Building Momentum for Long-Term Growth
Investor Day December 10, 2010 Building Momentum for Long-Term Growth
Hubert Sagnières Chief Executive Officer The Optical Market in 2010
A still significantly > under-penetrated market
> An under-used product offering
Emergence of a profitable > mid-range segment
> A highly fragmented industry
Investor Day – December 10, 2010 3 Essilor in 2010: A Solid Growth Potential
. World leader with just 27% market share • Some countries with market share at 3%, others at 60% or more
. Essilor present in only 54 countries out of 200 in the world • Active in only 9 out of the top 59 fastest growing countries • 11% of sales in fast growing countries
. More than 200 new products launched this year • Products less than three years old represent 45% of sales
. FGXI sells 70 Million units in a strategically fast growing related segment
Investor Day – December 10, 2010 4 Four Growth Opportunities
Trading-up Conquering Acquisitions Expanding through the mid- the market innovation range segment
Investor Day – December 10, 2010 5 A Significantly Under-Penetrated Market
Four billion people in the world require vision correction… but only 1.6 Billion correct their vision
1.6 2.4 Billion Billion
Investor Day – December 10, 2010 6 An Under-Used Product Offer
Lenses sold Lenses that add sensitive protections 1 Billion1000000 and improve visual comfort are all under-used worldwide
500 Million500000
0 2009 Anti Reflective Easy Clean Progressive UV400 block Photochromic Anti Static Polarized Computer & Anti-Fatigue
Investor Day – December 10, 2010 7 Consolidate Our Positions in the High-End Segment through Innovation
…
150
150 / 200
200 Million consumers pa
Investor Day – December 10, 2010 8 Conquer the Mid-Range Segment
via new products, new business models and by accelerating acquisitions
150
Bolt-on acquisitions Multi-networks 150 / 200 Segmented offers
200 Million consumers pa
Investor Day – December 10, 2010 9 A Global Market Dominated by Local Operators
Lens Essilor 150 to 200 200 to 300 Readers small operators manufacturers manufacturers manufacturers
F Distributors 1,500 to 2,000 Distribution Essilor G & local operators X of Readers laboratories Optical distribution Retail networks
1 Billion Rx lenses 200 Million Readers
A highly fragmented industry
Investor Day – December 10, 2010 10 Essilor’s growth potential as strong in developed countries as in fast growing countries
Investor Day – December 10, 2010 11 A Global Management Team to Face Global Expansion
. Enlargement of the Executive Committee • 6 new members in 2010 • Multiple nationalities represented: Canada, France, Germany, India, Switzerland, UK, US
. Appointment of 2 Chief Operating Officers • Paul du Saillant • Laurent Vacherot
Investor Day – December 10, 2010 12 Investor Day – December 10, 2010 13 Enhancing Growth Opportunities
Eric Thoreux Corporate Senior Vice President, Strategic Marketing 2010: A Simple Observation
6.7 Billion people in the world
4 Billion people (60%) require vision correction 1.6 2.4 Billion Billion Corrected (25%) Not corrected
A significantly under-penetrated market
Investor Day – December 10, 2010 15 2010: A Clear Marketing Strategy 1.6 2.4 Billion Corrected Billion (25%) Not corrected
1. Grow share 3. Increase number of wearers 150
150-200
200 ™ 2. Increase wearer spend ™ ™ ™
Investor Day – December 10, 2010 16 1.6 Billion Wearers: Grow Share and Wearer Spend
Superior innovation at every price point Product + Service + Shopping experience
Drive consumer purchases to higher value solutions
Investor Day – December 10, 2010 17 Trade Up: Innovation at Every Price Point
To lead in premium… … we’ll strengthen the core
Investor Day – December 10, 2010 18 Varilux Comfort New Edition
NEWNESS NEW vision NEW NEW Varilux positions technology Comfort A new lens, with Wearer positions have A step change, without the same positioning evolved significantly inferring that we started and values as the since 1993 again from scratch current Varilux Comfort
