Luisa Delgado, CEO, Safilo Group
NEW YORK—Just over a year since her official appointment as CEO of Padova, Italy-based Safilo Group (SFL.MI), Luisa Delgado is looking back at heritage as Safilo concludes 2014, its 80th anniversary. But, by employing modern tools and taking a proactive approach to a new design and a consumer-focused brand sensibility, she is working with her team to reinvent the future for Safilo, one of the world’s largest players in the eyewear and sunwear business.

In an exclusive interview with Vision Monday, Delgado, who had been a non-executive director on Safilo’s board before she took on the CEO role in October 2013, described her travel over the past year to virtually all markets where Safilo operates. Based on those tours, her knowledge of the company, its teams and capabilities along with discussions with customers, large and small, around the globe and in North America, she is sharing some of the organizational and operational approaches the company will be undertaking in the near- and longer-term. (A more detailed strategic view will be presented to the investment community in mid-March.)

In addition to her former position on Safilo’s board, Delgado was also a member of the global executive board and chief human resources officer of SAP AG from September 2012 to July 2013. Prior to that, she spent over 21 years at Procter & Gamble (P&G) where she worked in several local and international roles based in Portugal, the U.K., Belgium, Switzerland and Sweden. In her last role at P&G as vice president and CEO for the Nordic region, she was responsible for the turnaround of the P&G business in the Nordic region and a market leader in digital marketing. Delgado is a Swiss national who graduated from the Université de Genève, and holds a LLM from King’s College/University of London.

Safilo Group reported sales of €1.12 billion for 2013. In the first nine-months of 2014, Safilo reported increased sales of €867.5 million compared to the prior year, with net profit climbing to 24.0 percent. The company noted that North America was a driver of that overall performance. Safilo Group is present in about 130 countries and markets its products directly through 30 commercial subsidiaries as well as via a network of local representatives and distributors that reach more than 80,000 points of sale around the world.

After a period of financial stress at the company after which the founding Tabacchi family transitioned from the group, in October 2009, Safilo’s board approved a recapalitization plan for Safilo, executed in connection with an investment agreement underwritten by HAL Holding N.V. HAL Group also operates one of the largest international groups of optical retail companies in the world. Its Multibrands Italy, B.V. subsidiary became the reference shareholder of Safilo Group. Today, Multibrands Italy B.V.’s stake in the share capital of Safilo is about 42 percent. Said Delgado, “Safilo Group is very lucky to have an investor like HAL, a group extremely well-respected around the world, and one with the long-term, best interests of Safilo in mind. As a retail customer, the stores of HAL represent about 6 percent of our turnover. HAL is not involved in the day-to-day operations or management of the company. This is by design— we are together, at arm’s length.”

Safilo’s portfolio of brands includes its own brands of Carrera, Oxydo, Polaroid, Safilo and Smith Optics. The company is also licensed to produce eyewear for other leading fashion brands including Alexander McQueen, Banana Republic, Bobbi Brown, BOSS, BOSS Orange, Bottega Veneta, Céline, Dior, Fendi, Fossil, Gucci, HUGO, J.Lo by Jennifer Lopez, Jimmy Choo, Juicy Couture, Kate Spade, Liz Claiborne, Marc Jacobs, Marc by Marc Jacobs, Max Mara, Max&Co., Pierre Cardin, Saks Fifth Avenue, Tommy Hilfiger and Saint Laurent.

VISION MONDAY: How would you describe the past year and what you’ve undertaken at Safilo?

LUISA DELGADO: Safilo has a tremendous and successful history. There are not many companies in the world, including in eyewear, which actually got their start in 1878. Remember, the company began then in Pieve di Cadore and then Safilo began operating under that name in 1934. This is a company with a passion and a tremendous commitment to creating and innovating. Whether I speak to customers in Seoul, San Paolo, Dubai or in the U.S., we have a tremendous loyalty and partnerships stretching over decades.

