Securing supplies of suitable wood for production of furniture
Furniture giant IKEA has been operating and expanding its business in Europe for many years with great success. To increase its production capacity, the company has invested over € 100 million in a new production plant in Slovakia for the production of wooden panel boards. These boards are used as the basic material for the production of a large range of furniture products. For consistent production of boards, IKEA aims to secure a constant supply of wood for a reasonable price. This is realised by being directly involved in its own production of fast growing trees. High transportation cost means that tree plantations should preferably be located within reasonable distance from the production plant in Slovakia. To secure the lands, IKEA either enters into service contracts with existing farmers, leases the land itself, or purchases lands. From these options especially entering into a service contract with local farmers offers opportunities for both IKEA and the Slovak farmers. Fast growing trees are planted on low quality soils less useful for common agricultural products, as these lands generate relatively low yields. For the farmer, working with IKEA means a secured higher income per hectare and lower production costs, thus generating a higher profit per hectare. A clear win-win situation. To tackle the strategic challenges it faces in securing lands across Slovakia, IKEA turned to Pro4CE.
Pro4CE consulting and brokerage role
Developing and implementing the strategy to secure land for planting fast growing trees
Closely working with IKEA’s management team, Pro4CE assisted in developing a strategy for Slovakia aimed at securing lands for tree production. Operating in the Slovak agricultural sector for over 20 years, Pro4CE approached farming companies, the Catholic Church and the State Land Fund to partner with IKEA. As consultant and broker Pro4CE carefully defines any requirements and alongside IKEA guides these companies, through the permission processes and contracting phase. Utilising the network and experience of Pro4CE enables IKEA to speed up the due diligence and contracting phase.
Contracting of land and increase areal of fast growing trees
Pro4CE continues to create value for IKEA by supporting its aforementioned strategy to be directly involved in fast growing tree production. In the first 2 years of its cooperation Pro4CE has enabled IKEA in securing over 200 hectares of suitable lands, a large portion of which has now been planted with trees. Currently Pro4CE has intensified its efforts not only in Slovakia, but in the Czech Republic as well.
“IKEA has been able to rely on the know-how and experience of Pro4CE in developing and implementing its strategy in the Slovak Republic to secure the long term supply of suitable wood for its production plant for wooden panel boards”