Focused On Ferrero: CEO Nunzio Pulvirenti talks company's operations, goals and hazelnuts
The 2014 European Candy Kettle Club award recipient typifies what the Ferrero Group stands for: innovation and a passion for producing affordable yet premium quality confectionery products.
Forty-one years ago, the Ferrero Group employed around 8,000 people. Today, the company operates 20 manufacturing facilities, has around 24,800 direct employees and posted nearly $11 billion in sales.
Amidst this unprecedented growth and evolution, several elements have remained constant. For one, Michele Ferrero, chairman of the Ferrero Group, continues to do what he does best: innovate. The man who is credited with developing 20 different confectionery products, many of which are iconic such as Ferrero Rocher, Kinder Surprise, Mon Cheri andTic Tac, visits the company’s expansive manufacturing site in Alba every week, trying out new product concepts with his executive team, which includes Giovanni, his son and the company’s ceo.
Michele’s penchant for innovation dovetails perfectly with his passion for the growing the company. It’s a straightforward mission, one that focuses on developing “completely original products that can create new market niches featuring exclusive ingredients, obtained using highly complex technological production processes.”
That passion and perseverance is what led the European Candy Kettle Club to recognize Michele with its first award in 1973. As then-founder, -publisher and -editor of Candy Industry Don Gussow remarked in presenting the award, “The Kettle Committee felt that Mr. Ferrero’s achievements in the popularization and acceptance of new products and taste categories led the way for others to succeed in ways never before thought possible. Mr. Ferrero’s leadership was also demonstrated by the internationalization of Ferrero marketing, preceding the establishment of the European Common Market. Mr. Ferrero has displayed great leadership in his work with various trade associations in the candy manufacturing field, not only in Italy, but throughout Europe.”
Thus, when the ECKC selected Nunzio Pulvirenti as its 2014 recipient last year, it was a singular opportunity to see what had and had not changed at Ferrero during those 40 years. As noted earlier, the company has had a “substantial evolution,” one that has made it “One of the most important companies in the world, delivering its product line to more than 160 countries throughout the world.”
Last year, the company celebrated the 50th anniversary of Nutella (see sidebar) while continuing to see growth amongst its stable of stellar products. For example, Küsschen, Kinder Joy andRaffaello posted sales gains of 42, 15 and 12 percent, respectively.
At the same time, Ferrero also continued to invest in its manufacturing facilities, spending 473 million euros to strengthen its operational capabilities in Germany, Italy, Poland, Canada, Russia, Mexico, Turkey and Brazil.
Since joining Ferrero in 2005, Pulvirenti has been intimately involved in the company’s operations, first heading up its group supply chain project in 2005, then taking charge of the planning and development group, after which he took on the position of central operations director.
Since 2011, Pulvirenti has overseen all R&D efforts as well as product and process industrialization at the company as its chief product operating officer.
His success at growing the Ferrero brands across the globe prompted the ECKC to award him and the Ferrero Group the award in 2014, only the second time in the Club’s history whereby a company has been recognized twice (Fazer attained that honor last year when Marjlen Fazer was accorded the prize, joining her father, Karl, a 1982 ECKC award recipient).
In a wide-ranging interview conducted by Candy Industry Magazine, Pulvirenti shared some of his thoughts about Ferrero, its operations, and goals for the future.
CI: Ferrero, as evidenced by its product line, has always been an innovator with regards to confectionery items. I understand there are currently 100 products under development, some of which will be launched soon. Can you share some details with me about those new launches?
Pulvirenti: Innovation is certainly one of the main success factors behind Ferrero products. In the last fifty years, the Group has created innovative products that became, in time, veritable iconic brands. Ferrero, made up of researchers involved in both technical studies and identification of new nutritional needs and styles, operates by working with new raw materials and innovative production technologies, in order to create unique products of great taste and quality, as is expected from Ferrero’s philosophy and values. There are many experimental projects underway. However, for confidentiality reasons, I am unable to talk about any new launches.
CI: The company recently opened two new production facilities in Turkey and Mexico. No doubt, the company focused on using the latest automation and technology available as well as incorporating environmental design elements. Can you share some highlights about these facilities? Are or will they be LEED-certified?
Pulvirenti: The plants in Turkey (Manisa) and Mexico (San José) were developed with a strong focus on sustainability, with facilities for free cooling, heat pumps when possible and energy saving via building management systems. They are not LEED-certified; however, they comply with the same standards.
Looking for continuous improvement and in line with the requirements of the new Global Reporting Initiative guidelines, Ferrero is working on a road map for redefining the Group boundaries. For example, the project to extend the environmental data collection system to the new plants in Mexico, Turkey and other newer plants is currently underway.
CI: Sales for the fiscal 2013 year recorded a 5.6 percent gain from the previous year. The press release attributed extraordinary growth in new markets such as Asia, Russia, the United States, Canada, Brazil and Argentina. What were the factors driving the growth in these new markets?
