China Food

A case study of how a hazelnut made the Ferrero empire from a dessert shop to a candy giant

from a small dessert shop to a multinational candy giant, Ferrero’s success is inseparable from the innovation of craftsmanship spirit and keen and accurate insight and judgment.

Text: Carol he

Source: foodaily daily food (ID: foodaily)

When it comes to high-end chocolate for gifts, do you always think of Ferrero chocolate?
I heard an anecdote about Guangdong, “the year of Guangdong began in hoarding Ferrero and ended with Ferrero worm”. There must be exaggeration, but there is no doubt that Ferrero chocolate often appears in the gift scene of the Chinese New Year and festival.
In the report card of the double 11 test in 2021, Ferrero has been in the top 10 of sugar products for two consecutive years. In China, at least one generation has reached a consensus on the value of “advanced” and “gift giving”.
Golden tinfoil and complex structure are familiar to Ferrero’s hazelnut chocolate. But few people know that Ferrero actually made his fortune with hazelnut jam and expanded globally with several single products of hazelnut chocolate for 40 years. Nutella hazel jam, Jianda children’s chocolate and other world-renowned international brands are members of the Ferrero family.
Source: Ferrero
Relying on several single products, Ferrero has accumulated strong funds. Today, Ferrero has become the world’s top three candy giants after horizontally acquiring Nestle’s candy business. In fy2019 / 2020 alone, Ferrero group achieved a total operating volume of € 12.3 billion.
How did a small hazelnut build the foundation of Ferrero’s business empire? How did Ferrero chocolate create a “gift giving must-have” in the Chinese market? Facing the impact of new consumer brands, how does Ferrero show the “new charm” of old brands?
Neng Duoyi, Jianda, Ferrero
A hazelnut is a great cause
First generation: instead of chocolate, butterfly effect triggered by hazelnut
In the 1940s, during World War II, cocoa as a traditional chocolate raw material was in short supply and expensive, which made petro Ferrero, who ran a dessert shop in the small town of alba, Piemonte, Italy, frown.
Petro’s first chocolate shop in Piemonte, photo source: Ferrero
In order to find cheaper chocolate substitutes, petro tried to use the hazelnut rich in Alba as the main raw material, mix molasses, hazelnut oil, coconut oil and a small amount of cocoa and wrap it with tin foil. He called this dessert “pasta Gianduja”. Pasta means dough, and Gianduja is a small triangular hazelnut chocolate candy made for the Turin Carnival during Napoleon’s period in the 19th century, named after Gianduja, the carnival figure.
Gianduja’s hat brim is similar to Gianduja’s chocolate triangle. Source: Chocolate class, eatly
Pasta Gianduja is a solid hazelnut bar dessert. It needs to be cut into pieces with a knife when eating. It is usually placed on a piece of bread.
Pasta Gianduja, the old advertisement of Ferrero on the right, source: Ferrero
After the products quickly sold well, petro cooperated with Giovanni Ferrero, his brother with the background of wholesale food, and founded Ferrero in 1946. At the end of the same year, the company employed dozens of employees and purchased more advanced production equipment in alba.
At first, the Ferrero family only supplied goods for wholesalers and sold them everywhere. When supplying a Milan wholesaler, Giovanni realized that his company had the ability to sell products directly to customers. Thus, Ferrero began to create its own transportation team. In order to better publicize himself, Ferrero uniformly equipped the team members with trucks printed with Ferrero trademark.
In 1949, Ferrero introduced a paste version of giandujot that was easier to smear – supercrema Gianduja, the predecessor of nutella. Supercrema hazelnut butter is softer and easier to spread, just like peanut butter.
Supercrema Gianduja, photo source: Chocolate class
At that time, the price of hazelnut jam was only one sixth of the same weight of chocolate, which could be described as a genuine “civilian delicacy”.
In order to increase the appeal of supercrema, Ferrero also cleverly sold hazelnut sauce in containers such as cans, so that “stingy” customers can reuse these containers. Ferrero did not distribute through wholesalers, but used a sales team directly to the store to maintain low prices. The local store has launched an interesting service: bring a piece of bread to the store, and the store will coat you with hazelnut jam.
The second generation: innovation promotes development and the global expansion of Italy’s “candy Empire”
If you want to evaluate Ferrero’s glory in the global market, you can’t help but mention Michelle Ferrero, petro’s son.
Michele Ferrero, image source: network
Before petro’s death, Michel led the Ferrero family into the German market. Ferrero transformed the former Nazi Missile Factory and began to produce candy. In 1956, Ferrero launched a cherry wine chocolate called mon ch É RI, which soon found a foothold in the German market. Then Ferrero advertised the high energy content and health of his candy and expanded his business to Belgium, Austria and France.
