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REV: APRIL 10, 2013

JOSE B. ALVAREZ
CARIN-ISABEL KNOOP
MARY SHELMAN

Mutti S.p.a.
Francesco Mutti, owner, CEO, and great-grandson of the founder of Muttia S.p.a., ran the 113-year old Parma, Italy–based tomato-processing company whose tagline for decades had read: “Solo pomodoro. Per passione.” (Only tomatoes. For passion.) Mutti sales grew from €11 million in 1995 to
€185 million in 2011, without producing items for store brandsb in a market in which these offerings were steadily gaining share (see Exhibit 1 for Mutti’s financials). Tonnage of tomatoes processed increased from 30,000 in 1995 when Francesco had joined the management team, to 184,000 tons in
2011. From 3 managers and 16 employees in 2002, by 2012 the company had 10 managers, including one in France and one in India, and a total of 218 employees, including seasonal workers. “We achieved this growth by following different rules and developing a brand focused on quality when people said that brands were finished,” Francesco said. “We invested significantly to expand and improve our processing plant. We paid more for quality raw materials when others were starting to compromise and cut costs. We introduced TV advertising to explain why Mutti tomatoes were special. And then we stuck to the path—choosing a way and saying, ‘I don’t know if this is right or wrong, but I am going to do it.’”
In December 2012, the bets continued to pay off. Mutti was Italy’s branded, premium market leader in tomato products, producing puree, concentrates, pulp, and other tomato-related items. The company’s leaders wanted to make sure Mutti maintained its position in Italy and, further, to move into a leadership position in several countries around the world (see Exhibit 2 and Exhibit 3 for information on exports). Mutti had access to capital to finance its growth, but how and where to grow was unclear. Francesco, in his mid-40s, knew that as long as his 71-year-old father was still alive, tomatoes would remain the company’s core business. What was next for the family firm and brand leader from northern Italy’s Emilia-Romagna region? Would the recipe for success that had worked so well at home work abroad? How would the singularly focused, consensus-driven firm fare in an increasingly competitive, globalizing retail landscape?

a For clarity in this case, Mutti will refer to the company; family members will be referred to by their first names. b Store brands were a line of products sold by a retailer under a single marketing identity, which often included the retailer’s

name. Store brands were also referred to as private labels, own brands, or house brands.
________________________________________________________________________________________________________________
Senior Lecturer Jose B. Alvarez, Global Research Group Executive Director Carin-Isabel Knoop, and Agribusiness Program Director Mary
Shelman prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2013 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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Mutti S.p.a.

Mutti’s Passion—“Red Gold”
Stewed, pureed, cooked, or raw, over the centuries the tomato had become the king of the
Mediterranean diet (see Appendix A). The versatility, consistency, and flavor of the savory fruit had made the pomodoro (golden apple) one of the most important ingredients in modern Italian cuisine.
Tomatoes arrived in Europe from South America in the 16th century, but were first used as decorative plants before entering Italian cuisine in the early 19th century. By the end of the century, they had been widely adopted.
“Industrial” tomato production began first in Southern Italy (Naples and Salerno) and then in
Northern Italy (around Parma and Piacenza) in the 1870s. Growing conditions varied by region, as did the varieties and flavor profiles of tomatoes. In the south, tomatoes tended to be long and eaten fresh or canned whole. Northern tomatoes had ideal levels of sugars, solids, and flavor, all key to creating good tomato paste (concentrate) and other processed tomato products. Tomatoes provided farmers in the Parma area with a high-revenue annual cash crop in addition to the cows and pigs they kept for making parmesan cheese and prosciutto. Because ripe tomatoes could not be stored or easily transported, processing needed to occur close to where the vines were grown. This brought strong economic development to Parma in the late 19th century, including a number of canning plants and several companies that produced tin cans.
In 2012, Italy was the third-largest tomato producer in the world, producing around 6 million metric tons of tomatoes (1 million metric tons were eaten fresh and 5 million metric tons were processed). Farming area for processed tomatoes was about 67,000 hectares (down 14.6% from the prior year); 40% of production took place in the Puglia region (in the southeast), 40% in EmiliaRomagna (in the north), and 10% in Campania (in the southwest). Italy was one of the world’s leading exporters of processed tomato products, shipping 1.8 million metric tons in 2010, with the majority going to other countries in the European Union.1 (See Exhibit 4 for a map of growing regions, and Exhibit 5 for basic demographics of Italy.)

The Birth of Mutti
At the end of the 19th century, Francesco’s great-grandfather laid the foundation for the company.
Mutti’s first 50 years were marked by significant advances in processing and packaging. Selling tomatoes to a mostly illiterate population led to the emergence of pictorial labeling, with elements of nature as identifiers. A shopper asked for a product by its label; Mutti was “the two lions.”
In 1951, Ugo Mutti (Francesco’s great-uncle) developed a new package, the “thimble tube,” to solve a fundamental problem for tomato paste, which was typically used in small quantities. Because an opened tin could not be reclosed and few consumers had refrigeration, Ugo made a tube out of aluminum, which retained its shape after squeezing and kept air from entering the tube. Ugo worked with a toothpaste-tube manufacturer to develop an appropriate intra-tube coating (the acid in tomatoes reacted with aluminum, affecting the taste). Competitors claimed consumers would be confused by the new tomato-paste package, but the product was a runaway success and the company’s sales took off. By the early 1970s, “Ugo was getting old physically, but not in his mind,”
Francesco recalled, and he focused on solving the next problem: cooks still had to buy, peel, and strain tomatoes to get a fresh tomato taste when making tomato sauce. Ugo solved the quality tradeoff between convenience and freshness with a new canned product which he called polpa (peeled, finely chopped tomatoes). At first, the yield from the manufacturing process was disappointing but soon improved. In the mid-1970s, Mutti’s polpa became popular, especially with restaurants.

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Francesco’s father took over management of the company in the late 1970s and, with his wife, bought out the rest of the family in 1987. At the time, the majority of Mutti’s sales were in food service, and competition was stable. The main player, Italy’s Cirio, was more than 10 times Mutti’s size at the time.

Enter Francesco
Born in 1968, Francesco grew up working summers at the company and joined Mutti full-time after graduating from university with degrees in economics and finance. After watching his classmates take jobs in consulting and new technologies, Francesco went back to tomatoes. “Just for a couple of years,” he explained. “Then my daughter arrived and I decided to stay in the business.”
When Francesco and his father split management responsibilities in the mid-1990s, 9 out of the 10 managers were born in the same decade, all hired during the boom years, and all from the area. “It was a very stable, homogeneous team,” Francesco recalled. A potential distraction, women were not allowed in the office. Mutti sold several products but had no brand strategy or consumer recognition.
”We used to argue about $1,000 in marketing investment. The processing equipment was antiquated.
It was a quiet, conservative €11 million company,” Francesco said. He was neither quiet nor conservative. Some Mutti employees who met him when he was five described him as already kinetic and full of ideas.
Francesco closed two side businesses (parmesan cheese trade and cattle) to focus exclusively on tomato products. “We had a good position in tomato paste, about 70% of our sales, but this was a niche and declining market,” Francesco explained. “Our polpa was recognized as having the best quality compared to the competition, but it was mainly sold to catering [restaurant] customers.” At this time, however, branding was becoming more important as supermarket chains began to gain share from small retail shops in the Italian market. The chains used price promotions and developed store brands to draw shoppers. “This was the first time national brands had been attacked,” recalled
Francesco. “Barilla was the first to see the need to invest in brand building to protect its shelf price and maintain share. However, no one believed that you could create a brand in tomatoes—a commodity! The other processors all thought the answer was to lower their prices by paying farmers less for their tomatoes. We took a different approach and concentrated on quality.”

