Basic wage hike could spell a shake-out

29 January 2019



Economic growth in Spain is unprecedented. But can the industry handle rising costs and the biggest minimum wage increase in 40 years? Penny Wilson reports


Optimism in Spain rides high. Headline news is the ruling government’s recent move to increase the minimum legal wage by a whopping 22%. If this goes ahead in its 2019/2020 budget and Government opposition does not scupper it, Spain’s basic wage will reach E900 a month.

It could catapult the textile care industry into dramatic change.

One obvious scenario is that laundries face lower profitability due to higher wage costs.

A second will see them fast stocking up on new automation to save on labour, increasing their capacities and turnover and investing more in specialist skilled labour.

Asked if he had faith in the economic and public spending plans of the Spanish government, director of Kannegiesser Espana SL, Carsten Oesingmann, is direct: “The Spanish government, independent of the colour of their political orientation, is suffering lack of money, corruption and mismanagement. Rising cost for energy and water are forwarded to consumers, private and institutional. The government will raise the minimum wages. So 2019 for the Spanish textile care industries will be characterised by rising cost.”

Yet the future could prove positive and opportunistic for manufacturers. And certainly, industry pundits predict a shake-out of service providers who don’t immediately seek modernisation.

John Trachsel, regional manager for Iberian Cluster at Electrolux Professional, bluntly states that competing purely on low cost labour is “no way to go”.

Girbau’s Paulo Barreira, country manager, Spain, says the wage hike may mean “a good boost” for companies in the laundry sector, with service providers reviewing or expanding their facilities significantly.

Marco Niccolini, global sales and marketing director of Renzacci Spa, claims that the well-over 50% of Spanish (small) laundries and wetcleaner/drycleaners that currently use domestic machines, labour costs aside, will have to up their game significantly. “You cannot upsell or charge as much as you could do because you’re [perceived to be] doing the same job as people can do at home.”

Service providers moving fast to embrace change could, for now, be innovating in a bullish arena. Without doubt, banks are opening their pockets to loans. Textile care manufacturers collectively talk of a sunny climate fostering research and development, investment and entrepreneurship, especially ripe for SME growth. “Expectations now are remarkably better than in Italy, for example,” says Niccolini. Finance for public sector innovation and enterprise could do with a boost, says Barreira of Girbau. But he admits public hospitals are upgrading facilities and reports public procurement volumes of laundry equipment rising significantly.

Spain’s current economy gives a prettier picture than the recent past under former conservative president, Mariano Rajoy. His government’s concentration on fiscal stability damaged the entrepreneurial environment. Rajoy was replaced in June 2018 by the socialist PSOE’s leader, Pedro Sanchez, but long-term government stability is not assured. Some analysts predict a change of power before the 2020 general election. Current accounts, though, don’t look unhealthy. In October 2018 Spain’s national statistics agency, Instituto National de Estadistica, reported GDP growth at 2.5%, down from 3.1% in 2017 but still stable. Employment in Q3 2018 was up 2.51% on the previous year. The consumer price index showed a 1.7% increase, with inflation hovering around 1.7%. The government wants to pursue its 2.2% deficit target of GDP but forecasters predict several clouds on the horizon.

One could bring tax reforms and interest rate rises. Unemployment, forecast to average 15.4% in 2019, is high. Rafael Boeta Arp, general manager of Jensen Spain warns: “Everybody talks about a near recession and maybe another crisis, not so important as the one of 2006 but with remarkable intensity that could affect many sectors.” Kannegiesser Espana’s Oesingmann points to warning signs of Spain once again relying heavily on construction and tourism for economic growth – the very reason why she was hard hit in the last worldwide crisis. Miele’s spokesman, Reinhild Portmann, fears the strong economy may yet prove “a bubble.” But Export director Eduard Colomer of Domus is steadfastly upbeat: “In general the economy will remain strong.”

Collectively, the textile care industry holds faith in Spain’s crown jewel, tourism, which accounts for about 11% of Spain’s GDP. Spain recently announced a pursuance of quality tourism rather than cheap package visitors – a move roundly welcomed by the industry. “We believe in OPL laundries,” says Miele’s Portmann. “Where does the hotel customer spend most of his time? Normally in bed……If I were a hotel I would like to have as many differentiating arguments as possible, and bed linen and towels would be such a factor.”

