Ferrero Group: Achieving Sustainability Through Supply Chain Integration Ethics & Stakeholder Management: Notes

A$.$ Basic Analysis

$1.$ Goal of the company: Ferrero aims to double its turnover $($revenue$)$ to $20$ billion in $2026,$ from $10$ billion in $2016.$

$2.$ Actions: Carried out vertical and horizontal mergers to integrate supply chain and sources into company operations, while observing CSR responsibilities from each raw material source.

$3.$ Outcomes: Net Profit decreases by $19\%,514$ million from $636$ million. In spite of the actions carried out, why?

$4.$ Symptoms & Problems:

$$ Increase in costs of Raw Materials $($at least a $14\mathrm{.}7\%$ increase$).$ Why?

o Volatility of the $2$ most expensive raw materials: Cocoa and Hazelnut. Competition, lack of farmer$$s bargaining power, and changes in supply volume.

$$ Due to political issues, climate, and pests $($which is also a concern when it comes to regulating sugar production, pesticide$)$

o Fluctuations in currency exchange. Source: Political and economic situations in the sourcing country.

$$ Europe is declining in value as a market for chocolate sales. Forecasted to grow flat and decline, driven by factors other than quality.

o Possibly consumer consciousness on high$-$sugar products.

$$ Marketing is focused instead on portioning policies and exercise, not addressing the core issue: Consumers now do not want excessive sugar in their products.

$$ Ignoring the E$-$commerce market

o Due to concerns over shelf$-$life and quality

$$ Boycott concerns

o Environmental issues over sourcing of raw materials.

$$ Sugar production still involves using a large amount of water for irrigation, and pesticide has environmental effects

o Sugar already mentioned as a concern above.

$$ AA

$$ More?

B$.$ Other concerns

$$ Were the acquisitions$/$mergers the best move?

$$ Should Ferrero have gone with a merger?

o How different would things have gone if they had gone with the merger?

$$ What strategies should Ferrero pursue to achieve its goals in this troubled industry?

$$ Would pursuits in sustainability through CSR programs bring the company to its financial goals?

$$ Ferrero is lagging in its commitments to self$-$produced electricity and reducing its C$02$ emissions $($from transportation and storage operations$).$

$$ Is there enough product differentiation?

C$.$ Observations

$$ Ferrero operates through the philosophy of $$Glocal$$ or Global$-$local operation synergy, establishing plants near local markets to transition very quickly to customer demands.

$$ Strategy is aggressive acquisitive growth

$$ Ferrero sources cocoa from all available sources, but circumvents the ethical issues by establishing programs aimed at training farmers and reducing child labor. Price decline still may be in effect due to factors outside of Ferrero$$s control.

$$ Ferrero sources Palm Oil without any real problems, technically speaking. However, irrigation requirements are still a factor.

$$ Ferrero sources hazelnuts without much issue. They also harvest from South Africa, the same region where they cultivate cocoa.

$$ Perhaps Ferrero also needs to work on responsible marketing?

$$ If they want to satisfy customer$$s desire for nutrition and health, maybe removing sugar entirely may be an option, or introducing a substitute for sugar. It removes an expensive and environmentally$-$damaging resource at the same time.

Strengths: Unique product for each clientele$/$customer base $($Nutella$,$ Kinder, Pralines, Tictac$)$

Weaknesses: Reliance on sugar, costs incurred in integration

Opportunities: Asia, US$,$ Canada, Australia, Poland

Threats: Top $3$ current selling companies $($Mars$,$ Mondelez, Nestle$)$

Distribution of load:

$1.$ Intro, problem statement, problem analysis $$ Mark

$2.$ SWOT Analysis $$

$3.$ Fishbone Analysis $$

$4.$ Alternatives $$

$5.$ Implementation and Conclusion $$ under the case and provided information please write down IDENTIFICATION AND EVALUATION OF ALTERNATIVES $($ Identification and Evaluation of Alternatives $-$ This is for brainstorming. Arguments are provided for and against each alternative.$)$