The Quality Commitment
This strategic commitment to quality made in the late 1990s had several consequences and continued to shape Mutti in 2012. “The product is simple, but we make it precious, and the brand is sustained by the will to make a product of quality. This meant more controls and more procedures.
This was the idea of Francesco,” noted Giovanni Grossi, who headed warehousing, procurement, transportation, and production planning, and had joined Mutti in 1984 as one of 20 employees.

Improving Raw Materials
The first consequence was the need to improve raw material quality. “Ours is a simple business and simple product,” Francesco explained, “so the quality of the tomato is fundamental to quality in the can or bottle.” When Francesco took over, processors and farmers tended to be at odds over pricing for the harvest; processors were always trying to pay less for tomatoes, particularly in high production years.c Mutti management decided to set a firm price with the farmers that it contracted

c The tomato contract required that a processor take all of a farmer’s production from a field, regardless of the yield.

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Mutti S.p.a.

with, no matter how much they produced, and to pay a premium for better quality rather than push for discounts. Over time, as Mutti learned more about what types of tomatoes produced the best processed products, the company started to recommend the tomato varieties to farmers. Mutti worked with about 200 farmers in the environs (over 80% of raw materials were sourced within 70 kilometers), but negotiated mostly with their producers’ associations. Contract negotiations occurred from late December through February. Most competitors set a fixed price per kilo for the harvest, and quality did not feature as a main price-setting element except in the form of discounts from the set price for defects from standard quality. In some cases, farmers might not be given a fair quality evaluation if the harvest was abundant.
In the late 1990s, after a few years of learning to measure quality, Mutti developed a scorecard for its farmers. All Mutti growers were invited to participate in an annual quality contest, with the winner receiving the Pomodorino d’Oro (little golden tomato). The awards ceremony came at the end of a day devoted to discussing new technologies and sector trends. “We talk about our ideas and our problems,” Francesco explained. Understanding that recognition was a strong motivator, Mutti bought a page in the main Italian daily newspapers (such as the Corriere della Sera) to publicly announce the top-three winners, and a longer list of winners (the top 40 were acknowledged) ran in the local press (see Exhibit 6 for photos). “The farmers compete for the money, as we pay a 6% to 7% premium for top quality,” Francesco explained, “but they mostly compete for pride. At the top score, you find people who do whatever they can to get the prize. They appreciate going into their local
[coffee] bar, opening the local newspaper and saying, ‘Well I am the one.’ This means the world to our farmers.”
Since 2007, Mutti had raised the prices it paid its farmers over those of its competitors for the higher-quality output of all farmers, and introduced a grid pricing schedule that included stepped premiums for higher-quality tomatoes. “We want every good farmer to want to supply us because we pay more, very simple. If you are among the top 45 of our 200 farmers, then you can provide more or less quantity, but you should get a premium. A long list of farmers would like to join this system,” said Francesco. In 2012, Mutti purchased about 10% of the tomatoes in the northern Italian growing district and paid its farmers a total of €1.2 million more than they would have received at the average price paid in the district for the same volume.
Finally and importantly, competitors tended to harvest tomatoes five days earlier than Mutti did and worked with greener tomatoes, while Mutti used very ripe tomatoes. This increased the complexity—and the risk—for farmers who supplied Mutti: once tomatoes reached the peak of ripeness, they needed to be picked at once but harvesting could not occur in the rain. “Working on the ripeness edge increases the level of complexity,” Francesco explained. “We help with forecasting and we manage a lot from our side.”

Investing in Production
As the quality strategy took hold, Francesco invested to modernize and expand Mutti’s processing plant. “We are always trying to get something a bit better. If you continue this approach year after year, you get a better product,” he said. The plant in 2000 was still a reflection of the 1960s.
Equipment was antiquated, and traceability was next to impossible. In 2002, Mutti invested €500,000 in capital expenditures, in 2005 another €3.4 million, followed by two big years with €10.3 million in
2010, and €11 million in 2011, to continuously modernize the plant.
The tomato harvest season in the north was quite short, which also led to a short production season at the processing plant. Typically, the plant ran at full capacity for 55 days plus 15 days additional time for gearing up and winding down production. “Basically we have 60 days to produce
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the products that will account for all our annual revenues. A manager [compared to an owner] would never do this kind of job. It is not a rational business. You need to know the market exactly to make money,” Francesco explained. The plant ran around the clock during peak time. Tomatoes arrived by truck every hour, including throughout the night. The plant kept a buffer of one or two hours’ worth of tomatoes in case of delivery delays; other processors would keep tomatoes for 24 hours. The first stop was quality control and inspection, where a sample from each truck was visually tested for foreign bodies, defects, or insufficient ripeness followed by physical and chemical tests. Over 20 parameters were analyzed. Chemical tests included analyses for sugar level (measured in brix) and acidity (pH).d After each truck’s load was approved, tomatoes were unloaded and washed. Poorquality tomatoes were discarded.
Tomatoes that passed initial inspection were unloaded into tanks filled with water and then floated through conveyor belts where gentle jets of water washed them without damage, keeping them whole and preventing fermentation. There was a single input stream of tomatoes into the plant, so all Mutti products were made from the same high-quality inputs, the very best and ripest tomatoes. The storage tanks continually fed the processing lines. Employees visually inspected tomatoes again before they were sent to the various production lines. Unlike many of its competitors,
Mutti did not add anything (e.g., coloring, sweeteners) to the tomatoes, counting on the quality of the raw material to flavor and color the final product.
Mutti was very focused on food safety, taking tremendous care to prevent contamination in the production process. “We take samples every 10 minutes and do some rapid tests in our own quality control (QC) lab, as well as sending samples regularly to an outside lab,” explained Plant Manager
Giorgio Lecchi. “If we have a problem, we need to shut down as quickly as possible and would have to throw out a lot of product. Since this is a continuous process, we can’t isolate a single vat. That’s why we take quality very seriously.”
In 2012, the plant had 12 hours traceability; each product batch was lab tested every hour and Xrayed for foreign bodies. Each finished tin contained a time stamp and number that identified a particular batch of tomatoes. This allowed the rapid tracking in case of a customer complaint. In addition, consumers could trace how fast their tomatoes had made it from the field to the tin by entering the code on the company’s website.
Around 80% of the total manufacturing plant production went directly into the final packaging, with 100% of certain products (like polpa, passata, and datterini) being packaged at the time of production. This meant that Mutti managers had to decide before harvest its sales levels for the next year, down to the product type (pulp, sauce, or concentrate), unit size (small or large bottles or cans), market (different labels for different countries), and so on. Francesco explained another unique aspect: All our tins are printed in advance directly on the metal. That sounds crazy, because if there is a problem with sales in one market, then you cannot sell the product someplace else.
Knowing exactly what you have to produce and to sell provides a strong incentive for our production and sales teams. If you reduce the possibility of change, there will be less change. If you know that every tin has to be a certain product, you will make sure it is not wasted. It’s never nice to have to say that something went wrong and product had to be wasted. But this system also builds in quality by making mistakes even more costly.

d Brix was a standard measure of sweetness. One degree Brix was 1 gram of sucrose in 100 grams of solution. The pH scale

measured how acidic or basic a substance was. Pure water had a pH of 7; tomato juice a pH of 4 (toward acidic).

