Holding steady

The German textile care sector is holding steady, even developing, slightly, despite the pandemic and its consequences, which is reflected by maintaining stable demand for laundry and drycleaning services from local customers and resuming the implementation of many investment projects suspended in 2020.

Despite Covid-19, the German textile care sector will be growing by 1% annually until 2023. That will allow it to maintain a leading position in the EU market in volume terms as well as revenue generated. The same prediction was made in an earlier study, conducted by analysts at Statista and other leading German experts in textile care.

According to Statista data and that of the German Textile Cleaning Association (DTV), the current turnover of the industry is estimated at slightly more than €4 billion. Experts at DTV believe it has the potential for further growth this year. However, this is likely to be at rates significantly lower those expected by some analysts prior to the pandemic.

In the meantime, most of the market players interviewed here remain optimistic about the prospects for Germany and see some promising niches for their own growth in years to come.

Business climate 2020

Andreas Pützer of DTV commented: “In the midst of the Coronavirus crisis in 2020, sentiment had started from a very low level in the second half-year and recovered slightly during the summer of 2020. In the summer, the Corona restrictions had been partially withdrawn and the infection figures were at a minimum for several months. By the end of the year, however, sentiment in all segments deteriorated again – coinciding with a renewed increase of Coronavirus infection figures and the associated significant strengthening of social and business restrictions. ‘Good’ to ‘very good’ assessments for the second half of 2020 were only given by 12% of laundries/textile service companies, by 11% of drycleaners and by 2% of mixed companies.”

Business climate 2021

“The business climate was more optimistic again for the second half of 2021: 42% of the textile service companies and 17% of the mixed companies estimated their turnover development as ‘good’ to ‘very good’, whereas the value for drycleaners remained at zero. However, there is little hope only for a quick recovery of business. No company expects to recover within three months. Just 15% each hope for recovery within six, 12 or 18 months and 38% expect the full recovery to take longer than 18 months. Outlook Looking at the large number of vaccinated citizens, the associated

“Provided there are no further pandemic-related disruptions, the biggest challenge the industry is facing currently is the increase in prices for energy, raw materials and personnel. Energy costs In 1st half-year of 2021, there was a very significant increase in costs compared to 2020. It led to an increase in the DTV cost index for textile services from 107 points at the end of 2020 to 110 points at the end of June 2021. This means that costs have already risen more in the first half of 2021 than in any of the complete years since 2011. It is the strongest cost increase in 10 years.

"In the first half of 2021, heating oil and diesel fuel were particularly affected. The energy sub index has risen by a hefty 12 points since the end of 2020, hiding product groups such as light heating oil, which is 35 index points higher than in June 2020. In addition, gas and electricity prices are now expected to rise significantly. Cotton prices rise by up to 50% Prices for raw materials are also rising. The average price increase for polyester fibres, for example, was over 20% from May 2020 to May 2021. The price increase for cotton was even up to 50%, depending on the variety. This is also noticeable because the procurement of textiles accounts for around 23% of the costs in textile services.

Personnel costs

There are also massive increases in personnel costs which represent the largest cost block at around 45%. The statutory minimum wage will rise by a total of 2,6% in 2021. A further significant increase is expected for 2022. Similar wage increases have been agreed in the industry's collective agreements. The personnel cost index, the most important part of the overall index, rose by 3 points as of 30 June.

A lower incidence of Covid in recent months and the reduced number of severe illnesses, as well as the already far reaching relaxation of pandemic containment measures, makes the economy optimistic. On the other hand, it can be assumed that the considerable cost increases for gas and other raw materials, as well as inflation, will significantly slow down the recovery. The recent increase in the incidence of corona also dims hopes. The current fear is that economic development will slide from the pandemic crisis into the energy and commodity crisis.

Employees who lost their jobs during the hard phase of the lockdown have reoriented themselves in the meantime. In addition to the lack of junior staff, there is now a general shortage of workers, as they are no longer available. Some companies report that they have to cancel orders due to labour shortages, concludes DTV.

The German business of global player Alliance Laundry Systems shows positive dynamics this year with 7% growth on top of a two digit growth from 2019 to 2020 , Christoph Kampmann, sales director Central Europe (DACH), comments: "Our growth is the direct result of our five years investment in the market establishing the sales office to work closer to distributors and better serve customers, the markets we serve are not down, namely facilities management, care and the smaller commercial laundries. They suffered a bit but are generally doing well."

"For example, mop cleaning solutions, barrier washers in the health care segment were much more requested than ever before and on top of our on premises laundry development we added mare an laundromat business with store concept. The ALS turn-key-offer with Speed Queen (from offer to opening) is taking off and first references are in place. Based on our wide range of product and services we, ALS Germany, could manage the pandemic very well.

"However, HoReCa is a different story, he says, as mass events like exhibitions are down, tourism switched to more individual vacations (hiking, caravanning and so on.) "Here we expect some more tough times. We do expect, however, the 'semi-professional' segment to grow significantly."

Kampmann reiterates that overall demand in Germany is strong despite this.

Some analysts also believe the pandemic may create conditions far mare active consolidation of the German textile care sector and acquisition of smaller companies by larger players. Most of operators interviewed also deny the existing popular belief about higher demand for their services and wider opportunities in the Western provinces of Germany (which formed West Germany during the period of 1949 1990 and were characterised by a higher level of prosperity of local citizens [compared to those who lived in East Germany] during the Cold War).

