Nutella: From small family business to global spread - Naw Company | Iraq - Kirkuk

A small northern Italian family company has managed to ride the wave of globalisation and turn a simple idea into a food phenomenon.

From Corn Flakes to Coca-Cola, the food industry is famous for its universal brands and global conglomerates. Yet one of the greatest food globalisation stories of the past half-century belongs to a small company from Italy’s Piedmont region that founded itself on the success of one product – Nutella.

In five decades, the recipe has not changed from its blend of sugar, oil, hazelnuts, cocoa and milk. With 13 per cent hazelnuts and around 55 per cent sugar, Nutella is technically a sugar spread rather than a hazelnut spread, a straightforward testament to children’s interest in anything sweet, smooth and chocolate-flavoured.

Some visual aspects of the product and advertising styles have evolved, but there is a clear family resemblance going back to the beginning. It is a simple product with a simple name that combines the word “nut” with the Italian diminutive suffix “ella”.

The company behind the spread is similarly straightforward. The Ferrero company is a family affair, responsible not only for Nutella but for other hugely successful products, such as Ferrero Rocher chocolates, the Kinder line of children’s chocolates and the ubiquitous mints Tic Tacs.

Each product line makes little effort to associate itself with other lines, and the Ferrero group does not seek to advertise or brand itself as a corporate entity.

Yet for a simple product from a simple company, the Nutella story may have quite a lot to teach about investment, innovation, brand strategy and successful globalisation.

The mother of invention

Nutella’s half-century milestone has been marked by a new book, Nutella World, by food writer and journalist Gigi Padovani, who traces the origins of the product and seeks to understand the reasons for its success.

Padovani notes that the product grew out of the dire economic conditions in Italy in the years immediately after World War II. Italians have always loved chocolate, but cocoa was in short supply. Necessity, or at least scarcity, acted as the mother of invention.

A baker, Pietro Ferrero, looked for an alternative to chocolate for his pastries and realised that hazelnuts, which were plentiful in the area around Alba, could be used. He and his younger brother Giovanni created a hazelnut-based product called the Giandujot, which was the consistency of hard cheese and was meant to be sliced and put onto bread. The product was successful enough for Giovanni to set up a company to concentrate on it.

But then serendipity – in the form of a particularly hot Italian summer – intervened. The Giandujot ingots melted into a cream. As it turned out, the customers loved being able to spread it rather than slice it. After some further refinements, the first jar of Nutella was produced in 1964.

Widening its appeal

The company quickly outgrew Italy and became popular in France and Germany. Nutella was, somehow, a natural in a world heading towards globalisation.

A 2012 OECD report, Mapping Global Value Chains, noted that the world food industry was now structured around global value chains led by food processors and retailers. Ferrero was one of the report’s case studies, an example of a firm that grabbed the opportunities presented by liberalisation of foreign investment and trade in both developed and developing countries.

The report observed Nutella’s care in placing production close to its largest markets, from Argentina to Russia, while drawing its raw materials from economies such as Turkey, Nigeria and Malaysia.

Padovani reports that a great deal of research is conducted on any new country market before moving into it, often including trials in selected locations and with a focus on competitors to Nutella. For example, Britain was considered a difficult proposition because the spread market was dominated by Marmite. A country-specific campaign was developed and, eventually, Nutella overtook Marmite.

Speaking to the heart

Giovanni and his son Michele, who would take over the company after Giovanni’s death, seem to have had an intuitive talent for branding and effective marketing. In the early years, there was even an arrangement whereby children who brought a slice of bread into a Nutella-connected store could receive a free smear of the spread. The Ferrero family realised the importance of building a special connection with customers, well before marketing theorists began writing about it.

“The product life cycle has been replaced by a promotion life cycle.” Gigi Padovani

“Iconic brands manage to stay young forever, because they bridge generations and establish an emotional relationship with the consumer,” says Padovani. “Cult products speak to the heart as well as the mind.”

He believes that Nutella has become what Kevin Roberts, former CEO of Saatchi & Saatchi, called a “lovemark”. Part of this was due to nostalgia: the initial advertising of Nutella was directed at children, easily attracted to something chocolately, sticky and sugar-laden. The problem with such a strategy is that eventually children grow up, and while they might retain an attachment to the product, that attachment might not extend to actually buying it. Realising this problem, the Ferrero image managers began to re-align the marketing to embrace teens and adults as well.

In part, this succeeded because Ferrero was willing to embrace new methods of advertising, moving seamlessly from poster-based advertising into television and then later into social media. The most senior people of the company have always been closely involved with branding, advertising and image decisions. The linkages have been with de-stressing, mature enjoyment and family time.

Padovani notes that inside Ferrero, brand extension is viewed as a dangerous practice, because it could detract from the company’s original brand equity. “The product life cycle has been replaced by a promotion life cycle,” he says.

Yet Nutella has successfully extended into one new field: the commercial food sector. Restaurants and cafes proved to be big customers of Nutella in bulk. Any fears the company executives might have had about this detracting from the domestic focus of the product proved unfounded.

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