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Mutti S.p.a.

Improving Natural Resource Utilization
Francesco was focused on making Mutti not just bigger but also better. “I make money but it is not my driver. I would like a sustainable company from an environmental point of view.” To do so required educating farmers and enrolling them in his vision—extending it beyond his factory gates.
Through a partnership with the World Wildlife Federation (WWF), Mutti sought to reduce its carbon footprint, taking into account even the tomatoes that went into the product. A billboard at the plant featured a panda bear nuzzling a tomato. The tagline read: “Starting today our tomatoes have to pass one more control.” (See Exhibit 7 for a photo of the ad.) A relatively straightforward step was to make reductions at the processing plant. For example, Mutti had arranged to sell the 4,000 tons of tomatoes that did not meet its quality standards and its production leftovers for animal feed or to biofuel producers.
The bigger challenge was to reduce the footprint in tomato growing itself, which was outside
Mutti’s control. Tomatoes needed a lot of water to grow, and most farmers had installed irrigation systems, which they used in abundance since the water was “free.” But reducing irrigation entailed the risk of lower yields. “You save water and you lose money, you waste time and effort,” Francesco noted. “This is very hard to control with unstable weather. Every farmer has a book where they write down all the treatments made to the production, but the accuracy of this reporting is hard to check.
So we try to change the mentality. We make farmers aware.” Mutti technicians were experimenting with drip irrigation and other techniques in order to show farmers the best practices. Mutti was also investing in technology. It spent €50,000 to purchase 10 machines that measured the amount of water in the soil at the depth of the tomato plants’ roots, which was used to calculate the optimal timing and amount of watering. These machines were made available to farmers. Francesco and his colleagues hoped that the machine would allow farmers to reduce the amount of water needed to produce high-quality tomatoes and that it could help convince farmers to adopt this technology.
“Some farmers react rapidly to ideas and innovations and with some it takes time,” Francesco noted.

Building a High-Quality Company
With strong quality control processes and corporate culture in place, the company began gearing up to grow. Part of the imperative became to invest in the staff. Human Resources Head Francesca
Gazza had been with Mutti since 2002. “At the time, Francesco was looking for someone who did not just manage personnel but could develop human resources. This was unusual for a 40-employee company in Italy. I was to find people to fulfill the potential that Francesco saw for the company,” she explained. New employees had to take responsibility, show healthy ambition for themselves and the firm, have integrity, and be committed to the success of the company. She hired nearly 60 nonseasonal employees, for whom she had refined a regular performance evaluation system as a solid base for a variable pay program.
Because of the seasonality of its business, Mutti had 100 permanent employees in spring 2012 but more than double this number of workers in August 2012 when the plant was running at full capacity. For the seasonal workers, Gazza interviewed about 2,000 people, spending two to three minutes with each candidate. Mutti often competed with other processors seeking seasonal help. In the past, some seasonal workers returned every summer, but changes in Italian law had stopped this
(employees were considered permanent—and therefore entitled to employment for life—if they worked more than 36 months cumulative at the same company). As a result, most summer workers were new to the job; some were university students (like Gazza in her youth).

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As the business grew in size and complexity so did Francesco’s workload, and more management processes were added, including a three-year strategic plan. In 2009, Francesco decided to bring in as general director Franco Ferrarini, who had managed Barilla’s €152 million GranMilano group (ice cream, frozen dough, and specialty cakes such as panettone), which he had grown via five acquisitions over his 10 years at the helm. He left Barilla after the business was sold in June 2008. “Francesco asked if I would join the company to bring some managerial skills that I had developed with Barilla,”
Ferrarini said. “When I arrived, I found there were very few rules and individual roles were not well defined. So the first part of my job was to make responsibilities clear. This takes time. We hired people from larger companies; they know about structure. But in all the companies that I have seen, the behaviors are the same. People need to be proud of the company they are working for, paid well, and engaged in their projects.”
Historically, turnover among the permanent staff had been low, but had increased since 2010 as
Mutti had reorganized. The departure of even just two or three people had been surprising to the management team. There had never been any layoffs and the relationship with the union was collegial, according to Mutti management. Sick days were very rare, especially during the peak of the processing season, so the increase in turnover was a concern for the company.

Creating a Sustainable Financial Platform
The quality imperative and expansion of staff and production capabilities fuelled rapid revenue growth, from about €44 million in 2000 to €115 million in 2008. Around that time, Francesco started to consider outside financing, even though the firm had always grown organically. He wanted external counsel, a fresh perspective, and some liquidity to support expansion or in case an acquisition opportunity arose. He considered various options as the financial crisis struck. He recalled meeting with many potential funders and having “a lot of crazy conversations with crazy conditions.” He learned that he wanted a partner with a long-term view (beyond the usual five years), and that would give fair conditions for an equity participation. Francesco believed the company was worth €100 million. He was pleased when in late 2010, he reached an agreement with SODICA, an arm of the
French banking giant Crédit Agricole (CA), which had an investment fund with a 7- to 10-year exit window dedicated to the Italian agro-industrial and agro-food sector.
At the time, CA was putting together a portfolio of minority investments in companies with good growth prospects that would be managed via a financial holding structure. The fund representatives did not seek to be involved in day-to-day firm activities but presented themselves as partners to assist as needed with strategy and contacts. “We try to know all the main actors in the agribusiness sector in Italy. We know the actors of the entire range of activity,” SODICA investment manager Francesco
Orazi explained. “This allows us to know risks and cross-check information.” They targeted companies that were number 1, 2, or 3 in a market that was consolidating domestically. These were typically very small cap and family-owned companies. Some had strong positions in outside markets and were not in financial distress. Some had older owners with no second-generation involvement.
Besides the fund being a good fit for Mutti, Francesco liked that Orazi “came from agriculture” and was someone he could talk to. “Francesco had the classic dilemma of the Italian entrepreneur,” Orazi recalled, “basically discussing problems with himself in the mirror. We saw someone with deep knowledge of the process, the raw materials, and the market, able to transform a relatively cheap product into a premium product.” The fund took 5% of the company for €5.6 million. CA saw a premium brand and company, with increasing market share and continuous improvement, and a good platform to consolidate in Italy and develop internationally. As the trust and relationship deepened, Mutti reached a gentleman’s agreement that CA would be involved in the event of a significant investment or liquidity event.
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Mutti S.p.a.

