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Recession hits Ferrero’s plans for a UK factory

By Nicholas Robinson+

05-Sep-2014
Last updated on 05-Sep-2014 at 11:48 GMT2014-09-05T11:48:02Z

The recession has forced Ferrero to dtich plans to build a new Nutella plant in the UK
The recession has forced Ferrero to dtich plans to build a new Nutella plant in the UK

Ferrero’s plans to build a new production facility in the UK and double its sales here to £400M by 2015 were abandoned because of capital expenditure constraints, it has been revealed.

Christian Walter, the Italian chocolate maker’s former md for UK and Ireland, told Food Manufacture in 2011 that Ferrero had plans to build a new factory in the UK to meet increasing demand for its Nutella-branded hazelnut spread, which is currently supplied from France.

However, these plans were shelved as a consequence of the longer than expected recession here, which forced the company to shift its focus to emerging markets, such as Brazil and Mexico, Jason Sutherland, Ferrero’s sales director for UK and Ireland, told our sister title Food Manufacture magazine last month.

As a result, UK supplies of Nutella and other Ferrero products, such as the Rocher, Tic Tacs and Kinder products, would continue to be sourced from the company’s Italian, French and German factories, he added.

Business decision

“It’s a better business decision to open a factory in Brazil and Mexico to supply those [emerging] markets, rather than opening one in the UK, which can be supplied by Europe,” said Sutherland.

Ferrero, which has a distribution hub in Wolverhampton, still aspired to open a factory here eventually, he said, but the timing now wasn’t right. “It’s never say never, but not right now – in the future perhaps,” he added.

Apparently, the family-owned company’s decision not to go ahead with a UK factory was made shortly after the plans were revealed. It was a decision endorsed by the company’s current md for UK and Ireland Pieraldo Oldano, who replaced Walter and agreed that the timing wasn’t right, said Sutherland.

“I wouldn’t have opened one either, because it made no sense,” he added. “It’s still not right now, as we have got great supply from Europe.”

In a company update, Sutherland said the Nutella brand had performed better than the UK spreads market as a whole, which had grown by only 0.1% in the past 12 months. Nutella had grown to be “bigger than Marmite” and had passed more than £40M in sales value, he said.

Sales growth

Sales of Nutella grew by 21% in 2014 compared to the previous year, driven mainly by the company’s large advertising spend since the product’s launch in 2007, he added.

Ferrero recently launched Nutella & Go to introduce the brand to the food-to-go market in the UK. The pocket-sized product is a pack containing bread sticks and Nutella for dipping and has been successful in the US, outselling its nearest competitor by more than 60%.

Although sales of Nutella are strong at the moment, poor weather in the major hazelnut-producing country Turkey could effect the brand, as the hazelnut harvest is expected to fall from its usual 590,000t to 370,000t this year.

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