🍫 The Ferrero Empire (#30)
Trung Phan 
Origin of wealth: Nutella, a hazelnut treat his grandfather created due to WWII chocolate shortages.
Since then, the Ferrero family has created a $35B empire by inventing many of our favourite sweets 😋
🍫 Officially known as the Ferrero Group, the private Italian firm employs 34k+ people and runs 30+ plants globally.
It does $14B of sales a year with Nutella accounting for 1/5 of the total (~$3B).
The confectionary empire includes Kinder, Ferrero Rocer, Tic Tac and Mon Ami.
🍫 The OG Nutella was invented in 1806 during the Napoleonic Wars.
The famed French general started a continental blockade against his seafaring foes in UK, leading to a cocoa shortage across Europe.
In response, Italian chefs used ground hazelnut to stretch their chocolate... .creating a product called gianduja.
🍫 Fast forward to 1946: Pietro Ferrero -- a native of Alba, Italy -- recreates gianduja due to a cocoa shortage following another war (WWII).
The treat came as a solid block, sliced like butter and eaten on bread. It's a huge hit🔥
🍫 Why hazelnuts, though?
Alba is in Italy's northwestern region, where the nut (which comes from the hazel tree) is plentiful.
Its high fat content and "nutty" flavor complements bitter chocolate.
(N.B: a hazelnut's shell-to-kernel weight ratio is a key quality metric).
🍫 In 1951, Pietro turns his popular snack into a spread called Supercrema.
A final name change takes place in 1964 when the Italian government cracks down on superlatives in ads (eg."super" in Supercrema).
The Ferreros choose a new name that evokes the flavor of nuts: Nutella.
🍫 Pietro's son (Michele) spearheads the change, having taken over operations in 1957 (at age 32).
Michele would become a real-world Willy Wonka: a genius -- but secretive -- confectionary.
He was also a beloved owner, promising jobs for life for Alba residents.
🍫 An inventor at heart, Michele spends his days creating and taste-testing treats while sporting a lab coat.
The Nutella name change also comes with a reformulation (more sugar, cocoa, butter). He would go on to create many of the world's favourite sweets:
🍫 Michele's greatest technical achievement is the immortal Ferrero Rocher.
Launched in 1982, Michele spends 5 years perfecting the praline (wafer filled with hazelnut and chocolate covered by...more hazelnut).
In the lead-up to X-mas, 900 pralines are made a minute (running 24/7).
🍫 By the mid-1980s, Ferrero is a global operation with sales passing the $1B mark.
Just as the business was passed to him, Michele grooms his sons -- Pietro and Giovanni -- to take over.
One legendary test: they were blindfolded and had to smell their way out of a factory.
🍫 The sons work at Ferrero in different roles across the globe before becoming co-CEOs in 1997 (Pietro was 34, Giovanni was 33).
By then, the Ferrero empire is bringing in $5B a year. The brand is bombarded by acquisition offers but Michele always says "no, not for sale".
🍫 Per Giovanni, "someone will emerge as a front-runner."
Since 2015, Giovanni has spent ~$5B -- on chocolate, candy and snack brands -- to take the crown, with the moves expanding Ferrero's footprint in the US and UK.
🍫 The acquisitions are polarizing:
◻️ LESS LUX: The acquired names are "lower end", which can hurt Ferrero's margins
◻️ UNHEALTHY: As competing snack giants go healthier, Ferrero is doubling down on sugary vice
Supporters say Ferrero's inventive chops will upgrade the brands.
🍫 Among confectionary giants, Ferrero only trails Mars, which sells $20B a year of legendary brands including Mars, Snickers, Twix, Skittles and M&Ms.
Ferrero ($14B) leads Mondelez ($11B), Meiji ($10B), Hersey ($8B) and Nestle ($8B).
🍫 At its size, Ferrero is the world's largest buyer of hazelnuts (1/3rd of the annual supply).
Hazelnut gathering is backbreaking work and 70%+ of production comes from Turkey, where there are charges of child labor (often Kurdish migrants)...Ferrero faces criticism over this:
🍫 Ferrero says it wants 100% hazelnut "traceability", but supply chain complexity makes this goal difficult (it faces similar criticism for palm oil sourcing).
To help, it bought 2 of the largest hazelnuts traders and is the world's #1 hazelnut *supplier* (as well as buyer).
🍫 Ferrero also faces questions over the high-sugar content of Nutella. For decades, it advertised the spread as a part of a "balanced breakfast".
In 2013, it paid $3m to settle a California false advertising lawsuit.
🍫 Giovanni says Ferrero is aiming for +7% growth a year (per the rule of 72, sales double in 10yrs). It's too early to tell if M&A will get it there. The good news: Ferrero is still inventing.
🍫 In 2021, the company unveiled its first ever ice cream stick and chocolate bar.
