AR is in the House

By Linda Little
The anti-reflective (AR) coating market is finally seeing the increase in the U.S. that has been strong everywhere else in the world. According to Andy Huthoefer, vice president of business development for Satisloh, the market has increased significantly, from 17 percent of pairs sold in 2002 to 29 percent in 2007, or ± 20,300,000 pairs. Overcoming many obstacles, not the least of which was turn around time for this add-on, dispensers are becoming more comfortable and educated to recommend this product to their patients. Large labs and corporations are advertising the benefits of AR coating to consumers and dispensers. On a national basis, the AR Committee, a committee of the Vision Council of America, is dedicated to growing the AR lens market.

“We’d like to see the percentage of AR coated lenses increase to that of the European market which is approximately 70-80 percent of lenses sold,” explained John Quinn, chair of the AR Committee and president of LTI.

“AR coating is one of those bright areas in the industry,” Quinn added. “There is an opportunity for the labs to make money. Premium products are the key and AR is not only a premium product, it is a better product for the patient.”

So the market is growing, the need has developed and probably not going away. So the question independent labs should be asking themselves—is this the time to have an AR coating facility in-house?

“Every lab should be offering AR coated lenses today,” according to Quinn. “There is a low penetration of the market, about 30 percent; the good growth is in front of us.” A high percentage of optical labs are offering AR coating today, however, the decision to continue with an outside service or bring the process in house is a big step.

The arguments for considering an in-house AR coating lab are strong; reducing the turn around time can mean the difference in delivering a job in three to five days versus same day turnaround; the cost reduction and quality management is clearly a benefit for any lab that has experienced damaged lenses, returns due to poor quality coating or any number of problems that can occur when using outside vendors; and the realization that once offered, AR coating jobs increase, particularly with high margin jobs, therefore increasing jobs and profits for the lab. Based on discussions with a few successful labs that have brought AR coating in-house, there are a few suggestions that are worth noting if one is considering this investment:

#1 Make sure you have enough income to service the debt of the investment.

Sounds like solid advice no matter what you do however this was clearly stated by labs that have made the investment. Another way of saying this is, don’t count on the future growth, make sure you have the jobs today. According to Gerry Shaw, managing partner for Nexus Laboratory, and owner of Western Carolina Optical, “There are a lot more costs than the equipment when investing in an AR coating lab.” The parts are expensive, the service can be expensive and the amount invested in the lab can rival that already spent on all the equipment combined in an optical lab. The investment is in new and additional business for the lab, with new products and services that act different, look different, and require new skills and talents. This isn’t an expansion or upgrade of existing laboratory equipment.

Next Generation Laboratory in Minnesota, took a huge risk on their investment, but felt it was worth it. Opening a mere five years ago, Jacquie and Robert Honstrom opened an optical laboratory amidst the furry of acquisitions. Joking that everyone thought they were crazy, Jacquie says she became Robert’s partner in the business because no one else would. After three years in business, their AR coating jobs represented 50 percent of their business. Taking the plunge, they invested in bringing AR coatings in house. There was no doubt that this was a financial and a business decision that was full of risk. Today they have seen amazing growth in their business and their AR coatings are still 50 percent of their business, much higher than the national average.

“We looked at the fact that we were outsourcing 50 percent of our business,” explained Jacquie Honstrom. “Outsourcing was costing $15,000 per month. When we started researching the market, we realized we could breakeven with an investment at the number of jobs we had.”

The investment for equipment also requires a clean room, additional electricity, air conditioning, heating, as well as the room itself. The cost for a small lab could easily be a million dollars.

#2 Choose Your Partner Carefully

Equipment manufacturers know that taking AR coating in-house is a profitable move for a laboratory and they are able to assist in the evaluations. Since the U.S. has been so behind the world market for AR, it can be considered a ‘no-brainer’ that the market will continue to grow. Over the past five years between 2002 and 2007 there has been an average increase of 12.0 million pairs of eyeglasses being AR coated per year.

Jacquie and Robert Honstrom, Next Generation Lab, feel that choosing the right equipment ‘partner’ had everything to do with their success. “When you spend $1 million on a new business, you want to be sure you have the support you will need to make it successful, we choose a partner,” explained Ms. Honstrom. “We evaluated every manufacturer and looked at who was going to take care of us when we had a problem whether it was with equipment, process, improvements or even personnel. We wanted to work with someone who cared that we would be successful.”

