image.
That 3D image, also a digital impression with our scanner, that image gets consolidated, then it gets used into a software that you will see actually here in action, where the doctor will virtually place that implant, virtually, on the computer of that patient. The software will allow to tell the doctor whether that implant is in the proper position. When I talk about the implant, it is basically the screw, in a proper position so that he does not hit the nerve, he does not hit the roots, and he is actually putting that properly on the center of the bone. From there, then once the planning is done, the implant is placed, then we are able to provide a 3D-printed surgical guide for the doctor to be able to drill, and then place that implant.
Once the implant gets healed, patient goes back to the office, then in one visit, we are able to create a customized abutment and the restoration that goes in order to obviously provide that comprehensive solution for the patient. In a very similar fashion, faster diagnostics. In this case, call it 70% faster diagnostic and treatment plan solutions that we could offer. The doctor saves a tremendous amount of time. The patient also saves time by not having to go into the office several times. Ultimately, because that implant and that customized restoration was done specifically for that patient, we are able to have a much better outcome, in this case, for the patient. We also believe that we are very uniquely positioned in the restorative space, because once again, it starts with the image, the software, and the customized consumables.
On the image side, we have probably one of the largest and growing digital imaging footprint. Today we have over 6,000 3D machines, and a very large majority of them are what we call these 3D cone beam- Computed tomography machines. Some of the other ones are called 3D combo. In addition to that, just less than a year ago, we launched the Lythos scanner. In less than a year, we were able to actually put in the market, in North America alone, close to 500 Lythos scanners. Combine that with the increase in the penetration that we have in the CAD/CAM market, that today, primarily, we are playing today so far in the laboratory side. Today we have actually a very expanded network of roughly 700 CAD/CAM machines that are co-located in different labs.
It is a market that for us, still continues to grow very nicely. At Q1, it alone grew 50%. Now be able to combine all these capture image software and the Lythos scan, for example, in creating this unique solution that we believe could be uniquely positioned in the market, that we are expecting to launch here in early next year, where we are going to have, obviously, integrating our Lythos scanner, that you will see here later, with the ARCTICA mill to be able to provide an in-office solution, chairside CAD/CAM solution, that will be able to allow the doctor to increase his productivity by being able to produce more complex and more complicated materials and solutions than what might be available today in the market.
So we believe that, with the install base that we have, and with the solutions that we are developing, and replicating a lot of these digital dentistry applications that we have done in the orthodontic space, as well as now on the restoration side, it is obviously offering a very unique opportunity for the KaVo Kerr Group team to continue to expand the growth and success that we have seen so far in this digital space. To wrap it up here, I will say that the shift in the digital side is changing how we do business dramatically. It is changing how we sell it, where we sell it, and it is changing, obviously, the life of the doctor and the life of the patients. For us, this continues to be a very large emerging opportunity. One that is at the early stages of the adoption.
It is actually even much less adoption rates today in the high-growth markets. As you saw, high-growth markets for us is a very unique footprint that we have. Then how we combine high-growth markets and digital dentistry offers, obviously, a very unique competitive advantage where we can continue to enjoy some actually good growth. Obviously, at the end, ultimately, improve the life of the patient. Thank you.
Vicente, thank you very much. Leveraging technology. Technology that can drive faster treatment times, better patient outcomes, and improve the productivity of our customers. What a wonderful set of market drivers. What a wonderful market that is. When you combine that with the prospects that have existed and continue to exist in the high-growth markets, the abilities to drive technology and further penetration levels into the doctors' offices, we remain very bullish in terms of the opportunities that our dental platform has in the years ahead. Throughout the day, you saw how we were driving our strategic priorities for 2014 throughout the dental platform. Damien shared with you how we are gaining share through the use of DBS tools. DBS tools that are clearly driving new levels of innovation, as well as helping us to improve our commercial execution.
