Investment slows as textile care sector waits for upturn

17 January 2014



The Italian economy has continued to suffer over the last year, rocked by political turmoil and falling investment. GDP in the second quarter of 2013 fell by 0.2% compared with the first quarter of the year and by 2% in relation to the same quarter in 2012. The country has around €2trillion national debt and youth unemployment of 40%.


The Italian economy has continued to suffer over the last year, rocked by political turmoil and falling investment. GDP in the second quarter of 2013 fell by 0.2% compared with the first quarter of the year and by 2% in relation to the same quarter in 2012. The country has around €2trillion national debt and youth unemployment of 40%.
The government recently announced that it is considering strengthening its powers to intervene in the economy in an effort to entice investment into the country, although there are concerns that the country's utilities are being taken over by foreign investors.
On a more positive note, in July the Bank of Italy predicted that the economic situation would begin to stabilise at the end of 2013 and that recovery would strengthen in 2014.
However, there is no escaping the impact that the economic situation has had on Italy's professional textile cleaning sector and the continuing difficulty that businesses have in obtaining finance for further investment.
"The current economic situation is very difficult and strongly connected to the political situation so analysts are finding it hard to make any kind of forecasts," says Gabriele Cuppini from Union. "Consumers are cutting back on spending on services, resulting in a considerable reduction in the amount they spend at the cleaners."
John Balman from Alliance Laundry Systems says: "The main concern of laundry operators is to stay afloat at this juncture. Their revenues have dropped due to lower occupancy rates in hotels during the tourist season. Higher taxes undermine their operation and the imminent increase of the value-added tax (VAT) to 22% will have a negative impact on their businesses."
A drop in revenues in the laundromat sector forced some stores to close, says Balman. Future store openings will depend on whether investors have the necessary funds. Loans from banks are difficult to obtain, even with a good personal credit rating.
"In this situation, equipment efficiency and utility savings are of great importance because they reduce operating costs," he adds.
Alliance introduced its latest
soft-mount washer-extractors in January this year. Balman says they were extremely well received by the Italian market thanks to larger doors on the 13 and 16kg capacity models and, under its Ipso brand, the SmartWAVe feature, which continuously adjusts water levels in linen in line with the linen's ability to absorb water. Alliance also had success in Italy with its soft-mount tumblers (with 6 - 90kg capacity) as well as with its hard-mount line, particularly in the coin laundry sector.
Clément Silvaggio, director of Business Region I for Jensen Group, says that a spending review in the healthcare sector has also had an impact. Budget cuts have seen a decrease in the profitability of the private laundries operating in the sector and, ultimately, a decrease in investment. In addition, both public sector hospitals and private businesses, such as hotel chains, work on very long payment times. In some cases invoices can take more than a year to be paid.
Silvaggio says that there have been some initiatives from laundries in geographical areas to organise themselves in order to increase their purchasing power with suppliers. However, these initiatives have not yet provided substantial results, he adds.
In the hotel sector, the average occupancy of hotel rooms has fallen from 85% to 65% compared with three or four years ago, according to Livio Bassan from Christeyns. In addition, the table linen business has been dramatically reduced by the significant introduction of paper "linen" in the restaurants, he adds. "The workwear business remains underdeveloped and hospitals have reduced the number of beds. This is bringing about a huge reduction in fabric volumes washed."
In general, the structure of the laundry sector has remained fairly stable over the past year, although a few key players have taken over some smaller independent operators, especially in the care and hospitality sectors, according to Andrea Corraza from Electrolux. Smaller businesses with budget issues are still choosing to use textile rental services says Corazza. "On the other hand, those that are a position to plan further ahead continue to appreciate the benefits of on-premise laundries and investing in these."
Electrolux launched its Line 5000 series of washer-extractors and tumble dryers. "Mid-size machines, 11 - 18kg are the best sellers," says Corraza. "We are very satisfied with the results, especially in the care and facility management sectors."
The healthcare sector continues to be dominated by two major groups, Servizi Italia and Servizi Ospedalieri, but according to Silvaggio, these groups have ceased investment in Italy and are investing in growing global markets.
In the hospitality and garment sectors, the big players like Pedersoli Group and Alsco are investing in efficiency gains to compensate for the low sales price level.
Silvaggio adds that small laundries are now experiencing difficulties due to lack of investment over the last few years, long payment terms from end customers and low selling prices.
The number of small laundries continues to decline. Ten years ago there were around 25,000 units and now there only around 15,000.
However, this number may more accurately reflect the real requirements of the market where costs have risen under the Eurozone's single currency, according to Matteo and Walter Cividini from Fimas, which supplies finishing equipment and is part of the Macpi Group.
They add: "The impact of the single currency on the domestic economy has been quite negative in everyday consumption at all levels, including the laundry sector. Prices in Euros have slowly increased, reaching almost double the former cost in lire. Unfortunately, this has happened in almost all sectors and with the majority of consumer goods and services."
At Renzacci, Marco Niccolini says that since 2009, Italian newspapers have continually had articles saying that Italy is about to start recovering, so people don't believe them now. This has been exacerbated by political instability, a general decline in consumption and the reluctance of banks to lend money.
"As a result, laundries and drycleaners are holding on to their money, afraid to risk investment in new machines," says Niccolini.
Assofornitori, the main Italian association of laundry manufacturers and suppliers in the textile industry, is promoting a number of initiatives, such as conventions, round tables and training, to engage the operators in the industry in dialogue.
Kannegiesser of Germany is a member of the Assofornitori steering committee. It stresses the importance of co-operation with the industrial laundry association "in order to raise the awareness of political entities and consumers of the necessity of protecting the system. We should make consumers more aware of the importance of our business and of the highly advanced technologies and processes that are used in producing a stack of clean linen."
The company says the Italian market is looking for energy saving technologies as well as highly efficient equipment in the washroom, in particular batch washers, extraction presses and dryers, and also for flatwork and garment finishing, including feeders, ironers, folders, tunnel finishers and folding robots.
Systems for tracking linen inside the laundry are becoming essential. Automation is also needed beyond the ironer line - for example, automated systems for collecting stacks of linen.
Kannegiesser says that reducing energy consumption and other costs, sustainability and technological advances and quality will be the key themes of EXPOdetergo. This takes place in Milan next October under the banner of "Environment, Technology, Quality: an eye to the future"."

