Luxottica eyeballs expansion

Eyewear and fashion conglomerate Luxottica is casting its gaze to China.

"Increasing our presence in China is a key part of our strategy, obviously, given the size of the population, our growth potential there and the relatively high proportion of young people there," said Andrea Guerra, Luxottica's CEO.

The Italy-based company (which owns LensCrafters, Ray-Ban and Oakley) has sped up its expansion in China in recent years, investing 100 million euros in the country from 2006 to 2008.

It has plenty of room to grow. Only 1 percent of its 1.5 billion euro revenue from Ray-Ban (the company's biggest brand by sales) came from China last year. Just 2 percent of its LensCrafters revenue came from China and only about 300 of its 6,250 LensCrafters shop worldwide are in China.

Luxottica has not expanded much yet because China's high-end eyewear market is dominated by State-owned companies such as Beijing's Daming and Shanghai's Maochang, according to Liu Duoning, secretary-general of the Beijing Optometric & Optical Association.

Luxottica established production facilities, which it calls Tristar, in Dongguan, Guangdong province in 1997 (mostly making metal frames) and started its retailing operations in China via acquisition in 2005.

The company doubled investment in its manufacturing in 2006, expanding its facilities' size from 16,206 sq m to 41,206 sq m. It began producing plastic as well as metal frames and increasing the number of employees to 4,500 (from 258 in 1997).

Its average daily production in China increased by approximately 80 percent compared to 2005 and it now manufactures over 11 million pairs of metal and plastic eyeglasses frames a year, about 35 percent of the company's total annual output.

Luxottica also added a 20-person strong design team in Dongguan.

"Some of the technologies we're introducing at Tristar are new to China and some will be used exclusively in China," said Guerra.

The CEO said the company plans to invest further in Tristar but would not give details.

Luxottica began its retailing efforts in China (which operate under the LensCrafters brand) by acquiring three local chains, including Beijing's Xueliang Optical, Guangzhou-based Ming Long Optical, and Modern Sight Optics in Shanghai.

Liu from the optical association said Luxottica faces stiff competition in the eyewear sector, as other global companies such as Italy-based Safilo Group are peering into the Chinese market, with its economic growth and huge population base.

(China Daily 03/23/2009 page8)