Food Retailing and Consumption in Italy
The Mutti brand had been built in a retail food sector that was relatively underdeveloped compared to that of other Western European countries. Historically, Italians shopped several times a week at small, independent specialty stores, a behavior supported by the high proportion of women who did not work outside the home. In the 1970s, less than 5% of retail food sales were through supermarkets.2 As the number of women in the workforce increased (from 40% in 1980 to 50% in
2010,3 although still far below the EU-27 average of 65%4), “modern” grocery formats such as supermarkets and hypermarkets grew in popularity. Busier shoppers liked the convenience and value offered by the larger stores, which carried a full product line. In 2011, over 70% of food sales were through modern grocery retailers, including 35% through about 10,000 supermarkets, 18% through hypermarkets, and 9% through discounters such as Lidl. However, traditional grocery retailers, including specialty shops (16% share in 2011) and independent grocery stores (12% share), still maintained an important—although diminishing—presence, accounting for 90% of all locations.5
(See Exhibits 8, 9a, and 9b for data on consumer spending and retail sales.)
As the Italian economy worsened in the late 2000s, grocery shoppers were drawn to multi-store chains that could leverage their scale and buying power and offer consistently lower prices than independent stores. In one survey, 59% of Italians reported eating leftover pasta, bread, and vegetables, rather than cooking fresh, to try to make ends meet, a trend that underlined how austerity measures and unemployment were hitting people’s wallets.6 Many no longer cared if the ingredients were out-of-season, like fruits in the middle of winter, something that a few decades ago would have been unimaginable.7 (See Exhibit 10 for shopping habits.)
Historically, Italian consumers bought national (i.e., manufacturers’) brands, but intensified competition between the top grocery chains led retailers to turn to store brands to increase their profits.e Several grocery retailers extended their store brand ranges by offering value and premium lines, as well as lines focused on children, health and well-being, and “fair trade.” Strong domestic players topped the retail sector: Coop Italia, the largest, was a cooperative that operated over 1,400 shops under several banners, including Super Coop, Ipercoop, Coop, and Dico; number-two
CONAD, also a cooperative, had the largest brand share; and number-four Essalunga, which was privately held, had the second-largest brand share. In 2010, Coop opened a store in Parma under the banner Tutto Coop Solo Coop (“All Coop Only Coop”); it carried only Coop store brand products.
Overall, store brand sales of fast-moving consumer goods had increased from 13% value share in
20088 to 16.1% value share and 20.3% volume share in 2011, although this was still very low compared to countries such as the U.K. (49.2% value share, 56.9% volume share), Germany (37.7%,
59.6%), and Spain (40.4%, 49.5%).9
Since the end of World War II, the Italian diet had undergone a big change. Meat consumption increased 300%, fruit and vegetable consumption also increased, while bread and pasta consumption diminished.10 However, Italians tended to stick to what they knew best: Italian foods. Forty percent had never set foot in a foreign restaurant.11 One report said that Italian woman spent the equivalent of 21 full days each year preparing food in the home; men about eight.12 One survey indicated that 21 million Italians prepared foods, such as bread, pasta, and jams, at home.13

e On average, a “shopping basket” of store brand items was about 27% cheaper than national brands in 2011.

http://www.symphonyiri.fr/portals/0/articlePdfs/Special_Report-Private_Label_Europe-Dec2011.pdf.

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The Processed Tomato Category
Thanks to its quality focus, and the overreach and subsequent decline of a key competitor, Mutti dominated three of the four main Italian processed tomato categories. (Mutti did not compete in peeled tomatoes or pelati—21% of the tomato market by volume and 20% by value).

Passata
Tomato puree or passata (the market’s largest segment, with about 50% by volume of processed tomato sales and a little less by value) was “a basic product used in every household.” It was inexpensive, did not require much cooking time, and could be used in entrees and main dishes.
It tasted less fresh than polpa and was more like a smooth, uncooked tomato sauce that cooked more quickly in dishes. Passata was usually sold in clear glass bottles in Italy. Retail sales were €233 million on 199 million kg of volume in 2012. The average price was €1.17 per kg. Store brands, which were priced 33% below top branded products and 12% below the average, held 20% of the market by value and 23% by volume.
Mutti had been gaining ground on competing brands and in 2007 had passed Cirio, the historic top brand, to become market leader with 17.8% of market value and 13.7% of volume. Retailers used passata to draw customers into their stores, and more than 50% of all units in this sector were sold on promotion. The category was traditionally believed to be a commodity, but Mutti had made it clear that customers could recognize higher quality and would pay more for it.

Polpa

Tomato pulp or polpa (25% share of the total processed tomato market) was used as an ingredient in soups, sauces, and pasta dishes. It tasted more like fresh tomatoes than puree, but it took longer to cook and was more expensive. In Italy, polpa was usually packaged in tins (cans). Retail sales of polpa were around €147 million on a volume of 94 million kg. The average price was €1.56 per kg. Store brand share was about 25% by value and 31% by volume. Mutti’s share was 33% of value and 24% of volume. Mutti was the market leader and premium brand in the sector, selling at a 38% premium over the category average. The category had been steady until 2011 but had contracted by
6% since then. Mutti sales managers wondered if the decline was due to an 11% increase in the average retail price over the previous year, which might have caused families to switch to the cheaper puree. However, another explanation for the decline was that Mutti had stopped advertising pulp in the spring as it redesigned its packaging, instead of splitting its advertising investment 50% to pulp and 50% to puree as it normally did. Mutti had been the only company investing in promoting this segment through advertising.

Concentrato
The market’s smallest segment overall but Mutti’s strongest was concentrato, or paste, highly concentrated tomatoes used in small quantities to add flavor to dishes. This was a product used by experienced cooks who took time to prepare meals from scratch. “Most young people do not know how to use it,” noted a Mutti manager. Retail sales were around €14 million on
2.6 million kg of volume in 2012. The average price was €5 per kg. With 48% share by value and 44% by volume, Mutti was the clear brand leader and commanded a 10% premium over its few competitors. Store brands were not significant in the segment. In 2012, Mutti was investing in product placement, demonstrations, and TV advertising to showcase the product and increase its penetration, but doing so without hurting profitability was a challenge.

Competition
Mutti’s competitors in Italy were mainly family businesses or cooperatives that were often set up as part of larger producer organizations that coordinated contracts with input providers and processing firms. (See Exhibits 11a–11d for market share leaders.) Italian cooperatives did not

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typically pay taxes on profits and in the past had benefited from generous government subsidies.
Since 2011, all direct Italian support to cooperatives had been cut, but the EU via its Common
Agricultural Policy (CAP)f still paid 4.5% on turnover to the farmers who sold tomatoes to cooperatives. Cooperatives claimed that the 4.5% should be paid on all expenses, including raw materials, energy, and labor. Mutti noted that the financial crises had depressed the levels of subsidies and that more cuts might be ahead, although these would not start until at least 2014 when the CAP was again ratified.
Cirio, a family brand with roots tracing back to 1856, had been a leader in preservation technologies for vegetables and fruits, including tomatoes. The firm ran into financial difficulties and was ultimately acquired by Consorzio Cooperative Conserve Italia (Conserve Italia) in 2004.
Conserve Italia, an association of 64 Italian cooperatives established in 1976, included 17,500 fruit and vegetable producers. It operated eight production sites in Italy, which made 3,500 SKUs (or stockkeeping units) of canned vegetables and fruit juice. Net sales in 2010 were €1 billion. Along with its own brands, including Cirio and Valfrutta, 24% of its turnover came from manufacturing for store brands and third parties. Conserve Italia also had plants in France and Spain and distributed products throughout Europe. Foreign sales accounted for 36% of turnover.14 Cirio was the historic leader in tomatoes, but the brand had suffered when the company ran into financial difficulties during a time of private ownership. When Cirio was sold in 2004, Mutti was less than half of its size in sales; “for three years to catch to them we sacrificed our balance sheet,” explained Francesco. As part of its reorganization program, one of Cirio’s main tomato-processing plants had been sold.
Tomatoes were 21.6% of Conserve Italia’s sales in 2010.
Headquartered in Bologna, Valfrutta began in 1966 as a consortium of fruit and vegetable cooperatives and grew rapidly in the 1970s. It was acquired by Conserve Italia in 1972. Between 1978 and 1980, Valfrutta began to expand throughout Italy and entered international markets. In 1981, the company began a massive advertisement campaign to raise brand awareness. Valfrutta produced a wide range of products from crops grown from affiliated cooperatives, such as canned tomatoes, fruit juices, and canned vegetables.15

