Bright outlook still forecast

The economy continues to boom in the Republic of Ireland. The Celtic Tiger is still on the move, although it is beginning to slow down. According to the Central Bank of Ireland’s latest report, economic growth for this year is predicted to be 4.75%, against 5% previously. The Bank forecasts next year’s growth at 3.5%.

Despite this slowdown, the Irish economy is still growing at a rate well above that of other western European countries.

With last year’s employment growth of 4.4%, according to the Irish Development Agency, people are busy with their careers and they have money to spend. This is good news for the laundry and drycleaning sector.

Gerry Fitzgerald of Jeeves Dry Cleaning says people don’t have the time they once had to wash and iron shirts but they can afford to have them done professionally. “We offer shirts as a loss leader,” he says. “It then follows that people bring their suits in to be cleaned too.”

Although there has been an impact on the volume of drycleaning as a result of the smoking ban and tougher enforcement of drink driving laws, greater affluence means business is growing.

But there are other pressures that have had an impact on business. By 31 October 2007, all drycleaners must have obtained a certificate from their local authority stating that they comply with the Solvent Emissions Directive (SED).

Preparing to pass the SED inspection involves a substantial investment, in both time and money. Fitzgerald says it took his company about a year to get ready for the inspection, which it recently passed. However, he thinks overall the SED is a positive move, because it will lead to a higher standard of quality in drycleaning and will “get rid of some of the cowboys”.

The stringent inspections in the Republic of Ireland are in contrast to the situation in Northern Ireland where a system of self certification operates.Ray Farley of William Clements Chemicals says that while most equipment is up to speed, many local councils are having trouble understanding the directive and what it means for them.

Suppliers such as Allied Armstrong have also benefited from the need to upgrade machinery to meet the standards of the SED. Owner Billy Rooney says Allied Armstrong had avoided drycleaning equipment for years, preferring to focus on laundry, but moved into the sector as demand for new machinery grew.

However, efforts to promote the use of the environmentally friendly Green Earth solvent in Ireland have largely halted. Dermot Gibbons from Alex Reid Ireland, the Irish distributor for Green Earth, said the chemical is being used in two sites in the south and two in the north. Many cleaners are reluctant to change because the perception is that it is not as good as perchloroethylene (perc) on which they were trained. Its supporters disagree. However, 99% of drycleaners continue to use perc – and that does not look very likely to change in the near future.

Farley, whose company is the master licensor for Ireland says part of the problem is its classification by the EU as a volatile organic compound (VOC) which brings it under the remit of the SED, therefore requiring inspection for SED certification.

However, in the USA where the Green Earth system originates, he says, it is not categorised as a VOC because it is made from silicone.

The industry trade association, the Association of Irish Launderers and Dry Cleaners (ALDC), has become more proactive in the last couple of years helping to educate the drycleaning sector about the SED. Outgoing chairman Michael Fleming says funding applications are regularly submitted to SkillNet to improve education in the drycleaning sector.

Cutting resource costs

In the laundry sector, high water and energy costs continue to dominate. Launderers are upgrading and replacing old equipment and searching for ways to achieve more efficiencies in energy and water usage.

Philip Scallan says Celtic Linen is investing in water recovery equipment in an attempt to reduce its use of water and bring the water it is reusing back to drinking water quality. Its aim is to achieve zero discharge by the end of 2008.

Celtic Linen is also exploring the possibilities of using a wood chip boiler instead of an oil-fired one, aiming to reduce energy costs all round. This is only the beginning of its strategy to become more energy self-sufficient, Scallan says.

Energy efficiency is also being achieved through upgrading to more modern equipment, which has translated to good returns for suppliers. Both those who sell heavy-duty equipment such as Kannegiesser and smaller suppliers such as Allied Armstrong say last year was buoyant. Rooney says business has grown over the last three years and sales have shifted from reconditioned units to new equipment, because businesses have more money to spend and want good quality machines.

“There has been a lot of turnover of new machinery in the last three to four years,” he says.

Laundries are looking for energy efficiencies because of rising costs. There has also been a shift to high-spin washing machines, in order to save time and energy costs in drying. Rooney adds that he has hardly sold a standard-spin machine in the last 12 months.

Changes in bed linen preferences have also opened up opportunities. Selwyn Burchhardt at Kannegiesser, says the company sold two new duvet lines for hotels in the last year, which reflects the trend for hotels to adopt the European style of bed cover.

Although there have been some hotel closures, the number of hotels continues to expand.

As a result, smaller laundries that have opened up – companies such as Premier Linen, Kings Laundry and Millbrook – are competing with the big three, Spring Grove, National Linen and Celtic Linen.

Philip Scallan from Celtic Linen says prices are weak in both the hotel and workwear sectors and the market is now very competitive. People will fight to hold accounts with lower margins or no margins at all, so laundry has become a commodity product.

“Users of the product do not appreciate how far into the organisation it goes. But by pushing it as a commodity, they are pushing it even further out of the organisation – and it becomes less focussed on service, because costs have to be cut somewhere.”

On premise laundries (OPLs) provide big competition for rental laundries. Scallan says that 19% of new hotels have OPLs. The challenge is to get close enough to the customer so that you find out whether an OPL is being planned before the plans are drawn up.”

Although the hotel sector is expanding, there has been a slow decline in traditional manufacturing activity as companies choose to move jobs overseas to countries like India and China. Gerry Moore from Spring Grove says some electronic companies have also chosen to move their operations to Asia.

This decline in activity has affected the workwear market, placing more pressure on laundries.

In hospitals, the emphasis is on maintaining higher standards of hygiene. With more stringent auditing of hospitals, the pressure is on laundries to ensure that their equipment can meet those standards. Colour-coded bags have now become a requirement in Ireland, based on the national colour code accepted under the hygiene audit conducted in 2005 and the subsequent guidelines published by the Society of Hospital Linen Services and Laundry Managers in April 2006.

“We are implementing standards in Ireland that should have been implemented years ago,” says Gerry Foley, national chairman of the Society Hospital Linen Service and Laundry Managers. He stresses that most hospital laundries already work to these standards.

The level of production in laundries in acute hospitals has also increased as linen is changed more often due to increased activity levels and concerns about infection control. Foley says production last year was up 7-10% in his own laundry at St Loman’s Hospital in Mullingar. Hospital laundries are upgrading and replacing equipment to be able to meet the production needs.

As in other sectors, the main environmental concern is water usage. Foley believes water recovery systems will form part of the hospital of the future.

“There are massive savings both in cost and for the environment through recycling water,” says Foley. “Water is not a commodity that will be able to be taken for granted in future.” He predicts that the European Union will eventually bring in draft legislation on water.

Regarding speculation about whether the HSE will put laundry services out to tender. Gerry Moore thinks it is inevitable, although it is more likely to be in three to five years than in the next 1-2 years.