Eyewear in Latin America: A Unique Competitive Landscape – Part 2
As a continuation of an earlier opinion article on Eyewear in Latin America – Part 1, this article we look at the role of domestic player their strategies in staying competitive. Unlike many global markets, domestic manufacturers have a presence alongside international players within Latin American eyewear.
Keen competition from domestic players, often targeting lower price segments
ChilliBeans an eyewear franchise retail brand in Brazil that started in the late 1990s, has gained popularity due to its strong identity and understanding of the local culture. Being a domestic player, while there are no global economies of scale to reap, this has helped ChilliBeans to react to local consumer preferences by introducing new designs on a weekly basis. For example, with football being a national past time in Brazil, ChilliBeans launched its Manto Sagrado eyewear products specifically for the World Cup in 2014. The company also works closely with local designer brands, such as its collaboration with swimwear brand Blue Man, which saw it introduce a line of sunglasses with mirrored lenses.
Manto Sagrado Sunglass by ChilliBeans
Eyewear is not readily affordable in Latin America, given its current dismal economic conditions, high inflation rates and the absence of ease of availability of eyecare services. Price is always a consumer concern. Appreciating this, ChilliBeans positions itself to provide trendy eyewear at affordable prices, targeting low to middle-income consumers. Luxottica’s products, on the other hand, are generally of a higher price point, but to make Ray-Bans more affordable to the masses, Luxottica has introduced an instalment payment plan.
In the area of ophthalmic lenses where entry barriers are higher and product developments are driven by technology rather than fashion and culture, Augen Optics is seen as a quality domestic provider. With a huge distribution network of 18 ophthalmic lens laboratories located in 16 major cities in Mexico, Augen Optics is able to provide time-effective services to local eyecare practitioners. Augen’s research and development department focuses on technology suitable for the middle-income consumer, developing its own high-quality products at competitive and reasonable prices.
EasyForm® Digital Free Form Processing System by Augen
Which companies will win the battle?
Domestic players are country specific, with no regional presence or planned expansion moves in the near term. This indicates an absence of perceived sales growth in the region, especially with a tough competitive landscape that includes well-established and aggressive international players.
For example, ChilliBeans has started global expansion plans outside of the immediate Latin American region. Riding on its success in Brazil, ChilliBeans is looking to expand outside of Latin America through the franchising route. In 2012, Gávea Investimentos, a Brazilian investment fund took up stakes in ChilliBeans; this is expected to fuel its expansion into global markets, including the US. It is noteworthy that, despite its many years of industry experience in Mexico, Augen expanded into the US in early 2007, but was forced to close shop and focus on the Mexican market in 2009, as it was not able to withstand the US recession.
On the other hand, International players are aggressively expanding their business in this region to offset slower growth in matured markets. According to Euromonitor International, the Eyewear industry in Latin America is projected to grow at a CAGR of 18% from 2015 to 2020, current terms. They are able to bank on their vast product portfolios, which are spread across price segments, and their abilities to extend via both backward and forward integration, on top of having access to much deeper financial pockets. Besides the potential consumer base, which is increasing due to population growth and lifestyle changes, the attractiveness of the region is derived from economic pressure that is likely to see restrictions on trade being lifted, making it easier for international players to enter the region and expand. For example, the 2015 presidential election in Argentina might bring about some positive changes in the region; the newly elected President, Mauricio Macri, has announced plans to build relationships within Latin America and with other countries, which could improve trading conditions.
To conclude, a lack of global experience and low risk tolerance will make it hard for domestic players to expand both regionally and globally and be successful. Within the Latin American market, domestic players will have to contend with the rapid growth and presence of multinational manufacturers and can expect to find the going tough. Based on the historic evolution of the eyewear industry, it is very likely that international players will gobble up smaller players in the region for some time to come.