Big Specs: the behemoths that control the eyewear business

Soon one giant company will dominate the way the whole world sees. Sam Knight reports

If you have been wearing glasses for years, like me, it can be surprising to discover that you perceive the world thanks to a few giant companies that you have never heard of. Worrying about the fraying edge of motorway lights at night, or words that slide on the page, and occasionally spending a fortune at the opticians is, for many of us, enough to think about. And spectacles are unusual things. It is hard to think of another object that is both a medical device that you don’t want and a fashion accessory that you do. Buying them, in my experience anyway, is a fraught, somewhat exciting exercise that starts in a darkened room, where you contemplate the blurred letters and the degeneration of your visual cortex, and ends in a bright, gallery-like space where you listen to what you are told, pay more than you were expecting to, and look forward to inhabiting a new, slightly sharper version of your existing self.

The $100bn (£75bn) eyewear industry is built on feelings such as this. In the trade, the choreography that takes you from the consulting room to the enticing, bare-brick display of £200 frames is known as “romancing the product”. The number of eye tests that turn into sales is the “capture rate”, which most opticians in Britain set at about 60%. During the 20th century, the eyewear business worked hard to transform a physical deficiency into a statement of style. In the process, optical retailers learnt the strange fact that for something that costs only a few pounds to make (even top-of-the-range frames and lenses cost, combined, no more than about £30 to produce), we are happy paying ten or 20 times that amount. “The margins,” as one veteran of the sector told me carefully, “are outrageous.”

Almost everyone wears glasses at some point in their lives. In developed countries, the rule of thumb is that about 70% of adults need corrective lenses to see well. In Britain, that translates to some 35 million people. But it’s hardly a topic of national conversation. To the casual observer, the optical market also presents a busy and confusing sight. In Britain, thousands of independent opticians rub alongside a few big retail chains such as Specsavers, Vision Express and Boots. The wall displays in even a small, local optician hold several hundred frames, while posters advertise a range of lenses with sciencey-sounding properties – “freeform”, “photo-fusion”, “reflex vision”.

But what we see masks the underlying structure of the global eyewear business. Over the last generation, just two companies have risen above all the rest to dominate the industry. The lenses in my glasses – and yours too, most likely – are made by Essilor, a French multinational that controls almost half of the world’s prescription lens business and has acquired more than 250 other companies in the past 20 years. There is a good chance, meanwhile, that your frames are made by Luxottica, an Italian company with an unparalleled combination of factories, designer labels and retail outlets.

Luxottica pioneered the use of luxury brands in the optical business, and one of the many functions of names such as Ray-ban (which is owned by Luxottica) or Vogue (which is owned by Luxottica) or Prada (whose glasses are made by Luxottica) or Oliver Peoples (which is owned by Luxottica) or high-street outlets such as Lenscrafters, the largest optical retailer in the US (which is owned by Luxottica), or John Lewis Opticians in the UK (which is run by Luxottica), or Sunglass Hut (which is owned by Luxottica) is to make the marketplace feel more varied than it actually is.

Between them, Essilor and Luxottica play a central, intimate role in the lives of a remarkable number of people. Around 1.4 billion of us rely on their products to drive to work, read on the beach, follow the whiteboard in biology lessons, type text messages to our grandchildren, land aircraft, watch old films, write dissertations and glance across restaurants, hoping to look slightly more intelligent and interesting than we actually are. Last year, the two companies had a combined customer base that is somewhere between Apple’s and Facebook’s, but with none of the hassle and scrutiny of being as well known.

Now they are becoming one. On 1 March, regulators in the EU and the US gave permission for the world’s largest optical companies to form a single corporation, which will be known as Essilorluxottica. The new firm will not technically be a monopoly: Essilor currently has about 45% of the prescription lenses market and Luxottica 25% of the frames. But in seven centuries of spectacles, there has never been anything like it. The new entity will be worth about $50bn (£37bn), sell close to a billion pairs of lenses and frames every year, and have a workforce of more than 140,000 people.

The creation of Essilorluxottica is a big deal. It will have knock-on consequences for opticians and eyewear manufacturers

“About 1.4 billion people rely on Essilor and Luxottica’s products to drive to work, read, type messages, land aircraft, watch films”

from Hong Kong to Peru. But it is also a response to an unprecedented moment in the story of human vision – namely, the accelerating degradation of our eyes. For several thousand years, human beings have lived in more or less advanced societies, reading, writing and doing business with one another, mostly without the aid of glasses. But that is coming to an end. No one is exactly sure what it is about early 21st century urban living – the time we spend indoors, the screens, the colour spectrum in LED lighting or the needs of ageing populations – but the net result is that across the world, we are becoming a species wearing lenses. The need varies depending where you go, because different populations have different genetic predispositions to poor eyesight, but it is there, and growing, and probably greater than you think. In Nigeria, about 90 million people, or half the population, are now thought to need corrective eyewear.