(L) Henri Blomqvist, global commercial director of Safilo Group and (r) Glenn Rusk, senior vice president and commercial director, Safilo North America.
This is our ‘starting point’ and while we are preserving and nurturing this history, we are respecting that past, but modernizing and moving forward. We did, in our 80th year, go back to the archives and the extensive library we have at Safilo. We re-examined our historical values, the passion for excellence of products and the energy and enthusiasm of our customers across the world.

We also recognize that we now all live in a digitally connected, globally connected world. We developed what we call ‘Purpose, Values, Principles and Competencies’ (PVPC) which is guiding us in all our activities. What came through to us is that all of our stakeholders—our employees, our licensor partners, our customers are looking for a partner with long-term values. Brand-driven, design-inspired, premium quality eyewear is the heart of our purpose.

VM: How does this play against today’s changing consumer attitudes?

LD: There is an interesting consumer segmentation in our industry that is actually evolving very fast. People buy eyewear and engage with it for very different reasons. Each of those cluster of reasons is a segment, this is not at all as simple as just ‘price’ and leave it at that. We’ve identified five of these and Safilo wishes to serve the consumers in all of them.

There is of course Fashion Luxury, where many of our fashion house partnerships are and consumers still seek value for the money there including brands like BOSS, Max Mara and others. We also see a higher segment emerging which we call Atelier or Specialist Luxury, distinguished by more selective distribution, and a very engaged consumer who wants something special like a Dior, Celine, Jimmy Choo and others. We see a strong Fashion contemporary/lifestyle sector which is growing nicely where a Tommy Hilfiger, Marc by Marc Jacobs, Carrera, Kate Spade has vitality, it’s a lifestyle aspiration. A sector where price does play a stronger role is what we define as Mass/Cool, it’s turning fast, it’s enormous and growing the quickest, where we have a strong presence with Polaroid, which is the fastest-growing eyewear brand in Europe and we will continue to build on this. And of course, Sport is the fifth segment, no longer what you do at the gym, but it’s outdoors, a lifestyle choice. As you know, we announced that Smith will become an integrated part of our efforts in this area, rooted in snow, but moving to new ideas as well.

VM: As you speak with Safilo stakeholders and customers, what are the key competitive issues on their mind?

LD: Today, the operational excellence of a partnership is key. People want long-term ways of working together; not just making deals but how to build joint business over the long-term. They want partners not just committed to the sell in but the sell out and performance. We will provide tools against that ‘sell out’ approach.

We also hear an enormous need for product training. We are very committed to this, not just an occasional webinar but bringing real expertise to stores so the selling can include technical and brand and style information, teaching the staff to build the story around the eyewear brand as well.

VM: How does Safilo view that role in the U.S. market, particularly where managed vision care drives much of the buying and decisionmaking?

(L) Delgado with Nicola Bonaventura, artistic director of proprietary brands. (R) Delgado looks at designs with Vladimiro Baldin, global product creation director.
LD: The most important force in the market must be the brands and the way they speak to consumers. If anything, our industry has the opportunity to be even more ‘consumer-centric,’ so the strength of the brand carries the purchase decision. Safilo is not affiliated with any managed care program and yet we still have an extremely high share of market selling our brands to consumers who have other managed vision care plans. We want to help accounts leverage the power of brands in their store. This will continue to favor us in the long term.

VM: Can you speak to the way you’re viewing the organization of the group and relate some of the changes you’ve made? Are they more centralized or decentralized?

LD: One thing that is crucial is supply chain. In fact, we view it really as ‘supply network.’ Are we organized globally to leverage the best from all of our factories? For all of our regions and for all of these very diverse customers? We have three factories in Italy, one in Slovenia, one in China and one in Salt Lake City; we make polarized lenses in Glasgow, Scotland. Until about a year and a half ago, Safilo was organized in terms of three relatively independent regions of The Americas, EMEA and Far East. But we saw that with such enormous regions, we were sub-optimizing what we could be doing in certain countries, certain markets within those large communities. The capabilities were there but if connected properly and in new ways—and this is an investment in IT and people—we could remobilize the whole corporation.

