Fierce Competition Expected in Eyewear as Latin America Anticipates Strong Growth
Eyewear in Latin America posted a value CAGR of 3.5% over 2007-2012, slightly ahead of the industry’s global CAGR of 2.8%. As mature markets continue to inch towards saturation, eyewear manufacturers are eyeing emerging markets such as Latin America and Asia. Euromonitor International takes a look at some expansion activities in Latin America.
Brazil takes the lead
Within Latin America, Brazil registered the strongest performance in eyewear over the 2007-2012 review period. Brazil is the largest economy in South America in terms of real GDP, with a growing middle-class and enjoying higher than average GDP per capita. Thanks to a combination of the country’s ageing population, rising demand for prescription glasses and increased usage of eyewear as a fashion accessory, Euromonitor International expects to see continued strong demand for eye care and related services in Brazil over the forecast period.
Eyewear Market Value Size in Key Latin American Countries
Source: Euromonitor International
Strengthening retail reach
To tap into the growth potential in Brazil, global eyewear manufacturer Luxottica has invested heavily in building its retail presence in Latin America. Prior to 2011, the eyewear giant reported less than 10 bricks-and-mortar outlets in Central and South America. In 2011, the company’s aggressive expansion plan was realised, with its presence increasing dramatically to 1,050 outlets through retail expansion and acquisition.
Apart from the aggressive growth of its existing retail arm, Sunglass Hut, Luxottica also made a few strategic acquisitions, including those of the leading Brazilian eyewear company Grupo Tecnol Ltda and Multiopticas Internacional. Grupo Tecnol Ltda consists of a production plant, a portfolio of house and licensed brands, a strong wholesale distribution network, a laboratory and an optical retail chain, while Multiopticas Internacional owns the Opticas GMO, Econopticas and Sun Planet retail brands. These two acquisitions gave Luxottica an additional 560 stores across Brazil, Chile, Colombia, Ecuador and Peru.
This lucrative market has also attracted international investors, with 3i Group at the start of 2013 acquiring one of Brazil’s largest optical chains, Óticas Carol. Currently with 490 stores, Óticas Carol has doubled its store numbers over the past three years and has plans to continue expanding to 1,000 stores by 2014. While the company has been focusing its efforts on São Paulo, Rio de Janeiro and Rio Grande do Sul, it has indicated its interest in expanding into a wider number of cities, including the northeast region of Brazil. With new capital backing from 3i Group, combined with its aggressive expansion plans, the company looks set to grow at a rapid pace.
Creativity the key to standing out
Latin America is one of the regions that has a good mix of both international and local players. Of the top 20 eyewear companies in the region in 2011, half were companies of local origin. These players, including Augen Opticos SA de CV (Mexico) and Chilli Beans Comércio de Produtos Nacionais e Importados Ltda (Brazil), have been enjoying tremendous success on their home ground and beyond.
To achieve differentiation, local eyewear start-ups are becoming more creative in their approach, one example being new Brazilian online firm Lema21. Founded by two Brazilian entrepreneurs, this eyewear company aims to cut out the middleman in Latin America. It uses a transparent business model that allows customers to purchase prescriptive frames and lenses online for a flat rate of R$267 (approximately US$120). In addition, Lema21 also provides creative services such as a virtual mirror and home trial.
With aggressive expansion plans from the big players and the strong positioning of local and regional players, the competitive environment in Latin America is set to intensify. It will thus be essential to be seen and heard above the clutter in order to succeed in this profitable market.