A third of all IoD members trade with the Nordic country, attracted by its tech-savvy consumers, high purchasing power and love of all things British. But is it really an exporter’s dream? Those in the know outline the opportunities and share their advice…
As anybody who has experienced the Sunday-afternoon, no-turning-back traipse through their local Ikea will testify, its business model is one of stringent cost control. The flatpack furniture chain might thrive on thrift, but then so does its owner. Ingvar Kamprad has amassed a £2.35bn fortune since founding the retailer in 1943, but he lives in a modest bungalow and until recently tootled around in a timeworn 1993 Volvo 240.
Tempting as it is to view Kamprad as an 89-year-old Scandi-Scrooge, there’s a better explanation for his frugality. Rather, his lifestyle embodies Jantelagen (or law of Jante), the principle that seemingly governs Swedish business and personal life. Favouring humility over hierarchy, this don’t-get-too-big-for-your-boots maxim permeates everything from the country’s egalitarian workplace values, social welfare system, healthy lifestyle (sugar is something you only take in moderation) to, yes, Kamprad’s distinctly unostentatious choice of wheels (read his 1976 manifesto The Testament of a Furniture Dealer to see how Jantelagen has influenced the Ikea ethos). As Niklas Johnsson, senior business adviser, ICT, Business Sweden, says: “Swedes don’t like to brag about anything.”
However, Swedish business has plenty to shout about. Its export-driven economy sees household names H&M, Ericsson and Ikea straddle the globe. Stockholm’s fecund tech scene has spawned Spotify, Skype and SoundCloud. The country has the world’s best-performing economy, according to PwC’s Escape index, an accolade backed up by predictions its GDP will grow 3.1 per cent in 2016. And as British exporters are quick to enthuse, Sweden is home to millions of zeitgeist-surfing consumers with a hunger for new premium brands.
Edinburgh-based craft-brewers Innis & Gunn started exporting to Sweden in 2004 and current Swedish turnover stands at more than £1.6m. “Swedish people are very interested in details,” says founder Dougal Sharp. “I’ve been asked all sorts of crazy questions at the Stockholm Beer Festival – do we brew on a certain day? How long for? They have an incredible desire to get under the skin of products – they aren’t used to just buying what’s cheap.”
This connoisseur-like appreciation harmonises with the country’s famed healthy, green lifestyle. Sweden was the maiden export market for baby-food manufacturer Ella’s Kitchen in 2009. Currently enjoying a 13 per cent market share, founder and chief executive Paul Lindley says: “We’re known as a ‘lovemark’ brand there.” He attributes part of their success to “organic being high on Swedish consumers’ agendas – it’s a sophisticated marketplace where consumers quickly take on trends from the UK and elsewhere”. As Jenny Gardner, head of UKTI Sweden, says: “Companies like coming to Sweden because consumers are savvy and have a long-term attachment to brands.”
Opportunities don’t only exist for exporters. The Swedish government currently has a 10-year £50bn infrastructure plan, with Johnsson believing British companies hoping to develop and maintain new railway and road networks have a distinct advantage as, “You UK guys were so early on the deregulation side of things, especially in rail.”
UK brands could also exploit Sweden’s fascination with Britain. “Swedes are very fond of Brits and their culture,” says Gardner. “Even your humour translates here, everything from Fawlty Towers to Eddie Izzard. From a business perspective, British brands should market the fact they’re British when launching.”
There’s a particular Scottish-Scandinavian kinship, too – prior to 2014’s referendum, SNP activists mooted that Scotland should not only emulate Sweden’s welfare model, but even join the Nordic Union. “Swedes have an understanding of Scottish culture that other English-speaking countries don’t,” says Sharp. “The type of weather northern European countries share brings a certain mentality – Swedes are very similar. Any good business would get to grips with that.”
Being British also poses another benefit. With 70 per cent of Sweden’s labour force unionised, Beth Cauldwell, managing partner of executive search consultants Signium UK, believes: “This definitely gives British companies an advantage, especially more seasoned executives who may have dealt with them before. Coming from the UK, we know about unions.”
It’s a view echoed by Gardner. “Many non-British companies have failed to get a foothold in Sweden because they’ve avoided unions rather than worked with them,” she says. “The unions are very strong in Sweden but play a constructive role. They need to be collaborated with and respected.”
In a country where Nigerian writer Chimamanda Ngozi Adichie’s book We Should All Be Feminists is handed to every high-school student, it’s no surprise Sweden has the EU’s highest female employment rate (72.6 per cent). The government’s Office of Equal Opportunities ensures all company directors promote gender and racial equality, with gay rights and corporate transparency (last year’s big ‘scandal’ involved executives at forestry group SCA letting family members use corporate jets – Fifa this is not) also enforced.
The most conspicuous manifestation of this progressive culture is Sweden’s enlightened attitude towards parental leave. Parents get 16 months combined, with mothers and fathers both having a minimum of three (stay-at-home dads are termed ‘latte papas’), paid by social security rather than company coffers.
