Industry looks ahead to a challenging year

There is always hope in a recession when the decision-makers become more focussed and make constructive plans. Belgium and the Netherlands are hurting like the rest of Europe, but the positive signs are there too.

Even Luxembourgers, who are rich and thriving by European standards, claim to be crisis-struck. The government’s recovery plan includes tax reductions, a corporation tax cut of 1% to 21% and the abolition of capital registration duty.

The forecasts for the Netherlands, it must be said, are gloomy. The Economist Intelligence Unit expects heavy budget deficits both this year and next, with consumer and producer confidence still weak.

It predicts a rise in unemployment in 2009 and 2010 and a drop in gross domestic product, which means less manufacturing, restrained buying, falling exports and weaker investment.

The flipside is that inflation is held down. The predictions are for 0.4% this year and 1% in 2010.

The Dutch government’s response is a package to boost spending.

This involves government funds to stem rising unemployment, infrastructure projects to create jobs and laws to ensure that business bills can be paid earlier.

The administration warns, however, that the brakes will go on when the country recovers and the state retirement age will probably rise from 65 to 67.

The Belgian government is hopeful too, despite unemployment of 7.2% at the start of 2009 and predictions from its finance experts that the budget deficit will jump during the next 18 months.

Its recovery programme is aimed at wage moderation and stimulating lending, boosting buying power and encouraging public investment.

However, a challenging picture is painted by Maarten Van Severen, consultant at the Belgian Laundries Federation.

Van Severen found in a survey that 90% of members were suffering in the downturn. Loss of business averaged 10 to 15% and in some niche laundries, such as those specialising in hotel linen, the figure was 25%.

Business will be eroded

“I am afraid the worst is yet to come,” warns Van Severen, who is particularly concerned that the workwear business will be eroded by cuts in vehicle manufacturing.

His solemn message is repeated by Michel Richir, MD of Automatic Industries, which distributes Girbau products in Belgium.

Richir says: “Many projects are being postponed because people are afraid of what is to come and financing is very difficult. We have a few projects that didn’t go through. The beginning of the year was good, but there is a big question mark over the coming months.”

Yet Jan De Smet, Jensen’s central Europe director, is more optimistic. “The Benelux countries are a very strong market with a high standard of living and quite strong activity in industry and healthcare,” he says.

Echoing the optimism, Milnor International reports that sales in the first four months of 2009 are better than in the corresponding period last year.

However, there is no doubt that the hotel business has taken a hit. Occupancy is down because there are fewer business trips and because family holidays and weekend stays have been curtailed. Quite apart from the global financial crisis, indirect taxation means people have less to spend.

De Smet points out that Jensen has had “two fantastic years”. Laundries and manufacturers that have operated wisely during this boom will ride out the economic storm, while others will crash.

“A few bankruptcies are coming,” De Smet warns.

The profile of the laundry industry in the Benelux area is changing in certain respects too. For example, Dutch laundries are concentrated in just a few commercial groups, whereas the Belgian ones are mainly government-owned. Karl Schubert, Milnor’s general manager, has observed the Dutch pattern spilling over into Belgium. He says: “Belgium is getting away from the nationalised industry.”

Schubert also sees a fast growth in laundry business from workwear, corporate uniforms and dust mats, in both the Netherlands and Belgium, and more operations serving niche markets.

The workwear market, in fact, appears to be developing a profile of its own.

Koos Fuykschot, marketing director of Rentokil-Initial’s textiles and washroom services, says the market is prospering in the Netherlands and Belgium, even if the depression in the automotive industry is a threat – the industrial side of the business is particularly strong in the former.

On the service side, he says, the demand for more fashionable clothes is growing and the tendency is for a company to own them, rather than renting.

Hygiene and comfort are other influences. Fuykschot says the industry is responding to the increasing demand for hand hygiene, and roller towels are the most economical and environmentally acceptable products for the job.

Both comfort and health are behind another increasing market – for materials that do not cause skin irritation. The right cloth and the right washing processes are called for to satisfy this demand.

Energy efficiency

These developments were of course against the background of the financial crisis, which has intensified the drive for economies and this often goes hand in hand with good environmental practice.

Dutch laundries in particular are choosing gas-heated ironers, according to Wim Demeyer, Lapauw’s export director. This is because the laundries are concentrating on efficiency and gas ironers are very efficient so 90% of the industry has them. Now the laundries in Belgium and Luxembourg are asking for gas-heated models as well..

A main selling point of Wientjens, the manufacturer of industrial drycleaning and water recycling equipment, is cost saving on energy and water use. Sales executive Rik van der Linden says the company emphasises the environmental aspects of its products when selling in the Benelux countries.

