The eyeglass market is hot. Three significant deals signed in the last few months point to the heating up of the optics industry in Israel in general, and in the field of eyeglasses in particular. In fact, it is possible that they mark the leap that the entire optics industry is waiting for.
● The Sunglass Hut sunglasses chain of the global giant Luxotica is entering Israel
● Super-Pharm acquires Iruka for approximately NIS 75 million
● Exit to one of the richest kibbutzim in Israel: Shamir sold the rest of his holdings in the optics company for hundreds of millions of dollars
The first, and the most significant of them all, is that of the Fox Group led by Harel Wiesel, with the signing of the sunglass hut brand franchise belonging to the Luxottica Group. This is in fact the entry of a first international player into optical retailing in Israel, and it is expected to bring innovation at least in the shopping experience and in the variety it will offer to consumers.
Fox is talking about 50 stores within seven years, with an investment of tens of millions of shekels. In the quarterly reports, the company estimated that operations in Israel will begin by the end of the year, and according to a market source in the Azrieli Mall chain, 10 branches will be opened in early 2023.
Another player that plans to deepen its presence in the field is Super Pharm, which recently signed a deal to purchase the Iruka sunglasses chain for NIS 75 million, only a year after negotiating with Opticana.
The third deal was signed in recent weeks, in which Luxotica completed its ownership of Shamir lenses, and acquired another 50% of it at a value of about half a billion dollars. This is double the value at which the company was purchased in the previous round, about 11 years ago.
A market of 1,100 stores
The optics market in Israel generates about NIS 2 billion a year, according to data from the business information company Coface Bdi. About half of the revenue in the industry comes from eyeglasses (about NIS 930 million), about 35% from sunglasses (about NIS 720 million), and the rest is divided between contact lenses, solutions and complementary accessories. The estimates are that in 2022 the revenues of the optics market will register a growth of about 8% compared to 2021.
Coface Bdi estimates that the number of stores in Israel is about 1,100, of which about 500 are owned by chains and the rest are privately owned. The prominent players in the market are Optica Halperin with 122 branches, Opticana with 72 branches, Super Pharm Optic with 72 branches, Carolina Lemka with 66 branches, and Iroka with 60 branches. In total, the five main chains in the market operate about 400 branches, and their revenues make up about 45% of the total market revenues. As mentioned, this balance of power is expected to change in the coming year.
“It seems that the optics market has returned to the level of demand from the pre-Corona era, and is managing to generate a lot of interest among players in the market and outside of it,” says Tahila Yanai, Co-CEO of CofaceBDi. “The latest developments may undermine the balance of power in the market, and it is not impossible that Others are examining a possible entry into the optics market. By the way, managers in the industry express concern that the opening of the Fox group’s new network will create a significant advantage for it, due to the priority it is expected to receive in the sale of Luxottica brands.”
The purchase of the Iruka network still requires approval from the Competition Authority. The estimates are that from Superpharm’s point of view, this is a strategic move that, on the one hand, is intended to exhaust the potential of the optics and vision in which it specializes, and on the other hand, is intended to use the strong infrastructure of Iruka sunglasses to create a complementary move to optical sunglasses.
Super-Pharm, which until now has mainly focused on eyeglasses and contact lenses, is expected to include in its stores or combine in Iruka stores the services of eye tests and the sale of eyeglasses. The industry estimates that upon receiving the authority’s approval, SuperPharm will begin recruiting dozens of optometrists, with the aim of expanding its range of services and locations.
SUNGLASS HUT store / Photo: Shutterstock
Competition against the whole market
“The huge groups are taking over the small ones, leaving them without a chance. It’s not power, who can beat Harel Wiesel?”, says an industry source. To understand the concern, you need to know the network, and especially the group to which it belongs.
Five years ago, the Italian Luxottica merged with the world’s largest French lens manufacturer, Essilor. The connection of the two created a powerhouse on an international scale, which controls the entire supply chain – planning, production, distribution and sales. The market value of the merged company is estimated at about 65 billion euros, with revenues of about 20 billion euros in 2021.
Luxottica’s brand portfolio includes not only Rayban, Vogue and Oakley, but also Persol, Oliver Peoples and brands it distributes under license agreements, such as Giorgio Armani, Bulgari, Versace, Dolce & Gabbana, Prada and Michael Kors. Alongside these, it markets wholesale to chains and private stores.
The Sunglass Hut chain, which Wiesel is bringing to Israel as mentioned, is one of many chains that operates under Luxottica. The industry believes that Wiesel will also expand its activities to the field of eyeglasses, and when this coincides with the move in which Shamir lenses were purchased, it can be understood that Luxotica plans to deepen its grip and dominance in this field – that’s where the big money is.
And here, the plot gets complicated. “This is the sunglasses chain of the biggest brands in the world, and it belongs to the biggest sunglasses manufacturer in the world,” says a source in the market. “Until today, it has wholesaled to everyone in Israel. Starting tomorrow morning, it will also market separately to Wiesel’s stores, and it has a great interest in these stores.
“They are opening competition with the entire market through Wiesel, the largest retailer in Israel. The market is going to change both for the small and private stores, as well as for the existing chains. The fact that Super Pharm buys Iroka is a salvation for the market, because who will stand up to Harel Wiesel? Everyone knows that Is it possible to face him alone, so when he brings the largest glasses manufacturer in the world?” (Wiesel chose not to comment).
Competition for customers
Other voices are also heard in the industry. “Competition is a good thing for everyone,” says a market source. “In the end, everyone complains about the cost of living, and competition lowers prices. There are strong chains such as Opticana, Carolina Lemka and Iruka that have now received reinforcements from SuperPharm, alongside many private optician stores that have survived for years and have regular customers. Wiesel will add another 20, 30 in total , 50 stores. It’s not like he will come and take 50% of the market share.”
Regarding the concerns expressed by officials regarding the significant power that the large groups have in front of the shopping centers, the official adds, “This is bullshit. There are dozens of malls in Israel, each of them has several optical stores. What, will they be taken out because of him now? Anyone who talks like that should really check himself, and how He makes his network more attractive. The younger generation doesn’t want a 20-year-old optical store, they want a cool store. And whoever doesn’t know how to give a customer experience, has no right to exist.
“Bottom line, there is no way to stop Wiesel Mizmat, and all the stores that are talking now have the advantage that they already exist and are active. He will have to fight for customers, and it will take five years for Sunglass Hut to reach their number.”