Italy Eyewear Key Figures 2015 1
General information 2015 Population: 60.656.125 (-0,2% vs 2014) GDP per capita: 26.840 (+2% vs 2014) Population over-40: 55% of population Population over-65: 22% of population Population with visual defects: 61,5% Number of optical shops: 9.817 (-0,8% vs 2014) Population/shops: 6.178 Population data, GDP data: ISTAT Optical shops data: GfK Others data: Anfao 2
2015 overall situation The global economic outlook in 2015 was basically dominated by four main trends that emerged at the end of 2014: a slow global recovery, low oil prices, record low interest rates and a weak Euro. Added up, these four strengths gave a considerable boost to Italian GDP, which gradually gained momentum. However, this ponderous boost did not have a significant impact in pulling Italy out of the abyss it hit during the previous recession, with the country failing to take off again at the end of the year. Unlike many other sectors, Italian eyewear appears to have made the most of the overall situation not only on the international marketplace with a new record in exports, but also on the domestic market, which finally started growing again in 2015. 3
2015 recap for Italian eyewear NEW RECORD ON INTERNATIONAL MARKETS: EXPORTS +12,3%, IN EXCESS OF 3,4 BILLION EUROS. DOMESTIC MARKET UP BY 5,7%: FIRST SIGNIFICANT UPWARD TREND SINCE 2007. 4
Italian eyewear 2015: main figures 870 companies (+0,2% over 2014) 17.245 people employed (+6,5% over 2014) 3.566 millions euro production (+12,5% over 2014) 3.454 millions euro export (+12,7% over 2014) 985 millions euro domestic market (+5,7% over 2014 sell-in value) 5
Italian eyewear industry: details of last years 2011 2012 2013 2014 2015 Million value Euro var.% Euro var.% Euro var.% Euro var.% Euro var.% Output 2.659 8,6% 2.799 5,3% 2.898 3,5% 3.171 9,4% 3.566 12,5% Export 2.459 11,3% 2.622 6,6% 2.782 6,1% 3.064 10,2% 3.455 12,7% Import 808 5,8% 844 4,4% 885 4,9% 988 11,6% 1.146 16,0% Domestic Mkt 1.008 0,6% 963-4,5% 941-2,2% 932-1,0% 985 5,7% In 2015 Italian eyewear production totaled 3.566 million, up by 12,5% over 2014. This increase was not driven by eyewear exports alone, but by a good pickup in the domestic market. 6
Italian eyewear industry structure YEAR OUTPUT (million value) EMPLOYEES (number) FIRMS (number) INDUSTRIAL FIRMS (employment contract: industry) 2015 3.566 17.245 870 158 2014 3.171 16.195 868 165 2013 2.898 15.830 869 166 2012 2.799 16.220 880 169 2011 2.659 16.120 903 172 The number of companies remained basically stable, some closures were offset by new companies, especially SMEs, on the market, bearing witness to the good overall vitality of the industry. In 2015, there were 870 companies in the country (+0,2% versus 2014). Employment figures were more than positive: the sector is back to having more than 17.000 employees. This is also the result of many existing temporary contracts being transformed into permanent contracts because of government tax incentives. Therefore, without considering other employment contracts (about 500), there were 17.245 employees at the end of 2015, +6,5% over 2014. 7
Made in Italy The comeback of Italian production, especially for the very high-end of the market, dubbed reshoring or back to Italy, is gathering pace even among the large eyewear companies. The reasons are many (increased costs in China and other countries with low production costs, the need to maintain a local market presence and to have a more flexible production, the need to increase brand positioning, great consumer awareness of social and environmental issues). However, Made in Italy is the driving factor, for which sophisticated consumers are willing to spend even more. Higher costs for companies are therefore more than offset by the benefits of product image and quality. 8
IMPORT-EXPORT 9
Italian eyewear industry: 2015 export performance Exports of frames, sunglasses and lenses, which account for almost 90% of production by the sector, rose by 12,7% over 2014, totaling 3.455 million (new record). In 2015 exports of sunglasses posted a 14,1% year-on-year increase, settling at about 2.309 million. Frame exports posted a +10,1%, amounting to about 1.075 million. The buoyancy of eyewear on international markets was also demonstrated by imports which grew by 16% and were valued at almost 1.146 million. The trade balance for Italian eyewear continues to be very positive ( 2.309 million is the exportimport trade balance for 2015), rising by more than 11 percentage points over 2014. 10
