ferraro spa _strategic management

Ferrero S.p.A

Indulge in Layers of Delights

Presented by: Faiz Zihuna

ContentsIntroduction of ConfectionaryCivilisation of ConfectionaryBrand PortfolioNew ProductsStrategic Planning

MissionCore ValuesPrinciplesCode of Business ConductsCode of Ethics

ContentsOrgnizational StructureLeadership StyleFerrero Value-ChainCorporate ResponsibilityResech and DevelopmentMarketing MixSWOT AnalysisPESTLE AnalysisCompetitve AnalysisFinancialsTheoryRecommendationPersonal reflectionReferences

Confectionery is the art of making of confections, which are food items that are rich in sugar and carbohydrates.

Confections include sweet foods, sweetmeats, digestive aids that are sweet, elaborate creations, and something amusing and frivolous.

Sugar confectionery includes sweets, candied nuts, chocolates, chewing gum, sweetmeats, pastillage, and other confections that are made primarily of sugar.

Civilisation-History of Confectionary Industry

Confections date back more than 3000 years back to the time of egyptians. During this early time confections consisted products made from various dried fresh fruits, nuts, spices and herbs. Honey was the main confectionary sweetener with the coming of the middle age. Sugar based confections arose first in europe and spread. Only sold by apothecaries , their sweet taste created a consumer demand that quickly grew supply.

(Olver, 2014)

Civilisation-History of Confectionary Industry

In the 14th and 15th century venetians started importing sugar from Arabias and sugar confections were made available to common people. In the 15th and 16th century variety of hand prepared high boiled sweets, molded sweets and long established fruit and nut containing products were offered by confectioners to meet the growing consumer demand

(Olver, 2014)

Civilisation-Timeline of Confectionary Industry

1850 -1899

1854 The first packaged box of Whitman's chocolate debuts.1868 Richard Cadbury introduces the first Valentine's Day box of chocolates.1884 Thomas Adams creates Black Jack, America's first flavoured gum.1880s Wunderle Candy Co. of Philadelphia creates candy corn.1900 Milton S. Hershey of Lancaster, Pa., introduces the first Hershey milk-chocolate bar.1906 Hershey's Kisses chocolates appear in their familiar foil wraps.

(DeseretNews.com, 2002)

Civilisation-Timeline of Confectionary Industry1910-1932

1912 The Whitman's Sampler box of chocolates is born, the first boxed chocolates to include an index showing the filling in each candy.1913 Goo Goo Clusters, a Southern favourite, is the first bar to combine milk chocolate, caramel, marshmallow and peanuts.1912 The Whitman's Sampler box of chocolates is born, the first boxed chocolates to include an index showing the filling in each candy.1923 The Mars Milky Way Bar is the first candy from the Mars family.1930 M&M/Mars introduces the Snickers Bar, today's No.1 selling candy bar in the United States1932 Red Hots are made by Ferrara Pan Candy Co.

(DeseretNews.com, 2002)

Civilisation-Timeline of Confectionary Industry1910-1950

1939 Hershey's Miniatures chocolate bars1941 M&M's chocolate candies are introduced in response to slack chocolate sales during the summer.1946 Official opening of Ferrero company1949 El Bubble Bubble Gum Cigars are the first 5 cent bubble gum.1980 Goelitz introduces the first American-made gummy bears and gummy worms.1992 DOVE Dark Chocolate Bar and DOVE Milk Chocolate Bar introduced nationally by M&M/MARS.1999 Sound Bites Lollipops from Cap Candies is the first radio-lollipop combination.2001 M&M's Dulce de Leche Caramel Chocolate Candies tap into growing Latino market (DeseretNews.com, 2002)

The Story of a Family

Pietro Ferrero began his career as a pastry maker in Dogliani and later moved to Turin where he opened his own pastry shop. During World War II, however, Ferrero was forced to move his shop, to Alba. His wife Piera, took over operating the family pastry shop and Ferrero himself began experimenting with recipes.

Ferrero sought to develop new products to overcome the short supply of many traditional pastry ingredients, and particularly cacao, during the period. By the end of the war, Ferrero's efforts had paid off with a new frosting-like spread that combined roasted hazelnuts with cocoa butter and vegetable oil. Ferrero called his new paste "pasta gianduja," which he began selling in 1946.