Pulvirenti: Ferrero has been able to grow in these dynamic markets because it follows three basic principles, which always guide the Ferrero Group’s activities: offer more and more innovative products; be attentive to satisfy our customers’ wishes; and continuously strengthen the ethical commitment, which is the basis of our corporate culture.
CI: Will the acquisition of the Oltan Group help stabilize supply and price surges in hazelnuts for Ferrero?
Pulvirenti: The agreement of the acquisition is still subject to final approval. However, the purpose of investing in hazelnut production is to strengthen the Ferrero Group’s presence in the hazelnut market so as to guarantee and further improve the quality and traceability of its hazelnuts.
CI: According to the company’s 2013 Corporate Social Responsibility (CSR) report, Ferrero invested 6 percent of its sales revenues into ongoing plant modernization and processing automation. Was there an added emphasis on reducing environmental impact at the company’s production facilities?
Pulvirenti: Yes, improving the environmental performance of Ferrero’s production plants has been the subject of ever increasing attention. In the last five years, these efforts have been, above all, aimed at energy and water saving objectives, which were — in fact — met before the deadline, originally targeted for 2020.
An example of this attention is that the Group has equipped itself with an environmental policy. It is a management and procedures manual (updated as necessary) aimed to setting a common vision for waste energy management, water cycle, atmospheric pollution, the water cycle and for the prevention of soil degradation, as along with data analysis and the environmental targets of Ferrero’s sites. A project was launched to encourage communication, integration, and exchange of know-how and best practices within the Group and process is ongoing.
Another example of the Ferrero Group’s attention to improving the plants’ environmental performance is the P.I.X.A. (Program of Internal eXchange of Auditors), which allows technicians to participate in environmental audits at plants in which they are not based. This has led to nine out of 14 audits having a cross auditor in attendance, in its first year of implementation. The project has also been extended to the central functions that deal with environmental sustainability.
Specifically, in the last five years, Ferrero has made the following savings: 186,655 MWh of electrical energy (equivalent to the energy used by 35,000 60W light bulbs left on for 24 hours for one year); 268,858 MWh of thermal energy (equivalent to the energy used by about 150 million hot showers); 400,090 m3 of water (equivalent to 1,760 Olympic-size swimming pools); CO2 emissions have decreased by 32 percent; and water use has dropped by 26 percent since 2009.
CI: Are you reaching a practicable limit in attaining further reductions?
Pulvirenti: We continue to dedicate ourselves and adapt our business practices to CO2 emissions and water reduction. We are currently on track to achieving a 40 percent reduction of CO2 emissions from production activities (compared to 2007). Regarding water use, the trend of the last five years has once again seen the Group achieve significant reductions and a consolidation of the results achieved, with an overall improvement of 26.4 percent on the water consumption index.
CI: The company is planning to roll out a nutritional identity card for its products in 2015. Can you explain what that will entail?
Pulvirenti: The nutritional identity card of Ferrero’s products is the summary of any available information related to any single product and its ingredients. In short, they provide ready-to-use information for the external world and management’s internal data summary.
CI: One of the goals for the company in 2015 is to set up a single center for consumer complaints. Where will that center be located and will it be manned 24/7? How are consumer complaints handled now and what benefits do you see as a result of the move?
Pulvirenti: The practicalities of the system are defined internally by all corporate units. Until now consumer complaints have been managed individually according to each business unit and their resources. The implementation of this single center will allow the creation of a world-wide data base, which will enable us to monitor and archive all complaints in a united and structured manner.
CI: I was fascinated by the concept of “sacco conoscuito” or “known bag.”Can you elaborate for me how this differs from traditional quality control and quality assurance programs?
Pulvirenti: This name refers to all the procedures carried out by Ferrero’s specialist technicians, such as organoleptic testing and analysis, auditing operations with suppliers and the practices that ensure food safety and guarantee the traceability of the raw materials. Ferrero’s suppliers all over the world are selected and evaluated at Group level according to the same criteria, using an electronic platform that links them to internal expert food technologists.
CI: Another topic that fascinated me in reviewing your CSR report was GeoTraceability. I understand the goal is for 13,000 cocoa farmers to be part of the program in 2016. What’s the goal for 2020? And are you looking to apply this to other commodities?
Pulvirenti: Geotraceability is one element of the program, which is the mapping of farms, data collection and processing. This is part of a four-year program and we will decide in 2016 where and how to extend it. As for other commodities, we started to work with Geotraceability in Turkey within our hazelnut supply chain two years ago and enrolled more than 5,000 farmers, whereby 1,000 are mapped so far.
CI: There’s a great emphasis at Ferrero on producing small-portioned as well as healthier confectionery products, particularly when they are directed at children. Are consumers recognizing and accepting the message?
Pulvirenti: Yes, consumers are recognizing and appreciating this. The division of Ferrero’s products into portions has always been conceived and marketed in order to meet the various nutritional needs of consumers. The Kinder range of products, for example, conceived for children and teenagers, which is appreciated by them in particular, continues to be produced in individual portions weighing between 5 and 43 grams, which is among the smallest in their category. As proof of this recognition and acceptance, this year we are celebrating the 40th birthday of Kinder Surprise.