Who is the richest man in Italy? Former President Silvio Berlusconi, he of the bunga-bunga parties, might be a contender; so would the Prada family or a member of the Agnelli clan. Yet none of these names comes close to Michele Ferrero, the creator of Nutella, Kinder and Ferrero Roche.
Ferrero died last month, leaving behind a fortune of almost US$25bn, mostly from selling chocolate spread. About a million kilos of Nutella a week are consumed around the world. It is the delight of children and the bane of dentists. No one could have predicted that such a simple business could generate so much wealth.
That is partly because competitors haven’t been able to successfully imitate the hazelnut spread and partly because of Ferrero’s own philosophy and management style, from which there is much to learn.
Central to Ferrero’s business was to ‘Always do something different from the others’. To investors, this is a familiar mantra. For a maker of chocolate spread, it is more ambitious.
Nutella was modelled on a well known recipe for hazelnut spread that was centuries old and sold as a solid condiment, not unlike a hard, tough butter.
Young Ferrero experimented with the taste and texture, eventually adding enough vegetable oil to create a spread. Unlike any competitor product when it was released, Nutella could be spread easily on bread and it was sold in a jar, instantly changed the way chocolate was consumed.
He typically made unconventional decisions; he waited decades before launching in the US; the Roche chocolate was held in development for six years until he perfected the shape and crunch of the wafer; he made only a single acquisition in the history of the business.
None of this follows the textbook business management and it is unlikely his path would have been followed by a listed business. He could be unconventional because the business was private, free from the pressures of public scrutiny and short term investor demands.
Unusually for an Italian business, there wasn’t a single strike or union scrap under his leadership. Ferrero invested heavily in his workforce, sacrificing margin to pay them well and keeping them employed through cyclical downturns. Again, this is hard to imagine in a listed business under pressure to meet annual targets.
A long time horizon was perhaps his greatest advantage against competitors like Kraft and Nestle. The stockmarket isn’t the final arbiter of business success: time is. Time will ultimately reveal a poor business for what it is. For a good business, it does the same.