Sometimes, this results in a new approach to our own manufacturing capacity: Our Safilo brand is now Made in Italy, in-house. We are just relaunching this in the U.S. and have had such positive feedback, this is returning to what made us so strong. ‘Safilo’ is not a house brand—it’s the brand on which the house was built!

Latin America is stand-alone now. We are diving deeper into Brazil, Mexico and other markets where we are dedicating people and resources to grow our presence. The same is true in EMEA. Italy and France are now reporting directly while in the Middle East, we have a new HQ in Dubai. We’ve set up a showroom there and created a hub for Africa and the Middle East. We are prioritizing our activities in Germany and the U.K. as well. In the Far East, we’ve also adjusted. Our emerging markets (Brazil, Mexico and China) are growing at high double digits.

The successful launch of Bobbi Brown, (top) and the reintroduction of a new Made in Italy Safilo brand (bottom), are some of Safilo’s new initiatives. (Center) Safilo’s 80-year heritage is illustrated via advertising and product images on the wall of the firm’s NYC showroom.
VM: And from a leadership point of view, what types of changes have occurred across the teams?

LD: Global integration doesn’t mean local managers have less power. But we are developing new types of leaders. During my 21 years at P&G we liked to promote from within and develop talent. But we have brought some new folks in as well. The new head of Asia Pacific is our former Iberian head. Our new France leader was from Viva. Our new head of Latin America came from SAP. Our new commercial director, Henri Blomqvist, comes from P&G. Glenn Rusk, who was with us in Canada now heads commercial sales for North America.

We also created a new global product development and creation organization; our transformation is really product-centric. We want to take stylistic designs and translate these into cost-correct and on-time product. We have a new product creation director, who comes from Diesel. On the design front, we’ve started to open studios across the world, including a new one in Portland, Ore., for outdoor sports; one in our Parsippany, N.J. office will bridge New York and be a global design studio; another in Milan.

Another important new project for us is the creation of a product design school. We launched a three-year apprenticeship program, which we’ll run every year. We are taking up to 10 young people who will learn eyewear artisan and design skills, here in Padova, and then who will job rotate across our plants and in our offices.

VM: Can you speak to the role of brands, in particular licensed brands, in Safilo’s future? How does the recent announcement of Kering’s decision to take its Gucci and other licensed brands back in-house in 2017 impact that?

LD: The brand business is core to Safilo. Today, licensed brands are some 80 percent of our business. We do see a strong future of our own proprietary brands and we are working so they can fulfill their true potential, so that perhaps they can grow from 20 or so percent of the total to 40 percent or more. But we don’t see that we would be growing them at expense of our licensed brands overall.

Part of who we are as a group is to be the partner of trust and quality to our licensed partners. Our licensors want to stay with us and new ones want to come with us because we’re known as a humble partner with long-term experience. We are at the service of every brand.

Kering, the parent company of Gucci, approached us last summer about changing the model of the eyewear category for their company and they were interested in taking the license earlier than its scheduled expiration which was to be 2018. We reached an agreement to become their product partner and determined that the license of Gucci would conclude at the end of 2016 instead of at the end of 2018. We are agreed with Gucci/Kering to do product development and produce Gucci eyewear for four years, starting in January 2017 and finishing at the end of December 2010. And Kering will pay us a compensation of €90 million.

I cannot comment on Kering’s intentions. But we do not see a trend of other licensors going in this same direction. We’ve actually seen, during this year, other licensors moving in the opposite direction—wanting to strengthen their partnerships with Safilo; they are interested in research and innovation; they want a partner with the skills we present around the world. The licensing brand management model is evolving fast. But quality distribution, along with high caliber product and technological capabilities will remain paramount. This is what licensors are looking for.

The world today is about networks of companies working together. What we need to be and what our partners expect us to be is a licensee which is brand-driven. Which holds the brand equity in as equally high esteem as the brand’s owner does. The stakes are indeed going up.