While the going is good, the strong trend continues to be a switch from traditional to greener technologies, in line with alternative solvents both hypoallergenic and biodegradable. And increasingly advanced technology to match ever-changing textile makeups. “Every time the textile becomes more technical it means the technology to take care of it needs to be more accurate and advanced,” says Colomer of Domus.

Here is a snapshot of how some major manufacturers see growing trends and how they are honing their products.

Electrolux Professional focus is on sustainable equipment to reduce everyday costs. Equipment is centred on ensuring water is not wasted and creating technology to adjust water intakes to actual loads. Integrated Savings technology measures and shows loads in real time to avoid over or under loading. An Intelligent Dosing feature adds the precise amount of detergent according to the weight of the load. Electrolux Professional’s website markets financial support to customers who need it.

Jensen has a new product called GLOBE. This is in partnership with Inwatec and wades into Artificial Intelligence Robotics, allowing operations to gather masses of information, including possible problems and conflicts in plants and processes to manage their production most efficiently. ALPHA by Jensen is another Jenson innovation, helping an operator to plot the number and capacity of machines it needs, using similar designs and technologies to help reduce Chinese production costs. Jensen eyes the expanding industrial garment sector which increasingly needs specialised laundries.

Alliance Laundry Systems believes Spain’s laundromat industry is growing. It is not afraid of expected interest rate rise in that its financing department is able to fund investors for their projects, making it competitive at least in the short term, to traditional banks. Francisco Clemente, development manager, Spain, predicts more young, retired and unemployed people investing in laundromats, even if they become a bit more expensive to use. That, he says, means more investors. Alliance has just opened its 100th store in just three years. It provides a turn-key concept to its customers including a service to find a customer a laundry location, equipment and financing. Its new Speed Queen Designer machine series boast intuitive touch screen controls and a complete eco-system for managing and upselling a laundry operation.

Girbau’s focus among others has been innovating in cutting water and power use, reducing consumption and impact of chemicals, shortening cycles and making detailed programming easier for owners to personalise. It has introduced the Girbau Mobile Laundry, a package specifically for installation in locations like shopping centres and supermarkets. Girbau says vended laundry, which previously suffered ‘cultural barriers’, is now a growth area. Meanwhile its Girbau Lab is an innovation project aiming to plot the future of the textile care, customers and trends by bringing together players inside and out of the industry. Its Girbau Max virtual reality system enables customers design their projects and the Girbau Experience Centre provides training and first hand experience with Girbau machinery, and courses in laundry technology and cleaning processes.

Renzacci is showcasing its new bio dry cleaning machines worldwide. It has undertaken at least six major installations in the last six months.

They increase the types of garments that can be treated, responding to increasingly different textile makeups and designs by the fashion industry. They also guarantee biodegradability and bio compatibility. Renzacci Spa offers finance packages and a lot of handholding in new setups.

It has long concentrated on greener technologies using less solvents, water and energy, and continues to do so, also in the wet cleaning sector. Growth areas include the elderly care markets.

Miele has its new generation of Benchmark machines – washer-extractors with load capacities from 10 to 20kg and able to wash with 20% less water and 40% energy reduction.

It offers rentals through its German partner GRENKE and is additionally analysing how it can introduce tailor-made financing solutions like ‘pay-per-use’.

Miele predicts growth in self-service laundries. It partners with Italy’s Bloomest to equip new entrepreneurs with machines, training and tutoring. 

Domus, part of the giant Onnera group, says coin-op laundries push the envelope as one of today’s most important market sectors. It presented at Milan’s ExpoDetergo exhibition its new professional range of stackable 8 and 10kg washers and dryers, also capable of wetcleaning. It also showcased a new range of barrier washers with wide doors together with advanced features like traceability, communication and touch control.

A new flatwork ironer of 650mm diameter launches in June 2019.

Meanwhile, new recycling tanks will be connected on washers to encourage laundries to easily recycle water. In addition, Domus has upped the G-force on its low spin range to 200GF and to 300GF on its medium spin range.

In summary, Spain’s modernisation continues apace and while some service providers faced with big challenges may yet prove casualties,  those who invest and upskill will win the game.

ATTRACTIVE INVESTMENT


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