You heard how we are winning in high-growth markets and how those high-growth markets are markets where not only are our commercial efforts being rewarded, but where product localization is really making a difference. Going digital. You have just heard how important that shift in the landscape is today and will continue to be, in our customers' offices and in the ways that those technologies can improve patient lives. We have a great track record of how we have deployed capital, with 24 acquisitions over the last decade, but we really feel like there is plenty of runway ahead.
There's great opportunities, and we're confident that as we continue to harness the global scale of this business under the brand umbrella of the KaVo Kerr Group, continue to leverage the great organic investments that we've made, and supplement those with capital allocation in smart ways where we can add capabilities to the platform over time, the future is bright for our dental platform. With that, I'm going to ask our presenters today to come back up front. We're going to transition into a Q&A period. Our able-bodied team here is bringing up our Pelton & Crane chairs. I'm sure there's a more technical name for that than- Hygiene assistant chairs. Hygiene assistant chairs. Thank you. We'll take questions for the next few minutes.
Just a reminder, since we are being broadcast here, just give us a second to pass a microphone, if you would, so that we make sure we get your voice out on the broadcast. Jeff?
Thanks, Tom. It's Jeff Sprague from Vertical Research. Really, two questions. First on the M&A ambitions. Should we be thinking about those in terms of increasing the market size? You sized the market at $15 billion. Are there clear adjacencies that make sense for Danaher that kind of open that aperture? Is the first question. Unrelated, just on growth, obviously, we heard a lot of exciting things, but when you roll it all up the growth is okay. It's not extraordinary, right? I just wonder, are there particular places or geography in the portfolio where there's meaningful end of life, which is the flip side of the growth story we heard and what you're doing to maybe address that? Thank you.
Thank you, Jeff. Am I on? Yes, I'm on. First on M&A. We have a very active process today in that $15 billion space. I think what we're seeing in that $15 billion space is that, both from a technology or an equipment perspective as well as a consumable perspective, still some real opportunities. If you think about the consumable side, where we have $1 billion in roughly a $10 billion space, maybe a little bit more opportunity there. Also, as the digital convergence really takes place, there is probably some more opportunity there to tuck in some technology and some other things that would really help us advance the business. I think what we are seeing, to your other part of that question, is this a $15 billion space or can this space be bigger?
I think we're clearly seeing some things as things get more digital and as we understand some of the high-growth markets better, some of these market definitions maybe start to blur a little bit more. I wouldn't exclude it that we'd be back here with time with maybe a slightly larger definition of that market. But for now, we're mostly focusing on that $15 billion space. I think the second question there was on growth and what we've been doing. We clearly have had two things that we're really trying to optimize over a longer period of time, which is we need to get our margins up, and I think you saw quite a bit today of how we've done that and how we've done that consistently in admittedly probably a pretty slow macro.
We have balanced our investments in making sure that we get a better position in high-growth markets, which should set us up for better growth going forward, and making sure that we invest in new products and innovation. Those are all, of course, efforts to try to get that growth rate up. But I think if we look at the macro, I think we're still stuck there with the macro that I can't predict what the macro is going to do, but for now, it's still a fairly slow-growth environment. We have to deal with that, but we're going to continue to invest in places where we will get more growth going forward.
Hi. Thanks. Isaac Ro from Goldman. I wanted to ask a couple of questions about product-specific items in dental. First, just your thoughts on the clear aligner market and how attractive that is as an opportunity to expand your portfolio. Then secondly, in the implants business, it seems to me that it's fair to say you guys have focused more on the low to mid-tier of the market. There are some pretty well-known competitors at the high end. So how do you think about the importance of moving up the value chain to higher end? On the one hand, it seems like these are products that are somewhat less differentiated than others that you guys have in the portfolio. So just how do you move up the value chain? Is that important? Yeah.
Vicente, if you take the aligner question.
Yeah, so I'll take the aligner question. Yeah. So I'll say on the aligner side, today we have actually a small aligner portfolio of businesses. It is actually more focused on the express aligner side of things. It is obviously a space that we continue to like and a space that we hope to continue investing in and be able to play in that space.