Cees van Haasteren, the Netherlands MD of Christeyns, the chemicals manufacturer, points out that some healthcare costs have risen, so the economies are even more important.

“If somebody has cancer, the textiles must be washed separately, with resulting higher costs,” he says and he adds that laundries are now looking to keep machine temperature down and hospitals are turning to textile rental and saving on energy.

Christeyns claims to have been especially successful with a water-saving device, now supplied to a quarter of the laundries in Belgium and Luxembourg.

Franck de Meulemeester, the area sales manager, says: “Our Sanoxy system makes water savings up to 50%. We manage the water supply, change the water flow in the tunnels, run recycled water through a filter, which keeps the heat and thus uses less fresh water.

“Sanoxy is a neutraliser, bleacher and disinfectant.

“We hope eventually to achieve up to 60% savings.”

One of the Belgian operators finds the hospitals are economising too.

Raf Vanmechelen, who runs the St-Joris Laundry, reports that hospital business has dipped by between 4% and 6% this year.

The main reason is that many patients have become unemployed and cannot yet afford recommended hospital treatment.

“Hospital managers are now trying to save on everything. They’re looking at every single sheet,” says Vanmechelen.

His response is greater use of technology. The customer orders through the internet and manages the laundering.

Vanmechelen says: “The customer decides what he wants and everything is done automatically. We are working totally online and this way we work more efficiently. There is no more printing of delivery notes or invoices and we do not accept any faxes now.”

One unusual development has emerged in Belgium, where ironing shops are benefiting from a government subsidy so that the service is inexpensive.

John Balman, sales director of Alliance International, manufacturer of the Ipso brand, observes that: “Many people now wash at home but have their shirts ironed in these ironing shops.”

Without doubt, manufacturers are having to work harder for orders, but Pol Dewaele, sales manager at Primus, believes that, if there is a success formula, it is in having good distributors.

“Our first six months this year are as good as last year,” says Dewaele.

“In the Netherlands it’s because we have tied up with a strong partner, and we are now entering large projects.”

A sector that appears likely to grow is the coin-operated laundry. About 1,400 are dotted around Belgium, where they are popular partly because the rents are cheaper than in the Netherlands and partly because Belgians have adopted the coin-op practice.

The Dutch have about 400 coin-ops and Dewaele says: “We think there is potential.”

Richir at Automatic Industries also sees coin-ops spreading in the Netherlands – there is room for competition. By contrast, in the saturated Belgian market some are going bankrupt.

Drycleaning downturn

All suppliers of drycleaning equipment to the Benelux countries, including the main companies – Realstar, Union, Multimatic and Böwe – are witnessing the downturn.

The number of shops continues to fall, though Massimo Sanvito, export manager of the finishing equipment manufacturer Pony, is pleased to see more ironing points being established in Belgium thanks to the subsidies.

A general drift from drycleaning to laundering is causing shops to close in the Netherlands, says Eugenio Boni, export manager of Italclean.

Further evidence of the state of the sector was the reduced number of representatives at a trade fair in Paris, says Peter Huurman, director of UCP, the Dutch distributor for Italclean, Ghidini, Stahl and Imesa.

There are always exceptions to the rule. Union has done “surprisingly well”, says sales executive Mark Davis. The company’s Benelux business so far is better this year than last.

Boni strikes an equally hopeful note. He reveals that Italclean is working on new models, “which could appeal to the Netherlands and Belgium”. He expects these products will save costs for his company and its customers.

The next big thing, predicts Marco Niccolini, Renzacci’s export director, will be water purifiers. These will be fixed to the piping at shops to minimise pollution.

Although drycleaners are not compelled by law to fit them, Niccolini believes legislation is not far off. But he warns: “Some drycleaners are saying they may have to close because of the cost.”

In addition, many cannot borrow the necessary money because of the credit crisis.

Ghidini, the finishing equipment manufacturer, sees consumers tightening their belts and using drycleaners less because of a general cash shortage, while some are switching to laundering.

UCP’s Huurman, however, takes a positive view of this shrinking market. He says: “There is a fear that only the strong will survive. They are the better operators. A little light at the end of the tunnel is that the unsuccessful ones will fall out of the market.

“So the recession will actually benefit the market and the quality will improve.”

A measured judgment is given by Johan Stuyven, director of LDL, which distributes the Ipso brand: “I think we have to wait until better times. I don’t know what we can do immediately. We are careful that our level of stock is not too high, and we are looking for every opportunity there is. But when things go down they always pick up. It’s just a question of time.”