Introduction

Background of Company (1) 

Nutella was founded in Italy in the 1940’s by Mr. Pietro Ferrerro, pastry maker and founder of the Ferrero Company. Due to the outbreak of World War II, there was a shortage of cocoa supply. To solve this problem, Mr. Ferrerro used Hazelnuts in place of chocolate to formulate the breakfast staple that we know today as Nutella. The original version of the Nutella spread was called “pasta gianduja”, which means paste. In the early days, Nutella was marketed as a wholesome and nutritious breakfast for children. The paste was made into loaves so that mothers could easily slice the loaves and place it in between breads. Mr. Ferrerro later modified his product into the form of a spread that came in a jar, because he found that children were more likely to throw the breads away and only eat the slice of paste. The product was renamed “Supercrema gianduja” due to its spreadable properties. Eventually, the product was called “Nutella”. Chocolate, at that time, on top of being scarce, was too expensive and Nutella was a cheaper alternative to enjoy luxurious foods without having to burn a hole in your wallet. The Ferrerro Company first imported Nutella from Italy to the United States in 1983. Nutella’s popularity has made it possible for the product to be marketed and sold all over the world. It is now enjoyed in more than 75 countries all over the world! In addition to that, the Ferrero Company produces many other products, including Ferrero Rocher, Pocket Coffee, Mon Chéri, Giotto, Confetteria Raffaello coconut cream candy, Hanuta chocolate hazelnut-filled wafers, the Kinder line of products, as well as the Tic Tac breath mints. 

Reasons for selection

Nutella is consumed world-wide and has always been a childhood favourite for most. In Malaysia, it is a common sight to see school children having bread with Nutella spread for breakfast and as a snack during recess. Nowadays, it is not only enjoyed by kids, but also adults as a convenient pick-me-up snack to eat on the go. Not only is Nutella nutritious and convenient, it is also a tasty way to start the day! Who wouldn’t want to wake up to a warm, delicious Nutella sandwich? As most people, young and old, kick start their days with a Nutella sandwich, it has become our priority to investigate the reason behind the product’s popularity. Therefore, we have conducted a survey to study the demand, elasticity, market structure and market equilibrium to enable us to analyse the company. 

Market competition (2)

The Ferrerro Company is categorised as a monopolistic competition market structure. In a monopolistic competition, there is more than one seller offering similar, but not identical products. There is product differentiation where the products of monopolistically competitive firms are close, but are not perfect substitutes. Nutella can be easily substituted with other breakfast spreads, although, it is differentiated from other breakfast spreads. Monopolistically competitive industries have freedom of entry and exit because the start up cost and exit cost is low. The cost of entering and exit is very low. The company also has some degree of market power because it has relatively few competitors, where those competitors do not engage in strategic decision making and the firms sells differentiated product.

Problem Statement

i. What factors do consumer consider when choosing a breakfast spread?

ii. Why is it important to understand the demand factors?

iii. How do consumers respond to the price changes?

Objectives

- To understand the factors of demand. 

- To understand the importance of demand factor's information.

- To analyse the elasticity of demand or sensitivity of consumer towards the price change.

Limitations

The limitation associated with conducting the survey is a low response rate due to the absence of incentives upon completion of the survey. In addition to that, time constraint has also caused the survey recipients to answer the survey questions inappropriately without careful thought.  Furthermore, some survey recipients place lower priority in answering the survey questions, as they are too busy completing other urgent tasks. Other than that, a lack of experience in conducting a survey has caused us some difficulties in approaching respondents.