Europe is home to some of the world’s most iconic companies. Many started small to quell a single person’s curiosity before exploding into a global phenomenon. As a new resident, big, successful European brands have piqued my interest. What’s their story? How did they transform into the giants they are today? How have they sustained their legacy over time? Those are some of the questions I explore in this new series.
EssilorLuxottica is a colossus shaping the vision of billions around the world. Yet its veritable presence hides in plain sight, underscoring that there’s so much more to it than meets the eye.
Its labels are everywhere—from Ray-Ban Aviators and Oakley’s sporty sunglasses to progressive lenses that improve vision at different distances.
But it’s tricky to pigeonhole EssilorLuxottica into being a master of just one or a few things. It makes functional eyeglasses for daily wear, backs scientists addressing the biggest challenges hampering vision, and sells high-end branded eyewear—all at once.
The Franco-Italian company has built up its business—and, therefore, clout—to touch every part of eyewear, of which it controls 25% of the market, according to Euromonitor International. The company didn’t hit this scale of influence by accident, but built it over more than a century with an elaborate tapestry of deals.
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Luxottica, meanwhile, was founded in 1961 by Leonardo Del Vecchio, the brains behind the company’s ascent.
He set up a humble workshop in Agordo, Italy, to make components for the optical industry. But Del Vecchio’s ambitions soon outstripped the confines of Italy or Europe. He tapped every opportunity to expand into the eyewear industry’s value chain, which could grow Luxottica into an international giant.
Ultimately, Del Vecchio’s business chops and Essilor’s technical foundation would make for a powerhouse with unparalleled authority.
Both companies, Essilor and Luxottica, “are well rooted in their historical way of working … We are working always in somehow disrupting the business per se, [such as] introducing medical innovation, changing the world, and creating iconic products and iconic solutions,” Federico Buffa, EssilorLuxottica’s chief product and marketing officer, told Fortune. He covers the gamut of the company’s product pipeline as well as eyewear design and research.
Today, the Franco-Italian company operates in the complex convergence of eye care, fashion eyewear, and medical technology. It invests as much as €350 million in R&D annually and is chasing deals that will make its products even more critical to how people experience the world.
With a company as diversified and category-defining as EssilorLuxottica, finding successful growth engines is a constant quest. But there’s no company better positioned for it.
“We are in the visual world, and indeed … we are able to look into many [different] directions,” Buffa said.
3 things that helped EssilorLuxottica conquer the world:
1. Building business prowess through vertical integration
EssilorLuxottica secured its omnipresence in the world today by masterfully capturing every segment of the eyewear value chain, a strategy for which Del Vecchio was the chief architect.
His shrewd vision made Luxottica incrementally bigger with each business it eyed.
In business-speak, the company learned to master vertical integration—not just for its own suite of products, as luxury brands like Louis Vuitton or sports retailer Decathlon did, but for the entire eyewear and eye care industry.
“If I had to sum up how successful the business model is, really, 90% comes from vertical integration. I think it’s the ultimate competitive advantage in this industry,” said Cédric Rossi, the vice president of equity research in luxury and consumer goods at investment firm Stifel Europe.
Being vertically integrated fueled a virtuous cycle that made Luxottica’s business boom. For instance, it began inking long-term eyewear licensing deals with Giorgio Armani, Prada, and others, and when it eventually took over the largest optical banners, such as Sunglass Hut and GrandVision, it sold these fashion sunglasses there.
“In most cases, the structure of those deals is a trademark license where EssilorLuxottica is paying a royalty, which is a percentage of sales. While that royalty can eat into the overall profit, the high margins a luxury brand’s trademark can achieve easily dwarf those royalty payments,” Douglas Hand, a fashion industry lawyer, wrote in an email.
To be sure, while high markups are common in industries like luxury, where goods are made by craftspeople in limited quantities or use high-end materials like leather, the same qualities aren’t typically apparent in eyewear.
By extending its retail control, Luxottica became virtually inescapable for customers seeking eyewear. The stores put the company at the intersection of demand and supply by connecting people to optometrists, who guide them through the process of choosing their eyeglasses.
“It’s very interesting to have this combination of engineers, brand-building capability, [and] people coming from retailing activity. So all in all, you’ve got a perfect blend … which is definitely helping the company to outperform the eyewear industry,” Rossi said.
Another example of how vertical integration helped the company was in rejiggering Ray-Ban’s appeal.
But in 1999, when Luxottica bought its parent, Bausch & Lomb, Ray-Ban was in steady decline. Still, the Italian company recognized its potential and added its magic touch (and some extra dollars to the Ray-Ban price tag).
Today, Ray-Ban is EssilorLuxottica’s crown jewel and the vessel for some of its breakthrough wearable innovations. It’s also the largest brand in EssilorLuxottica’s portfolio, accounting for approximately 12% of the group’s 2024 sales.
The compound benefit of vertical integration for EssilorLuxottica was ultimately that it acted as a shield from potential new entrants in the eyewear market, ensuring that no one would heavily disrupt the industry, simply because they lacked the scale EssilorLuxottica has.
“In general, by dominating the market and being vertically integrated, life is good for EssilorLuxottica,” said Hand.
2. Fine-tuning the research muscle
At the center of EssilorLuxottica’s existence is its research focus, which has yielded over 15,000 patents. The company works with a network of researchers, engineers, and designers who help address vision impairments, develop wearable eye accessories, and more.
