Brought under new ownership and under new management a few months ago, Rodenstock has an ambition to become a world leader in certain selected segments of the optical market and not worse than #2 or #3 in others, through organic growth or through acquisitions. The market territories in which the German company wants to expand are not yet finally determined as the company is still in the process of defining those in which it has a chance to respond to future market demand in a unique and profitable way ? a process that is relatively new for a company that has been largely production-driven until now.

Customization is one area in which Rodenstock feels strong and where the demand is likely to grow in the future. Combined with its unique expertise in frames as well as lenses, it could lead the company to develop some interesting new ?system solutions? in consumer optics on a broad basis, says Giancarlo Galli, the Swiss executive appointed at the head of the group last November, after Permira, a wealthy investment fund, acquired a significant shareholding in the 125-year-old family-owned firm, understood to be in the area of 49 percent, at an undisclosed price. Rodenstock claims that its ILT technology for individualized progressive lenses has gained an over-proportional market share in Germany and in some other markets, and says that it has enjoyed a good start in Asia.

There are perhaps other areas in which Rodenstock can offer an interesting competitive advantage. Anyhow, the new management has decided to raise the company's spending on R&D significantly to almost 5 percent of sales, with the idea that more than half of its product range will be less than three years old by 2007.

In addition to a stronger emphasis on innovation and customer orientation, Galli wants to push further the concept of internationalization at all levels, from production to sales. On the production side, Rodenstock has already announced a major planned reduction in its German workforce, but company executives point out that this measure is not only intended to save costs, which can now be reinvested in R&D, but that it is part of a broader global realignment of the production and logistic apparatus that will help improve service levels and increase flexibility in responding to market changes.

Rodenstock will in fact retain the computer-intensive manufacturing of ILT lenses in Frankfurt and continue to carry out a lot of laboratory work in Germany and other West European markets such as Benelux and the UK, close to its clients, but most of its mass production of finished and semi-finished lenses will be concentrated in Thailand, while the more sophisticated product lines will be housed in the Czech Republic. The Czech facility will also serve as a common and flexible international distribution platform, using an SAP-based supply chain management system that is currently being rolled out through the organization worldwide to further improve service levels.

Galli also believes in decentralizing sales functions, giving more responsibility to the various world regions. A new matrix structure should be finalized by the middle of this year. The position previously occupied by Frieder Lohrer, the former international sales director who left Rodenstock unexpectedly shortly after the last Opti München, will likely be eliminated.

Rodenstock is budgeting an overall sales decline of between 10 and 15 percent this year, with sales in Germany cut by less than 20 percent in spite of the projected 25 percent drop in the domestic market, which represents a bit less than 50 percent of the company's total sales. The first few months of the year have in fact shown that the higher range of its product range is more resistant to cancellation of the German government's subsidies for eyewear purchases, which came into effect on Jan. 1.

Due in part to a certain carry-over from orders received at the end of 2003, when the market was still buoyant, Rodenstock marked a small sales increase in the German optical market in the 1st quarter, with a 27 percent gain in the area of frames. It also experienced sales increases of 4 percent in Italy, France and the UK, 18 percent in Northern and Eastern Europe, and 3 percent in the Asia-Pacific region. Total sales reached €96 million in the quarter. The North American region is no longer recorded in the company's results as its operations there were spinned off and licensed out last September, prior to the group's change of ownership.

In carving out what Galli defines as a ?path for profitable growth? for the company in the future, Rodenstock is aiming for black figures in each of its business units for this year, in spite of the overall sales decline. In 2003, the group managed to make a very nice profit thanks to the German health reform, which helped to push up its overall sales from continuing operations in the core business of spectacles by €19 million to €386 million.

There are no particular plans to raise the marketing spend for the moment, but Galli wants it to be allocated in more ?intelligent? ways. Rodenstock launched a relatively clever new campaign launched in Germany a few weeks ago where it offered to consumers a rebate of up to €30 as compensation for the abolition of the governmental subsidies for eyewear on Jan. 1. A German court issued an injunction against Rodenstock in the name of legislation that prohibits any type of discounts on medicines and medical devices. Rodenstock had no choice but to obey and changed the promotion to a lottery, but company executives found it incongruous that German authorities would enforce this legislation in the eyewear sector after taking eyewear off from the list of medical devices in liberalizing the public health care system. While expressing his own surprise and disappointment in the matter, Galli wants Rodenstock to continue to support the market with effective and ?smart? promotions aimed at opticians and end consumers.