Founding an international company

The idea for the modern vacuum cleaner was born in 1908, on Kärtnerstrasse, the most famous shopping street in Vienna., Axel Wenner-Gren, a Swedish businessman, was visiting the Austrian capital and while out on a walk, caught sight of an awkward-looking machine in a shop window. And so this indispensable household product came into being.

Wenner-Gren spotted the Santo vacuum cleaner, an American machine that was also being sold in Europe. It had a motor and a pump, weighed 20 kilos, and was sold for the daunting price of SEK 500 kronor – the equivalent of over SEK 20,000 in today’s currency. If the machine coule be made lighter and cheaper he could sell one in every home. It was there and then that Wenner-Gren hatched the first idea that was to become Elektrolux.

He laid the groundwork for the company’s global success in vacuum cleaners and refrigerators during ten intense years following the First World War.

In contrast to many other company founders in Sweden at that time, he was neither an inventor nor an engineer. He was, however, a sales genius. Wenner-Gren came up with a brand new approach in home selling. The salesman demonstrated the vacuum cleaner in the home and customers could buy it with an installment plan.

Axel Leonard Wenner-Gren was born on June 5, 1881, at Urhagen manor in Uddevalla, Sweden. There he spent his childhood and after elementary school attended Uddevalla five-year secondary school, where his favorite subjects were geography and mathematics. His interest in geography led to some successful stamp trading. In his attic, Wenner-Gren found his father’s old business correspondence and discovered several valuable Swedish and English stamps on the envelopes.

Inspired by this collection, Wenner-Gren set about trading on a grander scale. He spent school vacations with his aunt Caroline in Lysekil. With a cannery located close by, he found the manufacturing process left metal strips as waste. Wenner-Gren wove them together the way he had woven paper strips in school to make rugs and baskets, which he sold as souvenirs to tourists. It was a great success, so he hired friends to help produce them on a larger scale. In a corner of the attic he established a cottage industry, sending his younger friends out onto the streets to sell the products.

At the age of 15, after completing school, Wenner-Gren accepted a position with a grocery import firm in Gothenburg. He was an ambitious young man who took piano lessons at the YMCA on his lunch hour and studied French, German and English in the evenings.

In the summer of 1902, when he was 21 years old, Wenner-Gren moved to Germany and enrolled at the Berliner Handelsakademie. He finished the program in half the allotted time, graduating after one year. But he was running out of money and it was time to look for work. Wenner-Gren began by looking for Swedish companies with offices in Berlin. He found the company Separator, where he applied for a position. After his ninth application, the company finally relented and gave the stubborn youth a job, taking the inventory of its spare parts warehouse. Once Wenner-Gren had the chance to try his hand at several other tasks, he was sent out to solve a problem with a malfunctioning separator. He succeeded in correcting the problem and brought back several orders for new separators at the same time. Separator therefore took Wenner-Gren on as a traveling salesman. He rapidly became the company’s top performer. Despite his new position and success, he soon felt it was time to move on. He quit in 1904 and began to sell agricultural engines, which turned out to be of inferior quality.

It was during this time that Wenner-Gren visited Vienna in1908 and saw a Santo Staubsauger vacuum cleaner in a shop window. This, he realized, was the product he had been looking for that was needed in every home. In every home prospective customer was waiting.

Wenner-Gren put all his energy and resources into developing and selling his vision of a vacuum cleaner. He rapidly contacted the Santo’s American manufacturer in Philadelphia, offering to act as their European representative. The existing general agent in Europe was Gustav Robert Phaalen, an Austrian businessman with interests in Vienna and Berlin. Wenner-Gren eventually began working with Phaalen, heading up Santo Staubsaug Apparate Gesellschaft in Berlin. When a conflict led him to resign a couple of years later, Wenner-Gren left behind an extremely effective sales organization.

In 1912, Wenner-Gren returned to Sweden. Two companies, Elektromekaniska and AB Lux, had started manufacturing copies of the American Santo vacuum cleaner. AB Lux was a manufacturer of kerosene lamps for outdoor use, but around 1910, following electrification, it was left with excess production capacity and had started looking around for new product areas. AB Lux had been founded in 1901 in Stockholm. In its early years, it manufactured indoor lamps, but quickly realized the advantages of using Lux lamps outdoors. Due to the heavy demand, a new factory was built at Lilla Essingen in Stockholm in 1907-08.

Lux I

When Wenner-Gren returned to Sweden, he contacted Lux’s new president, C. G. Lindblom, proposing to serve as a general agent for the new Swedish Lux vacuum cleaner in Germany. It has been said that Lindblom thought he might be dealing with a conman, for Wenner-Gren guaranteed annual sales of 500 vacuum cleaners. The contract was signed in December 1912. Business flourished in Germany, and one year later, Wenner-Gren was made the company’s agent in the United Kingdom and France. Manufacturing of the first model, the Lux I,began in 1912, but mass production did not get under way until 1913. It weighed 14 kg and cost around SEK 300, the equivalent of SEK 12,000 kronor in today’s currency. Like the Santo vacuum cleaner, the Lux I was a stationary model and had several disadvantages. Its range was only as long as the hose which made stairs difficult to clean.

