By Gobbling Up Sweets Brands, the Secretive Italian Ferrero Group Has Become America’s Cookie Monster

This morning’s news that Kellogg is selling its Famous Amos and Keebler divisions to Ferrero Group for $1.3 billion is the latest development in Kellogg’s ongoing effort to jettison many of its nonessential brands in order to focus on proven performers like Pringles. As Kellogg CEO Steve Cahillane put it, the divestiture is “yet another action we have taken to reshape and focus our portfolio,” adding that giving the Keebler elves their walking papers “wasn’t an easy decision.” Meanwhile, snapping up the famous Famous Amos and Keebler’s milk chocolate mammoths like Fudge Stripe cookies seems like it was a very easy decision for Ferrero Group—or, if not exactly easy, then entirely congruent. “We are acquiring a portfolio of well-established brands that consumers love, with very strong market positions across their respective categories,” Ferrero Group CEO Lapo Civiletti said, “allowing us to significantly diversify our portfolio and capitalize on exciting new growth opportunities in the world’s largest cookie market.” Actually, we can’t be sure if Civiletti said that or his publicist did. Why? Because Ferrero Group is the black box of the confectionery segment, a private, family-owned firm not much given to public pronouncements, or public anything. Michele Ferrero, the late company chief, gave exactly one interview in his life (and kept his dark sunglasses on). The Guardian has called Ferrero Group “one of the world’s most secretive organizations.” Secret though it may be, this once-tiny Italian confectioner has, in almost no time at all, become a major player in America sweets. What’s more, though Ferrero has historically been an originator (do you like Nutella? They invented it), the company has built up its U.S. presence by gobbling up classic American brands that other companies have developed and marketed first. Ferrero’s roots reach back to postwar Italy when Pietro Ferrero began tinkering in the back of his wife’s pastry shop in the town of Alba. To save money on chocolate, he began developing recipes using hazelnut—a fateful decision that would lead to the introduction of Nutella in 1964. While the company had a toehold in the United States with its Tic Tac brand, introduced here in 1969, it concerned itself primarily with European expansion. That changed when Giovanni Ferrero, grandson of the founder, took the helm in 1997. Realizing that competitive growth could come only via acquisitions (versus the more time-consuming process of developing indigenous brands), Ferrero Group went shopping. After buying a Turkish hazelnut roaster and then the U.K.’s upmarket Thorntons chocolate brand in 2015, the company turned its attention to the U.S. In March of 2017, Ferrero paid a reported $115 million to acquire chocolatier Fannie May, a Chicago institution since 1920. With the deal came production and distribution centers in Ohio and Illinois, which the company said it “fully intend[ed] to keep.” The acquisition would become a template for those to follow: By buying established American brands, Ferrero would get not only brand names and associated products but marketplace infrastructure on which it could expand. Next into the shopping cart of Ferrero was the similar-sounding Ferrara Candy Co., maker of Brach’s and Red Hots, which it bought at the end of 2017 for $1.3 billion. Then, just a few weeks later, in January of 2018, Ferrero completed its largest acquisition yet, the $2.8 billion purchase of Nestlé’s candy division. With this deal Ferrero gained 20 brands—many of them household names—including Butterfinger, Baby Ruth, Goobers and 100 Grand. It also came into exclusive rights to the Crunch brand. With a foundation sunk in the American market, Ferrero has been building. In October of last year, for example, it broke ground on a $9 million expansion of its facilities in Somerset, N.J.—a plant into which the company had already sunk $12 million to produce Kinder Joy, another notable feature of its American strategy. Kinder Chocolate was created by Michele Ferrero (son of company founder Pietro) and debuted in Italy in 1968. Kinder has over 20 brands under its umbrella, but the best known is Kinder Surprise, a chocolate egg with a tiny toy hidden inside. The egg was a global smash—except for in the United States, where FDA regulations barred foods that contained “non-nutritive objects” inside. To comply with the law, Ferrero created a variant called Kinder Joy, a plastic egg containing two separately packaged pieces, one with a cream-filled chocolate wafer, the other with a toy. The maneuver worked. Since Kinder Joy’s American launch in November of 2017, Ferrero has sold upwards of 90 million eggs in the first year. Ferrero’s strategy has accumulated its share of skeptics who point out that, as Americans abandon sugar-laden treats for healthier snacks, buying up the legacy cookie and candy-bar brands might not be the most forward-thinking thing to do. But the company has, if nothing else, shown that it knows how to grow. Ferrero sales rose by 3.5 percent last year, and its recent acquisitions have made it into the third largest confectioner in the world.

Legacy Brands

By Gobbling Up Sweets Brands, the Secretive Italian Ferrero Group Has Become America’s Cookie Monster

Today’s acquisition of Kellogg’s Keebler division is sure to fuel the national sugar fix

Robert Klara

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Robert Klara