IKEA may be the most singular company we’ve ever studied on Acquired. They’re a globally scaled, $50B annual revenue company with no direct competitors — yet have only ~5% market share. They’re one of the largest retailers in the world — yet sell only their own products. They generate a few billion in free cash flow every year — yet have no shareholders. And oh yeah, they also sell hot dogs cheaper than Costco! (Sort of.)Tune in for an episode flat-packed with counterintuitive lessons about how this folksy mail order business from the Swedish countryside came into your living rooms (and bedrooms and dining rooms and kitchens and bathrooms and patios and garages and backyards) all over the globe!Sponsors:Sentry: https://bit.ly/acquiredsentryServiceNow: https://bit.ly/acquiredsnHuntress: https://bit.ly/acqhuntressLinks:Please take our 2024 Acquired Survey if you have a minute. It'd mean the world to us!The Testament of a Furniture DealerOur past episodes on Costco, Walmart, Amazon, LVMH and HermèsWorldly Partners Multi-Decade IKEA StudyEpisode sourcesCarve Outs:DetroitersThe 11-inch iPad ProThe QB SchoolIce Cube at the World SeriesMore Acquired!:Get email updates with hints on next episode and follow-ups from recent episodesJoin the SlackSubscribe to ACQ2Merch Store!© Copyright 2015-2025 ACQ, LLCNote: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
Chapter 1: What makes IKEA a unique company?
I know I could make money. I have product market fit. I should raise money. I should raise money. So he goes to the village in Elbhult and he takes out a 500 kronor loan from the bank there, Swedish kronor. This is like $63 about at the time. This is in 1938. And in 1938 dollars, $63 is hundreds of dollars today. Yeah. especially for a 12-year-old.
So imagine your kid walking down the street and going and somehow going back with $500.
Right. That's also part of the story here. He finagles, like, I don't think his, you know, grandmother or his parents were helping him with this. Right. So he uses that to import 500 fountain pens from Paris. And then I think, you know, they sell quickly. He, like, repays back, you know, the loan pretty quickly. And that, listeners, is the only capital that ever goes into IKEA.
That is the only money that Ingvar would ever raise.
We will flash all the way forward to modern day. Ingvar always owned 100% of IKEA. He built it into the world's largest furniture store and one of the world's largest retailers, period, without anybody else owning a single share of the company. No outside financing, no debt financing, nothing.
Nothing. They own, I think, all of their real estate today. They own all this. I'm sure they probably use construction financing today, but, you know, they have 25 billion euros in the bank. Like, This is it. This is the background. This is what he comes from. 500 kroner loan in 1938, paid back immediately. Only capital that ever goes into the business. Freaking wild. Totally crazy. Totally wild.
I don't recall exactly like the Walmart story, but I mean, even that, I think Sam was like from family and banks and other folks taking money.
Yeah, his wife's family, I believe, invested.
That's right. His wife's family. The whole thing gets financed off of cash flow from pens. Yes. He literally trades matchboxes to Christmas cards to pens to furniture to Ikea. Nuts. It's like the story of the guy who starts with a paperclip and ends up with not just a house, but like a city.
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Chapter 2: How did IKEA's founder begin his entrepreneurial journey?
Chapter 3: What innovations did IKEA introduce to the furniture industry?
Ooh, no.
And it was referred to as KD. So in preparation for this episode, I talked to Jim Senegal, who's the co-founder of Costco, because I was asking about Ikea and the similarities. And he said he used to love going to Ikea to look at the KD furniture that they stocked. And I thought this was like a brand. I was like, oh, maybe this was like a brand that Ikea used to stock.
At some point, I realized and I recall, oh, no, this is like what people used to call the flat packed as KD furniture. Yeah.
That's amazing.
Yeah. The interwovenness with Costco is really interesting. Another research call was with Bjorn Bailey, who ran IKEA in the US in the late 80s. And he mentioned that Ingvar always looked up to Costco and thought they were like the greatest retailer in the world. So there's a lot of shared admiration there.
Oh, man. We're going to talk about hot dogs in a little bit. You think I'm joking. I'm not. All right. Let's go. Okay. Before we get there, though. So, KD, you know, this innovation, knock down, flat back.
This is also, though, what enables this shift in the product mix for the new modern, young, urban, and suburban customer who doesn't want the same kind of furniture, can't use the same kind of furniture that their parents were using back on the farmlands.
