Suppliers of eyewear frames are doing well on the stock exchange. Based on a study conducted by Carlo Pambianco's management consultancy in Milan, at 16 trillion lire (e8.2bn-$7bn) the joint stockmarket capitalization of Italy's 4 major publicly quoted eyewear firms in March was equal to 2.3 times their combined annual sales of just over 7 trillion lire (e3.5bn-$3bn), as compared to only 2 times revenues for the whole fashion industry. Pambianco, which specializes in the fashion sector, presented the study during the Mido fair in Milan earlier this month, but a couple of weeks before the show, the joint stockmarket value of the same 4 firms had already risen to more than 18 trillion lire (e9.1bn-$7.9bn).
The stockmarket quotations of Luxottica and Safilo have been inflated lately by the former's bid for Sunglass Hut and by betting on Vittorio Tabacchi's takeover bid for the latter one. Still, the high overall valuation of the Italian eyewear companies can also be explained by the fact that the industry is much more concentrated than the fashion and apparel sector, and growing faster. Besides, Pambianco's sample of fashion firms includes relatively minor Italian players such as Fin.Part or Zucchi.
While Oakley and some other smaller non-Italian eyewear firms are also trading publicly, the 5 major Italian players ? Luxottica, Safilo, De Rigo, Marcolin and G. Fedon, the world's leading manufacturer of eyewear cases ? are all listed on the stock exchange. Together with 5 other smaller Italian players, these 5 companies had total sales of 7,538 billion lire (e4bn-$3bn) last year, or 32 percent more than in 1999, thanks only in part to acquisitions of other companies and foreign retailers and distributors. Comparatively, 50 smaller Italian eyewear firms raised their combined sales by only 10 percent to 434 billion lire (e221m-$190m) in 2000.
The 3 major Italian players employ 44 percent of all the workers in the Italian eyewear industry, and two of them, Luxottica and De Rigo, get now more than half of their combined revenues from foreign retail operations. Without retailing, their wholesale operations generated combined sales of about 4.2 trillion lire (e2.1bn-$1.8bn) last year, equal to about one-third of the total estimated world market for prescription frames and sunglasses, but a large portion of their production is carried out abroad. Anfao, the Italian eyewear industry association, says the country's total production of eyewear frames and sunglasses grew last year by 24.4 percent to 3,035 billion lire (e1,548m-$1,330m), thanks in part to the acquisition of Ray-Ban (see story in next page). That new high level gave Italy a world market share of about 21 percent.
According to Pambianco, Italian eyewear firms have a joint market share of 71 percent in the higher end of the world market, estimated to be worth 1.4 trillion lire (e710m-$610m) at wholesale, or 10 percent of the total market. Italian firms hold 106 of the 239 major international eyewear licenses, or 44 percent of them. They are followed by French firms with 60 licenses, US companies with 34 licenses, UK firms with 19, German firms with 12 and Japanese firms with 5.
While some licenses are less important than others, Marcolin leads the pack with a total of 16 licenses, followed by De Rigo with 15, Luxottica with 13, and Safilo with 10. Luxottica also has 10 brands of its own, as compared with 4 for the each of the three other majors.
The relatively high concentration of the Italian eyewear industry is the result of internal growth and of numerous mergers and acquisitions, partly financed through the stockmarket. Pambianco has calculated 17 such transactions in the eyewear sector in the past 4 years, as compared to 75 for the whole fashion sector.
Besides branding, the engines of growth for the Italian majors have been technological and innovation and vertical integration. Pambianco recommends to the smaller firms to choose specific growth and survival strategies. In summary, if they decide to have their own brand, they must insist on creativity and communication. If they decide to license a well-known brand, they must invest on distribution and sales channels. If they decide to work as contractors, they must be competitive in terms of price and service (check www.pambianco.com for further information and to contact them).
A large foreign eyewear manufacturer, Silhouette, provided an interesting side view at the symposium in outlining its own new strategy. Reacting to the inflation of eyewear models and brands in the market, to the shorter life span of new products, and to cheap imports from Asia, the Austrian firm has decided to cut the number of SKUs drastically, to raise prices and mark-ups, to invest only on 3 brands ? Silhouette, Adidas Eyewear and the Swarowski collection ? and to form ?value-added partnerships? with a limited number of retailers.
The company's CEO, Alexander Schmied, says it's been a policy of getting the best equipment, the best products, the best managers and the best retail partners, and it has paid off. Silhouette reached sales of 2 billion Austrian schillings (e145m-$125m) last year, and Italy has been one of its fastest-growing markets, in spite of the strong competition. From 7 billion lire in 1999, Silhouette's sales in Italy have tripled to reach a projected level of 22-23 billion lire (e12m-$10m) in 2001 by working closely with 2,500 clients and providing a guarantee of top quality. Much of the money saved from royalties has been reinvested on the product, on sales and marketing.
Other participants in the symposium stressed that eyewear, and sunglasses in particular, have a strong growth potential as they are being increasingly perceived not only as a medical device, but also or exclusively as a fashion accessory, particularly in trend-setting Italy. Fashion designers are contributing strongly to this trend, featuring more and more innovative sunglasses in their fashion shows and taking up shareholdings in the major eyewear firms.