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Barilla G. e R. Fratelli S.p.A.

Barilla G. e R. Fratelli S.p.A.

Via Mantova 166
Parma, 1-43100
Italy
Telephone: (39) 0521-2621
Fax: (39) 0521-270-621
Web site:http://www.barilla.com

Private Company
Founded: 1877
Employees: 7,033 (2001)
Sales: Euro 2.2 billion ($1.92 billion) (2001)
NAIC: 311823 Dry Pasta Manufacturing; 311812 Commercial Bakeries; 311821 Cookie and Cracker Manufacturing; 422490 Other Grocery and Related Products Wholesalers; 422410 General Line Grocery Wholesalers; 551112 Offices of Other Holding Companies

One of the worlds largest food marketers, Barilla G. e R. Fratelli S.p.A. is a holding company that produces pasta, sauces, and packaged baked goods (including cookies, cakes, snacks, wafers, biscuits, and crisp breads) under the brand names Barilla, Mulino Bianco, Pavesi, Voiello, Wasa, Misko, and Filiz. The company is the worlds largest pasta producer, holding leading shares of the worlds top two pasta markets, Italy (35 percent) and the United States (13 percent). Barilla sells its products in about 100 countries, running 25 plants and marketing operations throughout Europe, and in the United States, South America, Australia, and Mexico. Family-owned throughout most of its long history, Barilla is 85 percent-owned by fourth-generation Barilla brothers, Paulo, Luca, and Guido.

Company Origins and Development

Barilla was founded in 1877 by Pietro Barilla as a bakery and pasta shop in Parma, a northern Italian city famed for its pasta and cheese. The company specialized in egg pasta, as opposed to flour and water (glutinous) pasta. In an attempt to increase his income, the patriarch nominally handed over his original shop to his wife and launched a second outlet in 1891. Within just three years, however, he was forced to declare bankruptcy and sell both operations. Barilla made a new start soon thereafter but didnt achieve consistent profitability until 1898, when he added extruded pasta to his small line of handmade noodles and fresh-baked breads.

Production grew exponentially in the late 1800s and early 1900s, fueled by a combination of ever-increasing mechanization and customer-winning quality. Pietros sons Riccardo and Gualtiero succeeded the founder in 1905. Riccardo oversaw the day-to-day operations of the factory, while Gualtiero focused on sales and promotion. In 1910, they built a new pasta factory closer to railroad and warehouse facilities and installed the regions first continuous bread-baking oven. The Barilla brothers launched the companys first trademark, featuring a bakery boy cracking a giant egg into a cart of flour, in 1910. This graphic representation symbolized the simple, yet high-quality ingredients used in Barillas products.

In these early years Barilla pastas were sold in Parma through company stores and in other cities under exclusive contracts with grocers. Since all the pasta was sold in bulk, these outlets promoted the brand via in-store posters and displays. Barillas frequent participation in international trade fairs won it awards for quality and wider recognition. By the early 1920s, Barilla pasta was exported (albeit in extremely limited quantities) to France and the United States.

After both Pietro and Gualtiero died in the 1910s, Riccardos wife Virginia played an important role in the management of the business. Riccardo has been praised for his emphasis on capital investment of profits in plant, process, and promotion. During World War I, G. & R. Barilla Company supported its enlisted employees with care packages. The firm was buoyed in the early 1920s by Italys strong economy, employing 300 in its pasta plant alone by mid-decade. In 1926, Barilla launched a new trademark featuring a winged chef carrying a plate of pasta.

Despite the challenges of the Great Depressionincluding a call for the outlaw of pasta because it was too fatteningBarilla managed to progress on several fronts. Riccardos son Pietro, who joined Barilla as head of sales in 1936, was the chief architect of these changes. He exchanged the companys traditional horse-drawn carts for bright yellow Fiat autos and launched Barillas first full-fledged advertising campaigns. His Bonaventura trading card promotion coordinated newspaper, point-of-sale, radio, and outdoor media and gradually began to broaden the brands customer base to include much of Northern Italy. However, as Pietro confided to a friend in 1938, he would not be satisfied with part of Italyhe wanted to make Barilla the countrys top brand of pasta. Unfortunately, his plan to achieve that goal was interrupted by World War II.

