Ikea Group, the world’s biggest furniture retailer, will double its investment in renewable energy to $4 billion by 2020 as part of a drive to reduce costs as cash-strapped consumers become more price sensitive.
The additional spending on projects such as wind farms and solar parks will be needed to keep expenses down as the company maintains its pace of expansion, Chief Executive Officer and President Mikael Ohlsson said in an interview in Malmo, Sweden.
“I foresee we’ll continue to increase our investments in renewable energy,” said Ohlsson, who is due to step down this year after 3 1/2 years at the helm. “Looking at how quickly we’re expanding and our value chain, we will most likely have to double the investments once more after 2015.”
Companies from sportswear maker Puma SE (PUM) to drinks producer PepsiCo Inc. (PEP) are expanding efforts to cut their use of scarce resources as they jostle for customers. Prices for wind turbines sank 23 percent in the three years to June, while solar panels have tumbled by more than half in two years, making projects cost-effective, according to Bloomberg New Energy Finance.
Ikea plans to get 100 percent of the energy consumed at its stores and by subcontractors from renewable sources by 2020. The Almhult, Sweden-based company owns 250,000 solar panels, mainly in the U.S., and invested in 126 wind turbines in northern Europe to cover 34 percent of its energy consumption.
Ohlsson said the retailer will have opportunities for “strong growth” in Europe for “many years to come,” because many customers still do not have an Ikea store near them.
Sales in 2012 rose 9.5 percent to 27.6 billion euros ($36.7 billion), the company said in a release today, while net income increased 8 percent to 3.2 billion euros.
Ikea gained market share across all markets, with the biggest increases being in southern Europe, where the economic crisis made customers more conscious of value, Ohlsson said.
Sales at the retailer have risen 38 percent since 2007, the last fiscal year before the financial crisis, as Ikea expanded in markets such as the U.K. and Spain, where it’s opening new warehouses in Barcelona, Valencia and outside Madrid.
“We have seen very strong developments in the last few years in the U.S., in China, in Russia, in Germany, Poland and Finland,” the CEO said. “Obviously, development has been slower in southern Europe, even though we’ve performed the best in countries where the economy is at its worst.”
Ikea plans to increase same-store sales by 5 percent a year, while generating similar growth from new warehouses by doubling the rate of expansion after 2015.
In October, Ikea said it planned to more than double spending on wind farms and solar parks to as much as $2 billion to have the company cover more than 70 percent of its energy consumption by renewable sources in 2015 and protect it from volatile fossil-fuel prices.
The retailer is expanding its product range for customers to live more sustainable lives themselves, focusing on waste handling and cutting energy and water use.
“For now, we’re mainly focusing on the big parts of resource use at home,” Ohlsson said, adding that Ikea is testing some solar solutions for customers in the U.K., he said.