The long-term outlook is good – with mild, scattered lows14 December 2017
India’s economy continues to grow although Government reforms, including a new goods and services tax, may be slowing things down somewhat. However, Kathleen Armstrong reports on a positive outlook for laundry and drycleaning in an expanding marketplace
Growth continues to be on the cards for the world’s second most populous nation, although some analysts are querying the effectiveness of the government’s economic reforms following the release of this year’s economic indicators. GDP grew 5.6% in the first quarter of 2017-18 (April – June 2017) compared to the previous year quarter. However, that was down from 7.6% growth registered in Q1 2016.
Two major reforms have impacted on the economy in the past year. Firstly, in November, the government demonetised Rs500 and Rs1,000 notes with the aim of eliminating ‘black money’ and ‘unbilled transactions’. Then, in July, it introduced a goods and services tax (GST) to replace the huge number of federal and state taxes across the country.
“Both of these in the long term are positive but are having near-term impacts in terms of liquidity squeeze and reduction in discretionary spending,” comments Eric Brouwer, executive manager of Christeyns.
He says the impact on the laundry sector has been ‘neutral to mildly negative’. For example, there has been a reduction in discretionary spending which has led to a decrease in hotel occupancy rates – and a significant proportion of the sector’s business is linked to tourism. In addition, the change in the tax rate means higher taxes are being imposed on chemicals, the cost impact of which is being felt throughout the value chain.
“However, due to the tax changes several unregistered laundries are now registered which helps increase market penetration for companies like Christeyns who have diversified products,” Brouwer adds. “Historically, India was known to have family owned business and small independent players. However in the recent years we have seen much larger companies enter this space to service large-scale requirements.”
There has been an increase in coin-op laundries in the country’s larger cities, as well as laundries opening up in apartment blocks and gated areas to cater to residents.
“Encouragement for start-ups by the Indian government has provided opportunities for new job creation and more use of workwear,” says Neil Ghadi, India sales manager for Alliance Laundry Systems. “Ninety-seven per cent of the Indian laundry industry is still heavily unorganised and largely controlled by dhobis and local mum and pop operators who cater to a radius of 2km. However, there are fewer who want to continue in the tradition and the ones who want to remain in the laundry business want to upgrade to a mechanised laundry set-up. They will play an important role in the growth of the laundry sector in India in the future.”
Some opt out completely because of the high cost of commercial laundry machines. Others resort to cheap a cheap machine set-up and fail. “Assisting and educating this population will go a long way in the growth of this industry as they play an important role in growth of the laundry sector in India,” sas Akash Dharamsey from ADD Laundry Concepts, Girbau’s official partner in India.
Dharamsey is a founder member of the Laundry and Dry Cleaning Association of India (LDAI), which he says aims to facilitate the flow of knowledge and improve training throughout the sector.
“Training is traditional and normally taught on the job or through family members,” he says. “Formal training institutions are not available in India. Very few have been privileged enough to have received formal training overseas. The Laundry and Dry Cleaning Association of India does intend to close the gap.”
Stahl India has also been busy with start-ups. “Stahl India has helped develop some state-of-the-art small laundries which are on national TV, showcasing the new entrepreneurs being helped to develop in this unorganised industry,” says Uwe Stahl. “Stahl is also setting up Mumbai’s first and largest organised laundry system as part of a textile rental model for a very reputed textile group.”
Moving from a sector where hand washing is dominant to one with more sophisticated washing methods means training is a key challenge. In August 2016, Stahl launched the joint venture company Stahl Laundry Machine India and a dedicated training programme, the Wasmaatic Academy for Professional Fabric Care, which includes learning programmes and workshops held under the umbrella of the World of PTC Business India. The company is now in the ‘advanced stages of taking the training to the next level’.
Initiatives like the government’s Swatchh Bharat/’Clean India’ campaign are also having an impact on the sector, opening up hospitals and railways to foreign equipment manufacturers like Alliance, Ghadi suggests.
Interestingly, laundry equipment has been classified under GST as a luxury item, subjecting it to a 28% tax rate. “Our hope is that ongoing efforts to reclassify laundry equipment as something other than a luxury item will be successful,” Ghadi says.
High import duties
Relatively high import duties can also act as a barrier to the purchase of laundry and drycleaning machinery imported into India by international manufacturers.
However, John Hacker, director of sales Asia Pacific for Kannegiesser, sees opportunities for development in the evolving market. “The concept of outsourcing laundry services is in its early stages with many of the major hotels still using their own in-house facilities, although this does vary from state to state. For example, we see more specialised central laundries for the hospitality sector in places like Goa which is a major tourist area,” he explains, adding that the active sectors are in hospitality and railway laundries.
“The biggest challenge is a combination of investments and return on investment with relatively low prices for the provision of laundry services, restricting the amount of investment available.”
Kannegiesser’s main customers in India have been top hotels, with installations of its SHM ironer and folding machines. But Hacker says the company is currently in discussion with potential clients for larger scale laundries – it recently installed a large-scale modern complete Kannegiesser central hospitality laundry in Sri Lanka.