Investor Day – December 10, 2010 19
Varilux Physio 2.0
RESEARCH NEW NEW Varilux TECHNOLOGY Physio WAVE 2.0
For each Pupil diameter prescription, defines High definition whatever impacts lens the most constraining the light conditions performance pupil diameters
Investor Day – December 10, 2010 21
Differentiating Innovation
From innovation in the core…
… to customization
Investor Day – December 10, 2010 23 Specific Average Eye / Face / Reading Habits
By consumer sub-segment Asia India Korea
Investor Day – December 10, 2010 24 Differentiating Innovation
From customization…
… to personalization
Investor Day – December 10, 2010 25
Visioffice: Superior Performance and Enhanced Uniqueness
Frame selection assistance Universal Measurement System
Frame + Eye position Head/Eye Lens tutorial
Investor Day – December 10, 2010 27 Innovation & Personalization Can Be Cascaded down The Pyramid
. An innovative reading distance measurer for Anateo Mio, a premium BBGR lens • Reading distance measured by 2 ultrasonic transmitter-receivers • Accurate (+/-1cm) • 2 patents
SILMO d'OR 2010
Investor Day – December 10, 2010 28 Innovation Technology Can Be Cascaded down
From 1st Tier… Crizal Forte …to the middle Neva Max
. Improved scratch-resistance is shared . Superior smudge resistance still exclusive to Crizal Forte
Investor Day – December 10, 2010 29 1.6 Billion Wearers: Grow Share and Wearer Spend
Superior innovation at every price point Product + Service + Shopping experience
Discipline to answer unmet needs and lift barriers Drive consumers purchase to higher value solutions
Investor Day – December 10, 2010 30 Trade Up: Products that Enhance Visual Comfort Are Under-Used
Lenses sold 1 Billion
Modern life & aging Outdoor Life Screen
500 Million
… and there are many unresolved problems, barriers and unmet needs!
Investor Day – December 10, 2010 31 Trade Up: Invest in High Potential Anti-Reflectives in Both Developed and Fast Growing Countries
AR as % total lenses
2020e global market average : 65-70%
2009 global market average : 49%
Investor Day – December 10, 2010 32 Trade Up: Anti-Reflectives Penetration, from Push to Pull
. Expand proven media tests: • Crizal TV ad, tested in one US region and set for nationwide roll-out in 2011
Investor Day – December 10, 2010 33 1.6 Billion Wearers: Grow Share and Wearer Spend
Superior innovation at every price point Product + Service + Shopping experience
Discipline to answer unmet needs and lift barriers
Drive consumers purchase to higher value solutions Superior brand portfolio
Investor Day – December 10, 2010 34 Trade Up: A Portfolio of Powerful Brands
CONSUMER BRANDS TRADE BRANDS
Investor Day – December 10, 2010 35 Trade Up: New Media to Build Our Brands
Varilux.com Crizal.com
Xperio.com iPhone app
Investor Day – December 10, 2010 36 Drive multiple purchase behavior
Investor Day – December 10, 2010 37 Trade Across: The Example of Singapore
Investor Day – December 10, 2010 38 Multi-Pair: ECP and Consumer-Focused Strategies
Results (one chain in Singapore) Based on 2 months of results from a 23-store customers
Multi-pair penetration (%)
Before Essilor initiative After Essilor initiative
Source: Provided by Essilor APHQ
Investor Day – December 10, 2010 39 2011: Creating Packaged Solutions for Easier Retail Sales
1 Sunwear 2 Driving 3 Computer
Reduce sun & headlight glare Protection against the sun Anti-fatigue lenses to improve driving safety
Investor Day – December 10, 2010 40 Multi-Pair – Year-Round Approach
Investor Day – December 10, 2010 41 Make uncorrected consumers enter the category
Investor Day – December 10, 2010 42 Trade In: 4 Segments to Address 2.4 Billion Uncorrected Consumers
Top
1 Kids 30M 2 Adults 100M >$20K/yr
3 4
Urban Rural (Kids and (Kids and adults) adults) 600M 700M
>$2/day Below $2/day 950M Below $2 per day
Source: UN; Infomarché 2008; UNDP; World Bank; CIA World Factbook; BCG analysis Investor Day – December 10, 2010 43 Four Key Barriers to Eye Care Access
