Page 30 - Forbes - Asia (June 2018)

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FERRERO

decades of careful growth, with little debt And Giovanni is going against the grain: before he died of a heart attack in 1949,
and no acquisitions. His competitors are running from cheap, at age 51. But the groundwork had been
But a er a lifetime of working hand- junky sweets as healthier snacks like trail laid. hat same year Ferrero launched a
in-glove with his brother and his father, mix are increasingly in vogue. more spreadable version of Giandujot,
Giovanni is suddenly alone at the helm. Giovanni, who runs the company which eventually became Supercrema, the
His brother, also named Pietro, with from Luxembourg, is ixated on scale as precursor to Nutella.
whom he ran Ferrero as co-chief execu- an end unto itself, defying the views of his With some clever tricks, the family ex-
tive for 14 years, died of a heart attack in late father and industry experts. Yet if he’s tended Supercrema’s appeal. hey sold it
2011 at age 47. hen, three years ago his wrong, Ferrero’s market position could in receptacles like jars and pots so penny-
father, Michele, died as well. Le on his falter. And he would become the prodigal pinched customers could
own, Giovanni appointed Lapo Civiletti, son who blew billions of dollars trying to reuse the containers.
a longtime Ferrero executive, as CEO last reinvent the wheel. Rather than distribute it
fall in order to concentrate on strategy as through wholesalers, the
executive chairman. THE FERRERO STORY begins in the company used an army
In many ways he is now turning away shadow of World War I. In 1923, a er of sales reps who went di-
from what powered Ferrero’s ascent: a serving in the military, Pietro Ferre- rectly to stores, helping
singular focus on its native brands. In- ro opened a pastry shop in Dogliani, in keep prices low.
stead, Giovanni is chasing higher rev- northwestern Italy. Life soon began to hen came anoth-
enues through acquisitions. He be- move quickly. he following year he mar- er early death. In 1957,
lieves that existing product lines won’t ried 21-year-old Piera Cillario, who gave at age 52, Giovanni suf-
be enough, in the long run, to compete birth to a son, Michele, in 1925. fered a fatal heart attack.
with larger rivals like Mars, the maker of he family spent the next decade mov- he company bought
M&M’s and Snickers (2017 confectionery ing between cities, as Pietro perfected his the stake inherited by his
sales: $23.7 billion), and Mondelez ($23 skills at other shops. hen, in 1938, he widow. Just 33 years old,
billion), which has Oreo and Toblerone. moved to East Africa with a plan to sell Michele was thrust into
So in 2015 he bought the venerable Brit- biscuits to the Italian troops dispatched command.
ish chocolatier horntons for $170 mil- there by Mussolini. he efort izzled, so If any one person de-
lion. It was Ferrero’s irst branded acqui- Pietro returned home. By the time World serves credit for Ferrero’s
sition ever. His biggest purchase came in War II began, the family had settled in the global expansion, it’s Mi-
March, when he acquired Nestlé’s U.S. quiet hills of Alba. chele. Just before his fa-
candy business for $2.8 billion in cash. It was there that Pietro found his big- ther’s death, he persuad-
American icons like Butteringer and gest success. At the prompting of his ed his relatives to enter
BabyRuth are now Giovanni’s domain. younger brother, he began experimenting the German market. he
He can aford it. Ferrero is highly prof- with cheaper alternatives to chocolate, an company converted for-
itable—Forbes estimates the company out-of-reach luxury in wartime Italy. He mer Nazi missile factories
nets about 10% of sales—and is sitting landed on a blend of molasses, hazelnut and began churning out
on a pile of billions in cash. But it’s still a oil, coconut butter and a small amount sweets. It found a quick
risky endeavor. At its core, the chocolate of cocoa, which he wrapped in wax paper foothold with a cherry-li-
business is a branding game. Every pur- and sold around town. He called the mix- quor-illed chocolate called Mon Chéri,
veyor sells roughly the same commodi- ture Giandujot, which traced back to which it introduced in 1956. he Ger-
ties. Yet by some alchemy, or marketing gianduiotto, a similar confection that had mans were hooked.
savvy, Ferrero’s goods have traditional- been popularized under Napoleon. Next came expansion to Belgium and
ly commanded a higher devotion. Nutella “He had inventor syndrome,” Giovanni Austria and soon a er to France. Ferre-
especially so. When Columbia University says. “He would wake up at any hour, go ro blitzed new markets with ads billing
began ofering the spread (a blend main- to the laboratories and right in the middle the high energy content and healthful-
ly of cocoa, sugar, hazelnuts and milk) at of the night would wake up his wife, say- ness of its sweets. (Such messaging later
a dining hall in 2013, students smuggled ing, ‘Taste this. his is a great recipe.’ ” got the company into trouble in the U.S.,
it out like bandits, sending costs up a re- Giandujot was selling “as fast as [Pi- where it settled a false-advertising lawsuit
ported $5,000 in a week. In January, a er etro] could make it,” writes Gigi Pado- for $3.1 million in 2012, in part over call-
a French grocery chain marked down jars vani in his 2014 Ferrero biography, Nutel- ing Nutella “an example of a tasty yet bal-
by 70%, riots ensued. la World. So Pietro teamed with his anced breakfast.” It denied wrongdoing.)
he newly acquired product lines, brother, also named Giovanni, who had In 1962, as Italy was emerging from
however, are less premium, which threat- a background wholesaling food, and they postwar ruin, Michele decided to upgrade
ens to dilute those he y margins and formed Ferrero in 1946. the quality of his Supercrema. he coun-
complicate Ferrero’s business model. Pietro barely saw the business take of try could inally aford real chocolate, so

28 | FORBES ASIA JUNE 2018