Ophthalmic Market - Essilor€¦ · Egypt Singapore Nigeria Venezuela Spain Greece Sudan Iran...

Building Momentum

in the World’s Largest

Ophthalmic Market

November 7, 2012

Today’s Focus

Introduction Hubert Sagnières, Chairman & CEO

Chinese Economy through 2020: The Golden Age for ConsumersHe Yi, President, Essilor China Holding Company / Member of the Essilor Board of Directors

Essilor’s Ambition in ChinaEric Bernard, President, China, HK & Taiwan / Member of the Essilor Executive Committee

Education: A Key Enabler of Sales Growth in ChinaDr John Ang, VP Marketing & Customer Development, AMERA Region

Mastering the Complexity of China’s Retail LandscapeLouise Chen, VP Essilor Branded Network, China

China’s Position in Essilor’s StrategyPatrick Cherrier, President, AMERA Region / Member of the Essilor Executive Committee

China Field Trip - November 2012 2

A Solid Strategy Serving Essilor’s Mission: Improving Vision Worldwide


Operational and management efficiency

Products and

Services

INNOVATE

Corporate social responsibility

Top &

Mid-Range

Markets

DEVELOP

Acquisitions &

Partnerships

GROW

Demand

for Vision

Improvement

STIMULATE

Accelerating Innovation in Products and Services

Innovate Develop Grow Stimulate

More than 220 new products launched in 2012

SP-200 Sputter-Coater


Building Growth and Value in Every Market Segment

CONSUMER BRANDS TRADE BRANDS



Creating Value Through a Strong Dual Acquisition Strategy


Asset acquisitions: technologies,

brands, product categories, etc.

Partnerships with local leaders

Bolt-on Acquisitions Strategic Acquisitions


Addressing the 2.5 Billion People Needing Correction


$8/day

Business

to enterprise

Awareness/

Willingness Plug-in

to existing network

Mobile POS

ECP support

(optometry school)Governments

Enablers

$1.25/day

$2/day

Rural810m

Urban580m

Subsisters950m

Mature countries

120m

Source: UN; Infomarché 2010; UNDP; Worldbank; CIA World Factbook; World Resource Institute; BCG analysis

Social impact


Leveraging the Four Pillars in the Fast Growing Markets to Reach our Ambition


€612m

€1,500m

2011

2015

Revenue in Fast Growing Markets, in € millions

A Dual, Robust Organization in Fast Growing Markets that...


AMERA: Asia, Middle East, Russia, Africa

Regional hubs

Brazil

Bangalore

Moscow

Dubai

Shanghai

LATIN

AMERICA

AMERA

Singapore

Headquarters

Growth at constant exchange rates

... Delivers High Growth


FAST-GROWING MARKETS

2009 2010 2011 249

+22%

+25.6%

18%

Q3 2012

... Makes it Possible to Capture Local Opportunities

Local acquisitions or partnerships completed since January 1st, 2011

Plants

Prescription Labs & Wholesalers

Optik Mekk

Comopticos

Cientifica

L’N Optic

VST Lab

Equipments

CM Equipamentos

Ópticos de Precisão

Opti Express

Youli

Seeworld

GKB Hi-Tech

Crystal y Plástico

Centralab

Magrabi

Optical

Ipek Optik

Opak

SIVO

Optic Kenya

Incheon Optics

Optics India

Orgalent Repro

Unilab

Trend OpticalOptiben

Enterprise

Ophthalmics

JWL Phuket Lab

Readers

AAiJoke’s

Players: Prescription laboratories, manufacturers, wholesalers, etc.


Riachuelo

Optovision

Movisia

Evolution

Optical

Global Vision

AMERA

LATIN

AMERICA

... Makes it Possible to Capture Local Opportunities

Local acquisitions or partnerships completed since January 1st, 2011

AMERA

LATIN

AMERICA

Plants

Prescription Labs & Wholesalers

Optik Mekk

Comopticos

Cientifica

L’N Optic

VST Lab

Equipments

CM Equipamentos

Ópticos de Precisão

Opti Express

Youli

Seeworld

GKB Hi-Tech

Crystal y Plástico

Centralab

Magrabi

Optical

Ipek Optik

Opak

SIVO

Optic Kenya

Incheon Optics

Optics India

Orgalent Repro

Unilab

Trend OpticalOptiben

Enterprise

Ophthalmics

JWL Phuket Lab

Readers

AAiJoke’s

750-1,000 players

Players: Prescription laboratories, manufacturers, wholesalers, etc.


