Enjoying a positive outlook

An economic revolution that has transformed Spain in 30 years is bound to have boosted the laundry and drycleaning sectors, even though it has had a see-saw journey.

Spain now has a diversified economy, still strong on agriculture but boasting a mix of service and manufacturing industries. This growth thrives, despite an obstinate bureaucracy and antiquated labour laws, which remain to the irritation of businesses.

Economic growth was boosted in 1986 when Spain joined the European Union. For five years the annual growth rate averaged 4.1% against an EU average of 3%. The value of foreign trade jumped from $23.8bn in 1975 to $143bn in 1990. The expansion is impressive even when inflation is factored in.

Spain has developed into the EU’s fifth largest economy, though its industry is dominated by small and medium-sized family businesses and its wealth is a little patchy as the country’s industry is concentrated in Catalonia and the Basque country.

The progression to prosperity, however, has had a hiccup. Spain had one of the worst recessions in the EU’s history during the 1990s. Output fell, the public deficit bulged, inflation climbed and companies crashed. Generous payments from the EU were halted, too, as the seven years of concessions for new members ended. Nevertheless, the government poured money into sorely needed infrastructure projects and these qualified for billions of EU euros between 1995 and 1999.

One of the big boosts for the Spanish economy has been the investment of foreign funds from its European neighbours. More than 30% of Spanish industry is foreign-owned, including half its food production. The investment dwindled during the lean years but is back again, so Europe’s business bosses obviously see the potential.

Another bonus for Spain since the 1970s has been tourism. Income from tourists accounts for 4% of gross domestic product, and 10% of the country’s workers are involved directly or indirectly in the industry. Other big earners are olive oil, of which Spain is the world’s largest producer, dried fruit and citrus fruits – agriculture is still an important part of the economy.

During recession the government decided to start on its privatisation programme, which had the effect of swelling public coffers and giving the private sector an incentive.

The economy is growing again. During the second quarter of 2005 gross domestic product grew by 0.8% and by the same amount in the third quarter, and the annual growth rate is put at about 3.5%.

An economic review by the Royal Bank of Scotland says the 2006 outlook is “favourable”. Its optimism is to some extent justified by strong consumer spending, high wage growth and falling unemployment – the jobless figure fell to 9.3% last year, below 10% for the first time since 1979.

However, there are some warning signs. More tourists than ever have been coming to Spain but their stays are shorter and they are putting a little less into the economy. Growth appears to be slowing, too, says the bank assessment. Then there is the threat of higher oil prices, which can affect any economic activity.

However, the bank remains cautiously optimistic, noting that the money accumulated through taxation will allow the government to consider tax cuts and pension rises during the next two years.

Girbau, the Spanish manufacturer, draws on 30 years’ experience of supplying machinery to the country to say “expectations are positive”. Girbau still believes that tourism-related businesses such as hotels, restaurants and camping sites will maintain the industry’s growth. Commercial director Alfons Reixach says: “We are therefore optimistic.”

It may be significant that Girbau, the Spanish manufacturer with the lion’s share of the market in Spain, is happy with the market. Girbau expects to increase its market share further and is convinced its latest range of washer-extractors and dryers will sell well and enhance its well-established reputation.

More than 40 years experience went into the design of Girbau’s new 6 series range of washer-extractors. The company examined each of the factors influencing the wash process – mechanical action, chemical action, time and temperature. The 6 series is available in two versions, HS (high speed and Free Standing) and MS (medium speed and Hard Mount)

A more cautious note is sounded by Boaya, the Spanish distributor for manufacturers such as Denmark’s Jensen group. Rafael Boeta, a Boaya director, says prices have remained static for ten years and the hotels and other companies are reluctant to invest in replacement machinery. Many of those that are investing are borrowing to do so.

There are other financial pressures, too, says Boeta. Energy costs are rising and technicians are in short supply and therefore at a premium. The hotels have suffered because of the recent competition from new holiday destinations for foreign tourists, such as Turkey and the Baltic republics. The result is that they are giving large discounts to attract the budget package holidaymakers, which translates into less money in the kitty.

Primus, the Belgian group, regards the Spanish market as stable and observes a gradual growth of larger laundries offering a centralised service. These are the laundries serving the hotels, which are still busy despite the present slight depression in the tourism trade.

However, they are unlikely to cause the disappearance of the on-premise laundries as they are becoming selective. More are accepting linen from the hotels but are insisting that they will not launder towels – which hotels will have to deal with on-site.

The growth of the larger laundries is interesting in itself. The textile manufacturers have been hit by cheap imports, particularly from the Far East, and have turned to renting out their products. The manufacturers have also been subsidised, so they are setting up the industrial laundries to maintain profit levels.

This move has helped to turn the market on its head. Previously the annual value of the small machines trade was about 435m and that of the industrial side about 425m. Now the bigger machines command a 435m share and the smaller machines 425m.

Domus of Spain launched its line of commercial washer-extractors in September 2005, the significant feature of which is an increase in machine capacities. The new range has capacities of 9kgs, 13kgs, 18kgs and 26kgs, compared with the former range of 8kgs, 11kgs, 15kgs and 26kgs.

The laundry machine market is certainly expanding in Spain, reports Diederik Vervenne, export manager for Spain and Latin America at the Belgian-based Ipso-LSG group. However, it is attractive also because it is so diverse. The demand is rising from hotels, tourism centres, government bodies and drycleaners.

He says good markets are to be found in hotels and care homes. He expects the market to regroup – there will be mergers and takeovers to the financial advantage of participating companies.

A similarly upbeat attitude is taken at the Belgian Lapauw group, which considers Spain one of its prime markets. Sales manager Wim Demeyer says sales are benefiting from a strong and growing economy, created to a large extent by years of booming tourism. He maintains even this year was good for tourism, despite a dip in the market. Generally the market will slow down a little, but he regards its prospects as good.

A “small upturn” after a “sluggish” year or two is expected by Schulthess, the Swiss laundry machine maker.

Marketing and sales director Hans Peter Stamm hopes to succeed in this “highly competitive market” with its new ProLine range of large machines. He says: “With this equipment we can benefit from a larger part of the market. It is starting to sell well and it appears that we are on the right track.”

Opsomer at Primus expects the switch to larger centralised laundries to continue but predicts the smaller enterprises could react by setting up shops offering a coin-operated service.

The spread of launderettes is also predicted by Imesa of Italy, but mainly because there are now more households in premises that are too small to accommodate washing machines. Spain has become an important market for Imesa in the ten years in which it has traded there, probably because of tourism, says Marina Benedet, its area commercial manager.

Valerio Gatti, export manager of the Italian manufacturer Firbimatic, refuses to be gloomy about the drycleaning sector.

He finds the Spanish market is now improving slowly thanks to the growth of big franchisors.

This is good news for the market, he says, because franchising in itself brings expansion and provides the capital for replacing old machines.

“We don’t believe our market will grow dramatically but more shops will be opened thanks to franchising,” he adds.

One result of the shrinking holiday market income is a demand for second-hand machines in the drycleaning sector according to Alessandro Trippa, export manager of the Italian supplier Maestrelli. He says: “I understand there is not much capital for investment, so refurbished machines are required.”