Sweden: a close, stable and wealthy export market

Sweden is among the five most important export of goods markets for Latvia. Latvia mainly exports timber and timber products, metal and metal products, and building materials to Sweden. Engineering sciences and information technology services are also among the top trade sectors.

Mārtiņš Tiknuss, Chair of the Board of the Latvian Exporters Association The Red Jackets, said that in 2022, Latvian exports of goods and services to Sweden reached 1.46 billion euros. The import of goods and services from Latvia accounts for 1.3% of Sweden’s total imports. “Latvian exports to Sweden still have a great growth potential,” he stated confidently. M. Tiknuss sees Sweden as an easily reachable, stable, predictable and sufficiently well-off country. At the same time, Swedish companies want to buy goods for less than it would cost Latvian companies to produce them.

According to V. Jēkabsons, Head of the Investment and Development Agency of Latvia’s representative office in Sweden, Swedish customers expect high quality for a low price from Latvian and Baltic contractors. They are often eager to start negotiations when they are interested in a product, but in terms of price, their expectations may be lower than it is physically possible. “It is important to understand whether we can enter that market with our prices at all. Latvian companies can make high quality products in small quantities rather than huge amounts. Although the Swedish market is not gigantic, Latvian businesses know how to adapt to it, and it is something that large competitors may not be willing to do. We are so small that the Swedish market is big enough for us,” M. Tiknuss thinks.

Andis Blinds, the owner of the floorball goalkeeper equipment BlindSave, emphasised Sweden’s high purchasing power: “With 10.4 million people, the Swedish market is sufficiently large and solvent”.

At the same time, Dmitrijs Zolotarjovs, AS Putnu Fabrika Ķekava and SIA Lielzeltiņi Director for Scandinavian Export, highlighted that Swedes highly value loyalty, reliability, quick information exchange and transparency of business in their partners.

“Almost all Swedes, regardless of their age, speak English, and very well at that. All our contracts are mainly in English,” said Uģis Grīnbergs, Member of the Board of the industrial holding UPB. A. Blinds also noted that all Swedes spoke English and there was no problem whatsoever writing emails in English. Unlike, for example, Spain where his emails would be read only if they were in Spanish.

The closest practical market

“Pre-cast reinforced concrete structures are heavy and large, so their transportation generates significant costs, making the area where they can be sold at a profit very limited. So Sweden is the closest and the most practical choice for us. In addition, Swedes have already had experience with pre-cast reinforced concrete,” said U. Grīnbergs. This was the motivation behind UPB launching exports to Sweden back in 2005 offering metal structures and facade solutions of their own design and production in addition to pre-cast concrete products.

 In the first year, export sales reached a couple of million euros but now they have exceeded 100 million euros. Sweden is the largest export market for UPB accounting for 35 to 40% of the company’s turnover.

D. Zolotarjovs also noted that geographically, Sweden is one of the closest export markets, which opens many opportunities for business development. “Local companies can cover only about 55 to 60% of poultry consumption. Therefore, 35 to 40% of the demand comes from import, which means a great market potential for us,” he added.

BlindSave exports its floorball goalkeeper equipment to Sweden as this sport is extremely popular there. Export to Sweden accounts for 35% of the company’s sales.

Orderly legal environment

According to U. Grīnbergs, the business and legal environment in Sweden is rather well organised, with a reasonable tax policy.  Describing business in Sweden, he mentioned UPB as an example – with a turnover of 100 million euros and about 20 projects a year, 200 to 300 installation specialists and foremen, project managers, sales managers and engineers work on a rotation basis and go there regularly while the company does not have a permanent office there. Considering that UPB has projects all over Sweden, it is easier to manage all the regions from Latvia.

“Everything is pretty well organised and standardised: regulations on business, taxes, contracts, construction, environmental and occupational safety, order and everything that happens on a construction site. I think it’s the same in all other sectors, too,” said U. Grīnbergs.

He supposes that Swedes are among those rare nations with whom you can speak openly, and they appreciate it in others too. If there is a problem you can discuss it and look for a timely solution together. “The greatest advantage is that they get involved in seeking a solution rather than striking a pose like ‘here is your contract, you either get the job done or say goodbye to your money,” U. Grīnbergs explained, sharing his experience.

Decisions are taken together

“In Sweden, joint decision-making is prevalent indeed, i.e. they will all get involved, express their concerns, present their points and consider how the decision will affect the area of responsibility of a specific specialist. And only when all parties are in agreement will they go ahead with their joint decision. That is why the decision-making process in Sweden is slow,” M. Tiknuss said.

U. Grīnbergs also noted that Swedes took their decisions in meetings, consulting each other, discussing the matter and trying to consider all risks before signing a contract or even issuing a proposal. Matters that may pose a risk to them and their partners are also discussed. He remembered one instance when a customer pointed out an item where the price offered by UPB was too low and asked to double check. “In other countries, you are unlikely to hear anything like that, and if we did forget to include one floor or anything else in our estimate they would accept the proposal and say nothing. However, Swedes often note it so that all risks are clear from the off and everything is understood,” said U. Grīnbergs. On the other hand, M. Tiknuss says it’s an exception which may only be true for long-term partners. “Starting work with a new partner, the majority of Swedes are not willing to waste time on educating them. If a partner senses that we don’t know anything, for example, we have given a proposal twice the price of their current partner, or half the price, a Swede would never say which way we have gone wrong. Neither will a Swede ever haggle. Exporters should know what and to whom to offer and with whom to compete. If a proposal is not within an adequate range, you will not get any advice or feedback,” M. Tiknuss commented on the initial cooperation stage.

