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BARILLA PASTA: A COMPANY IN HOT WATER 1

Paul Bigus wrote this case under the supervision of Professor Jana Seijts solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2013, Richard Ivey School of Business Foundation

Version: 2013-11-08

On Thursday, September 26, 2013, Claudio Colzani, chief executive officer of the Barilla Group (Barilla) — the Italian-based and world-leading pasta manufacturer — was challenged with a precarious situation that was quickly reaching a boiling point. A day earlier, during an interview on an Italian radio show, company Chairman Guido Barilla made a series of anti-gay remarks when asked why the company did not feature advertisements with gay families. Specifically, during the interview, Barilla stated that his company believed in the “concept of the sacred family,” in addition to commenting that he had “no respect for adoption by gay families because this concerns a person who is not able to choose.” 2 Before the interview concluded, the chairman expressed his views further, stating, “If the gays don’t like it, they can go and eat another brand.” 3 Guido Barilla’s comments were met with outrage on social media, sparking worldwide calls for a boycott of Barilla pasta. Along with the comments of angered consumers, numerous equality themed pictures creatively featuring pasta started to appear on social media. Barilla’s competition also seized the opportunity to take advantage of the contentious comments. As news of the controversial interview comments continued to spread, consumers, equal rights organizations and the media were all looking for Barilla to provide an explanation. BARILLA HISTORY 4

The origin of the world’s largest pasta maker dates back to 1877, when Pietro Barilla Senior combined the skills acquired from an apprenticeship in the bakery of his grandfather along with training from his cousin to open a small shop of his own in Parma, Italy. In 1910, his two sons Gualtiero Barilla and Riccardo Barilla took over management of the company and made the transition towards industrial production. Building a new Barilla pasta factory that employed 80 people, production was increased to 80 tons of pasta 1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of the Barilla Group or any of its employees. 2 Globe and Mail, “Boiling Over: Homophobic Remarks From Pasta Company Stirs Boycott,” September 26, 2013, http://www.theglobeandmail.com/life/boiling-over-homophobic-remarks-from-pasta-company-stirsoutrage/article14553411/?utm_source=Shared+Article+Sent+to+User&utm_medium=E-mail:+Newsletters+/+E-Blasts+/, accessed October 9, 2013. 3 Ibid. 4 Barilla, “History,” 2012, http://www.barillagroup.com/corporate/en/home/chisiamo/history.html, accessed October 9, 2013.

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and 20 quintals 5 of bread per day. In 1937, the company shifted away from the range of products that were almost exclusively sold unpacked and through public tenders by targeting the wider middle-class market of consumers. The result was the introduction of Barilla packaged pasta that featured a transparent window displaying the contents. In 1947, when Ricardo Barilla passed away, his two sons Pietro Barilla and Gianni Barilla took over control of the company. The two brothers divided their responsibilities, with Pietro Barilla overseeing marketing, sales and advertising, while Gianni Barilla was in charge of management, the factory and purchasing. In 1950, Pietro Barilla travelled to the United States with the goal of better understanding packaging techniques, advertising and large-scale distribution to apply to company operations back in Italy. Influenced by what he learned, in 1952, Pietro Barilla decided to cease Barilla’s bakery operations in favour of focusing company resources on expanding pasta production and distribution to the national level. As the company continued to experience success, measures were taken to improve and expand production facilities. In 1965, Barilla opened a new factory in Rubbiano, Italy and began to diversify away from pasta products, once again focusing on various bread items. However, the previous decision for Barilla to focus on pasta operations had paid off and resulted in a market demand that required additional facilities and production capacity. In 1968, work began on a new factory in Pedrignano, Italy. The site, totalling more than 1.5 million square metres, would eventually become the most modern and largest pasta factory in the world. After remaining in control of the Barilla family for almost 100 years, in 1971, Pietro Barilla and Gianni Barilla sold the majority share of the company to Grace, a U.S. multinational. Under new ownership, Barilla continued to expand; in 1973, it acquired Voiello pasta, which allowed better access to the southern Italian market. In 1974, Barilla seized the opportunity to increase control over its production cycle by purchasing the largest wheat mill in Italy, which provided a larger working capacity and greater stability in the domestic wheat market. Continuing to diversify its product lines, in 1975, Barilla launched the Mulino Bianco line of oven-baked products. Yet in 1979, control of Barilla changed once again, as Pietro Barilla regained ownership of the company from Grace. The company continued to expand in 1987, acquiring pasta competitors Braibanti and Laboratori Riuniti, along with their market share. When Barilla was not acquiring competition, it recognized opportunities to expand internationally by introducing Barilla Deutschland in 1991. When Pietro Barilla died in 1993, his sons Guido Barilla, Luca Barilla and Paolo Barilla assumed control over the company. Seeking ways to further expand internationally, Barilla acquired Internex, an integrated logistics company in 1997. Reorganized under the name Number 1 Logistics Group and becoming autonomous in 2000, the company allowed for increased efficiencies in transportation not only for Barilla but for other companies as well. In 1999, Barilla continued with the expansion of its global production facilities by opening twin plants located in Ames, Iowa and Foggia, Italy. With a strong presence in international markets, Barilla also invested resources into various global projects. In 2004, the company launched Academia Barilla, an operation committed to the promotion of Italian culinary culture as a part of world heritage. In 2012, Barilla’s global operations encompassed over 12,400 employees and 42 production sites. 6 Leadership was maintained by fourth-generation Guido Barilla as company chairman, with brothers Luca Barilla and Paolo Barilla as deputy chairmen. Producing over 2.4 million tons of food each year under 14 different brands, on average Barilla products were consumed by over 50 million people in more than 100

