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How Ferrero Makes Millions Of Chocolates In America
How Ferrero Makes Millions Of Chocolates In America
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0:02
18 million pieces of chocolate roll off
0:04
production lines every day at this
0:07
factory in Illinois.
0:09
>> How many times a day do you get to try
0:10
chocolate?
0:11
>> Sometimes it's multiple times a day.
0:13
Yeah.
0:13
>> You have to, right? Yes. Yes.
0:16
>> Behind these popular American brands is
0:18
an Italian company, Ferraro.
0:21
>> When I tell people I'm from Ferraro, the
0:23
first thing that they always say 100% of
0:24
the time is, "Oh, Ferraro, they make the
0:26
little golden balls." I say, "Yes, we
0:27
do. We also make Nutella and Tic Tac and
0:30
Crunch and Baby Ruth and Halo Top ice
0:32
cream and Blue Bunny ice cream."
0:34
>> Ferraro has been on a shopping spree,
0:36
snapping up American favorites and
0:38
pouring money into new factories, all to
0:41
grab a bigger bite of the $55 billion
0:44
confectionery market in the US that's
0:47
very different from Europe.
0:49
>> US tends to prefer milk a little bit
0:51
more than dark chocolate. Americans love
0:53
peanut in a way that Europe in
0:54
particular doesn't really
0:56
>> Trends like that are forcing Ferraro to
0:58
take risks. The company launched an
1:00
entirely new flavor of Nutella just for
1:03
North America for the first time in more
1:06
than 60 years.
1:08
It has also invested in a US-based candy
1:11
lab, betting big on innovation.
1:14
>> I wanted to say that is salted caramel
1:15
and that's marshmallow.
1:18
>> We're actually starting with the
1:20
individuals that have worked at those
1:21
Michelin star restaurants to develop our
1:24
ideas and to eventually bring them onto
1:26
our factory lines.
1:28
>> So, we went to the heartland of American
1:30
manufacturing to find out what foreign
1:33
brands like Ferraro are doing to get an
1:35
edge.
1:36
And why the US is the biggest candy
1:39
market in the world.
1:42
Ferraro has quietly been building a
1:45
chocolate and snacks empire in the US,
1:48
but currently it's the third largest
1:50
confectionery business in the world
1:52
behind Mars and Mondelez International.
1:54
So, how can it catch up with the
1:56
competition?
1:57
>> I think Ferraro takes a very different
1:58
approach, which is buy well-established
2:00
love brands and then turn them back
2:03
around.
2:04
>> In fact, this factory in Franklin Park,
2:07
Illinois, belonged to Nestle.
2:09
But in 2018, Ferraro bought its US
2:12
confectionery business for $2.8 billion.
2:16
>> Okay, so we've got a lot of stuff to put
2:18
on before we can head in there.
2:20
Um there are earplugs cuz it's loud, um
2:22
goggles, I assume for splatter,
2:25
um hard hat, and steel-toed boots in my
2:29
size.
2:35
Okay, so after like 10 minutes of
2:37
putting on things, I'm all suited up uh
2:39
head to toe
2:41
and ready to go in.
2:43
And even though everything we were
2:45
wearing was brand new, we had to walk
2:47
through sanitizing stations several
2:49
times. And it's not as easy as it looks.
2:55
Yes, I made it.
2:59
>> You You didn't have You didn't hold the
3:01
handrail.
3:03
It's all right.
3:04
It's okay.
3:05
>> I failed.
3:06
>> Today, the folks who run the show here
3:08
are Italians, like Robert Pole, who was
3:11
born and raised in Alba, where Ferraro
3:14
is based.
3:15
>> Like, does the whole town just work at
3:17
Ferraro?
3:17
>> Yeah, practically. There's uh about
3:19
35,000
3:21
uh people in in Alba, and probably about
3:24
5,000 work for the company, so you can
3:26
imagine.
3:27
>> But in here, Ferraro is still producing
3:29
American classics, like Baby Ruth, made
3:33
here since the 1960s.
3:35
>> Well, the best advantage for us to have
3:37
a plant in the US is to be here, and the
3:42
size of of the consumers here is is a
3:45
very attractive point. So, I believe in
3:48
the US we will expand more than anywhere
3:50
else in the world.