Italian eyewear export: 2015 geographical details A breakdown of sunglass and frame exports according to geographical area shows that: the main export market for Italian eyewear exports in 2015 remained Europe, with48,2%shareoftotal Italian exports by the sector, up by 11,1% (+14,4% for sunglasses, +6% for frames). 2015 exports to America accounted for 30,6% of the total, with sunglass-frame exports rising by 17,1% over 2014 (+16% for sunglasses, +20,4% for frames). North America led the growth (+23,5%), versus the negative performance of Central and South America (-8,6%) which were impacted by high tariff barriers and other difficulties. In Asia, which absorbs 18,3% of Italian sunglass and frame exports, the 2015 export trend was +15% (+14,9% for sunglasses, +15,4% for frames). 11
Italian eyewear export 2015: first 10 mkt and share Sunglasses Frames 1 USA 27,7% 1 USA 20,9% 2 France 11,0% 2 France 16,9% 3 United Kingdom 6,9% 3 Germany 9,2% 4 Spain 6,3% 4 United Kingdom 7,8% 5 Germany 5,3% 5 Spain 5,7% 6 China 4,3% 6 China 4,0% 7 South Korea 3,6% 7 Netherlands 3,2% 8Turkey 2,8% 8Brazil 2,2% 9 Hong Kong 2,8% 9 Hong Kong 1,9% 10 United Arab Emirates 2,6% 10 Portugal 1,6% The first 10 export markets count about for 73% of the total Italian exports of sunglasses and frames. 12
Italian eyewear export 2015: countries details Percentage changes by value 13
Italian eyewear export 2015: emerging countries Percentage changes by value 14
Italian eyewear industry: 2015 export volume 98 million pairs Overall, Italian exports in 2015 amounted to about 98 million pairs of glasses, a 4% increase over 2014. Of the 98 million, 64 million were sunglasses (65.3%) and 34 million were frames ( 34.7%). More specifically, sunglass exports rose by 4.9% and frames by 3% in quantity over 2014. 15
DOMESTIC MARKET 16
Main facts In 2015, there was a turnaround in the stagnant domestic market trend and interesting signs of a recovery with significant percentage increases (+5.7% for the sell-in figure) finally emerged. This figure is particularly important if we consider that it was the first plus sign posted for the domestic market since 2007. Contributing to this result were mainly a pickup in sunglasses, which had been the most hard-hit, and, as regards prescription eyewear, the more than good performance put in by progressive lenses. 17
2015: sell-in details Sell-in figures for eyewear frames in 2015 improved by about 5 percentage points over 2014 while sunglasses recovered by 9.8%. Noteworthy is the trend posted by ophthalmic lenses which closed the year with a significantly positive result in terms of value (+6%) and volume (+4.5%). Within this segment, progressive lenses started growing significantly again (+10% in volume and value). The Italian market share for progressives is currently about 17% and definitely offers the best opportunity for companies, distributors and consumers because of a guaranteed high added value. Although a return to pre-recession levels is still a long way off, 2015 posted the first significant increases in both sectors (sunglasses and eyewear) and the market was dynamic again. 18
2015 Italian eyewear industry sell-in by units Products 2014 2015 15vs14 Frames 5,09 5,36 5,3% Sunglasses 5,86 6,50 10,8% Lenses 17,78 18,56 4,4% Pal 2,90 3,19 10,0% Single Vision 14,88 15,37 3,3% millions unit 19
2015 Italian eyewear industry sell-in by value Products 2014 2015 15vs14 Frames 214,12 220,72 3,1% Sunglasses 322,22 358,35 11,2% Lenses 260,80 276,59 6,1% Pal 125,63 138,09 9,9% Single Vision 135,17 138,50 2,5% Millions 20
2015 sell-in market share by value 21
Frames and sunglasses sell-in: plastic and metal 2011 2015 22
Frames and sunglasses sell-in: brands 2011 2015 23
Plastic lenses sell-in: geometry market share Single vision and progressive lenses share the lenses market. Pal represent 19% in term of volume, but count for about 53% of turnover. In 2011 the market share still remained on 2010 s level. About PAL position, Italy is slowly recovering (ie 2015 vs 2010). 24
