EssilorLuxottica - Seeing is Believing
The global eyecare and eyewear industry currently has sales of around $100bn.
According to research supported by McKinsey & Company, uncorrected poor vision is the world’s most widespread disability – it affects 2.7bn people and costs the global economy $272bn in lost productivity each year. By 2050, uncorrected poor vision is predicted to reach epidemic proportions with over 50% of the world’s population expected to suffer from myopia, many with serious vision-threatening side effects and long-term implications.
In addition to the increased incidence of poor eyesight, we believe growth will also be driven by a broad range of trends including:
· the increased use of smart phones and tablets, a trend that has accelerated during the COVID-19 pandemic;
· an ageing population;
· a growing emerging market middle class;
· increased education regarding sun protection focused on the six billion people who do not protect their eyes from the sun’s harmful rays.
· the growth of eyewear as a fashion accessory.
EssilorLuxottica is the industry leader with a global market share of around 30%. Created through a merger in 2018, the company is vertically integrated with exposure to the design, manufacture, and distribution of ophthalmic lenses, prescription frames, and sunglasses.
Its competitive advantage is based on its scale, portfolio of brands (such as Ray-Ban and Oakley), product innovation, flexible manufacturing base, quality service, routes to consumer, and partnerships.
The group is confident it will generate synergies from the merger of between €420m and €600m by 2023. On the cost side, savings are being made throughout the supply chain, while faster revenue driven should flow from cross-selling, category development, growth in prescription sunglasses, online penetration, and emerging market development.
Innovation will continue to drive growth in the industry – most recently, Essilor has launched Stellest, a revolutionary new lens to manage myopia in children, and the entered into a partnership with Facebook in smart glasses.
The group also plans to supplement its growth through the acquisition of smaller competitors, with the purchase of Grandvision, the global retail business, currently in progress.
The business generates strong free cash flow and is financially robust – critical in these uncertain times as the group looks to position to take advantage of attractive long-term industry growth.