Luxottica Group S.p.A. was an Italian eyewear conglomerate and the world's largest company in the eyewear industry. Prior to its 2018 merger with French lens-maker Essilor to form EssilorLuxottica, it was a titan in its own right, dominating the market through a powerful strategy of vertical integration. This means it controlled nearly every step of the eyewear journey, from designing and manufacturing frames to distributing them through its own retail stores. If you’ve ever bought a pair of designer sunglasses, there's a very high chance you were interacting with the Luxottica ecosystem, whether you knew it or not. The company’s story is a fascinating case study in how to build a powerful and enduring economic moat by owning an entire industry value chain, from factory floor to store front.
The tale of Luxottica is the classic “rags-to-riches” story of its founder, Leonardo Del Vecchio. Orphaned as a child, Del Vecchio started his career as an apprentice in a metalworking factory. In 1961, he founded Luxottica in the small town of Agordo, Italy, initially as a contract manufacturer making parts for other eyewear companies. However, Del Vecchio had bigger ambitions. He systematically moved up the value chain, launching his own eyewear collection in 1971 and then beginning the aggressive acquisition strategy that would come to define the company. Two acquisitions were particularly transformative:
These moves, along with many others, cemented Luxottica’s position as the undisputed leader in the industry long before its merger with Essilor.
Luxottica's dominance wasn't an accident; it was the result of a meticulously executed business model. By controlling the entire process, the company could dictate styles, control costs, and, most importantly, set prices.
Luxottica operated state-of-the-art manufacturing facilities, primarily in Italy, producing high-quality frames. It then placed these frames under two types of brands:
This is where the model’s true power becomes clear. Luxottica not only sold its frames to tens of thousands of independent opticians and department stores (the wholesale channel), but it also owned the world’s largest eyewear retail chains. Its retail empire included:
This retail ownership meant Luxottica could ensure its own brands received prime shelf space, effectively squeezing out competitors. To complete its vertical grip, it even owned EyeMed, one of the largest vision insurance providers in the United States.
For a value investing practitioner, Luxottica was a textbook example of a company with a wide and deep economic moat. This competitive advantage allowed it to generate high returns on capital for decades.
The sources of Luxottica’s moat were numerous and intertwined:
No investment is without risk. The primary criticism leveled against Luxottica was that its dominance was, in effect, a monopoly that led to inflated prices for consumers. A famous “60 Minutes” segment highlighted how a pair of frames that cost $10-$20 to make could sell for hundreds of dollars, largely because Luxottica controlled the market. For investors, other risks included the ever-present threat of changing fashion trends and the challenge of managing such a vast, global empire.
In 2018, Luxottica merged with Essilor, the world’s leading lens manufacturer, in a €46 billion deal. The new entity, EssilorLuxottica, created a fully integrated global eyewear behemoth, controlling everything from frames and lenses to retail and vision insurance. The strategic logic was to combine the best-in-class frame maker with the best-in-class lens maker, creating unparalleled market power and the potential for significant synergies. For investors today, the story is no longer just about Luxottica but about this even larger, more complex, and more dominant entity that continues to shape what the world sees, and how it sees it.