Opportunities opening up in German Market

Generous spending in Germany has to be good news for the laundry and drycleaning industry and the economic pundits are generally upbeat, although there is a mixed bag of predictions at present.

The forecast is that Germans are likely to continue spending, even though the latest government figures show retail sales fell by a modest 1.6% between January and February.

The Merkel administration appears to be keeping house pretty well. The government deficit was wiped out last year and small surpluses are forecast for next year. This could mean lower taxation and a little more disposable income in consumers’ purses. Falling unemployment is another good sign – the jobless figure was 110,000 lower in March, giving an overall statistic of 8.4%.

Optimism, however, may be premature because economic growth is expected to slow from last year’s 2.5% to 1.9% this year, though it could surge back to 2.2% next year, the Economist Intelligence Unit says.

Other black spots are export performance, which is flagging, and pay settlements, now going up. Last year wage rises averaged 2%, the highest since 2004.

Regardless of events elsewhere, laundry equipment manufacturers still regard Germany as a keen, competitive market.

The country is Europe’s biggest market, bulging with more than

80 million people and, as a result, home-grown and foreign manufacturers are crowding in to grab the business.

This market is also quite demanding as many customers have specific requirements. Juan De Cruz, manager of Girbau Deutschland, the German arm of the Spanish manufacturer, says: “The customers are special – they want specialised solutions for their laundries.”

Yet equipment manufacturers find Germany is a profitable market as well as a competitive one.

De Cruz says Girbau is experiencing growth in healthcare business even though the building of new care homes is slowing.

Kannegiesser says that there are three forces spurring demand for laundry equipment: saving resources, logistics and automation.

The reasons for the German market’s bright outlook are many. New machines are being required in healthcare partly because clean and dirty items must now be kept separate. While this may result in an extra cost for laundries, it benefits their suppliers. Alliance International, owner of the?Ipso brand is enjoying an increase in business here, but Ipso sales director John Balman believes it is largely due to Germany’s ageing population – more people are being accommodated in care homes which is making laundries busier. “That’s the real driver for growth,” says Balman.

Reducing consumption

A combination of environmental awareness and rising prices makes water and energy consumption a “hot topic”, says Balman.

The demand for equipment built to consume less water and energy has led to a surge in sales – more good news for manufacturers

Kannegiesser believes the need to reduce costs and environmental awareness present the biggest opportunities in the marketplace and these are a challenge for both laundries and manufacturers. The company aims to develop machinery that minimises consumption and maximises productivity. Examples include washers with built-in water recycling and faster and better water extraction with high-speed centrifugal exttractors or high pressure membrane presses.

Solutions have to be thought of in terms of a combination of machines, so ensuring that customers have an understanding of logistics will be a challenge for the future. Hence Kannegiesser’s focus on net-linked controls and management systems.

German launderers will also need to improve productivity, especially as customers are paying the same price for services as they did ten years ago, says the company. The answer will lie in automation.

Hospitality growth

The laundry business has recently been boosted by demand from the country’s hotels and restaurants. The rising popularity of table linen in restaurants has provided laundries with increased business. Hotels are also sending more towels and bathrobes to the laundries.

Such spurts in hotel and restaurant business is, of course, good news for textile rental companies. These laundries are grateful for the renewed growth in the German economy.

As it grows, the market is showing some changes. Jan De Smet, regional director of Jensen-Group, says: “We have the impression that there will be fewer laundries but bigger ones. Even a family laundry is doing 40 tonnes a week.”

The tendency to outsource continues. But German care homes may be the exception.

Rainer Leddin, marketing director of Stahl, the German manufacturer of heavy-duty washer-extractors and finishing equipment, finds that after a phase of outsourcing their washing, more care homes are preferring to do the work in their own on-premise laundries.

More environmental awareness is in the air too. Leddin emphasises that Stahl’s machines are built to last and that their parts must be put to good use at the end of their life in the laundry. “Stahl products consist nearly completely of steel and high-grade steel,” he says. “The few plastic parts are likewise recyclable.”