Great heterogeneity

Dr Timo Hammer, managing director of the The German Certification Association for Professional Textile Services (Gategemeinschaft sachgemglie Waschepflege e.V.) a community of commercial laundries in Germany, which focuses on the issues of quality in the German textile care sector, comments: "The German textile services industry is characterised by great heterogeneity. From small two person drycleaners to large industrial laundries with several hundred employees, there are many different types and sizes of businesses in the market. At the same time, the number of companies has been steadily decreasing for years. In addition to the closure of many small businesses, the market for medium sized companies is becoming increasingly concentrated through mergers, amalgamations and acquisitions.

"The coronavirus crisis has further fueled this development. And factors such as the shortage of well trained personnel or the pending implementation of sustainable processes are also currently posing an enormous challenge for many laundries.

"However, we expect markets for textile service providers to grow again with stable sales growth which is already happening due to demographic change and the growing proportion of older population groups. Furthermore, as most healthcare facilities are suffering from staff shortages, more and more hospitals and nursing and retirement homes are expected to outsource activities such as textile cleaning in order to better focus on their core business. Many textile service providers have continuously expanded their range of services in recent years, leasing business comes to mind. We are convinced that they will be able to build on past successes once the crisis is over.”

According to analysts, amid the ever-growing importance of water savings in Germany, more and more local laundries have started to pay increased attention to the rational use of water resources for their needs. That has led to the growth of demand for cleaning agents that are effective at lower temperatures and are less harmful to nature and humans and easy to use.

As in the case of other EU nations, in recent years the German textile care industry has faced serious challenges triggered by the various pandemic factors and the ever-growing demand for sustainability and convenience.

An official spokesman for Henkel believes the greatest challenge in the coming months will be the immense increases in raw material costs, with some increases that have not occurred in the last 15 years.

Digitalisation

Alliance's Kampmann is convinced that digitalisation/connectivity is among the main opportunity challenges at present. "The industry is demanding connectivity as part of the 360° approach we already offer. It's about optimising the most important factors: labour and utilities. The better we can support with management tools, the more efficient our customers will be. Managing tools that give insights and message alerts via various dashboards and offer preventive maintenance to avoid down-time and secure process optimisation to keep all costs under control are key. The development of the machines, is more and more towards smart built-in technology with features helping laundry owners to decide quicky and reach best optimisation of their processes.

"Another big challenge is getting educated technical staff willing to work in the laundry environment. In the meantime, Covid 19 in general remains unpredictable with decisions sometimes needing to be to be taken on a day-to-day basis," adds Kampmann

In the meantime, the need for more automation in the German laundry and drycleaning sector is also confirmed by Martin Sukop, sales director of Jensen Germany who says: "The need for automation and hygiene in Germany's heavy-duty laundries becomes more and more vital. German laundries are more and more interested in automating their production processes as some jobs in laundries become less pleasant and physically difficult or even dangerous when it comes to sorting of incoming linen. This makes jobs not particularly attractive, especially since earnings are often not particularly high. In addition, there is an already shrinking labour force in Germany as well as German speaking countries and better access to knowledge and education so that people decide to study rather than choose a physical job."

Active development

According to Sukop, Jensen continues its active development in the German market, which is reflected by the launch of various innovative solutions and products, such as the Inwatec GREIT Stack Storage & Pack Out storage system a solution to automatically store flat textiles, ensuring improved hygiene, along with new Jensen Tunnel washers and other equipment and solutions.

According to DTV, at present the average water consumption in the German textile service industry is 11 I/kg. However, many German companies in recent years have been able to achieve a much lower use, between 6 and 10 l/kg.

The German government is supporting the latest initiatives from industry players by implementing regular control for their operations. The latter is primarily in the form of conducting regular inspections of facilities to assess their compliance with various industry standards. Generally, in recent years, the requirements for the German textile care sector have been significantly tightened, while local companies have been obliged to report yearly consumption of chemicals, water and energy per ton of textiles processed.

According to DTV, at present about 600,000 tonnes of detergents and 330 million cubic metres of water are used for textile care in Germany. However, as part of the state plans and leading local operators a significant increase of these figures will be seen within the next several years.

Implementation of these plans, however, will probably result in the reduction of sales of these products in the local market. In recent years the annual sales of household care products in Germany have reached approximately €5.1 billion, of which about €3.5 billion accounted for the local textile care sector. At present the German textile care sector employs about 69, 000 persons. Of these, 67.5% are women.

World stage

Of course, the 'elephant in the room' this year was the cancellation of Texcare International 2021 in Frankfurt. it was pretty clear that when various 'big players' pulled out the show was not going to happen.

Apparently there was some appetite in the domestic market for the event to go ahead as a 'country' exhibition but this did not happen. Globally renowned Kannegiesser, the home country's leading manufacturer, commented at the time: "The decision was not easy for us, especially now, when everything points to a significant market recovery.

"Texcare is an excellent opportunity to meet customers from all over the world, talk to them about new developments and trends and demonstrate our systems live. Personal contact and exchange is very important, especially for our industry. But due to the Covid 19 pandemic, it is very uncertain whether this will be possible. Travel restrictions can have a considerable influence on the number of visitors. In addition, the presentations and demonstrations that are so valuable for our customers cannot be held in the usual way.

"However, we will present our new developments to our customers in a different way." Watch this space.