image: Chanel

image: Chanel

A European eyewear giant worth more than $52.5 billion is slated to make significant waves in the fashion industry, albeit somewhat quietly. The impending change is the result of the merger of Italy’s Luxottica – which maintains a brand portfolio that includes practically every well-known brand, such as Ray-Ban, Persol, and Oliver Peoples, as well as the rights to design, manufacture, and distribute eyewear of luxury brands including Burberry, Prada, Chanel, Miu Miu, and Versace – with French lens manufacturer Essilor.

Charenton-le-Pont-based Essilor confirmed in January that it had reached a share exchange deal with Luxottica’s main shareholder, Delfin, to form a new company, one expected to have combined revenues of more than $16 billion, 140,000 employees, and operations that span more than 150 countries. Essilor said at the time that the merger is in furtherance of “an effort to meet growing global demand for corrective lenses, sunglasses and luxury frames.”

The move marries Luxottica, the world’s largest manufacturer of eyeglass frames (and thus, one of the largest determiners of eyewear prices), and Essilor, the world’s largest producer of lenses, and thereby, combines supply for the two main elements of any final eyewear product. This stands to have an enormous impact of the fashion industry, as eyewear (often produced and marketed by third parties via licensing deals, much to many consumers’ surprise) remains one of the most important opportunities for fashion brands to reach new consumers and grow their revenues. 

What is the Big Deal?

To put the merger in perspective: Most of the industry’s eyewear – save for in-house manufactured glasses (and those are quite rare) – will now come from a single source, even more so than they already do. 

Given the breadth of the deal, it has been met with its fair share of criticism from the outset. While a spokesman for Essilor says that because “the parties’ activities are highly complementary, the deal would generate significant synergies and innovation and would be beneficial to customers,” others are not convinced. 

Gordon Ilett, of the United Kingdom-based Association of Optometrists, told BBC: “This now allows the group to control all aspects of supply of product – from manufacture to the end user. Those businesses who remain as their customers will be indirectly controlled by the terms and conditions imposed by them. The effect of it will be reduced choice for the consumer, and will most likely result in reduced quality products longer term.” 

WWD echoed this notion this spring, stating, “While the companies will no doubt reap major dividends from the $50 billion dollar deal, this kind of merger is bad news for brands — and even worse news for consumers” … for a few reasons. 

Primarily, with the increased control over the global eyewear licensing market that will inevitably come with such a deal, EssilorLuxottica will dominate the market – and its competitors – even more than before. “For brands, this means access to fewer licensing partners, which means fewer distinct design directions to offer brands. The market will thus be flooded with a limited range of generic designs from one company posing as multiple companies,” Andrew Lipovsky, founder and chief executive officer of eyewear licensor, Eponym, told WWD. (Eponym owns the licenses to Steven Alan, Alice + Olivia and Jason Wu eyewear). 

With fewer suppliers also comes fewer options when it comes to price and an almost certain decline in terms of quality and innovation. As Lipovsky further told WWD, “When marketplaces shrink, there are fewer options for brands and therefore fewer options for customers. That means higher prices and lower quality as the final product. After all, why would Luxottica/Essilor design high-quality products when they have no competition?” 

The deal is not necessarily done … just yet, although is appears to be only a matter of time. While the boards of Essilor and Luxottica approved the merger early this year, it is still in need of approval by Essilor’s works council and French labor bodies. Still yet, it must as establish compliance with and passage of anti-trust probes in the U.S., Canada, China, and Brazil, among other nations. 

As of late month, the deal appears to be on its way to finalization in the coming months. For instance, a series of international anti-trust applications have been submitted by Essilor and Luxottica ahead of the official merger, and in July, the companies said the deal “remains on course to be completed by the end of the year.”