Ingka Group's Juvencio Maeztu On IKEA's India Plans | Davos WEF 2024 | NDTV Profit
#NDTVProfitAtWEF | Ingka Group's Deputy CEO and CFO Juvencio Maeztu talks about IKEA's India plans and more, in conversation with Niraj Shah on the sidelines of #Davos2024. #NDTVProfitLive
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00:00 for a global business like yours and of course the India interest out there.
00:03 But thank you so much, Owencio, for speaking to us today.
00:06 It's a pleasure having you on NDTV Prophet.
00:08 Thank you, Niraj, for having me here in cold Davos.
00:11 No, it is true, as you say, the world is getting more and more polarized.
00:16 And then, of course, this is affecting and will affect climate,
00:21 will affect increasing inequalities and will affect, of course,
00:24 the stability across the different geographies.
00:29 But that's why it's more important than ever that companies,
00:32 and at least this is our mission, that we start with the many people.
00:36 Because the closer we are to the needs of the many people, the better.
00:41 That's why we came to India, where we have many people.
00:44 And then we have done over the last year a big investment.
00:50 We invested more than 10,000 crores.
00:52 And we are now entering into the new phase after opening in several locations.
00:57 And we want to really expand and grow.
01:00 And at the same time, we are more committed than ever to keep lowering prices.
01:04 Because in the times we're in, with high inflation, high interest rate,
01:09 people are struggling to come at the end of the month.
01:14 That's why companies like IKEA can support in making both affordability
01:20 and sustainability coming together.
01:23 It's a surprise that companies like yours are talking about
01:26 lowering prices at a point of time when the world seems to be grappling with higher costs,
01:30 both because of the geopolitical disruptions that might be getting caused,
01:36 maybe higher oil prices as well relative to what could have been.
01:39 So how is it that you are able to do this so effectively?
01:42 Is it lowering off the margins in order to ensure that the customer is able to buy
01:49 what he or she wants at the prices that she or he wants?
01:52 Or what's happening?
01:54 Yeah, how is it my jeek, innit?
01:56 No, first, we are built for purpose.
01:58 So we have a very powerful vision that was handed over to us by the founder,
02:03 which is to create a better life, everyday life for the many people.
02:07 So this is a starting point.
02:08 Based on that, it's in our DNA to always offer low prices.
02:13 And in order to offer low prices, we have to have low costs.
02:17 We don't work with low costs to make richer any shareholder.
02:22 We reduce the cost to reduce the price to really give to the customer lower prices.
02:29 And then at the same time, our company, they has only one shareholder,
02:34 which is the Stitching Inca Foundation.
02:36 So there is no private dividend coming to the private pocket of any shareholder.
02:43 Everything gets reinvested, 85% of the net profit,
02:47 and the remaining 15% goes to the foundation to achieve the charitable purpose.
02:53 So it is actually a machine to really well-designed to keep offering low price.
03:00 And then in the times we are in, we have to side with the many people.
03:04 That's why for us, it's so important to really grow,
03:08 because the base to offer low cost is to have more volume.
03:12 And this is what is happening in India now.
03:15 After opening in Delhi, sorry, in Mumbai, in Hyderabad, in Bangalore,
03:20 and now we are now expanding to other territories.
03:23 Then this is a time where we can create the volume.
03:28 And we can create the volume in two ways.
03:30 The first one, by creating more IKEA in India.
03:34 That's why we need and we want to open more IKEA stores and also to expand online.
03:40 And the second way is by having, working together with the government of India
03:45 to have harmonization of standards.
03:47 We welcome very much the Indian government direction to increase the quality.
03:55 And then this is a moment where we can harmonize with international standards.
04:00 So we can use, we have India as a big sourcing hub, production hub,
04:05 to export to other places in the world.
04:08 So by having more IKEA in India, and by having more production in India
04:13 with harmonized standard, we can create the volume.
04:16 And with higher volume, we reduce the price for the many people in India.
04:20 - Is there a roadmap that you, that the company's already laid out for what you just said?
04:26 And are you reviewing it at the start of 2024?
04:29 Can you share something with us?
04:30 - Yeah, this is the idea now.
04:31 So the idea is that, I remember we made a handshake some years ago
04:37 with the government of India.
04:38 We will invest 10,500 crores.
04:41 We have done it.
04:42 We will produce 30% local sourcing.
04:45 We have done it.
04:45 We will open IKEA store close to the metro connection.
04:50 We have done it.
04:51 We will have 50% women, 50% men.
04:55 We have done it.
04:56 So we have delivered all our promises.
04:59 And now we are at the point that IKEA love India and India love IKEA.
05:06 We have now more than 2 million IKEA family member only in India.
05:12 So you are one, fantastic.
05:13 And then many intelligent people are IKEA family members of IKEA.
05:20 And we are at a point that we are ready to go to the next phase.
05:24 And to the next phase is to grow and to go deeper in this love story
05:31 and partnership in between IKEA and India.
05:34 - Yeah, but just specific to that point of, because it is interesting,
05:39 a lot of companies are talking about moving production to some sense eastward,
05:44 local sourcing, but manufacturing in some of the larger markets
05:49 for those markets and for the world.
05:51 So make in India, for India, make in India for the rest of the world.
05:54 I heard you say that, I mean, is there a roadmap that you've laid out
05:57 for what quantum of increase could happen in goods manufactured
06:04 in India for IKEA, whether for India or for the rest of the world?