Consciousness Affordability Reach Examination
Access to Awareness Access to care Affordability dispensing
Investor Day – December 10, 2010 44 2.4 Billion Uncorrected People = Key Barriers Vary by Segment
1 2 3 4 Top Create willingness to pay and drive to 1 Kids 30M existing channels 2 Adults 100M >$20K/yr
1 2 3 4 3 4 1 2 3 4
Support/develop Urban Rural Develop appropriate ECP networks new channels where (Kids and (Kids and through awareness traditional ECPs adults) adults) and affordable cannot reach distribution 600M 700M
>$2/day Below $2/day ~ 950M
Access Access to Awareness Affordability Key barriers to care dispensing
Source: UN; Infomarché 2008; UNDP; World Bank; CIA World Factbook; BCG analysis
Investor Day – December 10, 2010 45 Trade In: Awareness Campaign
Investor Day – December 10, 2010 46 Driving Results through an Industry Alliance
3-Founding Member Board
. 7% increase in eye exams . 9% increase in new patients . 11% increase in eyeglasses
Investor Day – December 10, 2010 47 Trade In: Screening and New Access to Care Business Models
Urban marketing in China Rural marketing in India
Investor Day – December 10, 2010 48 Accelerating Market Growth Driven by Demographics and Trade-In Initiatives
2010 Billion People 2030
6.7 Billion people +1.6 8.3 Billion people
Correction needs (60%) +1.4 Correction needs (65%) 4 Billion people 5.4 Billion people
Correction wearers Correction wearers (25%) +0.9 to 1.3 (30 to 35%) 1.6 Billion people 2.5 to 2.9 Billion people
From 2-3% growth to 3-4% growth Aging population Aging population 2 Billion presbyopes +1.4 presbyopes 3.4 Billion presbyopes (31%) (41%)
Investor Day – December 10, 2010 49 Investor Day – December 10, 2010 50 There’s More Innovation Potential than You Think
Jean-Luc Schuppiser Corporate Senior Vice President, Research and Development The Ophthalmic Industry Is Still Young
A very promising innovation curve
100.0%
90.0%
80.0% ??? 70.0%
60.0% Unsolved problems and unmet needs 50.0%
40.0% Personalization
30.0% Where we currently stand Digital surfacing 20.0% New surface function First Transitions Photochromic lenses First Crizal Antireflective coatings 10.0% Plastic lenses First Varilux progressive lens 0.0%
Investor Day – December 10, 2010 52 How Basic Problems Can Be Solved
Edging issues due to surface properties
Temporary blue layer
Investor Day – December 10, 2010 53 Still Many Problems to Solve
The eye is not a perfect spherical Aberrometer object
Correction of the aberration
Hyper acuity?
Investor Day – December 10, 2010 54 Still Many Problems to Solve
The surface dilemma: Hydrophobic Hydrophilic
Anti smudge
Low surface energy Hydrophobic
High surface energy Anti fog Hydrophilic
Investor Day – December 10, 2010 55 Still Many Problems to Solve
Transmission through the eye Light toxicity Toxic light not
100% filtered by the eye 100% Very high
Blue light absorber Yellow lens? 50% 50% in the lens
0% 0% Very low Light wavelength 390 420 450
Investor Day – December 10, 2010 56 Innovation Has Not Yet Peaked…
Nber New Products Months
Nber New Products Average duration
Time to market reduced by 44% during the last 10 years
Investor Day – December 10, 2010 57 …And Has a Positive Impact on Sales
Sales generated by new products on a rising trend
% of sales generated by products launched within the 3 previous years
Investor Day – December 10, 2010 58 A New Environment Creates New Opportunities
1 New technologies
2 New areas of investigation
Investor Day – December 10, 2010 59 New Technologies
Measurement Digital Active systems Surfacing tools
Investor Day – December 10, 2010 60 New Areas of Investigation
New visual behavior • Modern lifestyle (computer, smartphone, ...)
Segmented offers • Customization • Personalization NEW TECHNOLOGIES
Hyper Acuity • Aberration control
Therapeutic lenses • Low vision • Myopia (Presbyopia?) • Medical disorder Depression, Sleep, Headache, Alzheimer disease?
