The Dynamic Belgian and Dutch Textile Rental Markets

"Dynamic", like the word "strategic", is often used indiscriminately, not meaning an awful lot but looking, well, dynamic. In this case, I mean what I say. These two, not too small but until recently relatively stagnant, textile rental markets have become dynamic. They are changing fast and innovating. Previous LCN articles on "Benelux" (I am declining to continue the myth of the "Lux") have highlighted the slow developments in these two markets, and especially the role of the smaller companies in depressing prices, especially in Belgium. In the words of a well-known song "The times, they are a-changin".

Before taking a closer look at these markets, it will be helpful to consider recent economic and social developments in both countries, which in fact show strong positive changes from earlier slow-growth, high unemployment economies.

According to the latest statistics and reports in "The Economist" newspaper, Belgium and The Netherlands are two of the stronger and faster growing OECD economies. With populations of 10.2 and 15.6 million respectively, Belgium and Holland rank among the strongest industrialised economies today in terms of current and projected growth of gross domestic product, industrial production, creation of new jobs, growth of the service sector and competitiveness. In its May 20, 2000, edition, "The Economist" ranked The Netherlands as number 1 for "Best Business Environment" projected for the next five years. For the period 1995-99, Holland was in fact ranked number 3. Belgium, a more laid-back country, as many of us are pleased about, ranks thirteenth, still well ahead of Austria, Italy and Japan. In a ranking of 47 major countries by level of competitiveness in 1999, The Netherlands came fourth (behind the USA, Singapore and Finland) and Belgium was 20th. In terms of industrial and labour relations, Belgium and Holland enjoy better labour relations than most of their fellow EU member states (only Germany and Austria have fewer days lost through labour unrest). Finally, and with mixed feelings for those of us in the greying zone, both Belgium and, to a lesser extent, The Netherlands, have ageing populations. In 1998 around 17% of Belgium's population was over 65 years of age (only Italy was higher). In Holland the figure was nearing 14%. The economic and social implications of "ageing economies" are a source of concern, although this phenomenon may actually have a number of silver linings.

What importance does this potpourri of statistics and rankings have for the textile rental markets in these two countries? Significant improvements in both economies over the last five years should be reflected in their respective textile rental markets. For example, the ageing of the populations should be helping to eliminate many of the "moma and papa" laundries described as a source of inefficiencies and price disparities in previous LCN articles on the Benelux markets. Strong growth in GNP and rising productivity should ensure that efficient textile rental companies have a good chance to expand and to continue to consolidate in both markets.

Do recent developments support these expectations?

Belgium

The simple answer is, "Yes"! The longer answer is that even dynamic changes require time to work their way through. One of the most important developments in both markets occurred in March 2000 when a major European investment company, Industri Kapital, bought a laundry in Holland and two in Belgium and consolidated them as a major new Benelux company called Fortex. Rob van den Akker, the Chief Executive of the new group announced: "This merger gives us the resources and critical mass to continue the rationalisation of the sector in the Benelux. We are interested in making more acquisitions to increase efficiency, improve regional coverage and extend the range of services offered to our customers. We now can accelerate the transformation of our company from an industrial laundry into a textile rental logistics company."

This type of rhetoric does indeed throw down a gauntlet to companies such as Rentokil Initial, the clear leader in both markets, Berendsen, which is the second biggest operator in Holland, and three other major European companies with operations in Benelux, Haniel Textile Services (CWS and Boco), Elis and Mewa. In effect, Industri Kapital considers Belgium and Holland ripe for rationalisation and consolidation. This is of course what Rentokil Initial already did in Belgium in 1998 with the purchase of Euroblan and its consolidation with Friswit. Rentokil Initial now controls between 30% and 40% of the Belgian rental market, which is estimated to total between Euro 200 and 250 million. The total size of the market causes confusion mainly because of its fragmented nature and the under-reporting of small and medium size laundries.

According to statistics provided by ETSA (European Textile Services Association), Initial Friswit and Initial Euroblan, both 100% subsidiaries of Rentokil Initial, had total turnover in 1998 of BFr 2.6 billion (Euro 65 million). A further BFr 2.5 billion was divided among 5 companies. According to the latest available statistics, 76% of the rental market is divided among industry (mainly garments), 33%, healthcare, 28% and Horeca, 15%. The Belgian market appears to be growing again, after a considerable period of stagnation, especially in the industrial sector, with the closures of several large automobile plants. The service, health care and Horeca sectors, especially based on higher quality products and customer service, are beginning to fuel the textile rental market. This is certainly one of the considerations that will have influenced Industri Kapital to invest in this sector.

The outlook for the Belgian market is positive. Firms like Mewa and CWS reported already last year that they were experiencing good growth and foresaw continued progress in the future.

The Netherlands

If the Belgian market is positive, the state of the Dutch market and its outlook must be viewed even more optimistically. The Dutch economy has been performing at a high level for several years. Although manufacturing industry is declining in relative importance, the services, trading and Horeca sectors are filling the gap and fuelling a modest but positive growth in textile rental. The Dutch market is estimated to total around DFl 1 billion (Euro 455 million). The market divides roughly 40% healthcare, 20% Horeca and 40% industrial, including workwear, towels, mats and wipers. The leading companies are Rentokil Hokatex with an estimated 20-22% of the market and Berendsen with 15-17%.

Two of the major players in Holland are in fact not individual companies. Dominating the Dutch healthcare sector with 25 laundries owned by 11 operators is the major franchise group, Rentex. This Dutch invention is even bigger in the German market, where 35 laundries operate under the Rentex franchise. Rentex's total turnover in Holland is estimated of the order of DFl 150 million, representing some 35% of the healthcare sector.

According to Mr Philippe Egyptien, manager of the Belgian and German operations of the Blycolin Group, this Dutch group controls some 40% of the Horeca textile rental market in Holland. However, Blycolin does not own one laundry! They were established in 1972 to rent textiles to the Horeca sector and today have around 1,200 customers in Holland. Blycolin organises and administers textile rental contracts for its customers, including purchasing the textiles, arranging all logistics, including contract washing done by some 70 private laundries in Holland. Blycolin, which appears to be the very image of a "textile rental logistics company", as referred to by Mr van den Akker earlier in this report, appears to have successfully taken the lead in Horeca textile rental in Holland. Blycolin say they now aim to follow the same route in the German market.

These are just some of the important developments in these two textile rental markets over the past two years. A closer look would show even more important changes taking place in the areas of technology, logistics and customer relationships. It will be very interesting and instructive to reconsider both markets in perhaps a year's time, to see just how strong and lasting the momentum of change has been.