IKEA's Ambitious Goal: Doubling Business and Sourcing in India, Says Deputy CEO and CFO Juvencio Maeztu

14 Oct, 2023

IKEA's Ambitious Goal: Doubling Business and Sourcing in India, Says Deputy CEO and CFO Juvencio Maeztu

India has emerged as a realm of boundless potential for IKEA, and the renowned brand is prepared to make substantial investments aimed at doubling its business annually. In an exclusive conversation with CNBC-TV18, Juvencio Maeztu, Deputy CEO and CFO at Ingka Group and IKEA, unveiled the company's ambitious plans for India, highlighting the deep emotional connection he holds for the nation.

Over the past decade, IKEA has made significant commitments to the Indian market. Maeztu emphasized their delivery on promises, alluding to their 2013 announcement of a ₹10,500 crore investment, and their successful achievement of 30% local sourcing. Although their goal was to have 50% female representation in the workforce, they have reached 46%, acknowledging room for further improvement.

Focus Areas for IKEA in India:

IKEA has been an integral part of the Indian retail landscape for five years, and it's already contemplating the next phase and how substantial it should be. Maeztu remarked that "IKEA loves India, and Indian consumers love IKEA," recognizing the current juncture as a "sweet spot" for the brand. This alignment between IKEA's offerings and India's burgeoning economy provides a unique opportunity.

He identified three pivotal focus areas for the future:

1.Developing IKEA Retail: Ensuring the availability of certified raw materials to integrate into the global supply chain.

2. Enhancing Product Quality: Establishing international standards to elevate the quality of products and facilitate global integration.

3. Becoming a Global Hub: Fostering international standards to improve product quality in India and seamlessly integrate into the global supply chain.

The Future of IKEA in India:

While IKEA has sourced from India for four decades, its foray into retail began with the opening of the first IKEA store in 2018. Since then, it has expanded its footprint to include Mumbai and Bengaluru, with three flagship stores, two city stores, and a robust online presence.

Currently, IKEA is in the process of devising a plan for a second phase of investments in India. Although Maeztu didn't specify the exact amount, he confirmed that it would be substantial. This decision follows the company's remarkable growth over the past year, with the objective of doubling its business in India each year.

"We are now investing in Gurugram and Noida with two very big shopping centers. The Gurugram center will hopefully come in less than two years, followed by Noida and then many more," Maeztu revealed.

Maeztu underscored India's tremendous potential, emphasizing that "India has a fantastic opportunity to be a manufacturing hub for the entire world, with the value of sourcing estimated to be more than ₹5,000 crore." This value is something the company believes it can double.

IKEA established a global operations center in Bengaluru in 2020, primarily focusing on digital development, innovation, and operations. Maeztu highlighted that this hub is involved in exporting financial, digital, and HR services. As part of its digital strategy, the hub is developing digital capabilities in India, which are being implemented not only in the country but also globally. This includes work on the 'app of the future' to streamline the shopping experience.

Beyond Retail:

The upcoming phase of investment is not exclusively dedicated to retail expansion. IKEA's broader vision for the Indian market involves creating a holistic presence that combines sourcing and manufacturing with retail and additional services.

"We want to see how we can combine production and sourcing possibilities with retail growth. We are also exploring how to grow faster and deeper in the markets we're in. It is critical for us to secure that by talking to suppliers, industry, and the government to also support exports. If we don't build an economy of scale, we are limiting our growth possibility," Maeztu emphasized.

In addition to strengthening its retail presence in India, IKEA places a significant emphasis on sourcing and production as vital components of its growth strategy. Currently, IKEA sources 30% of its materials locally in India, with ambitions to increase this figure to over 50%. The brand aims to extend its footprint further and cultivate more partnerships with Indian companies.

Maeztu disclosed that IKEA collaborates with 65 suppliers in India, which significantly impacts around 500,000 workers within the supply chain. He praised the progress in enhancing quality standards and stressed the importance of establishing the right international standards to ensure scalability and consumer welfare.