Investing in efficiency is vital for survival

Dark clouds are still hanging over Spain’s economy and the short-term forecast is not good. Although the worst is over, the country’s economy is expected to shrink further in 2010. Gross domestic product (GDP) is not predicted to grow until 2011 – and then only by around 1%.

Reduced investment in infrastructure has led to a decline in construction while unemployment has risen, affecting both individual and business expenditure. Spain’s unemployment rate reached 17.9% in 2009 and this year is expected to climb to around 20%.

There has also been a decline in the tourist market, upon which much of the textile care sector depends. Hotel occupancy rate was down by 2.84% in October 2009 compared to October 2008, while overnight stays had fallen by 1.74%, according to Spain’s National Statistics Institute (Instituto Nacional de Estadística).

People are not going out to eat in restaurants as much as they used to. Although Spain abounds in low-price restaurants that cater for lunch, most of these do not use table linen.

In the higher-price establishments that do use table linen, business is down by as much as 80%, says Carsten Oesingmann from Kannegiesser España.

Volume in some laundries has halved as a result and many are finding it difficult to obtain money from their hotel customers.

Great pressure

As a result laundries face great pressure to cut prices in a competitive market where prices are already very low, says Oesingmann. He thinks a lot of small laundries will close over the next few months.

“In Spain there are a great number of small laundries which process around 2,000 – 5,000kg a day,” he says. “It is this kind of laundry that will disappear.”

Currently, there are few large industrial laundries in Spain. The self-service coin-op laundries tend to be concentrated in tourist areas.

“The coin-op sector, although a small market in Spain, is continuing its trend to moderate growth,” says Merce Bover from Girbau.

However, she adds that most industrial laundries are not operating at full capacity because of the reduction in demand from hotels.

“In contrast, laundry services in the healthcare sector are more stable as activity in hospitals has been maintained,” says Bover.

On-premise laundries are also common and a lot of small hotels still do their own laundry, although Oesingmann thinks this too will change as they find themselves having to become more efficient and cost-aware.

Outsourcing is growing, and, according to Ivan Colombo from Pony Italy: “Some companies are going even further, offering linen management in the hotel or a complete linen service, which includes room cleaning.”

Oesingmann at Kannegiesser España thinks the future will see big changes in the sector as businesses find themselves having to adapt to higher energy costs and what is likely to be a tighter economy.

Although the economy is set to improve, it may be difficult to pass on any cost increases to customers.

He believes that it is unlikely that the construction industry will return to the level it once enjoyed. This will have an impact on consumer spending and customer numbers.

“The Spanish government provides subsidies to keep energy costs low but these won’t continue,” he says.

“So laundries will need to invest in machinery to control energy costs. Those who can’t invest won’t be able to continue. Laundries will need to become bigger.”

However, Oesingmann warns, a simple solution is often the smartest. High production is not always needed. In a country where small businesses are predominant, there is a lack of skilled technical staff.

Therefore, he advises: “Sometimes it is better to have four standard ironer lines than three high-speed ones as many companies do not have staff with the technical skills to operate the high-speed machinery. ”

Finding finance

Finding finance in the current economy is not easy. Those who want to invest in machinery to make their business more efficient are often finding that the banks will not lend them the money.

“This has affected new investments because not all owners have the money to pay cash for the machines they need to buy,” says Eduard Colomer from Domus.

Domus provides machinery to laundry and drycleaning sectors in Spain and both types of business are facing challenges.

According to Colomer, some businesses are investing a minimum amount to keep them going while they wait for better times when banks will be more open to lending money. Others are turning to second-hand machines or continuing to use the same equipment.

Drycleaning sector

Like the laundry market, the drycleaning sector in Spain is also dominated by small, family-run shops, the majority of which have one drycleaning machine and on average two employees.

According to Josepa Moral from drycleaning equipment supplier Unisec, there are currently around 4,000 drycleaners in Spain. Most also offer a laundry service.

In recent years, the number of franchises has grown, mainly in the bigger cities. However, these are also often small businesses with only one or two shops.

Although some have enjoyed success, others have failed.

Customers turned to the franchises when they found they could get their drycleaning done at lower prices than in a traditional shop.

“What they didn’t think about was that, frequently, they were also receiving a lower quality service,” according to Colombo at Pony Italy. “The traditional drycleaners had to adjust their margins, but they couldn’t lessen their quality or service.”

This had a positive effect in that it increased the number of people using drycleaning services, he adds.

“However, a significant number of franchises have closed because their business didn’t go as well as promised and the franchiser’s conditions were very strict.”

Jose Luis Basanta from Magarpa, which is the distributor for Ghidini products in Spain, thinks franchises have done a good job in helping to modernise businesses in Spain.

“However, many have also not done the drycleaning profession any favours,” says Basanta.

One other reason the small shops can survive is because, at the moment at least, the pressure to comply with environmental and other legislation is not as strict in Spain as it is in some other European countries such as Germany. Small family-owned companies are often not as tightly controlled as the larger companies.

In the current economic climate, it is unlikely that the Spanish government will start putting pressure on already struggling businesses to comply.

However, once the economy recovers, this is likely to change and that is when many small businesses may be forced to close.

Awareness of the need to comply with environmental standards is growing and that is beginning to impact on the type of equipment that drycleaners, in particular, are selecting. However, the trend at this stage is slow.

According to Josepa Moral at Unisec, 99% of drycleaning machines in Spain use perc but there has been a recent, small shift towards alternative solvents, such as hydrocarbons and silicons.

Shift to wetcleaning

For those facing financial challenges, the cost of hydrocarbon machines is still very high and, according to Eduard Colomer at Domus, they are still in need of some improvement.

However, he has noticed a gradual shift towards wetcleaning, an area in which Domus specialises.

“Many drycleaning shops are now interested in wetcleaning systems – and we are now beginning to enter this sector, step by step, with our wetcleaning systems and tumble dryers,” he comments.

Merce Bover at Girbau has also noticed a gradual shift towards wetcleaning, as recognition of the need to comply with environmental standards takes hold. However, she says that in small family-owned drycleaning businesses, the shift to wetcleaning is still slow.

Companies are beginning to recognise that to survive, they need to invest in machines that not only meet environmental standards but are also more efficient.

“They know that investing in equipment translates into reduced costs and a substantial increase in productivity.

“This allows them to become more profitable and competitive to come through the current economic situation with guarantees for the future,” Bover adds.

Jose Luis Basanta of Ghidini distributor Magarpa agrees. “Times are changing and companies have to adapt to new ways of working which reduce the impact on the environment in which we live – in the end we will all benefit from it.”

Basanta is optimistic about the future of the industry. “Laundry will always be needed.”

Transition

Basanta continues: “The drycleaning sector is in a state of transition because there are a large number of professional proprietors who have retired, or are on the point of retiring, and not many of their children want to continue in the profession.”

He adds: “I think other people, with different ideas and ways of doing things, will enter the profession and that could bring great benefits to the sector.”

Carsten Oesingmann also thinks there is great potential in the textile care sector in Spain.

Although he thinks the economic situation will bring about the closure of some laundries and drycleaners, Oesingmann believes the sector will be forced to become more efficient and suppliers will be there to help them achieve that efficiency.

It is clear that the next year will be tough for Spain’s laundry and drycleaning businesses.

Many may not see it through but those who do survive will come out stronger.