Industry Leaders Respond to Essilor-Luxottica Merger

Monday, January 30 2017 | 00 h 00 min | Acquisitions

InfoClip continues to post Canadian industry reactions to the ground-shifting mega deal between the two industry behemoths.  Bookmark this page for further reactions as we receive them.  SEND YOUR COMMENTS TO EDITORIAL@VUEPOINT.CA 

January 30:

Jason Kirk, Managing Director, Kirk & Kirk  

“optical retailers  need to make informed business decisions about what products they prescribe and what products they sell. The fact that two giants just got bigger should not affect those choices, although it does raise awareness of their dominance.

There is a very interesting challenge from which we must all learn; in general, the public know little about lenses and will be guided by their unerring confidence in the optician/optometrist, whether you recommend an Essilor product or any other. When it comes to frames, a hugely important styling decision, consumers have little confidence in a ‘scientist’ hiding behind a licensed ‘fashion’ brand, especially when your consumer is well-informed on products and competitive pricing. If you want to be an independent, you need to be truly independent in all aspects of your work.”

January 24:
Silvano (Syl) Ghirardi, Ophthalmic industry Executive (Retired)

I have read the comments on the “Essilux” merger and I believe that all are playing it safe. There will be change and it will happen earlier than 5 years as people position themselves for the future earlier than later. The time for the OD/Opt. practice to plan is now, not later when it will result in reactive responses. It was mentioned that e-commerce market is plateauing. Nothing can be further from reality as new technology and the addition of branding will make it much easier for the consumer to order on line.

These comments will lull the optical industry into a sense of denial about the future.  It is not Essilor and Luxottica that created this market shift, they are merely proactively reacting to changes in the market and are positioning themselves for the future optical market.

It is well understood that the average OD practice “loses” 50%+ of the Rxs and these are filled by competitive channels. The OD has always used a differentiation strategy by offering quality products. But now Essilux will be able to offer quality, branded and promoted product to the patient, at market attractive prices that will be available at dispensaries or on-line. The practices will be under pressure to compete to deliver the same product at a competitive price and service. The practices need to develop a strategy that takes into consideration the market direction and the Essilux influence, now.

January 20:
Grant Larsen, President, Digital ECP Inc. www.digitalecp.com

A $65 billion-dollar merger, 140,000 employees, thousands of retail locations in 150 countries.  Anytime two companies of this size get together, in any industry, the numbers make headline news, and often with negative undertones.  In Canada, it’s impossible to manage an optical store or work as an optician and not deal with Essilor or Luxottica branded products, ever day.  Luxottica’s retail brands, LensCrafters, Sunglass Hut, Pearle Vision and even glasses.com are formidable competitors to many opticians.  They also employ thousands of Canadians and hundreds of licensed Opticians.  Essilor, Transitions and Clearly.com have a media presence familiar to many consumers searching for vision solutions online. So why does a consolidation of these giants evoke such a negative reaction?  Better yet, how will this help the optical industry in Canada?

When two companies so different get together, the result is logically complementary. Consumers see lenses as functional and frames as emotional purchase decisions.  When you combine branding from both companies, the presentation at retail brings clarity and trust to consumers in an ever confusing and fragmented market. We often say “quality and brands speak for themselves”.  That being said, Essilor and Luxottica will have a lot to talk about and advertise in the coming years.  Their branded clout and market share size will stabilize branded value and the luxury eyewear market.  Good news as more and more price focused companies enter a very attractive eye care industry.

How does the investment world view this merger?  Although still early, both Essilor and Luxottica share values have increased post-announcement by as much as 8%.  The global eye care market is forecasted to grow at more than 5% annually through 2020.  Luxottica and Essilor have made significant investments into market expansion, global manufacturing, online channels and technology research.  Investments and learning they undoubtable will share to capitalize and grow their current estimated market share of 27%. With the next largest company in global eye care at barely 4% (J&J), you can bet on other companies seeking alliances or mergers to gain some competitive advantage or build investor interest.

So how do small independent retailers, consumers or eye care competitors benefit?  First of all, lets keep this in perspective.  You will see very little change in either company in 2017.  Some of the more complicated relationships between retailers, online and vision plans (EyeMed) will take longer than that.  Brand availability, pricing, policy changes, sales representation will change to build the synergies between both companies, but they will appear to be separate for years to come. So, for now this is a little like when Brad Pitt and Angelina Jolie first started dating.  Lots of headlines, a whole lot of speculation, plenty of fake stories and pent up anticipation for what’s next.

Sometimes we forget how big this industry is, even in Canada.  Many thought online retailers would bankrupt half of the independent bricks and mortar stores when they launched 10 years ago.  Yet online is less than 6% of all eyeglass sales globally and appears to be plateauing. With so many branded choices, complicated technology and eye health implications, consumers remind us, time and again, how much they rely on your expertise.  Buying eyeglasses is not a transaction.  Opticians are critical to selling brands, getting the most from lens technology, protecting eye health and creating better vision.  That can only be done by a local, trusted, eye care professional.

January 18:
Robert Grimard, O.O.D., owner of several optical offices in Quebec, Manitoba and New Brunswick, has kindly given us his comments on the “megafusion”  that has just been announced between Essilor and Luxottica:

“In my opinion, it is in the order of things. We are witnessing a merger that was to happen between two complementary partners, lenses and frames. It was therefore very predictable especially since the company Essilor was already involved in the distribution of frames in the early 1990s and that it had abandoned it to concentrate on the lenses. All of this is normal. We live in a world of global acquisitions and mergers in all fields and optics are part of it!

As retailers, we have already witnessed many other mergers that have not changed much in our daily lives. And I do not think we see the effects of the EssilorLuxottica merger for several years. Because I understand that the two companies will continue to operate independently and I do not see how that would affect us in the immediate future. Unless Luxottica wants to return with a distribution center in Canada? That would give us better service …

To conclude, in this merger, I see only positive, but probably not before 5 years. The optical model is changing  and evolving.  I would say it’s very refreshing and exciting to see our industry moving! ”

January 16:
Robert Dalton:  Executive Director  Opticians Association of Canada

“The trend of mergers and acquisitions continues in the global economy and the Optical industry is no exception. The merger of Essilor and Luxottica will create a massive 55 billion CDN international company focused on eye wear and all that it encompasses. The workforce of 140,000 includes a large number of opticians who offer vision care services in Luxottica’s retail sector and serve as consultants and managers in the Essilor labs, lens divisions and marketing sectors.

The Opticians Association of Canada has traditionally had a great relationship with both Luxottica and Essilor. Their support of the OAC and recognition of opticians’ skills in the delivery of vision care services is a testament to that dedication. The OAC hopes this merger will solidify the relationship and deepen both companies commitment to deliver safe and effective vision care through the services of Licensed Opticians.

The merger is expected to have little effect on our independent Optician owners as the segment of the population who are requesting custom personalized services and/or alternative eyewear selections is growing and the boutique experience can offer choice to that demography. Speaking to our young entrepreneurial Opticians out there, we can only wait and see what new innovative business ideas will be created in light of this continued competition. 

The OAC continues to monitor all business developments internationally and locally. We believe in collaboratively working together with all eye care professionals and industry to ensure the safe delivery of the highest quality of vision care services. ”