So legend has it that right around this time, as the whole IKEA range is shifting to flat pack, Ingvar goes on a trip to the Milan Furniture Show in Italy. And while he's there, one of the suppliers, a carpet supplier at the fair, offers to take him around the city. And, you know, Ingvar wants to see how people live. And he's like, sure, I'll go.
I'll ask a bunch of my employees who work in my urban, modern, mechanized factory here in Milan if you can just go into their homes. And so Ingvar goes into their apartments, and he's just appalled by the furniture that he sees there and how different it is from the new modern city living designs he's seeing at the furniture fair. It's all the old rural farmhouse, big, heavy, dark furniture.
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Chapter 4: How does IKEA keep prices low while maintaining quality?
Right. It's that it would be insulting to spend money on it.
Yes, exactly. This is the polar opposite viewpoint of the Apple, Steve Jobs, the insides must be beautiful. Yes. But it's actually a lot closer in philosophy than you would think. It is intentionality about it. Yes. Nowhere in either company is there sloppiness. But at IKEA, it's we are going to intentionally...
make the backside and the insides not beautiful so that it is a higher value to you as a customer.
Yeah, there's so much good stuff in this document. Just to illustrate Ingvar's personality, the fact that he wrote this is, well, here it is. Bear in mind that time is your most important resource. You can do so much in 10 minutes. 10 minutes, once gone, are gone for good. You can never get them back. 10 minutes are not just a sixth of your hourly pay. 10 minutes are a piece of yourself.
Divide your life into 10-minute units and sacrifice as few of them as possible in meaningless activity.
I'm so glad that you brought this up. I wasn't going to put this in the episode, but I totally highlighted that reading it. And I was like, wow, I need to think about that in my life.
Totally. And there's so many times when we're like 10 minutes away from a call that you and I are jumping on or 10 minutes away from recording an episode. And I'm like, I'm amazed in the amount I could get done in those 10 minutes when I really was forced to. And it's such a good point. Like if you actually force yourself, hey, just go focus and get 10 minutes of work done.
You can be astonishingly productive in 10 minutes.
Totally. I hadn't thought about this, but maybe Ikea and Apple are more spiritually aligned than I even realized. Ikea and Apple are very similar in a way that I will get to later. Ooh, okay. I love it. Okay. And then another similarity analogy. The Last Testament, number nine, is just so early Jeff Bezos shareholder letter-like that we can't not read it.
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Chapter 5: What challenges did IKEA face during its expansion?
From what I could tell, I'm not a tax expert. I think royalties are tax deductible. So by shipping money around between two entities, instead of having it just be one simple C Corp that runs the whole company, they are actually able to deduct those royalties off their taxes. Yeah, it is helpful for tax purposes.
that parent company did $27 billion in sales of goods, and they made $1.4 billion from franchise fees. That number pencils pretty well. IKEA as a whole did $47 billion in revenue. So when you think about it, the parent company sells $27 billion of goods to the franchises who then have their own top line of $47 billion. You can kind of start to understand the margin structure a little bit.
And then they get that, call it $1.5, $2 billion-ish sort of effective cash flow back in the royalty of that $47 billion total revenue. That's exactly right.
Okay, so where does money go when it comes up to the InterIKEA Foundation? This is, again, the parent company, the one who owns the IP, the one who develops the product range, all this stuff, but they don't operate the stores. Right. That company is owned by the Inter-IKEA Foundation in Liechtenstein.
The main purpose, as we talked about, is to ensure the independence and the longevity of the IKEA concept and to own and govern the IKEA group. The Inter-IKEA Foundation is a self-owned entity. That's a new thing that I didn't know existed.
Is the Novo Nordisk Foundation also self-owned? This is sounding familiar to me. Yeah.
And there is no, nor can there be, any individual beneficiary. Funds held by the foundation can only be used in accordance with the foundation's purpose. Which, again, the purpose is ensuring the future of IKEA. So, David, you were doing some napkin math on this. What sort of cash do you think is held by the Inter-IKEA Foundation in Liechtenstein?
Right. So it was reported around 2011 that it had roughly 15 billion euros in assets. And that does not include the value of the company. So that's just like cash and marketable securities, call it, sitting on the balance sheet of this foundation. Right.
In the 13 years since then, if you can sort of infer from the financial statements, and I think they actually do disclose now how much the operating holding company sends in cash up to the foundation every year, it's like a billion euros in cash every year that gets sent to the inter-IKEA foundation. So just add 13 more billion euros in cash every year, you're up to...
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