Yeah, maybe back to implants or maybe one other comment on the aligner space. A lot of our investment is going into our Insignia business today. So we are working hard to make sure that we have digital customizable solutions for our core orthodontic customer base, and that's really where we're putting our investment today. So that's investment in things like Lythos, more software, and better treatment solutions in that Insignia business. And we're obviously learning a lot about how to move teeth around in a computer model, whether that is with, in this case, fixed brackets and wires. I think we're learning a lot of how to do that in a true digital world. Now back to your implant question. We have a great position with our Implant Direct joint venture. We own the majority of that. It's been a great play for us.
We had high double-digit growth last year. And in that high-quality value segment, we continue to do quite well. I think what we're seeing is there is obviously a number of premium players. They've had a little bit more headwinds, I think, from a pure growth perspective. But I think what we're seeing is that in the overall market, I think we're seeing slightly higher growth rates finally in implants, but you still see that the value play that we have, especially in North America, continues to grow slightly faster than I think the overall market. And I think that's a function of good execution and a high-quality product at a value price.
Thanks.
Martin Sankey, Neuberger Berman. I can't resist the opportunity to ask the question. At one point, there was mentioned a clear line of sight to 20% operating margins over the next five years versus the current 15% today. Where does that come from as you analyze how you see the business evolving, and I'll have some follow-ups.
We're not done yet. Well, maybe, I can take the first part. You guys should pitch in here. I think the simple answer to this question is a very similar playbook than what we've been playing with in the last three years. We're living in a slow macro, and we're having to invest in some growth areas to get our fair share of growth. But it is a continuous balance of taking structural cost out. While we closed more than 10 facilities, we still have plenty to go at. So that's definitely an area, continued good purchasing. And importantly, as we continue to drive more new products to the market, making sure that those products run at a gross margin rate, that they are at or above the fleet average to try to drive that gross margin rate up.
Reynal, if anything else you wanted to add to that?
No, I was going to focus on that. On the fact of these new product innovations that some of what you're seeing here that obviously are incremental to the fleet average of what we have today. And obviously ensuring that as we continue to launch and develop a lot of these new innovations, they continue to be accretive to what we have in the P&L.
I think our big opportunity continues to be, too, this I talked a lot about DBS. We still got a lot of runway with the lean aspects of DBS that give us opportunity right across the whole platform now that we're collaborating better together. And I think that's important. And as we move up the value chain with all of our innovation, I think we're going to see that pay off, too. So continue, I'd like to say the continuation of the playbook.
Okay. Matt, one of the possibilities that the business evolves over time to, let's say, higher margin consumables versus the current 50/50 mix of consumables versus equipment today?
Well, let me take that question. There is clearly an opportunity to continue to grow in consumables given the relative market share we have in consumables versus equipment. I think importantly, though, how some of that stuff is going to come together, I think is going to be an important play for us, where we can really leverage some of our equipment positions and know-how that we have in the digital space, and hopefully translate that into a set of consumables that have attractive margins for us going forward.
Let's see. How would R&D expense look over the next couple of years? Does it stay the same as a percentage of sales or come down over the next few years?
You want to take that?
Yeah. From our side, on the Dental Technologies side, we're managing these more as a portfolio of investment of the different business units that we have. Then some of these digital dentistry and some of the high technology side, we're accelerating the R&D to be in the double-digit side. It all depends on the level of technology that we're looking at. But I'll say for the most part, it continues to increase. You saw some of the numbers here that Damien presented on how we're increasing R&D. But I think more important is that once you start looking into the different entities and the different technologies that we have, how we are accelerating the R&D investments on the software and the digital dentistry, that is particularly, to us, the more important number that we always get focused on.
Jon Groberg with Macquarie. Two questions. One, just to follow up on that chart where you showed you went from 46% gross margins to 50%, and your mix of business went from 90% equipment to 50/50. What is the gross margin difference between, I would have thought maybe that number would even be higher given that you went from 90% to 50/50. So what's the gross margin difference between the instruments and consumables?
