Hubert Sagnières, Chairman and CEO
Laurent Vacherot, President and COO
Jean Carrier, COO
Paul du Saillant, COO
Géraldine Picaud, CFO
Jayanth Bhuvaraghan, Chief Mission Officer
Bernhard Nuesser, President Online
Jeremy Teo, Chief Strategy Officer
Éric Thoreux, President Sun, Readers and China
NUMBER OF EMPLOYEES: 63,676
GLOBAL HEADQUARTERS: Charenton-le-Pont, France
“Improving the lives of 7.4 billion people by improving their sight.” That’s the stated mission of Essilor as dictated by chairman and CEO Hubert Sagnières. And based upon the performance of the company in fiscal 2016, the optics OEM is doing a fine job of maintaining that focus as sales grew yet again—a consistent trend since at least 2012.
In 2016, the company reported revenue of €7.1 billion, an increase over 2015’s €6.7 billion. In fact, the company has seen growth continue gradually since 2012 when it reported just under €5 billion in revenue. Looking at the world market, developed countries are providing the greatest amount of overall revenue contribution at €5.5 billion, an increase of almost 5 percent over 2015. While much smaller at €1.6 billion, revenue from fast-growing countries grew at more than 9 percent over the prior year, which could signal an opportunity for Essilor.
Digging deeper, the overwhelming majority of the company’s revenue originated from the OEM’s Lenses and Optical Instruments segment, which accounted for 87 percent of the firm’s overall revenue. Specifically, the segment contributed €6.2 billion in fiscal 2016, with the other segments—Sunglasses and Readers, and Equipment—accounting for €685 million (10 percent) and €212 million (3 percent) respectively. Within the primary Lenses and Optical Instruments segment, the largest customer base is located in the North American market, which generated €2.7 billion in 2016 (or 38 percent of the total revenue for the segment). Following that was Europe (€1.9 billion; 27 percent), Asia/Pacific/Middle East/Africa (€1.1 billion; 16 percent), and Latin America (€468 million; 6 percent).
ANALYST INSIGHTS: Historically, Essilor is a unique company, simply by its unique strategy to focus on organic growth and to be less reliant on acquisitions. However, that all changed in 2017 with the proposed mega-merger acquisition of Luxottica. Assuming the EU approves the deal, Essilor will be challenged to continue aggressive organic growth rates globally. It will be interesting to see how it balances its new pricing power (due to larger market share) versus the ability to provide lower cost lenses (which has driven its global growth).
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
The company points to several reasons for its growth in 2016 without any one specifically outstanding initiative. Rather, the combination of efforts was what ultimately resulted in the 2016 increases. These included addressing unmet visual needs through product innovation, new partnerships, product launches, and leveraging online opportunities. Product innovation was driven primarily by the company’s investment of €214 million toward research and development initiatives. New partnerships included acquisitions and totaled 18 transactions in 2016 for revenue totals of approximately €304 million (further outlined later in this report). Product launches of note in 2016 were fairly numerous (also outlined in greater detail later in this report). E-commerce revenue also grew, as the company experienced successful results through online initiatives, most notably EyeBuyDirect.
“In 2016, [Essilor] continued to provide an ever-growing number of solutions for unmet visual needs by widening its scope of activity in prescription lenses, sunglasses, and online sales,” said Laurent Vacherot, president and COO of Essilor. “Let’s remember that our strategy is to expand in industry segments that are growing faster than average. With this in mind, this year we have forged promising new partnerships, with 18 majority shareholdings in companies across all continents, strengthening our positions in China and in online sales.”
With regard to the aforementioned partnership/acquisition activities, the company made significant investments in a number of companies worldwide and across all segments.
