Big Box Retailers Push Wind Power

Ikea leads renewable charge

By Justin Williams
Friday, April 11th, 2014

We all know the stigma behind Ikea – cheap home furniture that is a major headache to assemble. Reputation aside, the Swiss company has become the largest furniture retailer in the world.

No surprises, no gimmicks. You know what you get when you walk into Ikea. People respect that. They certainly keep buying it, and for what it’s worth, it can look nice, too.

But Ikea is not stopping there, it's raising the bar.

Ikea announced Thursday that it would purchase its first wind farm in the United States – a 98 MW project in Hoopestown, Illinois, about 100 miles south of Chicago. This will be Ikea’s single biggest renewable energy project to date, and brings the company that much closer to its net zero goal for 2020, producing as much as it consumes.

The Hoopestown project is already under construction and will include two 49 MW turbines from Denmark’s Vestas Wind Systems (CPH: VWS) that should be completed by early 2015. The project will cost Ikea a total of $2 billion.

Why? Steve Howard, Ikea’s Chief Sustainability Officer said in a press release, “We are delighted to make this investment – it is great for jobs, great for energy security, and great for our business. Importantly, it’s great for the future of our climate.”

Who could argue with that?

The announcement came during Climate Declaration of the Bicameral Task Force on Climate Change, a group founded a little over one year ago to aim congressional and public attention on climate change and develop effective policies related to it.

There, Ikea affirmed its commitment to the environment by using renewable energy sources that will not only maintain a healthy carbon footprint, but will also make good financial sense – giving greater control over electricity costs and ultimately providing its customers with the greatest value.

Ikea was joined by Jones Lang LaSalle (NYSE: JLL), Mars Inc., Sprint (NYSE: S), VF Corp (NYSE: VFC) and a slew of other top tier business leaders of America as they addressed the Task Force Thursday.

The Vision

Hoopestown should be able to generate 380,000 MWh of renewable energy each year, according to Forbes, or 165 percent of electricity consumed by Ikea U.S. (38 stores, five distribution centers, two service centers and one factory) and 18 percent of its worldwide consumption. This project is one of several it has sprawled out over eight countries, plus 550,000 solar panels. The company has also started to invest heavily in energy efficiency to help reach its net zero goal for 2020.

If we look at Ikea’s long-term business strategy, the company is committed to total and complete ownership of its assets. Aside from producing and maintaining its own energy, Ikea plans to own its stores, factories, and even the land it all is built on.

Right at Home

The downside for us is that Ikea is privately held and it will likely stay that way, at least while Ikea founder Ingvar Kanprad is around. The family-owned company started in 1943 and has a trademark that is worth right around $12 billion, making it one of the world’s most valuable brands. But Kamprad is 86 years old today, and who’s to say where the future lies.

The man no longer speaks publicly, but he has always maintained a conviction that Ikea was better suited in private hands, offering more flexibility and a greater perspective on long-term business development.

It’s been working for Ikea for a long time. The company’s release of its annual earnings constantly show increases in net profits, something that should continue further as it leans on renewable energy.

The Competition

This is why Ikea still has such a great influence on its nearest competitors, those of which we should keep a close eye on.

Argos, Ashley Furniture Home Stores, B&Q, Bob’s Discount, Rooms To Go, and most notably John Lewis (LON: JLH) and Pier 1 Imports (NYSE: PIR) are all big name furniture suppliers, but none have revealed similar game-changing energy goals on their horizons.

This is actually a movement Ikea has led other big box retailers into.

High volume, low-cost retailers Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) offer products of comparable quality to Ikea, and they have the means to keep pace in the renewables race.

Big box retailers Best Buy, Lowes, Koh's, REI, and Staples don't compete with Ikea in the furniture space, but they've all entered into the Environmental Protection Agency's Green Power Partnership program, and source renewable energy from Solar, Wind, Biogas, Biomass, and small-scale hydro.


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