Confectionery Conspiracy? Nutella and the Hazelnut Shortage

2015 is shaping up to be a very forgettable year for Ferrero’s Nutella empire.

The death of the Italian firm’s legendary owner Michele Ferrero in February prompted concern about its ability to keep churning out innovative new concoctions.

And in June, French politician Ségolène Royal’s call for a boycott of the much-loved chocolate hazelnut spread, after decrying the environmental consequences of its palm oil, ensnared the company in an unwanted diplomatic spat.

None of this, however, compares to the drama posed by continued hikes in the price of the raw materials on which the brand relies for its celebrated ultra-sugary products.

Consecutive harsh winters in Turkey’s far east, which produces around 75 percent of the world’s hazelnuts, have sharply cut supply. Deprived of their foremost provider, most nut suppliers have had no choice but to substantially increase the amount they charge their clients.

“Prices are running at about 15 Lira a kilogram [a little over $5.50 and up from around $2.50 wholesale in 2012] right now,” said Ismet Erçal, whose facility in Kumru at the very center of Turkey’s hazelnut-growing heartlands has ground to a halt after a brutal March killed off the entire local crop. “Not many can afford to buy at that price.”

To those familiar with Nutella’s history, there’s a bitter irony to all this. Its creators originally dreamt the creamy, rich spread up as a substitute for pure chocolate in the aftermath of the Second World War when cocoa was expensive and hazelnuts cheap and plentiful (northern Italy remains the second largest producer of the crop).

But roiled now by hazelnut prices that have more than doubled at times over the past year, Ferrero bosses have found themselves dependent on a rash of increasingly costly commodities.

“We’ve had problems with cocoa as well,” said a Ferrero employee who spoke on the condition of anonymity. “With Ebola in west Africa, production was reduced. This is big area of importance for us, so this is difficult.”  A perilous combination of disease, climate change, and excessive demand driven by a growing appetite for chocolate in east Asia has many experts predicting that cocoa “will be as rare and expensive as caviar in 20 years time.” (See Can GMOs Save Chocolate?)

Some companies, including Hershey, which controls just over a third of the U.S.’s chocolate market, have responded to these developments by increasing unit prices.

Last December, Ritter Sport, the popular German marque, raised the price of its hazelnut-heavy bars by 8 percent.

Although it buys roughly a quarter of the global hazelnut crop, Ferrero has thus far avoided applying similarly large hikes.

To the company’s Turkish competitors, this smacks of conspiracy. The only way Nutella prices could remain mostly static, they claim, were if Ferrero had reduced the number of hazelnuts from the 50-55 they purport to include in each 400 gram jar.

“Ferrero is a company that buys from everywhere and uses every kind of product from every place. They even dropped their hazelnut content from 17 percent to 13 percent,” said Teoman Önsel, a former Ferrero employee and currently the branch manager of Sagra’s Sanset factory in Ordu, which produces the even more chocolatey competitor to Nutella, Sarelle.

His company, based on the outskirts of this city of 200,000 that derives at least 80 percent of its economic activity from hazelnuts, used to market its own chocolate hazelnut spread as Nugatella until Ferrero sued. (Propelled by pickier Turkish customers, they now craft a product that they insist is healthier and of higher quality than the Italian giant’s calorific mixture.)

Nutella employees, for their part, strenuously deny they’ve reduced their hazelnut content. “It’s always been 13 percent hazelnut,” the anonymous source at Ferrero said.

But other local businessmen in Turkey are still quick to charge the company with un-neighborly behavior.

“Ferrero just offers less money than most others, so we usually have to go somewhere else,” said Ismet Erçal, whose hazelnut facility stands a short drive inland from the Black Sea through hazelnut-capped peaks.

There’s plenty of evidence, however, to suggest that Ferrero has also simply played its card smarter than many of its hazelnut-consuming competitors. It appeared to recognize from an early stage that one country’s dominance of the market could spell trouble were anything to affect the local crop, and it swiftly set about diversifying its supply chain.

Aided by the high crop price, its agents have had a lot of success in persuading farmers in Georgia and Azerbaijan to ditch other forms of agriculture in favor of growing hazelnut trees. They’ve sown seeds in a number of South American countries, and are trying to begin growing in China, though the high cost of transport to its factories in Europe ensures the cost will likely remain prohibitively high there for a while, according to Ferrero employees. Ferrero declined official comment.

Peter Schwartzstein is a Cairo-based journalist. He focuses on food, water, energy and refugee issues, and his work regularly appears in National Geographic News, among other news outlets. You can find him on Twitter @pschwartzstein.

 

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