5

A measure of weight equal to 100 kilograms. Barilla, “Barilla Overview,” 2012, http://www.barillagroup.com/corporate/en/home/chisiamo/introductiontobarilla.html, accessed October 9, 2013.

6

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countries each day. 7 The company maintained the vision: “We help people live better by bringing wellbeing and the joy of eating into their everyday lives.” 8 Overall, in 2012, Barilla achieved an operating profit of over €60 million, down from €76 million in 2011. 9 Moving forward, Barilla had the goal of doubling global revenues by the year 2020. 10 THE RADIO INTERVIEW 11

On Wednesday, September 25, 2013, Barilla Chairman Guido Barilla was participated in an interview on Italian La Zanzara Radio24. During the course of the interview, the radio host asked Guido Barilla why the pasta company did not have advertisements that featured gay families. As one of Italy’s largest advertisers, for many years Barilla had portrayed the image of a happy heterosexual family with the slogan, “Where there’s Barilla, there's home.” 12 In response to the question, Guido Barilla, as mentioned in the introduction above, claimed that the heterosexual family was sacred and that gays should not be allowed to adopt children. Attempting to clarify and add context to his perspective, he stated, “I would not do a commercial with a homosexual family, not for lack of respect toward homosexuals — who have the right to do whatever they want without disturbing others — but because I don’t agree with them, and I think we want to talk to traditional families. The women are crucial in this.” He defended his views by explaining that you couldn’t always please everyone, adding before the interview concluded, “If the gays don’t like it, they can go and eat another brand.” 13

PUBLIC REACTION

Following the radio interview, almost instantly Guido Barilla’s comments were met with public outrage, as angry consumers expressed their dissatisfaction with the company’s perceived anti-gay stance. Social media sites were abuzz with comments and calls for a boycott of Barilla products under the Twitter hashtags #boicottabarilla and #boycottbarilla: @CMeushaw wrote: “It seems that Barilla has the only spaghetti that stays straight no matter how wet it is #boycottbarilla.” 14 @papalogan wrote: “Hmm...I guess “Barilla” is Italian for “homophobic bigot.” Learn something new every day. @BarillaUS #boycottbarilla.” 15 @Georgetakei wrote: “I hear Barilla pasta is making a new product — bigotoni.” 16

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Ibid. Barilla, “Vision,” 2012, http://www.barillagroup.com/corporate/en/home/chisiamo/vision.html, accessed October 9, 2013. 9 Barilla, “Performance Overview,” 2012. 10 Barilla, “Vision,” 2012. 11 Cavan Sieczkowski, “Barilla Pasta Won’t Feature Gay Families In Ads, Says Critics Can ‘Eat Another Brand Of Pasta,’” The Huffington Post, September 26, 2013, http://www.huffingtonpost.com/2013/09/26/barilla-pasta-antigay_n_3995679.html, accessed October 9, 2013. 12 Steve Scherer, “Barilla Pasta Baron’s Anti-gay Comment Prompts Boycott Call,” NBC News Business, September 27, 2013, http://www.nbcnews.com/business/barilla-pasta-barons-anti-gay-comment-prompts-boycott-call-8C11269315, accessed October 9, 2013. 13 Ibid. 14 The Huffington Post Canada, “Barilla Boycott: CEO's Anti-Gay Comments Spark Backlash,” September 26, 2013, http://www.huffingtonpost.ca/2013/09/26/barilla-boycott-homophobia-anti-gay_n_3996146.html, accessed October 9, 2013. 15 Ibid. 8