(Referenceforbusiness.com, 2014)

The Ferrero Timeline

1942

Pietro Ferrero begins to fulfil his dream of selling fine chocolates to the masses by opening his laboratory in Alba. Some of his first products are made with base ingredients of hazelnut and cocoa.

(Ferrerorocherusa.com, 2014)


1946

Ferrero begins industrial production and is recognized as an official company by the Italian Department of Commerce.



1950 - 1970

Ferrero develops a wide variety of confections that are sold first in Italy and other European countries, then to other countries throughout the world. Among the brands that are launched in this period are Nutella® hazelnut spread, Kinder® chocolates and Tic Tac® mints.



1982

The Ferrero Rocher® brand is launched and is sold in various European countries. Ferrero Rocher® grows in popularity throughout the decade as the brand becomes known for its distinctive gold foil wrapper, unique premium packaging and high quality hazelnut chocolates.

The introduction of Ferrero Rocher® is the first Tipping point for Ferrero.



1985

Ferrero Rocher® chocolates are first distributed regionally in the United States.

1988

Ferrero Rocher® chocolates are launched nationally in the United States. Over the next several years the brand grows into a premium chocolate category leader.

The second Tipping point for Ferrero(Ferrerorocherusa.com, 2014)


2000 - 2006

Rocher® continues to attract new consumers nationwide with its high quality premium image and "Fine Hazelnut Chocolates." In 2001, the Ferrero Prestige brand is launched in the US to introduce a wider assortment of Ferrero confections to a growing premium chocolate category.



2007

After more than seven years of perfecting the dark chocolate recipe, Ferrero launches Ferrero Rondnoir® dark chocolates in the US. Ferrero Prestige confections are re-launched with two new delectable flavors in addition to Rocher® chocolates, Rondnoir® dark chocolates and Ferrero Garden Coconut confections.



2008

Ferrero Prestige becomes Ferrero Collection, however, the successful flavor mix remains unchanged. Ferrero Collection combines the savory array of rich, sumptuous and creamy confections of Rocher® chocolates, Rondnoir® dark chocolates and Ferrero Garden Coconut confections – the ultimate treat for your senses.



2009 & Beyond – What the Future Holds

Ferrero entered new territories with a new iced and creamy coffee flavored milk beverage called “Ferrero Cappuccino” in 2011.

Ferrero continues to innovate in the premium chocolate category by satisfying the growing consumer demand for high quality confections.

(Eagle, 2014; Ferrerorocherusa.com, 2014)

Ferrero Brand Portfolio

(Ferrero.com, 2014)

Introduced in 1982.Today it's the world leader in its category.Success factors: Refined packaging, ground-breaking advertising campaigns and its innovative shape

Introduced in 1989.Unique and delicate taste.Whole almond is plunged into a delicious creamy filling and enclosed in a crispy shell, covered in flakes of coconut.

Introduced in 1956.Marks the beginning of Ferrero history in the world of boxed chocolates.Success factors:

- The recipe - The choice of colour - The name

Founded in Alba in 1944 The first version of what would become the revolutionary invention of the century. Success factors:

- Inimitable recipe - its genuine and carefully selected ingredients

Introduced in 1974.By combining a chocolate egg, a surprise, and a toy 30 billion eggs have been sold all over the world with more than 8,000 different surprises

Kinder was created 60 years ago.Success factors”

- Quality ingredients, trusted name, small in size that is perfect for children.

Mission“Our mission has been the passion for excellence

and reliability of our products”

Core valuesHigh quality, crafted precision, product freshness,

careful selection of the finest raw materials, respect and consideration for our customers

(Ferrero.com, 2014)

Principles

Loyalty and TrustRespect and Responsibility Integrity and Sobriety Passion for Research and Innovation Work, Create, Donate

(Ferrero.com, 2014)

(Ferrero.com, 2014)

Loyalty and Trust:Constant attention towards consumers’ needs is the foundation of the company policy, inspired by maximum transparency and excellence in quality.

The loyalty towards consumers and the trust they put in the products with their everyday purchases are at the core of the long-lasting relation that the company enjoy with them.

The Company practices are based on mutual trust between colleagues, full dedication and transparency towards the Group, as well as towards all civil society stakeholders with whom they interact daily

(Ferrero.com, 2014)

Respect and ResponsibilitySupport the protection of human dignity, as well as the absolute and unconditional respect of human rights, wherever the Ferrero Group companies operate.