World War II Brings Corporate Crisis

Barillas mid-century degeneration began when Pietro was drafted into military service in 1939. Wartime rationing and a government-controlled distribution system that funneled much of the companys production to the army eroded the consumer market Barilla had so carefully nurtured in the interwar period. Parma suffered a devastating air raid near the end of the war, and the Barilla plant in particular was sabotaged and fell into disarray. In 1943, the company lost L14 million, and in 1947 Riccardo, who had struggled with poor health throughout the war years, passed away.

Though they were discouraged by the events of the war and the soaring unemployment and inflation left in its wake, Pietro and his brother Gianni resolved to revive their birthright. Led primarily by Pietro, the company shed certain elements of its business and developed a strategy that focused on the consumer pasta market. After the government ended its rationing policy in 1947, Barilla exited its military contracts. During the latter years of the decade, the company sold its bulk retail outlets and divested the breadmaking facilities.

Barillas postwar plan coalesced in the early 1950s, just as the Italian economy began to gear up for the Economic Miracle of the 1960s. During this period, the Italian economy was transformed from one of Europes weakest, most agrarian economies to an industrial and consumer powerhouse. Over the course of the 1950s, Barilla became a shining example of this trend. In 1952, Pietro Barilla traveled to New York to observe packaging, advertising, production, and distribution methods used in the worlds largest consumer-driven economy. He returned home resolved to build Barilla into Italys premier pasta brand.

He accomplished this through heavy investments in advertising. Well-known graphic designer Erberto Carboni was charged with creating Barillas new image, encompassing everything from the corporate logo to delivery vehicles, packaging, and advertising campaigns. His new trademark, a stylized egg lying on its side with the Barilla name in the yolk, would continue to be used (with revisions) throughout the next four decades. Carboni also made the now-famous Barilla blue background the standard for all packaging. His first tagline, Its always Sunday with Barilla, won a national advertising prize. Having captured the leading share of the egg segment of the Italian pasta industry in the early 1950s, Barillas new strategy moved it ahead of Buitoni to lead the flour-and-water sector as well by the end of the decade.

Having established its dominance of the pasta market, Barilla rediversified in the 1960s. However, instead of making fresh bread, the company capitalized on its existing production and distribution network by adding such nonperishables as bread-sticks, cake mixes, sauces, and pizza.

National Economic Woes Trigger Early 1970s Sell-Off

This prosperous period came to a halt in the late 1960s, when rampant inflation compelled governmental price freezes on many staples, including pasta. After nearly 100 years under family control, Gianni Barilla decided that he wanted to sell his share of the business. Unable to buy his siblings stake, then 61-year-old Pietro Barilla sold the family business to Americas W.R. Grace & Co. in 1971 for more than US$70 million.

With pasta prices and profits locked in by federal fiat, Grace turned to new products for growth. Mid-decade the new parent introduced Mulino Bianco (White Mill), a premium line of breadsticks, cookies, cakes, biscuits, and bread. Grace supported the new brand with a highly successful promotional campaign that encompassed premiums ranging from tableware to toys. Nevertheless, as the Italian economy continued its tailspin in the 1970s, Barillas new parent grew disenchanted with its foray into food. After owning the struggling pasta maker for eight years, Grace sold it back to Pietro Barilla for US$65 million. Pietro had financial help from Biirhle, a Swiss company that continued to own 49 percent of Barilla into the mid-1990s.

Pietro Barilla maintained support of the Mulino Bianco division in the ensuing years. In fact, Barilla relaunched the brand in 1983, increasing the brands annual sales from US$222 million to US$740 million by 1989. By 1987, Mulino Bianco contributed 50 percent of Barillas total annual sales and had captured five percent of the European baked goods market. By that time, the brand enjoyed a 26 percent share of Italys baked goods market.

The return of family managementnot to mention the repeal of fixed pasta prices in 1978revived Barillas growth. Sales increased from US$288 million in 1979 to almost US$1 billion by 1986. Pietro Barilla also renewed the companys emphasis on marketing after retaking control. In 1984, he hired filmmaker Federico Fellini to direct one of Barilla Pastas most famous campaigns. Called High Society, the ad portrayed pasta not as a mundane dish, but as a sexily simple entree. Advertisements featuring such diverse international celebrities as Paul Newman, Gerard Depardieu, and Cindy Crawford helped make Barilla one of the best-known brands in Italy by the early 1990s.

