In less than a decade, polycarbonate lenses have emerged as the fastest-growing segment of the U.S. market for prescription eyeware, garnering roughly 15 percent of the total ophthalmic lens business, valued at $750 million. That growth has created a shake-up among PC lens makers, as they maneuver themselves into stronger fiscal positions to meet demand.
In the past year, the activity has raised more than a little dust and a few eyebrows. The most-recent deal, announced May 30, links up lens producer Sola International Inc. of Menlo Park, Calif., with the smallest of the PC lens injection molders, Neolens Inc., a 9-year-old Miami company with 70 employees and $2.5 million in sales.
If the federal government gives its approval, publicly owned Sola will buy Neolens for about $16 million, said Ian Gillies, Sola's chief financial officer.
Earlier last month, Monsanto Co. nabbed a piece of PC lens business when it scooped up Benson Eyecare Corp.'s Orcolite ophthalmic lens unit in Azusa, Calif., for roughly $55 million.
For Benson, the sale marked a hasty exit from PC and other plastic prescription lens production, since the Rye, N.Y., firm just picked up Orcolite in 1994 when it merged with Optical Radiation Corp. of Azusa. Essilor International SA bought Benson's other optic businesses, including its well-known Foster Grant unit, and merged them into a new public company, BEC Group Inc., also in Rye.
Monsanto's plan is to marry Orcolite's lens-making to its Diamonex unit's scratch-resistant coatings, now used mainly for nonpresription sunglasses and bar-code scanners.
Neolens aside, four public companies - Sola, Monsanto, BMC Industries Inc. and Essilor, which is traded on the Paris exchange -control the PC lens market in the United States. By most accounts, the biggest player is Essilor, via its Gentex Optics Inc. subsidiary, which the French firm acquired in May 1995. Gentex is the first manufacturer of the PC lens, according to marketing manager Gary Roderick.
``We kind of invented the segment,'' Roderick said by telephone from Gentex headquarters in Dudley, Mass.
Gentex got its start injection molding PC lenses for military and industrial uses, such as helmet shields and safety glasses, but by the late 1980s, it had moved into prescription lenses and sunware, Roderick said.
A thermoset plastic, known in the industry as ``hard resin,'' already dominates the ophthalmic lens scene: CR-39, an allyl diglycol carbonate made by PPG Industries Inc. of Pittsburgh. The material owns nearly half the U.S. market, according to Joe Bruneni, who heads the Polycarbonate Lens Council in Torrance, Calif. Various other high-index plastics make up 14 percent of the market; PC's share is 15 percent and growing; glass, 20 percent and slipping, he said.
CR-39 lenses are Essilor's primary business.
``But they saw the market moving into polycarbonate more and more, and they were not in that segment,'' Roderick said.
So, last year the company remedied that by buying Gentex, which makes nothing but PC lenses at its Dudley plant and a smaller operation in Carbondale, Pa.
Research analyst J. Keith Dunne said PC prescription lens sales have surged at a rate of 25 percent per year for the past several years, topping the total U.S. ophthalmic lens market, which has climbed at a modest 7-9 percent. He pegged PC's share of that market at about $112 million.
Dunne's firm, investment bankers Robertson, Stephens & Co. of San Francisco, initiated coverage on BMC in April, giving it a Long Term Attractive Rating that was based, in part, on the Minneapolis firm's growing PC lens niche, as well as on its main business, the manufacture of aperture masks for television tubes and computer monitors. Though RS&C sees PC lens' growth slowing to 10-15 percent a year, ``it's clearly going to [continue to] outperform the overall market in our opinion,'' Dunne said.
BMC's Optical Products unit, known for its trade name Vision-Ease, is big in glass eyewear, which still holds firm footing in the global market. But, with U.S. glass lens sales in ``a state of decline,'' Vision-Ease has shifted its focus in the past three years, devoting most of its research and development to its Versa Lite PC products, said Mike Hawks, BMC's chief financial officer.
In both 1993 and 1994, Vision-Ease doubled injection molding capacity at its 37,000-square-foot plant in Brooklyn Center, Minn., which houses PC lens operations, according to its 1995 annual report. Last year it boosted PC lens capacity again, by 40 percent, to accommodate 1995 sales growth of 40 percent.
