A light at the end of the tunnel for Italy

19 May 2016



As the Italian economy begins to improve, albeit slowly, the commercial laundry sector is starting to respond as operators invest in new machinery, writes Kathleen Armstrong


Uncertainty continues to dominate the Italian economy but there are glimmers of hope in the figures published by the government statistics agency Istat. While 2014 ended the year with a GDP of just 0.8%, 2015's results were much brighter at 2.3%. In its "Monthly Report on the Italian Economy" released in March 2016, the organisation said: "The current situation of the Italian economy shows elements of uncertainty on the supply side. On the demand side the steady growth of consumption is accompanied by a slight recovery in investment. In this context the composite leading indicator for Italian economy stays positive, suggesting the continuation of the slight growth also for the first quarter in 2016."
Thierry Lambermont , managing director of Milnor International, agrees there are signs of improvement. "Consumption of goods and services is stable around +0.1%. This is not enough to push general economy up but after three years of deep investment crisis, commercial laundry is starting to move a bit."
Modest investment began to take hold in November 2015 and Lambermont says the outlook for the next 12 months is around +10% on investment for new machines.
This may be partly thanks to the Italian government's October announcement of its 2016 Budget and Legge di Stabilità (Stability Law), a programme designed to encourage investment in new machinery and infrastructure by allowing companies to amortise 140% of their investment for tax purposes. "The aim of such a measure is to contribute to the renewal of the productive capital of the companies, after a long period of investment stagnation," the government said in its Budget statement. "This will contribute to increase productivity and to enhance the potential growth of the economy."
The tax deduction is applicable for the purchase of goods made between 15 October and 31 December 2016. In addition, tax on corporate profits will be reduced from 27.5% to 24% from 1 January 2017, bringing it closer into line with European standards.
These moves are welcome in the sector where finance has been very difficult to obtain since the economic crisis began and businesses who do not have the collateral to borrow have faced closure.
"We have seen a positive impact on our first quarter but predicting the future in this period of economic and international policy is difficult," comments Alexander Rolli, managing director of Kannegiesser: "However, the trend seems to be clear: the laundry industry is starting to invest in order to combat price competition."
Giorgio Cinally, general manager of Jensen's sales and service centre in Novedrate, Italy, agrees: "Our customers are investing again to increase their productivity, and keep their margin in a market where customer sales price do not increase. Interest rates are low, and we can see leasing companies more open to finance laundry equipment investment, as soon as the rental laundries can show and demonstrate possible productivity gains."

Tourist attraction
Not all areas of the country's economy have been suffering over the past year. According to Rolli, the hotel and restaurant sector has been booming for two reasons: one, because the country is "still considered one of the best places to visit" and, two, as an alternative destination to North African countries like Tunisia and Egypt, no longer considered safe by many.
Lambermont adds: "In the most recent tourist seasons (summer and winter 2015), hotel turnover increased by around 8%, thanks to European travellers deciding not to go to 'hot' areas such as Egypt and Turkey. In addition, local tourists changed their travelling style, "spot staying" (1-2 nights) rather than taking long holidays, so room occupancy frequency turnover is higher - and laundry business increased."
However, the use of paper napkins and tablecloths continues to impact on the laundry industry. Therefore, says Cinally: "It is also important to note the initiative of [Italian trade association] Assosistema which, during its Congress in Rome last year, had the theme of 'Use and Re-use' which militates in favour of textiles with regard to disposables in our industry."
The Italian healthcare sector suffered from a government spending review and substantial cuts in healthcare programmes. "Government policy had an impact on the major players, who saw their profitability decreasing over the past few years," Cinally comments. "Only those who could invest in new technology could maintain their margins."
At the same time, Italy's high unemployment rate has had a negative impact on textile rental and the hygiene and workwear sector.

Merging for competitiveness
As a result, small laundries are gradually disappearing, being taken over by larger competitors or merging with other laundries to improve how they operate. "This business model is slowly spreading," says Rolli. "Italian company structure is mostly composed of small industries, family owned companies and small markets. It will take time but this process will continue."
Simona Galanti, laundry product manager for Rotondi, says the small, traditional laundries catering to local needs cannot cope with the falling volumes, increased price competition from the industrial laundry sector or the rising cost of utilities and environmental compliance. So the market is moving towards larger industrial laundries with a handful of groups catering to the 2-3 star hotel groups, healthcare and hotels and restaurants.
In addition, she says: "OPL laundries seem to be growing again, at least in the northern part of Italy, where 4-5 star hotels choose to have on-premise laundries to process their higher quality linens. Some hotel groups have one centralised laundry."
Despite the positive notes about investment, finance remains one of the major concerns for Italian laundry and drycleaning businesses. The drycleaning sector continues to be dominated by small, family-owned shops with limited spending ability and little collateral to enable loans.
Shops catering to small, local populations are gradually closing and new ones opening in commercial centres or supermarkets with higher footfall, where there are more customers, according to Walter Cividini, managing director of Fimas. "They offer a good quality drycleaning service at a good price level.
"Another trend is the creation of central activity with washing and drycleaning machines and finishing," he adds. "Garments are collected from smaller sites (the same owner or shops owned by others), processed and then returned. Sometimes these smaller shops will have a table to touch up the garments or finish them after they have been cleaned before delivering them to the customer."

