International Expansion of Grupo Bimbo

2. International Expansion of Grupo Bimbo –
Challenges Opportunities
This case study focuses on Bimbo’s expansion strategies, vision, and mission, how it established itself in
Mexico, and transformed itself into a global company, the challenges and opportunities it faced, and how
the management was able to overcome the challenges and capitalize on the opportunities to turn Bimbo
into one of the leading baking companies in the world.
INTERNATIONAL MARKETING

3. Grupo Bimbo (Bimbo) is one of the leading global baking companies in the world
and a market leader in Mexico, founded in December 1945. As of Dec 2015, It
operated in 22 countries across North America, LATAM (Mexico and Central America),
EU and Asia. It had a strong brand portfolio of around 100 brands, offering more than
10,000 food items. According to the brand footprint study by Kantar, Bimbo was the
7th strongest food brand worldwide and #1 in LATAM in 2014.
Bimbo was the first LATAM baking company to expand into the global markets. It had
an expertise in producing, distributing, and delivering baked and confectionary food
products. Bimbo had 163 production units at different locations in the world, had a
direct distribution network covering 52,000 routes around the world, reaching 1,700
sales centres and about 2.5 million PoS (As of December 31, 2015). However, despite
being a leading global baker, Bimbo had a market share of only 4% in the global
baking industry and was facing challenges in expanding into the international markets.
Introduction and Background

4. Prominent Brands of Bimbo

5. He then invested the money generated from this business into the El
Molino and started bread manufacturing factory with the primary
objective of supplying raw materials to his bakery business. He raised
62,000 USD from his family and friends and named the factory
Panificadora Bimbo SA. With necessary equipment imported from
the US, the factory began production in December 1945.
Inception of Grupo Bimbo
The company’s origins went back in the year 1903, when Juan Servitije from Spain arrived in Mexico to explore
business opportunities. He joined a Bakery called “La Flor De Mexico” managed by his uncle Jose Torrallardona in
1905. In his endeavour to start his own business to meet financial necessities, Juan left his uncles' business and
worked in different places, trying his hands at various jobs. In 1928, he started a bakery business called “El Molino”
in partnership with his colleagues who worked with him previously. However, in 1935, Juan managed to acquire the
total stake in El Molino from his friends. A year later he passed away. Thereafter his wife and son (Lorenzo Servitje)
started handling the family business. Lorenzo started an export company of food products (mainly fruits) and metal
products to the American troops engaged in the WWII.

6. Bimbo’s Expansion in Mexico
❖ The company planned to produce different kinds of baked breads to cater to different segments of the population in Mexico.
Initially, when the company started operations the market for baked products, especially bread, was very limited. The company
primarily focused on producing and delivering unique foods products and differentiate in terms of Quality. In 1948, the company
crafted a distribution strategy, by establishing production plants and distributing food products in areas where there was demand.
❖ In 1956, the company diversified its business and added pastries in its product line. The timely delivery and the maintenance of
quality food products helps the company expand in the Mexican markets within a short span of time. Besides lower prices of food
products, lack of control in the baking industry, and political and economical environment during the 1960s (inflation, scarcity of
food products) provided an opportunity for it to create a market and demand for its products.
❖ The company also associated with local farmers and fertilizer manufacturing to help them produce quality wheat desired by the
company to produce its breads. The company would agree to purchase wheat at a higher price than the market value. In 1963, the
company merged its four independent units under one roof and named it Grupo Industrial Bimbo SA, which was later popularized
as Grupo Bimbo.
❖ In 1980, Bimbo established itself as the market leader in the bakery segment after acquiring its nearest competitor Continental de
Alimentos SA and entered into non-baked food category like candies, chocolates. During the same year the company went for an
IPO in the Mexican Stock Exchange.