Company Perspectives:

Our mission is to satisfy the consumer in his every need, while involving him at the same time through the study of his tastes and his demands, so that he II continue to trust Barilla tomorrowas he does todayto supply tasty, healthy and balanced products.

Challenges in the Mid-1990s

After guiding Barilla for a second term of 14 years, octogenarian Pietro Barilla died in 1993. His sons Guido, Luca, and Paolo took charge as chairman and joint vice-chairmen, respectively. Competition from private labels and cheaper brands combined with the relative inexperience of the new management troika to bruise Barillas bottom line. By 1996, inexpensive own-label pastas had captured 15 percent of the Italian pasta market and 12 percent of cookies and baked goods. Barillas revenues flattened at about US$2 billion, and its profits were halved from $73 million in 1993 to $37.5 million in 1995. The company was forced to close three plants, furlough 1,000 employees, and trim prices by 10 percent.

In 1995, the executive committee asked 66-year-old former Procter & Gamble Co. CEO Edwin L. Artzt to come out of his scant two-month retirement to help Barilla out of its tailspin. Artzt had held the top spot at Procter & Gamble from 1990 to 1995 and had led its battle against no-name brands. His turnaround scheme included several strategies that he had applied at Procter & Gamble, including Everyday Low Prices (EDLP) and an intensified global push. Under his guidance, Barilla cut the prices of products accounting for 70 percent of total sales by an average of 12 percent. He also encouraged more hard-edged advertisements focusing on Barillas superior quality. The company expected to maintain its traditional high quality by investing US$26 million in a pasta research and development facility.

Another aspect of the strategy was an increased emphasis on global expansion to increase Barillas proportion of international sales from less than 10 percent in 1994 to 50 percent by 2000. It targeted Asia, Latin America, and especially the United States, which had surpassed Italy as the worlds largest pasta consumer in 1990. Although the company only had $10 million in United States pasta sales by 1995, it had captured .6 percent of that nations pasta market after only one year of limited distribution.

Barilla also began a unique project in the Middle East, revealing a socially conscious aspect to its business. In 1997, one of Barillas subsidiaries, Barilla Alimentare S.p.A., established a cooperative business venture with Egypt, Jordan, the Palestinian Authority, and Israels Peres Center for Peace. As Alessandra Sulzer describes in the July 2001 issue of Harvard International Review, This venture will create a new strain of wheat that will be used to make pasta for local consumption and export, providing employment and technology to local producers and fostering links between Israel and Arab states.

Late 1990s and Beyond: Growth and Success Overseas

Although Barilla faced several formidable competitive challenges in the mid-1990s, the company had faced far greater hazards over the course of its long history. With the benefit of a young, well-educated management team and sound strategies, Barilla regained consistent, strong profit growth. By the decades end, Barillas expansion efforts established the company in several new countries, including the United States, Japan, Australia, Brazil, Mexico, Turkey, France, Austria, Germany, Sweden, Switzerland, Britain, and Greece. In 1999, Barillas share of the U.S. market had grown to nine percent, with Barilla-brand products available in about 90 percent of U.S. grocery outlets. And by 2000, the companys U.S. market share continued to steadily climb to 11 percent. By the close of 2000, 60 percent of total sales for the company came from nonpasta products, while pasta accounted for 35 percent of sales.

The year 2001 was an exciting year for Barilla. The company had captured about 22 percent of the world pasta market. It also became the market leader in branded pasta sales in the United States, capturing 13 percent of the market. The companys net debt was cut down more than half, profits went up 16 percent, and overall overseas sales increased 10 percent. This was also the year for a major reorganization, whereby the company evolved into two main business units: one would focus on pasta and sauces, while the other would handle baked goods. Barilla bought Italian ice-cream maker Sanson, shed its cold meats subsidiary, Parmamec, announced plans to launch a series of fast-food operations throughout the world, and bought Kraft Foods Mexican pasta business.

Barilla moved to boost its brand appeal and continued to establish itself abroad. In early 2002, the company struck a deal with Hollywoods DreamWorks studios to use the popular computer-animated character Shrek to help sell its Mulino Bianco products. By mid-year, the company bought Germanys largest baking group, Kamps AG. Barillas U.S. market share already grew to 15 percent. With its savvy, Italy-based management and new investments abroad, Barilla appeared to be well on its way to many more successive years of steady growth and profits throughout the world.

