The Global Spread of Nutella

Posted on October 24, 2016 by ATB Chartered Accountants

The food industry is famous for universal brands, and one of the more notable of these brands is Nutella. In the last 50 years, this Italian recipe has not changed. The sweet, chocolatey spread is a simple product which meets young children’s sweet tooth. The Ferrero Company is the face behind the many brands, including Nutella, Ferrero Rocher chocolates, and even Tic Tacs. Each of these brands have their own underpinning strategy, separate from their parent company. They also make no effort to show a connection between them. Despite all this however, Nutella has a success story like no other, showing the importance of strategy, investment, innovation, and globalization.

Innovation

Nutella was first created by a small company in Piedmont, a small Italian region. The product grew out of economic struggles post World War 2, where cocoa was not readily available. As a result of this shortage, Pietro Ferrero who was a baker in Italy during the time started looking for an alternative to using chocolate in his pastries. The initial product development was called Giandujot, which was meant to be sliced and put onto bread. This invention generated enough revenue for Ferrero to create a company to focus solely on Giandujot. The innovation of this however came about on a hot day when the block of Giandujot melted into a cream and Ferrero found that the customers preferred it as a spread. Following this, Nutella was developed in 1964.

Gaining Traction

Nutella quickly spread to France and Germany where the product was widely popular. The 2012 OECD report, Mapping Global Value Chains, noted that value chains around the world are led by food processors and retailers. Ferrero was described in the report as a firm whom successfully grabbed opportunities presented by the liberalization of trade and investment on an international level in both developed and developing countries. The report also noted that Nutella has taken great care in producing close to their markets, and sourcing their materials from countries like Turkey and Nigeria. Trials are conducted in every new market before the brand moves in, and these have a heavy focus on competitors.

Branding

Nutella is well-renowned for its branding and marketing tactics. In the early years of the brand, there was even an arrangement where children would get a free serve of Nutella if they brought a slice of bread into a connected store. Building a special connection with customers has always been an important goal for the company. Through bridging generations together, Nutella has been able to stay young forever because of their development of customer relationships. While they initially only marketed towards children, Nutella realized that they needed to extend this marketing to teens and adults as well to avoid people not using it after a certain age. This was successful because Ferrero embraced the new advertising methods available by going onto TV and social media. Following this, Nutella was able to spread into the commercial food sector where restaurants and cafes are able to buy Nutella in bulk. This extension was so successful that in Melbourne in 2015, there was actually a shortage of commercial-sized tubs and chefs had to buy the smaller consumer tubs at supermarkets to keep up with the demand.

Supply

Given the huge global expansion undertaken by Nutella, supply soon became an issue since many of Ferrero’s other products also use hazelnuts as a main ingredient. Ferrero was (and continues to be) the world’s biggest supplier of hazelnuts and they found that eventually there would not be enough to meet their demands. In the 1990s, the company resolved this issue through setting up subsidiaries to plant trees. These trees take a large amount of time and investment for them to grow large enough to yield. Since the 1990s, more that 6.6 million trees have been planted in developing countries. Ferrero are also highly involved in CSR, with 100% of their palm oil being sourced from RSPO certified ‘segregated and sustainable’ sources. As well as this, they are a member of the organization which eliminates child labour within the cocoa industry.

The move to social media

Ferrero was one of the first companies to take on social media. They saw this as one of the most effective ways they could win the newer generations of customers through providing a space where consumers could write about their experiences with Nutella, exchange recipes and tweet them. In 2014, over 17 million tweets contained the word ‘Nutella’. There are currently 15 Nutella channels on YouTube. The Australian-New Zealand Nutella Facebook page has more than 30 million likes. These figures highlight Nutella’s success in capturing the new generation. Lithgow, NSW, is the newest production facility for Nutella which will produce for Australia, Japan, China and Singapore, and also includes a plantation facility. With their ability to invest in the long term without losing their core values and beliefs, Nutella has been able to become the model of a globalized enterprise.