ICA – a start-up story from 1917
When he was 34 he’d had enough of the industry’s dynamics and structures. So he started his own company – with a set-up that was completely contrary to what existed at the time – and in the process he changed the entire industry.
In November 1917, Swedish newspapers carried an advertisement describing a newly started wholesale firm in Västerås:
"Subscribers of shares in the company with the proposed name ‘Aktiebolaget Hakon Svenson & C:o’ are summoned to its constituting meeting to be held at Stadshotellet in Västerås on Thursday, 22 November 1917, at 5 in the afternoon".
People in the grocery trade must have shaken their heads. Who was crazy enough to start a wholesale company right now? In Europe a world war was raging and food was strictly rationed in Sweden. A shortage of goods had already left many grocers throughout the countryside in a state of crisis, and one major player, Kooperativa förbundet (KF), dominated the grocery business that nevertheless existed.
But 34-year-old Hakon Swenson, the man behind the new company, was looking beyond the prevailing situation. He had bigger plans – plans that had taken shape during his 19 years with the wholesale company Manne Tössbergs Eftr., where until this time he served as office manager and part-owner.
"Costly in themselves"
Hakon knew everything about how a wholesaler buys in goods and sells them in turn to retailers. In theory this should lead to lower prices for retailers, but Hakon had seen how it was hard in practice to achieve the volume gains that were needed. The irregular and small purchases made by retailers were costly in themselves, which affected prices in all areas.
Hakon was convinced that the way to lower prices for everyone involved was closer cooperation between wholesalers and retailers. It was certainly working for Kooperativa förbundet, which was established in 1899 and which handled the entire chain from purchasing via wholesalers to sales in stores. The more large-scale operation that this solution created enabled KF to put pressure on prices, while its Konsum stores could offer the market’s best prices. This cooperative was the giant in the market.
But as an entrepreneur Hakon really disliked a basic principle of the cooperative solution: the retailers did not own their own stores. He felt that it stifled competition between retailers – and more importantly that it entirely stripped them of their independence as business owners.
"Let the retailers buy into the wholesaler"
Hakon wanted to achieve KF’s advantages of running a large operation but without the retailers having to give up their independence. The individual retailers should all be able to decide themselves what they would sell, based on what customers in their markets wanted and not based on what the central office had purchased. What they needed, Hakon thought, was a joint platform – a network solution for their shared interests. The practical solution was actually simple, he thought: let the retailers buy into the wholesaler! If the retailers own the wholesaler, together they would be able to achieve the volumes needed for lower prices. But when Hakon suggested this to his employers at Manne Tössbergs Eftr., the idea was shot down again and again. Would retailers cooperate on purchasing at the same time that they competed for their end customers? An impossible idea!
After seeing his idea rejected one more time by the others on the management team, in 1917 Hakon simply handed in his resignation. If the company where he worked did not want to realise his idea, he would do it himself.
But to do this he needed the assistance of competent people. Hakon invited five of his former colleagues to a dinner at his home in Västerås, to see if they would come along. Yes, was their reply – and not only them. In a later interview Hakon explained:
“Some twenty of my co-workers from Manne Tössberg joined me in forming the new company. We sat here in my house and discussed the arrangement. We had no office. The telephone was off the hallway upstairs in my bedroom. This became the first offices where we did our first business.”
As the son of a pastor and with a background as a travelling salesman, Hakon had trained himself up in a virtually pastoral rhetoric. He could “fill a room”, regardless of whether he stood on a platform or sat at a kitchen table. This talent was put to good work when he persuaded his old colleagues to leave secure employment for a newly started company with an uncertain future. And it helped now as he approached retailers to buy shares in the company Hakon Swenson AB. The goal was to raise SEK 800,000 in share capital, but by the time the subscription period ended, he had raised more than SEK 1.2 million. Some 250 grocers had now become part-owners. The tough war times certainly contributed to the retailers’ enthusiastic reactions. Throughout society there as a sentiment that cooperation was necessary for survival.
Independent retailers in cooperation
During the 1920 Hakon’s “impossible idea” gained momentum. Volume purchases increased, and the business grew steadily. Offices in Västerås, Gävle and Karlstad were followed by additional ones in central Sweden. The company began creating its own brands, with its own “HS blend” coffee as the first such product. Yet still, Hakon thought, “Hakonbolaget” was mainly a wholesaler that happened to have certain retailers as owners. The close cooperation with the retailers, which was the actual basic idea and which he thought was needed to gain a greater involvement from the retailers, was still lacking. In 1931 he therefore took the next step and made an offer to all of Hakonbolaget’s customers to become part-owners. This gave the company 1,400 new part-owners, and the retailer-owned purchasing house was now an established fact.
Today Hakon’s “impossible idea” is summarised as independent retailers in cooperation. This is the fundamental principle of ICA, the company that Hakonbolaget created in 1938 together with three other centralised purchasing firms that followed Hakon’s example in other parts of the country. Moreover, since 1964, when all affiliated retailers mounted the ICA logo at the front of their stores, ICA has had a larger market share than Kooperativa Förbundet.
Today we certainly could have listened to Hakon talk about his “disruptive networking idea” in a YouTube video of a TEDx talk. Instead, we will have to settle for visiting and shopping at any of ICA’s stores that are built upon his idea. Good enough!
At the same time, in Västerås…
In 1917, when Hakon Swenson started Hakonbolaget, he was 34. A good friend of his was the lawyer Ernfridh Browaldh, then 29, who would eventually become president and a pioneer at Handelsbanken. These two young company leaders gave a lot of thought to Sweden’s future after the end of World War I. Where would they find the best ideas and vital inspiration? So they looked up two older business leaders in the town: the publicist Anders Pers, 57, founder of the newspaper Vestmanlands Läns Tidning (VLT), and Sigfrid Edström, 47, the founder of Asea. In the years that followed these four “Västerås entrepreneurs” met often for talks about financing solutions, current events in society and news reporting, the world outside of Sweden – and the constant need for renewal.
Text: Anders Sjöman and Mattias Allgulin, Centre for Business History in Stockholm (based on research in ICA’s company archives at the Centre for Business History in Sweden, ica-historien.se, and Björn Edsta’s book Hakon Swenson, mannen bakom ICA).