Key Dates:

1877:
Pietro Barilla opens a bread-and-pasta shop in Parma.
1910:
Barilla opens its first factory and introduces its first trademark logo.
1936:
Production ramps up on the eve of World War II.
1947:
With the war over, Barilla moves to expand beyond Parma with a network of trucks throughout Italy.
1960:
Barillas employee count reaches 1,500.
1971:
U.S-based multinational company W.R. Grace buys the majority holding of the Barilla familys shares.
1975:
The Mulino Bianco product line is created.
1979:
The Barilla family reacquires controlling interest in the company.
1987:
Mulino Bianco accounts for 50 percent of Barillas total sales and enjoys a 26 percent share of Italys baked goods market.
1998:
Barilla opens its first plant in the United States, in Ames, Iowa.
2001:
Barilla reorganizes into two main business units, with one focusing on pasta and sauces, and the other on baked goods.

Principal Subsidiaries

Barilla Alimentare S.p.A.; Barilla Dolciaria S.p.A.; Barilla Alimentare Dolciaria S.p.A.; Giovanni Voiello Antico Pastificio S.p.A.; Barilla Alimentare Sud S.r.l.; Molino e Pastificio F.lli Quinto e Manfredi S.p.A.; Barilla Alimentare Mediterranea S.p.A.; Forneria Meridionale S.p.A.; Forneria Lucana S.p.A.; Unione Laboratori S.r.l.; Barilla Dolciaria Industriale S.r.l.; Forneria Padana S.r.l.; Pavesi Societa per Azioni; Panifici Italiani S.p.A.; Panem S.r.L; Barilla Diversificazione S.p.A.; Nuova Forneria Adriatica S.p.A.; Barilla Servizi Finanziari S.p.A.; CO.RI.AL; Barilla France Sari; Moulin Blanc Sari (France); Barilla Deutschland GmbH; Misko AE (Greece); Banta EPE (Greece); Barilla International N.V. (Netherlands); Barilla Espana S.A.; Barilla America Inc. (United States); Barilla Luxembourg S.A. Holding (Luxembourg); Italest S.R.I. (63%); Polinvest Societe Anonyme (France) (56.15%); Barilla Suisse S.A.; Kamps AG.; Panificio S. Antonio Biagio Lecce S.p.A. (30%); Pragma S.r.l (30%); Pragma 2 S.r.l (30%); Pragma 3 S.r.l (30%); Consorzio Politecnico Agroalimentare (33.33%); Filiz Gida Food Industry (Turkey) (35%); Daputa Sp.Zo.o (Poland) (30%).

Principal Competitors

American Italian Pasta; De Cecco; Goodman Fielder; Nestlé; New World Pasta; Spigadoro; Maple Leaf Foods.

Further Reading

Bannon, Lisa, Italians Do Eat Oodles of Noodles, but Trend Is Limp, Wall Street Journal, May 10, 1994, pp. Al, All.

Barone, Amy, and Laurel Wentz, Artzt Steering Barilla into EDLP Strategy, Advertising Age, February 26, 1996, p. 10.

, Barilla Spends 10 Years Cooking Up Pasta, Advertising Age, January 13, 1997, p. 21.

Barilla Changes Management Structure Again, La Repubblica, January 30, 2001, p. 32.

Barilla Has Sold 100% of Parmamec, La Repubblica, April 10, 2001, p. 42.

Barilla to Launch Fast-Pasta Chain, II Sole 24 Ore, November 8, 2001, p. 18.

Barilla Looks for Growth Abroad, Eurofood, March 14, 2002, p. 8.

Barilla Profits Grow 40%, Eurofood, May 11, 2001, p. 11.

Barillas Relaunch Spurs Grocery Sales, Retail World, April 612, 1998, p. 16.

Bentley, Stephanie, Former Kraft Chief Quits Barilla Post After a Week, Marketing Week, October 4, 1996, p. 10.

Devine, Nora, Kraft Foods Sells Mexican Pasta Business to Barilla, Dow Jones News Service, December 18, 2001.

Fabiana, Giacomotti, Mulino Bianco Ads Reconstruct Italy, Adweek, October 24, 1994, p. 16.

Ganapini, Albino Ivardi, and Giancarlo Gonizzi, eds., Barilla: A Hundred Years of Advertising and Corporate Communications, Parma, Italy: Archivio Storico Barilla, 1994.

