Price remains the textile care market’s biggest challenge

The Scandinavian region has come out of the economic crisis relatively unscathed. These countries have highly regulated economies that, to a large extent, have protected them from the financial impact felt elsewhere. Further, according to Danske Bank's Nordic Outlook (January 2015), both Norway and Sweden's economies became significantly stronger during the crisis.
However, these countries have still been affected in other ways.
Norway in particular has been hit by falling oil prices and this will impact on its growth, says Danske Bank.
The bank remains "cautiously optimistic" about Norway's economy and predicts GDP growth of 1.8% this year and 2.3% next year, but some other sources are more pessimistic.
The drop in oil prices has meant reduced production in Norway and many development projects have been put on hold, according to Michael Bohnet, director of sales at Kannegiesser. He explains that the politicians have had to face a huge and unexpected increase in the country's unemployment figures, so they are keeping the interest rate low to boost the country's economy.
As a result, Bohnet says, the Norwegian currency has weakened, resulting in higher investment costs for textiles and laundry machinery.
In 2015, hotel laundry volumes fell by around 20% because business travel had lessened. Demand for clean workwear has also reduced.
Tone Nymoen, adviser with Norsk Industri (Federation of Norwegian Industries), says challenges facing the industry in the country include competition from the public sector and the high Norwegian salary expenses, taxes and fees. "Being part of larger organisations like the Federation of Norwegian Industries helps," she adds. ??
In Sweden, the economy is expected to slow this year, thanks to slow investment growth and increased household debt, according to Danske Bank. The government has responded to the household debt risk by introducing stricter rules for amortisation, which the bank says will increase savings and reduce the strength of domestic demand, the main driver for the Swedish economy.
According to the Swedish Laundry Association's (Sveriges Tvätteriförbund) Industry Report 2014, Sweden has 257 laundry companies and the industry employs more than 3,500. Over 80% of the industry's enterprises have 10 employees or fewer. In 2012, the 67 companies that were members of the association employed 2,806 people. Turnover in the industry in 2012/13, was around SEK4.5bn.
Jimmy Nilsson, chief executive of Podab, a firm that has been working with Alliance Laundry Systems for more than 30 years, says that the Swedish government has been trying to weaken the krona. "This has impacted interest rates and that, in turn, has been very good for the laundry industry as the government and private companies have been more inclined to invest," he says.
He explains that Scandinavia as a whole experienced its own financial crisis in the early 1990s and had repaired its economies to such an extent that when the global economic crisis hit in 2008, the region was largely unaffected.
Nilsson adds that while the national economies tend to be very robust, the national markets are small so the export market is especially important and respective governments have been keen to push the export agenda.
Last year, Denmark had its first year of positive growth since 2011 and GDP began to move forward, according to Danske Bank. Growth is forecast to reach 1.6% in 2015 and to pick up further in 2016.
Bohnet at Kannegiesser says: "The financial situation in Denmark is getting better now and it looks like the investment in laundry machines has increased a little over the last year. In the last 12 months, we have had more inquiries for industrial laundry machines than we used to, and this will affect our turnover for 2015."
Berendsen and De Forenede Dampvaskerier (DFD) are the two big laundry groups operating in Denmark, each with around 13 to 14 plants, and together they claim a market share of around 70%.
In addition there are around 1 0 - 12 independent laundries and around seven, publicly owned (hospital) laundries.
Bohnet says that in recent years both Berendsen and DFD have bought up a number of independent laundries and their plants have become more specialised, focussing one sector, such as hotel or workwear.

Challenging environment
Finland continues to operate in a more challenging environment than the other Nordic countries. This is a result of the decline in the fortunes of both Nokia and of the forest industries. It has also been affected by the predicted Russian crisis, following EU sanctions. However, Danske Bank is predicting positive GDP growth of 0.5% for the country in 2015.
Raimo Kilpiäinen, deputy director at the Finnish Chemical Industry Federation, agrees: "The three-year downturn of Finnish economy is expected to come to an end this year and a gradual growth in the economy is forecast. GDP will grow but investment still looks sluggish. The budget deficit is forecast to remain above 3% of GDP in 2015/16 and public debt is expected to exceed 60% of GDP in 2015.
The demand for laundry services is lower. Laundries and textile service companies are under increasing pressure to downsize their operations and provide more cost effective solutions for customers, while also keeping the service and profit at an adequate level.
Laundries are investing in their processes, to improve general efficiency and increase productivity.
Finding opportunities in a shrinking market, where those still in business face increased competition, will be a challenge for the industry.
In April Finland's opposition Centre Party won the general election followed by the populist Finns Party. The new government, led by Prime Minister Juha Sipilä, was appointed on 29 May.
Kilpiäinen at the Finnish Chemical Industry Federation hopes the new government will introduce reforms that will help the operational environment of the industry.

