4.7 Sales and Marketing

North America 2002

The 2002 North American AO-SOLA strategic plan stated:-

The US ophthalmic market growth projection over the next three years is for flat to weak growth of 1-2% CAGR in units,

Polycarbonate has been the fastest-growing product segment in our industry over the past five years with around 20% growth each year. Today almost one in three lenses sold in the US are polycarbonate, and in retail chains it is closer to one in two.

• Through 2000 AO•SOLA was constrained by lack of capacity in semi-finished and finished polycarbonate, which prevented participation in this growth segment, and precluded full business bids at the polycarbonate-based retailers.
• 75% of AO•SOLA revenue is in the shrinking CR-39 material category while only 13% of revenue is in polycarbonate.

The fundamental issue facing AOSOLA in North America is growing top-line sales through the existing and new customer channels.

There are five main challenges to achieving this, and each will be addressed separately:

• Branding
• Product
• Partnerships and Strategic Alliances
• Channel Strategies
• Organizational Development

In addition to some unfavorable market and demographic trends, the landscape of the ophthalmic marketplace has changed dramatically in the last few years. Competition in the industry remains vigorous, with continued consolidation and integration among manufacturers, laboratories, retailers and HMO’s:

• Essilor now dominates access to the EyeCare Practitioner (ECP)
• Over 70% of ECP’s sell the leading progressive lens brand, Essilor Varilux Comfort, compared to around 40% distribution for SOLA VIP. [source: Jobson LensTracker 2000]
• The USA lab industry has undergone tremendous consolidation during the last five years as a result of aggressive lab acquisitions by Essilor and Hoya, and by the recent lab entry of Vision-Ease.
• Essilor acquired labs represent 27% share of the lab market.
• Essilor exerts substantial control over an additional 35% of labs through Varilux distributor contracts, which restrict promotions of non-Varilux products and require sales reporting of ECPs’ purchasing behavior.
• Hoya acquired labs represent 9% share of the lab market.
• The independent wholesale labs are losing market share.
• 20% of AO•SOLA revenue is in competitively owned or directed laboratories. An additional 27% of AO•SOLA revenue is in the shrinking independent wholesale market.
• Managed Care now influences over 50% of eye exams and over 35% of eyewear purchases, and is growing.
• Increasingly HMO’s are offering value-added options and focusing on vision plans as a profit center.

Europe and Asia Mark Thyssen

SOLA Europe 1993 – 1995

I joined the SOLA European team with Bernie Freiwald as VP of the European business (1991 to 1994). His appointment to this role was somewhat controversial and not appreciated by some of the European management team. However, I think Bernie did a remarkable job considering the fact that his previous business experience was USA based and considering the job he had been given. I have had feedback from some whose opinion I respect, that the period under Bernie’s management was a very good time and that SOLA benefitted from it. They had learnt much and SOLA had changed for the better. He took SOLA Europe from an old fashioned wholesale trading company to a more marketing orientated lens supply company with focus on customers and marketing. I have fond memories of working with Bernie and the European team.

As I recall, the negative growth in SOLA Europe during Bernie’s first year was mostly a matter of timing. At that point there was substantial change occurring in the market, particularly in the UK. SpecSavers had started their aggressive expansion at the expense of D&A and Boots, both large SOLA customers at that point.

At that time SOLA also started to convert the business from a wholesale business into a direct to retail business. This proved to be a challenging task for many SOLA companies. Mass manufacturing and wholesale are very different to prescription laboratories and direct-to-retail.

I also had the pleasure of working with Mark McKenzie during his time as General Manager of SOLA Europe. Mark was a professional manager and not from the industry. Sadly Mark’s time in SOLA was short-lived, with John Heine’s confrontational style not sitting well with Mark.

A meaningful and far-reaching activity during my European stint was a TV advertising campaign in Italy. At that time it was normal practice amongst Italian opticians to sell 2 pairs of glasses to presbyopes – one for reading and one for distance. It proved extremely difficult to persuade opticians to offer progressives to presbyopes because they made better money selling two frames and two pairs of lenses. Monica Salvestrini, the then marketing manager in SOLA Italy was emphatic that the only way to change this behaviour was to convince consumers directly, which required a TV campaign. Encouraged by Mark McKenzie, SOLA Italy presented a business case requesting US$600,000 towards TV advertising campaign, a first for SOLA. To my surprise it was approved. It worked so well that the budget was doubled to US$1.2 million for a follow-up campaign. To me this demonstrates the power of consumer advertising. Transitions have since also demonstrated the power of consumer campaigning and advertising.

