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By Maud Bonneville, Marie Jousse, Marie Tabary, Youssef Ben Lamine and Amira Do Rego

Table of Content Introduction

2

Part I: The Company

3

1 Who’s Ferrero

3

2. Once upon a time… Nutella

3

3. Ferrero’s power brands

3

4. Unique brands

4

5. International company

5

6.Key figures

5

Part II: The Market

6

1. Ferrero’s Competitors

6

2. The market capitalization

6

3. How are Ferrero’s brand positioned on the market?

7

4. The chocolate Market

8

5. Ferrero performance

9

Part III: The Strategy

10

1.Ferrero’s strategies

10

2.Ferrero’s future growth

11

3.Ferrero’s acquisitions and partnerships

11

Part IV: Other Information

12

1.Are there any significant remarks in their annual report?

12

2.Have there been any significant changes recently?

12

3.How important is innovation?

12

4. Any other information of interest?

13

5.What is the role of CSR (Corporate Social Responsibility)

13

in the company? 6.What initiatives has the company taken to be more

14

responsible in terms of the environment and society in general? Conclusion

15

References

16

Annex

19

Introduction

Today, the chocolate market is an important profitable sector. In 2016, French households consumed 1.56kgs of chocolate per year (LaTribune, 2016). The worldwide average consumption is about 7 kgs of chocolate. There are lot of players on this market such as Nestlé or Mars. Ferrero is also one of them. This paper’s purpose is to present the company, Ferrero. First, it will start with a general presentation of the company. Second, it will show the situation of the chocolate market. Then, it will explain the corporate’s strategies. Followed by the company forecast. Finally, the authors of this paper will expose their conclusion.

Part I: The Company 1. 1.Who’s Who’s Ferrero Ferrero?? Ferrero is an Italian chocolate confectionery created in 40’s by Piera and Pietro. The company is still based in Italy (Alba). Today, the CEO is Giovanni Ferrero. In 2016, the turnover is about 10 billion euros (€). Ferrero’s growth increased by 8.2% in 2016. Currently, they have 32 990 employees, which represent a turnover of 312 215,82€ per worker.

2. 2.Once Once upon a tim time...Nutella. e...Nutella. At first, Peira and Pietro were pastry makers until they found the unique recipe of “Giandujot” in 1946. Giandujot was the first name of Nutella. With the creation of “Giandujot”, Ferrero was officially founded. Ferrero was the first Italian manufacturer. The first year, Ferrero sold 300kgs of chocolate (FamilyCapital ,2015). In 1956, Ferrero started its first international sales in Germany followed by France. Today, Nutella is one of the power brand of Ferrero.

“Ferrero’s growth

3. Ferrero’s power brands…

increased by 8.2% in 2016.”

According to the Cambridge dictionary a power brand is “a product that is very well known in its market and sells in large quantities” (Cambridge Dictionary, 2017). Ferrero Rocher has got four power brands. First one is Nutella created in 1946.

Part I: The Company The second is Kinder Chocolate in 1968. There are also other brands such as Kinder Bueno, Kinder Joy, Kinder Schokos-bons, ... In 2015, the volume of Kinder Buenos sold increased by 10% (Confectionerynews, 2015). Then comes Tic Tac in 1969. The last one is Ferrero Rocher launched in 1982 (see picture 1). Those are the main one, but Ferrero has a large range of products such as Nutella B-ready or Nutella & Go. All the brand a well-known by the public. However, the company adapts its products according to different country. For example, in Italia, there are different Tic tac taste such as Pina colada or Coconut.

Picture 1

4. Unique Brand Basically, the four main brands are well known by the public. Nutella has a strong brand image. In fact, the name Nutella became a reference to identify any kind of chocolate spreading paste. 80% of French people prefer buying the brand Nutella than a subsidiary brand. 53% of French household buy Nutella at least once a year. Nutella is considered as unique. The brand image on social networks such as Facebook, twitter, LinkedIn, Instagram has become the key success for Ferrero. Ferrero main brands are popular and are liked, followed by millions of people. For example, Nutella’s Facebook page is liked by 323 million people (see picture 2). No other brand can compete against Nutella. In 1980-1990 Poulain launched a similar product but reached only 2% to 3% of the market share.