Structure of the industry
The structure of the industry remains varied across Scandinavia. In Finland and Norway, there are a larger number of distributors and independents while in Denmark and Sweden, the market tends to be dominated by a small number of much larger players.
"There is not much of an opportunity for a small independent, and trying to start a business in this industry would be difficult," says Nilsson at Podab.
However, consolidation is a trend in all countries, according to Stig Jallov, sales director Scandinavia for Jensen.
"Units are getting bigger and bigger in the hospitality and healthcare sectors, when we talk about flat linen.
"In Denmark and Sweden, industrial workwear is going both ways, depending on the customer," he adds. "The biggest challenge right now is the price. Some of the large groups have clear price positioning, whereas the independent laundries distinguish themselves with a quality positioning - with an even better service, a wider range of linen, better quality textiles and faster deliveries."
Jürgen Schäfer, product manager laundry technology for Miele, agrees that price is an important factor.
He says that there is a move to outsourcing laundry but that owners/operators, with an eye on the bottom line, might find the overall costs challenging.
In addition, OPLs are coming under threat from high labour costs and, depending on the country, the tax benefits for private companies, which subsidise rental contracts.
Schäfer says that the trend towards outsourcing has had a particular impact on the OPL market in Finland and adds that the coin-op sector is very small in Scandinavia.
However, Nilsson sees a real opportunity for coin-op in the region. He says that when you rent an apartment in Sweden, having a laundry in the block is part of the agreement.
"This is not the case in all of the Nordic countries. But across the markets generally, the opportunity for laundry has been encouraging. Taking Sweden as an example, we estimate that there are something like 2.4 million apartments, which means there are approximately 100,000 laundry rooms that require washers and dryers."

Five trends
Juha Laurio is the CEO and president of Finland's Lindström Group, the textile services company that was established in 1848. He highlights five further trends in the textile rental sector in the region.
First, textile service companies have moved from being process oriented to being customer focussed so services are organised to suit the customer.
Second, these companies have paid attention to sustainability and continue to do so.
Third, customers are also placing more importance on their business image."Textiles need to reflect the company brand, culture and identity."
Fourth, the importance of hygiene and safety is increasing.
The fifth trend is the growth in outsourcing.
Robert Long, secretary general of the European Textile Services Association, says textile services in the Scandinavian countries are well established and high quality and leading companies, such as Berendsen and Lindström, are very professional and visionary.
One initiative that Lindström is working on is how to create new digital solutions to track workwear and meet the needs of mobile work forces.
"We believe that the importance of finding new digital solutions that support existing services and which might also create new service models and concepts is growing," Laurio says.

Sustainability
Sustainability plays a significant role in the laundry and drycleaning sectors in all of the Nordic countries and regulations are stringent - not only with regard to the technology and its output but also with regard to the chemicals in the detergents themselves.
The most commonly known norm is Svanemærket, which Jallov says gives the laundries a competitive advantage when fulfilling strict criteria.
Technology wise, trends in the laundry sector include a move towards heat pump dryers and machines that save on energy and water usage.

Drycleaning move
Although there is as yet no legislation banning the use of perc in drycleaning in any of the Scandinavian countries, there is a clear move towards the use of alternative solvents, such as hydrocarbon, K4 and GreenEarth.
Marco Niccolini, general sales and marketing manager for Renzacci says: "Drycleaners are changing to alternative solvents not because of an obligation to do so, but because it is giving them more in terms of turnover and decreased costs - and it is better for your health."
The ability to clean a wider range of garments offered by the alternative solvent machines is one reason that the drycleaning sector in the region has remained stable over the past few years, according to Niccolini.
The generally favourable economic climate has also helped to keep the sector stable.
Wetcleaning is also playing a role in reducing the environmental impact and expanding the services offered in the sector and companies such as Renzacci and Miele have developed washer-extractors and other equipment with suitable programs.
Renzacci also supplies its washer-extractors to nursing homes, hotels and other OPLs in the region.
With regard to structure, drycleaning chains tend to be limited to the bigger cities in the region, while individual shops continue to dominate in the small cities and suburbs.
Niccolini and the other suppliers see further opportunities in the region as laundries and drycleaners work to improve their processes and reduce costs in an environment that is predicted to grow.

WORKWEAR SOLUTIONS: Lindström provides workwear solutions in 21 countries of operation in Europe and Asia. Pictured above is the company's service centre in Finland