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: You know, we've talked a lot about families that eventually went public — Cargill stayed private, but most of them eventually sold shares. But there is one giant that has never, not once, sold a single share to the public, and it's sitting on something like thirty billion dollars in revenue. Luna: Ferrero. Lucas: Exactly. Ferrero. The family behind Nutella, Kinder, Tic Tac — they've been private since 1946. And that decision, to stay private, is actually the story. It's not just a financial choice; it shaped every product, every acquisition, every succession. Luna: So give me the origin. Post-war Italy, a small pastry shop in Alba — how do you go from that to a thirty-billion-dollar empire without ever ringing the IPO bell? Lucas: It starts with Pietro Ferrero, a pastry maker who in the 1940s was dealing with a cocoa shortage. Chocolate was expensive, so he mixed hazelnuts — which grow wild in Piedmont — with a little cocoa to stretch it. He created a solid block called 'pasta gianduja' that workers could slice and put on bread. Luna: So Nutella was essentially a recession-proof product from day one. Cheap ingredients, accessible price point. Lucas: Right. But his son Michele really built the empire. Michele took over in the 1950s and he had two obsessions: quality and secrecy. He refused to license the recipe, refused to franchise, refused to go public. He once said that the only way to control quality is to own everything. Luna: And that extends to the supply chain? I remember reading that Ferrero owns hazelnut orchards in Turkey and Chile. Lucas: They do. They're the world's largest buyer of hazelnuts. But they also own their own machinery — they design and build their own production lines in-house. No external vendors know exactly how they roast or grind the nuts. That vertical integration is almost impossible to maintain if you have to answer to shareholders asking why you're spending on proprietary equipment instead of buying off the shelf. Luna: So the private structure lets them invest in stuff that doesn't show a quick return. Lucas: Exactly. Nutella took ten years to become profitable. A public company would have killed it in year three. But Michele could say, 'I'll wait.' And that patience built a brand that now sells one jar every two and a half seconds globally. Luna: That's staggering. But what about the succession? He stepped down in the late 1990s, handed to his sons — Pietro and Giovanni. Then tragedy. Lucas: Yeah, Pietro died in a cycling accident in 2011. He was the ceo elect. So Giovanni, the younger son, took over alone. That could have destabilized a public company — analysts would have demanded a plan, a timeline. But privately, Giovanni could say, 'I need time to figure this out.' He took three years to restructure management, and he didn't have to explain a single quarter. Luna: And he ended up being a pretty good steward. He oversaw the acquisition of Nestlé's US confectionery business in 2018 — bought Butterfinger and Crunch for over a billion. That felt very un-Ferrero, like they were finally buying brands instead of building them. Lucas: It was a shift. But notice they paid cash. No stock swap, no debt offering. They had billions in retained earnings because they never paid dividends to outside shareholders. The family could just write a check. That's a superpower. Luna: So the question becomes: why don't more families do this? Why go public at all? Lucas: Most families don't have the discipline or the scale. Ferrero makes something like twenty-five billion euros in revenue — you can generate enough cash to fund growth without selling equity. Most family businesses hit a ceiling where they need capital for expansion, and the easiest path is an IPO. But the trade-off is control. Luna: Speaking of control — and this ties to something we talk about a lot on this show — if you're finding these deep dives into private company strategy useful, and you want us to keep making them without ads, listeners can support the show at buy me a coffee dot com slash fexingo. Lucas: That's right. It's a small way to keep these conversations independent. We don't run ads, so listener support really helps us keep digging into stories like Ferrero's. Luna: Yeah. Okay, back to Ferrero — one more thing I find fascinating: the secrecy. They don't even have a corporate website in the traditional sense. No press releases about strategy. How do they recruit talent? How do they even have a culture? Lucas: They recruit through relationships. Many executives are second-career hires from other consumer goods companies who are tired of quarterly earnings pressure. Ferrero offers them autonomy and a long horizon. The trade-off is you sign a very tight non-disclosure. There are stories of employees not being allowed to take photos inside the factories. Luna: And that works because the family is still involved. Giovanni is chairman. His son — the fourth generation — is now in his thirties and being groomed. Lucas: That's the real test. Michele ran it for fifty years. Giovanni has been at the helm for about fifteen. The fourth generation has grown up with wealth and without the wartime scrappiness. Can they maintain the culture of thrift and secrecy? That's the open question. Luna: What's the biggest risk they face? Competition from Mars? Nestlé? Or the rise of healthier eating? Lucas: I think it's the latter. Nutella's core ingredient is sugar and palm oil. Consumer tastes are shifting. Ferrero has tried to pivot — they launched a hazelnut spread with less sugar, they bought a health bar company in the US called 'Health Warrior' a few years back. But those are small. The real question is whether a family that's been so focused on indulgence can adapt to wellness. Luna: And can they adapt without outside pressure? Without an activist investor pushing them? Lucas: That's the irony. The very thing that gave them freedom — being private — might also make them slower to change. There's no one forcing a transformation. It's entirely up to the family's own foresight. And that's a lot to put on one bloodline. Luna: So it's a double-edged sword. Control lets you be patient, but patience can become stasis. Lucas: Exactly. The next decade will tell us whether the Ferrero model is a permanent advantage or a relic of a different era. But for now, they're a thirty-billion-dollar proof that staying private isn't a limitation — if you have the right product, the right family, and the right patience.