Business Model Case Studies
Business methods, models, and supply chains for Nutella, Blue Diamond Growers, Cargill, and Fresh Del Monte Produce Inc provide a variety of approaches to operating businesses in the agriculture sector.
Nutella (Ferraro Group) Business Methods and Models
Founding of Ferraro Businesses
- The Ferraro Company was founded on May 14, 1946, in Italy, by Pietro Ferraro. Pietro created a sweet from hazelnuts, sugar, and cocoa and sold it in small loaves that could be sliced and applied to bread. He called his product Giandujot.
- In 1951, the product was changed into a spread and renamed SuperCrema. In 1964, Pietro's son Giovanni altered the recipe and renamed the product Nutella.
- In 1965, Nutella was introduced to Germany; in 1966 to France and the rest of Europe. In 1978, Nutella came to Australia. Today, it is sold in more than 170 countries.
Expansion of Ferraro Businesses
- The Ferraro Hazelnut Company was established in 2015 to acquire and distribute the hazelnuts that are used to make Ferraro products in its 25 manufacturing plants around the world.
- The Ferraro Hazelnut Company "brings together under one structure only all the hazelnut supply chain activities: Ferraro... agri farms, hazelnut outgrowing development, agronomic research and development, sourcing, industrial transformation, and sale of semi-finished and finished products hazelnut-based."
- Ferraro introduced a new product, "a cherry-liquor-filled chocolate called Mon Chéri," in Germany in 1956. In 1956. Other new products were introduced as the years went by: "the Kinder line in 1968, Tic Tac in 1969, Ferrero Rocher pralines in 1982."
- Ferraro Company had become a billion dollar firm by 1986, when "annual sales reached 926 billion lira, about $1.5 billion in current dollars."
Acquisition of Other Companies
- When Giovanni Ferraro took over the company after his father's death in 2011, he began buying other companies. He acquired Thorntons, a British Chocolatier, in 2015. "He next bought U.S. candy makers Fannie May ($115 million in May 2017) and Ferrara, maker of Red Hots and Trolli gummies (about $1.3 billion, in December). Finally, came the Nestlé deal, including its Crunch, Raisinets and LaffyTaffy labels, for $2.8 billion."
- After buying Nestle, Ferraro became the world's third-largest confectioner, according to data from Euromonitor.
- Giovanni proceeded to buy parts of Ferraro Company's supply chain. "A few years ago it purchased two of the world's biggest hazelnut traders, Oltan Group in Turkey and the Italian Stelliferi Group, and is further investing in plantations in Australia, the Balkans and South America in a bid to increase yields and availability throughout the year. Ferraro buys about a third of all hazelnuts and is now the world's largest hazelnut supplier."
Ferraro Group Supply Chain and Sustainability Goals
- According to the Organization for Economic Cooperation and Development (OECD), Ferraro purchases its supplies from all over the world. Nutella consists of hazelnuts from Turkey; palm oil from Malaysia, Papua New Guinea and Brazil; cocoa from Ivory Coast, Ghana, Nigeria and Ecuador; sugar from Europe; and vanillin from the United States and Europe.
- Ferraro Group is working to make its suppliers follow sustainable practices, according to its 2018 Corporate Responsibility Report (CSR). The report presents company goals as "100 percent cocoa certified as sustainable by 2020, 100 percent sustainable palm oil certified RSPO as segregated was reached in December 2014, 100 percent refined cane sugar from sustainable sources by 2020, traceability plan for 100 percent of hazelnuts by 2020, 100 percent of eggs from barn hens with respect for animal welfare was reached in September 2014 in EU plants and will be extended to a global level by 2025."
- In energy and emissions, Ferraro Group goals include "self-produced electricity totaling 70 percent (instead of 75 percent) of electrical consumption of all European plants, of which 18 percent (instead of 25 percent) was from renewable sources was partially met in September 2014; 40 percent reduction of CO2 emissions from production activities (compared to 2007) by 2020; 30 percent reduction of greenhouse gas emissions (tons of CO2eq) from transport and storage activities (compared to 2009) by 2020; use of packaging made from renewable sources (+10 percent compared to 2009) by 2020, and all packaging 100 percent reusable or recyclable or compostable by 2025.
Blue Diamond Almonds Business Methods and Models
Founding of Blue Diamond and Its Brands
- Blue Diamond Growers is a nonprofit, grower-owned cooperative business based in Sacramento, CA. It was founded in 1910 "as a processing and marketing co-op for California almond growers." Today, 3,500 of California's 6,000 almond growers bring their product to the Blue Diamond 96-acre processing facility."
- "The California almond crop is valued at over $1 billion annually. They are the largest food export from California."
- Blue Diamond Growers has two main brands: (1) Whole almond and almond related products, and (2) Almond Breeze Almond Milk. The company has focused solely on California almonds and almond products since 1910.
- At first, the company only had buildings that received almonds. The almonds were sent out to other locations for processing.
