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What’s Ahead for EssilorLuxottica?

By Staff
Tuesday, October 2, 2018 4:00 PM

John Carrier (l), chief operating officer, Essilor International, and
Fabrizio Uguzzoni, president, Luxottica Wholesale North America.

In an exclusive VMAIL interview, Essilor’s John Carrier and Fabrizio Uguzzoni of Luxottica Wholesale North America offer insights and observations about the new company’s objectives and outlook.

NEW YORK—The morning after Essilor and Luxottica finalized the deal that combines the companies into an optical colossus, top executives representing each part of the newly formed EssilorLuxottica spoke to VMAIL about what customers, eyecare professionals and patients can expect in the months ahead, and beyond. In an exclusive, joint interview, John Carrier, co-COO of Essilor International and Fabrizio Uguzzoni, president of Luxottica Wholesale North America, spoke with VMAIL editors Marge Axelrad and Andrew Karp, about the newly combined company’s plans to leverage its global supply chain, vast research and development capabilities and comprehensive knowledge base to grow the eyewear market while improving access to vision care for people in both the developed and developing world.

Speaking from their respective North American headquarters in Dallas and New York City, the two leaders offered a first glimpse of what EssilorLuxottica will look like and how it may reshape the optical industry’s landscape. The interview has been edited and condensed for length and clarity.

VMAIL: What is the most important positive aspect of this combination for the market, for eyecare professionals and patients?

John Carrier: For us, the most exciting thing is that we want to give vision a louder voice. We now have a very powerful company with strong financial resources, strong human capital resources, great brands, great innovation and this company is fully dedicated to vision so it’s going to make this topic much more visible. I think it’s going to reach consumers and all of our customers in a much more powerful way.

It will take time of course to reach the full potential of this alliance, but we are convinced on both sides that this industry is still very underdeveloped. We’ve made some projections where we think the industry should be three or four times bigger than it is. To get to that size, it will require people to be very focused with a lot of resources to make it happen, and EssilorLuxottica will be one of those forces in the market to give vision a voice and grow the overall market. Of course, we want to bring along all the customers and all the consumers with us in this exciting journey.

Fabrizio Uguzzoni: I believe that the creation of this amazing new company is really combining the best of both worlds. Our new colleagues from Essilor are the masters in terms of innovation and also branding and technology in the lens world. On our side, we bring our expertise in iconic, branded eyewear. Together, we’ll have a louder voice for stressing the better importance of vision care. I mean both as a basic human right, and as a key lever for global development.

We have a group of people who are passionate about what they do every day. It’s the beginning of a long journey. With Mr. Del Vecchio and Mr. Sagnieres co-leading the new company, we’ll start to work together on many different projects.

VMAIL:
How will the new company make the industry better for eyecare professionals, both independents and those who work in retail chains, over the near term and medium term?

JC: Today, when you look at the supply chain, it’s problematic in our industry. The turn time for product is too slow, and it’s unreliable. You have back orders, you have obsolete inventories, people have to wait a long time to get their glasses, and this is not good for the development of the market. We want to continue what we have started with Luxottica, except on a much bigger scale, which is to have a well-organized, integrated supply chain that all the players in the industry can benefit from. That’s one example.

Another example is how we can innovate by looking at the total equipment, frames and lenses. You can expect a little farther down the road to see a wave of innovation because for the longest time innovation has been siloed, with frames on one side, lenses on the other side, and that’s not good for innovation. You don’t want to have those silos. So I think the eyecare professionals and consumers will have those types of benefits in the mid-term, with a more efficient supply chain and new ways of innovation.

VMAIL: How are you defining ‘mid-term’? Six months from now? Longer?

JC: It’s a little difficult to say. We are on day one of this combination. We announced that we are running the companies separately. There is an integration committee. It hasn’t met yet, but it will in the next few days, and it will have to choose between many options of what we can do meaningfully together. It will really be a case of choosing what not to do, because there is really so much we can do together, but at the same time, this is not a combination where we feel pressed by time.

You know, we have nothing to ‘fix’ in Essilor or Luxottica. We are two healthy, powerful companies that will keep on running their businesses. But in the next few weeks and months, hopefully you will see some signs, we will bring new products jointly, you will start to see the benefits of new supply chain. The supply chain for example, will take time to get to full scale. It may take a couple of years to see it fully developed. In terms of innovation, we have ideas, so maybe you will see things in the market within the first six months. But right now those decisions are not completely cast in stone yet.

VMAIL: Luxottica has been an integrated company for a while, in terms of having both retail stores and serving wholesale accounts of many kinds around the business. Essilor has been integrated in terms of having laboratories and online investments. How do you imagine that these might change or come together in any way as a result of this? How might the new change impact North American customers? Will they see any difference in approach or policies?

FU: The independent professionals represent the vast majority of our business. We cannot be successful without them. Luxottica, even if we are vertically integrated in the way we go to the market, we always keep the businesses separate. The way we go to market, whether in the brick-and-mortar or online, or on the wholesale side with our independent eyecare professionals or even the optical retail chains, we make sure to give the same service, product and innovation to all of the channels that compete in the market, with regard to the end consumer and patient. That has always been the mantra for Luxottica, to bring efficiency and integration to the overall structure, while making sure we are always offering a fair offering and product to all our customer base the same as we do with our own retailers. That will be the approach we have with the integration and the combination with Essilor. When the integration committee evaluates the opportunities available to us, it’s important that the professionals—the optometrists—and their interests and passions, to be at the center.