Hawks would not disclose capacity or sales. But Dunne estimated that BMC holds 25-30 percent of the domestic PC lens market - which would put those sales at $25 million or more. In all, Vision-Ease contributed $76.2 million to BMC's $255.4 million in 1995 corporate sales.
Taken together, the PC lens makers sold about 89 million pairs of prescription lenses last year to independent wholesale optical labs or retail outlets, Bruneni said. Dollar value is much harder to gauge, with the public companies privately guarding their PC lens sales, he said. Gentex, Vision-Ease, Sola and Orcolite are all dues-paying members of Bruneni's trade group, along with PC resin suppliers GE Plastics and Bayer Corp. and 75 U.S. wholesale processing laboratories.
One issue clouding the market picture is the difficulty of separating ophthalmic lens sales from nonprescription sunglasses - which at retail represent $2 billion a year, Bruneni said.
Sunglass lenses ``are, to a very large extent, being converted to PC,'' he said, noting that currently many lenses for sunglasses and readers come from offshore.
BMC recently forged a four-year, $10.7 million sales contract with an undisclosed Southeast Asia firm, to buy hard-resin plastic lenses in ``the more popular sizes,'' mainly because of the labor required in manufacturing hard-resin lenses, compared with the automated injection molding of PC, Hawks said.
Bruneni said he thought all manufacturing of CR-39 single-vision lenses was moving offshore, primarily because of the high U.S. labor costs of producing the low-dollar product. Single-vision lenses are a much lower-margin product than more-pricey progressive lenses, used for bifocal or multifocal glasses.
``To make a profit, they've had to push that production offshore,'' he said.
Sola makes most of its CR-39 single-vision lenses at a plant in Tijuana, Mexico, according to Gillies. Like Essilor, Sola's biggest business comes from CR-39 lenses, but it also makes lenses from glass, PC, and a proprietary high-index plastic material trademarked Spectralite. Of the firm's $387.7 million in global sales, about half are domestic, with plastic lenses making up 85 percent of the latter, Gillies said.
Unlike the other, diversified, public players, privately owned Neolens makes only PC lenses. Jon Haglund, Neolens' chairman and chief executive, said he was brought in last September ``to figure out what to do with the company.''
Neolens already is allied with Sola, since for six months it has supplied the company with injection molded single-vision PC lenses, Gillies said. Sola injection molds progressive PC lenses at a plant in Petaluma, Calif., but it does no in-house molding of single-vision PC lenses: ``Hence the Neolens deal,'' Gillies said.
Globally, the activity promises to continue, with market possibilities opening up in Europe, and new PC lens makers popping up in places like Taiwan and elsewhere in Asia, according to Justus Homburg, director of market development at Monsanto. Homburg sees PC lenses as an opportunity for Asian compact disc injection molders to make use of excess capacity.
``They've got all the right equipment sitting there,'' he said. ``They don't know how to make ophthalmic lenses. [But] they certainly know how to mold polycarbonate.''
``PC, to date, is really still a U.S. product,'' Hawks said.
There's a reason for that, Bruneni said: the Food and Drug Administration's drop-ball test, which gauges the lens' impact resistance by dropping a five-eighths-inch steel ball on it from a height of 50 inches.
``As far as I know, this is the only country in the world where you have those requirements,'' he said.
Both Hawks and Bruneni agree that outside the United States, PC lenses account for less than 1 percent of prescription eyeglass sales. Last year BMC bought a British lens distributor, Optical Manufacturing Supplies Ltd., to exploit BMC's strength as a multifocal glass lens maker in Europe, where, Bruneni says, the eyeglass market is split evenly between glass and hard-resin plastic.
``Our plan certainly is to expand polycarbonate sales in the longer term in Europe,'' Hawks said. ``But immediately we will be more successful with glass, since that market already is there. It will take some time to educate people over there [about the value of PC lenses],'' he added, noting that BMC already has some PC lens customers in Europe and Asia.
But both the European and Canadian markets are opening up for PC lenses, according to Bruneni.
``We believe without question that Essilor will be taking PC to Europe,'' he added.