Yeah. I don't think I will comment very specifically on all the different gross margins level. But on average, consumables have slightly higher gross margins. But even within consumables, you have a broad range of gross margins depending on how differentiated and how much competition there is in a certain segment of the market.
Okay. Can you maybe talk, you talked about some of the overall macro trends, but just generally, when you think about some of your customers, whether it's dentists, orthodontists, maybe a little bit more on the dentist side, I'm thinking about, but what are some of the major trends impacting them? For example, I go to the dentist now, and he wants to take an X-ray, but I know my insurance only covers it once a year as opposed to every six months, and so I don't do it. Is there consolidation going on amongst 120,000 general practitioners that you talked about? Maybe just talk about what are the major trends that are really impacting your customers.
Sure. I think it varies by region. Maybe the micro trends that you see in China will be different from the U.S. Specific to the point that you mentioned, for being more U.S.-centric, there is definitely some consolidation. We see faster, call it, growth rates on these group practice. That is probably maybe what you were referring to as to dentists that are forming more of the group things. I will say that the bigger trend that we see is that dentists want to do more. General practitioners, they want to do just more than just general partitioning side.
Now, whether that is by hiring a specialist that could be in the dental office or that doctor trying to learn new techniques and new ways of doing things, I think this is where the technology that we just talked about offers the potential ability of dentists to be able to do more. I will say that from our side, that is one of the major trends that we see is dentists just wanting to do more than just what they have been doing in the past.
I think that is why we are uniquely positioned for this, right? Because we are a one-stop shop. I think as they move into, from GP to orthodontics, GP to endodontics, we are in a position where we have got a relationship, and they already have the trust with us that we can help move up that value chain and be that trusted partner for them.
Thank you. Good afternoon. Jeff Johnson from Robert W. Baird. Henk, maybe a question for you first, and then Vicente, I want to come back to a question on the CAD/CAM side. But Henk, you have made some changes in your North American distribution strategy here just recently, and would like to hear, one, what maybe drove that, but two, and more importantly, do you think we are seeing the end of the exclusives or national exclusives, the end of that era, or a winding down of that era, number one. Number two, what does that mean then maybe for some of your other products that are still at a national exclusive level, like a DEXIS or an i-CAT? Do some products always stay how they have been, or at least have been for quite a while?
Thank you, Jeff. A lot of our products go through distribution, and we have great partners with our distribution partners, both in North America and in other parts of the world, whether that is with Henry Schein or others. That continues to be a very important part of our business. In terms of the specific question of the change that we made in distribution, particular to KaVo handpieces, we believe that KaVo handpieces are a product that is more like a consumable and therefore needs to be broadly distributed. As a result, we decided to add a distributor, in this case, Patterson, and we now have a little bit more than 20 distributors in North America for KaVo handpieces. Let me just also say, Henry Schein continues to be our largest distributor partner.
We work very closely with them, and we do not think that this materially impacts anything that we do with Henry Schein. I think that partly answers your question on the exclusives. I think how exclusives evolve is to be seen. But I think we are definitely going to be living in a world where we will have exclusive distribution arrangements between manufacturers and distributors, and we do that as well, of course, with the i-CAT and the DEXIS today.
Thank you. Vicente, on the in-office CAD/CAM market, I would love it if you would lay out your launch strategy for us today. I do not think you are going to do that for us. But when I look at that market, there is four or five other players in that market. Typically, Danaher, not a fourth or fifth to market. The channel is a little mucked up, with an M, a little mucked up right now with some of the distributors already having partners on the CAD/CAM side and all that. Just from a high level, how do you think about attacking that in-office CAD/CAM market over the first couple of years here as you enter that market next year?
Sure. No, will do, Jeff. I will say, first of all, that the way we are approaching the market is first, we are going to attack the high-growth market. So our focus is to be a good player in the high-growth markets, and then potentially move into Western Europe, and from there, we will see where we go next. In terms of the players in the market, obviously, still the penetration and adoption rate of these chairside CAD/CAM is still very low. We still see a great potential market to be able to have multiple players. Obviously, not only be able to have multiple players, but obviously, with the unique features and benefits that we can offer with the solution that we have, we believe that we can be a good player in that space.