While Gardner laughs off recent news stories about Swedish companies adopting six-hour working days (“It’s not commonplace here at all!”), workers do down tools to honour the Swedish custom of fika – the often-mandatory coffee breaks. Johnsson notes these designated downtimes pre-date by many years Google’s notion of fostering creativity by keeping canteen queues deliberately long. “Fika is a communication tool where you leave your desk and chat to people you don’t normally speak to. Both management and employees see it as a good way of networking within the company.”
Such customs are worth considering when targeting Swedish consumers. Ella’s Kitchen ensures it has higher stocks during summer, when Swedes hoard food before decamping to their lakeside cabins. Likewise, the baby-food firm often targets latte papas who do weekly shops during paternity leave.
When marketing, Lindley suggests factoring in Swedes’ design-centric culture: “Swedish brands such as Ikea, H&M and Volvo have always fascinated me – they’ve got high productivity but unique, simple design. When Ella’s Kitchen launched, we were the first pouched baby food. Swedes accept and embrace innovation.”
This streamlined aesthetic dovetails neatly with the national love of technology. Having sired Spotify and Skype, Stockholm is the largest producer of ‘unicorn’ tech start-ups (those valued at more than $1bn, or £700m) after Silicon Valley. Staff use microchips implanted under their skin to swipe themselves into Stockholm’s hi-tech Epicenter office block, while even the capital’s street magazine vendors have card-readers (Sweden is frequently termed the world’s most “cash-free society”).
Taxes in Sweden
The country is also a leader in e-bureaucracy. Taxes can be paid by SMS, companies can be registered by completing an online form, while any business leaders wanting to conduct due diligence on potential partners or suppliers can check their accounts for free online, using Sweden’s offentlighetsprincipen (authentic principle of public records). Best of all, this information is available in English.
Although individuals pay higher taxes, Johnsson believes Sweden has “one of Europe’s most liberal holding company tax legislations. Corporate tax is low (22 per cent), there are no withholding taxes, plus [international companies] are free to move profits out of Sweden.”
So far, so utopian. However, Cauldwell says dealing in the krona (the euro was rejected by Sweden in a 2003 referendum) can be “an added complication – you need to take into account currency rates and sometimes end up missing out slightly. Make sure you establish whether you’re paying in euros or kronor before projects begin.” Matthew Martin, managing director at Metrocomp, does most of his company’s trade in US dollars, adding: “We’ve never had a customer who couldn’t work with that.”
He also warns British companies to be sensitive of the Jantelagen culture by not “overselling products, which is sometimes frowned upon. Keep that in mind if you’re used to quoting higher prices, expecting the customer to come back with a counter offer. It seldom happens.”
British exporters attribute their successes to employing distributors and partners in Sweden, whether it’s buyers guiding Innis & Gunn through the Systembolaget (state-run alcohol monopoly stores) process, Ella’s Kitchen’s distributors (Lindley: “they’ve made it work as much as we have”) or Martin claiming, “Metrocomp wouldn’t have developed the customers we have without our Swedish salesman.”
But with Gardner advising British companies to “be there for the long term – don’t leave when it doesn’t work”, maybe self-sufficiency is needed too. After all, as anybody who’s lugged home a Billy Bookcase, then struggled through its assembly, will vouch, rugged resolve has always been a core part of Ikea’s philosophy. Just ask Ingvar Kamprad.
Case Study: Bulldog Skincare for Men
After launching in the UK in 2007, Bulldog chose Sweden as its first export market three years later due to its proximity to the UK and the local mastery of English. “It helps grease the wheels in business relationships, plus it meant we didn’t need to translate our packaging into Swedish, which was initially very important,” says managing director Ben Grace.
With the penetration of male skincare products in Sweden higher than many other EU nations thanks to an “outdoor lifestyle and chilly winters”, UKTI helped Bulldog into the market, even hosting a launch party at Stockholm British pub, the Pickled Herring. Though skincare giants dominated the shelf space, Bulldog soon found a niche thanks to Swedes’ eagerness to embrace the new. “The Swedish market seems to really understand what we’re about, such as our sense of humour and tone of voice,” says Grace. “Swedish consumers are sophisticated and arguably ahead of the curve when adopting new trends.” Cruelty-free natural ingredients helped, too. Says Grace: “They have an awareness of the ingredients we use, preferring them to synthetic alternatives.”
With Bulldog edging out L’Oréal and Nivea to become the largest brand in Sweden’s male moisturiser category, and picking up awards in men’s lifestyle press, Grace credits much of its success to the local distributor team which deals with retailers, bureaucracy, marketing, forecasting and finance (“We don’t have to deal with the krona – our distributor relationship means everything is in pounds”).
Despite “the odd question, such as ‘What happens to your products when they’re exposed to -40°C temperatures?’”, exporting has been smooth. And with international sales representing 20 per cent of Bulldog’s predicted £10m turnover, Grace says: “That first market was important, but thanks to the Swedish consumers and having the right team, it’s all been straightforward.”