What's the most admired company in France? If you ask a French CEO, he will probably name an outfit few outside the country have ever heard of: Essilor International. The manufacturer of high-tech corrective lenses, with estimated sales of $2.7 billion in 2003, clearly lacks the name recognition of French outfits like Total (TOT) or L'Or?al (LORLY). Yet in terms of global reach and market dominance, Essilor is up there with the big boys. "Essilor is constantly thinking about its best competitive strategy," says Maurice Marchand-Tonel, Paris-based managing director of management consultant BearingPoint Inc. (BE).
Credit Chairman and CEO Xavier Fontanet with transforming a staid national player into a global champion since joining Essilor in 1991. It was he who brought its strategy into focus by concentrating on the two core areas of the ophthalmic-lens industry: manufacturing and processing lenses in prescription labs. To do that, Essilor began exiting peripheral businesses such as eyeglass frames and refrained from moving into eyeglass retailing. Fontanet, 56, also broadened the company's reach with a series of acquisitions and joint ventures. Based in the outskirts of Paris, Essilor had virtually no sales in Asia a few years ago; today, it has a market share of 10%. And it ranks No. 1 globally, with annual sales three times those of its closest challenger, Japan's Hoya Corp. Essilor's shares have climbed more than 10% in the past year.
Constant innovation is one of the keys to Essilor's success. The company files close to 200 patents a year. Its hottest new development: high-tech anti-reflection coatings that actually cut down on smudging. To keep up the stream of new products, Essilor spends the equivalent of between 4% and 5% of annual sales on R&D -- mostly at its large research labs in France, Japan, the U.S., and now Singapore.
Lucky for Essilor, world demographic and economic trends make for an ever-expanding market for corrective lenses. In North America, 60% of the population wears eyeglasses, vs. 37% in Europe, once poorer Eastern Europe is factored in. Elsewhere, the figure is just 17%. Plus, populations in developed countries are aging. The future looks fuzzy indeed -- and that's a good thing for Essilor. By John Rossant in Paris