Showing several interesting slides at the company's annual meeting with financial analysts, Hubert Sagnières, chief executive of Essilor International, sounded optimistic yesterday about the company's ability to capitalize on the considerable potential that remains for further growth in the ophthalmic lens markets, both in the high-growth emerging economies of Asia and Latin America and in the more mature countries of Europe and North America.

He pointed out that there are still 2.4 billion people around the world who need vision correction. Moreover, out of the 1.6 billion people who use spectacles, buying about 1 billion lenses every year, less than half use anti-reflective coatings, progressive lenses, polarized lenses and other special features. On the other hand, an estimated 200 million consumers join the middle class every year and thus have enough money to afford investments in this sector.

Contrary to common sense, there is still strong potential for growth at the high end of the market in many developed countries, considering the fact that different features have different levels of penetration in them. For example, progressive lenses have 34 percent market penetration in Canada, compared with 29 percent in France, 26 percent in the U.S., 25 percent in Spain and 11 percent in Italy. For photochromic lenses, a penetration rate of 20 percent in Australia compares with 7 percent in Germany, 11 percent in France and 18 percent in the U.S. Polarized lenses are strongest in the U.S., with a rate of 7 percent, double the rate in Canada and much higher than Italy (2 percent), France (1 percent) and Spain (0.5 percent).

Essilor, which is readying the launch of a new coating in the second half of 2010, wants to accelerate the level of innovation, develop new services and stimulate the demand to help improve market penetration for these and other features where they are not so popular. For example, it is launching its biggest global advertising campaign this year, worth €20 million, to promote its Crizal A-R coatings.

The biggest opportunities for growth still lie in emerging markets. Slides shown by Sagnières illustrated the strong correlation that exists between GDP growth and the growth in the volume of ophthalmic lenses sold in any country. There is also a correlation between the level of GDP per capita and average selling prices for lenses.

The migration to higher price points and the expansion of the medium segment of the market are particularly noticeable right now in Essilor's development in Brazil and other Latin American markets. It is in some ways similar to the situation in the U.S. 15 years ago, when Essilor began to acquire and strike partnerships with the local independent labs. Similar strategies are being applied in other emerging markets such as Morocco, where Essilor concluded a first partnership recently.

To foster its development in these markets, Essilor has decided to accelerate the pace of acquisitions and to set up a more dedicated management, reinforced by local people who will adapt Essilor's business model and know-how to each market. Especially in India, Essilor is also intensifying the education of optometrists to stimulate more store traffic and sell-through. The company is making use of Satisloh and its other resources in the area of equipment to accelerate the development of the medium segment of the market through local solutions.

On a currency-neutral basis, the group's sales in high-growth emerging markets increased last year by 22 percent to around €150 million, representing 12 percent of total revenues and delivering good profit margins. They will certainly become a more significant component of the group's turnover in the future, but Sagnières declined to make any predictions.

Big opportunities exist in the area of readers, as their users will become potential clients for more customized lenses in the future. Through FGXI, Essilor intends to push its turnover in this sector up to $480-520 million by 2015, partly with acquisitions.

Making its first acquisition since Essilor's takeover last year, FGX Europe just acquired Framed Vision Ltd., the second-largest supplier of reading glasses in the U.K. with annual revenues of about €2.5 million. Essilor has made four other acquisitions since the beginning of this year:

In India, Essilor signed a joint venture deal with Enterprise Trading Company, a leading lens distributor. Their new joint company, Enterprise Ophthalmic Private, is intended to speed up the development of plastic lenses in the Indian market, where 60 percent of the lenses sold are still mineral.

In Brazil, the group increased its stake in Unilab, one of the first local prescription laboratories with which it partnered in the country, from 30.5 to 51 percent. The company, which is one of about 200-odd labs operating in Brazil, has annual sales of about €5.5 million.

In Morocco, Essilor made its first acquisition with an agreement to take over a majority stake in one of its current distributors, L'N Optic. Described as the leading prescription laboratory in the country, with €2 million in annual revenues, it will produce Varilux and Crizal lenses.

Essilor's equipment division acquired a majority stake in Bazell Technologies, a U.S. company that produces equipment for processing water used in lens production. Based in California, it has annual sales of around $4 million. Its products are already distributed in the U.S. mainly through Essilor's Satisloh/National Optronics network.

Not including Shamir Optical, the Israeli-based firm in which Essilor is set to acquire a 50 percent stake later this year, the 29 acquisitions made by the group in 2010 represented combined full-year revenues of €432 million.