I also enjoyed the experience of working with Hubert Weiss in winning the Pearl Opticians account in Europe. My contribution was mainly in product training, with a seminar and training tours in the Netherlands.

SOLA Asia 1995 – 2000

(In SOLA’s parlance, the Asian region covered all Asian countries, excluding India.)

When my family and I returned to Australia in 1995, it was unclear what position I’d return to. Although I expected to return to the Australian business, I was pleasantly surprised when I was offered the position of Marketing Director for SOLA Asia, based in Adelaide. Owen Roe, then VP Asia, later told me that he and John Bastian could not agree who I’d work for, when Heine suggested that they flip a coin. Owen won and I was offered a role in SOLA Asia. Clearly an extraordinary Human Resource management approach.

I really enjoyed working with the SOLA Asia team - it was a small team with high expectations. In hindsight, my view is that the team was underequipped and overwhelmed by the opportunities and the things that needed to be done. Owen was an amazing bundle of energy. He was unstoppable and made decisions on the run – which was interesting but sometimes frustrating. Asia is such a unique and challenging environment, especially in those years. For me it was an amazing learning school.

Apart from a few pockets, we weren’t really successful in Asia. Asia was, and is a complex and compilation of diverging markets. I think that SOLA’s experience was partly due to the company philosophy of “act local - think global”. For this to work you need solid local management and the ability to align management implementation with global strategies. Where we did have strong local management we tended to succeed. This approach also assumes that local needs and market environments were in line with company strategies.

At that time the global strategy was to focus on progressive lenses and CR-39 in general. However, progressive lens usage in most Asian markets was in its infancy and higher index materials were starting to emerge. SOLA had a relatively small and simple range in finished lenses whereas finished lenses represented the bulk of lenses sold in Asian markets.

Although the SOLA Asia management team tried to convince senior management that we needed to pursue high index manufacturing, especially finished single vision, he would not have a bar of it. At one point we started talking to a Taiwanese 1.6 index manufacturer to explore collaboration, but this was quickly stopped when John Heine got to hear about it.

John Heine was relatively conservative and in many cases limited his strategic direction to best suit the USA and Australian market.

While most Asian markets were considered developing markets, Japan had been playing a critical role in setting global industry market directions. Japanese market requirements did not really suite the SOLA strategy and manufacturing capability. SOLA was focussed on SF CR-39 product, especially progressive lenses, and serving wholesale market. The Japanese market was mainly a finished high index lens market with primary business opportunities in direct-to-retail business. Thanks to the SOLA philosophy that “locals know best” and because of strong local management under Yamamoto-san, SOLA Japan developed its own business approach, with much of what was being offered sourced locally and not from SOLA factories.

Managing the Chinese commercial operations proved difficult for the local and regional management teams, with all regional China sites being closed and activities limited to the key cities, Guangzhou, Shanghai and Beijing.

It was interesting to see the effect of Korean lens manufactures on the China market. The introduction of low prices, good quality 1.56 stock lenses with AR coating played a critical role in shaping the Chinese lens market. Today we estimate that 55% of all lenses sold in China are Finished Single Vision 1.56 with AR coating, primarily controlled by Korean companies..

SOLA was not able to get a foothold in Thailand – we were dealing with selected distributers, but Thai Optical, Essilor and Hoya dominated the market with their local manufacturing.

SOLA Taiwan was the first SOLA casting plant in Asia, producing product for export and local consumption. It was also the first plant that produced lenses that were modified to better suit the Asian markets, albeit that these were only CR-39. Rapid developments in China lead to the closure and transfer of casting to SOLA China. Today we have a very small share of the Taiwan market.

The Middle Eastern markets were some of the early export markets for SOLA and were managed from Australia until 2008, when it was handed over to GKB in India (CZV India). The Middle East delivered consistent growth and proved a rewarding market for many years. Key players in our success were John Bastian, John Soukias and later Majdi Kayyal.

Overall, our business ventures in Africa were disappointing. The acquisition of GENOP, a South African Rx company in 2005, was one of our biggest single investments made in Africa. It proved to be very challenging in the first few years but is now well on its way to success.

In Australia the conversion from mass manufacturer and wholesale supplier to a direct-to-retail business, serving Optometrists directly has been challenging. A key step in this direction was the acquisition of Optical Eyewear, then a major customer to SOLA. This acquisition and conversion to SOLA Technologies occurred under management of Wayne Rockall, and later David Cross and then Tony Grey. During this period we also saw some major changes in the local Australian market. Essilor snatched the OPSM business from SOLA while SpecSavers entered the market, achieving meaningful market share in record time. Mass manufacturing was fully transferred to China and Mexico.