Barilla Business Case
Principal challenges and opportunities for Barilla
In the 90s the focus of big food companies was on aggressively conquering supermarkets’ shelf space with the aim of increasing the depth and breadth of consumers’ spending. The 21st century food purchasers, however, seem to possess profound nutrition knowledge. They consider the quantity of fats, sugars and preservatives. This situation creates a unique opportunity for Barilla to become the worldwide Ambassador of Mediterranean Diet by gaining First Mover Advantage in new geographical markets with meals and bakery solutions.
While financial crisis and floating prices of commodities, affecting both consumers’ spending behavior and companies’ profitability, represent the biggest threats, as Ambassador of Mediterranean Diet, Barilla’s main challenge is to communicate Mediterranean values to its target markets: North America, with health and obesity-related diseases concerns, and Asia Pacific, with growing Western culture curiosity and per capita food spending. Competitors
The global external environment is complemented by multinational food giants such as Kraft, Unilever, Nestle, and American Italian Pasta Company in US and Hebei Hualong in China on local scale. While domestic players enjoy a price advantage, the multinationals Unilever and Nestle gain competitive advantage by customization while Kraft and General Mills exploit a strong diversified brands portfolio. By exploiting its R&C, Barilla should take a different approach: growing internally and not by M&A emphasis, undertaking a stealth positioning in its market by leveraging relatively stable R&C. Resources and Capabilities
Exploiting key strengths is a more direct way of setting itself apart. Its long history and heritage of representing the Italian gastronomy in the world, its values of “feed others as you feed your own children” encourage Barilla to promote Italian and Mediterranean way of eating. Moreover, Barilla’s superior R&D capabilities enable the company to improve continuously the nutritional profile of the products, thus becoming “the well-being company”. (Exhibit 1) Superior IT platform and advertising skills complement the favorable opportunities.
However, Barilla is still lagging behind due to its relatively limited portfolio of products and weak distribution network, especially in Asia Pacific. Furthermore, it lacks ability to properly identify synergies in acquired brands, often leading to divesting them later on.
Under all these circumstances, the relatively smaller Parma company should penetrate North America and Asia-Pacific markets, offering not ‘Italian products’, but Mediterranean eating experience where typical ingredients (oil, balsamic vinegar, rosemary, tomatoes etc) and convivial atmospheres are well integrated within the environment. It is essential to create the brand identity in these markets as the Ambassador of Mediterranean Diet to differentiate itself. How can Barilla achieve this?
Strategy 2011 – 2015
To allocate corporate resources to different markets and business units, values chain analysis is required. (Exhibit 3)
In this model, food processing represents the most important phase, which covers the issues of where and what to produce. North American Business Unit’s aim is to sustain their success in pasta as the market leader and launch some of its bakery brands. To do so, products portfolio should be diversified with special focus on healthier varieties for both pasta and meal solutions (i.e. gluten free pasta, fortified pasta with omega -3 and fiber, lower-fat sauces). Moreover, foodservice products should be launched to take advantage of the growing foodservice industry. Fruit snacks and nutritional cereal bars should complement the heatlhy image of Barilla. For Asia-Pacific, Barilla should continue food processing of its two BUs in its existing European facitlites and reach...
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