Giacomotti, Fabiana, Milan: Y&R Cooks up Pasta Advertisements, ADWEEK Eastern Edition, January 16, 1995, p. 39.

Irvine, Steven, and Jules Stewart, Selling the Family Silver, Euro-money, January 1996, p. 57.

Javetski, Bill, Gail Edmondson, and William Echikson, Believing in Europe, Business Week, October 7, 1996, p. 22.

Johnson, Millard, Iowa: Pasta and Steel, Plants, Sites and Parks, October/November 1998, pp. 13839.

Lyman, Eric J., Barilla Cooks Up First Global Ads: Italian Pasta Manufacturer Launches Worldwide Marketing Campaign, Euromarketing Via E-Mail, July 6, 2001.

, Hollywood Characters to Front Barillas Global Ads: Barilla Group Signs Character Licensing Deals with DreamWorks, Euromarketing Via E-Mail, February 8, 2002.

Masera, Anna, Barilla Puts Newman into Santa Claus Suit, Advertising Age, November 11, 1991, p. 39.

McCarter, Michelle, Italian Loss May Mean Gain for Y&R, Advertising Age, November 27, 1989, p. 108.

Ono, Umiko, U.S. Market for Pasta Is Bubbling with Italian Makers Campaigns, Wall Street Journal, April 23, 1996, p. B7.

Pasta, Present and Future, Euromoney, January 1996, pp. 6466.

Pile-Up at Spaghetti Junction, The Economist, December 3, 1994, p. 78.

Pouschine, Tatiana, Mangia, Mangia, Forbes, November 20, 1987, p. 232.

Reeves, Scott, Offerings in the Offing: No Fireworks, Just Pasta, Barrons, October 6, 1997, p. 39.

Reich, Ingo, and Axel Granzow, Companies: Barilla to Acquire Germanys Kamps with Higher Offer, The Wall Street Journal Europe, April 24, 2002, p. A5.

Sansoni, Silvia, and Zachary Schiller, Is That Ed Artzt Pushing Pasta? Business Week, April 15, 1996, p. 102.

Santista and Barilla End Association, Gazeta Mercantil Online, February 13, 1998, http://www.gazetamercantil.com.

Sulzer, Alessandra, The Business of Cooperation: Peace and Profit through Joint Ventures, Harvard International Review, July 1, 2001, pp. 3436.

Tagliabue, John, Family Business (Extended): In Italy, New Generation of Leaders Looks Abroad, Wall Street Journal, November 7, 1995, pp. Dl, D6.

, International Business: To Avoid Tariffs, Pasta Makers Come to U.S., The New York Times, March 5, 1998, p. D4.

Tassi, Roberto, and Giorgio Soavi, The Barilla Collection, FMR: The Magazine of Franco Maria Ricci, April 1993, p. 6.

Thompson, Stephanie, Barilla Links Redesign to Ad Imagery, Brandweek, January 5, 1998.

Turcsik, Richard, Barilla Sauces It Up in U.S. Market, Brand Marketing, February 1999, p. 10.

Wellman, David, Westward Ho! Food & Beverage Marketing, January 1996, p. 33.

April Dougal Gasbarreupdate: Heidi Wrightsman

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Barilla G. e R. Fratelli S.p.A.

Barilla G. e R. Fratelli S.p.A.

Via Mantova 166
Parma, I-43100
Italy
(521) 2621
Fax: (521) 270621

Private Company
Founded:
1877
Employees: 7,900
Sales: L3.3 trillion (US$2.08 billion) (1995)
SICs: 2098 Macaroni & Spaghetti; 2051 Bread, Cake & Related Products; 2052 Cookies & Crackers; 2033 Canned Fruits & Vegetables; 5149 Groceries & Related Products, Not Elsewhere Classified

One of Europes largest food marketers, Barilla G. e R. Fratelli S.p.A. is a holding company that produces pasta, sauces, and packaged baked goods. The companys namesake branded pasta and sauces lead their respective segments of the Italian market, and its Mulino Bianco brand baked goods hold a 37 percent share of their domestic market segment. Although the companys products are distributed throughout Europe and in the United States, 85 percent of Barillas sales were still generated in Italy in 1995.

