Essilor International plans to set up and operate relatively open continental internet portals in North America, Europe and Asia over the next few years to sell its own lenses and their features as ?custom-made? and ?ready-made? products to the opticians and to their customers, involving also other major web operators and industrial partners. Some action along these lines has already started in the USA, where even the larger optical chains have indicated interest in getting involved, and it will gather further momentum later this year.

While Sola and some of Essilor's other competitors have their own e-business plans as well, the French company's CEO, Xavier Fontanet, feels that his company has a certain headstart, having invested $200 million on electronic data processing in the past 5 years to link up on-line all its 18 factories around the world and its 30 prescription labs in Europe, which is generating a lot of flexibility in the production process. A total of 448 million French francs (e68m-$62m) were spent on EDP last year alone, partly in connection with the Millennium Bug, creating an extraordinary charge of 90 million FF (e14m-$12m) for the year that depressed the company's operating income.

Essilor has developed and supplied to French opticians Optimeyes, a more advanced version of its own store management software, ensuring a certain compatibility with its own finishing processes. In Europe, Essilor is marketing Opsys, a complementary program that helps opticians to exchange technical data with consumers, and an American version of it will be launched in the USA later this year. On Apr. 1, Essilor launched on global scale a bi-lingual Vision1to1.com website which has for the moment mostly educational and informative functions, but may grow in the future into a major e-commerce portal, incorporating a virtual frame gallery among other things.

In the USA, where use of the internet is much more developed at the professional and consumer levels, Essilor began implementing last year several internet portals for its various lens technologies. Its Varilux.com site is now linked up with the websites of more than 3,500 opticians in the USA, and it allows consumers to locate the stores that supply the product and to trace the progress of their own orders, but also to participate in contests for $100 prizes through big web operators such as amazon.com or the LL Bean mail order catalog.

The internet and a belief in the value of branding are leading Essilor to reassess its own marketing strategies, which absorb 6-7 percent of sales. Backed by a huge advertising campaign and by banner ads on health-specific and lifestyle sites such as Healthanswers.com, the US Varilux site is helping Essilor to promote its new Panamic progressive lens, which now represent about 40 percent of Varilux sales, despite a 10 percent price premium, as against 15 percent in Europe.

In terms of business-to-business applications, Essilor's new nikoneyes.com site, which started in the USA last month, is quite sophisticated. Operated out of Essilor's recently reorganized Avisia lab, which is described as the world's first web lab, it allows participating opticians all over the country to pass their orders in a simple and secure manner, using as an option a new 3D frame scanning device for remote edging.

Essilor officials hope that these and other services, combined with its ownership of more and more prescription labs around the world, will help the company to sustain an annual 10 percent growth in its turnover over the next decade, or double the growth of the market, with 3 percentage points coming from acquisitions. Essilor already claims a 22 percent world market share in ophthalmic lenses, as compared to 12 percent 10 years ago, with a growing presence in the higher end of the market.

Essilor sees more room for growth especially in large markets like Japan, where it new joint venture with Nikon has give it a 20 percent market share, or China, where it now has 5 percent of the overall market and 20 percent of the organic market. Its sales in China are growing at a 30 percent annual rate. In Australia, Essilor claims to overtaken the former market leader, Sola.

Executives of the French group see new growth opportunities through new and value-added products such as medium-high-index lenses, where the market's average annual growth is anticipated at 12 percent, or polycarbonate lenses, where growth rates of 17.5 percent are expected.

Essilor sees no threat from refractive surgery, considering that it will take its place in the market like contact lenses without eliminating the need for ophthalmic lenses, partly because of proven post-surgery problems and because the patients become candidates for progressive lenses. In the USA, the market for ophthalmic lenses has continued to grow although contact lenses have risen from 25 to 35 percent of the total market.

In polycarbonate, Essilor's sales are growing at an annual rate of 30 percent. Essilor claims to have overtaken the world's former leader in polycarbonate, Vision-ease, and that its own sales in this segment could double. It's working closely with US optical chains on polycarbonate lenses, offering its own surfacing facilities, and it's beginning to talk to the chains in the virgin Japanese market. In Europe, where Essilor introduced Airwear later, its sales of this product are rising now at a high 3-digit rate. According to Essilor, polycarbonate may outsell other types of organic lenses in the USA by 2004, and to the same in Europe a bit later.

The joint venture with Nikon, which should break even this year, has given Essilor a solid body of expertise in high-index lenses and chemistry in general, which is highly developed in Japan. One of Essilor's challenges in this decade will be to combine as best as possible its R&D efforts in France, the USA and Japan to be in the forefront of product innovation.

Innovation, branding and service are all expected to make positive contributions to the group's profit margins. Essilor says it has managed to trim its overall production costs by 4 percent over the past few years, and that it can do better.

Carrying on with the improvement that began in the 3rd quarter of 1999, Essilor's sales rose by 10 percent on a comparable basis in the 1st quarter ended March 31. Essilor's turnover grew by 22.6 percent to 484.4 million euros ($439.8m) in the quarter, but 8.3 percentage points were due to the positive impact of the euro's weakness, and 4 percentage points were attributable to the integration of the Nikon-Essilor joint venture. Sales benefitted from a positive comparison with the 1st quarter of 1999, where price increases announce in the USA resulted in sales declines.