Picture 2

Part I: The Company 5. International C Company ompany Ferrero is a global company. The company is present in 53 different countries. This company sells its products in 170 countries. The Italian confectioner has 22 production plants in different countries (see picture 2).

Picture 3: Reference: (Ferrero, 2017)

6.Some Keys Figur Figures es The picture 3 shows the main figures of Ferrero. Ferrero business is quite flourishing. In fact, Ferrero’s turnover increased by 13.4% between 2013 and 2015. Its production raised by 5% between 2013 and 2015. With this result, Ferrero employed more workforce to support its business. Most of Ferrero’s turnover is generated in Europe (57%)

Part II: The Market 1. 1.Ferrero Ferrero Ferrero’s ’s Compe Competitors titors There are many competitors, but Ferrero remains leader in several sectors with specific products. Nevertheless, the main competitors of Ferrero are: •

Nestlé with the division Chocolates and confectionery (KitKat, Lion)

Nestlé is the largest agri-food company in the world. One of the specific features of Nestlé in France is to offer consumers a wide product portfolio. Products that can fit into every meal of the day and that cater to all classes of the population. In 2016, Nestlé confectionery’s turnover represented 7,5 billion € (8,7 billion CHF). Mars with the division Mars Chocolate Mars is the world leader in the chocolate category with a wide range of Mars chocolate products. They market a total of 29 brands around the world. 5 brands among the 29 are major source of income, and are billionaire in dollars: (M & m's, at, Snickers, Galaxy, Mars /Milky way, Twix). In 2015, Mars Inc confectionery’s turnover was about 16,2 billion€. •

Nestlé and Mars are the main competitors. However, there are few more such as Hershey’s, Lindt and Mondelez. Unlike Nestlé and Mars, Ferrero only operates on confectionery.

2. 2.Market Market Capitaliz Capitalization ation Since the Ferrero Group is not listed on the stock exchange, there is no market capitalization. The company is self-sufficient like Mars. Unlike Mars and Ferrero, Nestlé is listed on the stock exchange. (see Table1)

Turnover

Mars

Nestlé

16,7 billion €

83 billion €

10.3 billion €

Market Capitalization Private company 210billion € Private company Ration

Private company (Table 1)

2.5

Private company

Part II: The Chocolate Market 3. How are their produ products cts positioned on th the e market? Ferrero’s main brands are quite unique and popular compared to its competitors. In fact, Nutella has a unique recipe. Furthermore, Nutella has become a reference brand to identify any kind of chocolate spread. On social media, Nutella is followed by more people than its competitors. (On Facebook : Nutella: 32 million, Milka: 9,3 million, Kitkat : 26 million, Lindt: 6,9 million). Mars, Nestlé and Milka are also popular but there recipe are not unique. Lindt is quite unique by its quality but it’s less popular. On the market, Ferrero’s products are also more expessive than its competiros. Ferrero really tried to make the difference with its competitors by offering something unique to consumers. This map shows the postion of Ferrero’s brand on the market compared to its competitors (see map positionning 1)

Popular

Unique

Ordinary

Unpopular Map Positionning 1

Part II: The Chocolate Market 4. Chocolate Mark Market et Duncan Angwin, Gerry Johansson, Kevan Scholes, and Richard Whittington defined the red ocean as a market where the rules are already defined and where the competition is fierce. (Duncan Angwin, Gerry Johansson, Kevan Scholes, and Richard Whittington, 2013). Today, Ferrero is facing a red ocean. In fact, the chocolate market is full of competitors. Ferrero and its main competitors are sharing 40% of the chocolate market. Indeed, Ferrero holds 6.8% of the market against 9.9% for (see picture 4). With 36% market share in value in France, Ferrero is the first contributor to the growth of a market that is growing by 2.3%. Ferrero, between 2012 and 2016, increased from 8 percent to 9.5 percent on volume. This increase is the result of the sales during Christmas period. In fact, the company tends to get profit from seasonal peaks. For instance, during 2014, Ferrero acquired 36 percent of market share on volume, which confirm that Ferrero is the main actor of the Christmas chocolate market growth in France. Besides, this rise is strongly linked with an efficient salesforce of the company. To this end, Ferrero France relies on all its employees, including one of the most important sales force in the agri-food market. Indeed, more than 450 salespeople support the supply and promotion of the store offer throughout the holiday season.