Lenses & Optical Instruments – North America
- Axis Medical Group – Acquired stake: 51 percent – Optical Instruments distributor to eyecare professionals
- AllAboutVision.com – Acquired stake: 100 percent – Consumer website; source of eye health and vision correction news and information
- ICare Industries Inc. – Acquired stake: 80 percent – Florida-based prescription laboratory
- Opti-Port L.L.C. – Acquired stake: 80 percent – Purchasing alliance of multi-office eyecare practices
- US Optical L.L.C. – Acquired stake: 60 percent – New York-based wholesale optical laboratory
Lenses & Optical Instruments – Europe
- MyOptique Group Ltd. – Acquired stake: 100 percent – Leading European online prescription glasses, contact lenses, and sunglasses business
- Vision Direct Group Ltd. – Acquired stake: 100 percent – Leading online optical products retailer
Lenses & Optical Instruments – Asia/Pacific/Middle East/Africa
- One Vision Optical Pty. Ltd. – Acquired stake: 65 percent – Eyewear, readers, and sunglasses distributor; markets comprehensive vision solutions to independent opticians
- Jiangsu Creasky Optical – Acquired stake: 55 percent – Ophthalmic lens manufacturer and distributor based in Danyang, China
- Mamtora Lens Technology – Acquired stake: 50 percent – Prescription laboratory and ophthalmic lens distributor based in the Kolkata region (India)
- Essilor Distribution (acquired assets of Thai Thanh Phat Co. Ltd.) – Acquired stake: 51 percent – Ophthalmic lens distributor
Lenses & Optical Instruments – Latin America
- Laboratorio Óptica Ltda/Ópticas OPV Ltda – Acquired stake: 100 percent – Integrated laboratory and distributor
- Digital Lab Industria e commercio de lentes e Óculos Ltda – Acquired stake: 42 percent – São Paulo, Brazil-based prescription laboratory
- Laboratorio Ótico Summer Vision Ltda – Acquired stake: 49 percent – Rio de Janeiro-based prescription laboratory
- Sistemas Ópticos Integrales S.A. de C.V (SOI) – Acquired stake: 51 percent – Ophthalmic lens distributor based in Oaxaca state with two prescription laboratories and several distribution centers
- Ocutec Laboratorio – Acquired stake: 51 percent – Prescription laboratory
- SCL International – Acquired stake: 80 percent – Manufacturer of cleaning and hard coating machines; engineers and produces coatings for plastic lenses
Sunglasses & Readers
- Photosynthesis Group – Acquired stake: 50 percent – Hong Kong-based company that markets sunglasses and corrective lenses under a range of banners including MJS
Adding to its M&A strategies in 2016, the company also offered an array of new products to customers in order to further growth. Most notable, Essilor continued the global launch of its Eyezen stock lens, which is targeted to users of connected devices such as smartphones and tablets. The lenses were developed to provide protection and relief on a daily basis for those without visual defects. The OEM also launched its Eye Protect System, a clear lens that protects users against light related dangers (i.e., UV rays and blue-violet light). Within the company’s Varilux product line, the Physio 3.0 and Comfort 3.0 lenses rollout continued, while the Varilux Liberty 3.0 was launched. The company also enhanced its Transitions offerings with the launch of the Style Colors line, which offers a palette of four new colors applied directly in prescription laboratories. To support these new launches (as well as the company’s legacy products), Essilor invested approximately €209 million on consumer advertising and marketing by year’s end.
“We also launched in 2016 the first online innovation communities dedicated to vision,” explained Éric Thoreux, president of Sun, Readers, and China. “Thanks to our two Sharing Views websites—one in China and the other in the United States—we now hear directly from consumers aged 18 to 45 years old. Drawing on these two independent communities, each with 2,000 members, not only gives us an extremely rich base of information but also provides a great platform for cocreating and testing new products. The future of consumer proximity is undoubtedly online. It is an extremely powerful channel for bringing our innovations to market.”
Online is primarily a sales strategy for the company’s international markets, including growth regions such as Brazil and China, as well as more established sectors such as the United Kingdom. But the company is also leveraging the internet for sales within its strongest market—the United States. Its Costa line is one brand that is gaining momentum online.
“While our dealer network is the backbone of the Costa brand, we have also worked hard at building strong relationships with our consumers over the years and it’s become a real point of difference,” said Costa CEO Holly Rush. “By investing in a unique community marketing strategy and a strong digital presence, we’ve established a cult following of brand loyalists who want to engage with us and direct-to-consumer channels, like Web are a natural next step in the brand’s evolution.”
Perhaps in the years to come, with the right technology in place, consumers may look to Essilor for their prescription lenses to be provided through the internet without the need for a visit to their optometrist.