IKEA Owns Forests and a Factory Arm. It Still Makes Only a Tenth of Its Own Furniture.

Walk through any IKEA and the story tells itself: the cheap pine, the warehouse aisles, the famous flat boxes you wrestle into a hatchback. Somewhere upstream, the legend says, IKEA owns the forest the tree came from, the sawmill that cut it, the factory that pressed the board — a single Swedish machine running clean from soil to showroom. It is a beautiful story. It is also mostly not true. IKEA's own manufacturing arm makes roughly a tenth of what you carry out the door.¹

The official story is that IKEA is vertically integrated from tree to store. The real story is that IKEA owns a thin, deliberate slice of its own supply and buys the overwhelming rest — and that the slice it owns is chosen to protect the empire, not to build the furniture.

What IKEA actually owns, and why it owns exactly that

IKEA Industry — the arm most people still wrongly call Swedwood — does run forestry, sawmills, and board production. But its focus is narrow: wood-based furniture, and only about 10% of the catalogue.¹ The other 90% comes from a network of more than 800 outside suppliers IKEA designs for but does not own.¹ So when did this arm appear, and why? Not in 1943, and not to build cheap bookcases. The manufacturing subsidiary was founded in 1991 — for a reason that gives the whole strategy away: to safeguard IKEA against the loss of vital suppliers in Europe.⁶ The point was never to make the furniture. It was to make sure someone always could.

That reframes everything. A company that wanted to be end-to-end would push self-manufacturing toward a majority of its range. IKEA pushed it to a tenth and stopped. The owned capacity is an insurance policy: enough in-house volume to understand costs, set the benchmark price, and keep producing if a supplier region collapses — but not so much that IKEA takes on the capital and rigidity of owning a global furniture factory it doesn't need. The same logic runs through the forests. In 2015 IKEA bought a 33,600-acre tract in Romania, formerly held by Harvard's endowment, making Romania the first country where IKEA Group managed its own forest operations.⁷ One forest, in one country, is not integration from tree to store. It is a foothold — a hedge against wood-price volatility and a credential for the sustainability story, planted where it does the most narrative work.

The hedge that didn't hold

If owning a slice of supply truly insulated IKEA from the market, the recent numbers would show it. They don't. When purchase prices and logistics costs spiked, Inter IKEA Group reported that it absorbed a large amount of these costs to limit price increases to franchisees — and that this resulted in a large decrease in gross margin and thus profitability.¹¹ Owning a tenth of production and a forest in Romania did nothing to wall off the cost of the other 90%. Then, in FY24, total IKEA retail sales fell 5.3% to €45.1 billion, down from €47.6 billion — mainly because IKEA deliberately cut prices to protect affordability.² At the retail end, Ingka Group, the largest IKEA franchisee across 31 markets, posted €41.8 billion in revenue and just €0.8 billion of net income for the year.¹⁰ This is not the P&L of a company that has commodity swings beaten. It is a company eating the volatility on purpose to keep its prices low — which is precisely what the integration myth promises it shouldn't have to do.

The forest the brand doesn't mention

There is a darker reason to be skeptical of the clean tree-to-store image. In 2014 an FSC audit found 'major deviations' in IKEA's own logging operation in Russian Karelia — including logging in old-growth forest areas that should have been avoided — and the manufacturing arm's FSC certificate was suspended. IKEA announced it would stop operations in Karelia that year.⁸ Today IKEA's wood-and-forestry page tells customers the wood it sources is 'already deforestation-free' and FSC-certified — and makes no mention of the suspension.⁹ The gap between those two facts is the gap the integration legend papers over: vertical control was supposed to guarantee a clean chain. When IKEA actually owned the logging, it produced exactly the scandal that owning the chain was meant to prevent.

But isn't selective integration just smart?

The fair objection is that none of this is a flaw — it's the optimal design. Owning 100% of your supply is expensive and brittle; owning a strategic 10% gives you cost transparency, a fallback if a region fails, and a credible sustainability story, all at a fraction of the capital. By that reading, IKEA isn't faking integration; it's doing exactly the right amount of it. That objection is largely correct, and it is the point. IKEA is a genuinely shrewd selective integrator. The trouble is only that the company and its admirers let the story round up — from 'we own a hedge' to 'we own the chain,' from 'one Romanian forest' to 'forest positive,' from 'we usually source responsibly' to a page that quietly omits the year an audit caught it cutting six-century-old trees. The strategy is sound. The legend built on top of it is doing work the strategy never actually does.

IKEA didn't even start as a furniture company — it was registered in 1943 to sell pens, watches and nylon stockings, and added furniture only in 1948. It didn't invent the flatpack either; the format already existed, and IKEA simply adopted it in 1953 and made it famous.³⁴ That is the through-line. IKEA's genius has never been making things; it has been controlling exactly the right slivers of a system other people build — a tenth of the factory, a single forest, a box you assemble yourself so it doesn't have to. The tree-to-store legend gets the company backwards. IKEA isn't powerful because it owns the chain. It's powerful because it figured out the smallest piece of the chain worth owning — and let everyone assume it owned the rest.