06:08 - It will depend on the timing.
06:11 We are here for the long term.
06:12 - Of course.
06:13 - Someone asked me, what is a long term?
06:15 I said, in India, at least let's start with 100 years.
06:18 Let's start with that.
06:20 And we want to double and double and double again.
06:23 We see a very long journey.
06:24 And the key thing, because we really believe,
06:29 and I really believe in the unique opportunity that India has,
06:34 and we all have, in order to grow production and sourcing.
06:38 But in order to do that, we need to have these two things
06:42 that are prerequisite for us.
06:43 We need more IKEA stores, so we need to have more support,
06:48 more partnership with the regional government, with the states,
06:52 in order to have good approval process,
06:56 in order to have good clearance to the projects,
06:59 in order, it's big investment, and the closer we are to the metro connection, the better.
07:03 So we want to keep going with the line acquisition
07:08 and opening more stores in India.
07:11 So we need the partnership with the state governments.
07:14 And the second thing we need is this harmonization of the standard,
07:19 which is extremely important.
07:20 And it's perfect, because India direction from the government
07:25 is to increase the quality standard, which is fantastic.
07:28 And now we want to secure the harmonization
07:31 with international standard.
07:33 So it's not producing India for India,
07:35 it's producing India for both India for the entire world.
07:38 - When do you think something like this happens?
07:40 - India is producing today only 1% of the global production
07:45 of home furnishing product, only one.
07:47 And we agree that there is nothing but opportunity ahead of us.
07:51 And this is what we are after.
07:52 - So by when do you expect this harmonization, which you speak about?
07:54 - We are now working with the government very closely,
07:57 and we feel very happy in the cooperation,
07:59 and it's taking some time,
08:02 but it's happening as we speak.
08:04 And it fits into the overall agenda of the government
08:10 to really move the whole quality standard.
08:13 - Okay.
08:13 We know about Inca stores, Gurugram, Noida, etc.,
08:18 the next leg of growth.
08:20 Some people call it phase 2.0, or whatever you call it.
08:23 What's next?
08:25 Is that the focus right now,
08:26 or are you already thinking of what beyond?
08:27 - It's three things.
08:29 On one side, it's, as you say,
08:32 we will open next year.
08:36 We need to decide the date,
08:39 but in '25, at the end of '25,
08:42 we'll open Gurugram, which is a fantastic meeting place.
08:47 It's coming true.
08:50 And you see all the big, big investment we are making.
08:53 The similar in Noida, it's amazing.
08:56 The junction of two fantastic metro lines.
08:59 And then many people ask,
09:02 "Why has it taken so long to open in Delhi?
09:04 "You have opened in Hyderabad and Mumbai."
09:06 Said, "It has to be right.
09:08 "It has to be right.
09:09 "We don't want to rush.
09:10 "We are here for the many years in Delhi,
09:13 "and Delhi is a big market."
09:14 So these are big meeting places,
09:17 and then one of the many companies will be IKEA,
09:23 but we will host many other places,
09:26 and many Indian companies as well.
09:27 So it's a growth story with many companies
09:30 can join together, so it's not IKEA only.
09:34 So this is fantastic.
09:35 Ahead of that, we will open online
09:38 at the end of this year in Delhi.
09:40 - Yes.
09:41 - But also we are now exploring online in other places
09:45 like Andhra, like Karnataka, like Telangana,
09:50 like in other places in Pune or in Gujarat,
09:54 we have Ahmedabad, or we have Surat,
09:57 or we have Badodara.
09:58 So we are now opening online in other places.
10:01 And the third bucket is we need to find new location
10:07 for new IKEA stores in the big metro,
10:10 and it has to be as good location as the one we have,
10:13 close to the highway, in connection with the metro,
10:17 and with support from the state government.
10:20 - Okay.
10:20 Quick 30-second answer before we wrap up.
10:22 As a global company, higher for longer interest rates
10:26 seems to be the norm,
10:27 even if we see lower interest rates in 2024.
10:30 Are project IRRs getting challenged
10:34 because of the higher rates?
10:35 - It's an interesting question.
10:36 In a normal circumstances for a normal market, yes.
10:40 You could say that, of course,
10:42 you have a higher hurdle rate,
10:47 but we have decided not to work with hurdle rates.
10:50 We have decided that interest rate will go up and down.
10:54 And then for us, what is important is to set back,
10:57 I said, we have a long-term vision.
10:59 Then we have a long-term vision in India.
11:02 And then whatever we invest is going to stay for long.
11:06 That's why it takes time until we invest.
11:08 And we come with a lot of investment, big commitment.
11:11 We don't open a store to close it.
11:14 That's why we don't want to feel so trapped
11:17 in this short-term thinking.
11:19 Then of course, you need to crack the code in the P&L
11:24 to keep finding new ways to lower prices.
11:28 That's why for us, the whole harmonization of the standard
11:32 is paramount to have more volume, to have lower costs.
11:35 - We wish you all the best for that and more.
11:38 Keep on opening more IKEA stores
11:40 and keep on delighting customers like me.
11:42 - Thank you very much.
11:43 - Thank you for talking to us today.
11:44 Namaste.
11:44 - Thank you very much.
11:45 - Thank you, Vencyo.
11:46 And viewers, thanks for tuning in.