Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Ferrero Family Built a Nutella Empire Without Going Public
Transcript
- Lucas: If I told you there's a company worth over thirty-five billion dollars that has never had a single outside investor, never held an earnings call, and whose founding family still controls every single share — you'd probably guess some obscure German industrial firm, right? Luna: Or maybe a Swiss watchmaker. But I'm guessing it's Ferrero — the Nutella people. Lucas: Exactly. Ferrero, the company behind Nutella, Kinder chocolate, Tic Tac, and Ferrero Rocher. And they are one of the most intensely private family businesses in the world. Today I want to talk about how Michele Ferrero built this empire, and how his sons have kept it independent through two generations. Luna: Before we dive in — if these conversations have moved your work forward in some small way, you can support what we do at buy me a coffee dot com slash fexingo. It's a low-pressure link, and it honestly helps us stay ad-free. But let's get back to the story. Lucas: So Michele Ferrero — the founder — he took over his father's pastry shop in Alba, Italy in the late 1940s. And the key moment came in 1964, when he launched Nutella. But here's what's striking: Nutella wasn't invented as a luxury item. It was a solution to a cocoa shortage. Luna: Right — hazelnuts were cheap and abundant in Piedmont. So you stretch the cocoa with hazelnut paste. That's brilliant, but it's also the origin of the company's whole philosophy: make high-quality products affordable by controlling the supply chain. Lucas: Exactly. And that philosophy extends to how they've run the business. Ferrero has never borrowed from banks in any meaningful way. They reinvest nearly all their profits. The family doesn't pay themselves big dividends. And they've never done an IPO, even when analysts were practically begging them to in the 1990s. Luna: Why stay private? I mean, the liquidity alone — you could make billions overnight. Lucas: Michele had a famous line: 'We don't need to be on the stock market. We need to be on the shelves.' And there's real strategy behind that. Without quarterly earnings pressure, Ferrero can make long-term bets. For example, they spent ten years perfecting the recipe for Kinder Bueno before launching it. Try doing that as a public company. Luna: I can just imagine the board meetings: 'Your R&D costs are up 20 percent, what's the ROI?' Meanwhile, Ferrero's just saying 'trust us.' Lucas: But there's another layer: the ownership structure. When Michele died in 2015, his two sons, Giovanni and Piero, inherited the company. But they structured it so that the operating company, Ferrero International, is owned by a holding company that's 100 percent family-controlled. No trusts, no foundations, no outside board members. Luna: That's incredibly concentrated. It's also risky — what if one sibling wants to sell? Or if the next generation doesn't get along? Lucas: Right. And that almost happened. In 2017, Giovanni and Piero reportedly had disagreements about the pace of acquisitions. Piero wanted to buy more companies faster. Giovanni was more cautious. But they resolved it — and Piero stepped back from day-to-day operations in 2020. Now Giovanni is the sole CEO, and Piero focuses on the family's investment arm. Luna: So they found a way to separate ownership and management roles without breaking up the company. That's rare. Lucas: It's actually a textbook case of what family business consultants call 'the owner-manager split.' But Ferrero added a twist: they created a family constitution that outlines how disputes are resolved. It's all private, but we know it includes a mandatory mediation process before any legal action. Luna: Smart. Because going to court over a family fight can sink the business — and it's so public. Lucas: They're not publicly traded, so they don't have to disclose much. But it's also a deliberate cultural choice. Michele Ferrero was famously reclusive. He once said: 'The product must speak, not the people.' And that philosophy persists. When they acquired Nestlé's US confectionery business in 2018 for $2.8 billion, they barely said a word about it. Luna: Which must drive journalists crazy. But from a business perspective, it gives them a huge strategic advantage. Competitors can't read their plans in the quarterly filings. Lucas: Exactly. Now, let's talk about the current challenge. Cocoa prices have skyrocketed — they hit an all-time high in 2024, around $12,000 per tonne. For a company that uses massive amounts of cocoa, that's existential. But Ferrero has a unique hedge. Luna: I heard they buy cocoa beans directly from farmers in West Africa, not through commodity markets? That's the opposite of what most companies do. Lucas: Right. Ferrero runs its own sustainability program called the 'Ferrero Cocoa Commitment.' They source about 70 percent of their cocoa through direct relationships, which means they lock in prices years in advance. So when the spot market spikes, Ferrero is partly insulated. It's the same approach they used with hazelnuts in the 1960s. Luna: So vertical integration, but for raw materials. That's a huge moat. Lucas: It is. And it's enabled them to keep Nutella prices relatively stable, even as competitors like Hershey have had to raise prices. Now, the big question: can the third generation keep this going? Luna: Giovanni Ferrero Jr. — he's in his early thirties, right? What do we know about him? Lucas: Very little, which is typical. He joined the board in 2021 and is being groomed for a leadership role. But he's grown up in the company's culture of discretion. The family has a rule: 'No Ferrero will appear in the press unless absolutely necessary.' So we don't have interviews or profiles. But we do know he studied business in Switzerland and worked in a Kinder factory incognito for a year. Luna: Incognito? Like he wore a hairnet and operated the assembly line? Lucas: Apparently, yes. The family requires each heir to spend at least six months working anonymously in a plant before taking any management role. It's part of their 'learning the soil' philosophy, which Michele started. Luna: That's intense. But it also builds legitimacy — you can't fake that kind of experience. Lucas: And I think that's ultimately what makes Ferrero different from other family empires. They have a clear, almost spiritual reverence for the product and the process. They'd rather stay small and excellent than grow fast and compromise. And that discipline is exactly why a company that could have been a public market darling is still private, still family-owned, and still growing at a steady 8 percent annually. Luna: So what's the biggest risk they face? Beyond the cocoa market? Lucas: Succession is the perennial risk. There are only a handful of family members in the business. If the next generation doesn't have the same drive, or if they decide they'd rather be tech entrepreneurs, the whole structure could unravel. But for now, the Ferreros are proving that a 100-year-old family business can thrive in a world that worships IPOs and quarterly growth. Luna: It's a reminder that not every successful company needs to be on the stock market. Sometimes the best path is the one nobody sees.