Essilor and Luxottica have assured the world that it will be ‘business as usual’ for the foreseeable future following an announcement that the two giants of eye care would merge.
The Essilor Luxottica merger is the largest in the history of global eye care – exceeding the value of the Alcon Novartis merger by about four times with a combined market capitalisation of almost AU$65 billion.
Being a relatively recent announcement, there is still much speculation about the merger and opinions about its likely impact vary. In reality, the true impact will take some years to filter through.
Mr. Duy Phuong Nguyen, Chief Executive Officer, Essilor Australia & New Zealand Country Management, told mivision “rigorous processes with social partners and relevant regulators” must be undertaken prior to the transaction being completed. He said following this Essilor and Luxottica would continue operating as separate entities, maintaining their existing customer relationships, during the integration process.
Independent optometrists are increasingly closing down due to the domination of the large global optical corporations
When asked how he saw the merger affecting the eye care sector in broad terms Mr. Nguyen said, “In 1972 Essilor was born out of a combination of two companies. Thanks to that today there are hundreds of millions of people worldwide who enjoy better, safer, more protected vision delivered by hundreds of thousands of practitioners. I believe this combination will result in a further expansion of vision care to those who are currently corrected and to the 2.5 billion people who still have uncorrected vision problems. In addition, the increased innovation and marketing capacities and optimised supply chain will significantly benefit the eyewear industry.”
Hubert Sagnières, Chairman and CEO of Essilor agreed. “Our project has one simple motivation: to better respond to the needs of an immense global population in vision correction and vision protection by bringing together two great companies, one dedicated to lenses and the other to frames.”
No Surprises?
Ideology business consultant Mark Overton said the merger came as no surprise. “The move had been a subject of speculation for some time. Essilor’s long standing program of horizontal and vertical integration would naturally lead to the acquisition of spectacle frame manufacturing to complete the strategic map. Luxottica is the obvious target.”
George Nasser, Director of Opticare agreed. “This merger was always going to happen, it was just a matter of when and how… This global giant will dominate the industry even more. There will be a drive to push consumers to the Luxottica retail stores and online through Essilor’s online eye care stores.”
This, according to business consultant Michael Jacobs, is Essilor’s grand plan. “Their objective is to get directly to the consumer. This will give them control over the market – consumers will ask for Essilor as opposed to having a lens brand recommended to them.”
Optometrists Unhappy
A recent survey by Ideology Consulting showed that 65 per cent of responding independent optometrists were unhappy about the change. According to Mr. Overton, their resolve to act varied. “Every customer will need to have a hard think about their relationship with Essilor and decide whether this move creates an issue. Essilor already competes with its own customers to some extent and has a major market share. Some might be accepting and take the view that provided products can be bought at a fair price and sold at a fair price, do we have a problem? Others will be more concerned with the philosophical aspect, and the obvious conflict, and will make changes.”
Independent practitioner Damon Ezekiel from Perth, WA has already made his decision. “Independent optometrists are increasingly closing down due to the domination of the large global optical corporations and their ability to flood the market with cheaper products due to size and scale.
“As an independent optometrist, I will decrease my reliance on Essilor as a spectacle supplier to my practice. Why would I want to support an optical laboratory that is in bed with a ‘competitor’ optical shop down the road? I will certainly be looking at using the other optical laboratories around Australia,” said Mr. Ezekiel.
Optometry Groups Undecided
Mr. Overton said the merger could be a huge problem for independent optometry support groups. “ProVision in particular has a strong philosophical mandate from Optometry Australia. It only exists to support independent optometry. If that mission is applied rigorously, suppliers that have formal relationships with ProVision should not hold obvious conflicts with that position.
“Essilor’s acquisition of Luxottica means they are directly competing with independent optometrists, as well as being the major supplier of frames, lenses, and other important services. Some years ago ProVision dropped Luxottica from its position as a major frame supplier almost immediately when it acquired OPSM. If it is true to its mission and is consistent then they would have to sever the relationship with Essilor. In 2017 ProVision is a very much more commercially pragmatic organisation and Essilor provides essential funding of ProVision. Without that funding Provision has a serious problem. There will be some very interesting discussions.”
Steven Johnston CEO of ProVision and Simon Lewis General Manager of Eyecare Plus, were less forthcoming with their comments. “Our partnership with both suppliers is strong, especially Essilor. We will work with them to understand fully the future implications, however, we will continue to work hard to help our members grow their business and make Eyecare Plus front of mind with their patients through strong branding and marketing support, no matter the competitive challenges they face,” said Mr. Lewis. Mr. Johnston said ProVision was not prepared to comment until all facts had been received from Essilor.
Local Lab Opportunity
Sasha Sergejew, National Sales Manager at CR Surfacing said optometry’s reaction to the merger had been noticeable. “Since the merger, we have experienced a steady increase in volume but we are careful and will limit the amount of work we bring on to ensure our long standing, loyal customers are well catered for first,” he said. “Currently, the entire optical industry is in a holding pattern as we believe the shock of what has happened is being absorbed. In some instances, anger has surfaced, particularly amongst the independent groups where we have seen a member backlash demanding change to alternative suppliers.
Mr Sergejew said that prior to the merger announcement, CR Surfacing Laboratories had invested $3million in brand new, state-of-the-art equipment this year, with more investments planned on the back of this news
Adam Fletcher, Managing Director, CR Surfacing Laboratories highlighted concerns over security of information. “A merger of this type is a reminder to all of us independent suppliers and retailers the value of supporting likeminded businesses. The value of personal business information and data should always be held in the highest regard, as it forms the greatest percentage of our goodwill. Evaluate your current systems and processes and ensure that any sharing of data is used to enhance and grow your business, not be turned around and used against you.” Global competitors Zeiss and Rodenstock reconfirmed their commitment to the independent market as suppliers of eyeglass lenses and ophthalmic equipment, and as “business to business partners” as opposed to competitors in the retail or online space.
Reality Check
Andrew McKinnon, CEO of Optometry Australia NSW/ACT said despite the furore, he expected the sector would see little change. “Here’s the commercial reality for a lot of practitioners… Essilor and Luxottica make top quality products that a huge number of optometrists – and their patients – really like. If this arrangement works for your practice and your patients, why would you change it? Does it make sense not to stock them ‘on principle’?
I really can’t see this merger making a whole lot of difference in our daily lives.”
mivision will keep you up to date as developments occur.