Sonova AG: A Durable Growth Play on Demographics and Healthcare Trends
The high-quality market leader in the global hearing care industry
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The AG für Elektroakustik (company for electronic acoustics) was founded in 1947 in Zurich. In 1965, it was acquired and renamed Phonak AG, which is still one of the main brands for Sonova. The company went public in 1994 on the SWX Swiss Exchange and has grown to the global hearing care industry leader.
Sonova develops and manufactures hearing aid devices, cochlear implants, consumer products and an audiological care clinic network. It is a leader in its submarkets and the largest player in the total hearing care market. However, this oligopolistic and fragmented industry has several large players and intense competition. Sonova operates under many different brands for different geographies, customer needs and price points.
Hearing aids are a global market with a low penetration: Developed countries have a higher adoption rate of 32%, while developing markets have little adoption (3%), bringing the global average to 10% adoption. The largest opportunity is in capturing large and developing economies like China, where the population will rapidly age over the coming decades, but developed countries also show strong potential for growth with an aging population and wider access to health care benefits.
Some key reasons for the low global adoption rate are that many people don’t know about their treatable issues or simply have too much shame to treat them, as well as a lack of money or social security programs to purchase hearing aids. Wearing a hearing aid can be perceived as shameful for young adults or children, even if it would improve their quality of life.
This global market is expected to grow by 4-5% annually, with hearing instruments (Sonova #1) and audiological care (Sonova #2) growing at 3-5% and cochlear instruments (Sonova #2/3) growing faster at 5-10%. Cochlear implants are more invasive devices for severe cases and require more expensive procedures and instruments. Let’s look at Sonova's strategy and why it should continue to grow its market share in this highly competitive market.
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