India is the biggest growth driver for Essilor, says CEO Hubert Sagnières
Essilor International CEO Hubert Sagnières says the firm has revenue of €7 billion which will double to €14 billion post merger with with Luxottica.
Earlier this year, French lens-maker Essilor International SA and Italian frame designer Luxottica Group SpA announced a merger to create a global eyewear giant with a market share of 13-14%. In India, the combined entity will have 15-20% market share in the Rs22,674 crore (as of 2016) eyewear market.
“But the market should actually be three times bigger,” says Hubert Sagnières, chairman and chief executive officer at Essilor International and executive vice-chairman and deputy CEO of Essilor Luxottica, referring to the number of people with bad vision in India and across the globe.
Essilor sells lenses under brands such as Varilux, Crizal, Definity, Xperio and Foster Grant, while frame designer Luxottica operates brands like Oakley and Ray Ban. The companies are expecting to complete the transaction latest by January 2018. Sagnières, who was in Delhi last week, talks about the idea behind the merger, expectations from the Indian market, and how e-commerce has been a game changer for eyewear. Edited excerpts from an interview:
How will the merger change things?
The main reason why Luxottica and Essilor are in business is to improve the vision of the people. Essilor has been in business for 180 years now; Luxottica is a little younger with 50-55 years. We have developed our activities for improving vision with lenses and Luxottica has done the same with frames. The combination of the two companies is to make sure that we develop the eyewear market which is currently facing two key challenges—awareness and accessibility. There is a lack of awareness when it comes to bad vision. Secondly, there are not enough stores or access points where people can go and have their eyes checked or purchase eye-glasses, contact lens and sunglasses.
Secondly, most of the Luxottica brands which are sold in India are produced mainly in the US. With the merged entity, we can produce Luxottica locally at our facility in Gurgaon. So, the big change will also be on the availability of all the brands that Luxottica has. There will be luxury fashion and affordable fashion with the combined entity.
How do you plan to resolve the issues of accessibility and awareness?
To eradicate poor vision from India, we don’t need to develop any new product. We just need to make sure that people pay attention to their vision. People assume that a good vision is forever but the dust, light and sun can anytime attack your iris and retina. It may not make you blind but you may have eye diseases like glaucoma or retina issues.
In India, we take the young people in rural areas and train them to be basic opticians over a period of one year. We give them a small grant so that they can go back to their own villages and start micro-enterprises. This is one way of solving accessibility issue. We started this about five years back and today we have trained close to 3,000 people. We will add 10,000 more by the end of 2020.
How has overall eyewear market evolved in India?
It’s growing very fast. The uncorrected vision was not being paid any attention earlier. Over the last 15-20 years, there has been a lot of awareness. The cost of poor vision in India is estimated (by World Health Organization) to be over Rs2 trillion annually, that is $37 billion. If you just put glasses on people’s faces, you increase the GDP (gross domestic product) of India by Rs2 trillion every year.
India stands second when it comes to number of people with bad vision. India has 1.3 billion people, out of which 550-600 million people have bad vision. China is number one. At the same time, this ranking is linked to population.
Which are your best markets?
Absolutely none. There is no market where we have eradicated poor vision. In US, 40 out of 300 million people and in France, four out of 60 million people don’t have access to eye-care. We have not solved the problem of poor vision but we are making progress everywhere. Essilor is doing business in every country of the world except North Korea.
Which countries are driving growth for you?
India is the biggest driver. We are growing much faster in India than in China and we are basically the same size in both the countries. India is among top 10 markets for us. It currently contributes less than 5% to our global revenue.
Also, some countries in Africa are good drivers, where we have low market share. Certain countries are more organized. Like in Latin America, Colombia is very well organized for eye care. Government has invested a lot in eye care development schools there.
How big a role does e-commerce play in eyewear accessibility globally and in India?
Globally, huge. It contributes around 5% to our global revenue, while it was nothing three years ago. It has solved the problem of accessibility to a great extent. The biggest markets where online eyewear is doing well, are China and the US.
In India, it is not where it should be, but it is growing. It is still perceived as a way to get deals and cheap stuff. India is still very small because it just started a year ago. We have recently started a site called www.coolwinks.com.
What is the revenue of the company post merger?
Globally, we have revenue of €7 billion. Combined with Luxottica, it will be €14 billion in a market which is close to €100 billion. The more important fact here is that the industry is underpenetrated because the market is three times bigger. That’s the size of uncorrected, bad vision across the world.