- The company built and recently expanded its own processing facilities in California. "The processing facility ... produces exactly what the customer wants: raw, blanched, chopped, sliced, seasoned, diced, big, or little almonds. To keep the product fresh, ... there is enough cold storage for millions of pounds" of almonds.
- Increasing sales led Blue Diamond Growers to expand its California facilities, putting up two new buildings in 2015. "The first expansion [was] a 52,000 square foot addition to the existing 200,000 square foot Turlock manufacturing plant that first opened in 2013 and sits on 88 acres." The new building expanded Blue Diamond’s "almond processing capabilities with an automated factory that features state-of-the art handling, processing and packaging equipment."
- "The second expansion [was] the new Bulk 8 Warehouse at the Salida [CA] facility that ... opened as an almond receiving station in 1969. Today the 675,000 square foot facility sits on 44 acres.... The new 58,000 square foot bulk storage facility" will add "50 million pounds of in-house bulk almond storage capacity"....The building was completed in 2019.
International Marketing and Product Line Expansion
- Since 2010, Blue Diamond has engaged in aggressive international marketing and new product development. In 2012, the CEO announced that almond sales had reached $1 billion.
- A 2016 report to growers said, "Blue Diamond is a marketing co-op. Our business is almond demand generation. In the last five years we have tripled our advertising expenditures, continued to innovate new almond products, opened 45 international markets to our consumer brand and achieved two-thirds of our revenues through value-added products."
- In the 2019 annual report to growers, the company said "In 2019, Blue Diamond launched 20 new products with the intent of reaching emerging key markets and providing consumers worldwide with new almond product offerings. Our ability to develop unique uses for every variety of almond and expand almond capabilities into previously unexplored categories positions us as the innovation leader in the industry."
- One of the new 2019 products was a line of trail mixes of almonds and fruit.
- The 2019 annual report also stated that the company "introduced Almond Breeze to consumers in Mexico and the Middle East, just to name a few, and launched three new products across Japan and Thailand." The company reported net sales of $1,565,743 on August 30, 2019, which showed no change from 2018 net sales.
Cargill's Founding, Business Model, and Supply Chain
Founding and First 130Years
- The founder, William Wallace Cargill, "began his career in the grain business in 1865 in Conover, Iowa." In 1875 William Cargill moved his headquarters to La Crosse, Wisconsin. He and three of his brothers formed several different partnerships in the upper Midwest. In 1882 William's three brothers sold him their Red River Valley grain elevators. In "1888, James, William, and Sam Cargill formed Cargill Brothers. In 1890 this firm became the Cargill Elevator Company, headquartered in Minneapolis, Minnesota."
- Over the next 100 years, the company expanded in many directions and all over the world. "...[B]y the early 1990s Cargill had become one of the largest diversified services companies in the country. In addition to merchandising grains and oilseeds, Cargill operates as a transporter of commodities; a supplier of feed, seed, fertilizer, and other products to agricultural producers; a processor of food ingredients (such as corn syrup and flour) and of brand name products (such as meat and poultry products); an industrial producer of steel, salt, and other products; and a financial and technical services provider."
- Cargill is still largely owned by family descendants.
Growth since 1990
- By 1990, in addition to grain, feed, seeds, oilseeds and corn milling, Cargill's businesses included "chemicals, cocoa, coffee, cotton, eggs, fertilizer, financial services, flour, juices, malt, meat, molasses, peanuts, petroleum, pork, poultry, rubber, salt, steel, turkey and wool."
- In 1999, Cargill revised its business structure, "reorganizing its traditional divisions into 102 business units focused on its customers, innovation and performance."
- Cargill's 2017 revenue of $107.20 billion makes it "the largest private company in the US in terms of revenue and... the largest agricultural compan[y] by revenue in the world. It specializes in trading, purchasing and distributing grain and other agricultural products. [It] ... has a variety of operations, including... energy, steel and transport. Cargill’s agricultural business involves the raising of livestock, producing feed, and food ingredients. It also has a large financial services firm that hedges its risks in the commodities markets. Cargill is a family-owned company and is responsible for 22 percent of the US domestic meat market and 25 percent of US grain exports."
Business Model and Supply Chain
- Cargill serves a broad range of customers across its operating sectors. The company’s customers typically operate in one or more of the following sectors: Farming and Agriculture, Foodservice, Retail and Consumer, and Industrial.
- "Cargill has operations across the Americas, Asia Pacific, Europe, Africa, and the Middle East. The company’s largest market is North America, which accounts for around 35 percent of its revenue, followed by Asia Pacific, which accounts for around 29 percent, and Europe, the Middle East and Africa, which accounts for 25 percent."
- "Cargill provides value to its customers in the following ways: (1) brand recognition and reputation, (2) broad portfolio of products and services, (3) expertise and experience, (4) provision of industry insights, (5) global operations and reach."
- "Cargill seeks to establish longstanding relationships with its clients by providing high-quality, reliable, and efficient services its operating segments. The company works closely with its customer, offering sales and service contracts that are tailored to their individual needs. The company employs teams of customer service and relationship management personnel that ensure that its customers are served quickly and efficiently. It is through this effective service the quality of its products that the company attracts recurring business."