Mon ch É RI cherry wine chocolate, photo source: Wikipedia
In 1964, in order to enter the wider European market, Ferrero further upgraded supercrema hazelnut sauce, added more cocoa ingredients, and created the word “nutella” (translated into Chinese as “nengduoyi”) as the product name in different European languages.
Source: nutella
Combining the word nut with the soft “Ella” ending shared by other already popular Italian foods (such as mozzarella cheese and caramel cheese), it not only highlights the raw materials and taste of the product, but also implies that the origin is Italy.
Today, nutella’s product line has expanded from the earliest hazelnut jam to hazelnut jam sandwich biscuits, handy cups and hazelnut cocoa waffles.
Nutella handy cup, nutella hazelnut cocoa wafer stick, photo source: nutella
In 1968, Ferrero launched the kinder chocolate brand aiming at the children’s market. According to the size of children’s palm, Jianda chocolate bar is designed as an independent package suitable for children, which not only meets the needs of children, but also facilitates parents to control their children’s intake.
Photo source: Kinder
Inspired by the tradition of Easter eggs, Jianda launched kinder joy Jianda Qiqu egg products in 1974. The egg type consists of two parts: one part contains milk cocoa paste with crisp cocoa ball, with a spoon; The other half is equipped with unknown funny toys.
Jianda Qiqu egg entered the Chinese market in 2007, focusing on health and parents and children. It not only displays its products in supermarkets, canteens and other channels, but also selects the children’s channel of CCTV for advertising.
Source: kinder
In the 1970s and 1980s, Ferrero’s business expanded rapidly to Switzerland, Ireland, Ecuador, Australia and Hong Kong, China. In addition to kinder, the brand matrix is also expanding: tic tac in 1969, Ferrero Rocher hazelnut chocolate in 1982, etc. By 1986, Ferrero’s annual sales reached 926 billion lira, about US $1.5 billion at current prices.
Out of her love for chocolate, Michelle has always spared no effort to promote the development of Ferrero. In one case, he applied for a patent for mon ch É RI in Arabic to reduce the damage of counterfeit products to products. At his home in Monaco, he often goes to retail stores to taste competitors’ products and compare the differences.
When Michelle handed over her career to her sons petro Ferrero Jr. and Giovanni Ferrero Jr. in 1997, Ferrero company had grown into a multinational candy enterprise with annual sales of $4.8 billion.
The third generation: from the “craftsman” who specializes in chocolate to the “Prodigal Son” who madly purchases, Ferrero has become the third largest candy manufacturer in the world
Since taking over as CEO of his father in 1997, petro and Giovanni focused on the improvement of brand power in the next 15 years. However, heaven failed. In 2011, petro died of heart disease and Michelle died four years later. The burden of his career fell to Giovanni.
Giovanni Ferrero’s headquarters in Ferrero, Luxembourg, photo source: jameltoppin
Different from his father and brother’s focus on chocolate product innovation, Giovanni preferred sales and marketing, and soon began his “crazy acquisition”.
After acquiring Thorntons, a British chocolate manufacturer, in 2015, Giovanni acquired Fannie may and Ferrara, an American candy manufacturer. Finally, through the acquisition of Nestle’s candy business, it has become the third largest candy manufacturer in the world. In 2019, Ferrero acquired Kellogg’s biscuits and fruit snacks business, extending the business to the field of large snacks
Ferrara brand, photo source: Ferrara
In Giovanni’s theory, the candy market is similar to the beer market, some major players will dominate the industry, and other players will be downgraded to subordinate and follow suit.
Ferrero’s initial product line and business model were simple and profitable. The newly acquired product line has a low premium, which may dilute the huge profits of the original products and make Ferrero’s business model more complex. Unlike his father’s model of innovation driven growth, Giovanni’s way of expanding the scale through acquisition has been questioned by many.
Fortunately, Ferrero did not bear much debt in the continuous consumption boom, and new products such as Jianda Qiqu eggs launched in recent years have achieved good sales performance. Ferrero has acquired two of the world’s largest hazelnut traders in recent years and become the world’s largest hazelnut supplier. Therefore, Ferrero’s hazelnut products business is very safe and stable.
After 70 years of development and three generations of struggle, Ferrero’s growth history is the epitome of the people’s livelihood and economic recovery in post-war Europe. It also shows us the innovation gene in the bones of a candy empire.
Ferrero’s own brand product, photo source: Ferrara
In the European and American markets, sugar consumption has a deep foundation, which provides fertile soil for Ferrero’s rapid growth. However, in the Far East, especially in China with rapid development, Ferrero always has a strong attraction. In a big country where chocolate consumption is still rare and high-end chocolate is particularly rare, how should Ferrero dig for gold?
Little golden ball’s Chinese attack road
He is a master of innovation and cost management
In 1982, Ferrero launched Ferrero Rocher.