Investor Day – December 10, 2010 61 Where We Stand Today
A holistic approach of the visual system
Optics Biometry Neuroscience
Investor Day – December 10, 2010 62 A Unique Approach
A wearer-centric lens design process
Wearer data collection
Wearer tests Lens design
Control / measurement
Prototypes manufacturing
Investor Day – December 10, 2010 63 Initial Results in Personalization
Each eye is unique
TODAY 3D Real eye, Real 3D values (x,y,z) Real performance…
ERC
Actual Eye Rotation Center position can replace the theoretical values conventionally used in lens calculation and centering
Investor Day – December 10, 2010 64 Initial Results in Personalization
Eye/head strategy: Varilux Ipseo
H/E Coef. = 0 H/E Coef. = 1
Investor Day – December 10, 2010 65 Initial Results in Therapeutic Lenses
Myopilux • 2020: 2.5 Billion myopics • Huge impact on ocular health • Reduce myopic creep decrease risk of ocular pathology
Myopilux Pro • Progressive Lens for children • Reduces Myopia Progression by up to 38% • Only for ~1/3rd of children (esophores) • Aesthetic
Myopilux Max • Prismatic Addition Bifocal • Reduces Myopia Progression by up to 62% • For all children • Efficient
Investor Day – December 10, 2010 66 A More Global R&D Organization to Seize Opportunities
Deployment of 3 Innovation CRÉTEIL & Technology Centers
Norway Grenoble London Toulouse Montreal, QC Germany Boston, MS DALLAS Madrid Tokyo Shanghai San Diego Tampa, FL Tel Aviv Chihuahua, MX
Bangkok Bangalore Singapore
Jakarta ASIA Rio de Janeiro
Melbourne
Investor Day – December 10, 2010 67 Strategic Partnerships
. Essilor and the ophthalmic industry are dependent on strategic innovations developed in other industries: • Materials (chemistry, plastics) • Surface treatments (nanotechnologies) • Antireflective coatings (microelectronics) • Digital technologies
. One exception: • The progressive lens
Investor Day – December 10, 2010 68 Key success factors in choosing a partner
Identify Non Joint Joint Watch skilled Disclosure Development Research actions teams Agreement Agreement Laboratory
Investor Day – December 10, 2010 69 The Nikon-Essilor Research Center
An example of successful partnership THE STRATEGY:
. To leverage the creativity of the Japanese scientific environment
. To lead long-term disruptive research in the fields of materials and optics
. Thanks to these innovations, to contribute to the development of new generations of products and technologies for Nikon and Essilor: • For Nikon in the fields of cameras and steppers • For Essilor in the field of ophthalmic optics
Investor Day – December 10, 2010 70 R&D Will Continue to Contribute to Value Creation By developing additional benefits for the wearer
Investor Day – December 10, 2010 71 Investor Day – December 10, 2010 72 The Brand A Powerful Weapon to Conquer the Mid-Range Segment
Carl Bracy Executive Vice President, Marketing and Business Development EOA Who is Signet Armorlite?
885 People Worldwide and 9.4M lenses
3.75 MPcs 5 MPcs 415 p 438 p 400 kPcs 3 p 180 kPcs
60 kPcs 29 p
Investor Day – December 10, 2010 74 One of Signet Armorlite Major Asset is Kodak Lens
Kodak LENS Design Family
KODAK Unique Lens
KODAK Precise® Lens
KODAK Precise Short Lens
KODAK Concise® Lens
KODAK Single Vision
Investor Day – December 10, 2010 75 A Strong Recognition in the US…
The US #1 Brand of the Decade in terms of Customers Perception of overall Quality
Brand Brand Essence 1. Kodak • Powerful Pictures/Visuals 2. Craftsman tools • Solid Workmanship 3. Mercedes Benz • Elegant Engineering 4. Hallmark • Heartfelt Sentiment 5. Disney World • Family Magic 6. UPS • Reliable Delivery 7. Fisher-Price • Creative Play 8. Reynolds Wrap • Cooking Ease 9. Chiquita • Tropical Fun 10.Levi • Classic Ruggedness
Equitrend 2000
Investor Day – December 10, 2010 76 …and Everywhere Else
A strong consumers awareness, built on photo/ video products
Prompted Brand awareness UK Spain Germany Brazil China
A strong awareness Kodak 85 67 88 70 91 Among consumers
Nikon 78 65 84 46 53
Pentax 81 51 68 39 35
Seiko 58 45 67 42 42
Ray Ban 85 88 44 76 38
Zeiss 30 30 95 28 32
Investor Day – December 10, 2010 77 What This Brings to the Essilor Group
The Kodak Brand – A broadly appealing lens name, > excellently positioned against both value and trust
Signet – A light and lean organization complementary > to Essilor’s positioning, with a history of collaboration with other integrated lens companies