Ferrero support the abolition of the exploitation of child labour and of forced and coercive labour, within their sphere of influence and along the entire production chain, through specific legal means and close relations with local Communities.

Promote the professional and personal development of our human resources, based on our respect of the principle of equality of treatment.

Work to avoid any form of discrimination in the employment practices

(Ferrero.com, 2014)

Integrity and Sobriety

The company’s communications with consumers, including advertising, respect the values of human dignity, family and children, in line with Ferrero’s moral and ethical principles.

Ferrero’s advocacy practices towards International, National and Local Institutions are based on solid scientific knowledge and always inspired by intellectual and behavioural integrity, as well as transparency.

(Ferrero.com, 2014)

Passion for Research and InnovationThe goal is to create unique products, developing innovative research and production processes and using company’s own technologies.

Applying consolidated quality and traceability procedures, in order to preserve the organoleptic and nutritional characteristics of the raw materials.

A fundamental element of their success is the accurate selection of highest quality raw materials, sourced in full respect of a strict ethical code concerning their origin, harvesting and manufacturing.

(Ferrero.com, 2014)

Work, Create, Donate

Ferrero identify the company with the motto: “Work, create, donate”, conceived which was introduced by Michele Ferrero from the very beginning of his business pursuits. In essence, the company favour the “ethics of doing” over the “practice of appearing”.

Code of Business Conduct

The Code of Business Conduct is enforced to “business to business” relations, in compliance with the Ferrero Code of Ethics and it is based on 5 priorities:

1) Excellence of product quality and safety

2) Human rights commitment

3) Environmental protection and sustainability

4) Conditions of workplace environment

5) Business integrity(Ferrero.com, 2014)

Code of EthicsThe Ferrero Code of Ethics, in force since January 1, 2010, is intended to serve the following purposes:

To identify the guiding principles for the resources that operate

in the Company and for the Company;

To define the fundamental obligations that the Company

assumes with its associates and vice-versa;

To state the Company position with regard to its stakeholders.

(Ferrero.com, 2014)

Organizational Structure

(Ferrerocareers.com, 2014)

Management

Junior Product Manager(Bijoern R)

Tic Tac Product Manager(José M. J.)

Logistic Manager(Dave V.)

National Key Account Manager(Detlef L.)

Senior Controller(Tine D.)

Planning Manager(Salvador M.M)

Sales & Administrative Manager(Selma C.F)

Area Manager(Matthieu L.)

Junior Product Manager(Marjolaine G.)

(Ferrero.com, 2014)

Leadership

(Ferrero.com, 2014)

Control of the company has always remained in the hands of the Ferrero family.

After the death of the older Pietro Ferrero, his brother, Giovanni, took over before passing control to Michele, the son of the founder and the father of the younger Pietro.

Leadership Style- People-oriented leadership

(Fiedler, 1967; Sylvers, 2014).

A man of few words who shuns publicity, Ferrero senior has turned a Piedmont-based chocolate factory into a world giant. He is known for running Ferrero with an iron fist but is also loved by locals for a tendency to give back to his community and by employees for the company’s generous working conditions.

People-oriented leadership: The people-oriented leader is the one that, in order to comply with effectiveness and efficiency, supports, trains and develops his personnel, increasing job satisfaction and genuine interest to do a good job).

Women in workforce


Ferrero Value-Chain

(Corporate Responsibility, 2012)

Corporate responsibilities

(Ferrero.com, 2014)

Research and development

One of Ferrero’s strengths is its ongoing research, aimed at creating ever more innovative and unique products. The Ferrero Group’s Research and Development department

is locate at a company within the Group – Soremartec (Société de recherche de marketing et technique).It assigns a group of specialist engineers with the task of

examining the taste and appearance of products and monitoring the food industry so as to detect and examine new and unusual systems, often borrowed from other manufacturing sectors. (Ferrero.com, 2014)

Marketing Mix


ProductRaw cocoa quality guarantees chocolate product quality.Packaging of the product also secure the quality and image.Spherical with gold wrapper

Marketing Mix


Price and PlacePremium Pricing strategySupermarkets, Malls, Grocery storesCompany owned outlets/counters

Marketing Mix


PromotionExcellence, Style and ExpertiseWord of mouth Television, print ads and Social medias

SWOT Analysis

S W

(Euromonitor International, 2012)

SWOT Analysis

(Euromonitor International, 2012)

O T

PESTLE ANALYSIS

(KPMG LLP, 2012; Goodyear, 2013; Thestoryofchocolate.com, 2014)

Political & Legal Economical• Tax: The threat of taxes being

imposed on the confectionery industry in some countries

An increased emphasis on healthy lifestyles is an imperative for governments facing rising healthcare costs, particularly in developed economies that are battling childhood obesity. • International trade and

food labelling policy.

