How IKEA CEO Ingvar Kamprad Created One of the World's Biggest Brands
During the 1920s, Ingvar Kamprad sold matches. As a 5-year-old, he found that he could make a small profit by buying matches in bulk, then parsing them out individually. That same entrepreneurial spirit continued to push him, and in 1958 he opened his first retail location. In one swift move, IKEA transformed from a catalog and showroom concept to the familiar storefront that we know today.
Earlier this year, Kamprad stepped down from the board with a net worth of more than $50 billion, according to Bloomberg. Not bad for a kid who started out his global expansion by selling flower seeds in addition to those matches.
Last year, IKEA generated $32.6 billion in revenue and earned $3.8 billion, according to Furniture Today. The company that first opened its doors in Älmhult is now a massively complex international business, employing 139,000 people across the globe, and operating in 44 countries. Above all of this profit and employment sits a series of companies and groups that together form IKEA -- more on this in just a second.
The company's success has come largely from its strong branding. In its 2013 brand ranking, Interbrand valued IKEA's brand alone at $13.8 billion, making it the 26th most valuable brand in the world. A different 2011 study, focused on sentiment instead of value, found that only Williams-Sonoma had better consumer sentiment among big home store chains.
With such a valuable brand, IKEA has understandably decided to protect itself. It's done that by separating the brand from the rest of the weird web that comprises the IKEA corporate structure. The details of this setup were examined in wonderful detail by the Economistback in 2006. The long story made short is this -- IKEA makes a lot of money and no one knows where it all goes.
At the top is the Stichting INGKA Foundation, which owns INGKA Holding B.V., which owns the group of retail, strategy, and staffing businesses that make up the IKEA brand. Outside of that ecosystem, there are two other foundations that oversee the philanthropic work that the business performs and the group's investments.
Apart from the investments, the strategy, and the retailing group, IKEA also has a division that holds just its brand. That company is, well, here's what the Economist said:
The IKEA trademark and concept is owned by Inter IKEA Systems, another private Dutch company, but not part of the Ingka Holding group. Its parent company is Inter IKEA Holding, registered in Luxembourg. This, in turn, belongs to an identically named company in the Netherlands Antilles, run by a trust company in Curaçao. Although the beneficial owners remain hidden from view—IKEA refuses to identify them—they are almost certain to be members of the Kamprad family.
The magazine found that the system in place allowed Kamprad -- or his new replacement -- to maintain complete control over the business in almost every situation. The business has written its bylaws so conservatively that a takeover is almost impossible. This complexity has the side effect of effectively making the business permanently private. An IKEA IPO is unthinkable in its current form.
What that means is actually not as clear as it would seem. Kamprad gave his shares to the non-profit Stichting Ingka Foundation back in 1982, so he doesn't really own the company. However, because of the structure, he also was calling all of the shots until he stepped down earlier this year. That included what the money was spent on, how the brand was represented, and who sat on the board. Bloomberg investigated and decided that even though his name was no longer on the deed, Kamprad still owned the place.
Continued success for IKEA
The sum total of the business complexity, brand success, and global growth is that customers are likely to be kept happy for a long while, and potential investors are going to be left out in the cold. The business is now so large that no right-minded firm would ever try to buy a meaningful stake, which leaves design in the hands of the people who have been doing it all along.
IKEA's 70 year history -- it was officially founded in 1943 -- is a testament to the power of big-thinking entrepreneurs. Kamprad has led the business out of the Swedish winter and into the homes of millions of people worldwide. All along, he's kept up a Warren Buffett-style minimalism in his own life, eating in IKEA cafes and riding the bus.
In the end, as is often the case, the business was built by one man with an unlimited vision and a decent bit of luck. By tying the company down, Kamprad freed it to do what it does best without having to worry about what was lurking around the corner. That success is hard to put a dollar value on.
Keeping an eye on the long term
While Kramprad and Buffett may have gone about the process of amassing a fortune in different ways, the theory behind what drives them is very similar -- long-term quality wins out. While that's not quite as nice as Buffett would make it sound, the theory is solid. Luckily, you don't have to be satisfied with my summaries as Buffett has been liberal in his distribution of investing philosophies. Now, you can tap into the best of Warren Buffett's wisdom in a new report from The Motley Fool. Click here now for a copy of this invaluable insight into the mind of the world's greatest investor.
The article How IKEA CEO Ingvar Kamprad Created One of the World's Biggest Brands originally appeared on Fool.com.
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