Founding an international company

Close
Electrolux shop

Electrolux shop

The idea for the modern vacuum cleaner was born in 1908, on Kärtnerstrasse in Vienna. And so this indispensable household product came into being, according to legend, anyway. Axel Wenner-Gren, a Swedish businessman, was visiting Vienna. While out on a walk, he caught sight of an awkward-looking machine in a shop window.

It was a Santo vacuum cleaner, an American machine that was also being sold in Europe. It had a motor and a pump, weighed 20 kilos, and sold for the daunting price of SEK 500 kronor – the equivalent of over SEK 20,000 kronor in today’s currency. ”If I could make this machine lighter and cheaper,” thought Wenner-Gren, ”I could sell one in every home.” Then and there he hatched the ideas that were to become Elektrolux.

Axel Wenner-Gren laid the groundwork for Elektrolux’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: home sales. The salesman demonstrated the vacuum cleaner in the home, and the customer could buy it on an installment plan.

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

Staked by this collection, Wenner-Gren set about trading on a grand scale. He spent school vacations with his aunt Caroline in Lysekil. There was a cannery there, and the can manufacturing process left metal strips as waste. Wenner-Gren wove them together the way he had woven paper strips together 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 large scale. In a corner of the attic, he thus established a cottage industry, sending the youngest friends out onto the streets to sell the products.

At 15 years, after he completed school, Wenner-Gren took 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 matriculated at the Berliner Handelsakademie. He finished the program in half the allotted time, graduating after one year. He was running out of money now; it was time to look for work. Wenner-Gren started by finding out which Swedish companies had offices in Berlin. One of them was Separator, where he applied for a position. After his ninth application, the company finally relented and gave the stubborn youth a job taking inventory of its spare parts warehouse. Once Wenner-Gren had had a chance to try his hand at several other tasks, too, he was sent out to solve a problem with a malfunctioning separator. He succeeded in correcting the problem and brought home 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 instead to sell agricultural engines, which turned out to be of inferior quality.

It was on this business Wenner-Gren came to Vienna in 1908 and saw a Santo Staubsauger vacuum cleaner in a shop window. This, he realized, was the product he had been looking for all these years, for it was needed in every home. In every home was waiting a prospective customer…

Now 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. It turned out that the general agent in Europe was one Herr Gustav Robert Phaalen, however, 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. There, two companies, Elektromekaniska and AB Lux, had started manufacturing copies of the American Santo vacuum cleaner. AB Lux was actually a manufacturer of kerosene lamps for outdoor use, but in about 1910, following electrification, was left with excess production capacity and started looking around for new product areas. AB Lux had been founded in 1901 in Stockholm. In the beginning, Lux 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 1907-1908.

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 con man, for Wenner-Gren guaranteed annual sales of 500 vacuum cleaners. The contract was signed in December 1912. Business was superb in Germany, and one year later, Wenner-Gren was made the company’s agent in the United Kingdom and France. The ”Lux I,” as the first model was called, began being manufactured in 1912, but mass production did not get under way until 1913. It weighed 14 kg and cost about SEK 300 kronor, the equivalent of SEK 12,000 kronor in today’s currency. Like the Santo vacuum cleaner, the Lux I was a stationary model, and it had several disadvantages. Its range was only as long as the hose, for example, which made it difficult to clean stairs.

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 it was the motor chosen for the Lux the 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, rather 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 an ever 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’s management considered buying a property at 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 good production capacity. The negotiations went quickly, and on April 10, a cooperative agreement was ready. The agreement consisted of two stages. In the first stage, Lux increased its share capital from SEK 3 to 4 million kronor 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 kronor, 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 through 1929.

Concurrently, at Elektromekaniska’s general meeting on August 29, 1919, it was announced that the company was to be rechristened 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 was Wenner-Gren’s childhood friend Axel Hemming Sjöberg until 1928, when Wenner-Gren 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 tremendous. In 1919, 572 cleaners were sold in France, 442 in Denmark and 472 in the UK.

Sales were limited by the capacity of the Essingen plant, however. Though 7,000 vacuum cleaners were ordered, only 4,700 could be delivered. This was a problem, since the budget for 1920 forecast 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 in 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.

Categories
History
Read more within History

Electrolux designed the first ever vacuum cleaner with metal runners. We launched the world’s first countertop dishwasher. These are some other notable years in Electrolux design history.

Read more

In 1912, Electrolux launched its first vacuum cleaner – Lux I. Over the 100 years since then, Electrolux has launched some of the most innovative vacuum cleaners and appliances in the market.

Read more

Hans Werthén: a new president with a new strategy. In autumn 1966, Electrolux's board chairman Ragnar Söderberg contacted Hans Werthén and asked for a meeting.

Read more