Marketing Mutti
Product Development and Innovation
Processed tomatoes were basic products, and there was not a lot of innovation in the category. But
Mutti was committed to generating new ideas, believing that a stream of new products confirmed the company’s top position in the category. “We do whatever we can with tomatoes,” explained
Francesco. “Nine out of ten of our ideas fail. But as leader, we must create new things because that generates retailer interest in the category.” Mutti employed a corporate chef who developed new products, such as fresh-cut tomatoes packaged in a jar and tomato vinegar, as well as new recipes that were featured on the company’s website. Over the last five years, new products accounted for
3% of Mutti’s turnover. Recent product launches included datterini, a very sweet sauce; dadolata, cut sweet tomatoes in a jar; and a seasoned product made for gnocchi or fresh pasta. f The CAP was a system of agricultural subsidies, which accounted for nearly half of the EU’s budget. Its goal was to ensure a

reasonable standard of living for farmers, ensure that consumers had access to quality food at fair prices and that Europe’s rural heritage would be preserved. CAP combined a direct subsidy payment for crops and land that could be cultivated with price support mechanisms, including guaranteed minimum prices, import tariffs, and quotas on certain goods from outside the
EU. At the time of the case, reforms were underway and the share of traditional CAP spending was projected to decrease significantly. 10
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Brand Development
In a crowded and low-growth category, Mutti’s brand was its differentiator. The company had started print advertising in 1999 and TV advertising in 2002; in 2012, most marketing spending went toward TV advertising. Harvest time was a strong time for advertising, with ads emphasizing the close relationship between Mutti and the farmer and also the short distance that Mutti tomatoes traveled to get to the plant. The company also ran a large print campaign centered on the Golden
Tomato award. Mutti’s website featured printed and video recipes, and the company had developed a social media presence, including an Italian Facebook page that had 44,000 fans in 2012. The website also emphasized the tomato’s health attributes: low in calories and rich in nutrients such as vitamin A and C, mineral salts such as potassium, antioxidants, and a phytochemical called lycopene possibly involved in preventing prostate cancers and other health problems.
In 2012, Mutti introduced a new visual identity that was more modern, while at the same time continued to communicate its premium quality. The company highlighted the product features and more carefully defined its product range. Mutti’s packaging and marketing communications were redesigned to emphasize the quality and specialness of Mutti products. The company and product name were inverted in the new label design (see Exhibit 12 for photos). On one of the cans, the label said, Mai Vista una Polpa Cosi? (“Have you ever seen a pulp like this?”). The packaging also featured the “F Mutti” signature, and the association to Parma and the regal lions were retained.
A new TV spot featuring an appetizing piece of pasta jumping into the sauce, with a voiceover of
Mai Vista una Polpa Cosi?, was developed to support the new identity. The ad was very simple and visual. The new campaign launched on September 17, 2012, and coincided with the launch of a supporting web effort a week earlier. The updated website featured the same theme of Mai Vista una
Polpa Cosi? The left side of the website focused on the harvest, and the right side featured recipes.

Global Opportunities
While establishing its dominance in the Italian market, Mutti continued to develop export markets. Francesco encouraged his staff to think beyond Italy, in part by paying for English classes for all his staff. He had also tripled the export department staff.
There were three main ways for Mutti to increase its sales abroad. The first was to distribute products via importers. The second was to establish a presence in a new country as an importer, as it did in France (its first export market), where it had just hired the former manager of Nestlé Waters to lead its office in Paris. The third way to increase sales abroad was to partner with a retailer such as
Metro in Europe or another consumer packaged goods brand, as it was doing with Monini (a top
Italian olive oil brand) in the U.S. (see Appendix B).
In 2012, Mutti was present in 25 markets, of which 10 were defined as priority markets: France,
Austria, Germany, Belgium, Sweden, Finland, Norway, Australia, Japan, and the U.S./Canada. But it kept an eye on others, such as Switzerland and Russia, where Mutti’s products were sold only to food service providers. Mutti had deemphasized Latin America and the Middle East.
To get ideas for new products, Mutti management sometimes invested in market research (e.g., in the U.S.), especially when the plan was to enter a market with a full range of products. Mutti also learned from conversations with importers (e.g., Japan) and from Francesco’s frequent trips to other countries, where he explored a wide variety of retail shops. “We try to do whatever is possible with tomatoes,” Francesco explained, “especially when we work abroad, for example, adding cardamom in India to tomatoes. But it has to fit the Italian culture. We cannot turn our back on where we come
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from.” Mutti also used the company’s executive chef, Carlo Casonig (who worked on 200 recipes in
2011 and generated recipes from around the world), to aid in innovation.
Global sales added complexity to the operation. For example, global sales meant more SKUs that needed to be managed, since each country had its own packaging. Mutti management felt that the firm had been successful by remaining true to its core products. But it also added some ingredients to polpa such as chilies (U.S. market) or basil and garlic (Germany and Netherlands) that were deemed to be in keeping with the brand. These additional ingredients were added at the plant, increasing the complexity of the manufacturing process. “A tomato is not like Coca-Cola,” a Mutti manager explained. “It may be present in many countries but with different consumption processes.”
Along with differences in labeling requirements, packaging preferences were also different across markets. While Italians resisted Tetra Pak (coated paper cartons), Scandinavians embraced them.
Although Mutti did not do a lot of international advertising, when it did ad were tailored to local audiences. For example, tomatoes were not top of mind for most other Europeans as they were for
Italians, so in its print campaign Mutti told Swedish, French, and Austrian consumers about Mutti’s farmers and featured a hand cradling a ripe tomato. Mutti had also tested TV advertising in Sweden, where it had good distribution. However, Swedish consumers were skeptical of the quality message.
“They need more of our story and a reason to believe so they will spend just a little more on Mutti tomatoes over store brands, which hold the majority of the Swedish market,” Mutti’s marketing director explained. “What is behind a product now makes it more interesting. People are looking for stories.” Mutti’s Choices
In the fall of 2012, the Mutti team was considering its options for growth.

Growth Option 1: Grow in Italy
Most agreed that Mutti should continue to invest in the Italian market, where it held a significant advantage and 90% distribution coverage. “One of Mutti’s core competencies is the ability to understand and enter into relationships with distributors and the trade. This made it possible to turn products in the processed tomato category into a premium product,” Orazi noted. “In many Italian companies, you have strong products and the entrepreneur will think they sell themselves.”
Under the turbulent economic conditions and changing consumer behaviors, Mutti was the only
Italian tomato brand to increase its market share in Italy from 2007 to 2012. One of the keys to success had been the brand’s quality level and premium position. Retailers liked Mutti because its products sold at higher prices so they made more on each unit (at a constant margin). Mutti also established a price umbrella for the category, which retailers used to set their store brand prices. Mutti’s products were also well positioned for the changes in behavior that the Italian consumer was displaying.
Many consumers were eating out less often and looking for high-quality ingredients like Mutti’s to cook at home. Other consumers were economizing by choosing store brands instead of the middletier, relatively undifferentiated brands from Mutti’s competitors. Consequently, the lower-quality, mid-priced brands were being squeezed in the Italian marketplace, while Mutti was thriving. g During the 1990s, Casoni collaborated with several important Italian and foreign Michelin-starred chefs. In 2000, he joined

the Ferrari F1 Team and subsequently spent five years cooking meals for the Ferrari staff during the Gran Prix around the world. In 2005, Casoni moved to the Honda Team and, after a stint in Australia, joined Mutti in 2010 as the brand’s Gourmet
Chef, attending international events as well as shows and seminars promoting the use of Mutti products around the world.

