The conversations continue here in Davos, and joining us now is someone who is quite familiar with India and with CNBC TV18, Jesper Brodin, the CEO of the Ingka Group, IKEA as it's popularly called, joins us now. Jesper, thank you so much for joining us here on CNBC TV18. It's great to see you in Davos. We last spoke when you were in Delhi taking stock of your India operations. Sales expansion has been a bit slow and losses have widened. Is that a cause of concern? How do you see that shaping up from here on?
Very good, good morning Shereen. Nice to see a sunny day in Davos. It's part of the plan. So I always have said that we come here with a long trend in India, and IKEA is a long-term oriented company. So we are investing in setting the preconditions for long affordability in the country, and we have invested and we will keep investing. And we are very proud of the journey here.
But at this point in time, while I understand the need to invest because you are setting up new stores, and we'll talk about that in just a second, but what about demand? What about consumption? Are you seeing any indications of any weakness at this point in time?
No, customers love India. We have 180 million visitors online, and then we have a lot of visitors in our stores. Our stores in Mumbai, in Hyderabad, in Bangalore are welcoming thousands of very good people who want to have a better life at home.
The expansion plans now, and the expansion in the north specifically, let's talk about where things are and how soon you see those stores opening, whether we talk about Noida or Gurugram.
Yeah, as I said, we are operating in Mumbai, in Hyderabad, and Bangalore. We are building as we speak two very big shopping centers, one in Gurugram and the other one in Noida. And this big shopping center will have an IKEA store. It's already under construction. It's an exciting project, and we will soon open online sales of IKEA in Delhi NCR as well. At the same time, we have offerings online in Gujarat, in Telangana, in Andhra, in Karnataka, and we have opened for now 62 new cities for more online business. And then we are exploring and scouting for more opportunities to open more physical stores in these states and also in new states as well.
So by when do you see yourself identifying the new states, the new cities that you could set up your physical stores in? What's the plan there?
Yeah, the plan is of course more in Delhi NCR on top of the one in Gurugram and in Noida. We want to open more in Delhi NCR, we want to open more in Karnataka, we want to open more in Mumbai, in Maharashtra, we want to open in Tamil Nadu as well. So step by step we are expanding.
So over the next five years, how many stores could we be talking about for IKEA here?
Depending on the availability of the land, the more the better, but we need to find the right location. Location, location, location is important.
No, I would imagine. But are you also going to experiment with formats, with store sizes? You did that in Mumbai, it didn't work out for you. So the tried and tested large format route continues to be the route?
Yeah, we tried different setups, and one didn't go, but the other one is very successful and it's working. We are also exploring different city formats in different parts of the world. City stores we have opened in Barcelona, in Tokyo, in London, and we want to do more of this in India. Of course, I think it will be a combination between the big traditional stores, which is for us very important because the store is at the heart of IKEA, with smaller size, not too small, and then on top of that the online. It's a true omnichannel.
And you certainly seem to be picking up the pace as far as e-commerce is concerned. I mean, you talked about 62 cities. By when will we see these 62 cities have your online operations?
It's already, we are expanding, and we are now more than 30%, around 30% of the sales in India are online. 70% are traditionally store. So we are expanding in both at the same time. It cannot be that it's only a store or only online, it's a combination.
What about sourcing and the plans as far as sourcing is concerned from India over the next few years?
Very good question. We are sourcing 30%, so we are very proud. We are sourcing 100% of the food range, which is fantastic. And we are now determined to go to 50% now. And we are working now in really good discussion and conversation with the government to try to have a harmonized standard so we can produce more in India. So we can both use for domestic consumption but we can export more from India. India only accounts for 1.5% of the global export of furniture, not in general, only 1.5%. And can we agree that India deserves much more than that? So it's a fantastic opportunity, and we are in good conversation with the government to really set up India as a sourcing hub as well.
Well, what will it take to position India as a sourcing hub? You said that you're in conversation with the government in order to be able to achieve that objective. What are the specific asks? What are the enablers that you want the government to put in place?
Basically, it's harmonization with international standards. So factories in India can also use the same production and the same facility to have the same product outside. So if standards are harmonized when it comes to the product requirements, that helps massively to do the export. There are, I think, more than 40 IKEA suppliers, and the IKEA sourcing team now is actively looking for more as well. So we feel very positive actually about the development.
Well, you're very positive on your continued expansion plans in India. You're in conversation with the government, and of course you've been a long-term India observer but also a passionate India lover. You know, what's been the big changes that you've observed in the way that Indians are spending, what they're spending on? What have been some of the surprising trends and how you're factoring those into IKEA's plans?
Yeah, fantastic. I call myself an Indian ambassador in the business community, and you know, India is in my blood after living some years there. But what we have experienced is India has a love for cooking and eating, love for family, love for children, and all of these are shaping life at home. We have visited many homes in India. We are learning a lot from India. So it's not only how can IKEA contribute to a better India, it's how India is also making IKEA better because we are learning a lot. And the idea is of course to keep offering affordable and sustainable life at home. We also feel very proud of our sustainability agenda. Do you know, Shereen, that 90% of the deliveries are EV, and it's 100% already in Pune, in Hyderabad, or Bangalore. And then we are this year going to be 100% in renewable energy in our operations in India. And then we have achieved 80% recycling already in India. So it's more how can we combine affordability and sustainability together for a better life at home.
So that's as far as India is concerned, but what about the global outlook? You're at the start of a new calendar year. What does the demand environment look like in 2025? What do you see as the opportunities and some of the big risks in some markets?
There's a decline of the home furnishing sector, but IKEA is growing. IKEA is growing despite having heavily invested in price reduction. So after COVID and after all the impact in supply chain, inflation impacted the life of many people over the world. That's why we were very brave last year and we decided to invest 2.1 billion euros in lowering prices of IKEA products in all the markets where we operate. And now we see that despite creating impact in the result, of course, it was a good decision because this is another proof point that IKEA is siding with the many people. So we felt very proud of that decision, and the customers are really saying that to us.
Is there room to drop prices any further?
We will always keep working to lower costs. IKEA is really a low-cost company, and the reason to have low cost is not to have more profit for any shareholder, it's to reduce the prices for the customer. Our net profit, 85% remains in the company to keep expanding and making IKEA more affordable, sustainable, and 15% goes to the shareholder, which is a foundation to support the charitable activities of IKEA Foundation. So there is zero euro that goes to the private pocket of any shareholder. So we internally say without low cost we can never achieve our purpose.
Well, yes, and it is an interesting model that IKEA follows. But you know, we're here with President Trump taking office in a few hours from now. What's the expectation on what that could mean as far as business is concerned?
Yeah, let's see. Everybody's expecting the first signing, but for us, it's always a long time. Of course, IKEA is built on the long time, and it's in the long time where we are really committed. We communicated more than a year ago actually that we were investing in the US as well. So our agenda will not change, and we will keep growing in that market as well. But let's see how it is. But the most important thing is to always have a long-time view in everything we do.
You're always a pleasure. Many, many thanks for joining us. We wish you the very best of luck with IKEA's expansion plans in India, and we look forward to seeing you back there.