Between the two categories of chocolate and biscuits, this product is cleverly positioned as “hazelnut wafer chocolate” and moves closer to the more “high-end” chocolate. Continuing the application of traditional hazelnut chocolate sauce, Ferrero not only forms the difference in taste and flavor between Ferrero and traditional chocolate, but also improves the melting point of chocolate through the change of formula for preservation at higher temperature. Ferrero broke the flat or prismatic shape of conventional chocolate and biscuits and shaped the product into a sphere.
Hazelnut is poured on Ferrero Rocher chocolate on the left, and the outermost layer is poured on the right
Hazelnut wafer chocolate has a four layer structure. The outer layer is broken hazelnut and chocolate, the second layer is wafer biscuit, then soft chocolate, and finally a complete hazelnut. Such a fluffy and complex structure not only makes Ferrero chocolate products distinctive and difficult to imitate, but also reduces the cost per unit volume (weight) and increases the profit margin.
Ferrero Rocher is also very exquisite in packaging. Wrapped in gold tinfoil and backed by a dark brown base, it creates a hand-made exquisite and high-grade.
Source: Ferrero
Compared with traditional pricing, Ferrero Rocher’s pricing strategy is illogical. The price gap between different packaging specifications is irregular, but the more pieces, the larger the package, and the higher the converted price of each piece. However, this pricing strategy, combined with Ferrero’s own image and quality, also foreshadowed the positioning of high-end chocolate in the Chinese market.
In addition, Ferrero’s single product strategy simplifies the links of the whole industrial chain from supply chain, production, logistics, channel and sales because of the single product line, which makes Ferrero also improve the operating profit in the cost control of the industrial chain.
The price is expensive but not high. Ferrero relies on the reduced cost and the high value created by the products to eat all in the high-end and mass markets. Shortly after the FerreroRocher was launched, FERRERO ROCHER quickly focused on China and entered China’s Hongkong and Taiwan China market in 1984.
The channel is unique and aims at the gift scene
At that time, the Hong Kong market was the most mature and competitive market in Asia. The development conditions of Hong Kong chocolate market are mature, and the per capita consumption of chocolate reaches 0.5-0.7 kg.
At that time, the main sales channels of chocolate were concentrated in supermarkets, department stores or retail stores, of which the largest were Huikang and PARKnSHOP chain supermarkets.
The threshold of entering the chain supermarket is very high. In addition to having considerable popularity, the goods also need to pay high promotion fees; The pricing of goods must be agreed by the purchasing department. If the sales are not ideal within a certain period of time and the sales situation cannot be improved, the purchase will be stopped and the promotion fee will be refused to be refunded.
In the face of Hershey, Cadbury and other well-known chocolate paddocks, Ferrero, a “newborn calf” in a strange market, does not have enough influence. Coupled with its strange pricing method, this road obviously does not work.
So Ferrero found another way and chose to launch a breakthrough from Watson, who was roughly consistent with the target population. Cooperate with Watson group’s chain Western pharmacy and use Watson as the exhibition window.
At that time, Watsons mainly sold high-grade cosmetics, formulated western medicine and some high-grade daily necessities, mainly for high-quality consumer groups. Watsons are mostly distributed in areas with high consumption and high population density in Hong Kong and Kowloon, and Qu has many common characteristics with Ferrero in terms of image and positioning. Naturally, it has become an ideal place for Ferrero to promote.
Source: Ferrero
China’s gift consumption market is extremely huge. In China, “reciprocity” is a conventional habit, especially in some important holidays, it is a very common scene to use gifts to convey feelings or social needs. The romantic and beautiful genes of chocolate itself are very suitable for gift food.
Ferrero grasped the characteristics that Chinese people like to give expensive imported gifts. With the help of Ferrero Rocher’s exquisite image of gold foil paper packaging and the characteristics that are easy to create a festive atmosphere, Ferrero alleviated the cold style of Watson’s “western medicine” product orientation. Common and complementary, making the cooperation between the two logical.
After the launch of the Hong Kong market in China, Ferrero identified China’s official dealers in 1994 and successively set up representative offices in Guangzhou and Shanghai to expand its influence in China’s chocolate market step by step, and finally left a deep-rooted impression in the gift scene of Chinese consumers.
“Localization” deep cultivation, digital transformation,
Ferrero’s further introduction to generation Z
Borrow local culture and tell new stories
According to the top 10 list of online development of Chinese New Year snack package and gift box brands in 2021 released by iimedia ranking, Ferrero ranked 7th. Special purchases for the Spring Festival TOP100 2021 special purchases for the Spring Festival commodity platform are also available in FERRERO ROCHER Kwai Chung.
