Executives from the lab panel included from left to right, Barney Dougher, Hoya Vision Care; Marty Bassett, Walman Optical; Rick Davis, Nikon Optical; Bob Colucci, Essilor; Don Oakley, VSP Labs; Claude Labeeuw, Carl Zeiss Vision and Tom Puckett, HPC Puckett.
NASHVILLE—Executives from six major wholesale lab companies offered different perspectives on the U.S. wholesale lab industry at a lively panel discussion that kicked off the OLA’s education program on Nov. 6. Tom Puckett, president of HPC Puckett, a San Diego-based firm specializing in mergers and acquisitions of wholesale optical laboratories, moderated the session. He led the panelists, who represented Essilor, Carl Zeiss Vision, Hoya Vision Care, Nikon Optical, VSP and Walman Optical, through a wide-ranging discussion on the impact of the current economic crisis on wholesale labs, the effects of ongoing industry consolidation, the long-term prospects for independent labs and other topics.

Puckett began by asking the executives to discuss their companies’ acquisition strategies.

“We are actively in an acquisition mode,” said Don Oakley of VSP. “We anticipate acquiring two to four more labs wholly, and two to four more labs with joint venture partners in the next few years.”

Bob Colucci of Essilor, replied, “We’re continuing our acquisition program for the next two to three years at least.”

Claude Labeeuw of Carl Zeiss Vision, said his company plans to acquire three to four more labs; Marty Bassett of Walman Optical, the industry’s largest independent lab, said Walman is “actively looking for transactions that fit geographically and strategically. However, companies that require more third party consent [i.e. operating systems, VSP, exclusivity on certain lens products] are always a factor for us to consider in any transaction.”

Nikon Optical’s Rick Davis noted that Nikon, which entered the U.S. lab market just eight months ago, intends to acquire four to six more labs regionally across the country. Barney Dougher of Hoya Vision Care said Hoya will also continue to look at opportunities for acquisitions. “If they fit our criteria, we’ll pull the trigger,” he remarked.

Asked if the tightening credit requirements by banks might slow down acquisition plans, Colucci observed, “All businesses are worth less than before the economic crisis hit. That will be reflected in the prices paid in the near future.”

Oakley said VSP looks at two leading indicators when considering an acquisition: unemployment and consumer confidence. “Both are not looking great right now. We’ll all have to weather the storm for the next six months or so,” he said.

Speaking about sales trends, Colucci noted that Essilor is seeing fewer sales of add-ons such as AR and ultra high-index lenses. He added, jokingly, “As some people are saying, flat is the new up.” Bassett shot back, “That’s like saying salary is the new bonus. We’re trying to stay away from flat. [The economy will force us] to be stronger at the end of this year. Other labs will also be stronger.”

Labeeuw pointed out that industrywide sales are expecting to decrease between minus 5 percent to minus 8 percent. “But the strong will survive,” he asserted. “These cycles give us an opportunity to restructure. This will be the year of tightening belts. But I’d rather be in optical than in some other industries right now such as the automotive industry.”

Puckett predicted that the downturn will cause mass merchandisers and large retailers to run more promotions. This will increase the percentage of AR lenses for the entire industry while putting more price pressure on labs, he said.

Puckett then asked the panelists to what extent they are building their partner lab networks, and how their customers view labs in which suppliers have an ownership stake, such as Essilor’s “80 percent-20 percent” arrangement. Labeeuw responded, “We’ve found the loyalty is with the lab, not the vendor. I like it when the [owners] have some skin in the game.

However, Colucci said that “no doctor is only loyal to one lab.” He noted that Essilor has succeeded in switching customers to other Varilux labs after their primary Varilux lab had been delisted following its acquisition by a competitor. Labeeuw retorted, “I can give you the manual to show you how to [retain customer loyalty].” Dougher, whose lab had been delisted by Essilor, agreed that the customer’s loyalty is to the lab adding, “I’m proof that there’s life after Varilux.”

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