One look at the Benelux countries usually convinces the observer that they have stable economies and therefore offer a stable market to the laundry and drycleaning suppliers. However, the three countries, with a combined population of about 25million, each present important differences for the textile care industries.
For example, the Netherlands has achieved sustained, though slow, economic growth, attributed to sharp cuts in subsidies and social security spending, consistent moderation in wages, and the deregulation and privatisation of state-owned companies.
The government now wants to get more people into employment, even though unemployment is below the European average. But unemployment is actually rising slowly and only 2% gross domestic product (GDP) growth is being predicted for this year.
Consumer spending, too, is sluggish, though a surge in foreign demand, forecast at about 7% for this year, could compensate.
The economists are saying that wage settlements pose the biggest threat to the Dutch economy and that they could exceed the government’s 4% target.
The good news is that inflation dropped to 0.75% last year after hitting a peak of nearly 5% in 2001. The Netherlands also has a large trade surplus thanks to its service and information technology industries. This surplus appears to be a response to a lack of natural export-earning resources.
With money in the kitty, the government now has an ambitious long-term plan for expanding the country’s infrastructure and transport links. It is providing $28billion for the period up to 2010, and is setting aside $32 billion for the years 2010-2020.
Belgium is trying, like the Netherlands, to reduce unemployment and raise its employment level. It has a jobless figure of about 8% and the proportion in work is below 60%. Belgium is awash with illegal immigrants and has tackled unemployment by regularising many of them. It is cutting tax rates and privatising state industries, but the employment level continues to fall. Overall public debt also remains high at about 95% of gross domestic product.
Yet consumer demand is high and economic growth is predicted to rise to 2.5% of GDP this year. Inflation remains reasonably low at about 2%.
On the credit side Belgium has run a substantial current account surplus in recent years, even though its trade surplus has declined a little.
So the conditions look right for economic growth but, at present, banks are reluctant to lend for business expansion and this could hinder growth.
Luxembourg, by contrast, is considered the third most competitive economy in the world. Its wealth lies to a large extent in its service industries, and these are replacing a declining steel sector as the big earner.
Nearly 200 banks are based in this little country. Another success story is Luxembourg’s film industry.
Luxembourg has more jobs than its indigenous population can fill. Unemployment is almost non-existent, and a third of all people employed are not permanent residents. Taxes are low and exports outstrip imports.
So, generally the countries are a reasonable prospect for the laundry and drycleaning suppliers. The different economic conditions from country to country, however, change the sectors that they serve.
In the Netherlands commercial rents are sky-high, so businesses prefer to use their space more economically. Few, therefore, have on-premises laundries and the coin-operated versions in the high street are almost non-existent. Commercial laundries, therefore, are everywhere.
The exceptions to the rule are the boating and sailing clubs, for which the Netherlands is world-famous and every club seems to have its own coin-operated laundry.
The picture is completely different in Belgium, where the commercial rents are at least 75 % lower than in the Netherlands. The Belgian textile care industry includes all the market sectors – commercial laundries, self-service laundries, large drycleaning businesses, coin-operated laundries and on-premises operations.
In Luxembourg, all cleaning is done by specialists and this is probably due to the population’s prosperity. The coin-operation shop is virtually an extinct species here. High commercial rents may also be a factor.
In all three countries the customer profile is interesting. The people who pay for their laundry to be done are generally those with insufficient space for washing machines in their homes, people who move often, and, particularly in Belgium, newcomers from eastern Europe and north Africa.
Primus, the laundry equipment manufacturer based in Belgium, is generally pleased with the performance of the Benelux market. Jean-Baptiste Van Damme, the sales and marketing vice-president, says: “The market is very good and growing. We can’t complain.”
In Belgium, however, history makes life a little more difficult. Van Damme explains: “Belgium has always been a country with a lot of manufacturers. After the war, almost every village had its own commercial laundry, so small companies sprang up making washing machines, and their prices are very competitive.”
Even tough competition and fairly flat economies cannot stop demographic and other factors from influencing the market. The march of medical progress and better nutrition mean people are living longer and the care home industry is therefore growing and helping to increase demand for laundry services.