Photo source: AI media Jinbang, magnetic Taurus
Unlike other chocolate brands, Ferrero has a rich product matrix to meet the taste needs of more people as much as possible. Ferrero has formed different packaging specifications with Ferrero Rocher’s classic golden ball hazelnut chocolate, supplemented by Raphael and three-color ball and other products, and achieved proud sales results. It is far from enough to rely on products and positioning strategies.
Source: Ferrero
For a brand to achieve long-term development, in addition to relying on the charm of the product itself, it is its enduring secret to constantly match and adjust strategies according to the changes of market and consumer needs.
Around the gift scene, continue to dig deep into China’s local cultural background, master consumers’ behavior laws and consumption habits during the festival, and launch appropriate content for matching people’s emotions in a specific social atmosphere. Ferrero has frequently “broken through” in Chinese traditional festivals in recent years.
Ferrero has joined hands with tmall for three consecutive years to launch the “Mid Autumn Moon campaign” in September. Starting from 193 satellites around the solar system in 2019, Ferrero extended the concept to 193 moons guarding perseverance, with both personality and innovation; By 2020, seize the pain points that cannot be reunited in the post epidemic era, launch the cloud moon reunion applet, create the concept of “small reunion”, and interpret the hearts of young people through the “small reunion” gift box; In 2021, Li Xian was invited as a poet of the moon to give the brand a deeper cultural connotation through the presentation of the texture blockbuster of poetry in the moon and with the help of the national tide.
193 moons in 2019, little reunion in 2020, poetry in the moon in 2021, photo source: Ferrero
According to CBN date data, nearly half of the new customers on Ferrero tmall platform come from the post-90s, and generation Z has become the main consumer group. From the initial gift giving cognitive education to the spiritual influence of mind transmission through “cultural heritage”, Ferrero’s gift image is undoubtedly more deeply rooted in the hearts of the people.
Digital transformation, lock in the young market, not afraid of “afterwaves”
Ma Rucheng, general manager of Ferrero China, said, “about three or four years ago, 70% of our media expenditure will be invested in traditional media, but now on the contrary, 70% of our expenditure is invested in digital media. We have completed this work in just a few years, which also means that Ferrero’s marketing and media delivery mode in China has changed greatly.”
Mauro de felip photo source: Ferrero
In January 2021, Ferrero China announced a strategic cooperation with Jingdong home, a local real-time retail and distribution platform of dada group. In May, Ferrero China and tmall food signed a strategic cooperation agreement for the year 21 / 22.
At present, about 25% of Ferrero’s sales in China come from online channels including traditional e-commerce and o2o, but this figure was 15% two years ago. According to ecdataway data, Ferrero’s online channel market share is approaching the largest chocolate brand dove.
In order to better capture the generation Z crowd, Ferrero announced that he would open a new flagship store – “Ferrero young!” in tmall in the first half of 2022. It is different from Ferrero tmall flagship store. Raphael and Jianda binfanle will become the first brands to settle in. FerreroYoung! It will not only sell the existing products focusing on youth, but also become a testing ground for new products and new brands.
When new local consumer brands such as Daiichi Heiqiao and coco Fox began to impact the Chinese sugar Qiao market separated by multinational giants, Ferrero did not care about the competition of emerging brands, but believed that benign competition could promote market growth to a certain extent, “The rise of more new local brands is also a good thing for us. We will continue to unswervingly adhere to high quality as the magic weapon of competition in the past 75 years”.
In recent years, in the healthy consumption trend dominated by sugar reduction, the candy industry is facing an overall crisis. Traditional candy enterprises are impacted by new consumer brands and “cross-border attacks” from many brands outside the circle. How to make new ideas of traditional categories to meet the changes of consumer groups and consumption environment has become a “new business problem” to be solved in every industry.
From a small dessert shop to a local Italian chocolate company to a multinational candy giant, Ferrero’s success is inseparable from the craftsmanship and keen and accurate market insight of the early founders. Through differentiated product innovation and focusing on its own brand deep modeling, Ferrero sticks to its position with a more flexible and positive attitude. Just like the world-famous and powerful “little golden ball” (hazelnut Weihua chocolate), the golden tin foil contains Ferrero’s dream of conquering the world with delicacy. The exquisite and complex structure composed of various ingredients symbolizes Ferrero’s invincible magic weapon – keeping up with the ever-changing innovation of the market.
reference material:
[1] Nutella Billionaire: The Secret Empire of the Ferrero family Noah Kirsch
[2] The development of Ferrero I love snacks
[3] Ferrero Baidu Encyclopedia
[4] Ferrero’s Cross dimensional brand strategy
[5] Italian chocolate candy maker Ferrero’s road to globalization
[6] “Localized Ferrero, accelerating digital transformation” iron soldier
[7] How did Ferrero use the three-year Mid Autumn Festival campaign to become genz’s preferred gift Hegu
[8] General manager of Ferrero China: fearless of new consumption competition, the arrival of new products in 2022 pan Xian
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