3:52
>> That's become Ferraro's playbook in
3:54
America. Don't erase what people love,
3:57
instead help it grow.
4:00
So we're now going to head into Fannie
4:02
May, which is a premium American
4:04
chocolate brand that's 106 years old.
4:07
And Ferraro bought it in 2017 and was
4:11
their first American acquisition. For
4:13
generations, Midwestern families have
4:15
come here for holiday gifts and boxes of
4:17
chocolate.
4:19
>> We're really American pralines built
4:22
around the American palate. And you look
4:24
at our Pixie, which is still the same
4:26
recipe that we made in 1946 we make
4:28
today.
4:29
>> So so far we've seen a lot of the
4:31
chocolates that you can find at a
4:32
grocery store, um but this is a more
4:34
premium selection that I can put
4:36
together myself. I love dark chocolate.
4:39
Can you help me pick a few?
4:40
>> The brand's value went beyond the
4:42
numbers. It was more a symbol of
4:44
Ferraro's growing commitment to this
4:46
country.
4:47
>> When Ferraro purchased us, I think we
4:50
had way more products. I think we got
4:53
really focused on the right products.
4:56
You know, we innovated against the right
4:58
things. They also offered us a chance to
5:01
get even beyond Chicago.
5:03
>> Since then, Ferraro has added many
5:06
household names like Famous Amos, Little
5:08
Brownie Bakers, and Keebler.
5:11
And last year the group snagged WK
5:13
Kellogg's for $3.1 billion, uh um
5:16
bringing in cereals like Fruit Loops and
5:19
Frosted Flakes.
5:20
>> They're sweet. They're crunchy. They're
5:22
great.
5:25
>> And we have spent over $5 billion in the
5:27
last 5 years on investments within the
5:29
US. So we are investing heavily heavily
5:31
in US manufacturing.
5:33
>> With more than 50 brands including
5:35
luxury chocolates, candy, mints,
5:37
cookies, and breakfast cereals, the
5:40
third-generation business is still
5:42
growing.
5:44
It's nearly doubled its revenue since
5:46
2018.
5:47
Today, the company's president, Giovanni
5:49
Ferrero, is the second richest man in
5:52
Italy. And those closest to him told us
5:55
that it's become a personal mission to
5:57
crack the US market.
5:59
>> Mr. Ferrero comes to the United States
6:01
frequently. He will literally bring
6:03
hundreds of innovations to the US every
6:05
year. Try this, try this, what do you
6:07
think? Gather input here, gather input
6:09
from consumers.
6:10
>> But for Ferrero, manufacturing in
6:12
America has been tricky.
6:14
>> At the national level, again, there's a
6:16
lot of push and and excitement when we
6:18
say we're going to invest in the US. So,
6:20
I think that part has gotten a little
6:21
bit easier. The parts that have gotten
6:23
tougher, I would say that
6:24
it's more expensive to bring equipment
6:26
in, for example. It's a little bit of a
6:28
challenging regulatory and tariff
6:29
environment.
6:30
>> Let me put it this way. So, some of the
6:33
equipment was very obsolete. We brought
6:34
a lot of equipment from Italy, from
6:36
Germany. We have spent a lot of money to
6:39
improve also the structure of the place.
6:42
>> Buying beloved brands and upgrading
6:44
their factories is just one growth
6:46
strategy.
6:49
Ferrero is also trying to decode
6:51
American taste buds
6:52
by investing in a 45,000 square foot
6:55
innovation lab in downtown Chicago.
6:58
Efi Nestrud led us through this
7:00
restricted area.
7:01
>> Is it open to the public?
7:03
>> It absolutely is not.
7:04
>> So, is this top secret? I love it.
7:06
>> It's extremely top secret.
7:08
>> I was always um one of the kids that
7:10
would play with my food, and eventually
7:12
I just kind of
7:14
started to understand that you could do
7:16
that for a living, that someone would
7:18
actually pay you money.
7:19
>> Here, she oversees a team of eight,
7:22
including pastry chefs.
