Indian bureaucracy is shocking, says Raymund Heinen of Carl Zeiss

Carl Zeiss is a German-headquartered manufacturer of optical systems, industrial measurements and medical devices. Best known for its high-end Zeiss lenses, which go into cameras, eyewear and increasingly mobile phones, the company had revenues of close to $4.6 billion in 2013/14. In India, it operates in all the three segments it is present in globally. The country's operations contributed about $108 million in revenues last year [2014] to the parent company. Dr Raymund Heinen, President and CEO of Zeiss's vision care business, was in India recently and spoke with Business Today. Edited excerpts:

Q: How has the India market been growing for Zeiss?

Heinen: We see India as a huge market. Medical devices are extremely strong here in India and so is IMT (industrial measurements) in the automotive (and) mechanical industry. The semiconductor industry has a small presence here and should improve with time. Microscopic division also has a considerable share in India. The consumer optics is something that is growing very fast. Quite a few Bollywood movies have been shot using Zeiss lenses. We have been in the film industry in Hollywood for a while.

Q: Was affordability the issue with the Indian movie industry?

Heinen: Mostly the affordability issue, Indian movies don't generally run on the Hollywood scale budgets. The work model in India is different, Lenses are generally rented out rather than purchasing. There was (recently) a big fair in Delhi where all lenses and camera optics were on display for folks from all industries would come (and see).

Q: India contributes about 100 million euros (approx. $108 million). Is it from all the three divisions of Carl Zeiss?

Heinen: Yes. The 100 million euros contribution is including all units/divisions. We started very modestly few years ago, and we are growing quite rapidly. Last year [2014], we have seen a growth of almost 60 per cent.

Q: What about partnerships in the vision department?

Heinen: We had a tie-up with the GKB (Opticals) but we have separated now. Reasons being, we are not retailers. We are more of a B2B company. So, a lot of customers were confused of our business model. We also want to make sure we standardise our quality and that was one of the bigger issues. We did not want to favour any particular unit/ customer unduly. The JV lasted 10 years, starting with some scaled contributions and we separated in 2010.

Q: What is the size of the market in India?

Heinen: Till now, the market has been quite unorganised and growing. The sector is now coming of age. You will not find reports giving you the size of the market. We believe it should be in the range of Rs 5,000 crore to Rs 7,000 crore. About $1 billion.

Q: Can you talk a little more about your position globally? Is the target market only the premium category?

Heinen: We do not want to be just premium. We offer branded lenses also and some non-branded lenses for standard models. We have Zeiss as one big brand - promising quality, performance and service. Globally, there are other brands that competing at a lower level and we offer lenses in this spectrum - these are not under Zeiss. We start from Rs 500 which are not Zeiss branded. Other retailers are supplied with these lenses along with Zeiss - giving them a complete portfolio. We do not directly supply to other manufacturers. These lenses are under the name - American Optical.

Q: How do you work with e-commerce players (like Lenskart, for example) in this segment?

Heinen: Online directly means we are supplying directly to customers. We do not do that. We only supply to opticians and retailers. There is still a huge difference in this field between online and retail. We believe in quality and specification and in this field we require that physical check-up of the eyes, frame fit and other details are important. We do not want our customer to come back with a bad feedback.

AO [American Optical] is economical but international quantity lens. We supply AO lenses even to online partners and other retailers. We do not do it with Zeiss. We are not working with centimetres; we are dealing with microns (Zeiss lenses are accurate to .01 microns). And that accuracy is not yet there online. You could buy the most expensive lens and if the specifications and positioning is not accurate, it is of no use.

Q: With the 100 million euro contribution, Zeiss has a very small percentage, with AO being the large chunk of the contributions. Would you still wait for the market to mature for Zeiss?

Heinen: Vision care is very fast growing globally with more and more people using spectacles. With computer usage increasing, the demand for better vision is increasing. We have decided to come to India to establish our global lab (one of the six globally). The Vision Care division has about 250 employees presently (in India). Zeiss Vision Care also plans to double the production capacity in the near future, which will open up hiring requirements too. We are exporting out of India. We also want our customers to know that the lenses made here have the standard of an internationally produced lens in terms of quality unlike other companies.

The challenge in India is two-fold. One is logistics for the local market - infrastructure could be improved. We need to have a reasonable size to make sure our footprint is there in every corner of our country. The second is customs clearance (for exports). We could do much better here. It is very hard to challenge the bureaucracy. It is shocking because our products have a three-day delivery and customs make it hard.

Q: Does the facility in India mainly focus on manufacturing, or is there R&D too?

Heinen: The facility is mainly a manufacturing unit but research is also done here. We have two to three million euros in 2012 invested when we started the lab and now we have invested more to expand. This was started primarily for the domestic market and we did not export for the first two years. We worked hard to bring in the global quality matching it to any other manufacturing plant output abroad. We started export in late 2014 and we export to our customers in about 10 to 12 countries. We have integrated India into our global supply chain and infrastructure, legal works and logistics is blocking our growth a bit. Less than half is exported. We plan to ramp this up to equal export and domestic.

Q: In the domestic market, what is the kind of footprint and reach?

Heinen: Today, we have about 20 market stock points and we reach out 1,200 opticians (Zeiss lenses). We have a distribution network to reach out to another 2,000 (non-branded lenses). [We have] six trainers on board and a training calendar in place to train opticians on our brand and optimal use of our lenses. We invest in this training with our end retails as an effort to spread our brand and our expertise. We engage with our customers. The number of stores we end up reaching out to might be around 2,000 for Zeiss. We are competitive with the other premium brands/lenses.

Q: Is there anything else that you would like to add on (India perspective)?

Heinen: Overall, we are very pleased with the development of our business in India so far and we are confident that we will continue to grow rapidly over the next years. We hope to see a 20 per cent growth year on year. It is important to maintain our high growth in the Indian market in order to sustain continued investments at a rapid pace. India is a country with a large population which is becoming more quality conscious and is increasingly opening up their mind to pay a good price for that quality. It is exciting and also very challenging for organisations like Zeiss to cater to this new India. Our largest product line will be the Meditech (Medical Technology) business. They have been in India for a long time and are market leaders with some of their products. We provide a service along with our lenses and that is our stand out point. With globalisation, everyone demands equal quality tools across the world and we believe in providing global quality in our products.