• Price of cocoa: It can fluctuate daily, depending on—and affecting—supply and demand around the world.

• Inflation rate: if the consumers are under pressure to cut-down on their expenses, they would not want to buy ‘unnecessary 'products.

• Rising incomes in emerging markets and an economic recovery in the rich North, are predicted to lead to a 30% growth in demand by 2020.

PESTLE ANALYSIS

(Angelis, 2013; Thestoryofchocolate.com, 2014)

Social & Environmental Technological• Current trend of snacking: Snacking has become a major trend, due to the changing eating habits of consumers.

• Health-consciousness: The increasing health and wellness trend may limit the growth potential.

• Adverse weather or tree disease can shrink supply of Cocoa.

• Increasing concern for CSR calls for company to be more responsible.

• Development of new technology and innovation leads to opportunity for new products and markets.

• As consumers become ever more demanding, innovation is crucial to market share.

Competitive Analysis – Major competitors

(Ferrero.com, 2014)

Net Sales 2013: 17,640 (US$ millions)



Competition in different markets

• In 2013, The Hershey Co and Mars are expected to account for a combined 65% share of overall value sales in the US.• In UK, Cadbury UK Ltd maintains a strong leading position in

chocolate confectionery during both 2012 and 2013 with Mars UK Ltd remaining close behind in second position.• The most important player in chocolate confectionery in Italy in 2013 is Ferrero, which is expected to reach a 35% value share, with sales of €831million. Also international players such as Lindt and Nestlé also have a very important role• Mars Foods (China) is in leading position in China, Ferrero Rocher

enjoy unqualified success in the gift-giving segment of China’s emerging chocolate market.

(Euromonitor.com, 2014)

Competition in different markets• In US, over the forecast period 2013-2018, chocolate

confectionery is expected to register constant value growth of 7%, to reach sales of US$18.6 billion. Higher prices and smaller pack sizes are expected to drive retail volume sales down by 1% over the forecast period.• In UK, Chocolate confectionery is expected to increase

in both retail volume and constant value terms over the forecast period.• Chocolate confectionery is expected to experience

ongoing healthy constant value growth over the forecast period in China. (Euromonitor.com, 2014)

Financials

The Ferrero Group financial statements for the year ended 31 August 2013 indicates a turnover of 8.1 billion Euros up 5.6% over the previous period with a total of 7,670 million Euros. There was an increase in operating income, with a profit before tax of 795 million Euros, the result for the year decreased by 9.5% over the previous year, because of a drop in financial results due to the adverse effects of exchange rate fluctuations.

(Ferrero.com, 2014)

Financials

Financial improvement due to dynamic growth attained in the new markets:

Ferrero product sales confirmed and in some cases even improved over the outstanding results recorded in 2012 in Asia, Russia, the U.S., Australia, Canada, Brazil and Argentina. Sales rose strongly in Mexico and Turkey, where new production plants came on stream in the course of the year.

The investments made by Ferrero during the year came to 525 million Euros, of which 473 million (5.8% of turnover) went to strengthen the Group’s industrial and production activities, mainly in Germany, Italia, Poland, Canada, Russia, Mexico, Turkey and Brazil. (Ferrero.com, 2014)

Theory- Maslow’s Hierarchy of needs

Self-actualisation need: Ferrero’s key objective is to nurture the talents of its employees through numerous career and training opportunities. Provides employees with the opportunity to take on challenging and stimulating responsibilities.

(Ferrero.com, 2014)

Theory- Lean Production TheoryThe point of lean production is to eliminate all waste in an organization, using only what the firm needs at the moment.Manage their factories by using energy, materials and natural resources in an efficient manner, with the aim of reducing their environmental impact, reducing waste and refuse and, where possible, using renewable energy sources.Ferrero is highly concerned about its Corporate Social Responsibility and the sustainability of its supply chain. Organise projects and operational programs that respect the environment.