This demand is stepped up further by the need for more hygienic washing, a result of the emergence of the MRSA hospital bug. Hospitals and nursing homes naturally want to minimise the MRSA risk but they are also aware that neglecting the problem could result in avoidable deaths and lawsuits. For the manufacturers these concerns add up to more machines and better bug-beating techniques.
The response of the Christeyns Group, which includes both laundry chemicals and energy saving systems in its portfolio, has been to set up a plant in Ghent, where its headquarters are based, to produce peracetic acid, a disinfectant bleach used mainly in hospitals.
A second social change is fuelling the business in the Benelux countries. Despite all the complaints about the burden of longer hours and more arduous work, the truth is that most people have more free time. The result is a crop of sports clubs, fitness centres and camping and holiday parks, all needing strong efficient washers.
A third trend in the Netherlands and Belgium is the tendency to build smaller houses as both countries are already densely populated. “With less space people will not put washing machines on their wish list as a number one priority,” says Van Damme at Primus. “This could create a higher demand for drycleaning and coin-operation shops, or even washing machines in the basement in some cases.” Primus appears to have anticipated the need by opening a self-service megastore in Brussels with 46 washing machines, 28 stack dryers and three automatic ironing machines.
Another demand comes from industry in the Netherlands. Thanks to economic and ecological pressures more cleaning companies are washing their floor mops and not replacing them so often. They are laundering them on the premises rather than sending them to a commercial operation, following the example of Germany and the Scandinavian countries.
New requirements are showing up as companies sell to the Benelux countries. Christeyns observes that cotton is gradually being replaced by disposables – or microfibres and laminates. “It is an opportunity to push on these materials,” says Charlie Betteridge, the Christeyns European marketing director. “They are more expensive, so it could mean more money.”
From the textile services’ viewpoint, Rentokil-Initial sees more outsourcing of laundry services, which in commercial terms means steady but not increasing business. “I expect a reasonable future but little change for two years,” says Henri Hendrickx, Rentokil-Initial’s sector managing director for European textiles.
At least one company, however, is benefiting from more ingrained habits. Valerio Gatti, export manager of the Italian drycleaning machine manufacturer Firbimatic, says: “For us the big markets are the drycleaning shops and big hotels with laundries.”
Betteridge observes that the large companies are getting larger through acquisitions and the small operators are staying where they are, but the middle-size companies are gradually disappearing.
Small companies generally command the loyalty of their customers but the larger operators often offer more attractive prices – and here hard cash talks. Betteridge says: “Long-term loyalty is being thrown to the winds to some extent because of economic pressures.”
It is clearly a sign of the sharpening of the competition in the industry. Hendrickx says: “If you make a mistake in the marketplace today you are punished by your competitors.”
Environmental legislation affects the whole market. Machines are built to economise on water consumption and to produce effluent that does no damage. The greater cost to the buyers means the machines must be more efficient. They must be capable of handling bigger loads to give economy of scale in water, energy and chemical use. Van Damme reports: “We have to watch energy and water consumption, so we work with the soap manufacturers.”
For operators, economic considerations may eventually have to give way to environmental requirements. Gabriele Cuppini, sales director of drycleaning machine manufacturer Union, says that businesses have been reluctant to invest in replacing machines but predicts that in the near future they may be more active.
Firbimatic’s Gatti agrees saying that restrictions on vapour emissions are forcing more drycleaners to upgrade perc machines or switch to hydrocarbon.
Economic pressures are having another effect, says Carine Derez, commercial director of the Belgian manufacturer Ipso-LSG. Companies with on-premises laundries are tending to rent their machines. Derez says that Ipso has just started a factory for rentals and this will be a growing area because companies then know what their costs will be.
At Rentokil-Initial, Hendrickx sees the market polarising.
One group will be the big companies using facilities management, in which a contractor takes over all non-core jobs, including laundry services.
The other will comprise smaller companies that use different suppliers as needs arise. He predicts more spending on hygiene and safety. Employees will be clean, look clean in their working clothes and feel better for it.
There is yet another prediction, this time from the heavy-duty laundry group Jensen-LSG. More employers are investing in corporate wear, for which they will have to provide cleaning services. “The tendency is towards more formality and the corporate image,” according to chief executive Jesper Jensen.
It is an interesting move in an age when the trend appears to be towards more casual wear in the workplace.