Nexus Vision Company decided to locate their AR coating lab in Grove City, Ohio, near other optical companies for efficiency. They shared space with Satis Coating at first, and recently moved into their own location designed specifically for their needs now, and in the future. “The laboratories that formed Nexus Vision wanted to be able to compete with larger labs, and decrease the delivery times for AR coated lenses,” explained Debbie Rebischke, Mar-Com & Associates, the public relations firm for Nexus Vision. Their choice of Grove City, Ohio, offered shipping services with DHL that would meet each of the ten laboratories needs and wants for delivery.

“Pick your partner carefully,” advised Gerry Shaw. “Your partner needs to provide the technology you are looking for.” The consortium of laboratories found that their decision came down to how and who would provide service, technology improvements and advice as a ‘partner.’

#3 Brand, Brand, Brand

Years ago, AR coating equipment providers and lens companies attempted to brand AR coatings – Starcoat comes to mind with Ed McMann as the spokesperson who wore the lenses on the Tonight Show with Johnny Carson, or Martina Navratilova representing Essilor. Today, the branding of products is more prevalent than ever and an important success step for labs offering AR coating.

“We private labeled our product and promoted it six months before we had the lab ready,” explained Ms. Honstrom. “We found that most of our customers didn’t care that there was a name, they just wanted the product faster.” However, the brand for Next Generation coating has become well known amidst their customers, who expect to see the name on the paperwork for the product and feel confident in recommending the product.

The fact that AR coating is technology based, and quality could be all over the place, the ten laboratories that came together to form Nexus Company felt it was important to brand their coatings as NVision™ Coating with variations from there. “We wanted to compete with the larger labs,” added Gerry Shaw. “By branding our AR coating, we could promote collectively to all our existing customers.”

#4 Be Creative

Your not the first in the market, sorry. And let’s face it, there is a lot of competition today for offering AR coating services. NEXUS Company is a good example of creativity in addressing a market need and a wonderful business opportunity. “We did a lot of research, visited equipment manufacturers, obtained sales quotes and really evaluated the total package from each,” explained Shaw. “It was hard work and a big risk, but so far so good.”

The ten labs involved in Nexus were looking for ways to control their own destiny. They looked for future opportunities based on technology, quality, and growth. As they have found success in this investment, they looked forward to future opportunities that offered the group technology improvements. NEXUS serves as a vendor to all the labs, and stands as an individual for profit company. The location of NEXUS has served the group through shipping benefits and consolidation of shipments due to being within the area of various lens distributors such as Rodenstock, which offers consolidation of shipments with their AR coating jobs.

The investment in equipment is equivalent to investing in a new business. The investment in your laboratory requires a clean room with perhaps new electrical lines, air and heat that may not have been there, and training for skilled personnel. Labs should recognize that this is a business in and of itself, which may seem overwhelming at first. However, with a little creativity you’ll find that offering in-house AR coatings is only going to benefit your bottom line. Determining the best way to offer that product is a case in evaluating your market, your financial investment, your facility, and your willingness to take on another business or find a creative solution to meet your needs.

#5 Do Your Homework

The demand for AR coatings is not going away. If you haven’t decided how you are going to be successful in this market, you might want to consider the alternatives you have today. Talk to other labs. One suggestion every new businessperson hears is—talk to those who have done it!

Research the equipment manufacturers—they should have the ability to look at your current number of AR coating jobs and tell you your options, what your investment would cost to break even. Don’t buy for the future, which will occur. Remember number one—be able to service the debt and appreciate that you are adding a new business into your mix.

Other resources include the AR Committee. As an ongoing committee under the umbrella of the VCA, there is a wealth of information available. From marketing materials to test protocols and process adhesion tests, this committee is a resource for any lab. Although the VCA Web site is undergoing construction, you can still get to some of the information at www.visionsite.org, under committees. Also, anyone interested can contact Jeff Endres, VCA liaison for the committee at 703-740-2245 or jeffendres@cox.net.

CURRENT ISSUE


May/June LabTalk 2017