Via Mantova 166
One of Europe's largest food marketers, Barilla G. e R. Fratelli S.p.A. is a holding company that produces pasta, sauces, and packaged baked goods. The company's 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 company's products are distributed throughout Europe and in the United States, 85 percent of Barilla's 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 Pietro's 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 didn't 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. Pietro's 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 region's first continuous bread-baking oven. The Barilla brothers launched the company's 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 Barilla's 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. Barilla's 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, Riccardo's 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 Italy's 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 Depression--including a call for the outlaw of pasta because it was too fattening--Barilla managed to progress on several fronts. Riccardo's son Pietro, who joined Barilla as head of sales in 1936, was the chief architect of these changes. He exchanged the company's traditional horse drawn carts for bright yellow Fiat autos and launched Barilla's 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 brand's 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 Italy--he wanted to make Barilla the country's top brand of pasta. Unfortunately, his plan to achieve that goal was interrupted by World War II.
World War II Brings Corporate Crisis
Barilla's 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 company's 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.
Barilla's 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 Europe's 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 world's largest consumer-driven economy. He returned home resolved to build Barilla into Italy's premier pasta brand.
He accomplished this through heavy investments in advertising. Well-known graphic designer Erberto Carboni was charged with creating Barilla's 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, "It's 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, Barilla's 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 sibling's stake, then 61-year-old Pietro Barilla sold the family business to America's 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, Barilla's 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 brand's annual sales from US$222 million to US$740 million by 1989. By 1987, Mulino Bianco contributed 50 percent of Barilla's 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 Italy's baked goods market.
The return of family management--not to mention the repeal of fixed pasta prices in 1978--revived Barilla's growth. Sales increased from US$288 million in 1979 to almost US$1 billion by 1986. Pietro Barilla also renewed the company's emphasis on marketing after retaking control. In 1984, he hired filmmaker Federico Fellini to direct "one of Barilla Pasta's 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 Barilla's 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. Barilla's 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 Barilla's 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 Barilla's 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 world's 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 nation's 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 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 Sarl; Moulin Blanc Sarl (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 Societé Anonyme (France) (56.15%); Barilla Suisse S.A.
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