Hey, Mike Cherny from ISI Group. Jeff took part of my question, but maybe thinking a bit also using the penetration rate you had in the lab market on CAD/CAM into what you plan to do with regards to the chairside market. What was the key selling points that you guys were able to garner to generate that 700 placements that you made, which I think, if I remember correctly, is in a pretty short timeframe relative to when you fully tried to launch into that market.
Sure. I'll say that the uniqueness of what we have is the ability to be able to do just more different materials than what any other machine in the market could be capable of. I could get very technical as to how we can compare our machine, but whether it is the capability of a five-axis machine versus a three-axis machine, you can actually machine more complex geometries. You can actually make more complex materials, such as titanium, that other machines, milling systems in the market are not that capable of being able to do in the footprint that we're able to do that.
Great. Then maybe, Damien, a question for you. It seems like consumables are getting a little bit of the short shaft here during the Q&A session, so I'll try and come up with something for you. Some simple back of the envelope math seems like you guys roughly consider your consumables market 10% penetrated.
As you think about opportunities to expand that geographically as well as through greater usage of some of the innovation, new products you have, how much do you think you have in the toolkit now versus are there specific areas within consumables where you think it might make sense to get a leap start by pursuing some of the M&A strategies that Danaher is so famous for?
Yeah, I think we're looking at both parts of this. I think organically, we still have so much runway. We're pretty late to the game internationally. We were very U.S.-centric, and you can see that over the last few years, we've morphed more towards the high-growth markets, but even outside the high-growth markets, just better penetration in Western Europe. So we still see a huge organic play. I think key to that is some of their unique technologies. We've launched SonicFill, as I said, which has huge runway just in the U.S. for penetration, let alone Germany, U.K., and the rest of the developed markets. We've got the TF Adaptive for endodontics. Again, huge opportunity for us in endodontics, where we haven't been a big player. The new curing light gives us an opportunity.
We've gone from declining market share to the number one position in the U.S. with the new curing light. So I think our organic play and our investment in R&D is the first and foremost thing. Outside of that, we still definitely see a lot of opportunities in inorganic play. One of the things is after the first four or five players in the market, it's very fragmented and largely family-held businesses and that's a long cultivation cycle typically. So, as Henk says, we've got a really active funnel. We're actively talking to a number of groups, and hopefully, we'll be able to deploy some capital there. But our first and foremost thing is an organic play, and we think we've got a lot of runway there.
Chris Harrell with Capco Asset Management. You might have just answered a little bit, but I wanted to dig into that market share as well. If you've got 20% share in the equipment space and 10% in the consumables, is it just a difference in international penetration, or is it a difference in distribution, or are there areas of products you simply don't have? What's the real driver behind the spread in that market share that you have in those different areas?
Yeah. Well, I'll talk about it from the consumable side, and I think there are two things. One is we didn't have a particularly broad offering in a number of spaces. Our endodontic offering was a little bit limited. We've done some work there and like I said, TF Adaptive that you'll see in the hands-on will be a big opportunity for us in endodontics. I think broadly too, we were not that focused on international growth. We had a very U.S.-centric focus, and we've recently, in the last three years, changed that pretty dramatically. We've got a really great team running Western Europe now. They're doing an awesome job. We've got a great team in Asia, and so what you're seeing is great growth rates in those markets. And I think that's where a huge part of our opportunity lies.
Maybe if I can add to that a little bit. I think it's some difference in sort of international penetration within the consumable businesses. The other part is that there are some segments here in that consumable space, for example, the implant market, where while it is a very attractive and unique position, we're relatively a smaller player. Although in North America, we have good share, when you look at it around the world in a $3 billion+ market, we are still relatively a smaller player.
