The richest family in Italy is only continuing to rise.
Behind the sweet hazelnut spread Nutella stands the Ferrero family dynasty. At the end of the fiscal year in August 2019, a profit of 928.6 million euros was recorded – an increase of more than a quarter from the past year. Per regulatory filings, the family is also expected to receive a 642 million euro dividend from their main holding company.
According to the Bloomberg Billionaires Index, the Ferrero’s are not only the richest family in Italy, but also rank as the 28th richest family in the world – thanks primarily to the global success of Nutella. Despite their massive growth, the business is still family-owned and operated, with 55-year-old Giovanni Ferrero currently at the helm after the death of his brother in 2011, and his father in 2015.
The business has a long history in Italy. In 1923, following the end of World War I, Giovanni’s grandfather Pietro Ferrero opened a pastry shop in Dogliani, a town located in the Piedmont region. After a brief stint selling biscuits to Italian troops in East Africa, Pietro returned to Italy and began conducting culinary experiments that would ultimately lead to his greatest discovery. His grandson describes what he calls an “inventor syndrome”, telling Forbes that “He [Pietro] would wake up at any hour, go to the laboratories and right in the middle of the night would wake up his wife, saying, ‘Taste this. This is a great recipe’.”
The recipe Pietro originated was meant to stretch limited and very expensive supplies of cocoa. He blended molasses, hazelnut oil, and coconut butter with cocoa, and started selling the sweet locally under the name Giandujot. He joined his brother in 1946 to form Ferrero, and in 1949 they launched Supercrema, the precursor to Nutella.
Following World War II, the family began adding more cocoa to their products, eventually launching new lines that included Kinder and Tic Tac as they expanded their empire across the world.
Giovanni has attracted attention for taking a different approach from his predecessors. Instead of creating growth by focusing on existing and new products within the brand, Giovanni’s plan is centred on acquisitions. Rather than counting on native product lines to expand revenue, he aims instead to buy up other companies, with the end goal of achieving a 7.33 percent increase in revenue every year and doubling turnover in a decade. And in place of competing with rivals, including British chocolatier Thorntons and Nestlé’s US candies, he is buying them for billions.
Competition at Home
It is worth noting that Ferrero has managed to maintain – and increase – its popularity in a highly competitive market, even coming out ahead in a battle of sorts with another Italian snack giant, Pan di Stelle (owned by the pasta brand Barilla). When Ferrero moved to put out a line of biscuits that had been ten years in the making, they edged into well-marked territory. Barilla has marketed and sold chocolate cookies as breakfast biscuits since 1983, creating some of its very own superfans.
This is not to say that Barilla hasn’t also tried to compete in the hazelnut spread arena. In January 2018, they released Pan di Stelle Crema, a concoction made from “100 percent Italian hazelnuts and ‘dreamlike’ chocolate”. The brands continue to work to outdo each other, each bringing an insanely devoted fan base along with them. Marketing expert Michele Boroni sums it up: “When it comes down to Barilla and Ferrero, there can be a war…It’s a competition between Italy’s last food giants that have remained Italian”.
But those who have always been loyal to Nutella seem to stay loyal – dedicated to the product in an almost cult-like fashion. In 2017, when Ferrero announced that it had “fine-tuned” the spread’s recipe, die-hard Italian fans were not pleased. In France, the grocery chain Intermarché made the decision to discount Nutella by 70 percent, inciting riots that required police interference. And in 2013, when Columbia University in New York started serving its own version of the spread, students stole so much that costs went up to 5,000 dollars in a week. Through intense marketing campaigns and extensive product testing (both at home and abroad), Ferrero manages to bring in new business, but it seems almost impossible for them to lose loyal customers – or so it would seem.
Looking to the Future
Despite Ferrero’s success, the company does face one issue: sustainability. A huge amount of raw hazelnut is required to create Ferrero’s iconic products, accounting for about 30 percent of all global demand for the nut. Investments have been made in hazelnut plantations in Australia, South America, the Balkans, including the acquisition of the Oltan Group in Turkey. And Italy’s public is increasingly taking this into account.
Former Deputy Prime Minister Matteo Salvini, who was once a devoted Nutella fan, has changed his tune, perhaps thanks to an increasingly pro-Italy stance. He wants to boycott the product because of their sourcing practices. “I discovered that Nutella uses Turkish hazelnuts, and I prefer to help companies that use Italian products, I prefer to eat Italian, to help Italian farmers”, he said.
The company has also been met with some resistance when trying to increase production in Italy. The Umbria region, for instance, has been transformed by hazelnut farms; Italian director Alice Rohrwacher wrote to local governors saying, “Fields, hedges and trees [had vanished] to make way for hazel plantations as far as the eye could see”.
Umbria wants to go from 70,000 hectares of trees to 90,000, but there is concern as to whether the region can sustain this. Local environmentalist Vittorio Fagioli notes that the requirements per tree are staggering, including 30 litres of water daily and the regular application of pesticides and fertiliser. In turn, these chemical elements can end up in local water supplies, potentially leading to long-term health issues in local communities. Ferrero has responded by saying that other regional crops, like olives and apples, require even more resources than hazelnuts.
Meanwhile, Turkish farms that export hazelnuts are under increased scrutiny. Syrian refugees labour on these farms for at times just ten euros per day without any legal protection. They are often subjected to harsh and dangerous conditions with none of the benefits that a legally registered worker would receive. The country’s industry sector has also come under fire for issues with child labour.
Ferrero buys around one-third of Turkey’s hazelnuts, and has a vested interest in helping the industry keep a clean image. In a statement to the New York Times, a spokesperson referred to the Ferrero Farming Values programme, which is intended to support improved standards at the farms they buy from. “Ferrero is dedicated to providing its people with safe and decent working conditions…and we request that our independent farmers do the same”, the spokesperson said, It should be noted, however, that the company does not plan to release the success of this programme, citing “restrictions under national privacy laws”.
It may be that as Giovanni focuses more on acquisitions than current product innovation, their environmental impact will not grow, but they still need to decide how they fall politically on this issue. If prominent longtime fans like Salvini decide to drop their allegiance because of sourcing practices, it could force Ferrero to reconsider its business model – while the alternative may not be any better.