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Moreover, retailers wanted to reduce the shelf space given over to tomatoes, adding more pressure for product producers to deliver strong-selling items. If done right, this could benefit Mutti.
If Mutti were to continue to grow sales, it would need to expand processing capacity and sourcing. “We produce with Italian tomatoes; we write it on the package,” Ferrarini underlined. “We cannot produce Mutti with tomatoes from abroad. Market research confirms the association of Mutti with tomatoes and that good tomatoes are Italian tomatoes.” Half of Italy’s tomato production was in the north, and half in the south, but virtually all Mutti tomatoes came from the north. Being able to source in the south would enable Mutti to not only produce peeled tomatoes (made from the type of tomatoes grown in the south) but also hedge across harvests. Indeed, the tomato harvest had always been and was increasingly uncertain as summer weather in Europe seemed to become more erratic.
Tomatoes thrived between daytime temperatures of 32° to 34°C—not the 36° to 40°C that the region experienced in the summer of 2012. As a result, fruit averaged 50 grams instead of 75 grams. Some tomatoes had developed dark spots to preserve water, in effect killing parts of themselves to survive.
Many fields in both northern and southern Italy experienced drought and extreme heat throughout
August, followed by a period of heavy rainfall during harvest time.16

Growth Option 2: Expanding Mutti’s Global Reach
Export Manager Filippo Corsello explained: “To grow the export business, we mix planning and opportunity. Some markets may stay closed for some reason because tomato is not an interesting category. Our Italian consumers have a great loyalty to the paste. This takes time to develop in other countries, no matter how much you spend. And it is important to remember that ours is a nearcommodity, very classic category, so any buyer or distributor has to first be convinced that they should make an effort to shift to thinking ‘premium’ instead of ‘commodity.’” Corsello also noted that “sometimes there is an opportunity that we have not identified right away,” such as Israel where
Mutti had not been present eight years ago but was rapidly growing in 2012 with a major presence in
Israel’s main supermarket chain. “Now we are making dedicated tins and labels and paying attention to that market. We want to try to not have too much complexity.”
In some instances, partnering made sense in the broader context of retail challenges. Retailers were focusing on optimizing shelf space, which often meant cutting the number of brands to increase turnover and lower stocking costs. Often they elected to keep three brands: one premium/leading brand, one follower brand, and a store brand. Appendix B describes two strategic partnerships that
Mutti had entered, one with the European retailer Metro and the other with an Italian olive oil exporter to sell Mutti products in the U.S.
Corsello was clear: “Our aim is to become the reference tomato brand for the European market, a market that has become quite consolidated as supermarkets are looking for global providers.” He pointed out that Italian consumers were known for appreciating very high-quality food and being willing to pay a premium for it. “Our opportunity is to convert our best quality into quality for other markets. Breadsticks are typical Italian products—recognized as made in Italy. Tomatoes are less obvious,” Corsello continued. Ferrarini emphasized the challenges of growing exports:
Italy and abroad are two worlds, but abroad is many markets. What is important in France is not important in Germany. Regulations are different. And so are tastes and the uses of the products. We have to make a lot of effort for what are still small markets. We have to use distributors, so we need to convince them first, and then they have to convince the retailers.
We have to invest money, time, and efforts. In Italy, we are in 90% of all stores.

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By 2022, Mutti wanted to be a market leader in at least one big European country (France,
Germany, or the United Kingdom) as well as a leader in the Scandinavian market. Any market share at the premium end of the U.S. market would be welcome, too. Australia and Japan were also on the radar, as well as an expanded presence in food service. In 2012, food service remained more important for the export market, while retail dominated domestically. In food service, there was the need for good product quality, and Mutti did not have to work to convince both the buyer and the consumer. “This is also a matter of pride, but there is always a part at the top end of the market that is demanding quality,” Corsello noted. “Chefs move from one top hotel or restaurant around the world to another and they bring with them what they know about perfect ingredients and what creates success in the kitchen.”

Managing Growth
Growth had organizational implications for Mutti. Between 2009 and 2012, Mutti hired a staff member every month on average. In late 2011, the search was on to staff India and France. These hires had been very challenging not only from a regulatory and legal standpoint, but also culturally, to find “people who have and embrace Mutti’s culture when they are so far away,” Gazza explained.
“It has been hard to go as fast as the company has been going, and we always have to continue to adapt and innovate,” Grossi mused. “Francesco will have to let things go. Everyone works hard; there is no extra management capacity,” Gazza added, who continued:
[Francesco] does not think that he knows everything. He is very analytical. He will do research and he consults a lot. But this does not mean that he cannot make decisions. He has lots of new ideas, lots of new products, and always lots of new projects, always. He has not changed. He used to be around more and be the center of the decisions, but now he is delegating more.
“For the past 15 years, Francesco was like an umbrella over the company,” Orazi added. ”He knows everyone and everything about the business and the factory. This is an asset but might also be a problem. To grow, Mutti needs people who can execute the plans of the company with autonomy.”
One thing was clear, as one Mutti manager said for all: “We want to keep this company brilliantly alive for many decades to come!” Would Mutti be able to continue to aggressively grow volume without destroying its unique culture and brand?

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8.8
181

Return on Assets (%)

Number of Employees

Amadeus.

25.1

Source:

11.5

Return on Equity (%)

10,183

Net Income (€ ‘000)

Profit Margin (%)

15,568

Operating Profit (€ ‘000)

€127,897

2010

171

7.1

29.3

10.4

7,671

14,235

€122,058

2009

Mutti S.p.a., Key Financials, 2001–2010

Operating Revenue (€ ‘000)

Exhibit 1

156

2.4

12.6

3.4

2,381

5,379

€115,304

2008

141

2.1

11.0

2.2

1,816

2,884

€92,468

2007

120

2.0

10.0

3.9

1,466

3,416

€74,056

2006

105

3.2

14.5

5.7

1,979

3,983

€63,774

2005

101

3.8

17.8

6.5

2,151

4,053

€59,196

2004

141

5.4

23.3

8.3

2,422

4,647

€52,935

2003

134

1.6

7.6

3.1

630

1,739

€43,201

2002

-15-

120

5.2

24.3

9.1

1,863

3,739

€36,407

2001

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Exhibit 2

Mutti S.p.a.

International Net Sales by Region, 2011
€ Thousands

Europe
Asia Pacific
Americas
Middle East and Africa

€29,663
2,873
1,225
1,060

Total

€34,821

Source: Company documents.
Notes: Americas includes U.S., Canada, Central America, and South America.
Among the countries included in Europe are France, Germany, and Russia.

Exhibit 3

Mutti Export Volumes (tons) and Growth Rate, 2003–2012

*2012 to November 30, 2012. Total 2012 volumes estimated to grow 8.2% over 2011.

Source: Company documents.

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Exhibit 4

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Tomato-Processing Locations in Italy

Source: “Tomato Processing in Italy,” Amiton, WPTC, http://www.sudcon cept.fr/wptc.to/fichiers/files/Italy%202012.pdf, accessed December 2012.

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Exhibit 5

Mutti S.p.a.