(Ferrero.com, 2014)

RecommendationsAsia has the world’s booming economies. Ferrero should promote their products more in Asia markets especially in China and India which has an emerging upper middle class which will amount to half of the world’s population.Localize the advertisements and promotions, Ferrero should look in to the culture, values, norms and trends of the markets which they cater and then design the adverts and promotions.The market which Ferrero caters is relatively inelastic to the price. They should try to increase the prices and improve the profits.

Ferrero can use price differentiation in the markets by increasing prices in the markets which has high purchasing power.

(Ferrero.com, 2014)

Personal reflection

Importance of family and keeping the values we learnt from them.Being successful in the long run requires the considerations of all the parties involved in the business. As a company contributing to society and nature increases value of the company as people will develop more trust with the company. Creating a strong premium brand requires the constant research and development and understanding of the customer requirements.

(Ferrero.com, 2014)

1. Referenceforbusiness.com, (2014). Ferrero SpA - Company Profile, Information, Business Description, History, Background Information on Ferrero SpA. [Online]. 2014. Available from: http://www.referenceforbusiness.com/history2/21/Ferrero-SpA.html. [Accessed: 1 July 2014].

2. Ferrerorocherusa.com, (2014). The Ferrero Timeline - Ferrero Rocher®. [Online]. 2014. Available from: http://www.ferrerorocherusa.com/history-timeline.php. [Accessed: 6 July 2014].

3. Eagle, J. (2014). McDonald’s and Ferrero announce partnership. [Online]. 2014. FoodProductionDaily.com. Available from: http://www.foodproductiondaily.com/Markets/McDonald-s-and-Ferrero-announce-partnership. [Accessed: 7 July 2014].

4. Ferrero.com, (2014). Loyalty-and-Trust. [Online]. 2014. Available from: http://www.ferrero.com/ferrero-principles/loyalty-and-trust/attention-on-consumers/. [Accessed: 9 July 2014].

5. Ferrero.com, (2014). Respect and Responsibility. [Online]. 2014. Available from: http://www.ferrero.com/ferrero-principles/respect-and-responsibility/respect-of-human-dignity. [Accessed: 9 July 2014].

6. Ferrero.com, (2014). Integrity and Sobriety. [Online]. 2014. Available from: http://www.ferrero.com/ferrero-principles/integrity-and-sobriety/communication-principles. [Accessed: 9 July 2014].

7. Sylvers, E. (2014). Pietro Ferrero, 47, Food Company Scion. [Online]. 2014. Query.nytimes.com. Available from: http://query.nytimes.com/gst/fullpage.html?res=9404E3DE1F38F933A15757C0A9679D8B63. [Accessed: 9 July 2014].

8. Ferrero.com, (2014). Ferrero - Group Mission. [Online]. 2014. Available from: http://www.ferrero.com/the-group/mission/Ferrero-values. [Accessed: 9 July 2014].

9. Olver, L. (2014). TheFood Timeline: history notes-candy. [Online]. 2014. Foodtimeline.org. Available from: http://www.foodtimeline.org/foodcandy.html. [Accessed: 9 July 2014].

10. DeseretNews.com, (2002). A timeline of confectionery. [Online]. 2002. Available from: http://www.deseretnews.com/article/945518/A-timeline-of-confectionery.html?pg=all. [Accessed: 9 July 2014].

11. Angelis, A. (2013). German confectionery market led by Ferrero, Mars and Kraft Foods. [Online]. 2013. Yahoo Finance UK. Available from: https://uk.finance.yahoo.com/news/german-confectionery-market-led-ferrero-000000103.html. [Accessed: 11 July 2014].

12. Thestoryofchocolate.com, (2014). Economics- The Story of Chocolate. [Online]. 2014. Available from: http://thestoryofchocolate.com/Who/content.cfm?ItemNumber=3450&navItemNumber=3481. [Accessed: 11 July 2014].

13. Goodyear, D. (2013). The future of chocolate: why cocoa production is at risk. [Online]. 2013. the Guardian. Available from: http://www.theguardian.com/sustainable-business/fairtrade-partner-zone/chocolate-cocoa-production-risk. [Accessed: 11 July 2014].

References

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ferraro spa _strategic management

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