YS Wang and Ravi Chandran, sales manager and technical manager for Jensen Asia, agree that hospitality and railways are significant customers for laundry in India – and demand continues to grow. “We installed a state-of-the-art railways laundry in Ahmedabad, which has the highest efficiency equipment, as well as the most advanced technologies,” they explain, referencing the Western Railway laundry which opened a couple of years ago.
However, Wang and Chandran add: “Other sectors such as healthcare and hospitality laundries are also growing but there is still much to do in educating customers in India about international standards. There are still a lot of laundries being built with very basic facilities and equipment with very old technology, which are far from the international standards.”
Nevertheless, demand for laundry products is increasing thanks to the construction of new 5-star hotels, which have their own in-house laundries, and new 3- and 4-star hotels, which tend to outsource the washing of their linen. In addition, the past five or six years have seen more privately owned commercial laundries being built to cater to the boom in middle class travellers, Wang and Chandran say.
But it is not only to middle class travellers to which these private laundries are catering. While in years gone by small laundries and drycleaning operations were restricted to wealthy neighbourhoods or business districts, they are now cropping up more and more in middle class residential areas – some offering combined laundry and drycleaning services, others focusing more specifically on either laundry or drycleaning.
“Once [the middle classes] have provided for their basic needs, they look to improve their standard of living – and using a laundry and drycleaning service gives them more free time,” comments Marco Niccolini, general sales and marketing director for Renzacci.
While most customers bring their laundry or drycleaning into the shop, use of industry 4.0 technology is increasing – mobile apps for pick-up and delivery.
Drycleaning shops in India are divided into two categories: family-owned and franchising chains. Niccolini says franchises are starting to develop but not as rapidly as had been predicted, taken over by the rate of growth in family-owned businesses. But there are some that are establishing themselves – in the vended sector key franchisers include Instawash and Washiteria, while UClean and fabricspa offer both laundry and drycleaning services including pick-up and delivery options.
While perc still predominates as the solvent used, for Renzacci the vast majority of machines it sells in India are those that use alternative solvents, in particular Intense and DF-2000.
Enrico Cartabbia, media communication manager for Macpi, considers India to be one of the most important countries in the world for investment. It has an office in Bangalore, headed up by Stefano Bordogna, who has worked in the country for more than 15 years. “Macpi is a very well-known brand in India for ironing finishing technology,” Cartabbia says.
While the brand is known in Europe for its high-tech automated laundries, Cartabbia says: “India is not ready for this kind of technology or automation because the cost of labour is too low, but it is a very good market, for example, for ironing tables or dummies. Macpi exports a lot of these machines to the Indian market – our model 389 dummy for shirts is recognised as functional, solid and productive.”
Although the company is already well established in India, Cartabbia sees this as just the beginning. Its aim is to further build its presence in the laundry sector.
Recent salary reforms
Marzio Boni, sales manager for Trevil, says the market for automated finishing equipment is beginning to open up. “Our Indian dealers inform us that the recent salary reform has had a relevant impact in the drycleaning and textile sectors.”
Therefore, Boni says, the number of installation of automatic Trevil machines installed in India, especially for shirts and trousers, is on the rise: “This is evidence of our alignment with the needs of the market.
“Financing the new machines is on a case-by-case basis by the company’s local importers. We are witnessing a trend towards innovation and efficiency,” Boni adds.
Government initiatives such as Make-in-India, Invest India, Start Up India and e-biz Mission Mode Project under the national e-governance plan are facilitating investment and ease of doing business in the country, according to Anupam Chakrabarty, managing director of Lindström India and senior vice president, sales and markets for Lindström Group.
“The textiles sector (which accounts for nearly 14% of the total industrial production of the country and about 24% of the world’s spindle capacity) has witnessed a spurt in investment during the last five years.
The industry (including dyed and printed) attracted foreign direct investment (FDI) worth US$2.47 billion during April 2000 to March 2017, Chakrabarty explains.
“The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100% FDI in the Indian textiles sector under the automatic route,” he says.
Textile rental services
Within India, the demand for textile rental services such as those provided by Lindström, have grown with the growth in sectors that require workwear and related services, says Chakrabarty.
“Some of the sectors which have seen significant growth in the past months include the food segment and the electronic segment where many greenfield ventures have come up as a part of the ‘Make in India’ initiative,” Chakrabarty adds.
This year the company opened a new service centre in the coastal city of Vishakhapatnam (Vizag). “This is the eleventh Lindstrom unit in India and takes us closer to our vision of taking our operations as close to the customers as possible,” Chakrabarty says.
A key challenge in a predominantly unorganised sector is low awareness of critical elements like hygiene, water and electricity consumption, pollution norms and its importance, Chakrabarty suggests.
“However, as more organisations are making sustainable operations a key path to their organisational vision and goals, they have started giving due importance to these subjects as well and are beginning to work with vendors who are able to not only comply with legal compliances but also have shared values of sustainable operations.”
In addition, he adds, the number of audits undertaken by the Food Safety and Standards Authority of India and the US Food and Drug Administration are increasing. As India’s laundry and drycleaning sectors continue to modernise, so too will its practices, opening up further opportunities for suppliers and better outcomes for customers.