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

1877–1938

One of the world's 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 world's largest pasta producer, holding leading shares of the world's 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 didn't 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. 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 closer to 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.

After owning the struggling pasta maker for eight years, Grace sold it back to Pietro Barilla for US$65 million.

1939–1952

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 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 breadsticks, cake mixes, sauces, and pizza.

National Economic Woes Trigger Early 1970s Sell-Off

1971–1996

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.

1990–2002

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 United States pasta sales by 1995, it had captured .6 percent of that nation's 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 Barilla's subsidiaries, Barilla Alimentare S.p.A., established a cooperative business venture with Egypt, Jordan, the Palestinian Authority, and Israel's 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 decade's end, Barilla's 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, Barilla's 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 company's 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 company's 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 Hollywood's DreamWorks studios to use the popular computer-animated character Shrek to help sell its Mulino Bianco products. By mid-year, the company bought Germany's largest baking group, Kamps AG. Barilla's 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.