Barilla was owned and operated by family members from 1877 until 1971, when brothers Pietro and Gianni sold it to U.S. conglomerate W.R. Grace & Co. Pietro Barilla repurchased the firm in 1979, and it continued to be privately held into the mid-1990s. By that time, the business was run by Pietros three sons: Guido, Luca and Paolo.

Company Origins and Development

Barilla was founded in 1877 by another Pietro Barilla as a bakery and pasta shop in Parma, a northern Italian city famed for its pasta and cheese. The company specialized in egg pasta, as opposed to flour and water (glutinous) pasta. In an attempt to increase his income, the patriarch nominally handed over his original shop to his wife and launched a second outlet in 1891. Within just three years, however, he was forced to declare bankruptcy and sell both operations. Barilla made a new start soon thereafter but didnt achieve consistent profitability until 1898, when he added extruded pasta to his small line of hand made noodles and fresh-baked breads.

Production grew exponentially in the late 1800s and early 1900s, fueled by a combination of ever-increasing mechanization and customer-winning quality. Pietros sons Riccardo and Gualtiero succeeded the founder in 1905. Riccardo oversaw the day-to-day operations of the factory, while Gualtiero focused on sales and promotion. In 1910, they built a new pasta factory nearer railroad and warehouse facilities and installed the regions first continuous bread-baking oven. The Barilla brothers launched the companys first trademark, featuring a bakery boy cracking a giant egg into a cart of flour, in 1910. This graphic representation symbolized the simple, yet high-quality ingredients used in Barillas products.

In these early years Barilla pastas were sold in Parma through company stores and in other cities under exclusive contracts with grocers. Since all the pasta was sold in bulk, these outlets promoted the brand via in-store posters and displays. Barillas frequent participation in international trade fairs won it awards for quality and wider recognition. By the early 1920s, Barilla pasta was exported (albeit in extremely limited quantities) to France and the United States.

After both Pietro and Gualtiero died in the 1910s, Riccardos wife Virginia played an important role in the management of the business. Riccardo has been praised for his emphasis on capital investment of profits in plant, process and promotion. During World War I, G. & R. Barilla Company supported its enlisted employees with care packages. The firm was buoyed in the early 1920s by Italys strong economy, employing 300 in its pasta plant alone by mid-decade. In 1926, Barilla launched a new trademark featuring a winged chef carrying a plate of pasta.

Despite the challenges of the Great Depressionincluding a call for the outlaw of pasta because it was too fatteningBarilla managed to progress on several fronts. Riccardos son Pietro, who joined Barilla as head of sales in 1936, was the chief architect of these changes. He exchanged the companys traditional horse drawn carts for bright yellow Fiat autos and launched Barillas first full-fledged advertising campaigns. His Bonaventura trading card promotion coordinated newspaper, point-of-sale, radio, and outdoor media and gradually began to broaden the brands customer base to include much of Northern Italy. However, as Pietro confided to a friend in 1938, he would not be satisfied with part of Italyhe wanted to make Barilla the countrys top brand of pasta. Unfortunately, his plan to achieve that goal was interrupted by World War II.

World War II Brings Corporate Crisis

Barillas mid-century degeneration began when Pietro was drafted into military service in 1939. Wartime rationing and a government-controlled distribution system that funneled much of the companys production to the army eroded the consumer market Barilla had so carefully nurtured in the interwar period. Parma suffered a devastating air raid near the end of the war, and the Barilla plant in particular was sabotaged and fell into disarray. In 1943, the company lost L14 million, and in 1947 Riccardo, who had struggled with poor health throughout the war years, passed away.

Though they were discouraged by the events of the war and the soaring unemployment and inflation left in its wake, Pietro and his brother Gianni resolved to revive their birthright. Led primarily by Pietro, the company shed certain elements of its business and developed a strategy that focused on the consumer pasta market. After the government ended its rationing policy in 1947, Barilla exited its military contracts. During the latter years of the decade, the company sold its bulk retail outlets and divested the breadmaking facilities.

Barillas postwar plan coalesced in the early 1950s, just as the Italian economy began to gear up for the Economic Miracle of the 1960s. During this period, the Italian economy was transformed from one of Europes weakest, most agrarian economies to an industrial and consumer powerhouse. Over the course of the 1950s, Barilla became a shining example of this trend. In 1952, Pietro Barilla traveled to New York to observe packaging, advertising, production and distribution methods used in the worlds largest consumer-driven economy. He returned home resolved to build Barilla into Italys premier pasta brand.