A cost effective base to expand Essilor’s reach > in the mid-range market
Investor Day – December 10, 2010 78 The Middle Market – Hard Definition
Investor Day – December 10, 2010 79 The Middle Market – Soft Definition
Middle Market Premium Market Value Sensitive Performance Sensitive (Kodak Target) (Varilux Target)
Qualities of Best Clinically superior in head Consumer adapt with ease Performing Lens to head comparison
Many Few Number of Competitors (all major providers) (only the most advanced)
Customer Perception Generally view products Superior performance of Performance as commodities can be determined
Customer Perception Meaningful differentiator among Used as a tie breaker among of Price many equal choices few choices
Customer Self Image Smart Discerning
Investor Day – December 10, 2010 80 Kodak, the Best Brand for the Middle Market
> Strong Brand Perception
> Strong Brand Awareness
> Strong Fit with our Industry
Investor Day – December 10, 2010 81 A Clear Roadmap for 2011
Increase performance to get more competitive in the middle market
> Improve cost competitiveness
> Improve product performance and offering
Set up regional structures for expansion > of product availability
Investor Day – December 10, 2010 82 Drivers of Decreased Production Costs
Worldwide mass production plants which produce > at lower cost
Essilor Distribution Network with better freight > shipping rates from partners
Better asset utilization reducing fixed > costs per lens
Investor Day – December 10, 2010 83 Product Offering Enhancement
Improve products quality Cleaning Easiness
Scratch Resistance Index
Enrich portfolio Coating of products 1. Single vision Expand Kodak Clean and Clear throughout all 2. Transitions lab distribution points behind 3. New digital offerings Essilor Technology
Investor Day – December 10, 2010 84 Deploying Kodak through Existing Networks…
Essilor Laboratories of America
Partner labs Crizal & Other Coatings AR Coatings
Investor Day – December 10, 2010 85 …and Setting up New Ones
Kodak Digital Lenses Licensees in Japan and Korea
India & China are main targets for Kodak lens retail growth
Signet Armorlite Asia - Singapore
Investor Day – December 10, 2010 86 Capitalizing on Brand Recognition through the Deployment of the UK Experience How to win in the Middle?
Kodak Lens Retailers UK
. Kodak Lens Vision Centers 136 . Kodak Lens Authorised Suppliers 29 . Total 165
Investor Day – December 10, 2010 87 Building Brand Visibility in the UK
. Provide a well-known optical brand . Provide world class sales training . Provide consumer proven promotions . Provide a full portfolio of products
Investor Day – December 10, 2010 88 Expanded Offerings
Investor Day – December 10, 2010 89 New Launch
SolarTec
. The complete 8-base wraparound frame and prescription lens package
. The revolutionary surfacing and glazing processes result in optimum vision without compromise
Investor Day – December 10, 2010 90 Kodak Vision Lens Center Sales Growth
6 Months Post 12 Months Post
Large Accounts +50% +87%
Average Accounts +178% +230%
Investor Day – December 10, 2010 91 Kodak to Play a Key Role in Middle Market Strategy
Kodak positioned as a leader in mid-tier > segment in 15 countries in 2015
> High single digit organic growth through 2015
Kodak will help deliver high-end margins > in the middle-market
Investor Day – December 10, 2010 92 Investor Day – December 10, 2010 93 Questions and Answers
Investor Day December 10, 2010 Building Momentum for Long-Term Growth
Investor Day December 10, 2010 India Faster Growth and Share Gains in A Booming Market
Jayanth Bhuvaraghan President, South Asia, Middle East, South and East Africa, ASEAN India GDP Expected to Surpass France GDP by 2017
Source: Goldman Sachs, Tushar Poddar & Eva Yi, India’s Rising Growth Potential, Global Economics Paper No. 152, January 22, 2007 Investor Day – December 10, 2010 97 Fastest Growing Mobile Phone Market
Mobile Subscribers in Millions
. Fastest growing mobile phone market in the world, adding ~20 Million new customers each month . 670 Million customers and counting (August 2010), 2nd largest telecommunication network in the world in terms of wireless connections
Source: Wikipedia Investor Day – December 10, 2010 98 Essilor’s Journey in India
Key Metrics 1998 2010 Number of employees 26 2,168