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@tinarowleywrote: “The doofus in charge of Barilla doesn’t like money anymore. Don’t worry, pal. We’ll all eat another brand.” 17 @goldietaylor wrote: “Welp. Gotta go empty all of the @barillaUS pasta from my cabinets.#LGBT #Barilla #boycottbarilla.” 18 Equity rights organizations from around the world were quick to respond to the highly contentious views expressed by Guido Barilla during the interview. In Italy, Aurelio Mancuso, head of the gay rights group Equality Italia commented, “We accept the invitation from the Barilla owner to not eat his pasta,” garnering additional support from Progressive Italian parliamentarians for a boycott of the Barilla brand. 19 In the United Kingdom, a spokesman for the gay rights group Stonewall stated, “With so many pasta brands out there gay customers can easily show their disgust the next time they go grocery shopping. These comments will surely cost Barilla a pretty penne…” 20 In the United States, Rich Ferraro, vice-president of communications for GLAAD (Gay and Lesbian Alliance Against Defamation) wrote, “Homophobia is bad for business — plain and simple. Mr. Barilla’s opinion is ill-informed, and he will soon learn that the new traditional family accepts gay and lesbian families and does not support companies that promote discrimination.” 21 Numerous competitors in the pasta market also seized the opportunity to take advantage of Guido Barilla’s ill-advised remarks. Rival pasta manufacturer Bertolli provided an online advertisement that displayed different pairings of pasta shapes to represent different family dynamics (see Exhibit 1). “We just wanted to spread the news that Bertolli welcomes everyone, especially those with an empty stomach,” a rep for Bertolli's social media agency stated. 22 In a similar move, pasta producer Buitoni introduced its own pasta themed image on its company Facebook page. Pasta shapes were used to create different pairings of the male and female gender symbols with the caption “Pasta for all.” 23 A number of creative parody pasta advertisements also appeared on websites and social media; as an example, one caption read, “Pasta is our business . . . what you put in your mouth is yours.” 24 While such advertisements were easily identifiable as fabricated, the messages they conveyed to audiences were very real. Less than a day later, media outlets from around the globe made headlines with the interview content. Various articles and news segments speculated about the kind of backlash the company would receive as the momentum for a boycott of Barilla’s products continued to escalate. The purchasing power of the LGBT (lesbian, gay, bisexual and transgender) community represented a significant consumer market and

16

David Badash, “12 Best Responses To Barilla’s ‘I Would Not Do A Commercial With A Homosexual Family,’” Storify, September 28, 2013, http://storify.com/davidbadash/11-best-responses-to-barilla-s-i-would-not-do-a-co, accessed October 9, 2013. 17 Grub Street, “Gluten Intolerance: 48 People Who Definitely Won’t Be Buying Barilla Pasta,” September 27, 2013, http://www.grubstreet.com/2013/09/barilla-pasta-antigay-remarks.html, accessed October 9, 2013. 18 Badash, “12 Best Responses.” 19 The Huffington Post Canada, “Barilla Boycott.” 20 Ibid. 21 Sieczkowski, “Barilla Pasta Won't Feature Gay Families In Ads.” 22 Tim Nudd, “Bertolli Makes the Most of Barilla Chairman's Anti-Gay Comments,” Adweek, September 27, 2013, http://www.adweek.com/adfreak/bertolli-makes-most-barilla-chairmans-anti-gay-comments-152758#.UkYy1a05jGc.email, accessed October 9, 2013. 23 Diane Anderson-Minshall, “6 Scrumptious Pro-Gay Pastas,” Advocate, September 30, 2013, http://www.advocate.com/business/2013/09/30/six-scrumptious-pro-gay-pastas, accessed October 9, 2013. 24 Amanda B., “Barilla's Anti-Gay Controversy,” Know Your Meme, September 29, 2013, http://knowyourmeme.com/memes/events/barillas-anti-gay-controversy, accessed October 9, 2013.

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was estimated to exceed over US $800 billion annually. 25 A headline in Forbes perhaps best summarized Barilla ill fate: “Barilla Earns Gay Boycott, Learns Taking Sides Is Bad For Business.” 26 DECISION

On Thursday, September 26, 2013, consumers, competition and media around the globe all continued to make news of Guido Barilla’s controversial interview comments. The company desperately needed to devise a strategy to publicly respond and avoid the negative long-term consequences of a damaged brand name, decreased market share and ultimately lost revenues. As part of Barilla’s long-term strategy to increase revenues, the company had recently focused on expanding in the United States as it represented its second biggest pasta market. 27 However, a substantial boycott of Barilla products would almost certainly impede any expansion efforts the company made. Now more than ever, an individual’s sexual orientation and what constituted a family came in just as many diverse varieties as the types of pasta Barilla made.

25

Brad Fuller, “Here's How Some Brands Have Subtly Won Over The LGBT Community,” Business Insider, June 23, 2013, http://www.businessinsider.com/lgbt-community-untapped-market-consumer-brands-2013-6, accessed October 9, 2013. 26 Laura Heller, “Barilla Earns Gay Boycott, Learns Taking Sides Is Bad For Business,” Forbes, September 28, 2013, http://www.forbes.com/sites/lauraheller/2013/09/28/barilla-earns-gay-boycott-learns-taking-sides-is-bad-for-business/, accessed October 9, 2013. 27 Steve Scherer, “Guido Barilla Puts Pasta Company in Hot Water with Anti-gay Comment,” Toronto Sun, September 27, 2013, http://www.torontosun.com/2013/09/27/guido-barilla-puts-pasta-company-in-hot-water-with-anti-gay-comment, accessed October 9, 2013.

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EXHIBIT 1: BERTOLLI PASTA ADVERTISEMENT

Source: Bertolli, “Bertolli 1865’s Photos,” https://www.facebook.com/photo.php?fbid=561642967240554&set=pb.306242006113986.-2207520000.1380398987.&type =3&theater, accessed October 9, 2013. Used with permission.