Riachuelo

Optovision

Movisia

Evolution

Optical

Global Vision

450-600 players

China: A Key Market in our Growth Strategy

870 million people (65%) require vision correction

1,340 million inhabitants

540million

Not corrected

330million

Corrected

The World’s Largest Ophthalmic Market in Volume

250 millions lenses

2% Progressive Lenses


A Clear Strategy to Serve a Great Ambition


€84m

€1,000m

2011

2020

Revenue in China, in € millions

Today’s Focus


Chinese Economy through 2020: The Golden Age for ConsumersHe Yi, President, Essilor China Holding Company

Essilor’s Ambition in ChinaEric Bernard, President, China, HK & Taiwan



China’s Position in Essilor’s StrategyPatrick Cherrier, President, AMERA Region


Government’s Will to Reshape the Economic Landscape

Invest in new industries

Encourage R&D

Develop services

Emancipate the private sector


More than 1 Chinese out of 2 lives in a

City

Creation of 45 million urban jobs by

2015

Urbanization rate set to increase by

+1% per year under XIIth Plan

Succeed in the 3rd

Industrial RevolutionPursue Rapid Urbanization

The 12th Five-year Plan is Promoting a New “Inclusive Growth” Paradigm…


1 Great emphasis on social well-being

2 Creation of health insurance and pension plans

3 7% yearly increase in rural and urban income

…Very Favorable to Domestic Spending


CONSUMPTION DRIVERS

RISING INCOME LOWER SAVINGS RATIO CONSUMPTION UPGRADE

Economic Growth

Development of

Service Industry

Rising Wages

Government

Expenditure

Income

Re-distribution

Aging Population

Level of Economic

Development

Urbanization

Source: Morgan Stanley Research

2009 2019 2023 2025

37%45%

50% 52%

…Mainly Benefiting the Urban Middle Class


City Tier City No. Urban Population (m)

Tier I 4 45

Tier II 23 97

Tier III 260 190

Tier IV 367 113

Tier V 1,636 162

Total 2,290 607

Estimated Percentage of

Middle-Class Residents in

China’s Urban Population

Source: 2011 Blue Book of Cities in China

330 Cities Will Match

Shanghai’s Current Income Level by 2020

A Collection of Provinces with Varying Levels of Economic Development…


Xinjiang

Tibet

Qinghai

Inner Mongolia

Gansu

Sichuan

Shaanxi

Shanxi

Hebei

Heilongjiang

Jilin

Liaoning

Henan

Tianjin

Beijing

Shandong

Jiangsu

ShanghaiAnhui

Zhejiang

FujianJiangxi

Guangdong

Guangxi

Hainan

Yunnan

Guizhou

Hunan

Hubei

Ningxia

Taiwan

Chongqing

…And Various Dynamics…


Xinjiang

Tibet

Qinghai

Inner Mongolia

Gansu

Sichuan

Shaanxi

Shanxi

Hebei

Heilongjiang

Jilin

Liaoning

Henan

Tianjin

Beijing

Shandong

Russia

ShanghaiAnhui

Zhejiang

FujianJiangxi

Guangdong

Guangxi

Hainan

Yunnan

Guizhou

Hunan

Hubei

Ningxia

Taiwan

Chongqing

Jiangsu Province GDP to match

Russia’s current GDP by 2020

Source: HSBC

…Where Global Companies Need to Set DifferentiatedStrategies to Capture Local Growth


Israel

Zambia

Kenya

Kazakhstan

South Africa

Sri Lanka

Switzerland

Egypt

Singapore

Nigeria

Venezuela

Spain

Greece

Sudan

ArgentinaIran

Belgium

Turkey

Poland

Canada

Saudi

Arabia

Thailand

Malaysia

Netherlands

Korea

Denmark

Russia

Australia

Indonesia

Argentina

Colombia

Above $1,000bn Between $500bn-$1,000bn Between $100bn-$500bn Below $100bn

Projected China GDP in 2020 by Province:A Union of Second-Tier Developed + Top-Tier Developing Countries

Source: HSBC

Our Operations Continuously Adapt to Local Development


Total Employees In China: 7,200

Essilor

JVs

Partners

Readers

Equipements

Chengdu

Henan

Guangdong

Jiangxi

Beijing

Shanghai

Danyang

Hong Kong

TianjinHeadquarters

Region Offices

Plants

Local Prescription Labs

Export Prescription Labs

Logistic & Edging Centers

Service Centers

Partnerships with Universities & Hospitals

Essilor China

Chemilens

NikonChemilens

NikonChemilens

Tianjing Hospital Partnership

Varilux School

Shanghai University Partnership

Seeworld

Wanxin

BestILTYouli

REAP

Our Chinese Name: Our Ambition in China

Today’s Focus








Outline


Strong Market Potential

A Growth Strategy Addressing Every Segment


Market 75% Volume Low End

ECP 90% Independent, 1 for Every 27,000 Inhabitants

Lens Features 95% Anti-Reflective Lenses, 98.6% Clear Lenses

Lens Material 85% Low Index

Lens Design 98% Single Vision Lenses, 96% Stock Lenses

Significant Untapped Potential…

Volumes(in millions of pieces)