(Picture 4)

Part II: The Chocolate Market 5. Ferrero’s perfor performance mance Unlike its competitors on the chart (chart 1), Ferrero’s growth is flourishing. In fact, between 2013 and 2014, the Italian confectioner’s growth increased by 13,4% . And between 2015 and 2016, Ferrero’s growth increase by 8,2 %. Those increases are huge compared to Nestlé. Despite, this huge growth, Mars Inc is still the first leader on the chocolate market (Mars Inc 2016 turnover: 16,6 billion €).

Ferrero's perfomance 12

10

8

6

4

2

0 2014

2015 Ferrero

2016 Nestlé

Mondelez

Lindt

Part III: The strategy 1. Ferrero’s strate strategies gies -Main strategies Ferrero bases its strategy on its ability to innovate and invest on new markets to arouse new consumption habits, especially with the Research and Development. One of the main forces of the company is to bring new confectionary concepts. The company is also focused on the customer loyalty that is one of the main key success factors of the company. Indeed, the group has set up a long-term strategy to maintain a high customer loyalty. Moreover, the family business always refused partnerships or outside shareholders in the company, keeping privacy in management and highlighting internal development. Despite its success, Ferrero stayed a family business that inspires confidence. Furthermore, one of the brand’s strategies is to become independent in the production line. To achieve this result, the company decided to make acquisitions such as the Oltan Group. This company is a Turkish group specialized in the hazelnut market which is one of the main ingredients of its most popular brand (Nutella). To summarize, the group based its strategy on the diversity, the innovation and the globalization to expand its activities.

-

Sponsorship

The company is also famous for being committed to different causes. Ferrero has based its strategies on its image and reputation. The group’s approach to sustainability is currently based on the company’s social responsibility strategy, as demonstrated by its slogan: “Sharing values to create values”. This strategy is divided into two main subject areas: People and Planet. Regarding the environmental concerns, Greenpeace said that “Ferrero was leading the way” in terms of sustainability through its commitment to supply an environmentally friendly palm oil from the production to its use. Indeed, Ferrero signed a decree in which it is engaged in the preservation of the biodiversity in the areas related to its cultivation of palm oil and Ferrero’s suppliers must respect the rights of workers and local communities especially in the developing world.

Part III: The Strategy Ferrero is also involved in different sponsorships such as “Le Village kinder” in France that allowed hundreds of children to spend one week in this place dedicated to sport and personal development. To sustain the relationship that binds Ferrero to both its employees and customers and to express their gratitude, Ferrero has set up a unique concept, a foundation chaired by Maria Franca Ferrero: the Ferrero foundation. This foundation organizes congresses, conferences, exhibitions, concerts and seminars in various fields of knowledge ranging from arts to science. Moreover, the Ferrero foundation grants scholarships or funding to organizations or individuals in order to improve the quality of human life. Indeed, it’s very important for the group to be seen as sustainable to stand out of the competition.

2.Where does the company expect its fu future ture growth to come fr from? om? The Italian manufacturer is a global company like its main competitors such as Mars Incorporated or Mondelez. However, Ferrero is mainly present only in Europe. To rectify this lack of diversity, Ferrero has decided to conquer a new market: China. China enjoys the largest investment ever made abroad by the Italian group with $300 million. Furthermore, the group has decided to open a new factory in Hangzhou in order to reach this huge market more easily.Indeed, the group wants to increase its presence abroad and, for this reason, the group has decided to open factories on five continents. To sum up, Ferrero is looking for the growth in the developing countries by focusing on the proximity as a strategy.