Number of labs 2 38 (11 Essilor labs, 27 partner labs)
Number of subsidiaries 1 10
CAGR = 58%
Partnerships
Essilor India
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 F2010
Market leader in the country with good margins
Investor Day – December 10, 2010 99 Opportunities
Huge uncorrected Conversion from vision market 1 glass to plastic
4 2
Conversion from 3 Low retail BTF to PAL penetration
Domestic market lens volume is expected to grow from 83 Million to 250 Million by 2020
Investor Day – December 10, 2010 100 1 Huge Uncorrected Vision Market
100 500 Million Million
600 Million people in India require vision correction… but only 100 Million correct their vision
Investor Day – December 10, 2010 101 2 Conversion From Glass to Plastic
2009 2014
67% 33% 32% 68%
Glass Plastic
Source: Essilor Estimates Investor Day – December 10, 2010 102 3 Low Retail Penetration
Number of people per optical retail outlet
Potential to grow the number of optical outlets by around 10 times, or ~100,000 additional shops in order to reach the penetration of developed countries
Source: Essilor Internal Study (2008) Investor Day – December 10, 2010 103 4 Conversion from BTF to PAL
Population Demographics Lens Industry Structure in 2010
2010 2020 BTF 20% 3% PAL 100+ 90-94 80-84 70-74 60-64 50-54 40-44 77% SV 30-34 20-24 10-14 0-4 -150150 100-100 50-50 0 50 100 150
Source: US census bureau
Population >40 years old will increase by over 100 Million in the next 10 years
Investor Day – December 10, 2010 104 Our Strategy
1 2 3 4 5
Multi- Consumer Strong, Excellent Sustainable Network Branding Motivated Relationship Growth & Multi- People with Trade Initiatives Channel
5 Growth Levers
Investor Day – December 10, 2010 105 1 Multi-Network & Multi-Channel
Essilor brands
Delta Lens
2020, Delta CNC, Sankar Premium
Vision Rx, VV, BG
L&S, GKB Optics, XtraVision Mass Market
OSD
Rural Marketing Creating a new market
One stop shop for our customers, in some cases selling competition brands
Investor Day – December 10, 2010 106 2 Consumer Branding
. Started advertising campaign with Varilux from 2005, and with Crizal from 2006 . Sustained improvement in sales and EBIT margin . “Crizal as a lens” – No. 1 consumer ophthalmic lens brand . Endorsed by Luxottica in their nationwide Ray-Ban advertisements, to help both companies leverage brand power
Investor Day – December 10, 2010 107 3 Strong, Motivated People
Average age ~31 years old. Overall 80% university graduates (Essilor India). Serves as talent pool for Essilor International. Entire business run by India local talents.
Investor Day – December 10, 2010 108 4 Excellent Relationship with Trade
Investor Day – December 10, 2010 109 4 Strong Branding in Shops
Investor Day – December 10, 2010 110 4 Club Platine Website
Investor Day – December 10, 2010 111 5 Sustainable Growth Initiatives
Expanding the market… Increasing the number of wearers
Some actions taken so far:
1 Think About Your Eyes
2 Social Media
3 Rural Marketing
Investor Day – December 10, 2010 112 1 Think About Your Eyes 2 Social Media 3 Rural Marketing
. What is “Think About Your Eyes” • A program to create awareness about eye care and promote the importance of eye checks . Plan: • Pilot program in Chennai in December 2010 • Partnership with Luxottica • Win the support of opticians, ophthals and optometrists • To measure the number of walk-ins through the program . Key Tactics: • PR, radio, buses, website, direct mailers, mobile vans • POS in shops • Activities in schools, malls, beaches, parks, theatres . Consumers and opticians incentivized to promote eye tests . We will monitor the number of new prescriptions
Investor Day – December 10, 2010 113 1 Think About Your Eyes 2 Social Media 3 Rural Marketing
. Essilor India’s Facebook initiative . Launched August 30, 2010 . Feeds and content • Facebook Wall posts • Viral Video on eye diseases • Facebook contests • Facebook ads • Facebook queries . Cheap and effective way to drive traffic . 6,797 followers & 6,782 likes*
* As of 26 November 2010 Investor Day – December 10, 2010 114 1 Think About Your Eyes 2 Social Media 3 Rural Marketing
Investor Day – December 10, 2010 115 1 Think About Your Eyes 2 Social Media 3 Rural Marketing
. MRV projects started 2006 . 6 vans today Amethi (dec 2006) . 6 locations across 5 states
