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In 1997, Barilla took a big gamble to consolidate its position in the U.S. It invested $135 million in a new pasta factory there--in Ames, Iowa, the agricultural heartland. The brothers had planned on setting up a plant in the U.S. but only after Barilla had become an established brand with enough customers to buy the 80,000 tonnes a year the new plant would produce. But when Barilla was only half-way to that goal, the U.S. government slapped heavy tariffs on imported pasta. Passing those duties on to the customer would have priced Barilla pasta out of the market. The brothers had to build the plant or give up their American dreams.
It was a risk. What if they built the plant and the customers didn't come? But there was another reason Barilla couldn't sit still. Barilla had to cut costs and move closer to its main source of wheat: North America. "Pasta prices have fallen 30% since 1993," says Paolo, 41, the youngest brother. "The only way to keep costs down without sacrificing quality is to improve technology." A new plant was the most productive way to do that.
But is it Italian if it's made in Iowa? "After we built the factory in Iowa, a lot of restaurants were skeptical. But when they tried the American product, they knew that it was even better than what we can export from Italy," says Guido. How so? "The durum wheat that grows in the American desert [in western Arizona] is perfect for making pasta."
Before opening the Iowa plant, Barilla's executives studied Kikkoman, a Japanese maker of soy sauce that set up a plant in Wisconsin nearly 30 years ago. What Kikkoman learned was that Americans didn't want a toned-down soy sauce but would pay for something that was of better quality (it is No. 1 in the U.S.). The Japanese maker didn't try to Americanize its products; instead it made the best sauce it could with top-quality soybeans from the American Midwest. For Barilla's executives the lesson was obvious: stick to the traditional recipes.
The Iowa factory was the brainchild of Edwin Artzt, who was hired by Barilla as its executive director in 1995; he had just retired as CEO of Procter & Gamble, America's largest consumer-goods company. He stayed for only three years; but at Barilla's headquarters, people speak of him as if he might still be lurking in the hallways. "There are people here who would have died for Pietro," says Mauro Greco, the head of global human resources and also a veteran of P&G. "But with Ed, he was going to kill you first."
But with their father gone, Guido, then 37, and his two younger brothers were greatly in need of some gray-haired experience. Artzt was the one who persuaded them to open the Ames plant ahead of plan. "I've never seen anything like the kind of communication that went on between Italy and Ames to make sure the plant was a carbon copy of its newest factory in Italy," says Artzt.
The family hired a new CEO in 1999, Sharon Hintze, whose résumé includes more than two decades of experience at Mars and Nestlé. But Hintze resigned before she had officially begun her job as CEO after disagreeing with the family. "She wanted to fire everybody," said one 20-year veteran. There is no question who is in charge now: It is Guido, at least in a spiritual sort of way. "I'm not just running this company physically, and I'm not running it for the money," he says earnestly. "I am running it because of what we produce. The Barilla brand carries a strong Italian promise. There is a pride that we put in our product."
Despite the contentious moments, the family could never have achieved its worldwide ambitions without help from outsiders. Over the past few years, Guido has brought in talented people from Kraft, P&G and Nestlé. And he has hired Luca Bolla, a member of the Bolla winemaking family, to be the managing director of the pasta business.
Until ten years ago, Barilla did only 10% of its business overseas. Next year, well over half of Barilla's sales will come from outside Italy. Barilla is the top pastamaker in the U.S. and in most Western European countries and is now looking at China's hungry billion. And despite being in a business with razor-thin margins, Barilla has managed to turn a profit for the past thirty years and finance seven new plants and five acquisitions from cash flow. (The company earned $89 million on sales of $2 billion last year.) The company has almost no debt. Those narrow margins were one reason Barilla added a bakery line in 1975 to turn out Italian cookies and biscuits, and why it started bottling pasta sauce in the late 1990s.
With Barilla's acquisition in July of Germany's Kamps for $1.8 billion, baked goods are now its biggest business. With bakeries throughout Germany, the Netherlands and France, Kamps is strong where Barilla is weak. Kamps sold $1.5 billion worth of baked goods last year and is Europe's largest breadmaker.
Sidebars
Spy in the kitchen
Barilla's patrimony
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