Take Oakley’s Prizm lenses. The sports-tailored glasses help accentuate details of what the wearer sees by enhancing contrast through their tinted lenses.
“The growth plan of the company is not only by acquisition, [but] mainly by internal research [and] development,” said Buffa, EssilorLuxottica’s product chief.
The company developed the Essilor Stellest lenses, which can slow myopia progression by 67% on average, according to clinical trial results. Now that the lenses have proved successful, selling them will be simple enough, as EssilorLuxottica has a constellation of experts and stores that can prescribe and sell them.
Euromonitor International’s Cazin noted that the demand for myopia management spectacles and contact lenses has risen at a compound annual growth rate (CAGR) of 31% and 13%, respectively, in the past five years.
“The growth plan of the company is not only by acquisition”
If the company isn’t already researching a condition through its capabilities, it has never shied away from striking deals to further cement its R&D. For instance, EssilorLuxottica bought a majority stake in the German imaging and IT company Heidelberg Engineering last year to improve diagnosis and patient care in matters of the eye.
Beyond the focus on ophthalmology, the company’s appetite for innovative undertakings has also recently pulled it into the wearables market.
(Pointing to his spectacles during the interview with Fortune, Buffa said: “Sticking a piece of technology here doesn’t mean eyewear that people can wear on a daily basis.”)
The company’s ability to fund hundreds of millions of euros worth of new research assures its future path to creative and innovative advancements, whether in style or in the science underlying the eyeglasses it makes.
Bulking up its research muscles gives EssilorLuxottica one clear advantage: It’s becoming a disrupter of the same market in which it’s also an incumbent.
3. Smart shopping
Dealmaking savvy has been the greatest enabler of Essilor and Luxottica throughout their individual histories, as they have gone from strength to strength. That remains true today.
Buffa said the Paris-listed company’s acquisitions are generally guided by the “opportunity of that specific moment,” EssilorLuxottica’s long-term vision, and “seizing every opportunity that aligns with our ambition.”
Now that the company has grossed $100 billion in market value (another of Del Vecchio’s goals), its long-term growth is predicated on maintaining its prominent market position.
“When you are by far the biggest player in the field, the challenge is not to gain market share versus your competitors—it’s to make sure that the market itself grows, because you have a bigger cake, and it’s better for you to operate in a larger space,” Stifel Europe’s Rossi said.
Somehow, EssilorLuxottica hasn’t struggled to grow the market yet.
Regulators green-lit the €7 billion deal in 2021 on the condition that EssilorLuxottica sell its stores in Belgium, Italy, and Spain, where GrandVision’s retail presence could undermine competition.
In some ways, the company is like a chess grand master. It doesn’t blindly make moves but anticipates the following paradigm change that will shape the entire industry.
Last year, EssilorLuxottica bought Supreme, the streetwear brand, which confused many observers. Rossi characterized the deal as a bid for the millennial “phone book,” to get a better grasp on this demographic.
The Franco-Italian company’s deals are often strategic—even if, in some cases, the strategy is to protect itself from global volatility.
No matter how you look at EssilorLuxottica—as a market observer, curious reader, investor, or customer—the company’s current position feels unshakable.
The company’s shares have risen 25% in the past year, and it has reported five years of sales growth, barring 2020, when the pandemic hit.
When Del Vecchio died in 2022 at the age of 87, he was Italy’s second-richest man, following the family behind the hazelnut-flavored chocolates Ferrero Rocher. He was worth $25.7 billion at the time. Today, his family has a 32.5% stake in the business through their holding company, Delfin.
“Today, EssilorLuxottica is also fighting with Netflix, [and] with those kinds of companies, because your war … is to take a few minutes or a few hours of a customer in a day”
Experts have questioned whether EssilorLuxottica is a quasi-monopoly—not an outlandish claim given the company’s influence. But the world’s regulators certainly haven’t thought so, making it more of a smartly erected empire.
Rossi noted that, given the fragmented nature of the eyewear market and varied input costs in different markets, the company will always coexist with smaller, lower-priced players.
EssilorLuxottica won’t have a straightforward path ahead.
It will have to contend with the likes of Warby Parker, which went public in 2021 with price competitiveness relative to the rest of the market at the heart of its appeal. Others, like Germany’s Zeiss, which makes lenses for cameras and microscopes in addition to eyeglasses, and British chain Specsavers have growing businesses, too. But none of these players have as wide-ranging operations as EssilorLuxottica, nor are they as vertically integrated as their Franco-Italian counterpart.
It’s also diversified enough to be up to the challenges of the future.
“Today, EssilorLuxottica is also fighting with Netflix, [and] with those kinds of companies, because your war … is to take a few minutes or a few hours of a customer in a day,” Rossi said.
It doesn’t take 20/20 vision to recognize that EssilorLuxottica stays two steps ahead in a game its opponents are still learning to play. That’s perhaps why the French-Italian giant needn’t worry too much about losing relevance.
In a 2024 report, the company acknowledged that the need for optical products will continue to grow, especially as problems like an aging population and increased screen time show no signs of abating. Hearing loss is on a similar trajectory, and the company is already carving out this new niche with help from its retail channels.
“We are considering really every innovation that is related to the zone in which we can do something, directly or indirectly, to the [eye care] industry,” Buffa said.