Wardha (nov 2007) . Partners – Sankara Nethralaya, Aravind Eye Hospital & Indira Gandhi Kolkata (jan 2009) Eye Hospital . As of October 31, 2010 • 1,849 villages visited • 184,533 patients have been Bangalore (dec 2006) screened • 40,958 spectacles sold Rameshwaram (apr 2007) . Investing in more vans in
Theni (mar 2010) new states
Investor Day – December 10, 2010 116 Going Forward
> Enlarge distribution network
> Invest in brands
> Help to create more shops
Continue to develop products > suited to Indian needs
. Uncoat to HMC > Accelerate conversion . BTF to PAL . Glass to Plastic
> Continue to invest in people
Investor Day – December 10, 2010 117 India: One of the Successful Stories of Essilor in Fast Growing Countries
> Fast growing country with huge vision needs
Strategy firmly in place to take advantage > of identified growth opportunities
> $ 1 Billion revenue for Essilor in 2020…
Investor Day – December 10, 2010 118 Investor Day – December 10, 2010 119 FGXI – Fast Growth in a Strategically Related Segment
Alec Taylor Chairman and Chief Executive Officer of FGX International The FGX Advantage
Leading market • #1 in readers, #1 in popular priced sunglasses, #1 in Fits-Over positions
Portfolio of highly recognized brands
• Balanced product mix: 56% Reading Glasses; 44% Sunglasses Balanced business model • Readers non-seasonal, most profitable and fastest-growing line
Low-cost sourcing • Global outsourcing for over two decades strategy • 70 Million units sourced annually
Multiple growth • New channels, cross-selling to existing accounts opportunities • Domestic and international acquisition opportunities
Customer service focus • 2,300 person web-enabled field service team
Effective advertising • Invested $35 Million in measured media since 2007
• Renewed focus on pipeline of new products Product development • Light Specs and MicroVision successfully launched in 2010
Investor Day – December 10, 2010 121 Market Leader with Portfolio of Highly Recognized Brands
• 80-year heritage • 1960’s iconic “Who’s that?” TV campaign successfully reintroduced in 2009
• 25-year heritage, #1 in OTC reading glasses market • Combined with Foster Grant 68% market share in OTC reading glasses market
• 25+ year heritage, #1 in fits-over market • Strong medical positioning
• Acquired in 2009 to enter department store channel and add fashion expertise • Launched PR and print advertising campaigns in 2H 2010
Investor Day – December 10, 2010 122 Compelling Demographic Trends
High penetration of readers does Aging U.S. Population 2003 – not correspond to low multifocal % Growth 2003 to 2015E 2015E usage
% of 45+ owning readers
45
40 GERMANY SWEDEN 35
30 NORWAY SPAIN 25 SWITZERLAND
20 USA JAPAN IRELAND UNITED KINGDOM 15 ITALY NETHERLANDS AUSTRALIA CANADA 10 NEW ZEALAND FRANCE
5
PORTUGAL 0 0 10 20 30 40 50 60 70 80 90 100
% of 45+ owning progressive lenses or bifocals
Core Reader’s Market 0-4 5-9 10- 15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65- 70- 75- 80+Total 14 19 24 29 34 39 44 49 54 59 64 69 74 79 Source: U.S. Census Bureau Source: Company data
Investor Day – December 10, 2010 123 Reading Glasses: A Growing Need
. Fastest growing demographic group US OTC Reading Glass Universe . Consumers have a real need – 72% plan reading glass purchase 50
. Average consumer spends $52 annually 22 Million (4.2 pairs per year at $12.38 per pair) Million Potential Current Consumers OTC Reader . Foster Grant and Magnivision Users are the brands purchased most often;
combined share 68% Adults 35+ (Projection Excludes Prescription Lens Candidates) Synovate Research Study – May 2008
Investor Day – December 10, 2010 124 Balanced Business Model
2009 Sales by Product Line 2009 Sales by Channel Other
Sunglasses 17% Variety 44% Stores 5% Mass Reading 36% 56% Merchant Glasses Chain 6% Grocery
36%
Drug Stores
. Steady predictable business model . Revenue growth generated by both reading glasses and sunglasses . Distribution through multiple channels - 70,000 retail doors . Largest category - Readers - is highest gross margin, non-seasonal and fastest growing
Investor Day – December 10, 2010 125 Strong Sales Momentum
Annual Net Sales EBITDA(1) $ in Millions $ in Millions
CAGR 9% CAGR 14% 276-278 259.3 69-71 237.1 59.2 212.4 52.3 47.6
Note: Historical financials exclude costume jewelry business. (1) From continuing operations and adjusted to exclude certain nonrecurring events (fiscal 2007, 2009 and 2010).
