2003 Bateman Case Study Competition

Project Brief

Background

Nearly three generations of Europeans have grown up eating Nutella, the delicious chocolaty hazelnut spread. Nutella is a staple in virtually every household and Europeans have made it a category-generating product with millions of pounds consumed each year.

Most college students today were on a strict baby food diet when Nutella first appeared on American store shelves in 1983 as an import from Italy. Twelve years later consumer demand had become so great, the company began producing it in America to distribute within the country.

What is Nutella? Pietro Ferrero, a pastry maker and founder of the Ferrero Company, created Nutella in the 1940s in Italy by mixing cocoa with toasted hazelnuts, cocoa butter and vegetable oils into a spread. For roughly a penny, children could go to their local food store with a slice of bread and ask for a "smear" of the spread. This became so popular that Italian food stores started using it in a service called “The Smearing.” Today, Nutella is the number one spread in Italy, Germany and France, and worldwide it outsells all brands of peanut butter combined.

Nutella’s taste is unique. Cocoa combines with fresh toasted hazelnuts and skim milk to give Nutella a creamy chocolaty taste. Europeans have enjoyed Nutella for many years. In different parts of Europe, Nutella is eaten primarily at breakfast or as a snack spread on fresh breads and croissants, in crepes and on fruits.

Situation Analysis

Children in Europe grow up eating Nutella for breakfast just as American children grow up eating peanut butter (with jelly) for lunch. When Nutella was introduced in the United States, its European uses were not quickly adopted. American parents aren’t open to giving children a product that looks like a chocolate cream for breakfast. After extensive consumer research, Ferrero determined American children were not eating the spread as much as adults. In fact, results showed a substantial proportion of household use was among adults. Specifically, these adult Nutella users tended to be more affluent, better educated, more sophisticated and experimental with food behavior. Likewise, these qualities can be used to describe many college students. Therefore, Nutella began exploring college students as a target market.

Although Nutella sales have shown double-digit increases for many years, it’s apparent that there still is a lack of awareness for the product and its uses. Generally, Americans consider Nutella a snack or dessert spread on fruits, pretzels, toast and crackers or used in recipes. Marketing studies consistently have found that consumers’ purchases of Nutella dramatically increase after trying the product. And, brand adoption takes place after three to four purchases. Therefore, sampling and product demonstrations (in-store and elsewhere) as well as couponing have been critical to marketing efforts.

Not only has Nutella made great efforts to communicate product benefits to consumers, it also has developed close relationships with the trade (e.g. supermarkets, convenience stores). The trade are considered a key channel because- without them- the product would never get to consumers. Because of the trade’s importance to Nutella, Ferrero developed two distinct means by which a retailer can acquire the product: the specialty distributor network and direct distribution. The specialty distributor network, first established when Nutella was imported from Italy, warehouses the product to eventually sell as part of a package of specialty items. Specialty distributors maintain responsibility for stocking and merchandising. Although this method is slightly more expensive, it works well, particularly with smaller or independent accounts that enjoy providing specialty products to their clients. The direct distribution model allows retailers to receive Nutella directly from the Nutella plant in New Jersey, instead of through intermediaries. Although both mechanisms of working with the trade have proven effective, Nutella is interested in exploring smaller markets and trade outlets, particularly the ones on college campuses, including campus-administered cafeterias, mini-marts, and other food establishments.

Judging Criteria

A. Four Step Process (70 points total)

1. Research: Thoughtful analysis of the situation, identification of key audiences and “fact-finding activities” to determine relevant trends, attitudes and policies (e.g. telephone conversations, surveys, literature review): Document use of information to determine appropriate implementation of tactics. (20 points)

2. Planning: Statement of objectives, alternatives considered, strategy and development of program (key publics, channels of communication and tools, messages proposed, assignment of responsibilities, timetable and budget, with emphasis on feasibility of each of these). Include organization and clarity of written plan. (20 points)

3. Execution: The plan should detail the specific activities conducted to implement strategies of the public relations plan. (20 points)

4. Evaluation: The methods the team used to formally evaluate the effectiveness of its plan against its objectives. This will be important in determining points for “Effectiveness,” below. (10 points)

B. Effectiveness: Understanding of the situation—application of a viable marketing communications and public relations plan. Did the plan meet set objectives? Did the plan’s messages reach the target audiences? Did awareness and trial increase? (15 points)

C. Creativity: Creativity in planning and executing results. Were the goals met? (15 points)