Italy—Demographics (2011–2012)

Population
Total (millions)
Female
Male

60.2
51%
49%

Age 0 to14 years
Age 15 to 64 years
Age 65 years and older

14%
66%
20%

Living in urban areas
Living in rural areas

68%
32%

Christians (mostly Roman Catholic)
Other (including atheists and agnostics)

80%
20%

Number of Households (millions)

23.9

Labor Force
Total (millions)
Working in services
Working in industry
Working in agriculture

25.1
68%
28%
4%

Unemployment Rate (est.)

8.4%

• 54% of adults aged 25–64 earned the equivalent of a high-school degree, less than the OECD average of 74%.
• Nearly 57% of the working-age population aged 15 to 64 had a paid job. This figure was lower than the OECD employment average of 66%. Some 68% of men were in paid work, compared with 46% of women.
• The average household net-adjusted disposable income was $23,917 a year, higher than the OECD average of
$22,387.
• Households on average spent 23% of their net disposable income on housing, slightly above the OECD average of 22%.
• Life expectancy at birth in Italy was almost 82 years, two years higher than the OECD average of 80 years. Life expectancy for women was 85 years, compared with 79 for men.
Source: Economist Intelligence Unit and World Bank World Development Indicators, CIA World Factbook, and the OECD
Better Life Index, http://www.oecdbetterlifeindex.org/countries/italy/, accessed December 7, 2012.
Notes: The Organization for Economic Co-operation and Development (OECD) had 34 members, including the U.S., Canada,
Mexico, numerous European countries, and countries from Asia Pacific.
Population growth rates for Italy were near zero and its population was aging.

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Exhibit 6

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Press Materials Related to the Pomodoro d’Oro

Approximate translation: “Mutti recognizes quality with a Golden Tomato.”

Approximate translation: “Quality always wins.”

Source: Company documents.

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Exhibit 7

Mutti S.p.a.

WWF Print Ad: “Starting today our tomatoes have to pass one more control.”

Source: Company documents.

Exhibit 8 Europe: Distribution of Consumer Spending on Food, Beverages, and Tobacco,
Selected Countries, 2011

Source: “Supermarkets: More Than Just Food Retailing—Europe,” Mintel, November 2012, accessed December 2012.
Note: Specialists included bakeries, butchers, fishmongers, etc.

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Exhibit 9a

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Italy: Retail Sales, in Million Euros, 2007–2011

Source: “Supermarkets: More Than Just Food Retailing—Europe—Italy,” Mintel, November
2012, accessed December 2012.

Exhibit 9b

Italy: Retail Sales Forecast, in Million Euros, 2012–2017

Source: “Supermarkets: More Than Just Food Retailing—Europe—Italy,” Mintel, November
2012, accessed December 2012.

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Exhibit 10

Mutti S.p.a.

Italy: Grocery Shopping Habits, 2012

Source: “Supermarkets: More Than Just Food Retailing—Europe—Italy,” Mintel, November 2012, accessed December 2012.

Exhibit 11 Competitive Scene
Exhibit 11a Market Share per Category Based on Value, YTD November 2012

Concentrate
Mutti
Cirio
Star
Store brand
Other

Market Share
(value)
48.8%
12.2
8.9
10.8
10.1

Puree
Mutti
Cirio
Valfrutta
Star
Ubf
Store brand
Other

Market Share
(value)
17.8%
12.7
8.1
8.4
4.7
20.4
23.7

Pulp
Mutti
Ubf
Valfrutta
De Rica
Cirio
Star
Store brand
Others

Market Share
(value)
32.7%
4.9
7.7
4.2
4.8
6.9
25.2
11.8

Source: Company documents.

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Exhibit 11b

513-034

Market Share per Product Segment Based on Value, 2004 to September 2012

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Exhibit 11b

Mutti S.p.a.

(continued)

Source: Company documents.

Exhibit 11c

Total Category Market Share Based on Value and Volume, 2004 to November 2012

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Exhibit 11c (continued)

Exhibit 11d

Average Retail Price, 2004 to November 2012

Source: Company documents.

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Exhibit 12

Mutti S.p.a.

Rebranding the Polpa Can

Source: Company documents.

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Appendix A

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Brief Overview of the Mediterranean Diet

Mediterranean cultures were celebrated for the nutritional value of their diets, most of which were based on the use of fresh produce, whole grains, nuts and legumes, and healthy oils in their meals, as well as for a limited consumption of seafood and poultry, and sparing use of red meat.17
Mediterranean diets made minimal use of butter, eggs, sweet foods, and extra seasonings or sauces with meals.18 Portion control and exercise were also key elements of this diet and culture.19 The diet had first attracted substantial scientific research in the early 1990s,20 though others found that the benefits of this lifestyle were known to scientists as early as the mid-20th century.21 Following a
Mediterranean-style diet could lead to a number of health benefits, such as potentially lowering cholesterol levels and improving heart health.22 “A recent analysis of more than 1.5 million healthy adults demonstrated that following a Mediterranean diet was associated with a reduced risk of overall and cardiovascular mortality, a reduced incidence of cancer and cancer mortality, and a reduced incidence of Parkinson’s and Alzheimer’s disease.”23 One survey identified pasta as the world’s most popular food, and pasta sales hit $16 billion in 2010.24 “[Italian food] was considered fairly low-class but very lovable. . . . But it has since become not just the most fashionable food in the world but also . . . one of the healthiest,” one observer noted.25

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Appendix B

Mutti S.p.a.

Selected Mutti Strategic Partnerships (Metro and Monini)