He accomplished this through heavy investments in advertising. Well-known graphic designer Erberto Carboni was charged with creating Barillas new image, encompassing everything from the corporate logo to delivery vehicles, packaging, and advertising campaigns. His new trademark, a stylized egg lying on its side with the Barilla name in the yolk, would continue to be used (with revisions) throughout the next four decades. Carboni also made the now-famous Barilla blue background the standard for all packaging. His first tagline, Its always Sunday with Barilla, won a national advertising prize. Having captured the leading share of the egg segment of the Italian pasta industry in the early 1950s, Barillas new strategy vaulted it over Buitoni to lead the flour and water sector as well by the end of the decade.

Having established its dominance of the pasta market, Barilla re-diversified in the 1960s. However, instead of making fresh bread, the company capitalized on its existing production and distribution network by adding such nonperishables as breadsticks, cake mixes, sauces and pizza.

National Economic Woes Trigger Early-1970s Sell-Off

This prosperous period came to a halt in the late 1960s, when rampant inflation compelled governmental price freezes on many staples, including pasta. After nearly 100 years under family control, Gianni Barilla decided that he wanted to sell his share of the business. Unable to buy his siblings stake, then 61-year-old Pietro Barilla sold the family business to Americas W.R. Grace & Co. in 1971 for more than US$70 million.

With pasta prices and profits locked in by federal fiat, Grace turned to new products for growth. Mid-decade the new parent introduced Mulino Bianco (White Mill) a premium line of breadsticks, cookies, cakes, biscuits and bread. Grace supported the new brand with a highly successful promotional campaign that encompassed premiums ranging from tableware to toys. Nevertheless, as the Italian economy continued its tailspin in the 1970s, Barillas new parent grew disenchanted with its foray into food. After owning the struggling pasta maker for eight years, Grace sold it back to Pietro Barilla for US$65 million. Pietro had financial help from Bürhle, a Swiss company that continued to own 49 percent of Barilla into the mid-1990s.

Pietro Barilla maintained support of the Mulino Bianco division in the ensuing years. In fact, Barilla relaunched the brand in 1983, increasing the brands annual sales from US$222 million to US$740 million by 1989. By 1987, Mulino Bianco contributed 50 percent of Barillas total annual sales and had captured five percent of the European baked goods market. By that time, the brand enjoyed a 26 percent share of Italys baked goods market.

The return of family managementnot to mention the repeal of fixed pasta prices in 1978revived Barillas growth. Sales increased from US$288 million in 1979 to almost US$1 billion by 1986. Pietro Barilla also renewed the companys emphasis on marketing after retaking control. In 1984, he hired filmmaker Federico Fellini to direct one of Barilla Pastas most famous campaigns. Called High Society, the ad portrayed pasta not as a mundane dish, but as a sexily simple entree. Advertisements featuring such diverse international celebrities as Paul Newman, Gerard Depardieu, and Cindy Crawford helped make Barilla one of the best-known brands in Italy by the early 1990s.

Challenges in the Mid-1990s

After guiding Barilla for a second term of 14 years, octogenarian Pietro Barilla died in 1993. His sons Guido, Luca and Paolo took charge as chairman and joint vice-chairmen, respectively. Competition from private labels and cheaper brands combined with the relative inexperience of the new management troika to bruise Barillas bottom line. By 1996, inexpensive own-label pastas had captured 15 percent of the Italian pasta market and 12 percent of cookies and baked goods. Barillas revenues flattened at about US$2 billion, and its profits were halved from $73 million in 1993 to $37.5 million in 1995. The company was forced to close three plants, furlough 1,000 employees, and trim prices by 10 percent.

In 1995, the executive committee asked 66-year-old former Procter & Gamble Co. CEO Edwin L. Artzt to come out of his scant two-month retirement to help Barilla out of its tailspin. Artzt had held the top spot at Procter & Gamble from 1990 to 1995 and had led its battle against no-name brands. His turn-around scheme included several strategies that he had applied at Procter & Gamble, including Everyday Low Prices (EDLP) and an intensified global push. Under his guidance, Barilla cut the prices of products accounting for 70 percent of total sales by an average of 12 percent. He also encouraged more hard-edged advertisements focusing on Barillas superior quality. The company expected to maintain its traditional high quality by investing US$26 million in a pasta research and development facility.