7:24
>> Been working with chocolate my whole
7:25
career, and it's just never ceases to
7:27
not interest me, to not capture my
7:29
imagination.
7:31
>> At any given time, they're working on
7:33
more than 100 products, tinkering with
7:36
textures, flavors, and ingredients.
7:39
>> I would say something that is is really
7:41
critical in a role like this is to just
7:43
make sure that you don't close off any
7:45
ideas. That you always make sure that
7:48
you'll at least taste everything,
7:49
generally at least twice.
7:52
>> They even put our taste buds to work. We
7:55
were handed three unlabeled samples of
7:57
Butterfinger coating and challenged to
7:59
guess each flavor.
8:01
>> If you try to close close your eyes and
8:03
just try it and it takes you back to a
8:06
memory, a childhood memory, French
8:08
toast.
8:09
>> Perfect.
8:10
>> That one one was easy.
8:14
I want to say that is salted caramel and
8:15
that's marshmallow.
8:18
I can be a chester or taster whatever.
8:21
>> Yes.
8:22
>> Through experiments like these, they've
8:24
identified trends, some more obvious
8:27
than others.
8:28
>> American consumers love sweet things. A
8:30
lot of times we will get comments of I
8:32
love it but there's something off and
8:34
sometimes if you adjust the sweetness,
8:36
it's exactly what they wanted.
8:38
>> One,
8:39
two, three and then
8:42
gently.
8:44
Yes, perfect. Oh my god, you can work
8:46
with me.
8:48
>> Americans are also big on nostalgia,
8:51
something Ferraro is now tapping into.
8:54
>> In chocolate especially, what you were
8:56
exposed to when you were young tends to
8:59
carry forward to um when you're mature
9:02
as far as those products come.
9:05
>> So again, you might eat French toast
9:06
every weekend with your family at home
9:08
and then you go into your local grocery
9:11
store and you find a Butterfinger French
9:13
toast.
9:14
>> Still, one of their biggest best sellers
9:16
in the US isn't American but a Ferraro
9:19
original, Nutella.
9:21
In fact, it was their very first
9:23
product.
9:25
It all started in 1956 in a small town
9:28
in Italy called Alba.
9:30
Back then, the country was reeling from
9:32
the devastation of World War II.
9:35
Coco was scarce and chocolate was
9:37
expensive to make. So, two brothers,
9:40
Pietro and Giovanni Ferrero, turned to
9:43
an ingredient that grew in abundance,
9:45
hazelnuts.
9:47
They mixed them with sugar and the
9:48
little cocoa they could find to create a
9:51
solid sliceable loaf called Gianduja.
9:54
They wrapped it in foil and sold it
9:56
around town, where people would slice it
9:58
onto bread. That post-war recipe kept
10:01
evolving until in 1964,
10:04
Ferrero launched the first jar of
10:06
Nutella.
10:08
>> Nutella Ferrero.
10:11
>> These days, it makes 365,000
10:14
tons a year, equal to the weight of the
10:16
Empire State Building.
10:19
But now, it's trying to localize that
10:21
taste for US consumers with its latest
10:24
creation, Nutella Peanut.
10:27
About 90% of US households have peanut
10:30
butter in their pantries.
10:31
So, Ferrero decided to make this its
10:34
first new flavor since 1964. It took the
10:37
company about 5 years to get the recipe
10:40
just right, and it invested $75 million
10:44
to build the new Nutella Peanut line.
10:46
>> And right now, we're running, as I
10:48
mentioned before, 300 jars a minute. So,
10:50
you can see
10:51
how fast that goes.
10:53
>> Does it ever jam up?
10:54
>> It do.
10:54
>> Yeah. And then
10:55
And then, how long does it take you to
10:57
fix it?
10:58
>> Um
10:59
Usually, I would say a minute. It's so
11:01
Um it really depends on the very little,
11:03
but usually, it's really fast.
11:05
>> Since January, they've already produced
11:07
more than 7 and 1/2 million jars of
11:09
Nutella Peanut.
11:11
To avoid any supply chain disruptions,
11:13
Ferrero buys the peanuts from the US,
11:15
mostly from Georgia. They're also used
11:18
in other products like Baby Ruth and
11:20
Butterfinger.