- Cargill assures control of its supply chains by acquiring businesses and services that cover all aspects of its operating segments. For example, it sells seeds to the farmer, buys his harvested products, stores them in its grain elevators, distributes them through its railroads and trucks, processes them in its food facilities, and delivers them to warehouses for sale to customers.
Fresh Del Monte Produce Inc Founding, Supply Chain, and Business Plan
Founding and Early Years
- In 1886, the Del Monte name was first used on a food product. Del Monte coffee was the product designed as a premium blend of coffee for the Hotel Del Monte in Monterey, California.
- In 1892, the Del Monte® Brand was introduced as the brand name for a new line of California canned peaches. The peaches were one of the products created by a cannery called Oakland Preserving Company. Efforts to consolidate the many canners led to the formation of the California Fruit Canners Association (CFCA) in 1899. "CFCA represented a ... merger of 18 separate canneries, including the Oakland Preserving Company. ...CFCA was so vast that it comprised approximately half of the entire California canning industry and ranked, in effect, as the largest canner of fruits and vegetables in the world." CFCA's reliance upon commission agents to sell most of its produce led to ...the formation of the California Packing Corporation (Calpak), the immediate ancestor of the Del Monte Corporation."
- In 1967, CalPak changed its name to Del Monte Corporation. Over the next 50 years, the company went through more name changes, a merger, and acquisition of smaller companies, and is now called Fresh Del Monte Produce Inc.
- Fresh Del Monte Produce Inc. is organized into four business divisions: land trucking, ocean shipping, operations and sales, packaging.
- Land trucking Division: The company manages its supply chain to provide products to customers at peak freshness. A key element in the company's logistics network is its land trucking operation with 24/7 coverage, 365 days a year. This operation monitors all loads and provides delivery updates. "Del Monte Fresh Produce’s logistics department manages the cold chain from source to customer using a mix of asset-based carriers and our trucking company, Tricont Trucking Company. Asset-based carriers are required to comply with Del Monte Fresh Produce’s cold chain policy and procedures...."
- Ocean Shipping Division: The company transports "fresh produce and beverages to markets worldwide using a fleet of 11 owned and 6 chartered refrigerated vessels." The products are trucked to the seaports served by the ships and loaded into chilled holds for safe transportation." "...90 percent of our products are transported by vessel to distribution facilities operated by us or our agents."
- Operations and Sales Division: The company distributes products to retail stores, foodservice operators, wholesalers and distributors in over 100 countries around the world. It manages global logistics operations, transporting products from the countries in which they are grown to the markets where they are sold worldwide. "Maintaining fruit at the appropriate temperature is an important factor in preventing premature ripening and optimizing product quality and freshness."
- Packaging. The Packaging Development Group "works to keep the 'fresh' in the fruits and vegetables", to assure that "the physical needs of fruit are addressed to protect and maintain freshness. The packaging is designed for easy packing, rapid cooling and protection from the rigors of transportation". The fruit travels to its global destinations in refrigerated ships. "With fresh fruit and vegetables, the challenge is to design secondary packaging (primarily recyclable corrugated) that will [survive] the rigors of transport and handling while protecting the fruit and vegetables from bruising when exposed to moisture, shock and vibration." The fresh cut packaging operations use plastics that are sustainable (corn based PLA) and recyclable.
- With 2017 revenue of $4.01 billion, Fresh Del Monte Produce Inc is now one of the largest produce companies in the world. It positions itself as a leading producer, marketer, and distributor of "fresh and freshly-cut fruit and vegetables, as well as prepared fruit, vegetables, juices, snacks, and desserts all over the world.
- The company sells prepared fruit and vegetables, juices, beverages and healthy snacks in the US, Europe, Africa, the Middle East, Eastern Europe, and Asia, through a vertically-integrated network that allows the company to "manage the transportation and distribution of ... products in a temperature-controlled environment, ... to preserve quality and freshness and to optimize product shelf life while ensuring year-‘round distribution."
- Fresh Del Monte Produce Inc. claims to hold leading market positions in "several key fresh product categories." In a website letter to potential investors, the CEO wrote, "At the end of December 27, 2019, we believe we are: (1) the largest marketer of fresh pineapples in the United States, and a leading marketer in other markets worldwide; (2) the third-largest marketer of bananas in the United States, and a leading marketer in other markets worldwide; (3) a leading marketer of fresh-cut fruit in the United States, Canada, Japan, South Korea, the United Kingdom, United Arab Emirates and Saudi Arabia; fresh and fresh-cut vegetable products in North America; grapes and avocados in the United States; non-tropical fruit in select markets; and canned fruit in the European Union (the "EU") and other European and Middle East markets."
- Net sales for the full year 2019 were $4.489 billion. Net income for the full year 2019 was $66.5 million.
- Beginning 130 years ago as a line of canned peaches, the company today has grown in ways unimaginable to its original creators.