Barilla-SpA(A)

9-694-046REV:MARCH25,2008________________________________________________________________________________________________________________ProfessorJaniceH.Hammondpreparedthiscase.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.Copyright©1994,2006,2008PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.JANICEH.HAMMONDBarillaSpA(A)GiorgioMaggialiwasbecomingincreasinglyfrustrated.Asdirectoroflogisticsfortheworld’slargestpastaproducer,BarillaSpA1,hewasacutelyawareofthegrowingburdenthatdemandfluctuationsimposedonthecompany’smanufacturinganddistributionsystem.Sincehisappointmentin1988asdirectoroflogistics,hehadbeentryingtomakeheadwayonaninnovativeideaproposedbyBrandoVitali,whohadservedasBarilla’sdirectoroflogisticsbeforeMaggiali.Theidea,whichVitalicalledJust-in-TimeDistribution(JITD),wasmodeledafterthepopular“Just-In-Time”manufacturingconcept.Inessence,Vitaliproposedthat,ratherthanfollowthetraditionalpracticeofdeliveringproducttoBarilla’sdistributorsonthebasisofwhateverordersthosedistributorsplacedwiththecompany,Barilla’sownlogisticsorganizationwouldinsteadspecifythe“appropriate”deliveryquantities—thosethatwouldmoreeffectivelymeetend-consumer’sneedsyetwouldalsomoreevenlydistributetheworkloadonBarilla’smanufacturingandlogisticssystems.FortwoyearsMaggiali,astrongsupporterofVitali’sproposal,hadtriedtoimplementtheidea,butnow,inthespringof1990,littleprogresshadbeenmade.ItseemedthatBarilla’scustomersweresimplyunwillingtogiveuptheirauthoritytoplaceordersastheypleased;somewereevenreluctanttoprovidethedetailedsalesdatauponwhichBarillacouldmakedeliverydecisionsandimproveitsdemandforecasts.PerhapsmoredisconcertingwastheinternalresistancefromBarilla’sownsalesandmarketingorganizations,whichsawtheconceptasinfeasibleordangerous,orboth.Perhapsitwastimetodiscardtheideaassimplyunworkable.Ifnot,howmightheincreasethechancesthattheideawouldbeaccepted?CompanyBackgroundBarillawasfoundedin1875whenPietroBarillaopenedasmallshopinParma,ItalyonviaVittorioEmanuele.Adjoiningtheshopwasthesmall“laboratory”Pietrousedtomakethepastaandbreadproductshesoldinhisstore.Pietro’ssonRicardoledthecompanythroughasignificantperiodofgrowth,andinthe1940s,passedthecompanytohisownsons,PietroandGianni.Overtime,Barillaevolvedfromitsmodestbeginningsintoalarge,verticallyintegratedcorporationwithflourmills,pastaplants,andbakery-productfactorieslocatedthroughoutItaly.1SpA(SocietàperAzioni)canbetranslatedas“SocietyforStockholders”andinterpretedas“Inc.”Authorizedforuseinthis2016UnivMinnesotaCHMB5803OperationsMgmtcourse.Furtherposting,copyingordistributingiscopyrightinfringement.694-046BarillaSpA(A)2Inthe1960s,competinginacrowdedfieldofover2,000Italianpastamanufacturers,PietroandGianniBarilladifferentiatedtheircompanyusingahighqualityproductsupportedbyinnovativemarketingprograms.BarillarevolutionizedtheItalianpastaindustry’smarketingpracticesbycreatingastrongbrandnameandimageforitspasta,sellingpastainasealedcardboardboxwitharecognizablecolorpattern,ratherthaninbulk,andinvestinginlarge-scaleadvertisingprograms.In1968,tosupportthedouble-digitsalesgrowththecompanyexperiencedduringthe1960s,PietroandGianniBarillabeganconstructionofa1.25millionsquaremeterstate-of-theartpastaplantinPedrignano,aruraltown5kmoutsideofParma.Thecostofthismassivefacility—thelargestandmosttechnologicallyadvancedpastaplantintheworld—drovetheBarillabrothersdeeplyintodebt.In1971,theysoldthecompanytotheAmericanmulti-nationalfirmW.R.Grace,Inc.GracebroughtadditionalcapitalinvestmentandprofessionalmanagementpracticestothecompanyandlaunchedanimportantnewMulinoBianco(“WhiteMill”)lineofbakeryproducts.Throughoutthe1970s,facingdifficulteconomicconditionsandnewItalianlegislationthatbothcappedretailpastapricesandincreasedcost-of-livingallowancesforemployees,GracestruggledtomakeitsBarillaacquisitionpayoff.In1979,GracesoldthecompanybacktoPietroBarilla,whobythenhadsecuredthenecessaryfundstopurchaseit.ThecapitalinvestmentsandorganizationalchangesthatGracehadbroughttoBarilla,combinedwithimprovingmarketconditions,helpedPietroBarillalaunchasuccessfulreturntothecompany.Duringthe1980s,Barillaenjoyedanannualgrowthrateofover21%(seeExhibit1).Growthwasrealizedthroughexpansionofexistingbusinesses,bothinItalyandotherEuropeancountries,aswellasthroughacquisitionofnew,relatedbusinesses.In1990,Barillawasthelargestpastamanufacturerintheworld,making35%ofallpastasoldinItalyand22%ofallpastasoldinEurope.InItaly,Barillaofferedpastaproductsunderthreebrands:thetraditionalBarillabrandrepresented32%ofthemarketand3%ofmarketsharewasdividedbetweenitsVoiellobrand(atraditionalNe