Daily CSR
Daily CSR

Daily CSR
Daily news about corporate social responsibility, ethics and sustainability

Essilor-Luxottica, some hope for developing countries?


It’s not in the bag yet, but there may be some major change on the eyewear market in coming years, as the two eyewear giants from Europe work towards a new joint venture. Unless the fusion process is stopped dead in its tracks by Brussels, the operation will have major consequences in terms of access to eyewear for the underprivileged, both in Europe and in developing countries.

Eyewear, a luxury for many around the world

What may seem granted in many Western countries may be just a fantasy for many inhabitants of underdeveloped countries. With few or no producers, and low purchasing power, people in developing countries often simply let their sight wither away, for lack of access to proper medical correction. Josh Silver reports to Forbes that “Eyeglasses are as old as the Renaissance, but even now we still need trained professionals to fit them. That's no problem for the Western world, which has around one optometrist for roughly every 10,000 people. But it's a nightmare for developing countries. In sub-Saharan Africa, for example, there's only one optometrist for around 1 million people.”. The global market is in a sadly classic configuration, with producers fighting for the higher tier of the market, where glasses can reach several hundreds of even thousands of dollars. Developing countries, with 6-dollar eyeglasses seem far less attractive to businessmen. The consequences are dire. NGO Global Giving says Vision loss prevents over 500 million people from living full, independent lives. Without eyeglasses, artisans and mechanics cannot see their goods, shopkeepers cannot manage their accounts, teachers cannot instruct in class, and children cannot see the blackboard.”. In roaring silence, opportunities die away for the underprivileged in the world, keeping them locked in the poverty they were born in. But this may change if and when a new market leader emerges.
A new European eyewear behemoth?
French eyewear giant Essilor and Italian giant Luxottica, which have been fighting for leadership on the European market for years, are inches close to a merger. Of course, such an operation isn’t over until the fat lady sings, and European commissioner for competition Margrethe Vestager has requested to review it until she gives the go-ahead. Yun Chee reported for Reuters that “Having had some initial concerns about the deal between Luxottica, the world’s biggest eyeglass frame maker and Essilor, the biggest lens maker, the European Commission is scheduled to decide by March 8 on whether to clear it.”. However, management boards of each firm are in agreement, and investors are too. But this might be good news for other people too, as Yun Chee points out: “Luxottica shares last traded up 0.6 percent at 50.75 euros on Thursday, while Essilor closed up 0.3 percent at 112.50 euros.”.
It might be good news for Europe in general. The global market (and not just in eyewear) is increasingly drifting towards three poles: North America, strengthened and unified in its NAFTA alliance, Asia in its steady rise towards industrial modernization and international expansion and Europe in its slow attempt to get itself in battle order. With American high tech on one side (with gigantic private investors eager to fuel innovation), and Asian competitors nibbling at the market from the ground up (such as online shopping) with their gradual technological improvements, Europe needs to build fortresses if it doesn’t want to be devoured in the international arena. Gunnar Hökmark writes for Euractiv “We must not only identify and discuss the real problems, and the underlying causes of our troubles, but also suggest credible solutions. It is quite simple: a lack of competitiveness reduces the prosperity of our countries, firms and people. We need reforms aimed at making the EU economies more competitive. Europe needs a new agenda.”. A merger between Essilor and Luxottica would mean that the new conglomerate will be able to distribute its products all over Europe. And there are plenty of poor in Europe, in dire need of basic medical equipment such as reading glasses. In addition, European companies have an old corporate responsibility tradition, more than their Asian and American counterparts. Rodrigo Tavares says : “European corporations founded between the 11th and 16th centuries were borne of guilds, loose organizations of merchants and craftsmen that were formed to oversee the practice of their crafts within a particular town. Guilds were approved by the monarchy only if they served public purposes.”. Even through their former imperial ties, European countries have fare more access to emerging countries, if only through their shared language spheres.
The developing world as the last and only place to sell glasses
One last angle should be considered, and not the least. Until now, both companies were in a constant struggle to snatch high-end market shares from each other. If the two companies merge, the new company will no longer need to fight for an already-acquired market: outwards will be the only way to expand. This will naturally direct the commercial development efforts of the joint venture towards Central Europe and Africa, where glasses are much needed, as the only remaining place to grow. The European giant, which doesn’t have a name yet, will have no interest in increasing sales in Europe (where it will already own them all), nor in North America (where it knows it would get instantly pummelled by the powerful American competition), nor in the Far East (where local cheap competitors would undermine the market). Nathan Washburn writes : “Our research shows, however, that multinationals can position themselves to take advantage of the innovative energy that permeates emerging markets. The key is committing to the deployment of a new kind of manager: what we call a global bridger”. Central European, African and South Americans will be its new land of opportunity.
Luxottica and Essilor are hoping that Brussels will remove its barriers, now that they have provided the large amounts of documents requested. Investors of both companies are also hoping that European will not disrupt an economic project which they consider is Europe’s only hope to fend off competition both from the West and the East. And, unless Margrethe Vestager decides to block the merging procedure, the world may, for once, see a monopoly with positive effects.