The Grocer meets Ferrero UK boss Christian Walter

Ferrero usually does its best to shy away from the public eye, supposedly to guard against industrial espionage. But its brands are very much in the public consciousness, generating a global turnover of €7.3bn. The company - one of Italy’s biggest - swallows 15% of the world’s hazelnuts.

The company might enjoy an enviable 45% share of the Italian confectionery market, but the UK has proven a tougher nut to crack. Ferrero accounts for just 3% of British chocolate confectionery sales [Nielsen August 2011]. That’s about to change, says MD Christian Walter, who has broken with Ferrero’s reclusive traditions to announce his plans for doubling the company’s British business by 2016.

His weapons? Children’s chocolate brand Kinder, hazelnut chocolate spread Nutella and a major advertising push behind its key confectionery brands Ferrero Rocher and Tic Tac. So should confectionery and fmcg behemoths like Kraft and Unilever be worried?

On the face of it, no. Even if Ferrero upped its market share in chocolate confectionery, it would still lag behind giants Kraft, Nestlé and Mars, with their 33%, 23% and 19% respective shares [Nielsen August 2011].

Walter admits Ferrero has not paid the UK as much attention as other markets - but it represents the next logical step. “The UK wasn’t the same priority as Italy, Germany and France, which were closer,” he says. “We have the opportunity and the will to get our fair share of the market now.”

And he’s not sparing any expense when it comes to trying to maximise exposure for Ferrero’s brands. This year has seen another expensive ad partnership with The X Factor for Tic Tac and Kinder Bueno, and Walter and his marketing team are also busy trying to breathe new life into its mature boxed chocolate Ferrero Rocher range, established in the UK in 1982. While it has a high level of recognition, having “spoiled us” with the Ambassador’s reception ad campaign in the 1990s, Ferrero admits the marketing has struggled to keep with the times. Its more recent Food of the Gods campaign, which featured the gods of Olympus celebrating Easter by giving Ferrero Rocher chocolates to those on Earth, has failed to stop sales drifting 4.1% lower year-on-year at £40.2m [Nielsen 52w/e 3 September 2011].

However, last weekend may have heralded a new dawn for the brand with the first of two new TV ads for Ferrero Rocher and Rocher Collection, which attempt to break from its staid image - the first features an informal party based in a treehouse. A standalone ad for Rocher Collection, geared towards a slightly older audience, also goes live later this month.

The challenge for the brand, according to Tom Ellis, insight and innovation director at consultancy Brand Genetics, is to modernise its image without alienating core loyalists. “They have to update the brand, but that’s difficult to do when its key strength is that it is so unique,” he says.

Of course, that’s quite a strength to have, and rivals will no doubt be wary of a Ferrero that is now keener than ever to exploit it. Certain manufacturers in particular should also watch out for Kinder, suggest experts. “Cadbury needs to work really hard because Kinder are doing some great things - they’re a real threat,” says one industry source. “Ferrero just needs to work out what Kinder stands for in the UK and be ruthless about what it launches.”

Kinder represents about half of Ferrero’s group sales, but only 25% in the UK. The company is gearing up for UK launches of several lines from its existing chocolate range stocked in chillers - such as Kinder Pingui and other handheld bars - in the next few years.

Despite using Kinder to champion sports activities for children and a more active lifestyle as part of its social responsibility strategy, some of the brands in Ferrero’s portfolio have attracted criticism from health campaigners in recent years over the way they are marketed. Portion control is key to the Kinder range for children, argues Walter. “Kinder chocolate ranges from 12.5g for one bar to 20g for Kinder Surprise, whereas the average bar is upwards of 50g,” he says. “Chocolate can be part of a healthy diet, but it has to be adapted in a responsible way and small portions are a way to do this.”

Walter also defends Ferrero’s advertising of Nutella as a balanced breakfast choice, maintaining children and adults can eat Nutella as part of their daily breakfast - provided they stick to the recommended portions. While it isn’t exactly a bowl of bran flakes, a 15g portion of Nutella - two heaped teaspoons - contains 3.5g less fat and 2.2g less sugar than two heaped teaspoons of jam with 10g full-fat unsalted butter, says Walter.

Walter has his sights set on replicating some of Ferrero’s success on the Continent. “If you calculate the UK volumes we sell of Nutella per capita, versus France, it’s 10 times as much over there. That doesn’t mean we’ll necessarily do the same here, but we see there is room to grow,” he says, noting that 18% of UK households already buy into it.

Brand experts suggest Nutella needs to pick its battles carefully, however, particularly on the thorny issue of health. “Nutella may win based on the figures compared with jam and butter, but there is a trend towards naturalness and it’s harder for a manufactured product like Nutella to position itself against those products,” says Ellis. “It’s like pushing water up a hill.”

A smart strategy would be to position Nutella as a snack for after school, says Ellis, offering kids a piece of wholemeal toast with Nutella rather than a chocolate biscuit. “By changing your competitive set you could turn the health aspect on its head. Parents want to treat their kids, so it’s about what is the ‘better than’ option.”

To help support an anticipated rise in volume sales of Nutella, Walter plans to build a UK factory to boost business in the next three years. The first production line will be Nutella - but manufacturing capability for Rocher and Kinder are likely to follow. “We’re known in the UK as a seasonal company with Rocher, but Kinder will help us get into everyday chocolate,” he explains.

A prospect that will no doubt be sending shivers down the spines of its rivals.