Value (in RMB billions)(in millions of pieces) (in RMB billions)

X 2.4 X 5

536 15.0

2011 2020

226

2011 2020

2.9

2011 2020 2011 2020

A market as big as the US in volume,but still much smaller in value


…with Volumes Growing by an Average of 10% per Annum…


In millions of lenses

2011 2013 2015 2017 2019

180226

276332

40244

44

46

48

52

2

6

10

22

34Trade-in

New wearers

Renewals

226

276

332

402

488

…thanks to Strong Demographic Trends…

People in need of vision correction

>50 years old

People in need of vision correction

1 084

589

y25-50 years old0-24 years old 869

1,084+ 24m p.a.

258 287

380

2011 2020

231 208

287

2011 2020

Every year, demographics adds the equivalentof the French market to the number of potential wearers


Source: National Population Development Strategy Research Report; China Bureau of Statistics Year Book 2010; Essilor internal research

Age

…and a Huge Reservoir of Uncorrected People


In millions of people

0-24 years old 25-50 years old >50 years old

202264

90

153

296

141

105

84

No visual defect Uncorrected Corrected

433

522

380

53%

49%

100%

465

540

330

Population

1,335

Value is Being Driven by the Potential for Premium Products…


Photochromic Progressive Lenses High Index

1.4% 2%15%11% 11%

50%

Mainland China

Taiwan

Under-penetration of premium products

leaves substantial room for value growth

Premium products as a % of market volume

Growing Needs in Big Segments like Children…

Primary school Middle school High school

5%

11% 16%9%

24%34%

15%

36%56%

35%

58%

78%

Parents anxious to spend for children

increasingly affected by myopia

Rising prevalence of myopia in children

Source:

He et al., Prevalence of Myopia in Urban and Rural Children in Mainland China (2009)

Yang et al., Prevalence of Refractive Error in Erdos Plateau Region (2010)

Zhao et al., Refractive Error Study in Children: Results from the Shunyi district , China (2000)


1957

1998

2008

1963

…or 30-Somethings…


Generation W

-/+50Survived hardship

Conservative

Spend for their child (housing)

Generation X

-/+40Part of the transition

More open-minded

But heavy family burden:

housing and education

Generation Y

-/+ 30Grew up in economic boom

Independent

Spend

for THEMSELVES

…Will Accelerate Growth of Value-Added Products


Est. Volume

CAGR 2011-2020

Est. Value

CAGR 2011-2020

Single Vision Lenses

Progressive Lenses

Anti-Fatigue Lenses

+10%

+17%

+24%

Single Vision Lenses

Progressive Lenses

Anti-Fatigue Lenses

+18%

+26%

+33%

Value is Also Being Driven by Market Forces…


Low-end renewers intend to pay 48% more

compared than for their first eyeglasses*

CAGR

>+25%

~+20%

>+15%

~+5%Low

Mid Low

Mid High

High

Low

Mid Low

Mid High

High

20202011

*Source: « China Low Income Survey », The Nielsen Company, 2012

…Where Low-End Players Differentiate only with Brands


Source: Essilor internal research

170

37

18

Paving the Way for Market Consolidation

A distorted pyramid…


226 million pieces per annum

… served by atomized players

› 60/70 Casters with limited

direct access to ECPs

› Hundreds of brands

› ~90% Independent stores

Outline


Strong Market Potential

A Growth Strategy Addressing Every Segment

High

Mid high

Mid low

Low

MARKET

CITIES

A Unique Strategy for Total Market Coverage


Partnering with local leaders is key to building the pipeline

Tier 1 Tier 2 Tier 3 Tier 4 Tier 5

Innovation at Every Market Level


WHITE LABELS

Upgrade from low index

Innovation creates value at each price point

High

Mid high

Mid low

Low

MARKET

CITIES


Essilor Has a Comprehensive Education Strategy in China


CITIES

Education accelerates trade-up

High

Mid high

Mid low

Low

MARKET


Consumer Awareness Through In-store Visibility


Experience CenterCorner

Enhanced marketing helps create loyalty

CITIES

High

Mid high

Mid low

Low

MARKET


Promoting Personalized Lens at Strategic Retail Locations

Essilor Experience Center at a Leading Domestic Chain, Baodao, Hangzhou

Partnering with Retailers to Reach High-end Consumers

Nikon Corner at LensCrafters, Shanghai

Increasing Brand Awareness Across the Country…


…Is Helping to Widen Our Market Lead


Essilor Group #2 #3

600

[200][100]