Less money to spend
In the drycleaning sector, Pony's Massimo Sanvito says the consumer's reduced spending power is stopping potential customers from using drycleaning services.
To be more profitable, therefore, many drycleaners are trying to diversify their businesses by offering additional services, while others just try to cut their operating costs. Italian drycleaners are reluctant to invest in long-term projects or in new machinery, except in areas such as shirt finishing or other complementary activity. "Although we still sell more ironing tables than any other types of finishing equipment in Italy, we are noticing a growing demand for automatic and more hi-tech machines," Sanvito adds.
Davide Rotondi estimates that there has been a 10 - 20% decrease in work for drycleaners in Italy.
The Rotondi Group moved a couple of years ago into the production of large washers and dryers. Rotondi says that the company is now enjoying good sales of the new machines. "People are starting to recognise the Rotondi brand not only for ironing but also for washing and drying."
Given the current state of the domestic market, most Italian suppliers of drycleaning and laundry equipment need to rely on the export market for survival. Rotondi says that there is almost no finance available within Italy. People have to use their own money, so they cannot plan big investments unless they have serious big new contracts or very reliable customers.
Renzacci's Niccolini says many drycleaners removed their old machines and sent the garments to another shop to clean, becoming in effect "drop-in, drop-off" points. They are now providing business for local competitors that may not give them the best rates as they know there is no other option, so drycleaners that take this route become less profitable.
"It is suicide for many drycleaning shops whose strategy was to try to keep their heads above the water until the crisis came to an end," Niccolini says. "Instead, after a year and a half they realise they aren't making enough profits to keep going."
The Italian retail system was traditionally based on small stores along the main streets of each town. However, on the outskirts of larger cities, these small shops have closed, and been replaced by large shopping malls, which are becoming a growth area.
Each shopping mall hosts at least one drycleaning shop that often provides a service for small alterations and repairs. These stores charge very low prices, some of them using a single-price strategy, says Corinna Mapelli from Trevil.
Trevil is introducing a range of
hot-plate shirt units in Italy. Mapelli says that until recently there was no market in Europe for such machines but now they are attracting interest as the average size of drycleaning shops increases and shirt services are expanding.
Energy saving is another area of growing importance. The relatively high cost of electricity in Italy compared with that in other European countries, means that both laundries and drycleaners have to find ways to save costs here.
The most widespread option in drycleaning is hot water recycling - the use of steam condensate or waste hot water from washers to pre-heat fresh water.
Another challenge that businesses face is the Italian tax system. The taxes that each store has to pay are based on set parameters rather than on actual revenues and this makes it more difficult for smaller shops in particular to trade profitably.
According to Eugenio Boni from Italclean, the opening of new drycleaning shops has been hampered by regulations that say shop owners must have experience and training before they can get a permit to operate.
Niccolini at Renzacci agrees. He says that while law 86/2006 may be good in theory, the course involves many subjects and is very complicated.
In addition, it is often not clear when or where courses are available or what they will cost so this can deter prospective candidates from entering the drycleaning sector.
Perc remains the most common solvent. Cleaners are interested in alternatives but often they cannot fund the change. Boni says it is the fact that machines without distillation are cheaper than perc machines that is creating the demand. Small, cheap machines are the most popular. Boni adds that Italclean is seeing interest in closed-circuit dryers as in some places they are almost compulsory.
CINET's Peter Wennekes notes that the economic situation is accelerating trends such as reduced demand for
circle-P-labelled garments, lack of finance for investment or increasing the professionalisation of the industry. It is hoping its Best Practice Project (Best Practices in Safe & Sustainable Professional Textile Cleaning) will promote the industry.
Marco Mallegni from Ilsa says willingness to create networks and to attend the training courses and events of the sector's associations is increasing. "People are starting to understand that this is the time to leave their comfort zone," he comments.
"For example, Ilsa joined the partnership CleanItalia and actively participated in the Green Power Energy Work Shop training. Such activities are vital for keeping interest alive, for focussing the attention of young people and for offering a new paradigm for the cleaning profession."
Like other drycleaning suppliers, Ilsa sells mostly perc machines in Italy, the most popular being its 10 - 12kg perc machines. For those interested in alternative solvents, its Ipura machines are proven sellers but it also offers Jet Clean Ilsa and has started selling Multiflex, a purpose-built multisolvent machine that will help reduce energy consumption.



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