Ikea Names Thai Supplier Before Opening Its First Store In Bangkok

 The Swedish
furniture retail giant Ikea has signed a five-year production contract worth 15
billion baht with S.P.S. Group, a Thai furniture maker, and plans to open a
store in Bangkok next year as part of a plan to expand its presence in Asia, writes the thai newspaper Bangkok Post.

     Around 70%
of Ikea sales now come from Europe, 20% from North America and only 10% are
from fast-growing Asia Pacific, prompting it to make bigger strides in the
region, according to John Carlsson, business manager for Asia
of board-based furniture.

    The group
experienced 7% revenue growth to 21.2 billion in its financial year ending on
Aug 31 from 19 billion last year.

    To expand
its presence in Thailand,
Ikea recently signed a pact in Bangkok
with S.P.S to become a supplier of board-based furniture.

    ”As part
of the company’s survival during the global economic slowdown, our expansion in
Asia will help offset the plummeting sales in the US,” said Mr Carlsson.

    In Asia
Pacific, Ikea is planning to open 20 more stores, including its first in Bangkok. Its leading markets
in the region are Australia,
Japan and China, said Mr
Carlsson.

    ”We are
only slightly affected by the global economic recession although customers have
less purchasing power. We have seen a bigger market share from our competitors
who shy away from expensive furniture products,” he said.

    Worldwide,
the board-based furniture segment is growing by 10% yearly. For product
sourcing, Mr Carlsson said Thailand‘s
abundant rubber supply could become a raw-material source.

    ”We want
to see S.P.S. as our long-term partner as we are confident it is capable of
meeting our requirements,” he said.

    Meanwhile,
S.P.S. hopes to more than double its revenue to five billion baht from two
billion baht in three years after wining the purchase contract from Ikea, far exceeding
its normal growth rate of 10% to 20% a year.

    Kerati
Sermpraphasilp, president of S.P.S. Group, said that under the contract the
group would produce 5,000 containers of board-based furniture for Ikea, mainly
to serve its Asian market. It currently produces 3,000 containers of furniture
yearly with more than 90% of its output destined for exports.

    ”This will
make us the largest wooden furniture exporter in Thailand, with a 24% market share
or 12% of all furniture exports,” Mr Kerati said.

    It is
preparing to seek 1.2 billion baht in bank loans to expand its production
capacity.

    Of the
outlay, 750 million baht will be used to purchase new machinery and build a new
plant on a 22,000-square-metre plot, 400 million baht as a revolving fund and 150
million baht to expand the existing plant.

    He said Thailand
exported over 70% of its rubber wood products and local furniture exporters had
an edge over their counterparts in other countries in terms of ample, cheaper
supply.

    ”S.P.S is
not worried about the fluctuations of other raw material prices as the contract
has measures that take them into account,” he said.

    In the near
future, both parties plan to expand their co-operation to cover design
development. After two years, if Ikea’s global sales grow well, the contract
will be revised to increase in value.

 

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