Essilor's sales in emerging markets are growing at an annual rate of around 15 percent overall, indicating that they will represent more as a percentage of total sales in the future than the current ratio of 10-12 percent. While Brazil and other countries in Latin America and Eastern Europe are regarded as promising territories for expansion, Asia as a whole represents the biggest opportunities.
In fact, only 17 percent of the 2.9 billion people living in the Asia-Pacific region wear eyeglasses, compared with nearly 50 percent in the developed countries, and they change them on average once every three years. While they constitute one-half of the total population of the globe, they purchase only an estimated 310 million ophthalmic lenses per year, representing one-third of the world market. The penetration of eyewear in this part of the world is even lower in China, the Philippines and other areas of the region where most of the population lives, as the region includes relatively mature markets such as Japan, South Korea, Australia and New Zealand where about 200 million people live.
Looking at the rapid evolution of its economy, the Asia-Pacific region should account for one-half of the world market in terms of volume within 20 years' time, according to Essilor, which says the key to the growth of the market lies in the development of the optical retail sector. There are only about 300,000 optical stores in the region, including 139,513 in China, 130,725 in India and 34,385 in Hong Kong and other parts of Southeast Asia. Their number should double to reach the same penetration as in the West, where there is one store per 8,000 inhabitants.
About 75 percent of those who wear or should wear glasses in the Asia-Pacific region are affected by myopia. As a result, 41 percent of all the single-vision lenses sold around the world are bought there. The Japanese and Asians in general are also prime customers of medium- and high-index lenses, representing 60 percent of their world consumption. They are also very conscious about their appearance, so they buy 56 percent of all the lenses fitted with anti-reflective coatings. On the other hand, as hypermetropia is common for the most part only in India and in Australia, the region purchases only 31 percent of the bifocal lenses sold around the world and 17 percent of the progressives.
Together, China and India constitute two-thirds of the Asia-Pacific market in terms of volume. While 95 percent of the lenses sold in Japan are branded, 90 percent of those sold in China, India and Korea are relatively cheap and unbranded. These ratios are expected to remain largely unchanged for the foreseeable future.
Essilor already covers the region with a staff of 6,000 people at 16 subsidiaries, not including about 10,000 employed at manufacturing factories. They are coordinated by a recently expanded central office and distribution center in Singapore. The company has 51 laboratories in the region. Of those, 31 are in India, where Essilor has bought many different companies to cover many different sales channels including the ambulant vans. India is also being used as a base to cover the Middle East and the eastern part of Africa. The French company already has a strong presence in the western part of Africa.
The group covers the high and the low end of the Asia-Pacific market in similar proportions in terms of total value, using its joint venture with Chemi of Korea and local controlled operations such as OSA in China and ILT in Singapore to service the lower segment. The higher end is serviced by Essilor itself and its Japanese joint venture with Nikon.
Essilor estimates that it is by far the leading supplier of ophthalmic lenses in the Asia-Pacific region ? twice as big as its nearest competitor in the unbranded market and three times bigger in the branded market. It has the No. 2 position in China and in Thailand overall. In China, however, it claims to be three times bigger than its biggest local competitor in the branded market, while it is only slightly bigger than its nearest competitor in the unbranded market. It is the leader also in Korea, a very competitive market that still has potential for growth, considering that the local population only spends €4.90 a year on eyewear, 3.7 times less than those in Portugal.
In the very different Japanese market, which now accounts for one-third of its total revenues from the Asia-Pacific region, its joint venture with Nikon has paid off in the sense that their joint market share in the country more than doubled between 2000 and 2007, challenging the local leader, Hoya. Similarly, Essilor's joint venture with Chemi, which was formed in 2004, has led to an acceleration of their joint growth in Korea to an average of 13 percent per year, besides boosting the group's presence on the vast Chinese market.
Essilor is not pursuing aggressive sales policies to win market shares in the region. Overall, Essilor's profitability in Asia is now similar to that of the whole group. Its operations in India and China have been profitable from the start.