Ikea turned its meatball restaurants into a $1.5 billion growth business
Ikea Food's managing director applied the furniture playbook — scale, sustainable sourcing, democratic design — to a division seen as just a sofa-seller.
What was changed
Ikea founder Ingvar Kamprad installed a sit-down restaurant in the first Swedish store in 1959, and for more than 50 years management thought about food much the same way. "We've always called the meatballs 'the best sofa-seller'," Gerd Diewald, who runs Ikea's food operations in the U.S., told Fast Company. "Because it's hard to do business with hungry customers."
Michael La Cour, Ikea Food's managing director, says the opportunity was almost invisible: Ikea racked up $36.5 billion in revenue the year before the article appeared, and Ikea Food's roughly $1.5 billion of 2013 sales got lost inside it. "This might sound odd, but it's almost something we didn't notice," he says. When he put the numbers in the context of other food companies, "suddenly I could see, well, it really is not that small."
La Cour's team ran the division with the same thinking Ikea applies to furniture: it streamlined the supply chain around vetted providers such as a sustainable Norwegian salmon farm, used data-analysis tools to size food preparation — waste is down 30% so far in test locations — and applied the company's 'democratic design' principles of form, quality, sustainability and low price to the menu.
By mid-2015 the company described food as one of its fastest-growing segments, had become a major global purveyor of certified-sustainable seafood and Sweden's biggest exporter of lingonberries, and was weighing a next phase that could include stand-alone Ikea cafés in city centers.
Why it worked
Food was run as an amenity to keep shoppers in the store, and its sales impact was lost inside a $36.5 billion home-goods business.
Re-benchmarking Ikea Food against food companies rather than against Ikea made a $1.5 billion business visible to management.
Ikea's existing strengths — scale purchasing, democratic design, low prices — transferred to the menu and supply chain without new capabilities.
What can be applied
A support function can hide a growth engine: benchmark small divisions against their own industry rather than against the parent's size, then run them with the parent's playbook.
Aftermath
By the time the Fast Company article appeared, Ikea described food as one of its fastest-growing segments and was considering stand-alone cafés in city centers as the next phase of what the magazine called an unexpected revenue generator. The company had also become a major global purveyor of certified-sustainable seafood and Sweden's biggest lingonberry exporter.