Another important piece of the Lux vacuum cleaner puzzle was Aktiebolaget Elektromekaniska, founded by Sven Carlstedt. Elektromekaniska developed a universal motor that could run on either direct or alternating current, and was the motor chosen for the Lux vacuum cleaner. With the outbreak of the First World War in 1914, vacuum cleaner exports came to a standstill, and Wenner-Gren returned to Sweden. At that point, he contacted Sven Carlstedt at Elektromekaniska to discuss a new design – a small portable vacuum cleaner with a universal motor. Wenner-Gren had understood the difficulties associated with the stationary, awkward Lux machines.

He presented the new vacuum cleaner to Lux, but they didn’t believe in it. Instead, Wenner-Gren started his own company under the name Svenska Elektron AB, and sold his new vacuum under the Elektron name with great success.

AB Elektrolux

The success of the new vacuum cleaner gave Wenner-Gren a stronger position on the market and now he began to look for ways to strengthen his organization. On October 30, 1916, Elektron – whose largest shareholder was Wenner-Gren – bought a major block of Elektromekaniska shares. Wenner-Gren became a member of Elektromekaniska’s board and Carlstedt joined Elektron’s board.

The new company management considered buying a property in the Östermalm neighborhood of Stockholm and producing all the vacuum cleaners there. The plan was never implemented, however, and in early 1918, another alternative arose. The idea was to merge with AB Lux, which had a large production capacity. Negotiations went quickly, and on April 10, a cooperative agreement was ready, consisting of two stages. In the first stage, Lux increased its share capital from SEK 3 to 4 million so it could take over Elektron’s operations. In stage two, Elektron, which had previously acquired Elektromekaniska, bought 49 percent of the shares in AB Lux with two promissory notes for a total of SEK 2.2 million, borrowed from Svenska Handelsbanken with the new shares as security.

Carlstedt and Wenner-Gren were elected to Lux’s board of directors, which then appointed a new president. Elektromekaniska’s equipment was moved to Lux at Lilla Essingen, where Sven Carlstedt was made director of engineering. This deal made Lux the most powerful partner, since it now owned both the manufacturing and sales rights to the vacuum cleaners.

On August 1, 1919, a new contract was established between AB Lux and Svenska Elektron AB, which was dominated by Wenner-Gren. The agreement gave Elektron all sales rights to the vacuum cleaners and the right to use the Lux trademark, along with an obligation to show that the cleaners were manufactured by Lux. This last requirement, that Elektron under all circumstances must buy its vacuum cleaners from Lux, was the most important. The contract was effective until 1929.

Concurrently, at Elektromekaniska’s general meeting on August 29, 1919, it was announced that the company was to be renamed AB Elektrolux. Elektromekaniska was a wholly owned subsidiary of Elektron, where Wenner-Gren was the dominant shareholder. The new Elektrolux name was a combination of the company names Elektromekaniska, Elektron and Lux. The reason the shorter name, Lux, was not selected may be because Wenner-Gren did not have a majority share of Lux, and thus could not demand a name change. Initially, then, Elektrolux was purely a sales company, whose mission was to launch a new Swedish vacuum cleaner manufactured by Lux on the world market.

The chairman of the Electrolux board until 1928 was Wenner-Gren’s childhood friend Axel Hemming Sjöberg. Wenner-Gren then vacated the presidency and took over as chairman. He continued as chairman until 1939.

International growth

In autumn 1919, sales companies were established in Denmark, the Netherlands, Switzerland and France. The company also sold products in the United Kingdom and Norway. Demand for the new Elektrolux vacuum cleaners was huge. In 1919, 572 cleaners were sold in France, 442 in Denmark and 472 in the UK.

However, sales were limited by the capacity of the Essingen plant. Although 7,000 vacuum cleaners were ordered, only 4,700 could be delivered. This was a problem, since the budget for 1920 had forecasted sales of some 20,000 cleaners.

Sales subsidiaries were being set up in various countries at a rapid rate and it quickly became apparent that the production capacity of the plants on Lilla Essingen and later in Motala could not keep up with the demand for vacuum cleaners, floor polishers and refrigerators. A decision was made to establish factories abroad.

The first production plant for vacuum cleaners outside Sweden opened in 1926 at Tempelhof in Berlin. The following year, Elektrolux opened factories in Luton, England, and Courbevoie, France. Eventually these plants were equipped to produce refrigerators too. Production for the American market began in Old Greenwich, Connecticut, in 1931, and five years later Elektrolux opened its first production plant for vacuum cleaners, refrigerators and floor polishers in Australia.

Electrolux shop

Electrolux shop

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