Paolo Barilla: rethinking a traditional family business

On a bright morning in Parma, Marta Grandi stands in the central Piazza Garibaldi clutching a banner that reads “Change Food, Save the Planet”. Clustered around the 16-year-old are about 50 mostly school-age teenagers.

They decided to skip school that day, Ms Grandi says, to take part in FridaysForFuture, the global climate protest movement started by the Swedish activist Greta Thunberg. “Business is destroying our future,” she says.

The recent noisy scene, some 10 minutes walk across honey-coloured piazzas from the world’s biggest pasta maker, Barilla, brings home the immediate challenge facing Paolo Barilla, and his siblings Guido and Luca, who together run the closely-held family business in its fourth generation.

“We recently launched pasta made from red lentils,” says Mr Barilla, 58, sitting in one of a host of Barilla offices scattered across the northern Italian city.

He offers a ridged tube of penne pasta half the length of a finger, which is vegan and gluten free but otherwise identical to the traditional sort made of durum wheat, as a microcosm of the forces of sustainability, food quality and changes in lifestyle uprooting Barilla’s business.

“The pasta looks the same as it has done for the past 144 years, but what is going on behind it is completely different,” says the businessman who is co-deputy chairman with his brother Luca, 59. The eldest sibling, Guido, 61, is chairman but the three run the business equally.

Helping the family group, founded in 1877, to modernise has been a significant shift, he admits.

Barilla produces 120 shapes and sizes of pasta as well as sauces, biscuits, bread, crackers and cakes. It made €3.4bn in revenues in 2018, up 3 per cent compared with 2017. Italy accounts for a third of sales and the US is its next biggest market.

On the sustainability front, Mr Barilla and his brothers set up the Barilla Center for Food and Nutrition a decade ago. It espouses the Mediterranean diet — made up of a lot of vegetables, some pasta and rice, and little meat — as good for you, but also good for the planet. Mr Barilla says it came out of a rethinking of the family business.

The brothers decided they wanted to make the company more international. This led them to look more closely at how they were producing food: first, the nutritional impact and, latterly, the environmental one.

There was “a certain sense of new discovery” in taking over leadership of the business, says Mr Barilla, who was a Formula One racing car driver before joining the family company.

“We had industrial production lines and we asked ourselves: how are these products made and what impact do they have on people?” he says.

Since 2010, Barilla has changed 420 of its recipes, cutting out palm oil from all its products and reducing the use of sugar, salt and saturated fats.

It has involved some 5,000 farms in a plan to produce sustainable wheat, paying a premium to farmers who use some land to grow wild flowers to attract bees and rotate their crops.

But there was also a cultural aspect to shifting from a business model based on the habits of the traditional family. This they learnt publicly, and painfully. In September 2013, Guido Barilla said in an Italian radio interview that the company’s core value of serving the “sacral family” meant he would not do a “commercial with a homosexual family”. The comments went viral and #BoycottBarilla appeared on social media. Sales in the following year were not hit but in 2014 Barilla dropped 21 places on the Reputation Institute’s annual company ranking, an indicator widely understood to predict a future fall in sales.

Mr Barilla, who with his brothers owns 85 per cent of the company, says the family learnt a number of lessons. “We learnt your provincialism and history can cause you to inflict unintended prejudice towards others,” he says. They also learnt to be proactive. “We’ve asked ourselves: how can we take into account the changing lifestyle of people?”

The company created a diversity and inclusion board within weeks of the scandal, donated to LGBT causes and launched limited edition pasta boxes by the designer Olimpia Zagnoli showing two women sharing a kiss over spaghetti. Within a year, and for every year since, it has got full marks from the US-based Human Rights Campaign’s list of employers who are LGBT-friendly.

The irony, today, is that Mr Barilla argues the thing that caused them to make the error then was also the thing that helped them to recover from it: being a family company.

“It allows us to be more agile, to be more flexible and fast,” he says. “We had the ability to act immediately and to take on board more deeply what was going on.”

The red lentil pasta was a response to Mr Barilla’s biggest frustration: gluten-free diets. “It has very much had an impact on sales, in the US and in Italy.”

Global economic and social changes are going to bring about a reappraisal of family capitalism, he argues.

Mr Barilla says his privately held family company is a distinctly different corporate model from, for example, that of Kraft Heinz, the consumer industry mega-merger that has become shorthand for bigger-is-better Anglo-Saxon capitalism focused on boosting earnings per share. “Food needs to be pleasure and fantasy for the spirit and not just fuel for the body,” he adds.

Instead, he sees Barilla’s private ownership rooted in the local community as offering a panacea for capitalism. The business fell out of the family hands only once, for a decade, when it was sold to US chemical conglomerate WR Grace after the cost of a new factory took a huge financial toll.

Still, he considers that his best management lesson probably came from his time racing Formula One cars. That experience has best equipped him to try to deliver the rapid change on the global issues that the teenagers in Parma’s main square are agitating for.

“The F1 sportsman knows where the weak points of a car are, and the sooner you find them and fix them the sooner you go faster,” he says.