11:22
>> Really crunchy and crispy at this stage.
11:24
>> Yeah.
11:25
>> Amazing. Can I have more?
11:26
>> Absolutely.
11:26
>> Awesome. Thanks.
11:29
In fact, this factory processes roughly
11:31
24 tons every day.
11:34
That's about the weight of six African
11:36
elephants.
11:39
Ferraro also uses about a quarter of the
11:41
world's hazelnuts in some of its
11:43
signature products.
11:45
Most of that supply used to come from
11:48
Turkey, the world's largest producer.
11:51
But in 2019,
11:53
reports surfaced that some of those
11:55
farms used child labor.
11:57
Ferraro told us since then it's improved
12:00
traceability throughout its supply chain
12:02
while also diversifying its sourcing.
12:05
>> I'd say a lot of our nuts are grown in
12:06
the US, especially in Oregon where we
12:08
send most of our nuts then to our
12:09
Nutella facilities and our Rocher
12:11
facilities.
12:12
>> Since 2020, Ferraro says it has tripled
12:15
its use of American ingredients
12:17
including raisins from California. And
12:19
the bulk of its eggs, milk, and sugar
12:22
supplies also come from American farms.
12:25
Sourcing locally not only helps Ferraro
12:27
avoid supply chain disruptions, it's
12:30
also betting that the made in America
12:32
label will appeal to shoppers. But not
12:35
every ingredient can be found here.
12:38
>> Clearly the US can't grow chocolate. We
12:40
don't have a You need to be in a
12:41
rainforest climate, so our chocolate
12:43
still comes from outside.
12:44
>> Ferraro's cocoa beans mainly come from
12:46
West Africa and end up in Bloomington
12:49
and we decided to head there.
12:52
So we're an hour into this drive and
12:53
just seeing a lot of
12:55
wind turbines and silos and farmlands so
12:58
far.
13:03
Bloomington has historically been a
13:05
college town, but since 2018,
13:08
manufacturing jobs have increased 150%
13:11
with investments from electric vehicle
13:13
companies and of course Ferraro which
13:15
brought jobs to the area. Ferraro's
13:17
chocolate factory here is enormous.
13:20
>> The middle six silos right here are for
13:22
cocoa liquor. Each one holds about 45 uh
13:26
thousand kg of cocoa liquor.
13:30
On the very end, the four silos, two of
13:32
them are for dark chocolate.
13:34
>> At any given time, this place stores
13:37
upwards of 720,000
13:39
kg of chocolate.
13:41
That's as much as eight fully loaded
13:43
Boeing 737 passenger jets.
13:46
>> We were not able to see how that
13:48
chocolate is made. That is obviously a
13:50
top secret, but all we saw were these
13:52
massive tanks and it smells like
13:54
chocolate in here.
13:55
>> This chocolate is also used for Kinder,
13:57
which has around 30 products worldwide,
14:00
such as eggs and Bueno bars.
14:02
>> So, do you think about from a global
14:03
powerhouse perspective Kinder should be
14:07
eventually in the US the number one
14:09
chocolate brand?
14:10
>> So, Ferrero decided to start producing
14:12
Bueno bars locally by building its first
14:15
US factory from the ground up.
14:17
>> Make that growth both economically
14:19
viable and to have the right type of
14:21
local market insights, we have to build
14:22
facilities in the US.
14:25
>> First, the wafers are baked until
14:27
they're crispy. Then, the signature
14:29
hazelnut cream is piped inside. We got
14:32
to try it as soon as it came off the
14:34
line.
14:35
>> Without the chocolate you add the
14:36
hazelnut is really cutting through.
14:38
>> Oh, yeah. Yeah.
14:39
>> The bars are then coated with a thin
14:41
layer of chocolate.
14:43
>> Behind me are the rejects and I would
14:45
happily eat even these.