Another aspect of the strategy was an increased emphasis on global expansion to increase Barillas proportion of international sales from less than 10 percent in 1994 to 50 percent by 2000. It targeted Asia, Latin America, and especially the United States, which had surpassed Italy as the worlds largest pasta consumer in 1990. Although the company only had $10 million in U.S. pasta sales by 1995, it had captured .6 percent of that nations pasta market after only one year of limited distribution.

Although Barilla faced several formidable competitive challenges in the mid-1990s, the company had faced far greater hazards over the course of its long history. With the benefit of a young, well-educated management team and sound strategies, the company appeared poised to regain consistent, strong profit growth.

Principal Subsidiaries

Barilla Alimentare S.p.A.; Barilla Dolciaria S.p.A.; Barilla Alimentare Dolciaria S.p.A.; Giovanni Voiello Antico Pastificio S.p.A.; Barilla Alimentare Sud S.r.L; Molino e Pastificio F.lli Quinto e Manfredi S.p.A.; Barilla Alimentare Mediterranea S.p.A.; Forneria Meridionale S.p.A.; Forneria Lucana S.p.A.; Unione Laboratori S.r.L; Barilla Dolciaria In-dustriale S.r.L; Forneria Padana S.r.L; Pavesi Societa per Azioni; Panifici Italiani S.p.A.; Panem S.r.L; Barilla Diversificazione S.p.A.; Nuova Forneria Adriatica S.p.A.; Barilla Servizi Finanziari S.p.A.; CO.RI.AL; Barilla France Sari; Moulin Blanc Sari (France); Barilla Deutschland GmbH; Misko AE (Greece); Banta EPE (Greece); Barilla International N.V. (Netherlands); Barilla Espana S.A.; Barilla America Inc. (United States); Barilla Luxembourg S.A. Holding (Luxembourg); Italest S.R.L (63%); Polinvest Societe Anonyme (France) (56.15%); Barilla Suisse S.A.

Principal Affiliates

Panificio S.Antonio Biagio Lecce S.p.A. (30%); Pragma S.r.L (30%); Pragma 2 S.r.L (30%); Pragma 3 S.r.L (30%); Consorzio Politecnico Agroalimentare (33.33%); Filiz Gida Food Industry (Turkey) (35%); Daputa Sp.Zo.o (Poland) (30%).

Further Reading

Bannon, Lisa, Italians Do Eat Oodles of Noodles, but Trend Is Limp, Wall Street Journal, May 10, 1994, pp. A1, All.

Barone, Amy, and Laurel Wentz, Artzt Steering Barilla into EDLP Strategy, Advertising Age, February 26, 1996, p. 10.

Ganapini, Albino Ivardi, and Giancarlo Gonizzi, eds., Barilla: A Hundred Years of Advertising and Corporate Communications, Parma, Italy: Archivio Storico Barilla, 1994.

Giacomotti, Fabiana, Milan: Y & R Cooks up Pasta Advertisements, ADWEEK Eastern Edition, January 16, 1995, p. 39.

Masera, Anna, Barilla Puts Newman into Santa Claus Suit, Advertising Age, November 11, 1991, p. 39.

McCarter, Michelle, Italian Loss May Mean Gain for Y&R, Advertising Age, November 27, 1989, p. 108.

Ono, Umiko, U.S. Market for Pasta Is Bubbling with Italian Makers Campaigns, Wall Street Journal, April 23, 1996, p. B7.

Pasta, Present and Future, Euromoney, January 1996, pp. 64-66.

Pouschine, Tatiana, Mangia, Mangia, Forbes, November 20, 1987, p. 232.

Sansoni, Silvia, and Zachary Schiller, Is That Ed Artzt Pushing Pasta? Business Week, April 15, 1996, p. 102.

Taglibue, John, Family Business (Extended): In Italy, New Generation of Leaders Looks Abroad, Wall Street Journal, November 7, 1995, pp. D1,D6.

Tassi, Roberto, and Giorgio Soavi, The Barilla Collection, FMR: The Magazine of Franco Maria Ricci, April 1993, p. 6.

Wellman, David, Westward Ho! Food & Beverage Marketing, January 1996, p. 33.

April Dougal Gasbarre

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