Risks Taken in Making Nutella A $320 Million Brand

Previously appeared in The Food Institute Report
RISKS TAKEN IN MAKING NUTELLA A $320
MILLION BRAND
Bernard Kreilmann, CEO, of FERRERO U.S.A. INC., speaking at WEISERMAZARS
LLP Food and Beverage Industry Bootcamp in New York City last month discussed how
Nutella spread grew from $20 million in sales to a $320 million global brand in just a
decade, and the three major risks encountered along the way.
Nutella was created in the 1940s by Mr. Pietro Ferrero, a pastry maker and founder of
Ferrero. The creation used hazelnuts which were readily available while cocoa was not
during World War II. The hazelnut spread was first imported into the U.S. 25 years ago
and was considered a specialty item with limited distribution. Currently Nutella utilizes
about 30% of the world’s hazelnuts and its U.S. market penetration is 17%, while its
awareness in the U.S. is 96%.
Ferrero decided to expand in North America and in 2005 opened a plant in Canada,
where sugar costs were considerably lower than in the U.S. The company had to increase
scale however to justify the investment. Thus the company’s first risk was the risk of the
unknown.
Ferrero needed to determine if consumers in the United States and Canada had room in
their pantries for a third jar after the mainstays, peanut butter and jelly.
The second risk noted by Mr. Kreilmann was how to anticipate potential drawbacks and
will growth be sustainable.
To find out, Ferrero created two live market tests, in Albany, NY and Providence, RI
which ran for two years where they found there definitely was potential moving forward.
They also decided they would not compete directly with peanut butter but rather focus on
Nutella as a breakfast spread.
Lastly, Ferrero faced the risk of being successful. Obviously the competition was not
going to idly stand by and several rolled out competing hazelnut spreads. Another risk
encountered was a class action lawsuit that alleged false advertising and was settled 2012.
Ferrero has successfully fended off the competition and Nutella remains the leading
hazelnut spread, aided by a $25 million advertising budget. It is also the second most
popular brand on FACEBOOK worldwide, only topped by Coca-Cola.
As for the future, Ferrero is looking to expand Nutella’s presence in the growing
foodservice market and recently launched the first Nutella Bars in New York City and
Chicago’s EATALY, offering crêpes, waffles, gelato, pastries, fresh seasonal fruit, and
coffee, all served with Nutella. And rather modestly, Mr. Kreilmann anticipates Nutella
sales doubling in the next five years.
The company’s growth will be aided by its recent acquisition of the UK confectionery
chain THORNTONS, which marked Ferrero’s first acquisition of a branded company,
reported The Financial Times (June 22).
Ferrero‘s expertise matches a shift in Thortons’ focus that was underway before the
acquisition as the company turns away from its street stores and becomes more involved
in the consumer goods business by selling its products wholesale to supermarkets.
The move will help Ferrero gain a foothold in the UK, a market it previously tapped with
its Kinder Egg brands.
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