You must be able to dispel any doubts

M. Tiknuss believes that reputation is very important for many Swedish companies. That is why companies willing to export to that market must deliver quality products on time. “To them, it is extremely important that nothing goes belly up because they risk their reputation and customers’ trust which they have spent years building and which can be lost in an instant. Every new supplier is a new risk. This should be taken into account by anyone thinking about exporting to Sweden, as it will be easier if the company can dispel any doubts and show that they can be trusted,” he explained.

In Sweden, Latvian companies have to compete with other exporters, not to mention local Swedish businesses. That is why M. Tiknuss urges people to get an understanding of the company’s other competitors in the market and analyse whether something being bought on the Swedish market at the moment is an adaptation of a product created by the world’s major players which Swedes are forced to buy. Possibly, Latvian players can improve the quality of the existing product by adapting it specifically for the Swedish market and selling it for a better price. “Our businesses can occupy a specific niche in an already existing category, finding ways to offer a higher quality product,” M. Tiknuss proposed.

Trust is gained slowly

“Starting business with Swedish companies is not a quick and easy process. It can take three years from your first meeting with them to their first order. However, if it has worked, it will be a partnership for years. That is why you need a lot of patience to work in that market”, D. Zolotarjovs advised.

U. Grīnbergs also believes that Swedes’ trust is gained slowly. In 2005, UPB started with small projects in that market, and now major general contractors in Sweden rely on the Latvian company in their large-scale, complex projects in which UPB provides design, production, supply and construction services. “In 2016, the tallest building we built, Munksjotornet in Jönköping, was 16 storeys tall, but now we have completed a 36-storey high-rise, CityGate in Gothenburg. We have changed the cityscape of big Swedish cities with our high-rises,” U. Grīnbergs proudly noted.

Z. Zolotarjovs added that Swedes rarely change their suppliers when everything is going well.  M. Tiknuss also expertly said that, before changing their existing long-term supplier, Swedes would subject their potential partner to testing for a long time, so they rarely changed their old trusted partners.

“Swedes are rather consistent, they build their relationships slowly and for years to come, so the matter of reputation is a very important one. With a ‘cold’ approach, the result will come much more slowly than when you have been recommended by somebody from the company’s circle of trust. In such cases, you can get to decision-makers in a flash, especially if the customer is interested in what you have to offer,” V. Jēkabsons explained.

In his experience, in Sweden, things move significantly more quickly through personal contacts, especially in the context of small and medium companies.

Compliance with a variety of requirements is a challenge

“Working in Sweden has more advantages than disadvantages. The most difficult thing for us now is to align the requirements of Swedish trade unions with Latvian and EU laws and regulations. For example, what the amount of paid leave should be, considering that all our employees are UPB employees in Latvia who work on sites in Sweden, Norway or the UK and each country has its own requirements,” U. Grīnbergs shared his experience.

In Sweden, you must have an agreement with a trade union, you simply can’t operate without it, and you must comply. UPB also has to comply with the requirements of trade unions which are stipulated in contracts based on local market traditions and regulations. The company has to juggle the different taxation, jurisdiction and legal requirements of multiple countries, and it is not an easy task. “This is what’s most difficult – you can read one thing in a book or an agreement, but in reality, and traditionally, they all do it a bit differently. On top of that, you may have something clearly stated on paper, but every region may interpret it in their own way. Therefore, you have to be in touch with trade unions all the time, discuss these matters, and before starting each project, you have to negotiate working hours, pay rates and other conditions,” U. Grīnbergs explained.

Peace helps prosperity

M. Tiknuss highlighted an important fact about Sweden – the country hasn’t had a war for more than 200 years. It enabled Swedish companies to create continuity and accumulate wealth. If a Latvian company starts cooperation with a Swedish company, there is a very good chance that it has been a family business for generations. “Swedish companies behave similarly to really rich people. First of all, they think about not losing what they have. And only then do they think about developing something and making more money. The Swedes do not need to pursue profit because it has accumulated over the years, having been handed over from generation to generation. In Eastern Europe, which has experienced war, it was simply impossible to continue business in areas affected by fighting. It was not like that for Sweden,” M. Tiknuss added.

There are still broad opportunities for cooperation

M. Tiknuss believes that Swedish market is very far from being conquered:  “In any sector or industry we may look at, Latvian companies have opportunities to find their niche and expand to Sweden”. He hopes that in the future, Latvia and Sweden will implement an innovation programme to work together on the development of new products. There are similar programmes with both Norway and Finland. “Such programmes facilitate strengthening the business relationship between the counties,” M. Tiknuss believes.

V. Jēkabsons is confident that Sweden will continue to be one of the most important trade partners for Latvia.  It is due to a similar mindset, geographical closeness and a good representation of Swedish investors in Latvia, as well as price differences, although those will inevitably disappear as time goes by. Despite the growing volume of Latvian exports to Sweden, he thinks that we should continue seeking ways to make good products at affordable prices. We also have to work on our country’s image.

“Many Swedes still don’t associate Latvia with things we want to sell. So it is important to prove with our actions that we are trustworthy. We should establish contacts, and marketing efforts would help. Information about the company and its product should be widely available. In addition, it is very important to consider sustainability matters, which in Sweden is a requirement in all sectors and at all levels,” he believes.

If a company is thinking about exporting to Sweden, they can consult with Valters Jēkabsons, Head of the Investment and Development Agency of Latvia representative office in Sweden, or Laura Valtere, partner at Gateway & Partners.

Article made in cooperation with the Association of Latvian Exporters "The Red Jackets", www.eksportabarometrs.lv.