The contact lens marketplace has become increasingly crowded in recent years. Discounters like 1-800 Contacts, Wal-Mart and the warehouse stores such as BJ’s and Costco, have all cut into the lens sales of the eye care practitioners. When you add in the marketshare lost to new technologies, namely Lasik eye correction procedures, the picture looks even more bleak for contact lens sales through optometrists.
However, not everybody is willing to bet that patients are done buying their contact lenses at the doctor’s office. Los Angeles-based Riordan Lewis & Haden (RLH), at the end of May, acquired Con-Cise Contact Lens Co. the largest contact lens distributor on the West Coast.
Con-Cise, headquartered in San Leandro, Calif., is an authorized distributor for a number of soft contact lens makers, and the company also manufacturers its own line of rigid gas permeable lenses. Con-Cise controls the Primary Eyecare Network, which distributes contact lenses to independent optometrists and provides marketing support, educational programs and electronic Medicare billing services on top of other support services.
“Wal-Mart, 1-800 Contacts, those guys don’t sell lenses, they have lenses for sale,” RLH Principal Rob Zielinski said. “The eye care practitioners are the ones that manufacturers really depend on to push new products.”
He adds that this year alone there have already been more than 30 new styles of contact lenses introduced by the manufacturers, and the lens makers count on distributors like Con-Cise to keep the optometrists up to date on which lenses do what. The discounters, Zielinski says, are not being relied on to push new products because customers are only using them as maintenance and to fill old prescriptions.
Additionally, Zielinski downplays the affect the discounters have had on the Con-Cise business model. “It’s a concern, obviously, but there hasn’t yet been any impact on Con-Cise,” he says. “Stores like Wal-Mart are a category killer. It’s been that way with toys, groceries and other products, but there haven’t been as many people buying lenses at Wal-Mart as first expected. Nobody wants to get an eye exam next to the popcorn machine, and if people are going to shop there, they’re only going to get the big commodity type of lenses.”
With regards to Lasik, Zielinski says the number of procedures has leveled off in recent years, and at this point just represents a very small percentage of the 35 million to 40 million people that wear contacts in the U.S.
Con-Cise has revenues in excess of $100 million, according to Zielinski, and has seen its sales grow in the double digits annually for the past five years.
To further grow the business, Riordan, Lewis & Haden is hoping to make Con-Cise a national distributor. Right now, the company is principally concentrated on the West Coast, but RLH believes that through organic growth, Con-Cise can expand its distribution network from coast to coast.
No deal terms were disclosed. Zielinski would only say that it was primarily an equity investment, with additional senior debt coming from Union Bank and Wells Fargo. The firm used its $120 million Fund I for the transaction, which is almost fully committed at this point. RLH has just recently kicked off the process of raising its follow up investment vehicle, although the firm could not comment on target size or anticipated closing date.