Basis #3: Estimates Sales = 100

€1 billion in Revenue by 2020

Strong Long Term Growth Coming from Organic Gains and Acquisitions

48China Field Trip - November 2012

€84m

€1,000m

2011

2020

Revenue in € millions

Questions

& Answers

Today’s Focus








ECPs are a Vital Conduit to Consumers…

Consumers

Eye Care

Professionals

ECPs are the key prescribers:

their number and expertise are crucial


… but in China, Their Skills Level is Still Low …

Anyone with one

month training

can become an “optician”

Essilor’s solution

to raise their capabilities:

The Essilor Academy

Essilor is involved in education to raise standards


… and their Number is Too Small

Essilor is involved in education

to expand distribution

Number of opticians

per 100,000 inhabitants

Essilor’s solution

to train more opticians:

The Varilux Tianjin school


Europe China

16

4

Essilor has a Comprehensive Education Strategy in China


Education accelerates trade-up

High

Mid high

Mid low

Low

MARKET

CITIES


Essilor Academy: Raising the Skills of Existing ECPs


Teach ECPs to Respond to the Rising Prevalence of Myopia in Chinese Children

More sales for ECPs, more sales for Essilor


Total

35 ~ 40%

2011

Prevalence

2020

Prevalence

Urban kids:

60-70%

Urban:

~50%

Total

~35%

Lifestyle changes Parent misconceptions

Is wearing

glasses good?

Near Work

Homework / Video

No Outdoor Activities

Only 2% of the 380m Chinese

presbyopes wear progressive

lenses …

… but 60% would consider progressive

lenses if advised properly

24%

22%

16%

15%

11%

9%

Too expensive

Never heard about

progressive lenses

My optician

did not propose it to me

Satisfied

with my current equipment

I don’t feel I need it

I need proof

for this new technology

Q : Why didn’t you buy progressive lenses?

More sales for ECPs, more sales for Essilor

Teach ECPs to Sell More Progressive Lensesto the Growing Population of Presbyopes


58

A Varied Range of Short ECP Courses,Tailored to Different Levels


Management

Coaching

Selling

SkillsProduct Technical

Owners

& Corporate

Managers

Store Managers

Opticians

Sales Staff

Fitters

3 AMERA

training

directors 4 local training managers, 16 Varilux consultants

TRAINING

ECP

2005 2006 2007 2008 2009 2010 2011

100300

500

700

9601150

1300

59

Tianjin Varilux Ranks in the Top 3 of the 20 Optometry Schools in China


55%20%

15%

10%

Junior

& Intermediate

Advanced

Technician

Advanced Technician

A joint-venture between Essilor and Tianjin Eye Hospital

Training levelsStrong increase in student numbers

JUNIOR

(no experience)

INTERMEDIATE

(basic sales

experience)

ADVANCED

(standard optometry

experience)

TECHNICIAN

(10 years + experience)

ADVANCED

TECHNICIAN

30-Day Course30-Day Course21-Day Course15-Day Course15-Day Course

A Well Structured and Targeted Curriculum

8 dedicated trainers

Graduates get free access to higher level

if they sell 15 pairs of Varilux in a year


Leading Training for the Mid-level Segment

End

Customer

Training

West Point Style

Training

Province

Level

Training

TTT TrainingProfessional

Skill Training

Internal

Training

61

3 training managers, 15 Wanxin consultants


0

10000

20000

30000

40000

50000

60000

70000

80000

2012 2013 2014 2015 2016

44,200

58,68063,500

68,00073,000

0

500

1000

1500

2000

2500

2012 2013 2014 2015 2016

1,400

1,700 1,8502,000

2,150

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016

19

2325

27 29

Providing business,

technical and selling

training to ECPs

Increase training days

and staff support

year on year

62

Aggressive Plan for Essilor’s Education Effort in China


# of Trainers

# of Participants

# of Training Days

Our Goal:Be the #1 Provider of Vision Care Education in China


Essilor Education

EducationBusiness

Growth

EssilorBusiness

Growth

Today’s Focus








China’s Retail Landscape is Very Fragmented…

lens retail

Vol.

