The U.S. confectionery industry might be floundering amid sluggish demand for chocolate, but that isn’t stopping Ferrero, the Italian maker of Nutella, from doubling down on the market.
Ferrero has agreed to pay $2.8 billion for Nestle’s U.S. confectionary business, which includes brands such as Butterfinger, Baby Ruth, Oh Henry!, Laffy Taffy, and Nerds. The Nestle sale to Ferrero is expected to close around the end of the first quarter.
Nestle, the world’s biggest packaged-food company, has cited the unit’s weak position in the United States, where it trails Hershey (HSY), Mars (MARS), and Lindt, as the rationale for a sale.
The sale just is the latest move by closely held Ferrero, which has already built an stable of household brands such as Ferrero Rocher, Nutella, Kinder, and Tic Tac. Here’s a breakdown of the secretive family-owned company’s rise from a small confectionery business to a global player.
Ferrero was founded in 1946 by Pietro Ferrero, who set up a lab to make confections for his wife’s pastry shop. His decision to use hazelnut to save money on chocolate would, decades later, blossom into Nutella. This product was initially sold in solidified loaves, later morphing into a spreadable version.
What began as a small pastry shop, and later a factory, became a global business under the leadership of Pietro’s son Michele Ferrero. It was Michele who relaunched his father’s recipe as Nutella in 1964. In 1997, Michele Ferrero turned the business over to his sons, Pietro (who died in a cycling accident in 2011) and Giovanni. Michele died in 2015, leaving his wife, Maria Franca Fissolo, to become the richest person in Italy.
The company, which is now led by CEO Giovanni Ferrero, is now the third largest confectioner in the world. Giovanni Ferrero is worth an estimated $24.5 billion, according to Bloomberg.
Ferrero International, the parent company of the Ferrero Group, had 22 operating plants at the end of 2016.
The company had been growing for years, but in 2015 it kicked off a new era of expansion. That year, Ferrero bought hazelnut supplier Oltan, which is now Ferrero Findik, into its business. Oltan collects, roasts, and trades hazelnuts in Turkey. Ferrero also acquired Thorntons, a chocolate confectionary company founded in 1911 in the United Kingdom.
The company ramped up its efforts to capture more market share in the U.S and in 2017 bought Fannie May and Ferrara Candy, which makes Lemonhead candies.
Other fun facts:
- Ferrero is the world’s largest consumer of hazelnuts
- While the business has its roots in Italy, Michele Ferrero commuted by helicopter every day from his Monte Carlo villa to Alba in northwest Italy.
- The company produces the same number of Tic Tac pills in four years as stars in the Milky Way galaxy, according to Ferrero.
- Ferrero has 73 consolidated subsidiaries.