VMAIL: Is there anything in the communications that you plan in the near term designed specifically to address concerns ECPs might have about these other retail business or online businesses, anything that is different than it might have been before the combination?

JC: The general tone and message will remain the same. For Luxottica, a good part of the business relies on the eyecare professional. For Essilor, it’s even more true. We have a very large part of our business relying on eyecare professionals. We’re fortunate that in the U.S., optometrists have been our ally in bringing innovation to the market.

We’ve always favored very open business models, and that’s true on both sides. We have powerful technologies, powerful brands. At Essilor, it may be a little more integrated. For example, we let all the labs access our technologies, whether it’s Satisloh, Crizal or Varilux. We are about open business models, we are about growing the market and letting willing and able participants join our side against poor vision. That’s been our message in the past and it will continue to drive our decisions and action in the future.

By the way, a good reaffirmation of those principles has been when we obtained the antitrust approvals everywhere around the world. The authorities have been concerned on the part of some of the customers, ‘Are you going to keep your brands or your innovations to yourself?’ We have a good track record showing it’s not the case on both sides, and that’s why we’re successful. That was official confirmation for our business models.

FU: In the letter to our customers from Mr. Del Vecchio and Mr. Sagnieres, we wanted to make sure they understand that today the companies operate separately. In commercial terms, the way they operate remains unchanged, and so does our commitment and the way we conduct day to day business. It’s still Luxottica and Essilor of America on a day by day basis, and that’s very important to protect the business of our customers and make sure they continue to be successful and effective in the short term. Then, as we progress, we will definitely have a new collaborative project coming to the market that we will be very happy to announce as soon as it’s ready.

VMAIL: What percent of the combined company’s sales are in the North America market?

JC: It’s probably around 60 percent. The U.S. market has tremendous potential. When we survey consumers, we look at the low penetration of products such as photochromics, blue lenses, even, to some extent, progressives. There is still tremendous upside in the U.S. market. We can imagine how it will grow with more innovation and faster service.

But there is also opportunity for very strong international development. Even in some very developed economies the optical segment is very undeveloped. It’s easy to imagine that two large companies joining forces to develop the market will have a big effect. We have a big ambition to develop the market to be much bigger than it is, whether it’s China, India, Indonesia and everywhere else in the world. It will be balanced growth. The upside of investing in China is difficult to fathom what it could be. It’s going to be very big.

VMAIL:
One of the realities of business in North America is the managed care space. Fabrizio, is there anything you can say in terms of EyeMed, how it’s managed, and how customers of Essilor or Luxottica might be further involved with EyeMed’s progress in the U.S.?

FU: We want to make sure that EyeMed, as an insurance company, continues to operate independently in an integrated system with Essilor and Luxottica. We want to make sure they are making the right decision for the EyeMed members and customers, to make sure they select the providers in the right way and have the right coverage and give the right support and service to the EyeMed members. Of course, we’re trying to understand what synergies there are to provide better service.

VMAIL: Because of the power of this combination, and because we are seeing consolidation in the North American market in the delivery side as well as on the supplier side, do you expect any change in the way Essilor or Luxottica might partner with influential partners such as VSP or work with any of these larger groups that are forming?

JC: Like most companies, Luxottica and Essilor have had multiple projects and touch points with VSP for a long time. We are fortunate to have large companies with large resources that are dedicated to growing the market, and we find meaningful things to do together. There are other aspects of the market where we see a bit more consolidation and we are dealing with those customers. Their needs are changing. What are they asking for? They need brands, great technology, and they all want a much better supply chain, and to ensure a healthy flow of patients to their practices. EssilorLuxottica will be able to offer to those players all of the above, whether they’re small and independent or a part of the market that’s been consolidated.

FU: Think About Your Eyes is a great example of the shared vision we have of growing the industry and the access. It’s an initiative when big players, medium players and also some smaller ones got together and did something for the industry overall.

VMAIL: Is there anything we might anticipate in terms of the cultures of these two major organizations, each with a different heritage, as they come together?

JC: It’s easy for people to point out the differences in the two companies and differences in culture. For the last 20 months, I’ve met a lot of people at Luxottica. What strikes me every time is the commonality in our cultures. We both involved in vision and we’re extremely passionate. We like entrepreneurial spirit. We like innovation. One of our shared values is respect, transparency and accountability.

One thing that struck me about Luxottica is that they are product people. They want the product to be great quality and beautiful design and high technology. And of course, they want a great supply chain to make this product available to our customers and consumers. This the core of Essilor’s values and what we do, and sometimes it gets lost a little bit that Luxottica has a lot of the same. There is a lot in parallel in both cultures, and of course there are differences, too. We are developing joint projects and we are going to make these projects a big success. From this success a new culture will be born.

FU: I’ve noticed the same thing. I’ve met a lot of Essilor people over the past few months, and I’d say that at the core of the two companies the values are the same. Of course, there are differences in the way we operate, the way we manage and operate within the company. But at the core, the values are exactly the same. This is going to be a company of inventors, scientists, trend hunters, philanthropists, marketers and dreamers. The companies might operate in different ways, but they don’t really have different cultures.
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