In the way you define what's in equipment and what's in consumables, do you in effect make consumables for other manufacturers or are these things always joined hand in hand with your equipment, your consumables? Or is the definition so loose it doesn't really quite work that way?
The consumable doesn't always have to marry up to the equipment. I think that's the first thing. Yeah, we do have some OEM relationships where we manufacture for other companies, but that's not a core strategy. I know a lot of other groups pursue that, and that's fine. That's not our strategy. But we have been able to leverage some of our products by partnering more broadly. Again, internationally, that's been useful, but we don't always have to have them linking. I think SonicFill, for example, was a really prime example of where we did consciously link the groups.
Andrew Obin, BofA Merrill Lynch. Just a question on transformative marketing and implementation of DBS. I guess you showed it to us at Videojet. How far along are you guys, and is it at a point where you can quantify it in terms of contribution to sales growth? I guess a follow-up question, do you guys care to share where is it going next? Which segment of the company?
Damien, you want to take that?
Yeah, I probably won't talk about exactly the contribution, but we're in the early innings. I'd say the second or third. We've still got some runway there. I'd say by year-end, we'll be really well-characterized in the U.S., and we'll be rolling out pretty aggressively internationally the things that we learn from that in Q1, Q2. I'd say we're doing well with it, and we're pleased with how we're seeing this contributing to the sales.
Anyone else outside you and Videojet doing it at this point?
Yeah, I think there are a number of companies. Matt, I don't know if you want to jump in.
Yeah. Take that last one.
Yeah.
Can you take one or two more?
Thank you. Bryan Kipp, Janney Montgomery. Just a quick question in context to the operating margin call that was asked earlier. You guys said that roughly $350 million over the last two years in product vitality, so it suggests high single digits to low double digits on an annualized basis. In context to that of growing gross margins, do you expect that to accelerate or stay in that range going forward?
I'll take that.
Yeah.
I think in terms of new product launches, we clearly expect to continue to drive more products into the market going forward. Next year is an IDS year. Every two years, there is a big dental show, a global dental show in Germany, where typically the manufacturers roll out quite a lot of new products, and it is our plan to do the same. Typically, we get a little bump in sort of vitality, if you want to think about it that way, right around and after that IDS show. But I think from where we are going forward, I think that rate of new products coming into the market for us and the percentage of sales that that makes up will probably be roughly the same over the cycle.
Brad, take the last one, and then we should get moving on from.
Thanks. Brandon Couillard, Jefferies. Vicente, just to clarify and make sure if I understood your comments right, it did not sound like you expect to launch the in-office CAD/CAM system in North America. I just want to make sure that is true. Then as you go into emerging markets, are you going in with a Western brand, or is there a dual-brand strategy?
Yeah. To answer the first one, at least we are only talking about the priorities of where we are going now, which is high-growth markets in Western Europe, and then from there, we will define where we want to go next. In terms of the branding, that is something that you will see as we launch. But it is going to be comprehensive. Obviously, as part of our go-to-market launch, we are being very mindful as to what brand is the one that we are selecting to launch it at.
Okay. Thanks, guys. That is going to wrap our formal presentation part. We are going to go on to the demos now. We will take volunteers for patients as we. Good to see the audience has lightened up a little bit. In all seriousness, what you are going to see with the demos, we are going to have four for you. You are going to see how the investment, the innovation that the guys have talked about today is driving a workflow optimization for the dentist, and how our products are going to differentiate versus peers. A couple of housekeeping items before we move on. Like I said at the outset, your tour group number is on the back. You are going to meet over here in the lunchroom, one, two, three, or four.
For those of you that are attending the baseball game or going back to the hotel, there is a letter on your ID here, A or B. That is going to be what suite you are in and what bus you are on. The ticket to the baseball game also should be in your badge. If you have not registered for the baseball game, you are missing your ticket, just come talk to me or Michelle or Aaron, and we will take care of it. With that, this will wrap up the formal conversations and thank you all for joining us and for those that are not going to the game, safe travels. Thanks.