7. Global Expansion: United States
In 1980s, the company planned to expand the business into other international markets to start with US, as it saw an
opportunity for growth among Hispanic population in US. After exporting for more than five years, it started to acquire
businesses including Pride Bakeries and other small baking companies and brands to became a major player in the US
market. However, the company faced many challenges as well as competition from other players in the US market.
❖ Increasing Levels Of Unsold Inventory: Grocery stores and retail shops require full time supply of food products
irrespective of the demand due to which the unsold stock would be sent back to the producers. This would ultimately
incur loss for the manufacturer. However, due to immense completion, bimbo had no other choice but to start
distributing the food products as per the interests of the local players. Despite the efforts made, bimbo was not able
to generate enough profit.
❖ Unionized Truck Drivers: they exerted pressure on the company to form contracts that would be in their interest.
These contracts were not flexible and did not benefit the company. The truck drivers were reluctant to deliver the food
to retail store on time and demanded higher wages. Though the company was able to convince the truck drivers to
agree to a flexible delivery of food products, the company faced challenges of increased labour cost in the form of
health insurance and workmen's compensation, other insurances etc.

8. Global Expansion: LATAM
❖ In the process of expanding into the international markets, Bimbo also entered into the LATAM countries in mid-1990s.
It did not change any strategy and replicated its Mexico model, supplying same food products and brands. The company
knew that the taste and preference of countries in LATAM were similar to that of Mexicans due to close proximity. It
started to acquire related companies in South and central America to expand its base and operations. Starting 1995,
Bimbo began production and sales operations in Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Guatemala,
Hondorus in a quick span of time.
❖ However the business was not profitable as the company analysed that there were wide differences in the consumption
pattern in LATAM. The people, especially in Brazil preferred artisanal bread rather than industrial bread, and so the per
capita consumption of industrial bread in LATAM was lower than in North America. As a result the company faced acute
competition from the local artisanal bread manufacturing companies in terms of price and distribution of products. After
facing a critical situation in LATAM, bimbo modified its product portfolio and changed its distribution network It realized
that people in LATAM wanted similar products to those that we popular in Mexico, but wanted a different taste.
❖ The company therefore introduced food products that satisfied the tastes and preference of the people of LATAM.
Bimbo customized its distribution network as per the requirement of each region in LATAM. It also changed its
distribution network in order to target Hypermarket chains along with local mom and pop stores.

9. Global Expansion: Europe
The company expanded in the European region way back in 1964 when one of its partner started production
operations in the name of Bimbo in Spain. However, Bimbo failed to beat the competition and finally ended up selling
its business to its local competitor in 1970. Since then it never thought of expanding in the European region and
remained a long way from entering the EU. In 2012, Bimbo entered into the Spanish market by acquiring its long
standing competitor in the segment, Sara Lee.
Regionwide Revenue Share of Bimbo (as of Dec 2015) Bimbo Market Share in Global Baking Industry

10. The Chinese Market
Bimbo entered the Chinese market in 2006. Before entering this market, Bimbo conducted detailed pre-acquisition
research to evaluate consumers’ tastes and preferences in the Chinese markets. Although there is a lot of scope, the
company realized that it need to be more dynamic and innovative in its approach. The company acquired Panrico, a
loss making but popular baking company in China with a larger distribution network. It improved its operational
processes and focused on developing food products relevant to the China market. The baking industry in China was
very fragmented and despite being scope for growth and development, no company held more than 2% of the
market share in China. The largest baking company in China was Ting Hsin International Group, with a market share of
~2%. Many MNCs had entered the Chinese market with huge investments in R&D and marketing activities, none of
them were successful in the region as there was an acute competition from the local bread manufacturers, who were
well aware of local consumers' tastes and preferences.
According to a report published by Global Industry Analyst Inc, the global baking industry was expected to have a
market value of $447 billion in 2017. Although the company has a 4% market share in the fragmented global baking
industry, it would have to learn from the local experiences around the world. Moreover the company should take over
more local baking companies to increase its market share.

11. GRA IAS!