Encouraging the small operator

Doing business in the Benelux countries still presents a challenge, though there are some signs that the economies are on the up. Although economic pundits may not be in total agreement about the prospects for 2007, the tone is more optimistic.

The Economist Intelligence Unit says that, although no “major economic policy initiatives” are likely for the next two years in Belgium, gross domestic product growth is likely to hit 2.1% this year and in 2008, along with generous consumer spending.

The financial markets unit of the finance house ING predicts a marginal slowing of the Belgian economy this year, thanks to a general deceleration in Europe, the VAT rise in Germany and economic uncertainties in the USA. Economic growth, believes ING, will drop to 2.2% this year from a figure of 2.9% last year.

In the Netherlands, employment growth has been good and unemployment is decreasing. Wage deals are expected to average 2.25% this year, against 1.75% last year, and the increase in private consumption is forecast to stay at 2.25%. These factors, say economists, will be accompanied by reasonable inflation of 1.25%.

In Luxembourg the business and financial services industry has ensured a 5% growth that should continue in 2007, even though unemployment is still rising, partly because cross-border workers are soaking up the available – and less lucrative – jobs.

General economic trends, of course, are not necessarily reflected in every sector. The raw economic figures cannot fully explain some of the emerging trends in, for example, the textile care sector.

One such trend is highlighted by laundry machinery distributor LDL Equipment. Johan Stuyven, director and owner of the company, sees increasing numbers of smaller laundries coming on to the scene – for an interesting reason.

Customers of the large Belgian laundries are complaining that their goods are being damaged and lost because they are put in a washing tunnel and washed aggressively. Then, says Stuyven, they protest that the price is too high.

Stuyven explains: “A lot of big laundries are thinking of creating a smaller unit. I have a client who is developing a small laundry to do the wash better. This way it is easier to control the goods.

“Sometimes in a big laundry two or three people are in charge of four or five machines. That is too much for them,” he adds.

“We are in a project with a big laundry at present to convert it into a number of smaller ones. The installation will be in May.”

The change must be good for business, he says. He is looking to supply machines taking 15-30kilos instead of 200kilos or more.

The bosses of some hospitals and care homes are even thinking of ensuring quality by running on-premises laundries.

Generally bed linen is sent to outside laundries, though more care homes are having to conform to environmental legislation and wash their mop heads on the spot. Belgian hospitals and care homes are the source of yet more business. Because of recent legislation more hygienic equipment is in demand.

Business from the smaller laundries in Belgium is emphasised by Philip Streitz, a director of the company that distributes machines made by the German manufacturer Kannegiesser and equpiment by USA-based American Dryers.

Streitz says this business growth arises partly because a younger generation is taking over ownership and is buying new equipment to deliver a better service in a highly competitive sector.

The new owners are finding it unrealistic to drop prices further and are choosing to offer quality to win and keep business.

Sorting systems are another growth area for the laundry equipment sector. They are the means of handling work wear more efficiently. Streitz reports that laundries that were once processing 7,000kilos of private linen a week now get through 35,000kilos.

A further sales boost has come from the response of laundries to the rising costs of water and energy. Laundries are investing in filtering equipment, which allows water to be re-used, and heat reclaiming equipment to pre-heat incoming water.

Some industry experts say the smaller laundries are having a hard time because the cost of installing water treatment equipment. Their reaction is to sell to the bigger companies, says Frank De Meulemeester, the Belgian director of Christeyns, which supplies laundry chemicals

De Meulemeester expects to see even more consolidation in the next five years as the environmental legislation becomes tighter. For the present he is pleased that Belgium has a good mix of small and big laundries. He believes that is the reason why the Christeyns turnover in Belgium was 5% up last year.

A bright spot in the Belgian market, and to some extent in the Netherlands, is the proliferation of coin-operation shops. It is happening because there is a mix of students, particularly exchange students, immigrants and people living alone without their own washing machines. Indeed, some apartments being built are small and cannot take a great deal of domestic equipment, and some blocks are prevented by law from housing washing machines because they lack ventilation.