No. of stores

48%

86%

89%

International chain Hospital Other chains Independent

11% of Stores

15% of Volume

52% of Revenue

50,000

stores

226 m

pieces

RMB 18bn

Source : Essilor internal research

~ 90% of stores are independent


Lens retail

International Chains Hospitals Independents

Volume

…Very Atomized Geographically…

Tier 1 city

Tier 2 city

Tier 3 city

Tier 4 city

Tier 5 county

Tier 6 township

Village

# of Independent Stores

Source : Essilor internal research

# of Chains & Hospitals

Low penetration of chains and hospitals in all tiers


…with Mixed Levels of Marketing Sophistication…

High-end storePROFILE:

International chains,

flagship stores of other chains

Mid-range storePROFILE:

Mainstream stores of other chains

Low-end storePROFILE:

Independent stores


International

chains

Other

chainsHospitals Independents

…and Subject to Ongoing Consolidation

Consolidation

Aier Consolidation

American Eye

Consolidation

Trade up

to mid-market

Expansion

by acquisitions

LensCrafters,

HAL

franchise


High

Mid-high

Mid-low

Low

Group strategy

• Children

• Leverage

hospitals for

B2B & B2C

education

• R&D: clinical

studies

Group strategy

• New product

categories

• Campaigns

& alliances

Group strategy

• Tailored

solutions

• Becoming

partner of

choiceGroup

strategy

• Partner with

distributors

• Geographic

coverage

• Help to trade

upINFLUENCE

Essilor Present at All Levelswith an Elaborate Multi-channel Strategy


High

Mid-high

Mid-low

Low

International

chains

Other

chainsHospitals Independents

Preferred channel for children

due to strong medical

credibility

Hospitals prefer partners like

Essilor with strong R&D and

high professionalism

Hospitals: a Robust Channel for Essilor…

2010 2011 2012

100

124

153

Value of Hospital sales

(base 100 in 2010)


…and a Trusted Partner for Education & R&D

Tianjin Varilux: Opticians vocational training

Aier-Essilor: Over 7,000 people screened in 7

cities in 2011

Tongren-Essilor: Joint promotion of eyecare

in children’s day-to-day activities

Tianjin Eye Hospital: Wearers tests based on

clinical results from myopia vision tests


International Chains:Strategic Alliances to Develop New Product Categories


Anti-fatigue campaign with Baodao

Management

coaching for shop

owner

Essilor experience

center to upgrade

shop image

ECPs outsource

their edging to Essilor

Domestic Chains:Tailored Solutions to Become their Partner of Choice

Edging services Retail solutions Coaching


Recent ECPs:

Guangzhou Dongfang

Shenzhen Asia

Recent ECPs:

Jilin Wangpeng

Xi’an Xibeihang

Recent ECPs:

Kunming Tianming

Independents: Partner with Distributors to Expand Geographic Coverage

Essilor lenses distributed to over 4,000 smaller accounts across China


HLJ

JL

LN

MGXJ

TB

QHNX

HEB

SNX

HEN

SX

HUB

HUN

JX

ZJ

JS

SD

GD

GXYN

SC

GZ

AH

BJ

TJ

SH

HN

GS

FJ

SOLID

RESULTS

VISIBLE

MOMENTUM

BRIGHT

FUTURE


Today’s Focus








China’s Global Strengths Apply to the Ophthalmic Industry


40% of worldwide

Dishwashers production

50% of worldwide Shoes

production

66% of worldwide

Cell phones production

CHINA’s PRODUCTION

IN THE WORLD

INDUSTRY

60% of worldwide

Prescription Lenses

production

70% of worldwide Plano

Sunglasses production

80% of worldwide

Readers production

25% of Essilor global

Lenses production

CHINA’s PRODUCTION

IN THE GLOBAL

EYEWEAR INDUSTRY

Most of Essilor Assets Can be LeveragedIn and From China


Research partnerships

Readers and Sun

Equipment

Ophtalmic lenses

79

Leveraging our Chinese Partners to Support Mid-Segment Growth in other Fast Growing Markets


Ophthalmic lens

Readers / Sun

Equipment

AFRICA

LATIN

AMERICA

MIDDLE

EAST

ASIA

RUSSIA

Fast Growing Markets, a Key Growth Engine For the Group


€612m

€1,500m

2011

2015

Revenue in Fast Growing Markets, in € millions

Questions

& Answers

Thank you

Ophthalmic Market - Essilor€¦ · Egypt Singapore Nigeria Venezuela Spain Greece Sudan Iran...

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