Ferrero family expands

Italian chocolate manufacturer Ferrero aims to spoil us all with the launch of a new Kinder product in the UK. Kinder Country, a chocolate and cereal bar aimed at children (MW last week), hits the shelves later this year and is the latest Ferrero-owned confection to journey across the English Channel.

The family-run company, which owns the Kinder, Tic Tac, Nutella and Ferrero Rocher brands, is one of the biggest confectionery businesses on the Continent. It is gradually increasing its product range in the UK, although it still lags way behind domestic giant Cadbury. Ferrero’s UK market share rose 48 per cent between 2001 and 2003, with sales reaching £118m.

Established in 1946 by brothers Pietro and Giovanni Ferrero, the company built its reputation on manufacturing high-quality products. When the brothers died in the 1950s, Pietro’s son Michele took the reins and expanded the business while continuing to develop the range. Today, Michele’s sons, also called Pietro and Giovanni, run what is now the world’s third-largest confectionery company.

The Kinder product range sold in the UK, which includes Surprise, Bueno, Happy Hippos and Country, is relatively small compared with that available in mainland Europe. Observers say that each Kinder product has a unique quality – from texture to shape – which helps it to stand out from the competition.

It is widely agreed that the company’s strength lies in development. As one advertiser who used to work with Ferrero says: “New product development is the most important part of this business; and Ferrero has hundreds of ideas waiting to be launched.” Another executive who once worked for the company comments: “The secret of Ferrero’s success is that the owners completely understand what to do with chocolate and nuts.”

Of course, Ferrero, which spends £9.3m on advertising across all its brands in the UK, is perhaps best known for its infamous 1980s “ambassador” ads for flagship brand Ferrero Rocher. Relationships with advertising agencies can be prickly. “The family have terrific skills in new product development, but they are not skilled in the art of communications,” says an ad executive who used to work on the Ferrero business.

According to some who have worked with the company, there is little autonomy for different markets and all campaigns have to be signed off by the family. One executive described the arrangements as “very Italian”. Another says, “You have to remember, this is the company that produced the ‘ambassador’ ad – and did it without any hint of irony.”

Ferrero has its own in-house agency, Pubbliregia, which looks after the Ferrero Rocher product, and a roster of agencies working on other brands. Advertising reviews are frequent and accounts are often taken in house before being farmed out again.

Mediaedge:CIA won Ferrero’s UK planning and buying account last year after the confectioner parted company with Initiative Media. WCRS handles the Tic Tac and Kinder chocolate brands, but the Kinder Bueno account, worth £3m in the UK, has been separated and is now up for review. Earlier this year Nitro was awarded the £4m UK launch campaign for adult biscuit brand Giotto.

While the company’s advertising might not win industry plaudits, its in-store marketing policy gains more acclaim. One confectionery buyer says Ferrero has a policy of cultivating relationships with independent retailers. She says: “It is very supportive of the independent sector and it doesn’t trade too much in the multiples. In turn, this has made the independent trade supportive of Ferrero.”

She says Ferrero has set out to ensure customers do not realise its products are owned by the same company, which has helped the individual brands. An ad executive who worked on Ferrero’s business agrees its products are well placed: “Bueno is always right under your nose and Tic Tacs are always on the counter.”

Although it is increasing its market share in the UK, Ferrero has yet to overcome what one ad industry source calls the Cadbury factor: selling its products to a nation raised on Cadbury’s chocolate. However, it is early days for Ferrero, which has only

Facts and Figures

Ferrero was set up in 1946 by brothers Pietro and Giovanni Ferrero in the north-west Italian town of Alba.

The company’s first product was a chocolate-hazelnut spread called Pasta Gianduja – Nutella.

Pietro’s son Michele took over the company and in 1956 a new factory was built in Germany and the operation expanded throughout Europe.

Tic Tacs were launched in 1969.

Ferrero is the world’s third-largest confectioner.

Kinder Surprise Eggs were first sold in the UK 30 years ago.

Ferrero Rocher is the 15th best- selling chocolate product in the UK.

Ferrero’s UK market share increased by 47.5 per cent to £118m (four per cent of the market) between 2001 and 2003.

The company will spend over £4m advertising Ferrero Rocher in 2005.