Lenses sell-in: photocromathic segment Photocromatic segment represent the 10,3% of total lenses in volume. In 2015 the market share still remained on 2010 s level, but Italy is one of the best performer in this segment. 25
Optical trade structure Optical Shops 2011 2012 2013 2014 2015 TOTAL POS 10.121 10.041 9.969 9.895 9.817 chain 756 817 821 829 810 groups and independent pos 9.365 9.224 9.148 9.066 9.007 TURNOVER PER POS 317.000 282.000 279.000 280.000 285.000 26
Optical trade share of turnover Ophthalmic lenses represent more than 50% of optical trade turnover. 27
Italian retail market: renovation period 28
2015 Italian eyewear industry sell-out by value Products 2014 2015 15vs14 Frames 497,49 532,32 7,0% Sunglasses 563,05 596,84 6,0% Lenses 1.192,88 1.289,00 8,1% Millions 29
Opportunity for optical trade sector The distribution sector should think carefully about how to take advantage of the changes of the market and it has to focus on: 1. Differentiation 2. Quality 3. Service offered to the end consumer. 30
2016 outlook 31
Forecast for 2016 Towards the end of 2015, risks of a downturn emerged as a result of a further slowing down of the emerging economies, the consequences of terrorist attacks and war developments in Syria. The global economy got off to a turbulent start in 2016, with stock market losses and the falling prices of raw materials and a weakening Euro. As a result, financial conditions have become more restrictive, and almost equal to a one percentage point increase in interest rates. According to the latest figures released by the Confindustria Studies Center, the regained confidence of families and companies appears to be already feeling the effects of this. Overall, therefore, early 2016 does not appear to provide the ideal setting for an increase in Italian GDP. Also, although there has been a slight slackening in the credit crunch, loans to companies remain weighed down by the bad debts of banks, with stricter requirements on bank capital and the entry into effect of bail-in legislation. 32
Forecast for 2016 A further drop in oil prices will further boost disposable income in consumer countries (for Italy this will amount to a 0.2% increase in GDP this year), but in the immediate future is both a reflection and source of international instability. All this fibrillation is a sign that the situation has become more challenging, with a greater risk of downturns. However, the outlook remains favorable. A strong recovery is underway in the United States and the Eurozone countries are growing, albeit at a moderate rate. China is slowing down as expected and the good news is that the changeover from manufacturing to tertiary activities is gathering pace, even if with some inevitable jolts. Brazil and Russia are slowing down instead and India is posting some signs of weakness. 33
Forecast for 2016 Given the situation, although the Italian recovery remains sluggish, there has been a strong pickup in exports mainly to the Eurozone markets. Domestic demand is rising fueled mainly by consumption; there is a strong increase in domestic orders. The extent and content of the Italian stability law will provide the expected support (0.4 points of GDP in 2016-17, according to both CSC and Bank of Italy estimates). Considering how the sector is structured,with its export drive and new domestic market vitality, we could be moderately optimistic about 2016, even if initial figures for 2016 point to a slight slowdown. But the situation is still full of uncertainty and there is the shadow of BREXIT! 34
Export: 1st Quarter 2016 Products (value in mln ) 1Q 2015 1Q 2016 16vs15 FRAMES 279,63 284,32 1,7% SUNGLASSES 583,61 632,76 8,4% FRAMES+SUNGLASSES 863,24 917,08 6,2% 35
Domestic Market sell-in: 1st Quarter 2016 Products (unit in mln) 1Q 2015 1Q 2016 16vs15 Frames 1,12 1,21 8,0% Sunglasses 1,44 1,52 5,8% Lenses 4,50 4,72 4,9% Pal 0,85 0,96 12,9% Single Vision 3,65 3,76 3,0% Products (value in mln ) 1Q 2015 1Q 2016 16vs15 Frames 51,88 57,03 9,9% Sunglasses 79,72 85,32 7,0% Lenses 66,12 70,40 6,5% Pal 34,73 37,87 9,0% Single Vision 31,39 32,53 3,6% 36
Thank you for your attention! c.ronchi@anfao.it 37