3. Ferrer Ferrero’s o’s Acquis Acquisition ition and Partners Partnership hip Recently, the Italian confectioner bought several companies such Thorntons, Findink, Delacre, Oltan Group and Fanny May. By buying several chocolate confectioners, the company want to increase its growth and flood the market with its confectionery Ferrero made few partnership contracts with several institutions such as Ecovadis, Hershey, Sedex... This strategy will improve its supply chain sustainability performance. The aim of the partnership with Ecovadis is to assess and improve supplier performance. (For instance: Partnership with Hershey’s to reduce costs and carbon emission). To respect the environmental commitment, made a partnership with research centers and institutes: International institute for applied system analysis.

Part IV: Other Information 1. Are there any significant remarks in their annu annual al report? In the latest report, Ferrero wanted to focus on the innovation as a major issue. In the report, the group emphasized the importance of innovation instead of giving a lot of figures. The group is worried about its reputation due to the use of palm oil. For this reason, the group wants to prove it is focused on the sustainable development by setting up various approaches to ensure that the raw materials are produced ethically.

2.Have there b been een any significant cha changes nges recently? The latest financial report from Ferrero does not include the two latest acquisitions which are the US company, Fanny May (chocolate confectionery) and Belgium’s Delacre (biscuits manufacturer). (Ferrero Corporate, 2015).

3.How importan importantt is innovation? Ferrero group is considering innovative during its activity. Indeed, its aim is to adapt design a research process with using its own technology. The company is continually focusing on the traceability of its product in order to ensure the quality of raw material. By the way, the partnership with environmental institution such as Ecovadis, could explain the involvement of Ferrero about the whole value chain. Ferrero enters a Cooperative Initiative to End Deforestation in the global cocoa supply chain. The new investments made by Ferrero during the last financial year came to 646 million Euros of which 557 million (5.8% of sales) were used to strengthen the Group’s industrial and production activities, mainly in China, Italy, Germany, Poland, India and Brazil.

Part IV: Other Information 4. 4.Any Any other infor information mation of inter interest? est? Since our oral presentation, we had the occasion to read articles about Ferrero that completely changed our vision of the company. Indeed, on October the 9th, Novethic, a French newspaper has brought to light a report published by “Mighty Earth” an American NGO. In this document were found evidences that the chocolate giant and its competitors are illegally cultivating cocoa in national parks and protected areas in Ivory Coast and Ghana. (see Annex p18) Another article, from the Financial Times, describes a situation where the food quality is not the same across countries. As a matter of fact, it seems that Nutella in Hungary is less “soft” and “dark” than in Germany. This observation is not an isolated case, as this also concerns tea, fish and meat. The situation is such that companies will have to justify discrepancies. Alternatively, legal actions will have to be taken under the EU’s unfair consumer practice laws.

5. What is the role of CSR (Corporate Social Respon Responsibility) sibility) in the company? The Corporate Social responsibility report in Ferrero is not as essential as in other companies as they are not on the stock market. As such, they don’t have to be held accountable to their stockholders. Maybe, this could explain the fact that their last report is from 2015. However, it is still important for them to write a CSR in term of brand image for their customers but also for the media. Thus, they define their CSR approach as largely focused on offering their consumers the highest quality and freshness through carefully selected raw materials. In the food industry nowadays, it is very important to define each and every single action taken in term of environment in a CSR. What is really important also is to have a look at what the competitors are doing in this domain. For instance, Ferrero has made a mistake when they didn’t mention their measures against slavery and forced labor as Nestlé or Unilever did. Therefore, we can say that one of the role of its competitors CSR for Ferrero would be to have a basis of comparison in order to benchma

Part IV: Other Information 6. What initi initia atives has the company taken in order to be mo morre responsible in terms of the en environment vironment and soci society ety in general? The most important measures taken to protect environmental and society are defined in the table below. These are only measures related to ingredients used in the different products. As for the future condition of the earth linked to the climate change, they are currently thinking about introducing “novel food” concept in their future way to produce. Novel food makes reference to the fact of using new ingredients due to the climate change or their nutritional qualities.

Conclusion

To sum up, the famous Italian confectionery is one of leader on the chocolate market. Ferrero has been known to ensure its long-term success through diverse approaches that made its excellent reputation. First, by proposing unique ...