Investor Day – December 10, 2010 126 Barriers to Entry
. Industry is highly fragmented - FGX is leading player in each of its categories with competition typically being smaller closely-held businesses . Significant barriers to entry • Switch out costs are prohibitive for smaller players – e.g. product buyback, fixture replacement and pipeline fill • Three year contracts or longer for most accounts • Only supplier with dedicated field service team • FGX owns most in-store fixtures, thereby controlling space . Walgreens Case Study • 3 year contract for reader business signed in 2006 • Buyback, fixture purchase and pipeline fill investment $18-20 Million • Have renewed contract for additional 3 years • Have added Foster Grant sun and private label sun and reader outposts and expanded Dioptics • 2007 annual revenue: $23 Million; estimated 2010 annual revenue: $57 Million
Investor Day – December 10, 2010 127 Best of Class Sourcing Model
. All Asian sourcing strategy for over 20 years . Typical product lead times – order placement to FGX warehouse – is 75 days . 25 dedicated employees in Shenzhen, China office overseeing sourcing, quality control and logistics . 70 Million units sourced annually . Steady to shrinking COGS rates for 5 consecutive years
Investor Day – December 10, 2010 128 Distribution & Logistics
. 110,000 square foot distribution center in Rhode Island . 65 full-time employees in Rhode Island facility operating “pick-and-pack” services . Flexible temporary workforce is scaled to meet seasonal operating demand requirements . Realizing significant savings by sharing Essilor resources
Investor Day – December 10, 2010 129 Strong Field Service Support
. 2,300 part-time web-enabled field service team . Supported by 80+ full time employees . Over 10,000 in-stores visits weekly/40,000 doors total
Investor Day – December 10, 2010 130 Advertising
. Marketing spend – 4-5% of revenues annually . Combination of television, print, internet and PR . Spokesperson Raquel Welch from 70’s ads used to reintroduce iconic “Who’s that?” TV campaign . Brands differentiate FGX from competitors who use licensed brands . 6-week introductory Light Specs TV campaign to run Q2 2011
Investor Day – December 10, 2010 131 Television Advertising
Investor Day – December 10, 2010 132 Television Advertising
Investor Day – December 10, 2010 133 New Product Development
. 12 new product development staff devoted to developing a pipeline of innovative and exclusive new optical products . 2010 hits: MicroVision and LightSpecs
#1 selling SKU in CVS, Rite Aid, 18% sell through in one week Duane Reade and Fred Meyer at Barnes & Noble
Investor Day – December 10, 2010 134 Product Development 2011
FGX exclusive license #1 selling SKU in Staples High demand item in of RealD technology and OfficeMax to receive beach and resort areas in mass retailers updated look and display
Investor Day – December 10, 2010 135 Acquisition Strategy
North America Europe and Latin America Criteria Criteria . Enter markets with developed . Principally focused on reading retail channels glasses . Seek to acquire existing . Channel expansion market leader . Customer distribution gains . Develop markets and introduce . Gross margin expansion brands . Product technology . Gross margin expansion . 2-3 active North American targets . 4-5 active European and Latin American targets
Investor Day – December 10, 2010 136 A Powerful Growth Engine in the Optical Core Business
2015
$480-520 Million Sales 2009
$259 Million Sales
Investor Day – December 10, 2010 137 Investor Day – December 10, 2010 138 Building Momentum for Long-Term Growth Concluding remarks
Hubert Sagnières Chief Executive Officer Building Momentum for Long-Term Growth
. Acceleration in correction wearer market: CAGR from 2-3% to 3-4%
. Innovation to remain a key market share driver
. Kodak positioned as a leader in mid-tier segment in 15 countries in 2015
. $1 Billion revenue targeted in India by 2020
. FGX to double revenue by 2015
Investor Day – December 10, 2010 140 Essilor’s growth potential as strong in developed countries as in fast growing countries
Investor Day – December 10, 2010 141 Questions and Answers
Investor Day December 10, 2010 Building Momentum for Long-Term Growth
Investor Day December 10, 2010