Changing identity
Cividini says the laundry/drycleaning shop market is changing identity. "It was more of a craft industry in the past," he comments. "Now, with new fabrics for garments, new equipment, new requests from customers and new technology, it has had to become a professional business, with proper company management, to survive."
Corinna Mapelli, marketing director for Trevil, agrees. "We are witnessing a partial improvement in the laundry and drycleaning sector," she says. "This only affects cleaners who have a modern commercial structure and which leverage automation in their workflow, decreasing labour cost in their processes and increasing margins."
"Ma and pa shops" still form around 70% of Trevil's business. "They are craftspeople but not managers, with neither a professional nor a business background and this makes them unable to run a profitable business," she says. "These companies still focus on basic tools such as ironing tables or spotting tables, and they only buy a new one when the old one cannot be repaired any longer. Their choice inevitably falls on secondhand equipment. The remaining 30% have a business plan. They are able to evaluate their market potential and evaluate choices on the base of cost-benefit ratio. They make use of consultants to run their company professionally. They immediately understand the benefits of automated finishing equipment - they represent Trevil's target market."
Marco Boccola, business development manager for Ilsa, is confident that the market is improving, despite the number of drycleaning shops that were forced to close during the recession. "Several operators are investing in new technologies and participating more than in the past in workshops and seminars to improve their professionalism," he says.
He says the drycleaning sector, particularly multi-shop chains, is increasingly moving to automatic systems to improve their efficiency.

Looking for alternatives
Another trend is the move away from perc - Boccola says around 85% of its customers are choosing alternatives: "We forecast strong growth for our iPURA technology in the near future."
Pony is also preparing for increased demand for automatic systems in Italy and even in times of financial restraint it has had success with its state-of-the-art machines - "especially [with] Twins, our new rotary double-buck shirt press, Eagle, our blowing shirt press with its patented HARS system, and Pantamaster, our final solution for pressing trousers," says marketing manager Stella Fumagalli. "Pony is making a huge effort to design and develop new finishing systems. In the last two years, Pony has presented five new machines and revised old models to be more technologically advanced."
But it is not only suppliers who are working to professionalise the industry. Fumagalli says the laundry trade associations pushed to introduce a regulation to require those starting up a new drycleaning business to attend a training course to become a 'technical manager'.
"The problem is that there are no schools or courses that assign these titles. Therefore, ironically, a regulation pushed by them is actually damaging the sector, making it more and more difficult for someone who wants to retire to sell their business," she comments.
The regulation requires drycleaning businesses to undertake 450 hours of obligatory training before they can start a business. "[It is] quite an investment," comments Peter Wennekes, CEO of CINET, adding that, in terms of number of shops, Italy is still the third largest market in the world after the US and Japan, despite the recent closures. He says CINET and other trade associations are looking at ways of facilitating training programmes for drycleaners to meet the requirements of the Italian technical law.
In the meantime, says Marco Niccolini, general sales and marketing manager for Renzacci, those wanting to start up a new business are getting round the regulation by initially setting up a coin-op laundry and then, once that business is established, expanding their existing service with the addition of drycleaning and finishing equipment. "It is the first time we have seen such a trend in a consistent way [the bringing together of coin-op and drycleaning in one shop]," Niccolini says.
The number of coin-ops in Italy saw a steep increase between 2003 and 2010 but fell slightly between 2010 and 2013, he says. But over the past couple of years they have begun to grow again and he believes that will continue over the next 12 months, along with the growth of coin-op/drycleaning shops.
"In Italy, the changing view of drycleaning will produce a new generation of shops where the owner will be both a professional drycleaner and launderer," he suggests - and like Ilsa, Renzacci has seen a growth in demand for alternative solvents. Its most popular products sold in Italy are the Nebula and Excellence series.
Rocco di Bari, vice president sales EMEA for Alliance Laundry Systems, says the coin-op industry has done better than other sectors of the laundry industry because with a limited investment of between €50,000 and €80,000 people can open up a shop. "Some people say there is no room for more coin-op stores in Italy because the results of existing stores are not excellent but I believe that a better market approach could turn things around," di Bari says. "We are building on a more structured offer [for coin-ops], with a modern pleasant look and feel in nice locations, to help people overcome their negative perceptions of existing coin-op stores."
Alliance is also marketing its Softwash wetcleaning solution to drycleaners in Italy and has built a new training centre in Brescia where it can demonstrate its solutions. "New national regulations can accelerate investment in these wetcleaning solutions but in the meantime , we must also convince the public and investors that wetcleaning is really the best and most eco-friendlly solution," di Bari says. "We will also organise a roadshow over the next two years, where we will visit up to 20 places and organise 2-3 days of demonstrations and meetings for all of our contacts to promote Softwash."
While the economic environment in Italy may still be uncertain, it is clear that we are finally seeing some light appearing on the horizon and a future of modernisation for the Italian laundry and drycleaning sector.

CABINET


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