There are actually two things going on. The first is a largely unreported global epidemic of myopia, or shortsightedness, which has doubled among young people within a single generation. For a long time, scientists thought myopia was primarily determined by our genes. But about ten years ago, it became clear that the way children were growing up was harming their eyesight, too. The effect is starkest in east Asia, where myopia has always been more common, but the rate of increase has been uniform, more or less, across the world. In the 1950s, between 10% and 20% of Chinese people were shortsighted. Now, among young adults, the proportion is more like 90%. In Seoul, 95% of 19-year-old men are myopic, and many are at risk of blindness later in life.

At the same time, across the developing world, a slower and more complex process is under way, as populations age and urbanise and move indoors to work. The history of eyewear tells us that people do not, as a rule, start wearing glasses because they notice everything has gone a little out of focus. It is in order to take part in new forms of entertainment and labour. The mass market in spectacles did not emerge when they were invented, in 13th century Italy, but some 200 years later, alongside the printed word in Germany, because people wanted to read.

In 2018, an estimated 2.5 billion people, mostly in India, Africa and China, are thought to need spectacles, but have no means to have their eyes tested or to buy them. “The visual divide”, NGOS call it. Across the developing world, straightforward myopia, and presbyopia, the loss of near vision caused by ageing, have been linked with everything from high road deaths to low educational achievement and poor productivity in factories. Eye-health campaigners call it the largest untreated disability in the world.

It is also a staggering business opportunity. Essilor and Luxottica know this. It was Essilor that worked out and first publicised the 2.5 billion statistic, in 2012. “For 2,000 years, people were living mainly outside,” said Hubert Sagnières, Essilor’s chairman and chief executive, when we met recently in Paris. “Suddenly, we live inside, and we use this.” He tapped his mobile phone on the table. The details of the Essilorluxottica merger will take a few years to iron out, but Sagnières was transparent about its mission: to equip the planet with eyewear over the coming decades.

Leonardo Del Vecchio is the patron, legend and haunting spirit of the global eyewear business. He is its Citizen Kane and its Captain Ahab. Now 83, he was raised in an orphanage in wartime Milan, where he went out to work as a metal engraver at the age of 14. In 1961, when he was 25, Del Vecchio opened a workshop in the town of Agordo, in the Dolomite mountains. Del Vecchio asked the town for 3,000 sq metres on the riverbank to build a factory to make parts for spectacles. In time, he built a house next door so he could step from one to the other, starting his day at 3am.

Over the next half century, Del Vecchio grew his company, Luxottica, into the world’s greatest maker of glasses frames. In an industry that was fragmented and small-scale, the totality of Del Vecchio’s ambition took his rivals by surprise. He sought to control every element in the business, from the metal alloys of the hinges to the stores where eyewear is sold. In a series of audacious takeovers, Del Vecchio acquired brands such as Ray-ban and Oakley and Persol, and signed contracts with fashion houses such as Armani, Ralph Lauren and Chanel. He built factories in China and retail chains on four continents. Since 1994, Del Vecchio has been Italy’s second-richest man. A few years ago, people thought his career had run its course. But in January 2017, at the age of 81, Del Vecchio announced the greatest deal of his life, in which he also secured the final missing part for his frames – the lenses – when Essilor agreed to merge with Luxottica.

In 1972, Essel and Silor, two French optical companies, merged and began to sell aggressively into the US market. Essilor specialised in plastic lenses, which were replacing glass, and it also had a magical product: Varilux, the world’s first progressive lens, which allows people who are both long- and short-sighted to combine their prescriptions into a single, graduated lens. This was probably the most important innovation in eyewear since the invention of bifocals around the time of the French Revolution. The company set out to make sure that Varilux and the rest of its products were sold in every optometrist in the world. Today, some opticians call Essilor “The Big E”. The company supplies between 300,000 and 400,000 stores – three or four times as many as Luxottica.

Lenses are the pixie dust of the optical business. Barely anyone knows what they are made of, how they are constructed and exactly how they work. The profit margins within the optical business are a closely guarded secret, but insiders explained to me that while opticians might sell frames for two, or two and a half, times their wholesale price, the lenses are where they make the most money, charging markups of 700% or 800%. The largest margins are on complex progressive lenses and protective coatings – for scratch resistance, or to cut out blue light – features that cost Essilor a few cents to make, and which opticians sell for between £25 and £50 a pop. Even Luxottica executives are awed by this.

The question is whether there is anyone, beyond its shareholders, that will be able to hold Essilorluxottica to account. The next few years may be rocky, as the new company grapples with its size, and attempts to find a new leader who can define the corporation and its ultimate goals under the fading shadow of Del Vecchio. But after that, the field is open and the fundamentals are clear. “There is nothing close to that firepower once the combination is done,” Dr Norbert Gorny, Essilor’s head of R&D told me. “You have the global footprint. You can play all the courts.” And I thought about how one of the telling aspects of wearing glasses is that they help you notice everything else – and for the most part, see the world as it actually is – but it is only occasionally, through a chance reflection, or when you really take a moment to stop and look, that you see what is sitting on the top of your nose.