Laundry manufacturers agree that Germany today offers fairly rich pickings. Even in the hospital sector, where growth is slowing, Leddin refers to “a pleasing increase in new customers”, and Balman of Alliance says: “We are optimistic.”

Fewer drycleaners

There is less certainty about the drycleaning market. A clear understanding of the market is difficult because equipment suppliers offer somewhat differing opinions.

First, there is the hopeful view of Thomas Zeck, marketing and distribution manager of the chemicals company Kreussler: “The market is coming to a point where it is stable. We hope the shrinking is finished.”

Joseph Reuter, general custom manager of Fresenius Satec USA, is similarly hopeful: “It looks as if the business is coming back a little. Drycleaners are reporting this. Their turnover is better than last year.”

In contrast, Walter Mück, marketing and sales manager of the manufacturer Böwe, says the sector is still “slightly shrinking”.

One thing is definite. There are surprisingly few drycleaning businesses for a country with a population of more than 80 million. Jürgen Tagge, head of the drycleaning competence centre of the Hohenstein Research Institute, recalls the 1970s and 1980s when Germany had 10,000 drycleaners. The number has gradually fallen to 2,500, and Tagge believes the sector is still contracting.

The decline probably started when garment producers started making so many washable clothes. It did not help when state-run advice centres recommended people to buy clothes that they could wash at home. “These appeals to people definitely fell on fertile ground,” says Tagge. The attraction was that doing it yourself was cheap, while drycleaners were having to raise their prices.

Whether the sector is shrinking or growing slightly, or is at a standstill, Zeck has stern words of advice. The market has to change to suit its customers – and this is a Europe-wide need.

Zeck tells drycleaners they must offer a service covering the whole range of clothes. They must not only continue to serve the established customers who bring in their formal wear for cleaning but also people who favour casual clothes. Everyday shirts and trousers must go into the machines as well as business suits.

That’s not all. Zeck says drycleaners must communicate – they must let customers know they offer a full service. Zeck believes about half of Germany’s drycleaners are capable of changing and a third of them have already changed.

Methods are changing too. Equipment is being replaced, and every second new machine uses hydrocarbon, says Mück. Perc is on the way out and that should benefit the replacement market.

Wetcleaning is a growing trend. Here the indications are in the sales of the appropriate chemicals, and Zeck reports “a strong increase” in products for wetcleaning.

Certainly, the suppliers are agreed that drycleaners will have to adapt to a changing marketplace to survive and thrive. Reuter is quite blunt. Operators will have to renew their machinery or close.

Costs are always climbing, customers are becoming more price-conscious – and Tagge even thinks disposable income is falling, whatever the official figures indicate. He adds: “Net income is spent particularly on the really important things of life, or on the things that have the most fun factor.”

Drycleaners now have yet another challenge. Reuter at Fresenius Satec USA has noticed that some laundries are diversifying into drycleaning. He says: “The bigger laundries are trying to get some of the business. It is good news for us, of course, and it is easy to negotiate with the big laundries.”

Even though drycleaners usually trade on the quality of their work, which is becoming more important to the German consumer, the lower prices that a laundry can charge are a worry, particularly if a small trader has become complacent. “And some drycleaners are still sleeping,” warns Reuter.

Uncertain times for textile care

Speaking at a press conference for Texcare International 2008 earlier this year, Friedrich Eberhardt, vice-president of the German Textile Dry Cleaning Association (Deutscher Textilreinigungsverband-DTV) said legal regulations, international agreements and changes in consumer behaviour have had an impact on the textile cleaning industry.

“A rise in the population’s living standards may have stimulated the desire to buy textiles, but this has not translated into more demand for textile care. There is no doubt, however, that we have failed to exploit the full potential offered by the market. It is possible to raise the stock of textile cleaning through target-group-specific advertising campaigns and

high-quality service standards.”

The trend towards concentration within the industry will continue, while new legal regulations will continue to be a burden. “Passing on higher costs via price rises is not an option, given the overall situation,” he added. “The only possibility, therefore, is higher productivity, although job losses are also pre-programmed in our industry.”