WAR ZONE Textile care sector battles to
Russian laundry and drycleaning sector under pressure… Both Russia’s and Ukraine’s textile care industries keep up the offensive but it is hard going, as Eugene Gerden reports
he Russian laundry and drycleaning sector is having it tough these days, as ever-tightening sanctions and the growing isolation of the country in the international arena continue to put on serious pressure. Despite the fact the market shows stable growth rates this year, most analysts believe its long-term prospects are gloomy due to the ongoing deterioration of the Russian economy, which is experiencing serious pressure from huge military and industrial demands. According to the only official data available, the share of military spending in the Russian state budget is estimated at 40-50%. However, in reality, these figures are in the range of 70-75%. That has a negative impact on the majority of civil segments including laundry and drycleaning and may lead to a sharp drop in the near future.
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Still, the market shows a generally good dynamic, while, according to data from the Russian research agency AnalyticResearchGroup and some independent local analysts, the market has grown by up to 40% since February 2022 and is currently estimated at about RUB 20 billion (US$200 million).
The positive dynamic is mainly due to record inflation in Russia, which contributes to the constant increase in prices for drycleaning and laundry services and, consequently, the growth of the industry both in volume in value terms. In addition, the development of the market is supported by the introduction of new technologies, as well as the expansion of the range of services provided by both domestic and foreign players, many of which continue to work in the Russian market while trying not to advertise their ongoing presence in Russia.
While this is the highest figure in the past 30 years, most analysts expect the industry will face serious problems at the beginning of next year. One of the biggest will be associated with the ever-
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deepening shortage of personnel in the sector. Already laundry and drycleaning services, and Russia in general, is facing the deepest shortage of personnel since the end of World War II, caused by the ongoing mobilisation in Russia and the massive exodus of migrants from the country, which historically accounted for a significant part in the overall structure of the workforce employed in the industry. As for mobilisation, according to preliminary estimates, the industry lost about 30% of its workforce as a result of active recruiting of troops to the Russian. Such recruiting usually involves offering record contracts for people with monthly wages seven to eight times higher than average salaries in Russia at present. That leads to their massive exodus of professionals signing contracts with the military. As for migrants, many preferred to leave Russia due to the high threat of mobilisation and ever rising nationalistic threats, caused by a recent terror attacks in the country, such as Crocs City Hall attack in Moscow this March.
In the meantime, in addition to the lack of personnel, there are serious risks of a significant drop in demand for laundry and drycleaning services, which is expected to be observed in Q1 and Q2 of next year. According to data from the Russian Ministry of Economy, despite the current consumer boom in the nation, purchasing power for many Russians has significantly decreased in recent months (by up to 30-40%). That was caused by the rouble weakening, the growth of the key rate by the Russian Central Bank and other factors. Representatives of most of global laundry and drycleaning operators told LCNi about the suspension of most of their operations in Russia and the end of supplies of their machinery and equipment to Russian laundries and drycleaners. Prior to the beginning of the Russian-Ukranian war, Russia was one of the major markets for them (at least in Europe).
Still, despite this, machinery and equipment is still supplied to Russia these days, being mainly carried via parallel imports. Most such deliveries are conducted via third countries, such as Georgia, Kazakhstan, UAE and some others. Despite the fact that the cost of such supplies is very high given additional logistics, transport and other issues, the demand for them from some leading Russian laundry and drycleaning networks (primarily those, which are located in rich Moscow and St. Petersburg) is high, while many of them are ready to pay more for highly efficient Western imports. In addition to equipment, the supplies of foreign chemicals for the needs of laundries and dry cleaners to Russia has significantly decreased, which forced some leading local players to establish their own production of such products. For example, Diana, one of Russia’s oldest and largest networks of drycleaner’s has recently launched its own line of products. “At the moment, there are 10 products for washing and cleaning. We continue to actively develop this area,” according to Elena Markevich, CEO of the company.
With the departure of foreign brands from the Russian market, the range of chemicals available in Russia has significantly decreased, although this niche is gradually being occupied by Russian companies.
In recent years a number of other domestic players has significantly increased the supplies of their chemicals for leading Russian laundry and drycleaners. An example is NEFCOPRO, which is considered as one of market leaders.
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