Why IKEA's Supply Chain is Key to Food Price Drop

Ikea’s latest global initiative sees the company rolling out steep price reductions across its restaurant menus, offering free meals for children and reworking its supply chain to keep costs low without sacrificing margins.

It’s not just about meatballs and mashed potatoes—it’s a broader strategy focused on affordability, efficiency and tapping into changing consumer trends.

The company says it will reduce restaurant prices by up to 50% on weekdays in many markets, alongside giving children free meals. 

Tolga Öncü, Chief Operating Officer at Ikea Retail, says this is a response to the ongoing squeeze on household finances: "Consumer confidence has decreased. People are holding on to the money that they have in their pockets or in savings."

Although the timing of the price cuts remains unspecified, the message is clear: Ikea wants its restaurants to be a refuge for cost-conscious families.

According to Tolga, lowering wholesale prices by an average of 15% in the past year cost the business €2.1bn. Despite the hit, Ikea aims to make good food more accessible and maintain footfall, especially in challenging markets like China.

Restaurant items are also being tailored to local tastes.

Lorena Lourido Gomez, Global Food Manager at Ingka Group, the company that manages most Ikea stores, adds: "We will soon launch our very first falafel, adding this popular food to our restaurants, and later, to our Swedish food markets."

Alongside Swedish staples, new Asian flavours are being introduced to attract up to eight million new customers.

The company continues to see food as a gateway to deeper engagement. 

Rebuilding supply chains to manage pricing pressure

Ikea's strategy of aggressive price cuts goes against the grain at a time when many Western retailers are hiking prices.

Walmart, Target, Costco and Nike have all announced higher prices in response to increased duty and import costs.

Meanwhile, Ikea has chosen to absorb some of that impact, even as it faces tariffs on imported goods into the US. Tolga explains that Ikea is not “immune” to the effects of tariffs, but has “somewhat absorbed the impact and not passed on the total impact to customers in the US.”

This price-focused strategy is particularly relevant in China, where consumer confidence has dipped.

According to John Mercer of Coresight Research: “Big-ticket demand in China will be held back by decreased consumer confidence.”

Still, John believes that Ikea’s approach can gain traction: “An aggressive price stance is likely to support market-share gains as cautious consumers trade down.”

Behind these pricing decisions is a longer-term overhaul of Ikea’s supply chain.

In early 2025, Ingka Group announced a plan to cut greenhouse gas emissions by 50% across its supply chain by 2030, using 2016 levels as a baseline. This includes reductions across its own operations (Scope 1), energy usage (Scope 2) and the broader chain of suppliers, transport and product usage (Scope 3). The company aims to hit net zero by 2050.

By streamlining logistics and focusing on renewable energy and green transport, Ikea believes it can offer lower prices without permanently eroding margins.

China’s ‘silver economy’ and global expansion plans

Ikea’s growth plan also targets long-term demographic trends, including the ageing population in China. By expanding its product range to serve older adults, Ikea hopes to build loyalty with a growing segment.

“Multi-generational homes are increasing,” says Tolga. “That’s why we have introduced the new bedding and range. We are now testing to answer to those needs that has come from the silver economy in China.”

By 2040, around 30% of China’s population is expected to be over 60, compared to about 15% in 2024. These consumers are likely to have greater financial security, giving Ikea the opportunity to build targeted product lines that meet their specific needs.

At the same time, the company is expanding its physical footprint. Ikea will open 58 new stores globally during its 2025 financial year, which ends in August. This includes a new store in Seoul—its fifth in South Korea—which opened in April.

As competition intensifies and tariffs continue to disrupt global trade, Ikea’s approach contrasts with others in the sector.

Jesper Brodin, Chief Executive of Ingka Group, has criticised tariffs, saying: “Tariffs make it more difficult for us to maintain the low prices and be affordable for many people, which in the end is our goal. We have never experienced a period of benefit when we had high tariffs.”

Still, Jesper admits the retailer must stay adaptable. 

As Ikea commits to offering more for less, it bets that its combination of localised pricing, sustainable operations and careful supply chain management will help it stand out.