14:48
>> While the basic recipe stays the same,
14:50
European candy makers often tweak
14:52
ingredients in the US. Take milk
14:55
chocolate. In Europe, it needs at least
14:58
25% cocoa solids. In the US, just 10%
15:02
chocolate liquor. That's a mixture of
15:04
cocoa solids and cocoa butter. Many
15:07
brands in the US, including Ferrero,
15:09
also use compound chocolate in some of
15:12
their everyday candy. It's cheaper
15:14
because it's made with vegetable fats
15:16
rather than cocoa butter.
15:18
>> If they're added, then the product no
15:21
longer meets the standard of identity
15:23
for uh, chocolate. Sometimes you'll see
15:25
these labeled as chocolate flavored. And
15:29
you have to be a bit careful because
15:30
there are some very high quality
15:32
coatings that are manufactured. So, just
15:35
because it isn't real chocolate doesn't
15:38
necessarily mean
15:40
that it's an inferior product.
15:42
>> Europe has also long banned several
15:45
preservatives and artificial colors that
15:47
were still allowed in American candy.
15:50
>> President Trump and I are going to stop
15:53
the mass poisoning of American children.
15:55
>> Now, as Washington pushes companies to
15:57
clean up ingredient list, Ferrero says,
16:00
as a European company, it's already
16:03
ahead of the curve.
16:04
>> We obviously will follow any regulation
16:06
that's that's mandated by the
16:08
government, but I would say relative to
16:09
many of our competition, the impact of
16:12
the make America healthy again
16:14
regulatory pushes is less severe on the
16:15
Ferrero portfolio.
16:17
>> Once the bars are ready, they're
16:19
wrapped, packed, and boxed up, mainly by
16:22
machines. But chocolate factories
16:24
haven't always looked like this.
16:27
>> Historically, confectionery chocolate
16:29
and confectionery manufacturing
16:31
has involved a lot of hand work.
16:34
So, there were large numbers of people
16:36
involved, and nowadays a lot of that's
16:39
been replaced with automation, robotics,
16:42
specially in packaging.
16:44
>> We will also still need the individuals
16:46
to be more skilled in operating the
16:48
machines.
16:49
>> And that's why they haven't stopped
16:51
hiring, growing from 300 employees a
16:54
decade ago to more than 5,000. A trend
16:57
that's increasingly rare in the US.
17:02
>> While President Trump has promised more
17:04
manufacturing jobs in the United States,
17:06
they're actually declining and they're
17:09
shifting from high labor intensive jobs
17:13
to more mechanized ones like the ones we
17:15
see here. But by continuing to hire
17:18
locally, Ferraro is turning made in
17:21
America from a label into a business
17:23
strategy.
17:24
So, is Ferraro's bet on North America
17:27
paying off?
17:28
Well, this region now makes up about 15%
17:31
of the company's portfolio compared to
17:34
just 4% about a decade ago.
17:37
Since 2017,
17:39
US revenue has grown from about $600
17:42
million
17:43
to roughly $3 billion
17:45
faster than its main competitors.
17:48
>> We are today at Ferraro where Coke and
17:50
Pepsi were in the 1920s, which is
17:52
starting to introduce to to everybody in
17:54
the economy to become a ubiquitous, you
17:57
know, omnipresent powerhouse.
17:59
>> Winning over America is one thing.
18:01
Staying ahead is another. And the next
18:04
big breakthrough may come from a growing
18:06
wave of craft chocolate makers, those
18:09
transforming cacao from bean to bar.
18:13
>> Early in my career, there might maybe
18:15
were what we call six primary bean
18:17
processors that take, you know, raw
18:20
cocoa beans and process them into
18:22
chocolate.
18:24
And now there in North America, there
18:25
are something like 350. The advantage of
18:28
these small manufacturers
18:30
is that they can be very innovative. And
18:34
I think even the large companies are
18:36
looking to these smaller companies for
18:39
some of those innovative ideas.
18:42
>> But for lifelong employees like Robert,
18:44
Ferraro's success is about more than
18:47
sales. It's personal.
18:49
>> All my relatives, my wife, my my son,
18:51
everybody when they go into a store,
18:52
they fix the display, they put the jars
18:54
in the right way, and they clean the
18:56
chocolates all the line, they remove the
18:59
items that were put there by mistake
19:01
because this is us.
19:13
>> Any excuse to eat chocolate before noon.