To take advantage of global opportunities, in 2012 Mutti chose to partner with retail juggernaut
Metro and fellow Italian producer Monini. Metro was interested in partnering with a global processed tomato brand that could offer consumers high quality and innovation. Metro identified in
Mutti the brand that could best represent a premium/leading brand for the tomato category in all its stores across Europe and worldwide, for both quality and value delivered. Mutti was already the best-selling brand in Metro Italy and in Metro France, two main markets for canned tomatoes. Mutti
Export Manager Juan Pablo Carnevale explained: “It is not easy for us to be present in markets where we are not already.” At the time of the case, tests were underway in Central and Eastern Europe for in-store promotions and other joint activities. “For Mutti, Metro is the main player in the hotel/restaurant/café channel, so this partnership allows us to bring more added value and sales to a channel that is traditionally difficult for premium products,” Carnevale noted.
On the other side of the Atlantic, in March 2012, Mutti signed a commercial joint venture with
Monini North America, a leading Italian olive oil company present in the U.S. with a line of premium
100% Italian extra virgin olive oils. Monini North America President Marco Petrini found the two companies “very similar with respect to strategy, overall philosophy, similar strong positions in
Italian market, and independent family-owned businesses. It’s a good fit, with Monini No. 1 in olive oil and Mutti No. 1 in canned tomatoes.” Monini had been thinking for some time about adding products to its line in the U.S., in part at the request of distributors and retailers. “We have achieved sizable distribution in about 20% of U.S. stores, with the ultimate target of 45% to 50%, since not every area is right for our products,” Petrini explained “Mutti came to us to talk about working together in the U.S. market. They were already working through a few importers and distributors and had some sales, but it was not a good setup. Usually Italian companies look at the U.S. and see a competitive, difficult, and very far away market.”
The partners saw strong growth potential in the $1.2 billion U.S. tomato category, since the share of imported tomatoes was below 2%. “We think that could go up to 5% with the right focus,” Petrini explained. “There is definitely a quality difference between the tomato products produced in Italy and the ones produced in the U.S. ‘Fake’ Italian products are a big problem in this market, so we are emphasizing 100% Italian products, imported from Italy, the top choice of Italian consumers, in our communications. In the past, U.S. consumers haven’t paid much attention to origin, but there is more interest now. People are cooking at home more and exposed to different cuisines and techniques.”
The companies conducted consumer and market research to determine the market potential and ran focus groups in New York and Chicago to test Mutti’s portfolio of products. Talks began in summer 2011; the agreement was public in March 2012. The partnership would use the distributors that handled Monini products, but also saw opportunities to sell directly to retailers. For example, they were working with one of the top U.S. chains to deliver directly to their regional warehouses.
Chicago was chosen as one of the first markets. The city had a number of Italian independent stores. “There’s lots of space [in the stores], and not much competition,” Petrini explained. “The market is not huge, but it is significant. There’s lots of Europeans in the area, although not necessarily from the Mediterranean region. We can get more from our investment there, because we are not competing so fiercely to get on the shelf.” To support the Chicago launch, the partners planned a month-long event in December 2012, sponsoring, along with an Italian pasta company, the popular daytime TV show Windy City Live. Mutti Executive Chef Carlo Casoni would give live cooking demonstrations. The top prize in a sweepstakes was a 7-day trip to Italy. “Mounting this event helped us gain distribution much quicker than we would have done otherwise. It got retailers
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excited,” Petrini explained, “They didn’t want to be left out.” Another event was planned for January
2013 at the Italian-themed shopping and eating destination Eataly on 5th Avenue in New York
City. “It’s loud, it’s crowded, it’s messy,” Petrini noted, “and people love it. Eataly is a huge change from the very sterile environment of many grocery stores. It has really upped the excitement around
Italian products.” Being creative in New York City was also important for Mutti and Monini. It was the largest U.S. market, but the specialty Italian stores there were very small and it was very competitive. The partners did not develop any special products for the U.S. Mutti’s assortment was broad enough and deep enough so that retailers could take what they most needed to complete their Italian assortment. Paste (concentrato) was not very popular in the U.S., but chopped tomatoes were, so polpa sold. In some instances, packaging stood in the way of success. For example, passata had potential, but the glass jar used in Italy was not used in that category in the U.S. Petrini thought that pizza sauce had “great potential. It used to be that you didn’t see it in the stores. People went out to get pizza or had home delivery or cooked a frozen one. But now you can find all the ingredients to make them—the crust or even special flour and yeast, the toppings—so sauce is a growing item.“
Mutti and Monini managers met every five to six weeks, and e-mailed or phoned daily. In addition to Petrini, Monini employed two regional sales managers (one on the East Coast and one in
Chicago), two customer service representatives, and 25 brokers. It also used two public warehouses, one in the east and one in the west. There were two dedicated people at each warehouse. In the fall of
2012, the partners were considering adding a Mutti brand manager or specialist. They were also working together on a project in Brazil, one of the fastest-growing markets in the world. Monini had historically been an early entrant in places like Russia and Poland.

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Endnotes
1 Alessandra De Luca, “Italy Tomatoes and Product Report 2011,” USDA Foreign Agricultural Service,
December 16, 2011, www.fas.usda.gov, accessed December 2012.
2

“How the Supermarket Won Italy’s Hearts and Minds,” The Nordic Link, September 12, 2008, http://sandberghans.blogspot.com/2008/08/how-supermarket-won-italys-hearts-and.html, accessed October
2012.
3

From http://www.lifesitenews.com/news/women-entering-workforce-major-contributor-to-plungingitalian-birth-rates/. Updated statistics from http://www.census.gov/compendia/statab/2012/tables/12s1368. pdf, and further reference of Organization for Economic Cooperation and Development (OECD), “Labour
Market Statistics: Labour Force Statistics by Sex and Age: Indicators,” 2011, OECD Employment and Labour
Market Statistics database (copyright); http://dx.doi.org/10.1787/data-00310-en, accessed November 2012.
4

“Italian women hope for workplace changes post-Berlusconi,” Reuters, http://www.reuters.com/a rticle/2012/02/14/us-italy-women-idUSTRE81D0W420120214, accessed September 2012.
5

“Grocery Retailers in Italy,” Euromonitor International, January 2012.

6

“Over half of crisis-hit Italians recycle food leftovers—report,” Reuters, October 19, 2012, via Factiva, accessed November 2012.
7

“Italian Food and Wine,” Life in Italy.com, http://www.lifeinitaly.com/food, accessed November 2012.

8

“Private Label Made in Italy: An 8 Billion Euro Business,” Ital Trad.com, http://www.italtrade. com/news/16102.htm, accessed October 2012.
9

“Retail Private Label Brands in Europe: Current and Emerging Trends,” Symphony IRI Group, December
2011, http://www.symphonyiri.fr/portals/0/articlePdfs/Special_Report-Private_Label_Europe-Dec2011.pdf, accessed September 2012.
10 “Food and Wine Consumption in Italy: The Latest Trends,” Food and Travel Communications, http://www.itchefs-gvci.com/?option=com_content&view=article&id=595&Itemid=855, accessed November
2012.
11 “INFLATION: NEW BASKET; COLDIRETTI, 41% NEVER EAT ETHNIC FOOD,” ANSA—English
Corporate News Service, February 4, 2011, via Factiva, accessed November 2012.
12

Coldiretti and Censis, “The Economic Crisis: Living Together, Living Better” (translated from Crisi: Vivere insieme, vivere meglio), Coldiretti website, http://www2.coldiretti.it/News/Pagine/731---19-Settembre2012. aspx, accessed November 2012.
13

Coldiretti and Censis, “The Economic Crisis.”

14

Euromonitor, Passport GMID, local company profile.

15

“La Storia,” Valfrutta company website, Valfrutta.it/chi-samu/la-storia, accessed October 2012.

16

“Italian Tomato Harvest Will Finish Smaller than Forecast,” Agra-Net, September 5, 2012, http://www.agra-net.com/portal2/home.jsp?template=newsarticle&artid=20017986936&pubid=ag005, accessed November 2012.
17

“Mediterranean diet: Choose this heart-healthy diet option,” Mayo Clinic, June 19, 2010, http://www.mayoclinic.com/health/mediterranean-diet/CL00011, accessed November 2012.
18

“Mediterranean diet,” MedlinePlus, http://www.nlm.nih.gov/medlineplus/ency/patientinstructions
/000110.htm, accessed November 2012.
19

“Mediterranean diet: Choose this heart-healthy diet option,” Mayo Clinic.

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513-034

20

Elisabeth Rosenthal, “Fast Food Hits Mediterranean; A Diet Succumbs,” New York Times, September 23,
2008, http://www.nytimes.com/2008/09/24/world/europe/24diet.html?pagewanted=all, accessed November
2012.
21

Kathleen M. Zelman, “Benefits of the Mediterranean Diet,” WebMD, July 30, 2008, http://www.web md.com/diet/features/benefits-mediterranean-diet, accessed November 2012.
22

“Mediterranean diet,” MedlinePlus.

23

“Mediterranean diet: Choose this heart-healthy diet option,” Mayo Clinic.

24 Caroline McClatchey, “How pasta became the world’s favourite food,” BBC News Magazine, June 15, 2011, http://www.bbc.co.uk/news/magazine-13760559, accessed November 2012.
25

“How ‘Italian Food’ Became a Global Sensation,” National Public Radio, March 24, 2011, http://m.npr.org/news/Books/134628158?page=2, accessed November 2012.

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2016.