An almost too-heady smell of slightly singed chocolate brownies fills the manicured streets of Alba.
On other days this northern Italian town may be enveloped by the scent of strawberry, orange or mint. It all depends on what is happening in a vast factory complex on the edge of town, because Alba is home to Ferrero, the maker of Nutella, Kinder Surprise eggs and, of course, Ferrero Rocher.
The family-owned company that began with a small patisserie on a unremarkable backstreet has grown into an €8.4bn (£6bn) empire which spans 53 countries.
It started with a handed-down recipe for the local delicacy of Giandujot, a chocolate and hazelnut block, and turned the Ferreros into Italy’s richest family. Today the company uses a quarter of all the hazelnuts grown across the world, mixed into an ever-growing array of sweet treats.
Michele Ferrero, a real-life Willy Wonka who died aged 89 on Valentines Day this year, was the brains behind the company’s varied creations, from the world famous spread and Rochers through to less obvious products such as Tic Tacs. Ferrero has 20 factories worldwide, including one in its home town of Alba.
The pale grey outer walls of the factory and network of steel pipes, chimneys and vents puffing out mysterious steam do not give much clue to what goes on within. You could imagine it housing any kind of industrial production from metal widgets to plastic buckets.
But the interior is perhaps the closest one can get to a real-life version of Roald Dahl’s fictional factory – although here it is high-tech machinery, not Willy Wonka’s Oompa-Loompas, that creates 24m Ferrero Rocher chocolates a day.
A fifth of Alba’s 30,000 inhabitants are employed in the 340,000 sq m plant but just 64 people work on the main Ferrero Rocher line at any one time, most of those in quality control. A Kinder bar is even more unlikely to pass through human hands.
The technology is so secretive that no one is allowed to take a smartphone onto the factory floor and only a handful of journalists have ever been invited inside. Even notebooks must be left at the door. Perhaps it is no surprise that Ferrero guards its secrets so closely: it took Michele five years to work out how to create the sphere of wafer at the heart of a Rocher.
The machinery that creates them is a work of art. Sheets of dozens of wafer hemispheres are pressed out by rotating sets of jaws. The sheets arc overhead on wire racks to cool and then delicately bob along on conveyor belts of bright red elastic ropes to the main production line where they are cut out, filled with paste and a whole hazelnut, and turned into balls known as “pic-pocs”. Each pic-poc is then whisked through waterfalls of chocolate and bobbed in beds of chopped hazelnut to create the finished product.
It is a surprisingly colourful place. Pipes and barriers are coded in the primary colours of Kinder packaging. Staff wear blue hairnets and Oompa Loompa-esque uniforms in shades of green.
The factory offers a sense of the personality of Michele Ferrero. Right up until his last few months he liked to helicopter into Alba from his base in Monte Carlo to work on ideas. “He liked to say he felt alive because he could invent,” a former colleague says.
The company’s research and technology team continues to work on more than 100 new projects kicked off by Michele’s inventive mind.
His death prompted fears that the company would lose its creative drive, but his son Giovanni, who had already taken the reins of the business in 2011 after his elder brother Pietro died in a cycling accident, has taken his own bold steps.
In June, Giovanni led the £112m acquisition of Thorntons, the British chocolate maker. It was Ferrero’s first brand acquisition in its 70-year history. The buyout is part of the company’s strategy to find greater success in the UK, where Ferrero is currently vying for fourth place in the confectionery market.
In Germany, Italy and France it is No 1 but in Britain it has just a 5% share, putting it well behind Cadbury’s owner Mondelēz, Mars and Nestlé. But Ferrero’s growth is far outpacing its bigger rivals and accounted for half the total growth in the UK’s confectionery market last year.
“We would like to get to No 1 in the UK but there’s a long way to go,” says Pieraldo Oldano, managing director of Ferrero UK. “We have a very nice company that has a strong percentage share, in Cadbury, that has been in the market for nearly two centuries. I think the task is not really easy but with most of our products we are not competing directly with other companies. Our products are something different and specific.” .
Ferrero’s sales rose by more than 20% last year and the previous year as Nutella launched a takeaway snack with dippers that could be sold in corner shops. The innovation added nearly £12m to the company’s UK sales this year, a considerable chunk given Ferrero’s total sales in the UK were £259m in the year to August 2014.
The Kinder brand has also led growth over the past three years. Oldano says the business has benefited from a desire to cut down on sweet snacks. More than 95% of Ferrero’s products contain less than 150 calories; all Kinder’s are less than 130.
“I think part of our success is that parents are more confident to give children a product that is the right size, the right portion and calories,” says Oldano.
But sales are also being driven by heavy marketing spending. Pretax losses at the UK business widened to nearly £4m last year from £2.3m in 2013 as it tries to build its brands.
The company has also needed to absorb some of the rising price of hazelnuts. A bad harvest in Turkey drove prices up to $18,000 (£11,700) a tonne last spring and they are now at $10,000, still up from a historic level of about $6,000.
Ferrero Rocher prices rose 4% last year and will go up about 5% this year in a tough price-led market.
The next few months will be a crucial part of Ferrero’s plans as it works out how to get the most from Thorntons while trying for the biggest Christmas sales of its chocolate pralines.
Nearly two-thirds – 61% – of annual sales of Ferrero Rochers are made during the last three months of the year. In the run-up to Christmas Ferrero expects to sell more than 130m Rochers in Britain – enough for two per person. Last year the figure was 120m.
Despite their rather old-fashioned image, forever linked to the ambassador who is “really spoiling us”, sales last year rose 17%.
“To succeed at Christmas means to succeed in the whole year,” says Oldano. “If you don’t succeed then it will be difficult to recoup the business and competition is very tough. Everybody wants that business.”
Sugar tax ‘incorrect way to fight obesity’ – Ferrero chief
Sugary sweets are already taxed more than many other types of food and focusing on one ingredient is not the right way to fight obesity, according to the UK boss of Ferrero.
A government-backed report published this week urged ministers to impose a sugar tax and crack down on the marketing of unhealthy products to children, but Pieraldo Oldano argued that most confectionery and chocolate is already subject to 20% VAT, higher than most other foods.
Consumption of sugar per head in the UK fell 17% between 1992 and 2013, he said, but obesity rates have risen.
“We as a company think obesity must be fought with three main actions. We must eat a balanced diet with a variety of products, we must eat the right quantity and we must exercise. To focus on one ingredient is the incorrect way to fight obesity,” he said.
Oldano added that Ferrero was doing its bit by selling sweets in small portions and backing sports initiatives for young people in schools.
“The problem is intake and outgoing of calories. If you do not balance what you take with what you eliminate you become obese.”
