Christian Walter, managing director of Ferrero UK

Christian Walter, managing director of Ferrero UK

Ferrero, the Italian confectionery giant, first entered the UK back in 1966 and has steadily built a business generating GBP200m sales a year. However, under local managing director Christian Walter, the group is planning an offensive on this side of the English Channel. For this month's just-food interview, Dean Best met Walter to discuss Ferrero's plans.

The brands are well known - ranging from Rocher and Kinder to Tic Tac and Nutella - but little is really known about Ferrero, the family-owned confectionery giant.

The company, formed in 1946 by Pietro and Giovanni Ferrero, has grown, under the leadership of the former's son, Michele, to become the world's fourth-largest confectioner, behind Mars Inc, Kraft Foods and Nestle, and a business generating annual sales of EUR7bn a year.

The group, which remains owned by the Ferrero family and is now run by Michele's two sons (also called Pietro and Giovanni and both joint CEOs), has steadfastly focused on organic growth over the course of its 60-plus years in existence. There were signs, perhaps, that such a philosophy could change in the autumn and winter of 2009 when Ferrero was linked heavily to a possible takeover bid for Cadbury. Ferrero did confirm it was mulling whether to make a move but, ultimately, pulled out of the race for the UK confectioner, which ended up in the arms of Kraft Foods.

However, such conservatism over M&A does not mean Ferrero lacks ambition. The company already leads confectionery markets in Italy, Germany and France and is lining up an assault on this side of the English Channel. On a cold winter's morning in London, Christian Walter, the managing director of Ferrero's UK business, outlines the company's plans for the UK, a market where the company, facing strong stiff competition from the combined Kraft-Cadbury and Mars-Wrigley, is preparing a "step-up in investment".

"The priority now is to develop in the Anglo countries - the UK, Canada and the US, which are big markets, either by per capita, or, in the US, because it is huge - where we want to get our fair share," Walter explains. "If we talk about market share [in the UK], we are now around 6%. Our competitors are over 30% - if you take Cadbury and Kraft together - or in the twenties. Obviously, our ambition is not in the coming years to get 30% but to be a premium player and we see a possibility to enlarge our business and double the sales in the five years to come."

Walter has spent 14 years at Ferrero. He joined the business in 1996, where he led the development of the company's operations in central and Eastern Europe after the collapse of the Iron Curtain and in the early days of democracy. He then became MD of Ferrero's business in Austria before joining Ferrero's global corporate headquarters in Luxembourg where he led product categories on a global basis.

Walter's experience will be vital in leading Ferrero's expansion plans in what remains a competitive market, not just on the level of suppliers. However, Walter points to a 10% rise in Ferrero's UK sales in the last year and insists the business is growing market share "decimal point by decimal point, which on the whole market is a lot of volume". Walter acknowledges the wider concern over the prospects for economic recovery in the UK but maintains that the confectionery sector is "doing quite well" - and he plays down the pressure of dealing with the UK's powerful supermarket chains in the current economic climate.

"There is already so much pressure and I can't see how there can be anymore. It is everywhere," Walter says. "It's no different in the UK than it is in France or Germany. Everyone wants to gain share and the pressure is on suppliers. You talk about a few retailers versus a myriad of suppliers, so obviously there is a lot of pressure from retailers. On the other hand, they are very efficient in this country. They are machines to deliver fresh products in a very efficient way to consumers. The pressure that you get from retailers is, in the end, the pressure you get from the market and it makes you aware that you have to be very efficient in what you have to be doing."

Ferrero, like other confectioners, is facing volatile commodity costs. The cost of sugar has risen in recent months, while the price of cocoa has suffered spikes (just a week after this interview, the price of cocoa shot up after the president-elect in the Cote d'Ivoire, the world's largest producer of cocoa, called for ban on exports). In typical phlegmatic fashion, Walter is sanguine about the volatility in commodities and, indeed, points to the particular success of the confectionery category to increase prices.

"We have to acknowledge that commodities will go up because there is so much demand on the world market. we have to cope with it. We increased our prices and if you look at the confectionery market, there is a greater increase on confectionery than the total retail price index. Retailers also recognise [the issue], they read the price of raw materials every day," Walter said.

Amid that volatility, Ferrero is drawing up plans to further build the presence of its brands in the UK. The company's Nutella chocolate spread is growing "at double digits", Walter says, and the business is targeting a greater share of the breakfast market. Elsewhere, the Kinder brand, he explains, is a brand with which Ferrero sees "a lot of potential".

"If we analyse the portion of our UK sales from Kinder, it is about 25% of our business, whereas in the group it is nearly 50%," Walter says. "There are a lot of other Kinder brands in other countries and that is what the plan is - either the roll out of brands that exist in other countries or new product development of Kinder in this market." This year, Ferrero is not planning new Kinder products for the UK market but will launch an advertising campaign for Kinder Surprise to, as Walter puts it, "to build on the strongest equity in the Kinder range - and from there on the equity of other sub-brands".

Walter concedes Ferrero's UK plans are "aggressive" but he insists there is "a lot of opportunity" for the company in the market. It is this opportunity to which Walter refers when deflecting questions about Ferrero's interest in Cadbury.

Asked whether he was frustrated that the conservative family owners did not pursue a bid, he says no. "We did a lot of analysis and numbers but finally the family decided not to go forward," Walter insists. "We have still a lot of opportunity talking about just the UK." He then goes on to list where else Ferrero sees opportunity - including the world's emerging markets, where, naturally a number of the company's competitors are also expanding. First, however, he mentions the US.

"We launched Nutella in the US a year and a half ago. It was on the market but it was never advertised. That is now growing nearly by 80% a year. If at some point we get the same level of consumption that we have here, that will be huge volumes in the US, with 300m consumers," Walter says.

He continues. "South America also has interesting opportunities. In Brazil, if you talk about the BRIC countries, especially the southern part of Brazil, where temperatures are more friendly to our chocolate products. We have very good development in Russia because the Russians are heavy users of confectionery."

But, again, despite Walter's pronouncements of "opportunity" and Ferrero's marketing plans in particular markets, the ever-conservative company seems set to continue to avoid taking part in any further, major consolidation of the confectionery industry. Walter protests that "there are not a lot of big companies left" and says a more likely step for the business would "probably be more a joint venture on distribution in some countries".

And, despite the third generation of the Ferrero family now being in charge, anything else from the Kinder maker really would be a surprise.