In the Netherlands the stagnation that was evident in the laundry business a year ago appears to have passed. Rob Zeedijk, a director of the distributor Netherlands Laundry, finds the market stable and improving gradually.

“I think people have more confidence in the future,” says Zeedijk. He regards the economy as “a little better” and says many companies are now investing. Two growth sectors boosting business are health clubs, which have been becoming more popular for several years, and the maritime industry. Business is being created by the North Sea drilling rigs and shipbuilding. “In Rotterdam new ships are being built,” says Zeedijk. “The companies have order books filled until 2009.”

The owners of the Dutch care homes are renovating premises and new homes are being built to serve an ageing population.

Most of these establishments in the Netherlands have laundries on site but business is not actually expanding because the companies are short of money, says Zeedijk.

Economical use of water is providing good business in the Benelux countries for the laundry equipment manufacturer Jensen-Group. Water prices are driving companies to buy the equipment that allows them to re-use the water and harness the heat, and some plants have cut consumption to three litres per kilo, says Desmet Jan, Jensen’s central and eastern Europe sales director. In the past year Jensen has installed systems at three laundries in the Benelux countries. Other laundries, says Jan, are going for more automation. This cuts labour costs and makes them more competitive.

One trend noted by Jean-Baptiste Van Damme, the sales and marketing vice-president of the manufacturer Primus, is the switch from outsourcing to OPLs. He says customers are considering installing their own laundries because the bigger operators give them too little attention.

At the same time in the Netherlands and latterly in Belgium hospitals have merged and have greater bargaining power, forcing laundries into more competitive deals, says Raf Vanmechelen, chairman of the St-Joris Laundry.

Manufacturers also note that ironers heated by gas instead of steam provide important business, and the trend means business is going well for Lapauw.

The demand is being boosted by the Belgian and Dutch governments, which offer tax cuts if the gas-heated version is used.

Two developments dominate the Luxembourg laundry market at the moment. One is the new state-run laundry using only prisoners as staff. Jan says: “Our customers are worried because the laundry has cheap labour. The motivation of the staff is very low too.”

Perhaps the state laundry’s competitors need not worry. Vanmechelen reports that orders are not plentiful. The laundry has some machines that have never been used a year after the opening.

The other development is a state-of-the-art laundry, in the private sector, that is due to open in April. This plant, run by Pedus Lavador, will have a weekly capacity of 70tons.

Manufacturers are less optimistic for the drycleaning market in the Benelux countries. Drycleaners are still closing down, and for the moment there is no sign of any increase in business, says Marco Niccolini, who is the general sales and marketing manager at Renzacci and vice-president of the company.

One problem, says Niccolini, is that the drycleaners are buying German models, which have many features not needed to meet European Union standards.

This, he says, has bred confusion in Europe, which is not good for the drycleaners or their suppliers, except the German ones, of course.

Niccolini claims that the German machines are particularly expensive and will lead more shops to close for no good reason.

Already the regulations are becoming too much for some drycleaners and they are closing in large numbers, he says. The increasing popularity of washable clothes is another reason why the industry is shrinking. Niccolini protests: “The authorities are making the incredible mistake that washing with water is ecologically better than drycleaning. Yet the chemicals used in washing go into the environment.”

Niccolini expects that in the circumstances more laundries will open while the drycleaners close.

The drycleaning market, however, seems to be saturated, even though thousands of shops have put up the shutters, says Valerio Gatti, export manager of the manufacturer Firbimatic. He believes the market will remain calm for two or three years at least.

However, Firbimatic has come up with a possible answer to this becalmed market.

The company has designed a machine that uses water and hydrocarbon and can be used for washing and drycleaning.

The advantages, says Gatti, are that it makes economical use of floor space, it is easier on cost, and it means drycleaners need to buy only one machine. Drycleaners need to buy only one kit of spares and employ only one person to do the service. The machine is already in use in the UK, Italy, North America and Russia. It has yet to be taken up in the Benelux countries but Firbimatic reports some interested customers.

The whole market is increasingly being overshadowed by environmental legislation, and Niccolini at Renzacci forecasts: “There will have to be machines to treat the water before it is expelled into the environment.”