Parma

Barilla launching major push into emerging markets

Family-owned food firm seeking to double sales by 2020

Barilla launching major push into emerging markets

(By Gordon Sorlini) Parma, May 20 - Barilla, one if Italy's largest and best-known food companies, is looking to feed a lot more mouths over the next seven years. During a presentation in Milan on May 16, the company's management outlined plans to double sales, excluding revenues of Barilla's German bakery unit Lieken (which is being sold), to over 6.0 billion euros between now and 2020. In order to reach its goals, Barilla is relying on a major push into emerging markets, new product launches and continued investment in research and development and marketing and communication. Barilla - founded in Parma, Italy by Pietro Barilla in 1877 and still controlled by the founding family - is known the world over for its pasta, sauces and Mulino Bianco snacks, among other products. The company has 42 production facilities globally turning out some 2.5 million tons of food products each year. In addition to being the leading pasta player in Italy, Barilla already has a strong international presence, in part through its ownership of brands like Harrys (France and Russia), Golden Toast (Germany) and Yemina and Vesta (Mexico). Near its hometown, Barilla runs the world's largest pasta factory, which can produce up to some 1,000 tons of pasta per day. The company is placing a big bet on rising demand for its products in markets where consumers are not yet big eaters of pasta. During the presentation, Chief Executive Claudio Colzani - who joined the company recently after a long tenure in consumer goods giant Unilever - said that right now the firm is very dependent on Europe: 84% of total sales come from the region. Italy, where overall pasta sales have been contracting since 2009 and where Barilla is the market leader with a 35% share, makes up 40% of the company's revenues, which last year totaled just shy of 4.0 billion euros (including sales from Lieken). Despite a recession in its largest market and rising raw materials costs, sales grew by 2 percent. Barilla President Guido Barilla - who also spoke at the presentation - said he was "satisfied" with the result. Net profits dropped 21%, to 60 million euros, as the company kept prices to consumers steady in the face of rising raw materials costs and as it kept up investments aimed at reducing its environmental impact, Colzani said. Referring to the company's international expansion, the CEO said that "between now and 2020 there will be one billion new consumers in the world," in particular in areas like South America and Asia. Getting into these new consumers' shopping carts is one of the key drivers of Barilla's growth strategy. Currently, these markets represent only 4% of group sales, the chief executive said. In turn, international growth is also meant to offset some of the firms' dependence on its home market: the strategy to 2020 sees Italy's share of total group revenues dropping to between 25-30%. During the presentation, Colzani pointed to Brazil as a case study in how its new strategy is playing out. Sales in the Latin American country, which reached 18 million euros in 2012, are expected to reach up to 100 million euros by 2016 and over 200 million euros by 2020. A key driver of this growth will come from another part of Barilla's strategy: "customization", or developing products for local tastes. "Trying to sell the same sauce in China as we do in Parma clearly would present some difficulties," Colzani said. Looking again at Brazil, the company has launched a new range of products - including pastas, pasta sauces and even new packaging formats - targeting local consumers. Investments in research and development and quality control are seen as other drivers of the company's strategy. Colzani said the firm spends 29 million euros every year carrying out up to 250,000 quality tests on the grain it purchases for its products. Not surprising for a firm whose mantras include "good for you, good for the planet," and whose management strongly believes in the need to limit industry's environmental impact while making products that are tasty and healthy.

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